[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

H.R._: ``AMERICAN-MADE ENERGY AND INFRASTRUCTURE JOBS ACT''; H.R._:
``ALASKAN ENERGY FOR AMERICAN JOBS ACT''; H.R._: ``PROTECTING
INVESTMENT IN OIL SHALE: THE NEXT GENERATION OF ENVIRONMENTAL, ENERGY,
AND RESOURCE SECURITY ACT'' (PIONEERS ACT); AND H.R. _: COAL MINER
EMPLOYMENT AND DOMESTIC ENERGY INFRASTRUCTURE PROTECTION ACT.''

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

LEGISLATIVE HEARING

before the

SUBCOMMITTEE ON ENERGY AND
MINERAL RESOURCES

of the

COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

__________

Friday, November 18, 2011

__________

Serial No. 112-85

__________

Printed for the use of the Committee on Natural Resources

Available via the World Wide Web: http://www.fdsys.gov
or
Committee address: http://naturalresources.house.gov

U.S. GOVERNMENT PRINTING OFFICE
71-539 WASHINGTON : 2013
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COMMITTEE ON NATURAL RESOURCES

DOC HASTINGS, WA, Chairman
EDWARD J. MARKEY, MA, Ranking Democratic Member

Don Young, AK Dale E. Kildee, MI
John J. Duncan, Jr., TN Peter A. DeFazio, OR
Louie Gohmert, TX Eni F.H. Faleomavaega, AS
Rob Bishop, UT Frank Pallone, Jr., NJ
Doug Lamborn, CO Grace F. Napolitano, CA
Robert J. Wittman, VA Rush D. Holt, NJ
Paul C. Broun, GA Raul M. Grijalva, AZ
John Fleming, LA Madeleine Z. Bordallo, GU
Mike Coffman, CO Jim Costa, CA
Tom McClintock, CA Dan Boren, OK
Glenn Thompson, PA Gregorio Kilili Camacho Sablan,
Jeff Denham, CA CNMI
Dan Benishek, MI Martin Heinrich, NM
David Rivera, FL Ben Ray Lujan, NM
Jeff Duncan, SC John P. Sarbanes, MD
Scott R. Tipton, CO Betty Sutton, OH
Paul A. Gosar, AZ Niki Tsongas, MA
Raul R. Labrador, ID Pedro R. Pierluisi, PR
Kristi L. Noem, SD John Garamendi, CA
Steve Southerland II, FL Colleen W. Hanabusa, HI
Bill Flores, TX Vacancy
Andy Harris, MD
Jeffrey M. Landry, LA
Jon Runyan, NJ
Bill Johnson, OH
Mark Amodei, NV

Todd Young, Chief of Staff
Lisa Pittman, Chief Legislative Counsel
Jeffrey Duncan, Democratic Staff Director
David Watkins, Democratic Chief Counsel
------

SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

DOUG LAMBORN, CO, Chairman
RUSH D. HOLT, NJ, Ranking Democratic Member

Louie Gohmert, TX Peter A. DeFazio, OR
Paul C. Broun, GA Madeleine Z. Bordallo, GU
John Fleming, LA Jim Costa, CA
Mike Coffman, CO Dan Boren, OK
Glenn Thompson, PA Gregorio Kilili Camacho Sablan,
Dan Benishek, MI CNMI
David Rivera, FL Martin Heinrich, NM
Jeff Duncan, SC John P. Sarbanes, MD
Paul A. Gosar, AZ Betty Sutton, OH
Bill Flores, TX Niki Tsongas, MA
Jeffrey M. Landry, LA Vacancy
Bill Johnson, OH Edward J. Markey, MA, ex officio
Mark Amodei, NV
Doc Hastings, WA, ex officio

------
CONTENTS

----------
Page

Hearing held on Friday, November 18, 2011........................ 1

Statement of Members:
Hastings, Hon. Doc, a Representative in Congress from the
State of Washington........................................ 7
Prepared statement of.................................... 8
Johnson, Hon. Bill, a Representative in Congress from the
State of Ohio.............................................. 9
Lamborn, Hon. Doug, a Representative in Congress from the
State of Colorado.......................................... 2
Prepared statement of.................................... 3
Markey, Hon. Edward J., a Representative in Congress from the
State of Massachusetts..................................... 5
Prepared statement of.................................... 6
Young, Hon. Don, the Representative in Congress for the State
of Alaska.................................................. 37

Statement of Witnesses:
Alexander, Ryan, President, Taxpayers for Common Sense....... 32
Prepared statement on H.R. 3410.......................... 34
Dana, Todd, Chairman and CEO, Uintah Resources, Inc.......... 54
Prepared statement on H.R. 3408.......................... 56
Eikenberry, Bill, Rancher, and Former Wyoming State Associate
Director, Bureau of Land Management, U.S. Department of the
Interior................................................... 59
Prepared statement on H.R. 3408.......................... 61
Gardner, J. Steven, P.E., President and CEO, ECSI, LLC....... 64
Prepared statement on H.R. 3409.......................... 66
Helmericks, Mark, Founder of Colville, Inc., Colville
Village, Alaska............................................ 15
Prepared statement on H.R. 3407.......................... 16
McGinley, Patrick C., Professor of Law, West Virginia
University College of Law.................................. 72
Prepared statement on H.R. 3409.......................... 73
Milito, Erik, Upstream Director, American Petroleum Institute 27
Prepared statement on H.R. 3410.......................... 29
Sweeney, Tara M., Senior Vice President, External Affairs,
Arctic Slope Regional Corporation.......................... 11
Prepared statement on H.R. 3407.......................... 12
Van Tuyn, Peter, Alaska Conservationist and Environmental
Attorney, Bessenyey & Van Tuyn, LLC, on behalf of the
Alaska Wilderness League................................... 17
Prepared statement on H.R. 3407.......................... 18
Wagner, Hon. Frank W., Senator, The General Assembly of
Virginia................................................... 25
Prepared statement on H.R. 3410.......................... 26
Zaluski, Joseph J., Executive Vice-President, ECSI, LLC...... 68
Prepared statement on H.R. 3409.......................... 70

Additional materials supplied:
Hrenko, Rikki, CEO, Enefit American Oil Company, Statement
submitted for the record................................... 102
U.S. Department of the Interior, Statement submitted for the
record..................................................... 98

LEGISLATIVE HEARING ON H.R._: (STIVERS) ``AMERICAN-MADE ENERGY AND
INFRASTRUCTURE JOBS ACT''; H.R._: (HASTINGS OF WA AND YOUNG OF AK)
``ALASKAN ENERGY FOR AMERICAN JOBS ACT''; H.R._: (LAMBORN) ``PROTECTING
INVESTMENT IN OIL SHALE: THE NEXT GENERATION OF ENVIRONMENTAL, ENERGY,
AND RESOURCE SECURITY ACT'' (PIONEERS ACT); AND H.R._: (JOHNSON OF OH)
``COAL MINER EMPLOYMENT AND DOMESTIC ENERGY INFRASTRUCTURE PROTECTION
ACT.''

----------

Friday, November 18, 2011

U.S. House of Representatives

Subcommittee on Energy and Mineral Resources

Committee on Natural Resources

Washington, D.C.

----------

The Subcommittee met, pursuant to call, at 9:34 a.m., in
Room 1324, Longworth House Office Building, Hon. Doug Lamborn
[Chairman of the Subcommittee] presiding.
Present: Representatives Lamborn, Hastings, Fleming,
Flores, Landry, Johnson, Thompson, Duncan of South Carolina,
Amodei, Rivera, Young, Southerland, and Markey.
Mr. Lamborn. The Committee will come to order, there being
present a quorum, which under Committee Rule 3(e), is two
Members.
The Subcommittee on Energy and Mineral Resources is meeting
today to hear testimony on four bills. The first one is the
American Made Energy and Infrastructure Jobs Act, H.R. 3410.
There is also Alaskan Energy for America Jobs Act, H.R. 3407;
Protecting Investment in Oil Shale the Next Generation of
Environmental Energy and Resources Security Act, H.R. 3408; and
Coal Miner Employment and Domestic Energy Infrastructure
Protection Act, H.R. 3409.
Mr. Lamborn. Under Committee Rule 4(f), opening statements
are limited to the Chairman and Ranking Member of the
Subcommittee. However, it is my intention to recognize the Full
Committee Chairman and Ranking Member as well as the author of
one of the pieces of legislation.
I ask unanimous consent to include any other Member's
opening statement in the hearing record if submitted to the
clerk by close of business today.
Hearing no objection, so ordered.

STATEMENT OF THE HON. DOUG LAMBORN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF COLORADO

Mr. Lamborn. I now recognize myself for 5 minutes. Today
the Subcommittee is considering a package of bills designed to
create and save jobs, open American lands for energy
development, and generate new revenue for the American
Treasury. Combined, these bills provide one of the largest
single actions Congress could take to promote American energy
security. Using our Federal lands for energy production is
critical to our national security. These resources are the
property of the American people, and it is only the opening of
these lands and promoting their development that will bring
forth the value of the minerals on these lands.
Among the bills before the Committee today is the
Protecting Investment in Oil Shale the Next Generation of
Environmental Energy and Resource Security Act, or PIONEERS
Act, that will facilitate the development of our oil shale
resources in the United States. Our Nation is blessed with some
of the largest, richest deposits of oil shale in the entire
world. According to the U.S. Geological Survey, the Western
United States may hold more than 1.5 trillion, with a T,
barrels of oil, six times Saudi Arabia's proven resources and
enough to provide the United States with energy for the next
200 years. Furthermore, it is estimated that hundreds of
thousands of American jobs could be created by the development
of our oil shale.
Unfortunately, the policies of this Administration have
actively harmed both research and development of oil shale.
After changing oil shale lease terms, making them so limited
that there was practically no interest in the land offered by
the Bureau of Land Management and announcing they would be re-
reviewing the current rules for commercial leasing, the
Administration has stifled oil shale development and research.
At a field hearing held this year by this Subcommittee in
Grand Junction, Colorado, we heard testimony from numerous
witnesses stating that consistent policies and regulatory
certainty were greatly needed in order to advance oil shale in
the United States. My legislation aims to open up land for both
research and commercial development of oil shale and to create
stable policies that the industry can rely on. This will create
good-paying jobs for Americans, contribute to our energy
security, and decrease our dependency on foreign oil.
Just Wednesday, Secretary Salazar said there were many
questions still surrounding oil shale development. I agree.
However, the Secretary's response has been to inject confusion
and to restrict research. This bill takes a different tack.
Instead, it will provide certainty and promote research.
Companies were planning large investments in Colorado. However,
many are now working with and investing in other nations, like
Estonia and Jordan.
Another bill before us today is the Coal Miner Employment
and Domestic Energy Infrastructure Protection Act. The bill
limits the authority of the Secretary of the Interior to issue
new burdensome regulations under the Surface Mining Control and
Reclamation Act of 1977 until December 31, 2011. This will stop
the reckless rush of rulemaking by the Office of Surface Mining
that has resulted in millions of wasted dollars and confusion
by all parties as to the real impacts of the ongoing rulemaking
by the OSM.
Instead, this timeout will give OSM time to meet the
requirements of a National Environmental Policy Act and
generate a legally defensible regulation and to hear and
address the concerns raised by the cooperating agencies, coal-
mining States, citizens, and industry. These are concerns that
were raised in the April Budget oversight hearing for the
Office of Surface Mining and subsequent oversight hearings on
the Obama Administration's rewrite of the stream buffer zone
rule, including a field hearing by this Subcommittee held in
Charleston, West Virginia.
Broad concern was raised after chapters of the draft
environmental impact statement showed potential job losses in
the neighborhood of 7,000 coal mine jobs and a reduction in
coal production in 22 States. The Administration has backed
away from their job loss estimates and begun to publicly
criticize the contractor hired by OSM to prepare the EIS.
Eventually OSM and the contractor, Polu Kai, came to a mutual
agreement to terminate the contract. As one might imagine,
while OSM blames the contractor for problems with the EIS, the
contractor has raised concerns with OSM's management of the
process.
In particular, the numerous changes to the scope of the
rule the EIS was to support. This may be a classic case of
shooting the messenger when the message of massive job loss is
too uncomfortable.
Today we will hear from two of the subcontractors, Steven
Gardner and Joe Zaluski, who worked for Polu Kai Services, on
the Administration's rewrite of the stream buffer zone rule. I
look forward to their testimony and hearing a different
perspective on the rulemaking process.
I know Chairman Hastings is here today, and I expect he
will talk more about the other two bills before the Committee,
so I will end my comments with just one last thought: Americans
are desperate for new jobs, and blue-collar workers in our
trades have been particularly hard hit by the economic
downturn. Critics will say these bills are a give-away to the
oil industry. Nothing could be further from the truth. These
bills are designed to open lands to create opportunity,
opportunity for Federal and local governments to receive
revenues without having to borrow them, opportunity for
companies to pay billions of dollars to the Treasury for the
right to hire millions of new workers to explore, discover, and
develop these resources, workers who are experts in the skilled
trades, craftsmen, pipefitters, electricians, workers who will
have good paying jobs with benefits to feed and support their
working families. I look forward to hearing from the witnesses
today.
In lieu of the Ranking Member of the Subcommittee not being
here, I would like to recognize the Ranking Member of the Full
Committee for 5 minutes.
[The prepared statement of Mr. Lamborn follows:]

Statement of The Honorable Doug Lamborn, Chairman,
Subcommittee on Energy and Mineral Resources

Today the Subcommittee is considering a package of bills designed
to create and save jobs, open American lands for energy development,
allow for the continued production of privately owned coal resources
and generate revenue for the American treasury. Combined these bills
provide one of the largest single actions Congress could take to
promote domestic energy security.
Using our federal lands for energy production is critical to our
national security. These resources are the property of the American
people and it is only by opening these lands and promote their
development will bring forth the value of the minerals on these lands.
While there are a number of bills before the Committee today, I
would like to begin with the Protecting Investment in Oil Shale the
Next Generation of Environmental, Energy, and Resource Security Act--or
PIONEERS Act--will facilitate the development of our oil shale
resources in the United States.
In the United States we are blessed with some of the largest,
richest deposits of oil shale in the entire world. According to the
U.S. Geological Survey, the Western United States may hold more than
1.5 trillion barrels of oil--six times Saudi Arabia's proven resources,
and enough to provide the United States with energy for the next 200
years. Furthermore, it is estimated that 350,000 domestic jobs could be
created by the development of our oil shale.
Unfortunately, the policies of this Administration have actively
harmed both research and development of oil shale. After changing oil
shale lease terms, making them so limited that there was practically no
interest in the land offered by the Bureau of Land Management, and
announcing they would be re-reviewing the current rules for commercial
leasing, the Administration has stifled oil shale development and
research.
At a field hearing this held by our Subcommittee in Grand Junction,
Colorado, we heard testimony from numerous witnesses stating that
consistent policies and regulatory certainty were greatly needed in
order to advance oil shale in the United States. My legislation aims to
open up land for both research and commercial development of oil shale
and create stable policies that the industry can rely on to create
good-paying jobs for Americans, contribute to our energy security, and
decrease our dependency on foreign oil. Just Wednesday, Secretary
Salazar said there were many questions still surrounding oil shale
development. I agree, however, the Secretary's response has been to
inject confusion and restrict research. Companies were planning large
investments in Colorado; however, due to the Secretary's actions many
are now working with and investing in other nations like Estonia and
Jordan. This bill takes a different tack; it will provide certainty and
create an environment to foster research and development of this
important domestic resource.
Another bill before us today is the Coal Miner Employment and
Domestic Energy Infrastructure Protection Act. The bill limits the
authority of the Secretary of the Interior to issue new burdensome
regulations under the Surface Mining Control and Reclamation Act of
1977 until December 31, 2011. This will stop the reckless rush of
rulemaking by the Office of Surface Mining that has resulted in
millions of wasted dollars and confusion by all parties regarding the
real impacts of the ongoing rulemaking by the OSM. Instead this time
out will give OSM time to meet the requirements of the National
Environmental Policy Act and generate a legally defensible regulation
and to hear and address the concerns raised by the cooperating
agencies, coal mining states, citizens and industry. Concerns that were
raised in the April Budget oversight hearing for the Office of Surface
Mining and subsequent oversight hearings on the Obama Administration's
re-write of the Stream Buffer Zone Rule.
Broad concern was raised after chapters of the draft environmental
impact statement showed potential job losses in the neighborhood of
7000 coal mine jobs, and a reduction in coal production in 22 states.
The Administration has backed away from their job loss estimates and
began to publically criticize the contractor hired by OSM to prepare
the EIS. Eventually OSM and the contractor, Polu Kai, came to a mutual
agreement to terminate the contract. As one might imagine while OSM
blames the contractor for problems with the EIS the contractor has
raised concerns with OSM's management of the process in particular the
numerous changes to the scope of the rule the EIS was to support.
Today we will hear from two of the subcontractors, Steven Gardner
and Joe Zaluski, who worked for Polu Kai Services on the
Administration's rewrite of the Stream Buffer Zone Rule. I look forward
to their testimony and hearing a different perspective on the rule
making process.
I know Chairman Hastings is here today and I expect he will talk
more about the other two bills before the Committee, so I will end my
comments with just one last thought.
Americans are desperate for new jobs and blue collar workers in our
trades have been particularly hard hit by the economic downturn.
Critics will say that these bills are a give away to the oil industry.
Nothing could be further from the truth, these bills are designed to
open lands to create opportunity. Opportunity for companies to pay
billions of dollars to the treasury, for the right to hire millions of
new workers to explore, discover and develop these resources. Workers
who are experts in the skilled trades: craftsmen, pipefitters,
electricians. Workers who will have good paying jobs, with benefits, to
feed and support their families. I look forward to hearing from the
witnesses today.
______

STATEMENT OF THE HON. EDWARD J. MARKEY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MASSACHUSETTS

Mr. Markey. Thank you, Mr. Chairman, very much.
Yesterday, the Republican leadership unveiled what they
deemed to be a new plan to fund construction projects for our
Nation's roads and bridges.
Unfortunately, the majority's drilling bills would barely
get us started down the road of paying for a transportation
bill. The four bills we are considering today would only
generate 1/15th of the revenue that we would need to fund
transportation projects for the next 6 years. These bills would
leave us $70 billion short of funding our transportation
projects over that time.
Even the Ranking Member of the Senate Environment and
Public Works Committee, Senator Inhofe, acknowledged this week
that increased drilling would not be able to fund a
transportation bill, stating, quote, there is no money in
expanded energy production.
Now, Senator Inhofe and I seldom see eye-to-eye, but on
this issue I have to agree with him. We should leave no stone
unturned as we look to get our Nation's fiscal house in order
and get our economy moving again, but we don't need to drill
under every single rock to do it. Just increasing the number of
drill holes won't allow us to eliminate our Nation's potholes.
In reality, the Republican plan to pay for our
transportation projects is nothing more than the same drilling
proposals they have offered time and time again. These bills
would once again place drill rigs off our beaches, up and down
the East and West Coast. These bills would once again open our
Nation's most pristine wildlife refuge to drilling, and just
because the majority now wants to use any drilling revenue to
fund transportation projects doesn't mean that we haven't been
down this road before.
On the debt deal, the Republicans said it was my way or the
highway. On the continuing resolution, they said it was my way
or the highway. And now when it comes to funding the
transportation bill, they are saying my way or our highways; we
can't fix our roads unless big oil gets its fix.
But there is a better way. This week Democrats on the
Natural Resources Committee introduced legislation that would
generate nearly four times as much revenue as these drilling
bills through ensuring that oil, gas, and mining companies are
paying their fair share. Our legislation would generate more
than $19 billion in all over the next 10 years by closing
loopholes that allow these companies, some of the most
profitable companies in the history of the world, to drill and
mine resources without paying a dime to the American people.
Our bill would raise roughly $1 billion by encouraging
companies to begin drilling on the leases they already have,
just offshore. Oil companies are currently sitting on leases
that hold more than 11.5 billion barrels of oil. The
legislation would raise more than $9 billion by ending free
drilling by big oil companies on public lands offshore in the
Gulf of Mexico. It would raise more than $6 billion over the
next 10 years by updating the 1872 Mining Law that allows
mining companies to extract gold, silver, uranium, and other
minerals without paying taxpayers any royalties, and through
ensuring that companies pay to clean up their abandoned mine
sites.
Big oil has recorded $101 billion in profits through the
first 9 months of this year. These companies aren't just the 1
percent. They are the 1 percent plus. But the majority still
wants to allow these oil companies to stage an occupy movement
off our Nation's beaches.
As we look to fund our Nation's highways, we don't need
more drilling gimmicks. We need a concrete plan. We can pave
the way for a transportation bill by ensuring that the American
people get a proper return on the resources below public lands.
We are at an intersection for our Nation's economic well-being.
As we are looking to put American families back to work by
funding transportation projects, the clear place to start is by
ending the free ride for oil and mining companies on public
lands.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Markey follows:]

Statement of The Honorable Edward J. Markey, Ranking Member,
Committee on Natural Resources

Yesterday, the Republican leadership unveiled what they deemed to
be a new plan to fund construction projects for our nation's roads and
bridges. Unfortunately, the Majority's drilling bills would barely get
us started down the road of paying for a transportation bill. The four
bills we are considering today would only generate one-fifteenth of the
revenue that we would need to fund transportation projects for the next
six years. These bills would leave us $70 billion short of funding our
transportation projects over that time.
Even the Ranking Member on the Senate Environment and Public Works
Committee, Senator Inhofe, acknowledged this week that increased
drilling would not be able to fund a transportation bill, stating
``there is no money in expanded energy production.'' Senator Inhofe and
I don't always see eye to eye, but on this issue I have to agree with
him. We should leave no stone unturned as we look to get our nation's
fiscal house in order and get our economy moving again but we don't
need to drill under every single rock to do it. Just increasing the
number of drill holes won't allow us to eliminate our nation's pot
holes.
In reality, the Republican plan to pay for our transportation
projects is nothing more than the same drilling proposals they has
offered time and time again. These bills would once again place drill
rigs off our beaches up and down the East and West Coasts. These bills
would once again open our nation's most pristine wildlife refuge to
drilling. Just because the Majority now wants to use any drilling
revenue to fund transportation projects doesn't mean that we haven't
been down this road before.
On the debt deal, the Republicans said it was ``my way or the
highway.'' On the Continuing Resolution they said it was ``my way or
the highway.'' Now when it comes to funding the transportation bill,
they are saying ``my way or OUR HIGHWAYS.'' We can't fix our roads
unless Big Oil gets its fix. But there's a better way.
This week, Democrats on the Natural Resources Committee introduced
legislation that would generate nearly four times as much revenue as
these drilling bills through ensuring that oil, gas and mining
companies are paying their fair. Our legislation would generate more
than $19 billion in all over the next 10 years by closing loopholes
that allow these companies--some of the most profitable companies in
the history of the world--to drill and mine our resources without
paying a dime to the American people.
Our bill would raise roughly $1 billion by encouraging companies to
begin drilling on the leases they already have--just offshore, oil
companies are currently sitting on leases that hold more than 11.5
billion barrels of oil. The legislation would raise more than $9
billion by ending free drilling by Big Oil companies on public lands
offshore in the Gulf of Mexico. It would raise more than $6 billion
over the next 10 years by updating the 1872 mining law that allows
mining companies to extract gold, silver, uranium and other minerals
without paying taxpayers any royalties and through ensuring that
companies pay to clean up their abandoned mine sites.
Big Oil has recorded $101 billion in profits through the first 9
months of this year. These companies aren't just the 1 percent, they're
the one-plus percent. But the Majority still wants to allow these oil
companies to stage an occupy movement off our nation's beaches.
As we look to fund our nation's highways, we don't need more
drilling gimmicks, we need a concrete plan. We can pave the way for a
transportation bill by ensuring that the American people get a proper
return on the resources below public lands.
We are at an intersection for our nation's economic well being. As
we are looking to put American families back to work by funding
transportation projects, the clear place to start is by ending the free
ride for oil and mining companies on public lands.
______

Mr. Lamborn. I now recognize the Chairman of the Full
Committee, Representative Hastings, for 5 minutes for his
opening statement.

STATEMENT OF THE HON. DOC HASTINGS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WASHINGTON

Mr. Hastings. Thank you very much, Mr. Chairman.
Thank you for the courtesy of having me here. Earlier this
month, Speaker Boehner outlined plans for an energy and
infrastructure jobs bill that would link expanded American
energy production with initiatives to repair and improve
infrastructure. This would promote long-term private-sector job
growth and remove barriers that stand in the way of American
energy production. The Natural Resources Committee is doing its
part to advance this effort by moving forward with
consideration of measures under its jurisdiction that will be
included in the Speaker's bill.
The bills before us today are not just energy bills; they
are job bills. Increased energy production is one of the best
ways to help jump start our economy. It will create over a
million energy jobs and thousands of indirect jobs in a variety
of sectors in every State throughout our country. Increased
energy production is one of the easiest ways to generate new
Federal revenue. Through lease sales, bonus bids, and royalties
the Federal Government can raise billions of dollars by
allowing new production on Federal lands and in Federal waters.
Given the tremendous economic benefits, not to mention the
national security implications, there is no reason why we
should not provide access to our own energy resources here.
In contrast to the actions taken by the Obama
Administration with its new 5-year plan, the bill introduced by
Mr. Stivers of Ohio would open new offshore areas for energy
production. These are areas with vast energy resources that are
currently blocked from development.
A majority of Americans support increased offshore
drilling, and the bill includes proposals that have already
received bipartisan support in the House. We should move
forward with a smart plan that allows new drilling to occur in
areas with the greatest energy potential.
And it is well past time to open a small portion, less than
3 percent, of the Arctic National Wildlife Refuge to
responsible energy production. Mr. Young of Alaska and I have
introduced a bill that would do just that. ANWR is the single
greatest opportunity for new energy production on Federal land,
and it was specifically set aside for energy production by
President Carter and Congress in 1980. This Committee has heard
from a bipartisan group of community leaders and elected
officials who all spoke about jobs and economic growth that
ANWR production would provide.
Finally, the PIONEER Act by Chairman Lamborn will allow for
the increased production of our U.S. oil shale resources in the
West. It is estimated that the U.S. has over 1.5 trillion
barrels of shale oil in shale, six times Saudi Arabia's proven
resources. We should develop that potential. These proposals to
allow new offshore and onshore energy production will generate
substantial revenues because these proposals open new areas
that are currently closed to energy production.
As this legislation moves through the regular legislative
process, from hearing today, through markup and so forth, the
exact CBO score will be known. One thing that is certain, doing
nothing will not create any new jobs or generate any new
revenue.
During these difficult economic times, with soaring debts,
soaring debts and deficits, and a highway trust fund that needs
to be replenished, Congress should not pass up this opportunity
to create jobs and generate billions of dollars in new revenue.
The revenue from these projects will make significant
contribution to help fund America's roads and bridges. That is
why it makes sense to link these two issues of energy
production and infrastructure. By increasing energy production,
we create new American energy jobs and also generate revenue
that will help create infrastructure jobs. In short, this
creates jobs and provides important funding without having to
raise taxes on American families and businesses.
So I thank the Subcommittee Chairman Lamborn for holding
this hearing and look forward to working with you as this
process moves forward.
[The prepared statement of Mr. Hastings follows:]

Statement of The Honorable Doc Hastings, Chairman,
Committee on Natural Resources

Earlier this month, Speaker Boehner outlined plans for an energy
and infrastructure jobs bill that would link expanded American energy
production with initiatives to repair and improve infrastructure. This
would promote long-term, private sector job growth and remove barriers
that stand in the way of American energy production.
The Natural Resources Committee is doing its part to advance this
effort by moving forward with consideration of measures under our
jurisdiction that will be included in the Speaker's bill.
The bills before us today are not just energy bills, they are job
bills. Increased American energy production is one of the best ways to
help jumpstart our economy. It will create over a million energy jobs
and thousands of indirect jobs in a variety of sectors in every state
throughout the country.
Increased American energy production is also one of the easiest
ways to generate new federal revenue. Through lease sales, bonus bids
and royalties, the federal government can raise billions in revenue by
allowing new production on federal lands and in federal water.
Given the tremendous economic benefits--not to mention the national
security implications--there is no reason why we should not provide
access to our own energy resources located here at home.
In contrast to the actions taken by the Obama Administration with
its new five year plan, the bill introduced by Rep. Stivers would open
new offshore areas for energy production. These are areas with vast
energy resources that are currently blocked from development. A
majority of Americans support increased offshore drilling and the bill
includes proposals that have already received bipartisan support in the
House. We should move forward with a smart plan that allows new
drilling to occur in areas with the greatest energy potential.
And, it's also well past the time to open a small portion--less
than 3 percent--of the Arctic National Wildlife Refuge to responsible
energy production. Rep. Don Young and I have introduced a bill that
would do just that. ANWR is the single greatest opportunity for new
energy production on federal land and it was specifically set aside for
energy production by President Carter and Congress in 1980. This
Committee has heard from a bipartisan group of community leaders and
elected officials who all spoke about the jobs and economic growth that
ANWR production would provide.
Finally, the PIONEER Act by Subcommittee Chairman Lamborn will
allow for the increased production of our U.S. oil shale resources in
the West. It is estimated that the U.S. has over 1.5 trillion barrels
of oil in shale--six times Saudi Arabia's proven resources. We should
develop that potential.
These proposals to allow new offshore and onshore energy production
will generate substantial revenues -because these proposals open new
areas that are currently closed to energy production. As this
legislation moves through the regular legislative process, from hearing
to markup to the floor, the exact score from CBO will be known.
One thing that's certain, doing nothing will not create any new
jobs or generate any new revenue. During these difficult economic
times, with soaring debts and deficits and a highway fund that needs to
be replenished, Congress should not pass up an opportunity to create
jobs and generate billions in new revenue.
The revenue from these projects will make a significant
contribution to help fund America's road and bridges.
That's why it makes sense to link the two issues of energy
production and infrastructure. By increasing energy production we
create new American energy jobs and also generate revenue that can help
create infrastructure jobs. In short, this creates jobs and provides
important funding without having to raise taxes on American families
and businesses.
I thank Subcommittee Chairman Lamborn for holding this hearing and
look forward to hearing from the witnesses.
______

Mr. Lamborn. Thank you, Mr. Chairman.
And I now recognize the author of the Coal Miner Protection
Act, a member of this Subcommittee, Mr. Johnson of Ohio, for
his opening statement.

STATEMENT OF THE HON. BILL JOHNSON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO

Mr. Johnson. Thank you, Mr. Chairman.
On Monday, I introduced H.R. 3409, the Coal Miner
Employment and Domestic Energy Infrastructure Protection Act.
As we all know, thousands of hard-working coal miners go to
work every day to put food on their families' tables and keep
millions of American families supplied with reliable, low-cost
electricity. The Obama Administration has actively sought ways
to put an end to the coal industry through onerous regulations
and activist rulemaking.
My legislation is short and simple. It would stop the
Secretary of the Interior from issuing any proposed or final
rule that does one of five of the following things: Adversely
impact employment in coal mines in the United States, cause a
reduction in revenue received by the Federal Government by
reducing through regulation the amount of coal in the United
States that is available for mining, reduce the amount of coal
available for domestic consumption or for export, designate any
area as unsuitable for surface coal mining and reclamation
operations or expose the United States to liability for taking
the value of privately owned coal through regulation.
Now, I wish I didn't have to introduce this legislation,
but it is necessary to stop one aspect of the Administration's
continued war on coal. This legislation is in direct response
to a rewrite of a 2008 rule that the Department of the
Interior's Office of Surface Mining and Reclamation and
Enforcement is currently undertaking.
The rule, commonly referred to as the stream buffer zone
rule, was finalized in 2008 after a 5-year process that
included 40,000 public comments, 2 proposed rules, and 5,000
pages of environmental analysis from 5 agencies. The final rule
clarified and codified coal surface mining practices that had
been in effect for over 30 years.
However, on January 20, 2009, the Obama Administration
decided to reopen the carefully crafted rule. This proposed
sweeping regulatory action would radically alter the definition
of a stream as well as how the agency measures material damage
outside of the permit area.
To date, the Administration has provided no written
studies, data, or support to justify these radical changes.
Additionally, several States have expressed serious concerns
about the need and justification for the proposal. According to
the Obama Administration's own independent analysis, the
rewrite of the rule could eliminate up to 27,000 direct and
indirect jobs associated with the coal industry, cut coal
mining production by 50 percent, and increase the cost of
electricity for families and small businesses.
I look forward to the testimony of the gentlemen on the
second panel who were involved in the current rulemaking
process so that they can hopefully shed some light on this
flawed process. I thank the Chairman for having this hearing
today on this very important piece of legislation, and with
that, I yield back the balance of my time.
Mr. Lamborn. Thank you, Mr. Johnson.
I ask unanimous consent that for today's hearing members of
the Full Committee be allowed to sit at the dais and
participate in the hearing.
Hearing no objection, so ordered.
I would like to now invite our witnesses forward, and the
first panel will be Ms. Tara Sweeney, Senior Vice President For
External Affairs, Arctic Slope Regional Corporation; Mr. Mark
Helmericks, founder of Colville, Inc.; Mr. Peter Van Tuyn,
Alaska Wilderness League; The Honorable Frank Wagner, Senator
from the Virginia General Assembly; Mr. Erik Milito, Upstream
Director, American Petroleum Institute; and Ms. Ryan Alexander,
President of Taxpayers for Common Sense.
Like all witnesses, your written testimony will appear in
full in the hearing record, so I ask that you keep your oral
statements to 5 minutes, as outlined in our invitation letter
and under Committee rules. Our microphones are not automatic,
so you have to push the button to start. The green light comes
on at the beginning of your 5 minutes. A yellow light comes on
after 4 minutes, and a red light when your 5 minutes are over.
And Ms. Sweeney, you may begin.

STATEMENT OF TARA SWEENEY, SENIOR VICE PRESIDENT FOR EXTERNAL
AFFAIRS, ARCTIC SLOPE REGIONAL CORPORATION

Ms. Sweeney. [speaking Native American language.]
Honorable Chairman Lamborn and distinguished members of the
Subcommittee, my name is Tara Sweeney, I am an Inupiaq Eskimo
from Barrow, Alaska. I grew up on the cusp of oil discovery and
development in Alaska's Arctic. I remember what it was like to
melt ice blocks just to take a bath because we didn't have
running water. I was 16 years old when we finally had a flush
toilet installed in our house.
Advocating for responsible development of the Coastal Plain
is a second-generation issue for my family. Today, I serve as
the senior vice president of external affairs for Arctic Slope
Regional Corporation or ASRC, owned by 11,000 Inupiaq
shareholders.
ASRC was formed pursuant to the Alaskan Native Claims
Settlement Act of 1971 or ANCSA for the area that encompasses
the entire North Slope of Alaska. ASRC and Kaktovik Inupiat
Corporation, the native corporation for the village of
Kaktovik, own more than 92,000 subsurface and surface acres
respectively in the Coastal Plain. These lands hold significant
potential for onshore oil and gas development. We remain
committed to developing the resources from our land in a manner
that respects our Inupiat subsistence values, protects our
culture, and ensures proper care of the environment, habitat,
and wildlife.
However, as a result of Section 1003 of ANILCA, these
important economic resources remain off limits until further
act of Congress, which is why ASRC supports the Alaskan Energy
for American Jobs Act.
Development of natural resources within wildlife refuges is
not uncommon. For example, the Kenai National Wildlife Refuge
hosted one of Alaska's first oil and gas discoveries and
fields, and exploration and development continues today. We
question the differing standard applied to northern Alaska.
This legislation is aligned with ASRC's mission to enhance
Inupiaq economic opportunities while protecting our cultural
and subsistence freedoms through responsible stewardship of our
natural environment.
The Arctic is an unforgiving climate, home to the Inupiat
and the only village within the boundaries of ANWR, Kaktovik.
Our people subsist off the land and the sea. We would not
support development of the Coastal Plain if it meant or had an
adverse impact on our ability to feed our families with the
nourishment of caribou, fish, fowl, Dall sheep, moose, musk
oxen or marine mammals. No one would suffer greater harm than
our people in the event of mismanagement of our lands.
Today it is possible to develop the Coastal Plain's oil and
gas reserves and allow access to much-needed energy resources
with minimal footprint in the refuge and without any
significant disturbance to wildlife. There are several key
provisions in this legislation that ASRC supports, and I would
like to highlight them:
First, the development and implementation of a competitive
oil and gas leasing program within the Coastal Plain; second,
the repeal of Section 1003 of ANILCA; third, finalizing the
land selections for ASRC and KIC; and, finally, ASRC supports
the provisions included in the legislation that address the
recovery of legal expenses underneath the Equal Access to
Justice Act. We are advocating for equitable accountability for
all parties who choose to exercise litigious options to delay
meaningful energy projects.
It is incumbent upon Congress to take a leadership role in
developing sound energy policy for our Nation. Responsible oil
and gas development of the Coastal Plain could provide safe and
secure sources of energy for the Nation, create important jobs
for Alaskan natives and the country, and help ensure future
flows through the Trans-Alaska pipeline, which is now operating
at only one-third of its capacity. Now is the time for Congress
to act in the best interests of Americans with respect to
domestic energy supply. ASRC stands ready to be part of the
domestic energy solution for Congress.
As I close, let me be very clear: The Coastal Plain is the
place that our people have called home for over 10,000 years.
ASRC would not support development of the Coastal Plain if it
had an adverse impact on our ability to subsist off of the
land. Today, without development in our region, our communities
simply will not survive. Thank you for your time.
[The prepared statement of Ms. Sweeney follows:]

Statement of Tara M. Sweeney, Senior Vice President, External Affairs,
Arctic Slope Regional Corporation

Honorable Chairman Lamborn and distinguished members of the
subcommittee, my name is Tara Sweeney and I am an Inupiaq Eskimo from
Barrow, Alaska. I grew up on the cusp of oil discovery and development
in Alaska's Arctic--I remember what it was like as a child to melt ice
blocks just to take a bath because we didn't have running water. I was
16 years old when we finally had a flush toilet installed in our house.
Advocating for responsible development of the Coastal Plain of ANWR is
a second-generation issue for my family.
Today, I serve as the senior vice president of External Affairs for
Arctic Slope Regional Corporation, or ASRC, and I am here representing
the interests of over 11,000 Inupiaq shareholders of ASRC.
ASRC is an Alaska Native corporation formed pursuant to the Alaska
Native Claims Settlement Act of 1971 (ANCSA) for the area that
encompasses the entire North Slope of Alaska. Shareholders of ASRC
include nearly all residents of eight villages on the North Slope,
Point Hope, Point Lay, Wainwright, Atqasuk, Barrow, Nuiqsut, Kaktovik
and Anaktuvuk Pass.
We are committed to increasing the economic and individual
development opportunities within our region, and to preserving the
Inupiat culture and traditions. By adhering to the traditional values
of protecting the land, the environment, and the culture of the
Inupiat, ASRC has successfully adapted and prospered in an extremely
challenging economic climate.
ASRC owns approximately five million acres of land on Alaska's
North Slope, conveyed to the corporation under ANCSA, as a settlement
of aboriginal land claims. Under the terms of both ANCSA and the Alaska
National Interest Lands Conservation Act of 1980 (ANILCA), the unique
character of these lands, founded in federal Indian law and the most
significant Native claims settlement in U.S. history, must be
recognized by Congress and the Federal government in making any land
management decisions. ASRC lands are located in areas that either have
known resources or are highly prospective for oil, gas, coal, and base
minerals. We remain committed to developing these resources and
bringing them to market in a manner that respects Inupiat subsistence
values and ensures proper care of the environment, habitat and
wildlife.
ASRC and Kaktovik Inupiat Corporation (``KIC''), the Native
Corporation for the Village of Kaktovik, own more than 92,000
subsurface and surface acres, respectively, in the Coastal Plain of the
Arctic National Wildlife Refuge, also commonly known as the 1002 Area.
These lands hold significant potential for onshore oil and gas
development. However, as a result of Section 1003 of ANILCA, these
important economic resources remain off limits until further act of
Congress, which is why ASRC supports the Alaskan Energy for American
Jobs Act.
This important piece of legislation asserts Congressional authority
to open the Coastal Plain for responsible oil and gas exploration and
development, while protecting our Arctic environment. Development of
natural resources within wildlife refuges is not uncommon within the
United States, even in Alaska.
The Kenai National Wildlife Refuge hosted one of Alaska's first oil
and gas discoveries and fields, the Swanson River oilfield, discovered
in 1959 and produced in 1961. Since the Swanson River field
development, there has been a continuous program of exploration and
development within the Kenai National Wildlife Refuge. Most recently on
November 12, 2011, NordAq Energy announced discovery of a huge gas
field in the Kenai National Wildlife Refuge and plans for development
are to begin in 2012. NordAq's exploration activities took place on
leases from another Alaska Native corporation and occurred within the
Kenai National Wildlife Refuge.
Section 1110(b) of ANILCA allows for access to the subsurface in-
holdings of another Alaska Native corporation within the Kenai National
Wildlife Refuge for exploration, testing and development of
hydrocarbons. ASRC has been denied access to our subsurface in-holdings
within the Coastal Plain of ANWR, and we desire parity. This
legislation aims to afford those same opportunities to ASRC through the
repeal of Section 1103 of ANILCA. Further, other national wildlife
refuges around the country contain roads, power lines and other
infrastructure. We question the differing standard applied to Northern
Alaska.
The Alaskan Energy for American Jobs Act is aligned with ASRC's
mission to enhance Inupiaq economic opportunities while protecting our
cultural and subsistence freedoms through responsible stewardship of
our natural environment.
The Arctic is an unforgiving climate, home to the Inupiat, and the
only village within the boundaries of ANWR, Kaktovik. The people of
Kaktovik, or Qaaktugvigmiut, and the broader North Slope Inupiat
community subsist off the land and the sea. We would not support
development of the Coastal Plain if it had an adverse impact on our
ability to feed our families the nourishment of caribou, fish, fowl,
Dall sheep, musk oxen, moose, or marine mammals.
Some have suggested designating the Coastal Plain as
``wilderness'', but Inupiat have called the Coastal Plain home for
thousands of years, and we can hardly be considered a ``visitor''
there. As stated earlier, the area is clearly not one without human
habitation. To say that our homelands, where we have lived and that
have sustained us for thousands of years, are absent of permanent
residents, as if we do not exist--is insulting.
Responsible oil and gas development of the Coastal Plain of ANWR
would provide a safe and secure source of energy to the nation, create
important jobs for Alaska Natives and throughout the country, and help
ensure future flows through the Trans-Alaska Pipeline System, which is
now operating at only one-third of its original capacity. With advances
in technology, it is possible to develop the Coastal Plain's oil and
gas reserves and allow access to much-needed energy resources with
minimal land disturbance in the Refuge and without any significant
disturbance to wildlife. Technological advances have significantly
reduced the ``footprint'' of oil and gas development. Generally
speaking, caribou and other wildlife populations have shown themselves
to be highly adaptive to, and have not been adversely affected by,
people, machines, and appropriate development (including oil and gas
development) in the Refuge or nearby areas.
While we support the Alaskan Energy for American Jobs Act, there
are several key provisions that ASRC would like to highlight. First,
the development and implementation of a competitive oil and gas leasing
program within the Coastal Plain. The federal government has taken a
bipolar approach to responsible energy development in this country.
Elsewhere on the North Slope in the NPR-A, for example, lands are
leased for exploration and never permitted for development, held in
limbo by regulatory agency delay. The implementation of a competitive
oil and gas leasing program on the Coastal Plain of ANWR is a step
closer to increasing domestic oil supply for the benefit of all
Americans.
Second, the repeal of Section 1003 ANILCA, which declares that oil
and gas leasing program to be compatible with the purposes of ANWR.
This is especially important because without this, both ASRC and KIC as
private landholders are refugees on our own lands, with no opportunity
to responsibly develop resources for the benefit of the North Slope,
state of Alaska and the Nation.
Third, we believe it is important under this legislation to
maximize Federal revenues by removing any cloud on title and to clarify
land ownership with respect to remaining conveyances to ASRC and KIC.
It is equally important for ASRC and KIC finalize our lands selections
as provided for under PLO 6969 and the 1983 Agreement between ASRC and
the United States. We applaud this language to finally fulfill our land
selections.
ASRC supports the provisions included in the legislation that
address recovery of legal expenses under the Equal Access to Justice
Act. While the language targets energy legislation, we would support
taking it a step further and support including this provision in any
legislation regarding energy development, not just energy development
in Alaska. Over the past several years we have participated, to various
degrees, in efforts to advance exploration and development of energy
resources in Alaska. Our experience is that energy development
anywhere--not just limited to Alaska--is almost always hindered by the
threat of litigation and the ability of third parties to challenge such
projects--either administratively or in the courts--regardless of
whether the challenges are merited. Unfortunately, in many of these
cases third parties can actually recover their costs, including legal
fees, even if the challenge is not ultimately successful.
We are concerned that there does not appear to be any mechanism
that currently exists to ensure that only legitimate challenges are
prosecuted. As a consequence, significant damages can and do occur as a
result of delays in the process, even when claims in litigation are
ultimately rejected by a court. This currently happens all the time
with respect to development in Alaska, and we expect that it will
happen even more frequently as efforts continue to develop resources in
ANWR, NPR-A, and on the Outer Continental Shelf (OCS).
We urge Congress to consider adopting provisions to ensure that
plaintiffs consider the merits of their arguments before they pursue an
administrative or judicial challenge to an energy development project.
Options could include requiring that such plaintiffs post a bond as
part of a challenge to an energy development project, and that they
forfeit the bond if their challenge is ultimately unsuccessful. Another
option would be legislation that precludes third parties from
recovering costs or legal fees--under the Equal Access to Justice Act
or otherwise--that such third party incurs in bringing a judicial
challenge to an energy development project. We are advocating for
equitable accountability for all parties who choose to exercise
litigious options to delay meaningful energy projects. Project delays
of responsible oil and gas development in the Arctic have real-life
implications for our people, like threatening the sustainability of
providing running water and flush toilets in our communities, local
education for our children, or health care facilities, and police and
fire protection for our residents.
Finally, in addition to the provisions we support in the Alaskan
Energy for American Jobs Act, we would like to raise the issue of the
necessity of acquiring new seismic data for Coastal Plain resources.
Under the Act, future lease sales in the Coastal Plain would
necessitate seismic exploration activity to identify areas most
promising for recovery of hydrocarbons. While we advocate the opening
of the Coastal Plain for leasing we also advocate keeping surface
impacts to a minimum. We believe the interest in the hydrocarbon
potential under the Coastal Plain could lead to multiple seismic
programs in order for companies to collect current data using current
technologies for evaluation. We would propose that single seismic be
conducted prior to leasing in a manner that allows for community
stewardship combined with equipment and procedures focused on
assessment with minimal impact of such a program.
It is important to remember that the Coastal Plain of ANWR is the
very place that our people have called home since time immemorial, and
it continues to provide the resources that support our survival. In
addition to the substantial potential value that responsible
development of the area's natural resources holds for our people, the
land and its resources are essential to our subsistence way of life. It
bears repeating that ASRC would not support development of the Coastal
Plain if it had an adverse impact on our ability to subsist off the
land.
It is incumbent upon Congress to take a leadership role in
developing sound energy policy for our nation. The federal government
continues to send mixed messages about domestic energy production, and
now is the time for Congress to act in the best interests of Americans
with respect to domestic energy and energy supply. ASRC stands ready to
be part of the domestic energy supply solution for Congress. Thank you
for allowing ASRC to comment on this legislation.
______

Mr. Lamborn. Thank you for your testimony, and I stand
corrected on the pronunciation of your name, Tara.
Next I would like to invite to speak Mr. Helmericks.

STATEMENT OF MARK HELMERICKS,
FOUNDER OF COLVILLE, INC., COLVILLE VILLAGE

Mr. Helmericks. Chairman, Ranking Member Markey, members of
the Committee, for the record my name is Mark Helmericks. I am
a resident of the North Slope Borough of Alaska. I can't quite
trace my roots back 10,000 years, but I can trace my roots back
to 1947, when my father canoed down the Colville River and
established a homestead on the edge of the Arctic Ocean.
In my written testimony, I wrote that I was born, raised,
home-schooled and worked my entire life there. I need to
clarify that I was not quite born there, but almost. My parents
were living in a snow-walled tent on the edge of the ocean when
my mother went into labor. My father, being a bush pilot, put
her in the airplane and started flying her south to the nearest
hospital, but since that was 500 miles away and it was winter
in May, when my mother was in labor, and it was springtime/
summer in Fairbanks, so my father, whose airplane was on skis,
he had to not only load his pregnant wife in the airplane but
also a change of landing gear. So he flew halfway to Fairbanks,
landed on a glacier, took the skis off, put the wheels on, flew
to Fairbanks, had the baby, spent about 10 days in Fairbanks.
Meanwhile, spring arrived on the North Slope, the snow melted,
so my father then had to take the wheels off, put the airplane
on pontoons, and fly home, so in my father's log book for my
birth, it records: 1,000 miles flown, three changes of landing
gear, one baby delivered, mission accomplished.
So I have been there for a long time, 53 years. I grew up
eating caribou meat. I have spent a lot of time in ANWR. It is
a gorgeous place. It is worthy of our serious and careful
consideration. I climbed Mount Chamberlin for my 40th birthday.
That is the highest peak in ANWR. And I consider Lake Schrader,
that big hourglass lake in ANWR, my favorite place to go
fishing.
This bill is about American jobs and American energy, and I
have worked many jobs in Alaska. I have been a subsistence
hunter, a commercial fisherman, a logger, a truck driver, a
bush pilot. I now own a solid waste and industrial supply
company. That is the Colville that is before you right now. I
could tell you that the jobs in the oil industry are by far the
best. They pay over twice the average of Alaskan jobs. They are
safe. They are long term. They are progressive.
I have two children, a boy and a girl, and the oil industry
is a career choice that I can recommend to my son, and it is
also a career choice I can recommend to my daughter.
Alaska has a world class oil infrastructure in place. We
are fretting a little bit about losing our place in the
competitive league, you know, in the world, and there is a few
things where America still stands head and shoulders. And oil
is one of them, and Alaska is one of the best of the best. It
is not perfect, but we have really worked very hard to do it
right. And I am proud of the record that we have established up
there.
But we are only running at one-third capacity. Right now we
have a lot of unemployed people. We have this industry in
Alaska that is only one-third utilized. If you take a look at
Prudhoe Bay, it is a State enclave, and it is landlocked by
Federal properties. If you go to the west, there is NPRA. If
you go to the north, there is Outer Continental Shelf. If you
go to the east, there is ANWR. So we really need a State-
Federal partnership to proceed from this point forward, and I
think that is why we are respectfully here asking for your
assistance.
In short, to keep the industry from slowly dying on the
vine from under capacity, we need Federal oil. And by giving
the Alaskan industry access to Federal oil, we also create
excellent jobs, really good, blue-collar jobs. We also create a
good stream of money into the Federal Treasury, and taking a
look at the Federal deficit, I think a little bit of positive
cash flow into the Treasury would be welcome.
I thank you for the opportunity to appear here today, and I
welcome any questions that you might have.
[The prepared statement of Mr. Helmericks follows:]

Statement of Mark Helmericks, Founder of Colville, Inc.,
Colville Village, Alaska

Dear Chairman Hastings, Ranking Member Markey, and Members of the
Committee,
For the record, my name is Mark Helmericks. I am a resident of the
North Slope Borough of Alaska.
Thank you for the invitation to appear before your Committee and
offer testimony on H.R. 3470. Our country is experiencing a bit a
slump, and with people needing good jobs, I am glad to assist in wise
and effective actions that help bring work to our citizens. Making oil
Federal oil reserves available for Alaska's petroleum industry is one
of the best such actions I know of.
First, a bit of background on myself. You will hear many
statistics, studies, and positions from well qualified specialists and
experts. I do not have these abilities. Today, I'm only going to speak
of things I have seen with my own eyes, or done with my own hands.
Politically speaking, I'm non-partisan and philosophically consider
myself an environmentalist.
I have been a resident of Alaska's North Slope for 53 years. In
short, my entire life. I was born, raised, home schooled, and have
worked nearly my whole career in this region. I grew up eating caribou
meat. My family traces its roots back even farther, into the 1940's,
when my father canoed down the Colville River and homesteaded land at
the edge of the Arctic Ocean. I have spent many days in the Arctic
National Wildlife Refuge. In fact, I climbed Mt Chamberlain, the
highest peak, for my 40th birthday, and Lake Schrader remains my
favorite place to go fishing. I have seen that care of the environment
and oil production can, and do, co-exist.
I have worked a number of different jobs, including being a
subsistence hunter, a commercial fisherman, a logger, a truck driver, a
bush pilot. I now own a solid waste and industrial supply company. The
work in the oil industry has been the best, by far. It is well paid, at
nearly twice the average wage in Alaska, stable, and safe. Staff is
trained continuously throughout their career. It is progressive. As a
father with twin children, it a place I can recommend as a career
choice for my son. And for my daughter.
Alaska has a world-class oil industry infrastructure. But it is
only running a 1/3 capacity. We could literally ship another million
barrels a day if there was access to the resource. Due to the
circumstances of land ownership in Alaska, the overwhelming majority of
new reserves are under Federal control. Nearly all the Arctic oil
development to date has been with State reserves. But to keep the
investment from dying from undercapacity, and bring benefits to America
like well paying long term jobs, we are respectfully asking for access
to Federal oil.
I thank you for the honor of appearing before you today, and I
welcome any questions you have.
______

Mr. Lamborn. All right, thank you.
Mr. Van Tuyn.

STATEMENT OF PETER VAN TUYN, ALASKA CONSERVATIONIST AND
ENVIRONMENTAL ATTORNEY, BESSENYEY & VAN TUYN

Mr. Van Tuyn. Mr. Chairman, thank you for inviting me to
testify on H.R. 3407, the latest in a long line of bills to
drill the Arctic National Wildlife Refuge.
For over 50 years, the Arctic Refuge has embodied the heart
of the public land legacy that leaders from both political
parties have provided for present and future generations. These
leaders recognized the importance of balancing the responsible
development of public lands with the protection of places that
are simply too special and sensitive to develop.
H.R. 3407 would break this legacy. I oppose it and ask
instead that you join the nearly 1 million people from every
State in this union who just this past week expressed to our
government that no oil drilling should take place in the Arctic
Refuge and that, instead, it should be protected as designated
wilderness.
One of the most misleading claims made about previous
Arctic Refuge drill bills was that impacts would be limited to
2,000 acres of the Coastal Plain. This loophole-ridden
provision did not mean much because it would have opened the
entire 1.5 million acre Coastal Plain to leasing and
exploration, and wells could have been drilled anywhere on that
Coastal Plain.
Twenty oil field developments and all their road and
pipeline connections could be spread like a web across the
entire area and still comply with the bills that included this
provision.
Nevertheless, the sponsors of those bills pointed to that
provision to assert that they were at least somewhat sensitive
to the impact of industrial sprawl on the land.
H.R. 3407 gives up any pretense of such sensitivity. Like
previous drill bills, it opens the entire Coastal Plain to oil
activities. Doing away with the 2,000 acre provision, it would
allow coverage of as much as 10,000 acres for every 100,000
acres leased or 150,000 of the Coastal Plain's 1.5 million
acres. The bill would thus allow for vast year-round industrial
complexes on the refuge.
The bill also contains numerous provisions that exempt or
otherwise limit the application of environmental laws and the
check on executive decisions provided by the judiciary. Taken
as a whole, H.R. 3407 would subject our Nation's wildest refuge
to the weakest program of drilling regulation on Federal lands
in the United States.
And what do the experts say about the impact that oil
drilling would have on the refuge? Over 1,000 scientists wrote
and said the Coastal Plain is uniquely sensitive to
disturbance, making it virtually impossible to mitigate the
effects of oil development. If oil development proceeds, much
of the wildlife, water, and cultural resources for which the
Arctic Refuge was established would be severely diminished or
lost.
And those impacts occur under the best of situations. This
was the headline in the Anchorage Daily News 2 days ago,
``Prosecutors Aim to Revoke BP Probation.'' In the article the
prosecutors are quoted as saying that BP's choices have been
reckless, and further violations of State and Federal law are
the result.
Unfortunately, we also take reckless actions as a
government. Recently, Interior approved Shell's Beaufort Sea
exploration plan, and appears poised to do so in the Chukchi.
In its recent leasing program decision, Interior chose not to
offer leases off the Atlantic, due in part to a lack of oil-
spill-response infrastructure there, a prudent decision given
the BP spill in the heavily industrialized Gulf of Mexico. Yet
the Arctic has an absolute desert of infrastructure compared to
the Eastern seaboard, and we think it is OK to drill there
without addressing that problem?
H.R. 3407 would expand such recklessness to the Arctic
Refuge, and for what benefit? Job claims for the Refuge are way
overblown. Our current industry employs less than 17,000 people
while drilling proponents claim 60,000 jobs from drilling the
Refuge. The reality is that despite record profits and more
development of oil and gas in the U.S. than at any other time
in our history, the oil industry has discarded 12,000 workers
in recent years.
Benefits to the Treasury are also based on wildly
speculative numbers, a fictional 33 percent tax rate, which in
reality is under 16 percent, and assume a 50/50 split of
revenue with the State of Alaska, something which Alaska
politicians say should be 90/10 in favor of Alaska and which
they would sue over.
No, the real answer to our economic and energy challenges
lies not in the past but in the future. Since we know oil will
run out, why don't we seize the opportunity to think big and
deliver even bigger? Think the Manhattan Project for
alternative energy. The United States is an incredible country
made up of inventive and intelligent people. Why are we so
pessimistic that we cannot solve our energy challenges, put
people to work, and benefit the economy at the same time?
Rather than pass the buck to future generations, let us seize
the day. And what better way to express optimism for this
result than to lay aside this tired Refuge drilling debate and
protect America's wildest refuge for generations to come.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Van Tuyn follows:]

Statement of Peter Van Tuyn on behalf of the Alaska Wilderness League

Thank you for the opportunity to testify to the Subcommittee on
Energy and Mineral Resources on H.R. 3407, the ``Alaskan Energy for
American Jobs Act,'' which would open the Coastal Plain of the Arctic
National Wildlife Refuge to oil and gas leasing and development.
Drilling the Arctic Refuge is not a meaningful solution to economic or
energy challenges facing the United States, and serves as a distraction
to real solutions. Rather than revisit the failed efforts of the past,
the subcommittee should reject this effort to drill the Arctic Refuge,
and instead should pass legislation designating the Coastal Plain as
formal Wilderness.
The Arctic National Wildlife Refuge is our nation's wildest Refuge,
and for over 50 years has embodied the heart of the public land legacy
our forefathers have provided for this and future generations. The
Arctic Refuge holds its iconic place atop our public lands for good
reason. As the Interior Department states, the ``Arctic National
Wildlife Refuge supports the greatest variety of plant and animal life
of any Park or Refuge in the circumpolar arctic'' i and the
Coastal Plain of the Arctic Refuge is the ``most biologically
productive part of the Arctic Refuge for wildlife and is the center for
wildlife activity.'' ii The Coastal Plain also has
``outstanding wilderness qualities'' and important scientific values,
especially in the age of global warming. iii
---------------------------------------------------------------------------
\i\ FWS, Arctic Refuge, Wildlife And Habitats, http://www.fws.gov/
refuges/profiles/WildHabitat.cfm?ID=75600.
\ii\ U.S. Department of the Interior, Arctic National Wildlife
Refuge, Alaska, Coastal Plain Resource Assessment, Report and
Recommendation to Congress and Final Legislative Environmental Impact
Statement (1987) (FLEIS) at 46. This 1987 report came about due to
Section 1002 of ANILCA, which mandated that the Interior Department
conduct a ``comprehensive and continuing inventory and assessment of
the fish and wildlife resources of the coastal plain of the Arctic
National Wildlife Refuge.'' 16 U.S.C. 3142(a).
\iii\ FLEIS at 46.
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For thousands of years the Inupiat Eskimo and Gwich'in Athabaskan
people of the Arctic have relied for subsistence on resources from the
Arctic Refuge, including caribou and other mammals and birds.
iv Notably, the Gwich'in rely physically, culturally and
spiritually on the Porcupine Caribou Herd, and consider the Coastal
Plain of the Arctic Refuge--which serves as the calving ground for this
herd--as ``the sacred place where life begins.'' v
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\iv\ Committee On Resources, U.S. House Of Representatives, H.R.
39, Arctic Coastal Plain Domestic Energy Security Act Of 2003; And H.R.
770, Morris K. Udall Arctic Wilderness Act, Legislative Field Hearing,
Kaktovik, Alaska, Serial No. 108-13, 108th Congress, 1st Sess. (April
5, 2003) (testimony of Robert Thompson).
\v\ Gwich'in Steering Committee, et al., A Moral Choice for the
United States; The Human Rights Implications for the Gwich'in of
Drilling in the Arctic National Wildlife Refuge at iii (2005), http://
www.gwichinsteeringcommittee.org/GSChumanrightsreport.pdf; see also
Arctic National Wildlife Refuge, Alaska: Hearings Before the Committee
on Energy & Natural Resources of the United States Senate, 100th Cong.
at 313 (1987) (Tanana Chiefs Conference, Inc., Resolution No. 87-65)
(noting that Arctic Village, Venetie, and Old Crow ``are extremely
dependent upon the population and distribution of the Porcupine Caribou
herd as a matter of economics, nutrition, and cultural heritage[.]'')..
---------------------------------------------------------------------------
Just three days ago, nearly one million people submitted comments
to the U.S. Fish and Wildlife Service asking that the Coastal Plain be
kept off-limits from oil and gas development. These included people
from every State in the country, including in Alaska, nearly 75 Members
of Congress from both chambers, faith communities, scientists, birders,
and well over 1,000 businesses.
Oil drilling on the Coastal Plain of the Arctic Refuge would
irreparably damage the unparalleled wildlife values and wilderness
character of the Refuge. vi The impacts of oil drilling may
also deprive the Gwich'in people of their means of subsistence,
resulting in economic, social, and cultural impacts in violation of
fundamental human rights. The drilling program in H.R. 3407 proves no
exception to this general point. And as is discussed below, H.R. 3407
abandons the hollow ``environmentally sound'' drilling promise of prior
Arctic Refuge drill bills. It opens the door to what could be direct
development on tens if not hundreds of thousands of acres of the
coastal plain, and does away with fundamental checks and balances so
important in our system of government by exempting or severely limiting
the application of environmental and judicial review laws.
---------------------------------------------------------------------------
\vi\ See, e.g., Arctic Refuge Coastal Plain Terrestrial Wildlife
Research Summaries, Biological Science Report, USGS/BRD/BSR -2002-0001
(detailing impacts on wildlife); FLEIS at 46, 144.
---------------------------------------------------------------------------
As is also detailed below, H.R. 3407's justification for drilling
the Refuge--that the United States needs to drill the Refuge for the
oil it may contain, the money it may bring in, and the jobs it may
support--are not supported in fact. The United States would be better
served by investing in alternative energy programs, which can address
economic, jobs and energy issues, without sacrificing our public lands
legacy.
Again, the subcommittee should reject this bill, and instead
support designated Wilderness for the Coastal Plain.
The Values of the Arctic Refuge
Any discussion of the Arctic Refuge Coastal Plain must start with
its incredible values. It is in the Arctic National Wildlife Refuge
that the tallest peaks of the Brooks Range exist; rising from the
Arctic Ocean across a 15 to 40 mile wide coastal plain to 9,000 feet.
Snow melt that flows north down these mountains through the spring and
summer feeds rivers that move from the mountains, across the coastal
plain, to the Arctic Ocean's Beaufort Sea. vii The coastal
plain itself is tundra, with communities of mosses, lichens, dwarf
shrubs, berry plants and wildflowers.
---------------------------------------------------------------------------
\vii\ See U.S. Fish and Wildlife Service, Arctic National Wildlife
Refuge, http://www.fws.gov/refuges/profiles/index.cfm?id=75600; http://
arctic.fws.gov/.
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The Arctic Refuge hosts a huge range of wildlife species, including
36 species of fish, 36 species of land mammals, nine species of marine
mammals, and over 160 different species of birds. viii
Perhaps the most celebrated coastal plain wildlife are the caribou of
the Porcupine herd.
---------------------------------------------------------------------------
\viii\ FWS, Arctic Refuge, Wildlife, http://arctic.fws.gov/
wildlife.htm.
---------------------------------------------------------------------------
The Porcupine Caribou herd is named for the Porcupine River, which
the herd crosses on its annual migration from wintering grounds in the
United States and Canada south of the Brooks Range to its summer
grounds on the coastal plain of the Arctic Refuge 400 miles away.
ix Some individual caribou travel as much as 3,000 miles
during this round-trip migration, thus making the largest migration of
any land mammal in the world. This herd moves to the coastal plain for
calving and post-calving habitat. Giving birth to tens of thousands of
calves in a two week period--most within a few days--the herd uses the
coastal plain for its nutritious protein-rich plants, and as insect-
relief habitat. x During calving on the coastal plain,
``[a]dult females are at the lowest ebb of their physical condition''
and ``no alternative habitats are apparently available.'' xi
Mid-summer Porcupine herd congregations on the coastal plain can total
tens of thousands of individual animals. xii
---------------------------------------------------------------------------
\ix\ State of Alaska Department of Fish and Game, http://
www.adfg.alaska.gov/index.cfm?adfg=caribou.main; http://www.taiga.net/
top/caribou.html; United States Geological Survey, http://
alaska.usgs.gov/BSR-2002/pdf/usgs-brd-bsr-2002-0001-sec03.pdf
(including map of range of Porcupine Caribou Herd).
\x\ USGS, http://alaska.usgs.gov/BSR-2002/pdf/usgs-brd-bsr-2002-
0001-sec03.pdf. In years when the Porcupine herd did not make it to the
coastal plain to calve (prevented, for example, by high water river
crossings or deep snows), they subsist on less nutritious plants. See
id.; see also http://arctic.fws.gov/caribou.htm.
\xi\ International Porcupine Caribou Management Board, Sensitive
Habitats Of The Porcupine Caribou Herd 14 (January 1993).
\xii\ FWS, Arctic Refuge, Caribou, http://arctic.fws.gov/
caribou.htm.
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Millions of birds from throughout the world also come to the
coastal plain of the Arctic Refuge in the summer. Here they nest, rest,
feed, or raise their young. Some of the remarkable bird species of the
coastal plain are the golden plover, which migrates to the coastal
plain from Hawaii, the Arctic tern, which coming to the arctic from
Antarctica has the longest migration in the animal world, and literally
dozens of waterfowl. xiii
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\xiii\ FWS, Arctic Refuge, birds, http://arctic.fws.gov/
birdlist.htm ; Audubon, From the Arctic to your backyard, http://
www.protectthearctic.com/history_migrate.html; Encyclopedia Britannica
Online, golden plover, .htm http://www.britannica.com/eb/topic-237742/
golden-plover; About.com, Arctic Tern, http://birding.about.com/
library/weekly/aa020700a.htm.
---------------------------------------------------------------------------
During the short but intense summer, wildlife is ever-present on
the coastal plain, yet it is not devoid of wildlife in other seasons.
For example, muskoxen spend time year-round on the coastal plain.
xiv Muskoxen, once extinct in America's Arctic, were re-
introduced in the Arctic Refuge in 1969. Renowned for their prehistoric
look and long, soft, fur called quivut, muskoxen also have a dramatic
defense technique against predation; they form a tight circle with
their sharp horns facing outward.
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\xiv\ FWS, Arctic Refuge, Musk Ox, http://arctic.fws.gov/
muskox.htm.
---------------------------------------------------------------------------
Historically, the ``Arctic Refuge is the only national conservation
area where polar bears regularly den and [it is] the most consistently
used polar bear land denning area in Alaska.'' xv As such,
the coastal strip of the Arctic Refuge is the most important land
denning area for polar bears in Alaska. xvi And polar bears
are also increasingly using the Refuge's coast in seasons other than
winter. One recent survey found as many as 200 polar bears on land from
Point Barrow to the Canadian border to the east, most within the Arctic
Refuge, during the ice-free season. xvii
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\xv\ FWS, Arctic Refuge, Bears, http://arctic.fws.gov/bears.htm;
Amstrup, S.C. 2002. Movements and population dynamics of polar bears.
Pages 65-70 in D.C. Douglas, P.E. Reynolds, and E.B. Rhode, editors.
Arctic Refuge coastal plain terrestrial wildlife research summaries.
U.S. Geological Survey, Biological Resources Division, Biological
Science Report USGS/BRD/BSR-2002-0001; see also FWS, Arctic Refuge,
Polar Bear Denning (maps of denning sites), http://arctic.fws.gov/
pbdenning.htm.
\xvi\ U.S. Fish and Wildlife Service, A Preliminary Review of the
Arctic National Wildlife Refuge, Alaska Coastal Plain Resource
Assessment: Report and Recommendation to the Congress of the United
States and Final Legislative Environmental Impact Statement at 7
(1995).
\xvii\ Jim Carlton, Is Global Warming Killing the Polar Bears?,
Wall Street Journal (December 14, 2005), http://
www.stopglobalwarming.org/news/is-global-warming-killing-the-polar-
bears/.
---------------------------------------------------------------------------
All of this led the Interior Department to state that the ``Arctic
National Wildlife Refuge supports the greatest variety of plant and
animal life of any Park or Refuge in the circumpolar arctic''
xviii and the coastal plain of the Arctic Refuge is the
``most biologically productive part of the Arctic Refuge for wildlife
and is the center for wildlife activity.'' xix Stating the
obvious, the Interior Department has also found that nearly the entire
coastal plain area meets the wilderness criteria under the 1964
Wilderness Act. xx
---------------------------------------------------------------------------
\xviii\ FWS, Arctic Refuge, Wildlife And Habitats, http://
www.fws.gov/refuges/profiles/WildHabitat.cfm?ID=75600.
\xix\ FLEIS at 46.
\xx\ FLEIS at 46.
---------------------------------------------------------------------------
Though primarily marine mammal hunters, the Inupiat people of the
Arctic--especially those in Kaktovik which is on the northern border of
the Refuge--also use resources from the Arctic Refuge, including
caribou and other mammals and birds. xxi Living in villages
along the migratory path of the Porcupine Caribou herd, the Gwich'in
people of northeastern Alaska and northwestern Canada rely physically,
culturally and spiritually on the Porcupine herd. xxii
Because of their deep reliance on the Porcupine herd, the Gwich'in
consider the coastal plain the ``Sacred Place Where Life Begins.''
---------------------------------------------------------------------------
\xxi\ Committee On Resources, U.S. House Of Representatives, H.R.
39, Arctic Coastal Plain Domestic Energy Security Act Of 2003; And H.R.
770, Morris K. Udall Arctic Wilderness Act, Legislative Field Hearing,
Kaktovik, Alaska, Serial No. 108-13, 108th Congress, 1st Sess. (April
5, 2003) (testimony of Robert Thompson), http://bulk.resource.org/
gpo.gov/hearings/108h/86329.pdf.
\xxii\ Gwich'in Steering Committee, et al., A Moral Choice for the
United States; The Human Rights Implications for the Gwich'in of
Drilling in the Arctic National Wildlife Refuge at iii (2005), http://
www.gwichinsteeringcommittee.org/GSChumanrightsreport.pdf; see also
Arctic National Wildlife Refuge, Alaska: Hearings Before the Committee
on Energy & Natural Resources of the United States Senate, 100th Cong.
at 313 (1987) (Tanana Chiefs Conference, Inc., Resolution No. 87-65)
(noting that Arctic Village, Venetie, and Old Crow ``are extremely
dependent upon the population and distribution of the Porcupine Caribou
herd as a matter of economics, nutrition, and cultural heritage[.]'')..
---------------------------------------------------------------------------
The Arctic Refuge, encompassing as it does both arctic and sub-
arctic ecosystems, also offers an unparalleled opportunity for
scientific research. This is an especially critical role, as oil and
gas activities in other parts of America's Arctic impact that habitat,
and as global warming causes changes throughout the arctic. As the
experts state, without an environmental baseline such as that provided
by the Arctic Refuge it is difficult to gauge the effects on the Arctic
of various human or environmentally-caused changes. xxiii
---------------------------------------------------------------------------
\xxiii\ Arctic Council Report, Impacts on Porcupine caribou herd
graph (Graphset 3 at 4); U.S. Geological Survey, Arctic Refuge Coastal
Plain, Terrestrial Wildlife Research Summaries, USGS/BRD/BSR-2002-0001
at 11-15 (Reston, Virginia: 2002); International Porcupine Caribou
Management Board, Sensitive Habitats of the Porcupine Caribou Herd at
14 (January 1993).
---------------------------------------------------------------------------
H.R. 3407--A Drilling Disaster for the Arctic Refuge
One of the most fundamental, and misleading, claims made about
previous Arctic Refuge drill bills was that they would only allow oil
and gas development on 2,000 acres of the Coastal Plain. This provision
did not mean much because all the bills would have opened the entire
1.5 million acre Coastal Plain to leasing and exploration, and
exploration and production wells could be drilled anywhere on the
Coastal Plain. xxiv For example, 20 Alpine-size developments
and all their connections, spread across the coastal plain, could fit
through the loopholes in that provision. Nevertheless, the sponsors of
those bills pointed to that provision to assert that they were at least
somewhat sensitive to the impact of industrial sprawl on the land.
---------------------------------------------------------------------------
\xxiv\ See e.g., Section 7(a)(3), H.R. 5429 (109th Congress).
---------------------------------------------------------------------------
H.R. 3407, on the other hand, gives up any pretense of such
sensitivity. Like previous drill bills, it opens the entire Coastal
Plain to leasing and exploration, and exploration and production wells
could be drilled anywhere on the Coastal Plain. Section 4. Yet it does
away with the 2,000 acre provision in favor of one that would allow
coverage of as much as 150,000 acres of the Coastal Plain under the
same loophole-ridden standard. Section 7(a)(3). To put this in context,
the existing oil industry on the State lands of the North Slope
consists of a web of development the size of Rhode Island that can be
seen from space, and directly covered approximately 17,500 acres in
2001. National Academy of Sciences North Slope Report (2003).
And it does not stop there. Any bill that allows leasing and oil
production on the Coastal Plain of the Arctic Refuge could potentially
open over 92,000 acres of subsurface land within the Coastal Plain of
Arctic Refuge to which Arctic Slope Regional Corporation (``ASRC'')
obtained the subsurface rights. xxv While these lands are
currently--and have always been--closed to oil and gas leasing and
development, in the event that Congress passes an Arctic Refuge drill
bill these lands will also be opened. ASRC acquired the rights to this
subsurface estate in a controversial Watt-era land exchange, pursuant
to which it traded its surface rights in Gates of the Arctic National
Park for subsurface rights to 92,160 acres under the Arctic Refuge.
This land trade occurred behind closed doors and flew in the face of
the Alaska Native Claims Settlement Act's (``ANCSA'') intent to
prohibit subsurface selection within National Wildlife Refuges.
xxvi In 1989, the General Accounting Office found, after the
fact, that this land exchange was not in the interest of the United
States. The terms of this transfer specifically prohibited leasing and
development of these lands for oil and gas unless the Federal
government authorizes leasing or development in the Coastal Plain, on
these lands, or both. xxvii Consequently, opening up the
Coastal Plain to oil and gas leasing and development also allows
leasing and development of nearly 100,000 acres of ASRC lands within
the Coastal Plain. xxviii
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\xxv\ For more information about ASRC lands with the Arctic Refuge,
see Pamela Baldwin, CRS Memorandum re: Arctic Slope Regional
Corporation Lands and Interests within the Arctic National Wildlife
Refuge (April 22, 2002).
\xxvi\ See Pamela Baldwin, Legal Issues Related to Proposed
Drilling for Oil and Gas in the Arctic National Wildlife Refuge (ANWR),
CRS Report RL31115 at 15 (May 4, 2005).
\xxvii\ Agreement between Arctic Slope Regional Corporation and the
United States of America (Aug. 9, 1983), Appendix 2: Land Use
Stipulations ASRC Lands, Kaktovik, Alaska at 6.
\xxviii\ Chevron Texaco and BP currently hold lease agreements for
these lands. See Arctic Slope Regional Corporation, Oil, http://
www.asrc.com/Lands/Pages/Oil.aspx.
---------------------------------------------------------------------------
Therefore, H.R. 3407, if passed into law, would allow for vast
industrial complexes along and within the borders of the Arctic Refuge,
including production sites, airports, permanent gravel roads, and
pipelines. These facilities operate year-round, with vehicle traffic,
production plant noise, helicopter and airplane traffic, and air and
water pollution.
And, as we know, oil production is preceded by exploration. Seismic
exploration activities are conducted using convoys of bulldozers and
``thumper trucks'' that travel over extensive areas of the tundra.
Newer 3-D seismic surveys on the North Slope deploy more vehicles than
older 2-D seismic surveys, including heavy vehicles used for ``cat-
train'' camp hauling, and make a tighter grid profile than 2-D seismic
surveys. xxix Exploratory oil drilling uses large drill
rigs, convoys and aircraft. Not only are these activities intrusive,
but surface exploration activities--which are employed year after year
throughout the life of the oil field--can cause severe and long lasting
damage to the land. xxx
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\xxix\ See U.S. Fish and Wildlife Service, Potential impacts of
proposed oil and gas development on the Arctic Refuge's coastal plain:
Historical overview and issues of concern (Jan. 17, 2001), available
at: http://arctic.fws.gov/issues1.htm; Janet C. Jorgenson, J.M. Ver
Hoef, and M.T. Jorgenson, Long-term recovery patterns of arctic tundra
after winter seismic exploration, Ecological Applications, 20(1) at
218, 219 (2010).
\xxx\ See Janet C. Jorgenson, Long-term recovery patterns of arctic
tundra after winter seismic exploration, Ecological Applications, at
219-20 (discussing the still evident impacts from exploration
activities that occurred in the Arctic Refuge the mid 1980's).
---------------------------------------------------------------------------
Even if exploration activities are only conducted in the winter--
something not required by H.R. 3407 (see Section 6)--the activities
still pose many threats. The Coastal Plain is the most important land
denning area for U.S. populations of polar bears, which are now listed
as a threatened species under the Endangered Species Act (``ESA''),
xxxi and much of the Coastal Plain was recently designated
as Critical Habitat under the ESA for this northern bruin.
xxxii Winter exploration activities can disturb polar bears
from their maternity dens, as was witnessed at the Alpine oil field in
March of 2006 xxxiii and this spring at the Nikaitchuq
field, xxxiv which may expose cubs to increased abandonment
and mortality. xxxv These exploration activities can also
impact other year-round Coastal Plain residents such as muskoxen.
---------------------------------------------------------------------------
\xxxi\ 73 Fed. Reg. 28,212 (May 15, 2008).
\xxxii\ 75 Fed. Reg. 76,086 (Dec. 8, 2010).
\xxxiii\ Department of the Interior, Office of the Solicitor,
Alaska Region, Notice of Violation issued to Conoco Phillips Alaska,
Inc. (July 31, 2007).
\xxxiv\ See Jackie Bartz, Denning Polar Bears Wake Up to New Oil
Drilling Station, KTUU-TV, Channel 2 News (April 11, 2011).
\xxxv\ See Rachel D'Oro, Polar Bear Cub Rescued at Alaska Oil
Field, Fairbanks Daily News-Miner (April 29, 2011).
---------------------------------------------------------------------------
These are the realities that led the National Academy of Sciences
to conclude its 2003 review of existing data concerning the cumulative
effects of oil and gas activities on Alaska's North Slope with a
section titled ``The Essential Trade-Off.'' In that section the NAS
addressed whether oil drilling and a pristine environment can co-exist,
and concluded that the answer is no:
The effects of North Slope industrial development on the
physical and biotic environments and on the human societies
that live there have accumulated, despite considerable efforts
by the petroleum industry and regulatory agencies to minimize
them. . .. Continued expansion is certain to exacerbate some
existing effects and to generate new ones. . ..
xxxvi
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\xxxvi\ NAS Report at 21.
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All of these facts demonstrate that oil and gas activity on the Coastal
Plain would cause significant impacts to wildlife and subsistence
resources within the Arctic Refuge, and destroy the wilderness
qualities of the Coastal Plain.
And those impacts occur when all the laws are followed, which is
not always the case. Two days ago Anchorage residents woke to the
headline in the Daily News that ``Prosecutors aim to revoke BP
probation.'' BP has been on probation for environmental crimes in
Alaska's oil fields as a result of a massive 2006 oil spill there. The
United States is seeking to revoke BP's probation because of another
spill in 2009. Prosecutors stated that
The 2009 spill vividly demonstrates that BP has not adequately
addressed the management and environmental compliance problems
that have plagued it for many years, and that continue to
result in operational, process safety, and equipment failures.
BP's choices have been reckless, and further violations of
state and federal laws are the result.
Lisa Demer, Anchorage Daily News (November 16, 2011) (emphasis added).
Turning back to H.R. 3407, if passed it would establish a drilling
program for the Coastal Plain of the Arctic Refuge with weaker
standards for the protection of the wildlife and wilderness character
of the Arctic National Wildlife Refuge than exist in laws that apply to
federal lands elsewhere in the United States. In addition to opening
the entire Coastal Plain to oil and gas activities and allowing massive
placement of facilities on the Coastal Plain as described above, H.R.
3407 would also do the following:
use an economically-qualified and thus weak ``no
significant adverse effect'' environmental standard, compare
Section 3(a)(2) with 42 U.S.C. 6504(b) (agency must ``assure
the maximum protection of such surface values consistent with
the requirements of this Act for the exploration of the
reserve'') and Pamela Baldwin, Legal Issues Related to Proposed
Drilling for Oil and Gas in the Arctic National Wildlife
Refuge, CRS Report RL31115 at 8 (May 4, 2005) (providing other
examples of more stringent congressional standards).
xxxvii
---------------------------------------------------------------------------
\xxxvii\ While the analysis in RL31115 focuses mostly on H.R. 6 as
passed by the House (109th Cong.), H.R. 3407 is similar to this act.
---------------------------------------------------------------------------
fail to mandate almost any specific environmental
protection for the Coastal Plain, relying instead on the
discretion of the Secretary of the Interior and the agreement
of an outside ``peer review'' process to impose such
protections, Sections 3(a), 3(g), 6(a), 7, see RL31115 at 11-12
(fact that ``no specific controls are enacted'' means that
``the regulations will depend on the Secretary's
interpretation''); xxxviii
---------------------------------------------------------------------------
\xxxviii\ H.R. 6 did not include the ``peer review'' process for
regulations that is contained within H.R. 3407, and which further
complicates the imposition of environmentally-protective requirements.
---------------------------------------------------------------------------
eliminate the fundamental ``compatibility'' standard
that is at the heart of national wildlife refuge management,
under which activities that impair refuge purposes cannot be
allowed, Section 3(c)(1), see 16 U.S.C. Sec. 668dd(d)(3)(A)(i);
limit the authority currently available under key
provisions of the Endangered Species Act and National Wildlife
Refuge System Administration Act to close areas in the Arctic
National Wildlife Refuge for the protection of wildlife and
habitat, Section 3(f), see RL31115 at 10;
exempt a large part of the oil and gas leasing
program from the environmental review and public participation
provisions of the National Environmental Policy Act (NEPA)--our
nation's charter for environmental protection--and imposes
severe limitations on NEPA environmental review for the
remainder, Sections 3(c)(2), 3(c)(3);
restrict judicial review of the Secretary of the
Interior's decisions to such a degree as to significantly limit
the traditional check placed on the executive branch by the
judiciary, Section 8, see e.g., RL31115 at 32 (``The
requirement of clear and convincing evidence in this context
differs from the usual standards for proof and may be
confusing, but appears to be intended to make overturning a
decision difficult'').
grant authority over the leasing program to the
Bureau of Land Management (the mineral development experts) at
the expense of the U.S. Fish and Wildlife Service (the federal
government's wildlife experts who manage the Arctic Refuge
today), Section 3(a)(1); see CRS Report RL31115 at 7 (BLM
authority over the leasing program could ``divorce the mineral
development aspects from the biological/wildlife purposes and
the expertise of the FWS personnel, and may result in the
Coastal Plain receiving less protection than lands in other
refuges do under current law and regulations'').
impose weaker restoration standards and financial
assurances than exist in other laws, Section 6(a)(5), see
RL31115 at 11, 14, U.S. General Accounting Office,
Congressional Requesters, Alaska's North Slope, Requirements
for Restoring Lands After Oil Production Ceases at 82-83 GAO-
02-357 (Washington, D.C.: 1994) (addressing restoration
requirements in other states).
Simply put, opening the Arctic Refuge to oil leasing, exploration
and production, whatever the technological or environmental promises,
unacceptably threatens the exceptional values of the Arctic Refuge.
The Claimed Benefits of Drilling the Refuge Are Illusory and More
Rational Alternatives Exist
Drilling proponents claim that opening the Coastal Plain of the
Arctic Refuge to oil activities will be a boon for the national
treasury and economy. History and common sense show that this is not
the case:
oil estimates for the Refuge are based on unproven
reserves, and the top end oil numbers used have only a 5%
likelihood of being real. Recently, the United States
Geological Survey (USGS) revised its estimates for the National
Petroleum Reserve-Alaska (NPRA) downward from 10.6 billion
barrels to 896 million barrels--roughly 10 percent of its 2002
estimate, further emphasizing the risky nature of predicting
oil reserves.
claimed federal treasury benefits of $150 to $296
billion are based on a 50/50 split of these already highly
speculative numbers, and the State of Alaska undoubtedly will
claim 90% of the revenue under the Mineral Leasing and Alaska
Statehood Acts. Such benefits are also based on a corporate tax
rate of 33%, while the oil industry has an effective tax rate
of only 15.7%. xxxix
---------------------------------------------------------------------------
\xxxix\ See Corporate Taxpayers and Corporate Tax Dodgers 2008-
2011, A Joint Project of Citizens for Tax Justice & the Institute on
Taxation and Economic Policy at page 7 (November 2011) http://
www.ctj.org/corporatetaxdodgers/CorporateTaxDodgersReport.pdf.
---------------------------------------------------------------------------
industry job claims for Arctic Refuge drilling are
beyond the pale of reality. To assert that there would be
60,000 additional jobs within five years is to ignore the fact
that Alaska's oil industry employs only about 16,500 workers,
including support jobs.
In the meantime, the five largest oil companies have brought in
over $101 billion dollars in profits so far this year. Between 2005-
2010, BP, Shell, Exxon/Mobil, and Chevron made more than half a
trillion dollars in profits, and in that time frame they also reduced
their U.S. workforce by over 11,000 jobs.
And at the same time, the oil industry currently is drilling more
in the United States than anywhere else in the world, with over 2,000
drill rigs operating here as opposed to roughly 1,700 in the rest of
the world. Alaska will see its busiest exploration season in years this
coming winter, and projections are that TAPS can and will continue to
deliver substantial oil from the North Slope to Valdez for decades to
come. Indeed, the United States currently is producing more oil and gas
than at any other time in our history. xl
---------------------------------------------------------------------------
\xl\ For more information on the state of drilling in the United
States, oil industry profits and oil-related jobs in the United States
see ThinkProgress (November 15, 2011) http://thinkprogress.org/green/
2011/11/15/369358/why-are-house-republicans-holding-hearing-20-about-
how-to-drill-more-despite-the-fact-that-we-are-drilling-like-crazy/.
---------------------------------------------------------------------------
To be sure, as BP's Deepwater Horizon oil spill demonstrated, the
United States is also taking great risks to get this oil and gas out of
the ground. We even appear willing to drill in the Arctic Ocean,
despite the fact that we know that we do not have the capacity to
respond to an oil spill in those remote and icy waters. xli
---------------------------------------------------------------------------
\xli\ A more detailed treatment of the TAPS throughput and other
oil issues in America's Arctic is presented in my testimony to this
committee on ``Domestic Oil and Natural Gas: Alaskan Resources, Access
and Infrastructure'' (June 2, 2011).
---------------------------------------------------------------------------
A far more rational approach to the economic and energy challenges
we face in the United States is to invest in energy conservation
measures and sufficiently fund programs to hasten the inevitable
transition we need to make to renewable energy sources.
Conclusion
The Coastal Plain of the Arctic National Wildlife Refuge represents
the 5% of America's onshore Arctic that currently is not legally open
to oil and gas activities. Drilling the Refuge thus does not represent
a balanced approach to energy development and environmental protection,
and would destroy the values that Republicans and Democrats alike have
found worthy of celebration and protection. The Arctic Refuge is a
treasure owned by current and future generations of Americans, and it
should not be plundered based on myopic and false claims that drilling
it for oil will meaningfully contribute to our nation's current
challenges.
Thank you for the opportunity to testify.
______

Mr. Lamborn. OK, thank you.
We are going to shift gears and hear testimony on another
bill now.
Senator Wagner.

STATEMENT OF THE HON. FRANK WAGNER,
STATE SENATOR, COMMONWEALTH OF VIRGINIA

Mr. Wagner. Thank you, Mr. Chairman, and members of the
Subcommittee. I am here to talk about, in particular, Lease
Sale 220 off the coast of Virginia, which had been included in
the previous 5-year plan, but to kind of back up a little bit,
I have been told that we import about $300 billion a year in
energy outside the borders of this country, and the $300
billion, I sit there and try to grasp that number. Down in
Virginia, our entire budget might be $70 billion over 2 years,
and so I kind of want a comparison. So I compare that I guess
to the Act that you passed in 2009, the Recovery Act, that was
some $800 billion, $850 billion, and so now I have a concept.
And that was supposed to turn the economy around and put
everybody back to work.
So now I have a concept of what $300 billion is every year,
and albeit a lot of that comes from Canada and Mexico, but a
lot of it comes from a lot of countries that don't really hold
America like we do right here, and that concerns me very much.
And I wonder what would happen if that $300 billion was
circulating in our own economy, employing Americans to produce
American energy for American homeowners and American business.
And I think that is the goal that has been driving Virginia for
so long. That is what started it back in 2005, when we passed
the first legislation that said, please, Washington, let
Virginia go off our coast and try to develop our offshore
natural resources. That bill wandered through, and with
bipartisan support in both Houses of the General Assembly, made
it to the Governor's desk, and then Governor Mark Warner, who
is now Senator Mark Warner ultimately vetoed the bill, but when
he vetoed it, he said, I really want to study this issue a
little bit. It kind of came at me quick, and I want to study
that.
Now you fast forward to this year and both Senator Warner
and Webb from Virginia in the Senate have filed legislation to
push forward Virginia's offshore desires. It is a clear
statement that we made. We were initially, because of the
actions we took, we were initially included in a 5-year plan,
the last 5-year plan that went through, and we survived cuts,
we took into account military concerns, all of the things that
went through, and we defined an area, we were literally a year
away from moving forward with the lease sale when this current
Administration canceled the lease sale.
And now we find ourselves back at square one, and even
worse, when the new 5-year plan has come out, Virginia is not
included in the 5-year plan. And as we went through that
process 5 years ago and as we went through the administrative
processes, 79 percent of those respondents from Virginia were
in favor of developing our offshore resources, 79 percent. I
have never won an election by that much unless I was unopposed,
and, you know, it is just an overwhelming support throughout
Virginia.
Our Governor has made it a clear statement on his mind that
he wants to make Virginia the energy capital of the East Coast.
He recognizes that Virginia is very, very dependent on
government spending, and actually with our location, the
proximity to Washington as well as a very large defense
establishment we have in Virginia, we recognize what is going
on in Washington. We recognize that we need to diversify our
economy and need to diversify our economy in a rapid way if we
are going to be able to continue to move Virginia forward.
I know every legislator is here from all over the country,
and, you know, I am just laying out Virginia's plan right now
and our strategy. We want to move forward. We made the
statement very, very clear.
And so as we move forward, we look at this Lease Sale 220
that has come along so far, and we are very, very encouraged by
the actions that we have heard within the Subcommittee and
indeed the entire House Natural Resource Committee that
direction may come as a part of the bill as we move forward
with it. I am struck by the testimony here from Peter next to
me, the million folks from the Wilderness League. My concern is
the tens of millions of Americans that are out of work or
underemployed right now. What can we do to put these folks back
to work? What kind of hope, what kind of positive message?
To me there is nothing more basic that drives this economy
than energy. Energy is the key component. We take it for
granted. We shouldn't take it for granted because if we
continue down the road we are going to do, we are going to find
ourselves in a deeper morass, and I think if we lay out a
comprehensive energy plan, which was a bill that the Virginia
General Assembly passed a year later, which also included the
need to go offshore but a comprehensive energy strategy to move
forward, if you will, a blueprint of where we would like to
take Virginia. But as we kind of move forward with that
blueprint, what we find is we have our hands tied behind our
back because of the decisions made inside this beltway right
now. We are not being allowed to do what it is Virginia wants
to do and what Virginia citizens have clearly indicated they
want to do. So we are coming here today to appeal to the folks
here within the halls of Congress to move forward and assist
Virginia and all the rest of the States, indeed, to move
forward with and do the kinds of things we want to do. As I
look through, and we have talked about the Bakken reserves, the
oil shale reserves up in the Upper Midwest, and I am struck by
as you look at this kind of flaccid economy we have around
here, the one place that is super vibrant where it is just
boomer is right on top of that Bakken reserve, and so if you
look at States in fiscal distress and those that are not, what
you generally find is a lot of those are associated with the
energy industry themselves, and so we want to move forward, we
want to open that up and indeed give a blueprint that
encourages all Americans and shows them, yes, we have a plan,
yes, this is it, and we want you to move forward with it.
So thank you very much, Mr. Chairman.
[The prepared statement of Mr. Wagner follows:]

Statement of The Honorable Frank W. Wagner, Senator,
The General Assembly of Virginia

Mr. Chairman and Members of the Sub Committee on Energy and Mineral
Resources,
I want to thank you for the opportunity to testify before your
committee. Specifically I would like to talk to you about Lease Sale
220, the proposed lease for oil and gas off the Eastern coast of
Virginia.
Virginia has long been concerned about the energy crisis that faces
this nation and Virginia. We also recognize what a tremendous
opportunity for our state and nation that a comprehensive energy policy
would mean to our future.
At a time of record budget deficits, unacceptable levels of
unemployment, and a totally out of balance trade deficit, it is
inexcusable that this nation has not developed a comprehensive energy
policy that maximizes utilization of this nation's vast supply of
natural resources.
This nation imports in excess of 300 billion dollars a year in
energy resources from outside the borders, while at the same time we
put off-limits our own energy resources and this nation has no plans to
fix this large deficit.
I am struck that this number of 300 billion is nearly half the
economic stimulus package passed by Congress in 2009.
What if this 300 billion was spent recovering our own natural
resources? That is 300 billion employing Americans to produce energy
for American homeowners and American industry.
I am told that the second largest source of revenues next to income
taxes to the Federal government is Rents and Royalties collected from
those companies recovering resources from Federal property both on and
off shore.
To a major extent our foreign policy and military deployments are
driven by our need to secure our imported energy needs. Yet at the same
time, we put off-limits this nation's natural resources.
Mr. Chairman, this brings us to Lease Sale 220.
As you may be aware, during the 2005 Session of The Virginia
General Assembly, I submitted legislation that passed both the House
and Senate and requested Congress to lift the moratorium. This
legislation was vetoed by then Governor Mark Warner. In his veto
message he stated, in part, that he wanted to further study the issue.
It is interesting to note that now Senator Warner and Senator Webb have
introduced legislation in the Senate to move Lease Sale 220 forward
including revenue sharing. In a similar manner the issue of off-shore
drilling has bi-partisan support in the General Assembly.
Our current Governor, Bob McDonnell, has stated a goal of turning
Virginia into the Energy Capital of the East Coast. He has worked
tirelessly to achieve this goal; including getting Lease Sale 220 back
on track.
Because of the legislative actions during both the 2005 and 2006
sessions of the General Assembly, the Department of Interior included
Lease Sale 220 in their 5-year plan.
Lease Sale 220 went through an exhaustive series of agency input,
public hearings and written comments. Through their actions the 220
block was paired back to accommodate concerns from the State of
Virginia, Department of Defense, and other agencies. The Department of
Interior was ready to precede with the final environmental impact
studies when the sale was suspended by the current administration.
Recently, the current Administration announced an out right
cancellation of this sale and did not include any off-shore areas on
the Atlantic coast.
It is interesting to note that our neighbor to the north, Canada,
is actively recovering resources in the Atlantic basin recovering both
oil and natural gas.
It is my sincere hope that this Congress will reinstate Lease Sale
220 off of Virginia and respect the desire of our Democrat Senators,
the majority of our Members of the House of Representatives, our
Governor and the Virginia General Assembly.
I would also hope that you not only look favorably on Lease Sale
220, but indeed look carefully at all the restrictions and prohibitions
placed on this Nation's energy and natural resources. The keys to
making the United States energy self sufficient lie inside these halls
of Congress and down Pennsylvania Avenue.
______

Mr. Lamborn. Thank you.
Mr. Milito.

STATEMENT OF ERIK MILITO, UPSTREAM DIRECTOR, AMERICAN PETROLEUM
INSTITUTE

Mr. Milito. Thank you, Chairman Lamborn, Ranking Member
Markey, and distinguished members of the Subcommittee.
Good morning, my name is Erik Milito, and I am the Director
of the Upstream and Energy Operations at the American Petroleum
Institute. API represents over 480 member companies involved in
all aspects of the oil and natural gas industry, including the
tremendous numbers of companies that are involved in exploring
for and developing U.S. resources in the offshore and onshore
as well as the companies throughout this Nation in States like
Pennsylvania, New York, California, Illinois, who support the
industry through steel manufacturing, manufacturing boots,
helicopters, those types of things. We truly do impact the
whole country.
Thank you for the opportunity to testify. API is encouraged
that the House of Representatives and this Committee are
discussing ways to increase oil and natural gas development in
the United States. More domestic oil and natural gas
development is an indispensable component of a stronger energy
and economic future. More development can deliver more jobs for
Americans, more revenue for our government, and greater energy
security, while providing a necessary and reliable source for
the fuels consumers and businesses use in their homes,
vehicles, and factories, and for the petrochemicals used in
everything from our clothing to our iPads and to our computers
and pharmaceuticals.
Oil and natural gas currently provide most of our Nation's
energy, while supporting more than 9 million U.S. jobs and
delivering to our government more revenue, about $86 million a
day, than any other industrial sector. And this debate is not a
choice between traditional energy sources on one hand and
renewable energy on the other. We will need it all to meet our
Nation's growing energy demands in the future. If we can go to
the first slide please.
The Department of Energy's Energy Information
Administration projects that the U.S. will require 20 percent
more energy in 2035 than in 2009. I think when we have these
types of discussions, we have to really look at the context and
look at the practical reality we face in the future. And what
this slide shows is that we will have significant increases in
biomass and renewables, so we are going to go from about 5
percent to about 10.7 percent of our energy coming from biomass
and renewables, and that will continue to increase. It is going
to increase by about 120 percent in that time frame. Yet even
with the substantial increase, we will continue to rely on oil
and natural gas for most of our energy needs. The blue portion
on the very bottom shows about 33 percent coming from crude
oil, and the green portion about 24 percent from natural gas,
and while it is going to make up less of a percentage of our
overall energy portfolio, we are actually going to need more of
it.
One thing I would like to note is that in terms of
renewables, this industry provides one out of every five
dollars investment in zero carbon technology, so this industry
takes it very seriously, but our focus remains on oil and gas.
Next slide, please.
We also have to look at global energy demand. This
information is from the Energy Information Administration from
the 2011 Annual Energy Outlook. What we see on a global level
is that energy demand is going to rise more than 50 percent
between 2008 and 2035, and global demand for liquid fuels will
go up by 30 percent, so we as a Nation are going to continue to
compete with the rest of the world for oil resources.
Next slide, please.
We are all aware of this. This has been a part of a lot of
the discussion, imports. This slide shows our reliance on
imports to meet our demands for crude oil, and this shows that
as of 2010, imports of crude oil accounted for about 62 percent
of U.S. supplies. There is a lot of talk about how we are
importing only 46 percent, but that gets into how you compute,
but that is really a number for all the liquid fuels. When you
are looking just at crude, the majority of our supplies do come
from imports. But the good news is that through reasoned policy
choices, we do have an opportunity to substantially impact this
picture here such that, you know, this pie chart would show
that U.S. demand for liquid fuels is met entirely from supplies
from the U.S. and Canada. We can do this by providing access to
U.S. resources that have been kept off limits and by approving
pipelines to bring resources from Canada. By doing that, we
believe we can meet our total demand in the U.S. for liquid
fuels entirely from U.S. and Canadian supplies by 2026. These
resources would help us meet the goals of energy security, job
creation, and revenue generation. That is the last slide I am
going to refer to.
A recent study by Wood Mackenzie calculates that the full
development of the offshore areas that have been left off
limits by Interior's recent offshore proposal, including the
Atlantic, the Pacific Coast, and most of the Eastern Gulf could
provide hundreds of thousands of additional new jobs, more than
$300 billion in cumulative additional revenue for the
government, and nearly 4 million additional barrels of oil
equivalent per day by 2030.
The U.S. oil and natural gas industry provides a
significant stimulus to our Nation's economy. Last year, it
directly contributed an estimated $470 billion to the U.S.
economy in spending, wages, and dividends, more than half of
the Federal Government's 2009 stimulus program, which was just
referenced by Honorable Frank Wagner. Our industry is one of
the few industries creating jobs throughout the recession. The
Bureau of Labor Statistics data shows that between 2007 and
2009, the height of the recession, this industry created
120,000 new jobs.
There is more work to do for that to happen. We appreciate
efforts now underway in Congress, including Representative
Stivers' bill, H.R. 3410, to help move us in that direction.
Thank you and look forward to any questions.
[The prepared statement of Mr. Milito follows:]

Statement of Erik Milito, Upstream Director, American Petroleum
Institute

Good morning. I am Erik Milito, director of upstream and industry
operations at API. API represents over 480 member companies involved in
all aspects of the oil and natural gas industry.
Thank you for the opportunity to testify today. API is encouraged
that the House of Representatives and this committee are discussing
ways to increase oil and natural gas development in the United States.
More domestic oil and natural gas development is an indispensable
component of a stronger energy and economic future. More development
can deliver more jobs for Americans, more revenue for our government,
and greater energy security--while providing a reliable source for the
fuels consumers and businesses use in their homes, vehicles and
factories and for the petrochemicals used in everything from our
clothing to our iPhones to our computers and pharmaceuticals.
Unfortunately, U.S. energy policy today does not allow us to take
full advantage of opportunities to develop here in the U.S. more of the
energy we will need in the decades ahead. However, we appreciate the
efforts of Chairman Hastings and this committee in passing legislation
earlier this year, including H.R. 1229, 1230, and 1231, that showcase
the benefits of increased oil and natural gas development.
Oil and natural gas currently provide most of our nation's energy
while supporting more than nine million U.S. jobs and delivering to our
government more revenue--about $86 million a day--than any other
industrial sector.
And this debate is not a choice between traditional energy sources
on one hand and renewable/alternatives on the other. We will need it
all to meet our nation's growing energy demands in the future.
The U.S will require 20 percent more energy in 2035 than in 2009,
the Energy Information Administration projects, while world demand will
increase by 53 percent. To meet this demand, we will need all forms of
energy, including substantial amounts of oil and natural gas. In fact,
even with significant increases in renewable energy use, efficiency and
conservation, the EIA projects that we will need more oil and natural
gas in 2035 than we are using today.
The good news is that we have very ample resources in America that
can be produced safely and economically, and the estimates of available
resources are growing because continuous advances in technology both
onshore and offshore are making previously unreachable resources
accessible.
A simple choice lies before us. We can choose to safely and
responsibly produce at home more of the oil and natural gas we know we
will be consuming, creating hundreds of thousands of jobs for Americans
and much more revenue for our government--or we can stand still and
watch as other countries produce the resources that we will then have
to purchase, with the jobs and revenue going to those nations.
Put another way: will we direct our own energy destiny and remain a
world leader in resource development? Or will we let others set our
course?
Wood Mackenzie calculated the benefits of expanded domestic
development earlier this year in a study it conducted for API. It
concluded that by increasing onshore and offshore access to U.S oil and
natural gas resources, avoiding unnecessary new regulations, returning
the pace of permitting approvals in the Gulf to previous levels, and
bringing in more Canadian energy, we could create as many as 1.4
million jobs by 2030--with one million of those jobs ready in the next
seven years. This pro-development path would also generate $800 billion
in additional cumulative revenue, and substantially boost U.S. oil and
natural gas production. When factoring in projected biofuels growth,
following this path would allow us to meet all of our liquid fuel needs
through U.S. and Canadian supplies in 15 years.
Industry is willing to make the investments, but national energy
policy is not currently synched to move forward along the path of
increased domestic development. The Department of the Interior's
recently released offshore leasing plan basically says to continue
looking where we have already been looking for the past several
decades. It would leave most of our coasts locked up, while also
creating disincentives for leasing in the limited areas where that
would be permitted.
The Wood Mackenzie research calculates that full development of the
offshore areas left off-limits by Interior's proposal--the Atlantic and
Pacific coasts and most of the Eastern Gulf of Mexico--could provide
hundreds of thousands of additional new jobs, more than $300 billion in
cumulative additional revenue for government, and nearly 4 million
addition barrels oil equivalent per day by 2030.
The administration says that current policy is preparing us for our
energy future and that oil and natural gas production is increasing.
However, the current production increases are largely due to the
development of shale oil and natural gas on private lands in North
Dakota, Pennsylvania, Texas, Arkansas, Louisiana and elsewhere--and
because of leasing and development on public lands and federal waters
initiated many years ago.
A robust national energy strategy must include the continued
exploration and development of offshore areas and BLM-administered
lands. These resources would help us meet the goals of energy security,
job creation and revenue generation. Interior's offshore plan fails to
take advantage of this opportunity. We are not doing the things
necessary today to be able to meet tomorrow's energy needs with the
greatest possible benefits for the American people.
The U.S. oil and natural gas industry provides a significant
stimulus to our nation's economy. Last year, it directly contributed an
estimated $470 billion to the U.S. economy in spending, wages and
dividends, more than half the federal government's 2009 stimulus
program. And it is one of few industries creating jobs throughout the
recession.
We can create even more jobs and generate far more revenue if
allowed to responsibly develop and produce here in the United States
more of the oil and natural gas we need. But more development--
especially on public lands and federally controlled waters--requires
that industry and government share a vision of the potential benefits
and act as partners to fully realize them. There's more work to do for
that to happen, and we appreciate efforts now underway in the Congress,
including Rep. Stivers bill--H.R. 3410--to help move us in that
direction.

[GRAPHIC] [TIFF OMITTED] T1539.001

[GRAPHIC] [TIFF OMITTED] T1539.002

[GRAPHIC] [TIFF OMITTED] T1539.003

Mr. Lamborn. Thank you.
We have one more witness on this panel, Ms. Alexander.

STATEMENT OF RYAN ALEXANDER, PRESIDENT,
TAXPAYERS FOR COMMON SENSE

Ms. Alexander. Thank you, Chairman Lamborn, and thank you
for the opportunity to testify today.
At Taxpayers for Common Sense, our mission is to achieve a
responsible Federal Government that spends taxpayer dollars and
operates within its means, so, you know, we have some work
ahead of us.
Over the last 15 years, TCS has actively worked to ensure
that taxpayers receive a fair return on resources extracted
from Federal lands and waters. Royalties and fees collected
from resource development represent a valuable source of income
for the Federal Government and should be collected, managed,
and accounted for in a fair and accurate manner. As the
rightful owners, taxpayers have the right to fair market
compensation for the resources extracted from our lands and
waters, as would any private landowner.
Unfortunately, over the years, taxpayers have lost billions
on royalty-free oil and gas leases and royalty-free hard rock
mineral operations on Federal lands. Taxpayers have also lost
because of a corrupt and inadequate royalty collection system.
In today's budget climate, we cannot afford to lose this
valuable revenue. These revenue collection problems must be
resolved as we move forward with additional mining and energy
production on Federal lands and waters.
Energy production on public lands and waters is certainly
an important Federal revenue source, and today's hearing
presents an important discussion, but making more Federal lands
available or limiting regulations on resource extraction is not
a solution to our Nation's debt crisis and could lead to
greater taxpayer liabilities down the road.
Taxpayers for Common Sense is opposed to any legislative
measure that would alter the existing Federal-State revenue
sharing provisions for royalty payments or direct any
percentage of royalties collected on new leases in Federal
waters or to the States as the American Made Energy and
Infrastructure Jobs Act does.
TCS does not oppose offshore drilling, provided fair market
royalties are applied and appropriate taxpayer protections are
in place. Indeed, with appropriate taxpayer safeguards, Federal
resources can and must be used to meet our Nation's energy,
transportation, and mineral needs. The calculation on whether
it is in the national interest to drill should certainly
include sufficiency of offshore resources but also potential
long-term liabilities and risks of those liabilities.
Revenue-sharing provisions like those in the American Made
Energy and Jobs Infrastructure Act siphon billions of dollars
in valuable revenue from the general treasury. Altering these
shares toward the States would do nothing for the bottom line
of the oil and gas, wind or other offshore developers. They
would owe the same royalties, rents, and fees at the end of the
day either to the States or the Federal Government. Altering
existing revenue-sharing arrangements also does not alter the
Federal taxpayers' responsibility for offshore drilling. Unlike
onshore energy operations, offshore energy operations do not
occur within a State, and the impact for operations beyond
State waters has national implications. Federal taxpayers fund
the agencies charged with royalty collection and lease
regulations.
Additionally, the U.S. Coast Guard, not the States,
inspects and regulates the offshore drilling rigs as well as
performs vessel regulations, search and rescue, security, and
pollution response. Federal waters are administered, protected,
and managed by the Federal, not State agencies at a cost to
Federal taxpayers, and the revenue derived from the sale of
these resources should be returned to the Federal treasury. The
American Made Energy and Jobs Infrastructure Act suggests that
revenues derived from the new leases be used for infrastructure
and other purposes.
This approach would be a significant departure from the
user-pays principle for transportation spending that has
operated for decades where the system's users or drivers pay
for construction and maintenance of the system. Instead, it
relies on speculative future resources derived from new
offshore drilling leases. Paying for a couple of years of
transportation funding with expected revenues from an increase
in oil and gas drilling will likely take many years to get
rolling. This is not a responsible budget approach. TCS
believes Congress either needs to find more concrete offsets or
revenue increases to pay for the Nation's transportation system
or limit spending to what we can expect through gasoline tax
increases.
TCS also has concerns with the PIONEERS Act. Oil sale is in
its very early stages of development, and the technology to
retrieve it in a cost-competitive fashion does not currently
exist. Therefore, it is extremely difficult to ensure taxpayers
will receive a fair return for extracted shale. No country in
the world has established a commercial and viable oil shale
industry. Thousands of acres have already been conveyed for
shale development but sit idle. This locks up valuable Federal
land for other uses, including other oil and gas development,
grazing, timber or other uses.
Despite Federal law, the PIONEERS Act does not guarantee a
fair return to taxpayers and allows the Secretary of the
Interior to reduce royalties, fees, rentals, bonuses or other
payments on oil shale to promote its development.
The bottom line is that Federal lands and waters must be
used responsibly, and taxpayers must receive appropriate
financial assurances from those companies benefiting from
resource extraction. Without proper assurances, any future
financial liabilities will fall on the shoulders of taxpayers.
Providing increased access without addressing future taxpayer
cost is fiscally irresponsible and could cost taxpayers
billions.
The country is now facing a $15 trillion debt and an annual
deficit of more than a trillion dollars. Many things need to be
done to resolve the Nation's fiscal woes, not least of which is
ensuring taxpayers get the revenue they deserve from the
resources they own.
[The prepared statement of Ms. Alexander follows:]

Statement of Ms. Ryan Alexander, President, Taxpayers for Common Sense

Good morning Chairman Lamborn, Ranking Member Holt, and
distinguished members of the subcommittee. Thank you for the
opportunity to testify today. My name is Ryan Alexander and I am
President of Taxpayers for Common Sense (TCS), a national, non-partisan
budget watchdog organization. Taxpayers for Common Sense's mission is
to achieve a government that spends taxpayer dollars responsibly and
operates within its means.
Over the last fifteen years, TCS has actively worked to ensure that
taxpayers receive a fair return on resources extracted from federal
lands and waters. Royalties and fees collected from resource
development represent a valuable source of income for the federal
government and should be collected, managed and accounted for in a fair
and accurate manner. As the rightful owners, taxpayers have the right
to fair market compensation for the resources extracted from our lands
and waters, as would any private landowner.
Unfortunately, over the years taxpayers have lost billions on
royalty-free oil and gas leases and royalty-free hard rock mineral
operations on federal lands. Taxpayers have also lost because of a
corrupt and inadequate royalty collection system. In today's budget
climate, we cannot afford to lose this valuable revenue. These problems
must be resolved as we move forward with additional mining and energy
production on federal lands and waters.
Today's hearing to examine legislation aimed at increasing energy
production on public lands and waters is certainly an important
discussion. But simply making more federal lands available or limiting
regulations on resource extraction is not a solution to our nation's
debt crisis and could lead to greater taxpayer liabilities down the
road.
This morning, I would like to raise two overall concerns with the
suite of legislation offered today, followed by a more specific
discussion on the revenue provisions in the American-Made Energy and
Infrastructure Jobs Act and the royalty provisions in the Protecting
Investment in Oil Shale the Next Generation of Environmental, Energy,
and Resource Security Act, or PIONEERS Act.
Energy Legislation Must Ensure Fair and Accurate Collection of Revenues
for Extraction of our Federal Resources
Natural resources derived from federal lands and waters can and do
provide great benefit to the entire country. In addition to their end
use and overall domestic economic benefit, as resource owners their
extraction provides valuable revenue for the federal coffers.
To this end, federal lands and waters must be mined, drilled or
otherwise developed in a manner that protects taxpayers' interest.
Appropriate fees, rents and royalties must be applied and collected and
long-term liabilities such as potential clean-up or mitigation costs
must be shouldered by the extractive industries.
TCS believes in ``fix it first.'' While our federally owned natural
resources currently provide around $10 billion to the Treasury, the
amount collected falls dramatically short of what is rightfully owed to
federal taxpayers. We must recoup what we are owed before moving
forward. For example, taxpayers are currently losing billions of
dollars on royalty free oil and gas leases in the Gulf of Mexico, as
well as royalty-free leases for hard rock mineral extraction on federal
lands.
TCS believes there are many areas where reform is needed to ensure
fair and accurate royalty collection. First, the federal government
must have a clear, transparent collection system which has sufficient
oversight and accountability. Through the many scandals that plagued
the Minerals Management Service (MMS), the agency that for nearly three
decades ran the government's royalty collection system, we are all
aware how corrupted the system can become.
The Government Accountability Office has said for years that the
Department of Interior has not done enough to monitor and evaluate its
royalty collection system. A report in 2008 found that the DOI had not
re-examined how it was compensated for extracted oil and gas from
public lands in over 25 years and had no system in place to evaluate
whether or not such a reassessment was needed. Then a 2010 study found
that DOI also had no way to determine if it was accurately measuring
the amount of resources being taken from public lands, meaning
taxpayers may very well not be receiving a fair market value for their
goods. All of this on top of some the lowest royalty rates in the world
means that the system in place to collect royalties on current or new
leases just isn't up to speed.
Although the MMS has been dismantled, the Department of Interior's
new royalty management structure is still establishing itself. Until
this new system demonstrates it can effectively manage our taxpayer
resources and collect royalties from existing operations on federal
lands, it would be premature to add to their portfolio with new leases.
Additionally, federal taxpayers should not be asked to provide
revenue from offshore leases in federal waters to the states. The
GOMESA Act already directs a portion of revenue derived from new leases
in federal waters in the Gulf of Mexico to the states rather than
federal taxpayers. Other legislation like the American-Made Energy Act
propose expanding state revenue shares for new leases in federal waters
outside the Gulf of Mexico.
Existing onshore oil and gas operations can also provide more
revenue for taxpayers. In late 2010, the GAO found taxpayers could earn
$23 million more in royalty revenue annually from additional natural
gas obtained from federal lands, if companies were required to capture
vented or flared natural gas in cases where it is economically
feasible.
Making more natural resources available, without ensuring
recoupment of what we are already owed for current and past operations,
is likely to only ensure inadequate collection of royalties on new
leases and perpetuate the existing flawed system for even longer.
Without legislation to address this existing problem, taxpayers will
continue to lose valuable revenue--revenue that can be used to address
our nation's federal deficit.
The American-Made Energy and Infrastructure Act
Specifically on the legislation before us today I would like to
first comment on Representative Stivers's bill, The American-Made
Energy and Infrastructure Jobs Act. Taxpayers for Common Sense is
opposed to any legislative measure that would alter the existing
federal-state revenue sharing provisions for royalty payments or direct
any percentage of royalties collected on new leases in federal waters
to the states.
TCS is not opposed to offshore drilling. We believe with proper
taxpayer safeguards and the application of fair market royalties,
federal resources can and must be used to meet our nation's energy,
transportation, and mineral needs. The calculation on whether it is in
the national interest to drill should certainly include sufficiency of
offshore resources, but also potential long term liabilities and risks
of those liabilities.
Revenue-sharing provisions, like those provided in the Stivers
bill, siphon billions of dollars in valuable revenue from the general
treasury. Not only is this bad policy, in today's fiscal climate it is
downright foolish. Altering these shares towards the states would do
nothing for the bottom line of the oil and gas, wind, or other offshore
developers--they would owe the same royalties, rents, and fees at the
end of the day either to the states or to the federal government.
Federal taxpayers are due any royalties derived from leases
operating in federal waters. Federal waters are administered,
protected, and managed by federal--not state--agencies at a cost to
federal taxpayers, and the revenue derived from sale of these resources
should be returned to the federal treasury. Unlike onshore energy
operations, offshore energy operations do not occur in a state and the
impact for operations beyond state waters reaches well beyond any one
state and has national implications.
Federal taxpayers fund the agencies charged with royalty collection
and lease regulations. Additionally, the U.S. Coast Guard, not the
states, inspects and regulates the offshore drilling rigs as well as
performs vessel regulation, search and rescue, security, and pollution
response.
States do get the money from waters dedicated to the states under
federal law and we believe this should continue in any new drilling in
state waters. But all Americans should get the revenue from federal
waters. These waters are more than six miles from the coast and nine
miles in parts of the Gulf of Mexico. State waters are within three
miles of their respective shoreline.
The American Made Energy Act suggests the revenues derived from the
new leases be used for infrastructure and other purposes. House
leadership has also argued for the use of speculative revenues from
increased oil and gas drilling to offset very real, concrete
transportation and infrastructure costs. According to the Speaker's
release, House Republicans ``favor an approach that combines an
expansion of American-made energy production with initiatives to repair
and improve infrastructure and reform the way infrastructure money is
spent.''
This is approach would be a fairly radical departure from the
``user pays'' principle for transportation spending that has operated
for decades--where the system's users (drivers) pay for construction
and maintenance of the system. Instead it relies on speculative future
revenues derived from new offshore drilling leases. Paying for a couple
of years of transportation funding with expected revenues from an
increase in oil and gas drilling that will likely take many years to
get rolling is not a responsible budget approach. It's like buying the
Ferrari tomorrow because you are sure a raise is coming sometime in the
future. If you think this sounds like a similar story that got us into
our current budgetary quagmire, you'd be right.
Adding insult to injury, we've already discussed that revenues from
the bill are going to be shared with the states--further constraining
the actual amount the federal government will receive to pay for
transportation and infrastructure needs.
TCS believes Congress either needs to find more concrete offsets or
revenue increases to pay for the nation's transportation system or
limit spending to what we can expect through gasoline tax increases.
In summary, royalties collected from offshore drilling in federal
waters should be returned to the rightful resource owner, the federal
taxpayer. States receive revenue from royalties collected within state
waters and the transitional area between state and federal waters (3-6
miles from shore). The federal government manages and secures
operations off our coasts and the taxpayer bears the cost of these
services. The impacts of drilling in federal waters have national
implications. Costs and benefits should be carried out in the interest
of all Americans, not a handful of coastal states. Additionally,
relying on this money to pay for today's infrastructure needs is bad
budget policy.
PIONEERS ACT
TCS also has concerns with the PIONEERS Act. Oil shale is in its
very early stages of development, and therefore it is extremely
difficult to ensure taxpayers will receive a fair return for extracted
shale. No country in the world has established a commercially viable
oil shale industry.
Retrieving oil from shale may be a way to produce more domestic
energy, but the technology to retrieve it in a cost competitive fashion
does not currently exist. Taxpayers should not bear the financial
consequences of this risky prospect. Research and development on
federal lands is already occurring, and fast-tracking to commercial
leasing before a technology is developed is a high risk taxpayers
cannot afford.
Thousands of acres have already been leased for shale development,
but sit idle. This locks up valuable federal land for other uses
including other oil and gas development, grazing, timber, or other
uses.
Furthermore, the PIONEERS Act does not guarantee a fair return to
taxpayers. Federal mineral leasing laws should provide a fair return
for federal taxpayers and for oil shale development it is explicitly
required under the Energy Policy Act of 2005. The PIONEERS Act allows
the Secretary of the Interior to reduce royalties, fees, rentals,
bonus, or other payments on oil shale to promote its development, but
because shale developers are primarily big oil companies, this amounts
to little more than another subsidy to the profitable oil and gas
industry.
CONCLUSION
All resources extracted from federal lands must provide federal
taxpayers with fair market revenue. We believe it is imperative that
energy legislation address these problems.
From our perspective, the bottom line is that federal lands and
waters must be used responsibly and taxpayers must receive appropriate
financial assurances from those companies benefiting from resource
extraction. Without proper assurances, any future financial liabilities
will fall on the shoulders of taxpayers. Providing increased access
without addressing future taxpayer costs is fiscally irresponsible and
could cost taxpayers billions.
The country is now facing a $14 trillion debt and an annual deficit
of more than $1 trillion dollars. Many things need to be done to
resolve the nation's fiscal woes, not the least of which is ensuring
federal taxpayers get the revenue they deserve for the resources they
own.
Furthermore, relying on the speculative revenue of new leases is
dangerous fiscal policy. Instead, Congress must take steps to fix our
existing royalty and leasing problems and spend less time spending
money that we do not have.
______

Mr. Lamborn. Thank you.
Before we ask our 5 minutes of questions each, I would like
to recognize Representative Young of Alaska for his opening
statement on one of the pieces of legislation for which he is
the author.

STATEMENT OF THE HON. DON YOUNG, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF ALASKA

Mr. Young. I thank you, Mr. Chairman, and thank you for
holding this hearing.
This is really my legislation on energy for American jobs.
Actually it is ANWR legislation. Tara, welcome. I was stuck in
traffic burning up gas, you know, while we are doing this, you
know.
But this is long overdue, Mr. Chairman, members of the
Committee. This is the 11th, 12th time we have attempted to
open up ANWR for the benefit of this Nation, the benefit of the
people of Alaska and Alaska natives. You are going to hear, and
you just heard from one environmental group, and they are not
the taxpayers group, and another environmental person, and I
understand their beliefs, but they don't know what they are
talking about. This is very crucial to this Nation. We talk
about taxpayers, and we talk about the environment. We are
destroying ourselves when we keep buying foreign oil. We are
just transferring the garbage to some other country that has no
safeguards like we do, and this is especially important to the
native community and the coastal area where Barrow, Kaktovik,
Nuiqsut, the rest of the areas are badly needed. To hear this
same garbage from certain groups of people when we could have
saved $4 trillion--$4 trillion that was sent overseas since we
passed this and then got it vetoed by President Clinton, $4
trillion. It could have helped balance the budget. But it has
financed tremendous activity overseas against us and actually
created 9/11.
So, Mr. Chairman, I can say truthfully that this is long
overdue. I will hear people, you will hear people, ``Oh, this
is a little bit of oil, it won't change a thing because it
takes 10 years to get it onboard.'' We could probably develop
this in 3 years and deliver it to the pipeline and to this
Nation. I say that with pretty much confidence because we built
an 800-mile-long pipeline with all the infrastructure and all
the docking facilities and the ships to deliver oil from 1973
to 1976, we pumped the first barrel of oil. This is the thing
that should be done, and I have been in that area, most of you
have not been in that area other than Tara knows what is going
on, and this is not the pristine area with wolves laying next
to caribou or vice versa, that will be a cold day in Saudi
Arabia whenever that happens, anybody that knows anything about
this operation. The caribou have increased in Prudhoe Bay, only
74 miles away, we have a viable wildlife refuge there really.
And the people that live there support this. And I just keep
getting very frustrated when I hear, like I say, the garbage
that comes out of people's mouths about how this pristine area,
365 million acres of land. This is one-third of a 19 million
acre refuge, which I have been over most, and most people have
not, even those that say they live on the coast. I have been
over the lower part of it, which is the prettiest part, but it
is nowhere near the oil. So this should be developed. It should
be passed. The Senate should pass it. Let's get this country
back on the road to recovery so we have a sound economy instead
of sending our dollars overseas.
And I yield back the balance of my time.
Mr. Lamborn. All right.
Thank you.
And last, one more important piece of business before we
start our questions. I would like to take this opportunity to
welcome the newest member of our Subcommittee who is here this
morning. From Nevada, we have Mr. Amodei.
Welcome to the Subcommittee. Your district is one of the
most mineral rich districts in the Nation, providing 80 percent
of the Nation's gold production. We also find there copper,
silver, molybdenum, lithium and other important metals and
industrial minerals. Some people may not realize it, but one of
the highest flowing oil wells in the country is also in your
district in Railroad Valley. Finally your district is rich in
geothermal energy. Welcome to the Committee, and we look to
your knowledge and your expertise.
Would you like to make a speech at this point?
No. You don't have to.
OK. We are going to start with our round of questions. Each
Member will have 5 minutes total to ask all of the witnesses,
which is a big task, because you all had important and
interesting things to say.
Senator Wagner, I would like to start my round by asking
you my first question. How would you respond to individuals who
say that providing Virginia or any other coastal State with a
portion of revenues is some kind of waste of taxpayer dollars?
Mr. Wagner. Mr. Chairman, I am kind of astounded by that
statement. When you understand that Federal property in Nevada,
Federal property in New Mexico, all of this Federal property
that we hold, it is my understanding that 50 percent of the
revenue generated on that Federal property goes directly back
to the States and another 40 percent goes into a special fund,
which ultimately ends up a lot of times back in that particular
State also, and the Federal Government only derives 10 percent
that I actually understand goes to the general fund. That is 50
percent. Under the legislation that I have glanced at, it was
talking about 35 percent.
Now, citizens in Virginia or citizens in New Jersey or
citizens in Massachusetts have just as much right to that
Federal property in Nevada as the citizens of Nevada. And all
we are asking for, not even the kind of equity that they get on
Federal lands in those States, but are off our coast,
immediately off our coast, a few--50, 75 miles off our coast,
what we are asking for is a portion of that. Because as that
infrastructure comes ashore, there are going to be associated
things that we need that money for, transportation and other
things that we do that. So we think it is only equitable. And
we, quite frankly, don't understand the position of some of
these in Congress that would say, oh, it is fine for our State,
even though Virginians have just as much a right or North
Carolinians or people from New Jersey, but it is not OK for
you. And we don't understand that quite frankly in Virginia.
Mr. Lamborn. OK. Thank you.
Ms. Sweeney and Mr. Helmericks, can you elaborate on the
difference in pay and benefits and stability between jobs
provided by the energy industry, such as this bill would
create, versus other non-energy types of jobs that are
available in Alaska?
Mr. Helmericks. Well, the big difference that I have seen
is that the oil industry's jobs are very well paid. They are
about the top of the scale. They are stable and they are one of
the few jobs in Alaska where you can actually work year around
and look at having a career.
If you take fishing, fishing is seasonal. Logging is
seasonal. Construction is seasonal. Tourism is seasonal. I am
only speaking about Alaska now. That is the only place I am
talking about. You have government jobs, you know, teaching
school, being a fireman, things of this nature. You have small
business owners, people with hair salons, things of this
nature. Even bush flying is seasonal. But the oil industry runs
24/7, 365 days a year. So if you are looking at entering an
industry as a blue-collar worker--I am talking about if you
want to drive a truck, operate a flow station, work in a camp
for a catering company and you want to bring home a regular
paycheck, have a 401(k) and be able to look for and invest in
the future, the oil industry is your best choice in Alaska, and
that is why I can so enthusiastically say, if you want to
create good paying blue-collar jobs right now for people, I can
give the oil industry my unequivocal endorsement.
Mr. Lamborn. Ms. Sweeney.
Ms. Sweeney. Thank you.
I have family members who work up and down the Trans-Alaska
Pipeline in Prudhoe Bay, in Valdez, and it provides significant
benefits to Alaska natives in terms of the employment
opportunities and training opportunities for our people. In
addition to that, the schedules, whether it is 2 weeks on, 2
weeks off, 6 on, 2 off, it enables and empowers our workers,
our Alaska native workers to return home to engage in those
very important subsistence activities that provide food for our
families.
In addition to that, the oil industry on the North Slope
provides much needed revenue for our county form of government,
the North Slope Borough. And the revenues derived from that tax
base also provide revenues for local schools, for police and
fire protection, running water and flush toilets. I talked
about that in my testimony. And so there is significant benefit
to not only our region, but to the entire State of Alaska.
Mr. Lamborn. All right. Thank you.
At this point, I would like to recognize Mr. Markey for 5
minutes.
Mr. Markey. Thank you, Mr. Chairman, very much.
Ms. Alexander, we are hearing a big discussion here about
where we can find revenues for our government, especially to
put it into new roads in our country. And this morning, I woke
up and the story was how high the price of gasoline has now
skyrocketed across the country. And it occurred to me that the
four largest oil companies in the United States made over $500
billion in the last 5 years, but they laid off 10,000 people,
which is unbelievable. Just, you know, they laid off 10,000
Americans while they made $500 billion over the last 5 years,
the these four oil companies, these biggest ones. It is just
shocking to me what they do. Meanwhile solar now has 100,000
employees; wind has 85,000 employees. So it is just really sad
what the oil companies are doing in our country, laying people
off. But that being said, it is clear that people are just
going to be tipped upside down and have money shaken out of
their pockets at the pumps as they drive to go visit their
relatives over the Thanksgiving day weekend.
So what I propose, what Mr. Holt has proposed, what the
Democrats have proposed is that we look at the tax breaks that
we give to the oil industry, to the mining industries from--as
gifts, as gifts from the Federal taxpayers, even as they are
recording the largest profits that any corporations in the
history of the United States have ever recorded as they lay off
people in our country.
So I was just wondering, given the fact that all of the
legislation which is being proposed by the Republicans would
raise $5 billion, but the legislation which Mr. Holt and I and
the Democrats have introduced would raise $18 billion to--and
it would be used to pave over--to pave the roads of our
country, to have more people put to work actually doing work
and--on our highways in our country, don't you think that would
be a better way for us to go, to look at all of these tax
giveaways, Ms. Alexander, and to find a way to get that back,
given the fact that they are likely to report even larger
profits in this coming quarter, given the skyrocketing price at
the pump that these oil companies are receiving?
Ms. Alexander. You know, Taxpayers for Commonsense has
opposed the oil and gas tax breaks for many years, for 16
years, as long as we have been around. We continue to oppose
them and think that there are real opportunities for deficit
reduction for taking tax breaks off the books that have been on
to encourage the development of the industry that is, as you
said, well established.
I think at the same time, we see that efforts to remedy the
existing royalty collection system are also critical, so we
will look at any proposal that we see. But we are on the record
and have been on the record for a long time on those positions.
Mr. Markey. In addition, in the legislation which the
majority has introduced, they are actually going to increase
the amount of revenue that comes off of Federal lands that are
given to the States rather than keeping it in the Federal
Treasury so we can reduce the deficit. We have a supercommittee
that is meeting right now, and their proposals would actually
take money away from the supercommittee, take money away from
the Federal Treasury and just give to the States and make it
more difficult for us to balance the budget, make it more
necessary for us to cut our troops or to cut checks for
Medicare for grandma. Does that make any sense to you that we
would be, you know, changing that formula?
Ms. Alexander. You know, as I said in my testimony, we
oppose altering the existing revenue share, particularly for
offshore, because we think that any of the potential problems
which everybody, particularly the industry, doesn't want to see
any problems with any new development, but any problems that
would happen would have national implications. Nobody can
guarantee that an accident--God forbid--an accident off of
Virginia only affects people in Virginia and you just can't
guarantee those things when we are talking about offshore
development. So we think that that is appropriate to stay in
the Federal Treasury.
Mr. Markey. So I agree with you, Ms. Alexander. I just
think that--and perhaps I care too much about, you know,
ensuring that we balance the budget. I don't think we need a
constitutional amendment. I just think we have to do it
ourselves. And these giveaways to the oil industry, we should
get them back and balance the budget with them. You know, these
proposals to take the revenues that we would raise offshore and
public lands and give to the States rather than keeping it to
balance the budget so we can keep our defense strong, that just
runs contrary to what our country should be doing at this time.
So even as we debate a constitutional amendment to balance the
budget out there on the Floor, we have here a Committee that is
talking about actually potentially increasing the Federal
deficit by changing the way in which we take the revenues from
public lands and, instead of putting them in the Federal
Treasury, just give them back to the States. I understand that
if I could--if I came from one of those States, that maybe that
makes some sense, but not while we are debating a Federal
constitutional amendment to balance the budget, that it seems
to me it should be our highest priority, so that we can send a
signal to the American people that we really do care about
balancing that budget. I know, I do. And I hope this Committee
shares my deep commitment to that goal.
I thank you, Mr. Chairman.
Mr. Lamborn. Yeah. Thank you.
I would like to remind everyone that a company like GE,
which made $14 billion in profits, paid zero income taxes last
year, Federal income taxes, when they had a lot of money coming
in from wind production, solar, et cetera.
Mr. Markey. Would the gentleman yield?
Mr. Lamborn. And I should also remind the Ranking Member
that when you buy a gallon of gas at the pump, you pay a lot
more in taxes than the oil company made in profit on that oil--
that gallon of gasoline. So when it comes to greed and so on,
we should look in the mirror.
Mr. Markey. Would the gentleman yield?
Mr. Lamborn. Yes.
Mr. Markey. I thank the gentleman for yielding. Again, I am
with you. OK. These large corporations are getting away with
murder. They should be paying their taxes. OK? Whether it be
General Electric or ExxonMobil, they are absolutely not paying
their fair share of the dues to live in our society. And I
share with you, we should do something on a bipartisan basis to
make sure that General Electric and these other companies don't
have----
Mr. Lamborn. OK. Agreed upon, let us go on to our next
questions.
Mr. Flores.
Mr. Flores. Thank you, Mr. Chairman. I find the last set of
statements pretty interesting given that we don't--here we are
talking about American jobs, American infrastructure, the
American economy, fiscal responsibility, the 26 billion
Americans that are either unemployed or underemployed. And look
at how many folks we have from the other side of the aisle that
are here that are interested in these key American issues
today: One. So let the record reflect that.
The second thing, we are talking about excessive profits.
This iPad is worth about five barrels of oil, about $500 new.
Now, who thinks that more profits are made on five barrels of
oil or on one iPad? Any of you all care to guess? The profit
margin on this iPad is over twice as high as on five barrels of
oil. Let us keep that in perspective. So when we talk about
companies paying their fair share, how many of you think--if we
go to Apple and say, Apple, we want you to pay your fair share,
we are going to double your tax rates, but we want you to
produce more iPads at lower cost for Americans. How many of you
think that is really going to happen? That defies the laws of
economics. And the laws of economics are like the laws of
gravity, the more you violate them, the harder the impact at
the end.
So with that said, let us go forward. Senator Wagner,
yesterday the Secretary of the Interior testified that he
suspended any leasing off the Pacific Coast because local and
State jurisdictions opposed drilling. Now, you are telling me
that Virginia supports drilling off its coast; is that correct?
Mr. Wagner. Mr. Chairman, Congressman Flores, that is
absolutely true. In repeated measures, legislation, the
Governor has----
Mr. Flores. One word is fine. I think we got the point
across. I am not trying to be--we have a lot of questions.
Second, he went on to testify that off the Atlantic Coast,
that the reason he didn't allow drilling off the Atlantic Coast
is because the Department of Defense felt like that would be a
problem. Now, I think I heard your testimony say that you don't
believe that is the case; is that right?
Mr. Wagner. Mr. Chairman, Congressman Flores, as I went
through the process, the Department of Defense weighed in very
heavily. Remember, this is a 5-year ongoing study. The
Department of Defense weighed in very heavily. As it was
presented to me by the Department of Defense, within the lease
sale 220, which we need to talk about at some point in time, is
40,000 acres. The Department of Defense said it was OK and then
they designated another perhaps 40,000 acres for subsea
exploration, where it would not come up through the surface of
the water.
Mr. Flores. So the answer is the Department of Defense is
willing to work with the Department of the Interior if we were
to tell the truth in this Committee, it sounds like. Or if the
Secretary of the Interior would tell the truth.
Mr. Wagner. I am just telling you what I saw as a----
Mr. Flores. That is what I thought. I would like to suggest
to the Chairman that we invite somebody from the Department of
Defense to come talk to us as well about this issue so we can
clear up that misconception. There are a couple of approaches
to fiscal responsibility.
Let me ask you this, Mr. Milito, which approach do you
think has the best impact on American jobs, the American
economy, the Federal fiscal deficits that we face, and also
revenues for infrastructure? Option A is, let's go ahead and
raise the taxes and restrictions on oil companies. Option B is
let's try to promote domestic drilling. Which one has the
better impact?
Mr. Milito. Option B.
Mr. Flores. That is what I thought. OK. Which--let's see.
Mr. Helmericks, let's see what my question is for you. What
has been--you are a resident of Alaska today, correct?
Mr. Helmericks. Yes.
Mr. Flores. What has been the adverse impact of drilling
and oil and gas operations as from your perspective? You live
there.
Mr. Helmericks. Yes, I have. In fact, I could see the
Discovery well out my bedroom window. I actually watched the
well being drilled, and I am only 7 miles from the Alpine
Prospect.
Mr. Flores. Allow Ms. Sweeney time, too. OK.
Mr. Helmericks. The adverse impacts have been very small.
Really, we have created something of a wildlife preserve around
Prudhoe Bay because it is a no molestation and no hunting area.
And, of course, it doesn't take the animals long to figure it
out. So, honestly, if you want to see game right now, I would
take you to Prudhoe Bay.
Mr. Flores. Ms. Sweeney, do the benefits of increased oil
and gas activity in your State outweigh the cost?
Ms. Sweeney. Yes.
Mr. Flores. Thank you.
I yield back.
Mr. Lamborn. OK. Thank you.
Mr. Landry of the Cajun Caucus.
Mr. Landry. Thank you, Mr. Chairman.
Mr. Chairman, I would like to note that I, too, share the
gentleman from Massachusetts' desire to balance the budget and
hope that I could continue to serve here alongside with him to
ensure that we get that budget balanced. And today I would like
to use the same card slot as him, and we can both vote for a
balanced budget amendment today.
You know, there are some statistics I think that are
important: There was a recent study that showed that if you--
that the average pay in the exploration and production side of
the oil and gas industry, the average pay per employee is
$2,000 per week. It is $104,000 a year by my math. If you are
in refining, if you are downstream, the average pay is $1,750
per week. That is $91,000 a year. If you are in the pipeline
industry, the average pay is $1,500 per week, $78,000 a year.
Now, if you are lucky enough to be in those industries and
enjoy those jobs and enjoy those wages, that means that you are
now in the top 25 percent of wage earners in this country. Now,
isn't that what we are about? Isn't that what America is about?
And yet this week, the President destroyed 20,000 of those
pipeline jobs by not allowing the Keystone pipeline to move
forward. Mr. Van Tuyn, do you live here in D.C.?
Mr. Van Tuyn. Mr. Chairman, Representative Landry, I do
not. I live in Alaska and have for quite a long time.
Mr. Landry. Now, how long did it take you to get from
Alaska to here?
Mr. Van Tuyn. 10 and a half hours?
Mr. Landry. On an electric plane?
Mr. Van Tuyn. It was a plane, and I make the trip often.
Mr. Landry. Well, I can tell you that I haven't been able
to find one of those planes we can plug in yet or whether we
can put those solar panels on those wings to fire up those
turbine props that allow you the luxury to come down here and
testify before us.
Mr. Van Tuyn. Perhaps we have to work on that.
Mr. Landry. So until you can get us to that point, I think
that it is prudent of us in this country to allow us to use the
resources that we have here. You know, the shame of it is that
right now--I am so mad because right now, we are exporting our
cheapest form of energy. We are becoming a net exporter of
natural gas while we import the most expensive form of energy.
Americans should be outraged.
And, Senator, I apologize that Congress has allowed itself
to just take certain States who don't want to drill--and I
respect that if a State does not want to drill off their coast,
I respect that. But if a State comes to Congress and says, this
is our plan, and this is what we would like to do, Congress
should weigh heavily on what that--on the decisions that that
State makes. So I apologize to you for Congress not respecting
the State of Virginia's plan to drill off its coast. I support
it.
And of course--I guess my question is actually to Mr. Van
Tuyn. Do you know another industry that has an average pay of
the numbers that I put before you earlier?
Mr. Van Tuyn. I do, Mr. Chairman, Representative Landry. I
think everyone on Wall Street.
Mr. Landry. Everyone on Wall Street. OK. And let me ask
you, how much--does Wall Street fuel your plane?
Mr. Van Tuyn. Wall Street sure increases gas prices. I can
tell you that.
Mr. Landry. Wall Street increases gas prices. The last time
I checked it is called supply and demand. It is a supply and
demand curve. And look, if you feel that Wall Street is making
too much money, then go over to the Financial Services
Committee. OK? But you know what, Americans right now are
paying through their wallets at the gas pump. Today, in
November, when gas prices are supposed to be going down, what
do you think the gas price is going to be in May? And, you
know, if we just keeping this can down the road, the price is
just going to go up and up and up, and the economy will
continue to be smothered. So I suggest that you take a good
hard look at your neighbor next to you who lived in Alaska all
his life, like you did, and respect his position and respect
the people who are making our energy, the people who allowed
you to get in that plane and go from Alaska all the way to
Washington, D.C.
Thank you, Mr. Chairman.
Mr. Lamborn. All right. Thank you.
Next is Representative Johnson.
Mr. Johnson. Mr. Chairman, I have no questions for this
panel. So I would like to yield my time to Mr. Flores from
Texas.
Mr. Flores. Thank you, Mr. Johnson.
Let us dive into the weeds here a little bit. This is for
Mr. Wagner and Mr. Milito. H.R. 3410, to increase the levels of
offshore drilling, have either of you all had the chance to
review that legislation? It just came out. So I don't know if
you have had a chance to review it.
Mr. Wagner. Mr. Chairman, Congressman Flores, I have not
had the opportunity.
Mr. Milito. I have. I have had a chance to look at it.
Mr. Flores. Do you have any specific recommendations that
you would make before we have a markup on that bill later on
this----
Mr. Milito. You know, we just got it. We looked at it. We
wanted to have an opportunity to really get back to the
Subcommittee and to the Committee staff to weigh in on it a
little bit.
But generally, it is going in the direction this country
needs to go in. We need to be leaders in developing our energy
resources. It provides an opportunity this Administration is
not providing by allowing us to go out there and develop
offshore resources, and the ability to go in these areas off
the Atlantic and Eastern Gulf and the Pacific, that is the step
that we need to go in.
Mr. Flores. OK. If you would, we will ask you to provide
some written recommendations to the Committee if you would so
that we can get those in. I am concerned--I am wondering if we
put hard enough targets in there and if the targets are
realistic, also. I am concerned about the fact that a lot of
the information we use regarding undiscovered technical
reserves may be way out of date and in most cases from what
recent history has shown us is our recoveries tend to be much
higher than those initial UTRs. So we need some feedback on
what we can do to improve those numbers because if the
Secretary is using 30-year-old data, that is going to drive us
to a suboptimum outcome, and I would like to get to an outcome
where we go to the areas that have the greatest potential
first. One of the things in the legislation is it says you look
at it by lease area, and I am wondering if you should just look
at the entire offshore in the United States where do you go
first instead of looking at lease areas.
Mr. Milito. Those are actually two specific items that we
have been looking at. But, you know, we want to make sure that
we--a lot of it is legal language and how you interpret these
clauses. But those are two concerns. We want to make sure it is
maximizing and optimizing our opportunities.
Mr. Flores. Right. Because, I mean, again, the goal here is
to put Americans back to work, improve the American economy, to
reduce the Federal fiscal deficit and to have the most amount
of money available for U.S. infrastructure. I think that is the
common objective. So if you can help us achieve those
objectives, that would be great.
Yes, sir. Senator Wagner.
Mr. Wagner. Mr. Chairman, Congressman Flores, one point I
would like to add. Again, I have not read the legislation. So I
apologize for that. But one of the issues that has come up that
has been a big issue in Virginia is the computer models the
Department of the Interior uses to actually designate what
States have what purview over there. And what happens is States
that have concave coastlines are very much penalized because it
uses--I have been told by Interior--international treaty and it
has a thing. If you just went straight east-west, as it should,
from the border, straight east-west out to the end of the
Continental Shelf, obviously Lease Sale 220 would be much
larger. But more importantly, vast areas would be open well
outside of the Navy op areas. So there would be no concerns
from DOD on that. So I would hope that as that legislation
moves forward--I talked to Congressman Wittman about it--that
those kind of things--direction is given to Interior about how
they go ahead and designate these things both on the East and
West Coast.
Mr. Flores. OK. That makes sense to me because we ought to
be looking at the offshore in the aggregate and not in pieces
of pie or partials. Another somewhat rhetorical question for
many of you on the panel, and it is which opportunity provides
the greatest impact on American jobs, the American economy,
improving the Federal deficit situation and providing the most
revenues to the Federal Government for infrastructure, is it
drilling overseas or drilling in the United States of America?
Let us start with Ms. Alexander.
Ms. Alexander. In the United States, of course.
Mr. Flores. Mr. Milito.
Mr. Milito. The U.S.
Mr. Lamborn. Senator Wagner.
Mr. Wagner. The United States.
Mr. Van Tuyn. In the United States. We are reducing our
imports every year and have since 2008.
Mr. Flores. Mr. Helmericks.
Mr. Helmericks. Chairman, Congressman, of course in the
United States.
Mr. Flores. Ms. Sweeney?
Ms. Sweeney. In the United States.
Mr. Flores. OK. We have 100 percent agreement. Now, if we--
the next question is, if we decide to raise taxes on oil
companies domestically, is that going to increase the amount of
drilling and investment in this country? Senator Wagner?
Mr. Wagner. Mr. Chairman, obviously not. I mean, it would
take money away from----
Mr. Flores. OK. Mr. Milito.
Mr. Milito. That would serve the opposite goal and mission.
It would go the other way.
Mr. Flores. Mr. Helmericks.
Mr. Helmericks. Yes, it would decrease it, Congressman.
Mr. Flores. Ms. Sweeney.
Ms. Sweeney. It would decrease it.
Mr. Flores. Thank you.
I yield back.
Mr. Lamborn. The next person on our list to ask questions
is Representative Thompson.
Mr. Thompson. Thank you, Chairman.
Mr. Helmericks, you mentioned in your testimony that you
have, quote, respectfully are asking for access to Federal oil.
I certainly support that with all humility and pun intended, I
want to drill down on your response a little bit. Just
specifically, you talk about Federal oil, well, I think this is
elementary, but who owns those resources, such as the oil and
gas, on Federal lands?
Mr. Helmericks. The citizens of the United States.
Mr. Thompson. Absolutely. The United States taxpayers and
the citizens here. I appreciate that.
To all of the panelists, what is the overall expected
economic impact of opening the small portion of ANWR that we
are talking about within this legislation?
Ms. Sweeney, any thoughts?
Ms. Sweeney. Through the Chair, Congressman Thompson, there
are significant economic benefits to developing the coastal
plain of ANWR and we are looking at jobs for Americans and
revenues for the Federal Treasury in addition to the benefits
felt by Alaskans.
Mr. Thompson. Any other panelists have any other thoughts
on economic impacts on opening up just a small portion of ANWR
that this legislation is addressing?
Mr. Milito. We understand that the USGS estimates that
between 5 and 16 billion barrels of oil. That is more than
twice the proven reserves in Texas. We also understand the
production could get up to 1 million barrels of oil per day,
which closes in on what we are doing in the Gulf. So this would
certainly enhance our economic and energy security.
Mr. Thompson. Thank you.
Mr. Van Tuyn, you had made some comments about since 2008,
we have reduced our imports. Today we also have unemployment
that equals the size of the population of Pennsylvania, 14
million Americans. I would argue that if there has been any
need to reduce imports, it is unfortunately because people are
sitting at home and not having a job to be able to drive to.
Within the testimony, there were comments about the Equal
Access to Justice Act and the payments that this fund provides
to litigants. Mr. Van Tuyn, do you believe that lawyers and
environmental groups need to draw from this or need this
payment?
Mr. Van Tuyn. As much as API does. I think API gets a lot
more money under the equal act--the Justice Act than
environmental groups like--if not, it is--you know--under these
fee-shifting provisions, API gets money, too. And that is true
for the National Rifle Association and others. And it is simply
a matter of fairness and access to the courts.
Mr. Thompson. Well, in my congressional district, where we
have lost significant jobs because of what I consider to be
frivolous lawsuits, it has been the environmental groups that
have been killing jobs and tying things up.
How specifically would you--any suggestions on how you
would suggest fixing--and I open this up to all of the panel
actually, suggesting fixing the Equal Access to Justice Act?
Any thoughts or comments, Ms. Sweeney?
Ms. Sweeney. Through the Chair, Congressman Thompson, yes.
On the North Slope, we have seen meaningful energy projects
delayed by lawsuits that have very little or no merit, and we
are supportive of reform of the Equal Access to Justice Act for
challenges that have no merit. And what we would like to see is
those that are interested in challenging meaningful energy
projects in this country, that they also have skin in the game
and are accountable in this process. And so our suggestion
would be have them post a bond for the value of the project.
Mr. Wagner. One other concept, probably outside the realm
of anybody in this room to carry: Loser Pays. It is certainly
one of those actions that the alternative of that is if a
frivolous lawsuit causes unnecessary damages, have Congress
create a cause of action, where the damaged party because of a
frivolous lawsuit, they may seek a cause of action and come
back and sue the person doing that and create a cause of
action. That will have an effect of having people not file
frivolous lawsuits. If there is a legitimate concern, go ahead
and file a lawsuit. So I think much more achievable within this
Congress would be to have a cause of action for the damaged
party because of a frivolous lawsuit.
Mr. Van Tuyn. Mr. Chairman, Representative Thompson, there
is already those rules in place. It is called Rule 11. If I
file a frivolous lawsuit, I am subject to losing my license to
practice law. It exists today, and I would say anybody who
thinks the lawsuit that has been filed on Arctic oil and gas or
any other issue has an absolute remedy in court to deal with
that now.
Mr. Thompson. That is interesting information. I will be
glad to take that back and why it seems that Rule 11 is being
ignored, at least in my congressional district.
Thank you, Chairman.
Mr. Lamborn. Thank you.
Representative Duncan.
Mr. Duncan. I learn something every day, Mr. Chairman. I
really didn't know that Wall Street had complete control over
the gasoline and oil prices. And I swear that I learned growing
up--since I was a little boy until now--that supply and demand
is the driver. And that OPEC can turn open that spigot or close
that spigot just like they did in the 1970s when they had gas
lines. Because the supply was cut off, gas prices went up,
supply and demand. But I learned something today. Wall Street
dictates all of that.
You know, I guess I am the slow zebra on the Committee. I
guess I am like the average American that wonders why in the
world America isn't harvesting its own resources to meet its
own energy needs, lessen our dependence on Middle Eastern oil,
people who don't like us very much. The average guy out there
is going, ``we have got the gas, we have got the oil, why are
we exporting natural gas?''--as the gentleman from Louisiana
just said, and importing the most expensive product? Why are we
stopping bringing oil from one of our most favored nations, our
neighbor, our largest trading partner in Canada, why aren't we
allowing that oil to flow to American refineries and be refined
into products that benefit both America and Canada? To things
that have happened in the last couple of weeks and in this
Congress with regard to and under this presidency, regarding
energy production and American energy independence baffles me
and baffles the American--average American out there. I will
stop my rant.
And I want to thank Senator Wagner for being here because
he and I first met in Louisiana when I went offshore to look at
offshore drilling and the Devil's Tower Platform. And I want to
thank him for his work because Virginia is one of the only
States that has a comprehensive energy plan. And this man
helped draft that comprehensive energy plan. Virginia set
itself up to be very successful in the future. Let me remind
the Committee that the second largest economic strength of the
United States of America, second only to income taxes is the
money we receive from revenues, the royalties from oil and
natural gas production of American resources. The second
largest income stream of the country. Virginia was poised to
take advantage of offshore drilling. Senator Wagner encouraged
me to be involved in South Carolina and pursue natural gas,
drilling off the coast of the State. He came to South Carolina
and testified as to why that was important. South Carolina and
Virginia and other States ought to be like Louisiana and Texas
and Mississippi and share in the oil revenues of energy sources
that are produced off our coast and within our State. So,
Senator Wagner, I just want to ask you to expound on--you have
an energy plan for Virginia. You all were set up to drill, you
were set up to harvest those resources, to benefit from the
manufacturing, from all of the industry that supports offshore
drilling, the royalties. What do you do now?
Mr. Wagner. Come up here and beg you all to please put us
back in the plan, Mr. Chairman. I mean, that is why I am here.
It just floored us. It astounded us; after all of the hard work
that had gone through so much, after all the taxpayers' dollars
we expended to get Virginia into the position it is in, to find
out it has been wiped out, and so we are back up here saying
please, please reconsider. Nothing has changed in Virginia
except for we are very, very concerned about our economic
outlook, as I know each of you are for your own States and
congressional districts. This is a very, very scary time. And
when you mention, you know, get our oil, I need our oil, and
you forgot to mention the third part of that and that is, I
need my job, I need a job. And there's jobs waiting to happen
right there. There are jobs that need to happen here in
Virginia, your State in South Carolina, all across this
country. And this is a solution to me. This is a spark that
starts things going, that you can build off of, the spillover
effect to move forward and ultimately end up with some lower
cost energy which makes this country more competitive across
the board, be it agricultural products. So much of natural gas
is used in making fertilizer, as well as lower overhead across
our Nation with a sound energy policy, which makes all of our
exports much more competitive. That is where we need to be. We
have the future. We have the natural resources. I hope Congress
can get the message out, and we can start turning this country
around.
Mr. Duncan. We stand with Virginia.
I am going to yield the balance of my time.
Mr. Flores.
Mr. Flores. Mr. Van Tuyn, Rule 11, interesting. What
percentage of the time do judges grant Rule 11 sanctions?
Mr. Van Tuyn. I do not know.
Mr. Flores. Let me put it to you this way. In percentage
terms, it is lower than the percentage profit margin on a
gallon of gasoline.
Mr. Van Tuyn. Mr. Chairman----
Mr. Flores. Let the record reflect that right now, we don't
have anybody from the other side of the aisle that is paying
attention to American jobs, the American economy, the Federal
deficit, American energy security or national security.
I yield back the balance of my time.
Mr. Lamborn. Thank you.
The next person to ask questions is Representative Rivera
of Florida.
Mr. Rivera. Thank you very much, Mr. Chairman.
One often untold story of energy consumption is in the
United States, our military is one of the largest consumers of
fossil fuels. The mission of our Nation's armed forces is of
the utmost importance and the skyrocketing cost of energy takes
money in their budget away from other areas where they could be
investing it on our troops. I am wondering if API has done any
studies on how increasing domestic energy production can also
be a national security issue. And perhaps Senator Wagner may
have some thoughts on this, too, given the significant presence
of the military in Virginia.
Mr. Milito. Well, most of our efforts have focused on just
the general ability of this country to increase its energy
security by getting to the point where we become dependent upon
ourselves and our neighbor to the north, Canada. You know, I
was in the Army for 5 years, and we had a slogan, KISS, keep it
simple, stupid. And I showed the slide which showed that we
need all this energy as we move forward. We need oil and gas,
and we should be leading it. We shouldn't be promoting
Brazilian offshore oil and gas. We should be doing it here and
leading that effort.
And what we have shown is that by providing the access to
these offshore resources, providing access to the pipelines to
bring the resources down to Canada, we can depend on two
countries, the U.S. and Canada, which would provide the
security for this Nation and for our folks in the armed
services. That is the focus we have been taking and the
revenues and jobs come along with it. So it is a win-win-win.
Mr. Rivera. Senator Wagner, any thoughts?
Mr. Wagner. Mr. Chairman, Congressman Rivera, it is my
understanding that the Department of Defense is the largest
purchaser of energy in this nation. Obviously, with our Air
Force, Navy, all of our armed forces heavily dependent on
fuels, as well as a variety of electricity, a big demand within
our DOD.
As we are sitting here grappling with defense budgets in
the supercommittee, and it has obviously got Virginia very,
very concerned about defense cuts--we know they are coming. We
hope they are minimized. But when you start looking at the
defense budget, one of the major expenses, certainly not as
high as the personnel expenses and health care expenses, is
their procurement of energy. Anything that we can do to drive
down the cost of energy is going to reduce our Department of
Defense's cost of energy and allow those dollars to be freed up
for training, for operations and for maintenance, to make sure
our armed forces maintain ourselves as the number one in the
world like we are today.
Mr. Rivera. Thank you very much.
Mr. Chairman, with your permission, can I yield the rest of
my time to Mr. Landry of Louisiana?
Mr. Lamborn. Certainly.
Mr. Landry. Thank you very much, Mr. Rivera. I appreciate
it, Mr. Chairman. Ms. Alexander, do you support removing the
tax credits that oil and gas companies receive, as the
gentleman from Massachusetts----
Ms. Alexander. Yes. We do support that.
Mr. Landry. OK. I am just curious. Do you know the
percentage of major oil and gas companies in all of the deep-
water drilling in the Gulf Coast? Do you know the percentage of
projects that major oil and gas companies make up?
Ms. Alexander. I don't.
Mr. Landry. You don't. Would you think it is 80 percent?
Ms. Alexander. I am guessing you do know and you can tell
me.
Mr. Landry. I do know, but I am trying to understand if you
have any concept when you talk about big oil.
Ms. Alexander. I should clarify a couple of things. First
of all, our organization, we take a position that we should
reform corporate taxes across the board to eliminate breaks,
lower rates and simplify the code.
Mr. Landry. OK. Let me just say this: 36 percent of the
projects are done by the majors. That means that the
independents, the moms and pops out there, the people that
started on land, worked on the shelf, just built their
companies up, that is the majority of who drills offshore. That
is who drills here, Americans, small American companies. Why is
it that you believe that if we drill off the coast of a State
that that State is not entitled to revenue sharing? Are you
opposed--would you oppose the royalty payments that go to the
land States, the States like Wyoming or Montana? Do you believe
that the 50 percent of Federal royalties that they receive
should be taken away from them as well?
Ms. Alexander. You know, our position on onshore
development is they are within the States, we think that is
different. But also we--I mean, think that for onshore
development, for mineral development, they need to be paying
more royalties. Many of the hydro mineral developers now don't
pay royalties to the United States off Federal lands. So I am
happy to defend our organization's consistency. It is not a
priority to change the current revenue-sharing arrangements. We
don't want to see them changed. We don't want to see an
increase in revenues going to the States of offshore
development because we don't think that is relevant for the
industry, and we don't think it is good for the Federal
Treasury. I understand----
Mr. Landry. Do you think that the Federal Government uses
your tax dollars wisely?
Ms. Alexander. Not all the time.
Mr. Landry. Why would you want to give them more money?
Ms. Alexander. I don't think my State--well, I live in the
District, but I have lived in other States. But I don't always
think my State does the right thing with my tax dollars either.
I think that the Federal taxpayer owns those resources and the
Federal taxpayer should get those revenues. I absolutely
understand that you disagree on this.
Mr. Landry. Mr. Chairman, I yield back.
Mr. Lamborn. Now we will hear questions from the other
member of the Cajun Caucus, Mr. Southerland.
Mr. Southerland. I am a proud honorary member of that
caucus, as are you, Mr. Chairman. So thank you very much. I
would like to thank all of the witnesses.
Mr. Milito, this past week you described the Obama
Administration's 5-year plan as simply maintaining the status
quo. And I believe your organization sent a letter to the
President calling it a missed opportunity. I appreciate that
you also took on the Administration's recent boasts that U.S.
energy production is at an all-time high, when in truth, the IA
chart showed that energy development on Federal lands is at its
lowest in 10 years. So the Obama Administration is literally
taking credit for increased energy production on State and
private lands where they have no jurisdiction.
I would say this also--this is also status quo for this
particular Administration. Do you think that H.R. 3410 helps
the government break beyond the status quo to take bold moves
toward getting more domestic energy production on line in new
areas?
Mr. Milito. Definitely. We have been kind of isolated and
restricted to the Central and Western Gulf for decades. And it
is a very mature field. And this industry has shown the ability
to use technological advances to get out there and make huge
discoveries and continue to develop that to the benefit of the
Gulf Coast States and the whole country. But we need to expand
our opportunities and make sure that we are not missing
anything. We don't even have the ability to get out in the
Atlantic and run seismic work because the EIS work that was
started in January of 2009 has been delayed. We are coming up
on 3 years now. We want an ability to get a permit to do
seismic work. And now they take the Atlantic off, what
incentive does this industry have to go find the seismic?
And then it is a Catch-22 because the Administration is
saying we don't have the information to move forward with those
lease sales off the coast of Virginia, which are supported. So
we are in a bit of a quagmire, and we are stuck in the Western
and Central Gulf. And in Alaska, it has been 5 years where
these leases have been issued, $4 billion spent and haven't
been able to get the permits to go out there and do the work.
So we are kind of stuck in a corner, and we need more
opportunities.
Mr. Southerland. Very good. And because I just arrived, I
guess--is it Van Tuyn?
Mr. Van Tuyn. Yes, it is.
Mr. Southerland. OK. I apologize if I messed that up. Let
me ask you a question because I hear this often times and we
talk about some things in this Committee. Is profit a bad
thing?
Mr. Van Tuyn. No, it is not.
Mr. Southerland. Is it wrong for oil companies who invest
billions of dollars to have a profit?
Mr. Van Tuyn. No.
Mr. Southerland. Then why do we have to hear the opposite
of that ad nauseam in this Committee room as well as on the
Floor and by groups who claim that profit is bad?
Mr. Van Tuyn. These are the most profitable corporations in
the world.
Mr. Southerland. How do you define profit?
Mr. Van Tuyn. Mr. Chairman, above your cost. The money you
bring in above your cost.
Mr. Southerland. But I am a business owner. Our family has
been in business for many, many years, many generations. I have
asked this question before, and I don't know if you are a
business owner, because I don't know your past. What is an
acceptable rate of return on an investment? I mean, is it 20
percent, 30 percent, 10 percent, 5 percent? What is acceptable?
I am a small-business owner. But I think it is relative.
Mr. Van Tuyn. You know, I don't have a strong opinion on
that. I think that the oil industry has shown that it is
historically the most profitable----
Mr. Southerland. I asked you about profit percentage.
Mr. Van Tuyn. I think it changes by industry and volume.
Mr. Southerland. Well, let me tell you as a small business
owner and as one who has a degree in business and the
experience of a long history of family--of multiple businesses,
10 percent is always, in business, 10 percent is, you know,
something that you say, hey, we can invest and have 10 percent,
then it is worth our while. OK? It is worth hard work. It is
worth putting an investment in. I am sitting here and hearing
people say billions and billions and billions of dollars. That
is wonderful and great. It is sensational, and it is a bit
disingenuous. Because if an organization has a billion dollars
in profit, to totally ignore the $15 billion that they had to
invest is a bit disingenuous, wouldn't you agree?
Mr. Van Tuyn. I guess, Mr. Chairman, Congressman
Southerland, I think it is not fair in the United States to
have a tax rate on the books of 33 percent and pay less than 16
percent of your taxes. If you want to pay 16 percent, then----
Mr. Southerland. First of all, you are probably of the
opinion that higher taxes leads to a greater economy.
Mr. Van Tuyn. I would not express that opinion. That is far
outside my expertise.
Mr. Southerland. So my point being with my remaining
seconds left, my point being that last year with Chevron,
Exxon, and BP all being in the 5, 6, 7 and 8 percent profit
margin, that is acceptable, based on the billions upon billions
of dollars that are invested and that the American Treasury
receives from their investment. And it just infuriates me,
really, as a business owner to--everybody wants to use the word
billions, but they never want to use the proper terminology
that business owners understand and it is profit margins based
on percentage.
So with that established, I yield back.
Mr. Lamborn. All right.
Thank you. I want to thank the witnesses for be being here
today. Members of the Committee may have additional questions
for the record and I would ask that you respond to these in
writing. Thank you for being here.
And I would like to now call to the desk the second panel
of witnesses. The Subcommittee will take a brief recess and
reconvene in 5 minutes at 11:25.
[Recess.]
Mr. Lamborn. The Subcommittee will come back to order. I
would now like to introduce the 5 members of our second and
last panel. Mr. Todd Dana, Chairman and CEO of Uintah Partners
LLC; Mr. Bill Eikenberry, rancher and Former Associate Wyoming
State Director of BLM; Mr. Steven Gardner, President and CEO of
ESCI, LLC; and Mr. Joe Zaluski, executive vice president also
of ESCI, LLC; and Mr. Patrick McGinley, Professor of Law at
West Virginia University College of Law.
And like all of our witnesses, your written testimony will
appear in full. So we ask that you keep your oral statements to
5 minutes. And you saw allow the lights work: They are green
until the last minute, when they turn yellow, and red after 5
minutes. So we will go ahead and start in with our first
witness.
Mr. Dana, you may begin.

STATEMENT OF TODD DANA,
CHAIRMAN AND CEO, UINTAH PARTNERS, LLC

Mr. Dana. Thank you, Mr. Chairman and members of the
Subcommittee.
My name is Todd Dana. I am Chairman and CEO of Uintah
Partners. I am pleased to talk with you today regarding H.R.
3408, Protecting Investment in Oil Shale, The Next Generation
of Environmental Energy and Resource Securities Act.
Mr. Chairman, as an oil shale industry entrepreneur, I
welcome the opportunity to provide my perspective on the re-
emerging United States oil shale industry. My goal is to
provide the Committee with the guidance and support it needs to
push for the development of what I believe to be one of this
country's greatest assets, over 1 trillion barrels of very
premium crude oil from oil shale in Utah, Colorado and Wyoming.
After researching the global energy demand and technologies
of the future for liquid energy about 10 years ago, I
determined that the development of unconventional oil shale
would by necessity come to fruition in the United Sates in my
lifetime. Each day I go to work in the oil shale industry, I am
more and more confident that my efforts will develop--to
develop responsible environmental and economically viable
technology for this industry will play a major role in bringing
much needed jobs to our country and thus benefit our national
security.
The fact is that we now have the technology to tap into
this enormous resource, a resource that the U.S. Department of
Energy has estimated at more than 800 billion barrels of
recoverable oil from shale. We simply need to harness the
combination of our business acumen and community resources so
guide us down the path of responsible planning and
environmental sound development of these rich reserves.
For almost 100 years, scientist, engineers and corporations
have attempted to extract oil from shale on an economic scale.
Despite having produced millions of barrels of oil from shale
decades ago, the price of oil on the global market could not
sustain the industry.
The industry has not flourished for many reasons. Some are
economic and some are technical. Most people familiar with oil
shale in the Rocky Mountain region understand that it is
actually quite easy to produce oil shale from oil shale rocks
using the well known process of pyrolysis. The problem has been
that the capital and the operating costs relative to mining,
building and operating retorts, and the building and operating
of hydrotreaters or upgraders has been too expensive relative
to the price of crude oil.
But while the economics have failed, the resource remains a
viable, very world-class asset. For the past 6 years, oil
prices have averaged above $85 per barrel. At that price, the
oil shale industry could have been operating profitably for the
past 6 years. The price of oil driven by supply and demand as
well as geopolitical constraints and with nationalism on the
ride from China, is rising. Just a few weeks ago at the oil
shale symposium in Golden, Colorado, at least half a dozen
companies set forth timelines indicating the commencement of
commercial operations between 2016 and 2020.
The new price of crude oil combined with new technology and
the anticipated higher volume production and lower operating
costs will be the primary drivers of the industry, provided of
course if the Federal Government will allow it to move forward
with development through commercial leases.
For many years, horizontal kilns and vertical retorts have
been limited to approximately 5,000 barrels per day. For
example, the ATP Process, the Paraho Process and Petrosix
Process and even the processes developed by the Estonians have
been stuck at this certain ceiling of volume. I am aware of at
least three surface retorts now with technologies that have the
ability to provide shale oil delivering over 25,000 barrels per
day on an economic and environmentally sound basis.
I am pleased to report to the Committee that there are now
full commercial projects in development, including with tens of
millions of dollars in mine planning, engineering and
development that will put the industry in play by 2016 to 2017.
But again, this will only be possible with your support and
that of the responsible Federal agencies. Because the Federal
Government controls the vast majority of this vital resource,
the most important thing we could do now is to have government
establish clear rules, lift the overreach of regulation and
establish a dedicated entity to coordinate with all the key
regulators. The development of oil shale in Utah, Colorado, and
Wyoming, will provide millions of jobs over decades to come,
thereby reducing our dependence on foreign oil and our
substantial trade deficit.
All of this can be done responsible in a manner that
protects water, wildlife and the environment, while providing
liquid transportation energy that we need for our national and
economic security.
Thank you for the opportunity to appear today. And I will
be happy to respond to questions later.
[The prepared statement of Mr. Dana follows:]

Statement of Todd Dana, Chairman & CEO, Uintah Resources, Inc.

I thank the Committee on Natural Resources and Chairman Lamborn for
the opportunity to provide perspective and comments on the reemerging
United States Oil Shale Industry--from the perspective of an industry
entrepreneur. I hope my comments will be helpful in guiding reasonable
and bipartisan support for what I believe is America's best asset, over
1 trillion barrels of very premium crude oil from oil shale in Utah,
Colorado and Wyoming.
For almost 100 years many scientists, engineers and corporations
have attempted to extract oil from shale on an economic basis. Despite
having produced millions of barrels of oil from oil shale rocks decades
ago in the United States, the price of crude oil in global markets was
not supportive of this industry. The industry has not flourished for
economic reasons and some technical reasons. Most people familiar with
oil shale in the Rocky Mountain region understand that it is actually
quite easy to produce oil from oil shale rocks using the well known
process of pyrolysis which is heat in an oxygen free environment. The
problem has been that the capital and operating costs relative to
mining, building and operating retorts to extract the oil, and building
and operating hydrotreaters to upgrade have been to expensive relative
to price of crude oil. But while the economics have failed the resource
remains a viable world class asset.
What is now changing is price of crude oil. Over the past six years
the price of WTI NYMEX crude oil prices has stabilized above $85.00
average price per barrel. The price of oil is driven by supply and
demand as well as geopolitical constraints. With nationalism on the
rise, competition form China and growth in Asia and emerging economies
demand is expected to rise and drive prices upward. With an average
NYMEX WTI crude oil price of $85.00 per barrel, the oil shale industry
will emerge by the end of 2016 and into 2017 with first production.
Just a few weeks ago at the Oil Shale Symposium at Golden, Colorado at
least a half dozen companies set forth timelines in presentations
showing commercial operations starting between 2016 and 2020. The new
price support in the global crude oil market combined with new
technology based on much higher volume production and much lower
operating costs is the driving new forces that will open this industry.
When people ask ``What is different now about oil shale?'' the answer
is simply two main reasons. First, global crude prices have risen to an
average of $85 dollars per barrel, and second, new, outstanding, high
volume technology is being developed in a responsible manner that
lowers the operating costs from 75 dollars per barrel to about 35
dollars per barrel. It is really that simple.
To the credit of the environmental community, with the rise of the
Green Energy movement earlier this past decade, inspiration and
guidance was provided to many of us in the oil shale industry who set
out to open the industry responsibly. For example, after researching
the global energy demand and technologies of the future for liquid
energy about ten years ago, I determined that unconventional oil shale
would by necessity come to fruition in the United States in my life
time. I also determined that the limitations of solar and wind to
actually replace petroleum were wishful thinking and that liquid
petroleum is an entirely different industry. Since my decision 8 years
ago to participate in the oil shale industry, I have not regretted this
decision once. Not only do we now see the failures of economics in
solar, wind and ethanol as I predicted 8 years ago, but we now see that
America has fallen into a rut of fighting wars in the Middle East over
oil. Each day I go to work in the oil shale industry, I feel my efforts
to develop responsible environmental technology and economic technology
will be a part of not only displacing future emissions but also
displacing the need for wars over oil that cost the health and lives of
soldiers and their families. Let me say that to all opposing
environmental activists willing to fight against the oil shale
industry, I implore you, in the name of our military families to cease
with unnecessary and frivolous opposition to the industry that
otherwise causes these many wars for oil in the Middle East. The anti-
oil agenda is futile and green energy cannot and will not replace our
need for liquid fuels. I know many environmentalists share an
opposition to wars and especially wars over oil and that has been a key
driver in promoting an anti oil agenda. We are now in era where
environmentalism and regulation is actually causing these wars and
green energy cannot offer us a realistic solution to liquid fuels. Its
time to do the best we can with the resources and technology we have
and that, speaking from my research and point of view has morally lead
me to engage in responsible oil shale development. I encourage you and
all good Americans to consider your activism and weight it in this
context.
The fact is that oil shale industry can help us develop responsibly
and inhibit the United States from fighting for oil elsewhere. Tens of
thousands of soldiers have been maimed, millions of people have been
killed and the United States is on the verge of financial collapse due
to spending on these oil wars. We can do better. We have the
technology. We simply need the moral judgement and the community
working together attitude of beneficial development through responsible
planning.
After 8 years in the oil shale technology development business I
have a few easy solutions to the environmental concerns that I would
like to discuss. The most often cited challenges are relative to
1. Water
2. Emissions
3. Reclamation
4. Wildlife
In regards to water, many environmental alarmists would have
America believe there is no water for the oil shale industry. This is
patently false. Over the past years I have spent in this industry I
have found it humorous to read newspaper article after newspaper
article about how much water oil shale will use. There has never been a
shortage of conflict-inducing journalists looking to regurgitate this
worn out story with arguments on both sides. Seldom however is the real
issue of supply and source of water dealt with. Even government
sanctioned reports of the industry such as that as from the Rand
Corporation have been completely misguided when it comes to water use
in oil shale and availability and process volumes. The truth is that
water is widely available in the State of Utah for purchase. Anyone
worried about the water availability can simply buy the water. For
example, my company negotiated a large contract recently that now
provides us all of the water rights we need into the foreseeable future
for our own process water for oil shale. The water is available and it
is in abundance currently in use for corn and alfalfa farming. If the
price of oil can support buying that water from farms, it can be used
on an industrial basis in the oil shale industry--its that simple. On a
macro level of planning for water consumption in the arid West (for
example population growth), for those that are naive to believe that
this is the way we plan the world, there's not much I can say to
dissuade someone on water. But even on a macro scale argument of water,
it is also true that water can and will be piped to the region from
long distance if necessary widely available from Utah Lake, The Great
Salt Lake and even as far distant as the ocean itself. Water is not a
problem for oil shale. Every comment to the contrary is just
environmental activism without the economic understanding of importing
the water. Water is not only available now it will be far into the
future for the U.S. oil shale industry.
In regards to air emissions I have already mentioned the benefits
of using clean burning natural gas to heat up the oil shale in
retorting processes. Many of the projects I am familiar with now
seeking air permits are actually coming forward as minor source
emitters. In other words, the oil shale processes they employ are so
low in emissions due to burning natural gas (instead of buring the rock
itself as in the old days) that they are not even major sources under
the Clean Air Act. Natural gas in abundance will continue as an ideal
input for retorting oil shale. America is currently discovering
enormous amounts of natural gas from shale formations from the Rockies
all the way to New York and beyond. Unlike the Solar and Wind
industries which cannot compete with electrical generation from natural
gas without subsidies, the U.S. oil shale industry actually benefits
from natural gas at low prices and without subsidies. Because oil shale
retorting is driven by natural gas, each barrel of oil shale becomes
that much cheaper to produce. Further, after production of shale oil
from the rocks in the pyrolysis step, oil shale requires the semi-
refining step known as hydrotreating or upgrading. The oil is processed
at high temperature and high pressure and combined with 2,300 standard
cubic feet of hydrogen per barrel. The hydrogen comes from natural gas
and therefore the lower cost of natural gas lowers the price of oil
shale as well. It should be understood by your committee that this
downward pressure on natural gas is forseeable for the next two or
three decades. This is excellent news for oil shale inputs on energy
and upgrading relative to hydrogen production.
Further to the discussion of emissions is the overall emissions
profile of each barrel of crude oil. While environmentalists have
recently attempting to label Canada's oil sands as a ``dirty oil'' the
same cannot be said of U.S. oil shale. Not only does the step of
burning clean natural gas for the pyrolysis emit very little emissions
but the reality is that oil shale once hydrotreated yields nearly 75%
of the barrel as Ultra Low Sulfur Diesel (ULSD). This is not diesel as
we have once known this is diesel known as Green Diesel, the same Green
Diesel that most of the European automakers have highlighted as highly
fuel efficient. I will refer the committee to the Super Bowl TV
commercial from Audi from two years ago known as the ``Green Police
Commercial''. The Green Police where depicted policing ridiculous
notions of green living including a police barricade on the highway.
When the Green Diesel Audi approached the Green Police at the traffic
stop, the Green Police noticed the Ultra Low Sulfur Diesel automobile
from Audi and allowed it through. Americas Green Police
environmentalists need to get the memo and join the Ultra Low Sulfur/
Green Diesel movement. The Europeans have gone to this fuel for mileage
efficiency and its time we do so here in the United States. In fact,
there are several green diesel automobiles that actually get better gas
mileage than gas-electric hybrids--most people are not aware of that. I
am hoping to see Al Gore drive up to the Sundance Film Festival in Utah
in a Green Diesel vehicle from Germany and not just a Prius each year.
When the true story of the potential of oil shale is told relative to
Green Diesel, the emission profile looks quite normal to regular crude
oil production already refined around our country. This is good news
for American families looking to be employed by the oil shale industry
and simultaneously provide a secure energy future for our children.
In regards to mining and surface disturbance in the U.S. oil shale
industry many environmentalists argue that oil shale lands cannot be
reclaimed and that desert land do not grow back. This is also patently
false. I wish to direct the committee to look into all of the gas well
pads that have been drilled on oil shale surfaces for decades now in
Utah and Colorado. All across the Piceance Plateau and in the Uintah
Basin thousands of natural gas well pads have been cleared by dozers to
flatten a site suitable for drilling rigs to set up and drill for
natural gas. It is quite typical that these pads are directly on the
outcrop of oil shale and the oil shale is pushed up in large piles
around a flat surface. There are now hundreds of well sites that are
now reclaimed where once drilling has taken place. The oil shale lands
(high desert lands) are now so well reclaimed that it takes a very keen
and trained eye to even notice that a well even once been there. There
are other examples as well. For instance, in the case of the old
Geokinetics oil shale production site in Utah that produced over
100,000 barrels of shale oil, the land that was once disturbed can best
be noticed today by looking for wild life. The deer and elk in the area
actually prefer to live and graze on these reclaimed oil shale lands
which support far better foliage than the undisturbed and unreclaimed
lands. This brings me to a few comments about wildlife from an industry
perspective.
Its amazing to me that we have grown into a society that protects
sage grouse more than American soldiers. I think environmentalism and
the green energy movement is falling apart these days not only due to
the failure of President Obama to negotiate with the Chinese in regards
to the Kyoto Protocol and relative to a global carbon trading platform,
but also because the American people view with disgust the fact that we
are blocking our hydrocarbon resource development domestically actually
causing our soldiers oversees to fight wars for oil as a result. Each
day I work on oil shale technology and project development I am
inspired by American soldiers who sacrifice for our country. I am
committed to reducing the impact on wildlife such as sage grouse that
environmentalists cite as needing protection relative to our industry.
What I believe the American people are seeing clearly now is that
perhaps it is our fellow countrymen and countrywomen serving us in the
armed forces that are rare, precious and endangered. Blown off limbs,
destroyed familes to death, disability and loss bring a whole new
meaning to an ``Endangered Species Act''. The good news is that reason
is on our side and environmentalists everywhere are recognizing
overregulation, unnecessary alarmism and unwelcome damage to our
society and our economy by blocking resource extraction. Let me be
clear, we welcome reasonable environmental planning to the table of
planning the oil shale industry, but I think more emphasis going
forward will be placed on American lives, American jobs and stopping
our wars overseas for oil. It should already be common knowledge that
human beings are far more valuable to this earth than wildlife
activism.
In closing, let me say that the key to the industry is volume
production. For many years horizontal kilns and vertical retorts have
been limited to approximately 5,000 barrels per day. For example, the
ATP Process, the Parahoe Process, the PetroSix Process and even the
processes developed in Estonia have been stuck at this ceiling of
volume. I am aware of at least 3 surface retorting technologies that
have the ability to produce shale oil delivering over 25,000 bpd on an
economic and environmentally sound basis. I am pleased to report to the
committee that there are now full commercial projects in development,
including with tens of millions of dollars in mine planning,
engineering and development that will put the industry in play by 2016
to 2017. The projects I speak of have nothing to do with federal lands
or the Research and Development programs administered by the BLM. My
recommendation is that the BLM and the federal government pass laws
that keep the bureaucracy of Washington out of the industry and make
all federal lands available to the private sector. Since the Energy
Policy Act of 2005 was enacted the Department of Interior has leased
approximately 30,000 acres of the 1.9 million acres of oil shale. This
is pathetic performance--less than 1% of 1%. The federal government has
no skill in managing the lands containing oil shale let alone
determining what the technology should and shouldn't be. Just as with
Solyndra the federal government isn't going to pick a winner in the oil
shale industry. The best technologies I am aware of have nothing to do
with federal programs.
The fact is that there is a thriving oil shale industry emerging in
oil shale in Utah, Colorado and Wyoming. Dozens of the highly respected
private equity and hedge funds have invested into start up companies
working on technology in this space. For example, in 2006, I authored
patents and invented an oil shale process known as the EcoShale In
Capsule Process for low cost, high volume production of shale oil.
Since that time, my technology has garnered more than $100 million
dollars in supportive investments. Without any subsidies from the
federal government, and set in a time and era where trillions have been
spent on reviving the economy and fighting wars for oil--virtually no
money has been spent or provided to the oil shale industry for
assistance. This is a shame on so many levels as this industry holds
the key for economic and national security--and industry that directly
offsets the hundreds of billions in trade deficit for imported crude
oil.
I am hoping to help be a driver of change influencing better
technology and also convincing my environmental friends that the time
has come to stop catalyzing wars for oil overseas by blocking domestic
hydrocarbons. Our war is an economic and creative war here at home. If
we win it we can be stewards for the environment and protect the
unnecessary loss of life of American soldiers fighting wars for oil.
Perhaps the most interesting thing I have learned in development over
the past decades is that the very same technology of pyrolysis for oil
shale is the same technology for creating biochar. Intellectuals in the
Carbon Trading world of Kyoto know and promote the pyrolysis of biomass
to create biochar--a carbon capture and sequestration method that is
superior to other approved Clean Development Mechanisms--I have
attended many of these seminars and have studied Biochar. As the oil
shale industry unfolds and new technology in this space emerges,
biomass pyrolysis will excel as well as a result. Isn't it interesting
that oil shale pyrolysis--a legitimate potential solution to our
problems of wars for oil, trade deficit, jobs, energy security could
simultaneously emerge as the same technology for even carbon capture
and sequestration. I find that absolutely fascinating, Mr. Chairman. I
believe many in the U.S. Congress will find that fascinating as well.
Thank you, very much to the committee for this opportunity.
I am available for questions.
______

Mr. Lamborn. Thank you, Mr. Dana. That was perfect timing.
Mr. Eikenberry.

STATEMENT OF BILL EIKENBERRY, RANCHER, FORMER ASSOCIATE
DIRECTOR OF THE BUREAU OF LAND MANAGEMENT IN WYOMING

Mr. Eikenberry. Thank you, Chairman Lamborn and Ranking
Member Holt, for the opportunity to testify today on the
PIONEERS Act and the important question of the feasibility and
wisdom of developing oil shale deposits in Colorado, Utah and
Wyoming. I am a former land manager, served 30 years at the
Department of the Interior and most recently served as
Associate State Director of BLM in Wyoming. I also taught for
approximately 5 years in environmental natural resources at the
University of Wyoming.
I am a third-generation Wyoming rancher, so I pay close
attention to energy development issues in the West and how
these activities affect the rural communities and our ranching
way of life. And I have been deeply involved in environmental
issues with the Department of the Interior over a long period
of time.
I urge the Committee to oppose this legislation. Oil shale
is a failed resource that will create zero energy, zero jobs
and certainly no revenues for transportation. If oil shale is
supposed to fund our crumbling infrastructure, it is simply not
going to happen.
As you may know, we are seeing record levels of oil and gas
development right now in the United States. In fact, drill
activity is higher today than it has been in the past 24 years.
That means production of oil and gas under the Obama
Administration is higher today than when President Bush left
office.
Still, as a Westerner and a former land manager, I
understand the challenges of this Committee when it comes to
producing energy, creating jobs, growing revenue and so on.
That is why I believe to achieve this goal, Congress should
ensure that the oil and gas companies develop something like 22
million acres of public lands that have already been leased but
are simply not being developed.
And these are proven reserves on these public lands.
Industry should also seek to develop--we have something like
7,000 applications to permit to drill that are laying in these
States. Something like 3,500 APDs are laying in Wyoming and
another 3,500 that are spread out through New Mexico, Utah, and
Montana. But there are simply acreages out there that have been
leased that big oil is simply not developing.
I believe the Markey bill, which would create an annual
production incentive fee to ensure that industry uses these
resources it already has in hand, would do just that. And I
certainly would support that.
And another way to fund our crumbling transportation sector
would be to end the $15 billion a year in special tax breaks
for oil and gas companies, which they receive every year. And
that is something that we have talked about here today, in
terms of royalties and the subsidies, of course, that is going
to big oil.
Instead of attacking commonsense safeguards for clean
water, clean air, protections which benefit people like myself
in farming and ranching, make the companies use what they have
first, and that includes oil shale. Companies such as Chevron,
Shell, Exxon Mobil have upwards of 200,000 acres leased for oil
shale speculation. Let the free market work in those lands
already leased before we dive into more taxpayer-funded
subsidies and Western land giveaways, such as the Lamborn
legislation proposes.
The bill today that offers up oil shale as an answer to our
current economic woes does not really pass the real test, much
less achieve any of the stated goals of this Subcommittee. The
only thing blocking oil shale development is the thing that has
blocked it for a hundred years: the rock itself. It is low-
quality resource oil shale rock and the very physics that make
up that rock. It simply is not viable.
Oil shale is not a viable resource in the West. It is
simply a Wall Street speculation on our public lands. We have
been waiting for a hundred years to see a technological
breakthrough in oil shale development. It is simply not viable.
Once again, there are zero jobs, zero energy, and zero
revenues in oil shale speculation. Shell, for example, already
has rights to more than $1 trillion of Federal oil shale
resources, except those resources aren't worth a dime because
they don't have the technology to extract it in an economically
viable way. Even Shell admits that it will be anywhere between
10 to 20 years before we even know whether the latest
technologies will be economically viable.
Oil shale speculation is a dangerous gamble. Are we
actually willing to start taking away water rights from farmers
and ranchers like myself and wastewater from the Colorado River
to conduct speculation on a failed technology----
Mr. Lamborn. Mr. Eikenberry, are you about to wrap up?
Mr. Eikenberry. I am, real quick here----like oil shale in
the public lands.
The legislation introduced by Congressman Lamborn won't
solve any of our energy or jobs issues out West. It will just
invite throwing more taxpayer-funded subsidies at a failed
resource. It would shift the cost of oil shale research on to
the backs of already struggling local communities. It would put
critical water sources at risk.
And, in summary, Mr. Chairman, again, I urge the Committee
members to unequivocally oppose the PIONEERS Act.
[The prepared statement of Mr. Eikenberry follows:]

Statement of Bill Eikenberry, Rancher and
former Associate Director of the Bureau of Land Management in Wyoming

Thank you Chairman Lamborn and Ranking Member Holt for the
opportunity to testify today on the PIONEERS Act and the important
question of the feasibility and wisdom of developing oil shale deposits
in Colorado, Utah and Wyoming.
Opening remarks
I am a former land manager who served over 30 years with the U.S.
Department of the Interior and most recently served as the associate
state director of the U.S. Bureau of Land Management in Wyoming. I was
also an adjunct professor of natural resources at the University of
Wyoming. Today, I tend to my ranch in south eastern Wyoming and pay
keen attention to the energy development issues in the West and how
those activities would affect rural communities and the agricultural
sector.
As you may know, we are seeing record levels of oil and gas
development in the United States. In fact, drill rig activity is higher
today than at any point in the last 24 years. Also, both production of
oil and gas are higher today than when President Bush left office.
Still, I can appreciate the concern the members of this committee
have when it comes to producing energy, creating jobs, and growing
revenue. I believe that to achieve this goal, Congress should ensure
that oil and gas companies ``use it or lose it'' and develop the 22
million acres of public lands already leased for development. Industry
should also seek to develop the 7,000 drilling permits where they have
a green light to drill--over half of which are in my home state of
Wyoming.
Unfortunately, oil shale will fail to achieve any of the goals
aimed at by this committee. The only thing blocking oil shale
development is the same thing that has blocked it for 100 years. It is
the low-quality resource of the rock and physics.
Oil shale is just an opportunity to fuel Wall Street-style
speculation on our public lands. Without the breakthrough in technology
for commercial oil shale development--which industry says is at least a
decade or more away--there are no jobs, there is no energy, and there
is no revenue in oil shale.
In fact, the legislation introduced by Congressman Lamborn would
actually invite throwing more taxpayer-funded subsidies at a failed
resource, shift the cost oil shale research onto local government, and
communities, put water resources at risk, gamble away 2 million of
acres of public lands for speculation, and risk losing real jobs in the
agricultural, tourism, and outdoor recreation sectors.
I urge the committee members to unequivocally oppose the PIONEER
Act and vote no on this legislation.
No Jobs, No Energy, No Revenues
Regardless of whether you support, oppose, or like most people are
uncertain about oil shale development, the fact remains that the
fundamental problem with oil shale is the rock itself. This bill will
do nothing to change that fact. Oil shale is not feasible because
industry leaders such as Shell Oil, ExxonMobil, and Chevron have not
been able to solve the many technical, economic and environmental
hurdles, despite decades and hundreds of millions of dollars of testing
and researching various technologies.
What Congress, through this legislation, is looking to do is step
in front of the Department of the Interior, circumvent a process
underway that has strong local input from stakeholders across the West,
and force bad land use and economic decisions that would directly hurt
local communities and economies. It is because of those concerns--
concerns I have about the fundamental goals of the PIONEERS Act--that I
am here today.
As industry continues its decades-long research and tests
technologies with the goal of developing commercially-viable business
models, we have time to make sure that we ask and answer the correct
questions. The PIONEERS Act presents oil shale as a viable jobs and
energy program. If Congress is looking at oil shale to spur economic
growth, we as a country are in a mess of trouble.
For more than 100 years, boosters have promised that pulling oil
out of rock-solid kerogen formations in the West would be easy, and the
region would be awash in jobs, fortunes and eternal economic prosperity
if we only tapped it. That's the central trust of the PIONEERS Act. The
reality though is that such overly optimistic promises of oil shale
have throughout history shown to be pure hype. In the 1910s and 1920s,
people were lured West by oil shale boosters' promises of jobs and easy
money. But that hype busted in the mid-1920s when oil reserves were
found in Oklahoma, Texas and California--shattering the livelihoods of
thousands of people in Wyoming and Colorado's Western slope.
The same dynamic played out in the 1940s and again the late 1970s
into the 1980s. I lived through those turbulent times in the 1980s and
can tell you that lofty promise by industry and government hurt people.
In 1980, Exxon announced at a meeting in western Colorado that they
would be developing 8 million barrels per days by 2010. In 1981, the
Reagan administration approved a $1.2 billion loan guarantee for
Exxon's Colony oil shale project. One year later, in May 1982, Exxon
pulled the plug on its Colony oil shale project and more than 2,000
local workers lost their jobs over night.
Twenty-eight years later, not a single barrel of oil from shale has
made its way into the nation's commercial oil supply. It's not for a
lack of trying--and it not a result of any particular federal policy.
Industry heavyweights like Shell and ExxonMobil have hundreds of
thousands of acres of private oil shale lands on which to test their
technologies. They've also invested hundreds of millions of dollars.
They still cannot produce oil from oil shale.
The current research program the Bush Administration initiated in
2007 is progressing but is yielding few results. Shell Oil recently
announced that it was shifting gears and is now looking to develop
deeper deposits. Enefit USA (formerly OSEC) told the BLM in a July 2011
report that they were taking a step back and reviewing their entire
approach to research. Chevron, in their quarterly reports to the BLM,
has likewise shown little progress.
Why is this background important? The bill states oil shale is
``one of the best resources available for advancing American technology
and creating American jobs.'' Aside from the fact that the leading
companies are not American--they are Dutch, French, and Estonian--until
there are technologies, there are no jobs, there is no energy, and
there is no revenue. What there is, is hope and hype, and that's it.
Shifting the Cost of Doing Business on to Local Governments and Giving
the More Taxpayer Handouts to Big Oil
While it is not the intent of the PIONEERS Act to hurt local
communities, one of the unintended consequences of this legislation is
that the very local communities that would be responsible for
supporting development could be severely negatively impacted by
development.
Local governments, as the host communities, would be charged with
developing the infrastructure necessary to support commercial
development. That means our communities would need to provide schools,
housing units, hospitals, police and fire departments, social services,
road improvements, and the like. The way governments pay for these
improvements is through royalty payments. Under current law, 49% of
royalties go the states and local governments to bear the financial
costs of supporting local governments.
As Democrat Keith Lambert and Republican Ken Parsons, two local
elected officials from western Colorado stated in an August 2011
editorial in the Grand Junction Daily Sentinel, ``Cutting the royalty
rate by more than half, as rules set in place by the previous
administration provide, effectively removes millions of dollars
intended to help our communities provide the increased services and
infrastructure necessary to accommodate the industry.'' Congress, in a
rush to ``accelerate'' oil shale, has yet to discuss in any serious way
the potential impact development would have on local governments. To
conclude, as the PIONEERS Act does, that Congress should force the BLM
to levy low royalties at the expense of taxpayers without first
examining the fiscal impacts on local governments is extremely
troubling.
At Congressman Lamborn's oil shale hearing in Grand Junction in
August 2011, Jim Spehar, the former Mayor of Grand Junction, Colorado,
raised this very issue. As Spehar stated in written testimony:
``Whether you oppose or support oil shale development, it's
irresponsible not to be planning now for potential development
and the possible impacts. That examination of impacts demands
more than just a science project. But current research is
focused primarily on technology, not the broad range of social,
economic, environmental and other community impacts that will
result if the technical research is ultimately successful. Just
as the industry desires certainty in what's required of it, so
do communities deserve that same degree of certainty as to what
the expectations of will be of their local governments, non-
profits and other agencies, schools, hospitals, for
infrastructure and services associated with the development of
this industry.''
Instead of following this sage advice and examining the impacts of
foisting an unproven industry on local governments with incredible
unknowns, Congress instead is now trying to subsidize industry and tear
down the BLM all for a gamble on oil shale--one that has been a losing
bet for 100 years. Lost in this shuffle are the real impacts on local
governments, rural agriculture, and communities.
The reviews that the BLM is undertaking--the reviews this Act seeks
to upend--are critical to understanding these and other impacts. It is
reprehensible for Congress to subsidize large, highly profitable
corporations at the expense of local communities, while also attempting
to undermine two extremely important reviews that the BLM is
undertaking. Companies such as ExxonMobil, Chevron, and Shell can
afford to pay the costs of their own research.
Gambling on Oil Shale at the Expense of Real Jobs and Western Economies
Just as local governments would feel the impacts of potential
development, so too would our ranchers, farmers, water districts and
others whose livelihoods rely on access to clean air and water.
The PIONEERS Act, by working recklessly to ``accelerate'' potential
oil shale development, might be asking western communities to trade
real jobs we have right now in the agricultural, tourism, and outdoor
recreation industries for the promised, but never delivered, employment
from oil shale.
In 2008, the BLM determined that large-scale development of oil
shale--the goal of the PIONEERS Act--would fundamentally change the
face of western Colorado. Currently, our communities and economies are
agriculture based, but also benefit from diverse income sources such as
recreation, hunting, fishing, retirement, colleges, tourism, and real
oil and gas energy production. The BLM forecasts that if large-scale
industrial oil shale development were ever to become possible, it would
dry up our farms and ranches, diverting scarce water supplies to
industrial uses, thereby changing the economic and social fabric of our
communities.
In fact, major corporations already have extensive water rights
that they could use for oil shale speculation. As Congressman Lamborn
knows, using large quantities of water for oil shale, as the BLM, GAO,
Rand Corporation and Colorado water users have concluded would be
needed, would have profound impacts on the state and on economies. Utah
would face similar challenges. As a rancher I have huge concerns with
the potential impacts to agriculture oil shale development would bring.
When coupled with existing massive oil and gas production, the
cumulative impacts could be staggering.
It is for these that Ken Neubecker, the executive director of the
Western Rivers Institute and a past president of Colorado Trout
Unlimited, offered this sage advice in written testimony to the House
Natural Resources Committee:
``Taken in isolation the water needed for full oil shale
development is legally and physically available. However, as
Wayne Aspinall noted `In the West, when you touch water you
touch everything.' Water in the West is no longer a resource to
be developed; it is a fully developed resource. Simply put, the
water needed for oil shale development will come from someone
else's current or planned use. It will have water supply
implications far beyond the boundaries of the open spaces of
northwest Colorado, eastern Utah and southwest Wyoming.''
Hunting and fishing is also central to our region. Not only are
these activities part of who we are as a people, but they are also a
central part of our economies. Already oil and gas development in the
Piceance Basin is impacting herds. Rushing potential large-scale oil
shale development on top of this existing energy framework, as the
PIONEERS Act seeks to do, could be devastating to this important
industry.
One final issue this committee should examine is the energy demands
and associated impacts on our air and water. Independent studies by Dr.
Adam Brandt at Stanford and Dr, Cutler Cleveland have concluded that it
might actually take more energy to develop oil shale than the amount of
energy that can be recovered from oil shale. The reason is the huge
energy demands associated with production. The BLM estimated that
producing just 100,000 barrels of oil per day from oil shale would
require 1.2 MW plant with enough capacity to power 1.2 million homes
each year. Those power plants do not yet exist, and that is a
significant hurdle for development. If companies use natural gas to
power production, the demands would likewise be astounding. To produce
2,400 MW, a very efficient combined cycle gas power plant would require
approximately 135 BILLION cubic feet of natural gas,\1\ or about 10% of
Colorado's gas production. The fuel bill would be about $600 million
per year.
---------------------------------------------------------------------------
\1\ There is roughly 1000 Btu per cubic foot of gas. A 2400 MW
combined cycle power plant would generate about 18 million MWh per year
at an 85% capacity factor. The heat rate might be 7.5 MMBtu/MWh,
implying 135 billion cubic feet of gas per year.
---------------------------------------------------------------------------
Industrializing the local landscape brings massive amounts of air
pollution. Communities in Wyoming, Colorado and Utah are already
experiencing worse air from natural gas development than Los Angeles.
The cumulative impacts of oil shale and oil and gas development must be
understood, as poor air would not only compromise public health but
would also seriously impact other sectors of the tourism and outdoor
recreation industry.
Closing
I support Interior Secretary Ken Salazar commitment to take a fresh
look at two key decisions that were rushed to at the end of 2008
regarding oil shale. As a rancher I too am concerned about what we are
getting into with oil shale and the amount of water that commercial
development might require. Ensuring oil shale doesn't steal or pollute
my water or that of my neighbors requires moving carefully, and I
support Secretary Salazar's caution. I also support the strong work by
the BLM to ensure that stakeholders from across the West have a seat at
the table in this decision. Understanding the impacts before proceeding
with oil shale commercial development is just common sense--but it is
common sense that this legislation seeks to undermine.
In summary, I would again like to thank the committee for the
opportunity to testify today.
I sincerely urge the committee to consider the dangers in rushing
ahead with oil shale speculation and the serious cost that it could
bring to western rural communities and local economies.
I urge the committee to vote ``no'' on the PIONEERS Act and allow
the current BLM stakeholder process to move forward so that everyone
has a voice in this incredibly important decision.
______

Mr. Lamborn. OK. Thanks for your testimony.
We will now shift gears and hear testimony on our fourth
bill that we are considering today.
And Mr. Gardner?

STATEMENT OF J. STEVEN GARDNER, P.E.,
PRESIDENT AND CEO, ECSI, LLC

Mr. Gardner. Thank you, Mr. Chairman.
My name is Steve Gardner. A little background: I grew up on
a tobacco farm in the Appalachian region of Kentucky. I went to
the University of Kentucky and got a degree in agricultural
engineering, but by some fluke turn of life I ended up working
in the coal industry, doing primarily reclamation and
environmental work in the Appalachian region. I went back to
school, then got a degree in mining engineering and
environmental systems. I now work as a consultant, have been
working in and around the mining industry for about 36 years
now.
Our firm, ECSI, was a subcontractor on the Polu Kai
Services team as part of the EIS for the stream protection rule
proposed by OSM. Approximately 2 years ago, I received a call
from OSM, who asked if ECSI would be interested in being
involved in the EIS. The stated reason was ECSI's reputation,
both in the regulatory and the regulated community.
OSM intended the process to be a minority small-business
set-aside contract so they could issue it quickly, and OSM was
recommending subcontractors for the team. That was to include
ECSI; Morgan Worldwide, who is recognized for their work in the
environmental community; and a national geotechnical firm. It
was our understanding that OSM had a preferred minority
business contractor for the project.
In due course, we received a call from PKS. They planned to
retain MACTEC, a large national consulting group, for the
geotechnical and some of the environmental aspects of the
project; Morgan Worldwide; Plexus Scientific for their NEPA
experience; and then our firm.
In June of 2010, there was a kickoff meeting here in D.C.
with OSM. We learned that OSM had assembled internal teams for
the rule writing and for the EIS. An immediate issue that came
up was the short time frame for the project. Many of the OSM
team members were concerned about that, as well, and they
advised us that they thought it was likely that time extensions
would be granted, and additional budget increases, to
adequately prepare the EIS. Also at that time, we were given a
copy of the proposed rule, dated May 25, 2010.
There were two other key issues that were brought up at
that time. OSM, at that point, did not believe that public
meetings were necessary. The NEPA experts on the team said it
was absolutely required. And after long debate, Director
Pizarchik was called in, and the decision was made to conduct
additional scoping. That essentially delayed the process 4
months right off the bat.
It was also unclear to the PKS team if the proposed rule
applied to underground coal mining methods. That question was
repeatedly posed to OSM over the weeks. It was not until
several months in to the project that OSM finally told us that
the proposed rule would be applied to underground mining. This
took the team by surprise and also many of the OSM personnel
present at that meeting by surprise.
The team felt that that last-minute inclusion of
underground mining impacts was a major change of scope and
budget and requested additional time and money. OSM denied that
request and then insisted that the underground mining had been
part of the original scope all along. That disagreement is well
documented in the record.
After the 4-month delay for scoping, OSM began to embed its
own engineering and science personnel into the various
contractor working groups, ostensibly to speed up the process.
One subgroup was formed to perform the production impact
analysis based on the alternatives. That subgroup included
members of our firm, Morgan Worldwide, PKS, and OSM personnel.
As an additional validation of that process, it was
proposed that selected coal companies from across the country
be surveyed to get their input on what the production impacts
would be. OSM originally approved that approach, but then
hours, literally hours, before us sending that survey out, OSM
withdrew its approval.
The coal production impacts that were forecast under each
alternative were then distributed to the rest of the PKS team,
including those members performing the economic analysis. Those
production impact numbers were then used to predict the job
impacts nationwide. After that information was leaked, then at
a team meeting here in D.C. OSM suggested that the PKS members
revisit the production impacts and associated job loss numbers
with different assumptions. That, obviously, would then lead to
a lesser impact.
The team was concerned about a very specific instruction
from OSM to make the assumption that the 2008 stream buffer
zone rule was in effect and being enforced across the U.S. At
that time, which was, of course, not true. The PKS team
unanimously refused to use a fabricated baseline scenario to
soften the production loss numbers.
Thank you for this opportunity to present a different side
of this story.
[The prepared statement of Mr. Gardner follows:]

Statement of J. Steven Gardner, PE, President and CEO, ECSI, LLC

My name is Steve Gardner. I am President and CEO of ECSI, LLC, an
engineering consulting group based in Lexington, Kentucky. ECSI's core
business is mining, in particular coal mining in the United States.
ECSI was subcontracted by Polu Kai Services (PKS) as subject matter
experts to assist with the EIS for the Stream Protection Rule.
Approximately 2 years ago, I received a call from someone at OSM
who asked if ECSI would be interested in being involved in drafting the
Stream Protection Rule EIS that was going to be contracted. He stated
that the reason ECSI was being approached as a recommended
subcontractor was our reputation with both regulatory and regulated
community. OSM intended the process to be a minority/small business set
aside contract so that they could issue quickly. OSM was recommending
subcontractor teams to be ECSI, a national geotechnical firm, and
Morgan Worldwide (recognized for their work in the environmental
community).
In conversations with OSM personnel, it was our understanding that
OSM had a preferred, minority business contractor who would contact
ECSI. In due course, we received a call from PKS who was responding to
an RFP issued by OSM to perform an Environmental Impact Statement on
the Proposed Stream Protection Rule. PKS advised us that they were
assembling a team of consultants to perform this complicated,
nationwide programmatic EIS and that they were looking at our firm to
be the mining experts on the team. They were also retaining MACTEC, a
large national consulting group to perform geotechnical and
environmental aspects, Morgan Worldwide to contribute their mining and
environmental expertise to complement and balance our involvement, and
Plexus Scientific for their NEPA experience, project management,
logistics and final EIS drafting. ECSI assisted PKS in preparing the
proposal and budget, and eventually a contract was issued to PKS. We
assembled a team of experts in mining. These included nationally
recognized academic experts in mining, hydrology, and reclamation (some
of whom are experts that OSM has utilized on a routine basis).
The EIS project kicked off in June 2010 with a meeting in DC
between PKS, the subcontractors and OSM's team. During that meeting, we
learned that OSM had two teams assembled. One was a rule writing team
and the other an EIS team. An immediate issue that came up was the
short timeframe within which OSM wanted the EIS prepared. PKS and the
subcontractors voiced their collective concern that the accelerated
timeframe was overly ambitious. OSM team members agreed and advised
that there would likely be time extensions granted and budget increases
to adequately prepare an EIS of this magnitude. The original date for
delivery of the Draft EIS was February 2, 2011. The assignments were
allocated and ECSI was charged with reviewing the concepts of the
proposed rule and predict production impacts nationwide. A copy of the
draft rule dated May 25, 2010 was provided to the PKS team at that
time.
There were two key issues that the PKS team brought to OSM's
attention during that kickoff meeting, pertinent to the EIS and NEPA
process:
OSM did not believe that public meetings were
necessary, and that the Notice of Intent (NOI) and request for
public input within the NOI, as published in the Federal
Register, was adequate. Virtually everyone on the PKS team
agreed that the NEPA process called for public meetings to be
held so that affected communities could comment. The PKS team
convinced OSM of the necessity of public meetings, which added
approximately 4 months to the process. Public meetings (termed
``open houses'') were held across the country. These meetings
were poster sessions where the various alternatives for the
rule were outlined and the public was given the opportunity to
submit written comments or oral statements.
It was unclear to the PKS team if the proposed rule
applied to underground coal mining methods. That question was
repeatedly posed to OSM, and several months into the project at
a team meeting in Atlanta, the PKS team was informed that the
decision had been made that the proposed rule would be applied
to underground mining. This took both the PKS team and many of
the OSM personnel present by surprise. The PKS team received a
letter dated October 7, 2010 from OSM stating that it was
disingenuous to suggest that the rule did not apply to
underground mining. The PKS team felt that the last minute
inclusion of underground mining impacts was a major change in
scope and schedule to the EIS, and requested additional time
and budget to properly evaluate the impacts. OSM denied this
request and insisted that underground mining had been part of
the original scope of work all along and that the contractors
were well aware of this. This disagreement is well documented
in the record.
After this initial 4 month delay for scoping meetings, OSM began to
embed its own engineering and science personnel in the various
contractor EIS working groups, ostensibly to speed up the process.
To determine impacts on coal production under the various
Alternatives, including the proposed rule (termed the ``Preferred
Alternative''), ECSI planned an analysis of production impacts
utilizing ``typical mine'' models of all mining methods from each coal
producing region, and applying Alternatives to those mines to determine
production impacts. However, that effort proved to be impossible within
the prescribed schedule and budget. As an alternative to the ``typical
mine'' analysis, an Expert Elicitation methodology was proposed and
approved by OSM. That methodology and the major assumptions are
described in detail within the Draft EIS at Section 4.0.6.1, as
submitted by PKS on February 23, 2011. A subgroup was formed to perform
the expert elicitation production impact analysis, which included
members of ECSI, Morgan Worldwide, PKS, and OSM personnel. As an
additional validation of the elicitation process, ECSI proposed that
selected coal companies from each coal region be surveyed on what they
believed the production impacts would be under each Alternative. OSM
originally approved of this approach, but hours prior to sending the
survey out, OSM withdrew its approval.
Coal production impacts under each Alternative were forecast and
the results were distributed to the rest of the PKS team, including the
team members performing economic analyses. The production impact
numbers were then utilized to predict job impacts nationwide.
A joint PKS and OSM team meeting was held in February in OSM's
offices in DC. During this meeting, OSM ``suggested'' that the PKS team
revisit the production impacts and associated job loss numbers, and
with different assumptions that would then change the final outcome to
show less of an impact. The EIS team unanimously told OSM that it was
not appropriate to change assumptions just to get a different answer.
The team was also very concerned with the specific instruction from OSM
to make the assumption that the 2008 Stream Buffer Zone (SBZ) Rule was
in effect and being enforced across the U.S., which was not true. No
state with an approved SMCRA program had promulgated the 2008 SBZ Rule,
especially since the rule itself was subject to the litigation which
brought about the SPR. If the PKS team assumed that the 2008 SBZ was in
effect as part of the baseline existing environment, the nexus from the
SBZ to the SPR would show less production, and therefore less job loss
impact. The PKS team unanimously refused to use a ``fabricated''
baseline scenario to soften the production loss numbers.
In order to meet the revised February 23, 2011, deadline for
submission of a Preliminary Draft EIS, the PKS team inserted
``placeholders'' in the narrative of the document and a general
disclaimer into the document to succinctly describe the situation with
respect to OSM's change in instructions to the PKS team, assumptions
and baseline data:
``[NOTE--As a direct result of recent instructions from OSM, the
production impact analysis with a baseline thermal energy balance
adjustment using the 2008 EIA production figures will be changed to a
production/benefits analysis using the 2010 EIA dynamic production
forecast as the baseline without a static thermal balance component.
Section 4.06, Methodology, will be revised to reflect the new OSM-
approved methodology. In addition, OSM has indicated that:
the SPR implementation timeline should be shortened
from the previously approved 12 years to 8\1/2\ years;
that Chapter 2 may be further modified (Alternative 5
as previously approved may not reflect the current rule
provisions and other Alternatives may have to be modified to
reflect these changes); and
that the production impacts/benefits should be tested
by applying the alternative analysis to typical mines for each
Region.
These new instructions will likely require substantial changes to
Chapter 4, as well as changes to Chapter 2.]''
It is important to note that Chapter 2 of the EIS is the
description of all Alternatives, including the ``Preferred
Alternative,'' upon which the entire EIS impacts analysis is based.
Shortly after the February meeting with OSM in DC, the PKS team
received a notice that the contract with PKS was not going to be
renewed.
I had the opportunity to review the testimony of Joseph G.
Pizarchik, Director of OSM during the November 4, 2011, Subcommittee on
Energy and Mineral Resources Hearing and would like to address comments
made during the hearing:
1. Mr. Pizarchik made the statement that the job loss numbers
were ``placeholders'' and were ``fabricated.'' As I have
previously stated, the EIS team, which included OSM personnel,
performed the analysis to the best of its ability given the
deadline and budget. When OSM did not like the result of the
analysis, OSM asked that the team change the baseline
conditions and use alternative assumptions to alter the coal
production and job loss numbers.
2. Plagiarism was alleged against the PKS team in drafting the
EIS. Under NEPA, it is preferred that the drafters of an EIS
utilize as much existing information as possible and not
``reinvent the wheel.'' While I cannot speak for the entire PKS
team, ECSI utilized text from previous EIS documents, as
directed by OSM, where appropriate and cited those documents in
its references. In fact, ECSI posed the question to OSM
personnel of whether we should simply cite previous EIS
documents or if we should put the actual text in the SPR EIS.
ECSI was directed by OSM to put the text in the SPR EIS rather
than merely cite to another document for ease of the reader.
3. Despite Mr. Pizarchik's claim that OSM was at ``arms
length'' during the process, OSM personnel were intimately
involved in the EIS throughout.
Thank you for the opportunity to appear before the Committee today
to testify about our involvement with the Stream Protection Rule EIS.
______

Mr. Lamborn. All right. Thank you.
Mr. Zaluski?

STATEMENT OF JOE ZALUSKI,
EXECUTIVE VICE PRESIDENT, ECSI, LLC

Mr. Zaluski. My name is Joe Zaluski. I am the Executive
Vice President of ECSI.
And Steve has gone through quite a bit of what we did as a
subcontractor to Polu Kai. We were the subject-matter experts;
we were not the NEPA experts or the EIS experts. And in
preparing for today, I listened to Director Pizarchik's
testimony here before this same Committee and take sharp issue
with him in regard to five areas at least.
He challenged the qualifications of the subcontractors, and
Steve has already addressed some of that, ECSI's expertise as
well as Morgan Worldwide. Personally, I retired from the
practice of law in 2009, but for 35 years all I did was SMCRA
work. It is kind of an old country song: I did SMCRA before
there was a SMCRA. I was up here with Mo Udall, actually, when
SMCRA was being drafted, and helped in that regard, and my good
friend to my left, as well. So all I have done for 35 years is
SMCRA work, and I think I know the subject.
I take issue with Director Pizarchik's testimony in regard
to our qualifications, as I said. He seemed to intimate that
the methodology used by the team to predict coal production
shifts and job loss was some sort of hands-off with OSM. It is
not true; OSM was intimately involved. And, Mr. Chairman, we
supplied you and the Committee with rather lengthy materials,
and everything that Steve and I will testify to is supported by
emails or conversations with OSM.
The Director implied, I think in response to Congressman
Johnson's question, that OSM didn't give us any assumptions on
which to base production shifts and job losses. That is not the
case. We were given very specific assumptions; I will be glad
to talk about those if we have the time. And that ties directly
to the placeholder comment made by the Director, somehow
implying that the team did sloppy work, ran out of time, and
stuck something in as a placeholder.
In the documents tendered to OSM at the very beginning,
there is a footnote that says, these are placeholders because
OSM at the last minute, as Steve mentioned, changed the
assumptions. They changed the assumptions so markedly that
there was no time to go back and rerun the numbers. And, in
fact, as Steve said, one of the assumptions they wished to
change the surface mining experts refused to accept.
There was an email early on in the process--as Steve said,
we were asked to send out our thoughts and our mapping and
production shift impacts to selected members of the industry. I
believe we were required to do that by contract. At the last
minute, literally at the last minute, we checked with OSM and
said, OK, here is the package we are going to send out, here is
what we are going to say, and here is who it is going to. I
received an email back in red--and I didn't know you could send
emails in red, to be quite honest--and it said under no
circumstance are we to do that, and then an email relaying a
conversation with the Director by an OSM senior person who said
that the Director's position is non-negotiable on this and
violations would have extreme consequences. Not exactly a great
working relationship.
As Steve said, I think contrary to what the Director
indicated, OSM was heavily involved in this process. They
embedded dozens of their people into the team, so much so that
we started in June and by October we had participated in so
many extra conference calls, meetings, whatever, with OSM
personnel--because I think the folks working on this were as
confused as we were--that we were running out of budget. We
were going to ask for more money to get our project done
because we had spent hours and hours and days in meetings that
were not scheduled.
I personally believe, having been involved in SMCRA since
the beginning of time, that this was about a 3-year process
that they were trying to get done in 15 minutes. It just didn't
work.
I would conclude to say that the initial OSM regulations,
SMCRA regs, and the permanent program took years to accomplish,
with lots of input from State agencies and sister agencies. Mr.
Chairman, I think in support of the legislation that is pending
here today, we need to take that time to better think out what
needs to go forward here and not just run and try to get it
done in a very short period of time. I think the experts
involved asked very hard questions of OSM that they simply
could not answer.
I thank you for your time.
[The prepared statement of Mr. Zaluski follows:]

Statement of Joseph J. Zaluski, Executive Vice-President, ECSI

My name is Joe Zaluski, I am Executive Vice-President of ECSI, LLC,
an engineering consulting group based in Lexington, Kentucky. ECSI was
subcontracted by Polu Kai Services (``PKS'') as a subject matter
experts to assist with the EIS for the Stream Protection Rule.
In preparation for addressing you today, I watched the entirety of
recent testimony by Director Pizarchik before this Committee. I would
like to comment on several statements made by the Director.
We have submitted materials to the Committee for your review and
those materials are rather voluminous. I do not know if they were also
supplied to you by the Office of Surface Mining. They have been
supplied to you today as a result of this Congressional Inquiry.
First, as to the credentials of the subject matter experts, I
respectfully disagree with any implication that the team was not well
qualified. If you wish to elaborate upon that during the question and
answer period, I will be glad to do so. However, as to ECSI, I can tell
you that the President of the company, Steve Gardner, has spent nearly
30 years in the mining consulting business in virtually every aspect.
He is a Professional Engineer and has been involved in various state
and national legislative efforts concerning mining, as well as the
every day permitting and operational aspects of all types of mining
operations. He is extraordinarily active in national organizations and
has been recognized by them for his achievements.
Without taking up too much time, I can advise that I became
involved in SMCRA before there was a SMCRA. As an attorney, I first
worked for the Commonwealth of Kentucky while SMCRA was being lobbied
in Congress. I began my career involvement with the regulation of
surface and underground mining at that time and have continued,
literally, ever since. I helped draft part of SMCRA, I served on the
first regulation drafting committee with Walter Heine who became the
first Director of OSM in 1978; and participated in the adoption and
drafting of the first SMCRA based regulations. I helped in the drafting
of Kentucky's program, both at the regulatory and statutory level. I
have been involved with mining in virtually every aspect, not just with
rule making, but from the permitting, problem solving and litigation
perspective. I have been involved at the local and national levels and
believe that I am well respected by counsel and other professionals on
virtually every side of the mining issues that have arisen over the
years. I served as one of the first chairmen of the Natural Resources
Section of the Kentucky Bar Association; and have served as President
of the Energy and Mineral Law Foundation, a nationwide nonprofit
academic and continued education organization celebrating its 30th year
in existence. I have published in this area and know the subject matter
very well. I hope that is why I was asked to participate in this
process.
Contrary to the Director's intimation that the subcontractors were
inept, I believe that the train wreck of an attempt at an EIS was
caused by OSM's constant change in direction, instructions, assumptions
and restrictions. All that is well documented in the materials we have
supplied to the Committee. In fact, an email that will give you some
idea as to the relationship between OSM and the contractors is dated
December 15, 2010.
We were developing impacts to various types of mining across the
nation and believed that our contract specifically required us to
solicit industry input on the impact of various alternatives on various
types of mining operations across the country. We had packaged up
material and had lined up several companies to review our work. At the
last moment before sending the material out, we contacted OSM to advise
them that we were about to undertake that step. We received an email
back through Polu Kai that was written in red and stated ``under no
circumstance is the internal workings of this team and/or the rule team
to be released to outside parties. See suggestions below.'' The actual
email from OSM to Polu Kai stated as follows:
As per my meeting with OSM Director Joe Pizarchik, no part of the
SPR rule text or EIS are to be sent to any parties for the purposes of
the EIS preparation at any time. He indicated that this direction is
non-negotiable, and that violations would have extreme consequences.
His alternative suggestions for how to proceed are two-fold:
1. Contractor team members working with OSM staff should
develop our ``best estimates'' based on sound science and
engineering, and provide those as a part of the draft EIS. He
and I chatted about the possibility of error, but agreed that
the comment period for the draft EIS will give the opportunity
for all sides to provide us with additional information.
Additionally, he indicated that we should be able to explain
exactly how the numbers and assumptions for impacts to coal
production were derived, including being able to explicitly
list all factors used by the consultants to generate their
estimates.
2. The Director suggested that we develop an internal team of
mining engineers and other appropriate experts from OSM and
other federal agencies to ``peer review'' the methodology used
by the consultants. His suggestion was to include mining
engineers in OSM regional and field offices, USGS, BLM and
other DOI and non-DOI federal agencies.
My suggestion is that we have a call tomorrow to strategize on how
best to proceed.
I think that email really sums up the relationship between OSM and
the EIS team. The contractors were threatened with ``extreme
consequences;'' and in the alternative suggestions from the Director
makes it very clear that OSM understood that ``best estimates'' would
be used; and, in the second paragraph, that there was a very close
working relationship between OSM and the EIS team. This was certainly
not the impression that the Director left when he testified before you.
Having been involved in the SMCRA at the national level and the
rulemaking at that level, as well as at the state level, I and others
stated to OSM at the kickoff meeting for the EIS that the schedule for
accomplishing this task was absurdly short. A reasonable schedule for
this process, which should have involved all regulatory authorities,
state and national, should easily have been set for three years.
Contrary to what the Director stated, OSM was intimately involved
throughout this process with not only regularly scheduled face-to-face
meetings and telephone conferences, but constant phone calls and
emails--most with conflicting instructions. As you will see from the
documents supplied to the Committee, OSM embedded dozens of its
employees into the EIS Team. We met with them constantly. They approved
methodologies, especially with regard to production shifts. They
supplied the team with assumptions for financial models. Examples of
the assumptions would include which production numbers to use
nationwide and requirement that as we determined production shifts that
we maintain a national thermal balance. These instructions came
directly from OSM.
The assumptions that we were directed to take by OSM, contrary to
the Director's testimony, are set forth in the exhibits to the February
15, 2011, letter tendered to the Committee. In addition to the February
15, letter I just referred to, there is a second letter dated February
23, 2010, to the OSM contracting officer responsible for the
implementation of the consulting contract with PKS and subsequently
ECSI, LLC. I direct your attention in particular to the tab entitled
``PKS Detailed Response to OSM Cure Notice,'' pages 1-20. Every
statement made in that section is well documented by emails, letters
and other exhibits attached to that same letter.
I would direct attention to the following:
Attachment 1--OSM, in December 20, 2010, confirms the methodology
proposed by the contractors for determining production shifts, if any.
Attachment 2--as late as February 6, 2011 the consultants are still
attempting to resolve with OSM the baseline for calculating production
shifts. This was approximately 2 days before OSM issued its Cure
Notice.
Attachment 4--is also worth noting that OSM at this time had
reversed its position that the national thermal balance had to be
maintained during implementation. These changes were very significant
as far as their impact on the work of the EIS team.
Attachment 5--Bill Winters of OSM on February 18, 2011, changed the
implementation timeline from 8 \1/2\ years to 12 years. This would be
another significant change that would likely affect production shift
and job loss.
Let me conclude my remarks by again reflecting back on the
development the initial SMCRA regulations and what is known as the
permanent program. The process took years to accomplish with the input
from states that had mining within their borders. A great deal of time
and expertise went into that effort. The Stream Protection Rule,
although it may have a fairly innocent and noble name, seeks to rewrite
the very heart of the entire program. To try to accomplish this in
short order was a mistake, a big mistake. The experts involved asked
very pointed questions of OSM that simply could not be answered.
Thank you for this opportunity.
______

Mr. Lamborn. All right. Thank all four of you for being
here today--excuse me, we have another witness.
Professor McGinley, please share your testimony. Then we
will launch into our questions.

STATEMENT OF PATRICK C. McGINLEY, PROFESSOR OF LAW, WEST
VIRGINIA UNIVERSITY COLLEGE OF LAW

Mr. McGinley. Thank you, Mr. Chairman. Thank you for
inviting me to testify today.
Mr. Chairman, Congressman Johnson, the proposed bill, the
Coal Miner Employment and Domestic Energy Act, laudably seeks
to address the plight of coal field communities. The lack of
jobs and opportunities there is heart-wrenching and
unacceptable. For more than a century, an economic boom-bust
cycle has resulted in chronic unemployment, poverty, and lack
of opportunity in many of the communities that provide the coal
that generates 50 percent of our Nation's electricity.
Part of my written testimony offers a view of this
historical context, and I will not repeat that this morning.
Let me turn first to some important facts.
Since the enactment of the Federal Surface Mining Control
and Reclamation Act of 1977, coal production in the United
States has increased significantly, while the number of coal
mining jobs has dropped precipitously. The loss of jobs in the
coal fields is not related to regulation. It is related
directly to the mechanization of coal mining.
Interestingly, there was a stream buffer zone rule that was
in effect beginning in 1982, imposed by Secretary Watt's OSM in
the Reagan Administration, and it remained in effect until
2008. There was a time when there were no complaints about the
stream buffer zone rule, but when much larger equipment moved
into central Appalachia to remove more and more of Appalachian
Ridge tops, what happened was that the buffer zone rule was
simply not enforced, and OSM and the State regulatory agencies
looked the other way while the violation of law continued.
Interestingly, today, after long downward trends, coal
mining jobs in West Virginia and other central Appalachian
States are on the upswing. The Mine Safety and Health
Administration released information only last week showing that
the number of mining jobs have reached the highest level in
central Appalachia in a decade, and East Coast coal exports are
nearing the capacity point.
That said, more jobs and better protection of the
environment in coal field communities is imperative. In my
view, the proposed bill, with all due respect, will deliver
neither.
Notwithstanding its praiseworthy goal, the language of the
five subsections of the bill contain terms that are
extraordinarily vague and, therefore, unenforceable. The bill
provides no definitions by which to measure the loss of jobs or
coal production. The geographical and temporal limits of the
bill's prohibitions are undefined.
This bill, if enacted, would trigger the law of unexpected
consequences, I would submit. Enactment of the bill has the
potential to make regulation less predictable for a coal
industry crying out for predictability.
One need not look far to find ways to use existing law that
could have the impact of producing jobs. SMCRA moneys in the
AML Reclamation Fund should be released. Billions of dollars of
reclamation from prior pre-SMCRA mining remains to be done, and
these jobs are shovel-ready.
Section 515(c)(3) of SMCRA requires that, in order to
obtain a permit for mountaintop removal mining, a cooperator
must propose to the regulatory agency either an industrial,
commercial, agricultural, residential, or public facility as a
post-mining land use. The law requires an MTR permit applicant
to present specific plans for proposed post-mining land use and
assurances that it will be obtainable according to expected
need and market, that public facility investment is ensured,
and that there is private financing to complete the proposed
use.
In short, SMCRA says no post-mining development, no jobs,
no MTR mines. But one can search the tens of thousands of acres
mined by MTR methods and find only scant evidence of the
required industrial, residential, commercial, and other post-
mining economic development there. Rather than a field of
economic dreams fulfilled, one finds fields of weeds and few
jobs.
Thirty-five years after SMCRA was enacted, one should ask
the coal industry and regulators, where is the post-mining
development on these mine sites? Where are the jobs? Why has
this explicit mandate of post-mining economic development of
SMCRA been ignored?
Our coal mines are safer today because of mine safety
regulation, but they are still not safe enough. Enforcement of
SMCRA and the Clean Water Act has reduced pollution in coal
mining externalities, but not enough. Regulations that save
lives and protect communities are not an enemy of job creation;
they are a necessary companion of economic development.
I would be glad to answer any questions and provide any
additional information that may be helpful to the Committee.
[The prepared statement of Mr. McGinley follows:]

Statement of Patrick C. McGinley, Professor of Law,
West Virginia University College of Law

Chairman Lamborn, Representative Holt and members of the Committee,
thank you for inviting me to testify today on the proposed ``Coal Miner
Employment and Domestic Energy Act.''
Since 1975, I have been a member of the West Virginia University
College of Law faculty where I am presently the Judge Charles H. Haden
II Professor of Law. Prior to this, I served as a Special Assistant
Attorney General with Pennsylvania's Environmental Strike Force where I
enforced laws regulating coal mining and mine safety prior to enactment
of SMCRA.
I grew up in the Western Pennsylvania coalfields as the grandson of
a coal miner who worked in West Virginia, Ohio and Alabama coal mines a
century ago. My mother was born in Piper, a coal company town in the
Cahaba coalfield of Bibb County, Alabama. From the time I joined the
WVU faculty until the present, I have represented coalfield families
and organizations in matters relating to SMCRA. I was honored to have
served on then-Governor Manchin's Independent Investigation teams that
reported on the Sago and Upper Big Branch mine disasters.
As far as the proposed Bill--it's sponsor clearly understands the
plight of coalfield communities--the lack of jobs and opportunities in
these communities is be heart-wrenching. I know because I have friends
and family who live and work in the coalfields. However, the lack of
employment is not new to the coalfields. For more than a century a
economic boom-bust cycle has visited the best of times and the worst of
times upon those communities that provide fuel that generates fifty
percent of our nation's electricity.
It should be noted, however, the since SMCRA was enacted in 1977,
coal production has increased dramatically. The loss of jobs in the
coalfields is related directly to mechanization--the ingenuity of
mining engineers--who have brought giant drag-line shovels to strip
coal from mountain ridges and longwall mining that gouges two mile long
swaths of a coal seam--a mile wide--from below the earth's surface. The
mechanized mines of the 21st century are not labor intensive--but they
produce far more coal per miner than would have been though possible
when SMCRA was enacted. Interestingly, today, after a long downward
trend of coal mining jobs is on the upswing. There is evidence that
strictly regulated coal mining is producing more jobs while protecting
the environment. That said, more jobs and better protection of the
environment and coalfield communities is needed.
However, the proposed bill will, in my review, deliver neither,
notwithstanding it's praiseworthy goal. The language of the 5
subsections of the bill contain terms that are extraordinarily vague
and, therefore unenforceable. The bill provides no definitions by which
to measure the loss of jobs or coal production. The geographical limits
of the bill's prohibitions are undefined.
Such legislation, if enacted, would trigger the law of unintended
consequences. Enactment of the bill has the potential to make
regulation less predictable for a coal industry crying out for
predictability in regulation.
The prohibition of agency power to initiate regulatory action could
jeopardize the property, health and lived of coalfield families.
Subsection 4, though vague, could prohibit coalfield communities from
petitioning to have areas declared unsuitable for coal mining when such
mining places community water supplies, homes and coalfield
environments at risk.
Subsection 5 places upon the Department of the Interior an
impossible task of determining what regulatory actions might result in
a court declaring that an unconstitutional ``taking'' of private
property has occurred. As Justice Brennan once remarked--determining
what is a regulatory taking is ``the equivalent to the physicist's
search for the quark.'' Subsection 5 is simply unenforceable by any
legal standard and also raises serious constitutional separation of
powers concerns.
As the goal of the proposed bill is to promote jobs and economic
development in coalfield communities, I submit that it is important to
understand the context in which SMCRA was enacted and has been
administered and enforced since 1977. I examined this context in a law
review article I wrote. I want to share this context with the Committee
and urge it to consider the broader context before proceeding on the
proposed bill.
As the 1960s began, a combination of coal industry consolidation, a
poor coal market, population exodus from coalfield communities, and the
attendant collapse of mining employment ``made for a severe and chronic
economic predicament'' for West Virginia's coalfield communities. West
Virginia's unemployment rate was the nation's highest, more than triple
that of the rest of the nation. As the coal-based economy continued to
collapse, tens of thousands left the coalfields in search of work in
the industrial plants of the Northeast and the nonunion textile and
manufacturing plants of the Sunbelt.

The Coal Bust of the 1960s: New Relationships Between Coalfield
Communities and the Companies
Unwilling to be stuck with camp houses, commissaries, and other
facilities that the newly contracted industry did not need, some camp
owners altered the relationship between themselves and the miners
living in the company houses. This relationship continued in many
instances for decades; even today there are former coal camps where the
successors in interest to the first coal company masters collect rents
from descendants of early miner occupants.
The rent in most cases was and is consistent with the quality of
the premises involved. For example, a 1987 Charleston (W.Va.) Gazette
(``the Gazette'') article related that coal camp houses were being
rented then for $15 per month. While the rental amount seems incredibly
low, one must consider that the amount reflects what is said to be the
first rule of real estate valuation: location, location, location.
Associated Press reporter Jules Loh described the location of the old
coal camp in Eureka Hollow:
The springs from Eureka Hollow flow into Elkhorn Creek. The
village on its trash-strewn banks at the mouth of the hollow is
Eckman. You won't find it on a road map. Eckman consists of a
grocery store, filling station and a one-room post office.
Wooden planks thrown over a ditch at the uphill edge of town
mark the start of the road up Eureka Hollow.

Woebegone wooden houses, many of them falling down, dot the
hillsides along the road. Tree limbs, like crutches, prop up
porches. Abandoned houses crumble alongside inhabited mobile
homes. Coal dust trodden into black gum replaces grass. Red
dog, a rust-colored mine waste turned into coarse gravel, paves
driveways. Automobile carcasses rot beneath clotheslines
burdened with patched jeans and faded shirts.

Roosters peck around lopsided sheds, providing a staccato
music. Homemade pinwheels stuck in bare yards offer snatches of
joy.
After closure of the mines connected to a company town, the
landlord-tenant relationship was most frequently a ``month to month''
agreement. These month to month tenancies in many instances were
honored by the coal camp owners for decades. However, as explained
below, in the last ten years encroachment of large-scale mountaintop
removal and longwall mining operations has often resulted in abrupt
termination of these long relationships. With little notice, families
whose history in an old coal camp extends back for many decades have
been unceremoniously forced to move to make way for mining operations.
In some instances, a whole community has been evicted. Within weeks of
notice, homes were torched and bulldozed, leaving only empty lots where
community and family roots had been planted and nurtured for the better
part of a century.
Renting coal camp houses was not the only way owners of coal camps
sought profit. In the 1950s many coal companies chose to sell the camp
houses to their occupants. Harry Caudill describes the sales
``technique'' used to persuade coal camp occupants to buy the houses in
which they lived:
The first step in their program to ``free'' the camps lay in
the making of blandly optimistic statements to their employees
and to the general public. They gave the impression that the
company anticipated twenty or thirty years of uninterrupted
mining with their employees drawing high wages. No mention was
made of mechanization or of reduced payrolls. While no specific
promises were made, the miner and his wife were led to believe
the inhabitants of the camps could expect continued employment
at union-scale wages.
The next step in the operators' disposition of coal camp houses was
the announcement that they were getting out of the real estate business
so their executives could concentrate on mining. Writing with razor-
sharp sarcasm, Caudill describes the ``con'':
Besides, said the benevolent bosses, they wanted the miners and
their families to enjoy the feeling of independence and self-
assurance that comes from home ownership. It was undemocratic,
the Big Bosses now declared, for the company to dominate the
affairs of the community. A new generation of stockholders and
officials wanted the people to live proudly in their own homes
and to govern their communities in conformity with the Great
American Dream. The company owners opened up offices for the
purpose of facilitating the sale of camp houses. Prices were
not exorbitant and occupants were given purchasing priority.
Buyers could pay through monthly deductions from their wages.
The timing of these sales programs was excellent--for the company
owners. Most sales occurred as the winds of mechanization began to blow
through the industry. The timing was not so good for a miner who might
find ``himself jobless before his home was cleared of debt, though most
purchasers pridefully held a deed `free and clear of encumbrances'
before the discharge notices were slipped into their pay envelopes.''
Although nearby underground mines closed and production from the
remaining deep mining operations continued to decline, if the new home
owners could find work in other mines they tried to maintain and
improve what they had purchased. Moreover, a critical distinction
existed between coal camp rental properties, whose residents had no
incentive to spend their often meager income on property that they were
merely renting and houses purchased by camp residents from company
owners. Families in the latter category generally invested in the
maintenance, repair, rehabilitation, and remodeling of their homes to
the extent that their income would enable them to do so. Attorney
Gerald Stern described how families worked to improve the camp houses
they bought from the company and the investment they made to transform
a camp house to a home of their own:
The miners took great pride in turning them into real homes,
helping each other, or even paying someone to do the work once
they saved enough money. An indoor bathroom, maybe new
electrical wiring, electrical baseboard heating, new floors, a
new roof, new siding to keep out the cold, maybe a new porch or
even a new room. Roland [Staten] and his wife Gladys spent
seven years remodeling House No. 20--adding a cesspool,
paneling, insulation, siding, a new roof and furnace, and even
a garage. This was no coal-camp house anymore. In those
communities where mining jobs could still be found, miners
receiving respectable middle-class wages often built modest new
homes so that they could continue to live near relatives in
what had been their homeplace for many decades.
Of course, when a camp house was purchased and the family
breadwinner lost his mining job and could not find another that paid a
living wage, purchasing food and fuel for heating and cooking took
precedence over home maintenance and repair. During the 1960s bust, and
again in the last decade and a half of the twentieth century, many
residents of the former coal camps found it increasingly difficult to
maintain their homes as more and more mines closed and mining jobs
evaporated.
Thus, to the vicious cycle of coal industry boom and bust--long the
dominant impediment to sustained coalfield economic development--was
added the albatross of home ownership. Miners who purchased a coal camp
house and abruptly found themselves on the unemployment dole without
promise of finding work faced the horns of a dilemma. To provide for
their families, they would be forced to migrate to another region of
the country leaving behind their relatives, lifelong friends, and
ancestral homeplace. And, if they decided to leave, it would be
difficult to sell their home. If they could find a seller at all, they
were likely to sell at a significant loss. If they stayed, there were
no jobs and only the largess of government relief programs was
available to sustain them.
Faced with such a choice, many unemployed miners chose to seek work
in other states, abandoning their homes and the life savings they often
represented. Some who left could not establish themselves in other
places and returned to their homeplace. Others chose to hang on, hoping
against hope that another coal boom would begin and ``the mines'' would
start hiring again. In the interim, unemployed miners would do whatever
it took to survive. Roger Luster, of Eureka Hollow explained the
quandary he and thousands of other coal camp families faced as coal
mining jobs evaporated:
``It's rough, buddy. . .. This is home. This is where we were
both born and raised. We like it here. Until I can find work,
we stay. If the program I'm on runs out, well, then I guess
we'll have to think about moving on. Where to? Where can a man
with a family go with no place to set out for and no money to
get there? Hard as it is, we want to stay here. This hollow is
home.''
Unfortunately, new underground and strip mining technology and
other political and economic factors dashed dreams of a new boom and
``the mines,'' as 1960s coal camp residents knew them, ceased to exist.
Professor John Alexander Williams places the hopes of coalfield
residents and four decades of reality into perspective:
One measure of the social change induced by these trends was
the number of miners in West Virginia: more than 150,000 in
1945, but just over 17,000 in 1999, by which time there were
fewer miners in the state than there were nurses or telephone
solicitors. WalMart now has more employees in West Virginia
than any coal company, although coal industry apologists still
insist that ``five thousand people working at WalMarts in this
state don't equal 400 coal jobs.'' Michael Harrington's widely
acclaimed book, The Other America, captured the plight of the
urban and rural poor at the beginning of the 1960s. The book
was a phenomenon, revealing for the first time to a broad
national audience that the nation's post-World War II economic
prosperity had not reached many Americans. Harrington observed,
``The millions who are poor in the United States tend to become
increasingly invisible. Here is a great mass of people, yet it
takes an effort of the intellect and will even to see them.''
The dire circumstances of many who lived in the coal camps of
central Appalachia was not invisible to those who took the time to
look. But, as Harrington explained, ``looking'' took some effort:
Poverty is often off the beaten track. It always has been. The
ordinary tourist never left the main highway, and today he
rides interstate turnpikes. He does not go into the valleys of
Pennsylvania where the towns look like movie sets of Wales in
the thirties. He does not see the company houses in rows, the
rutted roads (the poor always have bad roads whether they live
in the city, in towns, or on farms), and everything is black
and dirty. And even if he were to pass through such place by
accident, the tourist would not meet the unemployed men in the
bar or the women coming home from a runaway sweatshop.
Two years before The Other America was published, one important
observer did take the time to visit West Virginia's coal camps. Then-
Senator John F. Kennedy was shocked by what he saw and learned there
during the state's 1960 presidential primary. That primary campaign was
crucial to Senator Kennedy's quest for the Democratic Party's
nomination and his later election to the presidency. As one West
Virginia newspaper observed:
It was important to Kennedy. . .. He won the primary, showing
that a Catholic could win in a predominantly Protestant state,
a key victory in his drive to the nomination and the
presidency. It was important as well because of what he saw,
and what the reporters and TV cameramen with him saw, at the
home of Burley Luster. Luster was a disabled coal miner with a
sickly wife and eight hungry children living in a four-room
shanty. Kennedy talked with them for 45 minutes and then,
shaken, stood on the Luster's sagging front steps and promised,
if elected, to press Congress for federal help in Appalachia.
Kennedy's message from Eureka Hollow alerted America to the paradox
of wretched poverty in an area teeming with rich resources. Professor
John Alexander Williams relates that ``Kennedy and his entourage. .
.traveled through West Virginia by bus and car in the early spring,
when nature had not yet hidden the abuse of the land by mining. . ..
The politicians and reporters following the campaign were less
impressed by the state's scenic beauty than by its environmental scars
and miserable roads.'' Despite the relief efforts at the federal level,
life was as bleak as ever in the coalfields of Appalachia as the 1960s
drew to a close.

The 1970s Coal Boom
As the decade of the 1970s began, John Denver's song Take Me Home,
Country Roads portrayed West Virginia as ``almost heaven.'' Denver's
song put West Virginia residents in an upbeat mood, coming along ``at
just about the right time'' as ``it reflected a growing feeling of
satisfaction shared by many, if not most, citizens, a feeling that one
of the worst chapters in West Virginia's history was closing at last.''
The coalfield economy perked up again at the beginning of the 1970s
as the United States attempted to come to grips with an ``energy
crisis'' triggered by price fixing of petroleum supplies by a Middle-
Eastern cartel. The cost per barrel of petroleum soared during the
1970s as the Organization of Petroleum Exporting Countries (OPEC)
ratcheted up prices in response to the Yom Kippur War and the closing
of the Iranian oil fields after the Shah of Iran was overthrown in a
1978 Islamist coup. The U.S. economy reeled in the 1970s from the
impact of the abrupt skyrocketing of energy prices. The nation's gross
domestic product fell by 6% and unemployment doubled to 9%.
In the former company towns of southern West Virginia and other
Appalachian states, significant numbers of job postings for coal mines
appeared for the first time in decades as electric energy producers
shifted from petroleum to a more reliable and less costly product. In
West Virginia alone, more than 17,000 new miners were placed on
payrolls during the period between 1973 and 1978.
Freelance journalist Rudy Abramson capsulized life in the
Appalachian coalfields during the short-lived boom:
During those fabulous days in the mid-seventies, thousands of
men who had left the mountains came home from distant cities to
dig coal. In West Virginia, Virginia, Kentucky, and Tennessee,
small truck mines that had been abandoned for years were
reopened. Nearly anybody who had or could borrow money to buy a
dump truck and a road grader could become a strip mine
operator. Bootleggers mined without permits and got good money
for gray mixtures of coal, slate, and rock. Spot market prices
soared to nearly $100 a ton and suddenly-rich independent
operators lived in opulence, bought luxury cars for their
wives, and concluded business deals on the golf course. Two and
a half decades after the boom, Abramson interviewed people who
had lived in or near the Boone County, West Virginia, town of
Whitesville. They described life there during the boom:
Saturday nights in Whitesville were reminiscent of the good old
days after World War II when it was hard to get through the
crowds on the sidewalks. Miners' families from communities up
and down the Big Coal River--Seth, Comfort, Sylvester, and
Sundial--and up from Marfork, High Coal, and Seng Creek Hollows
came to shop, take in a movie, and catch up on the news. You
could forget finding a parking place in the middle of town. The
good times did not last.

Coalfield Communities: 1980 to Present
The boom of the 1970s was short. As oil prices increased in the
1980s, and midwestern utility companies turned to cheaper western coal
in the 1990s, the economy of the Appalachian coalfields cycled again
into a bust phase. Another factor responsible for this shift was the
continuing loss of mining jobs in Appalachian underground mines
resulting from even further mechanization. In 1980, coal jobs had
dropped by 7,000 from the boom high of almost 63,000 in 1978; five
years later only 35,813 miners were working in West Virginia. Ten years
later, in 1990, coal mine employment had dipped further to less than
29,000. By 2002 less than 15,000 miners worked in the state. Today,--
ten years later--and notwithstanding SMCRA, NEPA and Clean Water Act
requirements more than 20,000 coal miners are at work in West Virginia.
Similar patterns of the natural resources boom bust cycle occur in most
coalfield communities.
The recession of the early 1980s further weakened West Virginia's
economy. By 1984, West Virginia had the nation's highest unemployment
rate and ``economic indicators pointed to continuing difficulties, with
recovery trailing far behind that of the other states.''
Another important factor in the economic plight of West Virginia
from the 1980s to the present has been the coal industry's continuing
political domination of state government. In 1985, the West Virginia
Legislature enacted the ``super tax credit,'' a law supposedly intended
to expand economic development in the state. In 1986, the legislature
extended the super tax credits, provided that existing state companies
increased hiring and modernized their operations. Given the grip of
Coal industry interests on the state, it is not surprising that coal
companies received nearly ninety percent of the total amount of these
credits.
This coal lobbyist-generated windfall for industry harmed the state
economy rather than promoting economic development. One observer has
suggested that:
[I]n their long-range effect, they may have actually compounded
the very problem they were supposed to alleviate. The study of
the super tax credits in 1990 revealed that the number of jobs
in coal mining had fallen by 1,300 in spite of an increase of
13.3 percent in coal production. The adverse effects of the
super tax credits on state revenues and on the general economy
led in 1990 to *45 legislation to prevent coal companies from
using the super tax credits to avoid payments of severance
taxes. . .. [T]ax officials estimated that about 20% of the
coal mined in the state was produced free of any business
taxes.
During 1985-1989, under the guise of stimulating new coal
development, the state's Workers' Compensation Fund (WCF) slashed
premiums paid by coal companies by thirty percent and awarded generous
refunds to companies. By the beginning of the 1990s, the WCF faced a
deficit of $1.2 billion.
While West Virginia ended the 1970s in better economic shape than
it had been in for decades, state government corruption in the 1980s
eliminated the economic gains. Journalist Rudy Abramson interviewed
Randy Sprouse who had lived Whitesville, West Virginia during the 1970s
boom. Sprouse remembered the prosperity of the moment: ``You had two or
three clothing stores, shoe stores, furniture stores, a whole bunch of
restaurants, taverns, a movie theater, and a bowling alley. . ..
Anything you wanted, you could get right there in Whitesville. You
didn't have to leave Whitesville for anything.'' Whitesville today is
depressingly different:
Most of [what Randy Sprouse described] has been gone for years.
The sidewalks of Whitesville are usually empty. Vacant stores
dot the town's main drag and windows are covered with dust from
coal trucks that rumble through night and day. Traffic lights
work intermittently. Parking meters were removed long ago.
The economic plight of coalfield communities in the 1980s continued
throughout the next decade as new mining technologies replaced more
labor-intensive methods. While Appalachian coal production approached
record levels in 2003, the number of coal miners declined to its lowest
level since the nineteenth century. The coalfield economy continues to
stagnate with high levels of unemployment in those areas which lead in
coal production.
Unable to rely on state government for economic and environmental
protection, the communities looked to Washington for assistance. The
federal assistance that John F. Kennedy had promised from the front
porch of Burley Luster's Eureka Hollow home in 1960 materialized in a
plethora of federal programs such as food stamps and Medicaid, which
continue to this day to sustain many who remain in the old camps of
central Appalachia. One new federal program, the Surface Mining Control
and Reclamation Act of 1977, held out the promise of protecting
coalfield communities and their citizens from the environmental,
economic, and social harm that unregulated coal mining had caused. The
following discussion examines how that promise was effectuated.

Regulation of the Adverse Impacts of Coal Mining
When historian John Williams completed West Virginia: A History, he
made predictions about the future of coalfield communities:
In terms of short-run market considerations, strip mining is
the swiftest and cheapest way to expand coal production. . ..
Stripping is the most costly method of producing coal, however,
if social and environmental factors are calculated. . .. The
future of tourism and recreation depends to a significant
extent on what is done about surface mining and other
environmental issues. . .. Yet the political impact of
recreation industries is diffuse, and the aesthetic and human
values that environmental degradation subverts are difficult to
measure. By contrast, the coal industry retains much of its
old-time political power. . .and can readily deploy it to
defend immediate and specific economic concerns. It appears
that Professor Williams was especially prescient when he
predicted that ``environmental controversies promise to
generate the most lively and probably the most crucial debates
that West Virginia faces in the last quarter of the twentieth
century.''
Professor Williams's prediction that environmental controversies
would come to the fore as the twentieth century came to a close was not
based on gut instinct or crystal-ball gazing. Rather, as a historian,
Williams based his predictions on an appreciation of the policies,
politics, and players that had shaped West Virginia's past and his
recognition of the old and new forces that were then in motion vying
for control of the extraction of Appalachia's vast coal wealth.
As students of history are aware, most of the enterprises of the
Industrial Age created significant adverse externalities. For example,
effluent from steel and chemical manufacturing poisoned thousands of
miles of the nation's streams and air pollution from the same plants
clouded urban skies. For the better part of a century, the nation's
polluting industries were given a free pass by Americans who agreed
with industry's plea--``where there's smoke there's jobs.''
It was not until the mid-1960s that people in the United States
began to appreciate the extent to which industrialization had
externalized costs to their own communities. Citizens' demand for
pollution cleanup and regulation of the adverse effects of industrial
activities spurred Congress to enact the National Environmental Policy
Act of 1969 and reached its apogee in 1977 with passage of the federal
Surface Mining Control and Reclamation Act. No other federal
environmental regulatory statute contains as many opportunities for
citizen involvement nor grants to citizens such a broad array of
statutory rights that may be used to influence the law's administration
and enforcement than does SMCRA.
To understand the current struggle of the people of the coalfields
for economic and environmental justice, one must understand how SMCRA
came to be law and the way in which its strict mandate has been
administered and enforced. The following discussion begins with an
examination of SMCRA's origins in the oppressed and poverty stricken
Appalachian coal camps in the 1960s. SMCRA's history is then traced
from enactment through criticism of state and federal enforcement to
the current extraordinary controversy over enforcement of SMCRA's so-
called ``mountaintop removal'' regulatory regime.

Historical Overview of the Pre-SMCRA Period
Prior to the enactment of SMCRA in 1977, unregulated surface and
underground coal mining created enormous environmental harm throughout
the Appalachian coalfields. These externalities created disincentives
for local economic development as well as other adverse social and
economic consequences. Generally, local people experiencing these costs
of mining also enjoyed the benefits of jobs created by mining. The
adverse environmental impacts of mining received scant notice in the
Appalachian coal camp struggle for survival during the first half of
the twentieth century. Like the pervasive pollution that accompanied
steel mills and chemical plants, coal mining's adverse impacts were
seen as part and parcel of the industrialization.
The most visible adverse impacts of coal strip mining were the
scars gashed in Appalachian mountainsides. Surface mining strips away
forest vegetation, causing erosion and attendant stream sedimentation
and siltation, accompanied by negative impacts on aquatic life and
drinking water supplies. In some coalfield regions, iron-laden
sulphuric acid mine drainage pollution from underground mining produces
red-orange stained stream beds and renders some watercourses
ecologically sterile. Underground and strip mining contaminated or
depleted underground aquifers that provide domestic and farm water
supplies to many coalfield families. Loud noise and dust from blasting
and earth-moving activities disturb nearby communities and wildlife.
During mining, dust and debris often fill the air as soil and
underlying rock strata are blasted apart, earth is moved, and coal
extracted. Landslides caused by indiscriminate dumping of mine spoil
downslope on steep Appalachian mountainsides buried cars, homes, and
sometimes killed people.
From the beginning of these efforts to regulate strip mining, the
coal industry cooperated with local and state politicians to oppose
meaningful state regulation. Economic competition between coalfield
states for jobs and tax revenues fueled this opposition. Instead of
placing limits on the worst of strip mining abuses, legislators chose
to protect their own domestic industry. Obviously, they reasoned, a
state choosing to pass laws to reduce the adverse consequences of coal
mining would impose increased costs on its own coal industry. Those
costs would not be incurred by coal operators in other states that
chose to give carte blanche to their own coal operators. State
politicians recognized that the price of coal produced in a state
forbearing regulation would be cheaper and thus more competitive in the
market than coal produced in a state that imposed environmental
regulatory costs on its operators.
By the end of the 1960s, public concern over the adverse impacts of
coal mining had grown to a crescendo of opposition. It was generally
recognized that the states could not and would not impose meaningful
regulation on coal companies operating within their own borders.
Coalfield citizens and other critics of strip mining realized that only
a statute passed by Congress could end the states' ``race to the
bottom.'' A federal law imposing uniform national regulatory standards
would nullify the strongest argument raised against regulation--in-
state coal operators' competitive position vis-a-vis operators in other
states. Operators in every state would be required to play by the same
federal rules. The race to the bottom pressures would be eliminated by
instituting a uniformly applicable federal regulatory program.
Years of national media attention and unrelenting pressure from
coalfield residents made it impossible for Congress to ignore coal
stripping. Proponents of federal regulation accumulated massive
documentation of the enormous costs coal mining had externalized onto
coalfield communities. Furthermore, Congress faced a national outcry
against irresponsible coal mining when the totally avoidable collapse
of a huge coal waste impoundment at Buffalo Creek, West Virginia killed
more than one hundred people, injured thousands more, and wiped out
whole communities.
Twice Congress passed legislation, and twice the coal industry and
its state political allies succeeded in persuading President Gerald
Ford to exercise his veto power. But with the transition to the Carter
Administration came cooperation from the executive branch, and Congress
once again passed legislation regulating surface mining. On August 3,
1977, President Jimmy Carter signed the Surface Mining Control and
Reclamation Act of 1977. Finally, federal regulation was being imposed
on the coal industry in an effort to minimize the adverse impacts of
underground and strip mining.

SMCRA's Cooperative Federalism Approach to Regulation
Paralleling other federal environmental regulatory laws, Congress
designed SMCRA as a ``cooperative federalism'' statute. Congress found
that ``the cooperative effort established by this chapter is necessary
to prevent or mitigate adverse environmental effects of present and
future surface coal mining operations.''
SMCRA's cooperative federalism scheme instituted an extensive and
permanent federal regulatory presence to deal with problems previously
within the sole domain of the states. Congress created a new Office of
Surface Mining (OSM) to oversee implementation, administration, and
enforcement of SMCRA. Congress intended that states have the option to
assume ``exclusive jurisdiction'' to administer and enforce SMCRA,
subject to compliance with minimum statutory standards and compliance
with OSM's implementing regulations. Moreover, state assumption of
``exclusive jurisdiction over the regulation of surface coal mining and
reclamation operations'' was made specifically subject to OSM's
oversight and enforcement power. If an OSM-approved state fails to
implement, enforce, or maintain its program in accordance with SMCRA,
OSM must enforce part or all of such program or assume exclusive
federal jurisdiction over all mining operations within the state.
Problems immediately arose pertaining to OSM's administration of
SMCRA's phased implementation. OSM's effort to promulgate permanent
program rules produced one of the most extensive rulemaking proceedings
in the history of administrative law. Two drafts were submitted for
public comment; 57 public meetings and 25 days of public hearings were
held; 589 public comments were received by OSM; 22 different task
forces, composed of over 100 technical experts from more than 20
agencies, evaluated and revised the draft rules into their final form.
In the quarter century since enactment of SMCRA, the environmental
degradation and attendant adverse social and economic impacts on
coalfield communities continue, albeit not at the catastrophic levels
that existed in the pre-SMCRA years when coal mining was essentially
unregulated. One of the best examples of such continuing regulatory
failure can be seen in the failures of state and federal enforcement of
SMCRA's requirements pertaining to huge mountaintop removal strip mines
that have proliferated in the southern West Virginia coalfields. It is
there, in close proximity to coalfield communities that a specific
SMCRA promise of environmental protection and local economic
development was broken by coal operators and compliant federal and
state regulators.

Mountaintop Removal Strip Mining
A decade and a half after enactment of SMCRA, some believed the
statute was reducing abuses of coalfield lands and people caused by
conventional strip and underground mining. Notwithstanding a
significant measure of success, some coalfield communities continued to
feel the effects of inadequately regulated mining that had plagued them
decades earlier. Many of these post-SMCRA impacts were produced by new
surface and deep mining techniques that had gained favor with the
nation's biggest coal producers.
A major transformation of the coal industry triggered this post-
SMCRA departure from conventional mining methods. Corporate mergers,
consolidations, and bankruptcies accompanied intense competition
between eastern and western coal mining operations. A combination of
all of these events foreshadowed the growth of ``mountaintop
removal''--a strip mining technique that existed only on a small scale
before SMCRA. One commentator observed:
Because of [competition with] cheap western coal, mountaintop
removal suddenly boomed in central Appalachia in the 1990s.
Trucks and power shovels have grown to gargantuan sizes, and
drag lines swing shovels holding up to 100 cubic yards of rock.
Mountaintop mines that reduce ridges and peaks by hundreds of
feet now sprawl across more than 2,000 acres. An estimated 400
square miles of southern West Virginia mountains and ridges
have been leveled and 1,000 miles of streams buried beneath
debris blasted, shoved, and dumped into narrow valleys. The
move to the use of large-scale mountaintop removal operations
would make mining in Appalachia more efficient, productive,
and--most importantly for coal operators--much less labor-
intensive. Mechanization and concomitant massive job losses
attendant stripping operators' embrace of mountaintop removal
were paralleled by the underground operators' adoption of new
deep mining technology.
The coal industry's competition-driven movement to new mining
methods in central Appalachia adversely impacted coalfield communities
both above and below the earth's surface. On both fronts, coal
production and man-hour efficiency in Appalachian mines increased
dramatically. However, as mountain ridges were blasted apart and more
miles of headwater streams were buried under huge valley fills, mine
jobs continued to hemorrhage. Promises that mountaintop removal mining
would spur job-creating commercial, industrial, and residential
development have gone unfulfilled.

Mountaintop Removal Mining Methods
SMCRA regulations define mountaintop removal as ``surface mining
activities, where the mining operation removes an entire coal seam or
seams running through the upper fraction of a mountain, ridge, or hill.
. .by removing substantially all of the overburden off the bench and
creating a level plateau or gently rolling contour, with no highwalls
remaining.'' As traditional contour and area mining rapidly declined
during the 1980s and 1990s, growing numbers of mountaintop removal
mines began clear-cutting the steep-sloped hardwood forests and
chopping off mountaintops in eastern Kentucky and southern West
Virginia. The underlying coal seams there lie sandwiched in layers of
rock and soil hundreds of feet thick. In mountaintop removal
operations, each layer of the rock above a coal seam is blasted and
removed, the coal is extracted, and then the next layer is removed
until the removal of rock and coal layers is no longer cost-effective.
Operators put some of the removed rock back on the flattened
mountaintop. Because rock blasted from its natural state ``swells,''
coal operators assert there is usually inadequate room available on the
flattened mountaintop to place this ``swell'' or ``excess spoil.'' The
spoil is dumped in adjacent valleys, often creating huge ``valley
fills.'' A single valley fill may be as much as 1,000 feet wide and
extend several miles at the upper reaches of Appalachian headwater
streams.
Over the course of more than two decades, the West Virginia
Department of Environmental Protection (DEP) and its predecessors
authorized the coal companies to bury at least 786 miles of West
Virginia streams under valley fills. Thousands of acres of hardwood
forests were leveled. The United States Fish and Wildlife Service found
that ```the loss of these streams and their associated forests may have
ecosystem-wide implications.''' Beginning in the late 1980s, the size
and number of mountaintop removal mines and their associated valley
fills increased, especially in southern West Virginia, which has
enormous reserves of high-energy, low-sulfur coal coveted by electric
utilities.

The 95th Congress Placed Strict Limits on Mountaintop Removal Mining
Under SMCRA
Ordinarily, when a state grants a permit to conduct strip mining
operations, a coal operator is required to restore mined land to its
approximate original contour (AOC). When Congress was debating SMCRA,
central Appalachian coal operators and coal-state congressional
representatives sought an exemption from the AOC requirement for
mountaintop removal mining. Mountaintop removal mining, they argued,
could produce flat land for development--a commodity in very short
supply in the mountainous coalfields of West Virginia, Kentucky,
Virginia, and Tennessee. Congress accommodated these requests, but
placed severe limitations on those situations where mountaintop removal
would be allowed under a variance from the generally applicable AOC
reclamation requirement.
In order to qualify for a variance from the AOC requirement, SMCRA
requires that a mountaintop removal permit applicant propose a
postmining land use that falls in one of five specific categories:
industrial, commercial, agricultural, residential, or public facility
(which includes recreational facilities). In addition, the permit
applicant must also prove that the *59 proposed postmining use
constitutes an equal or better economic or public use of the affected
land as compared to the premining land use. An applicant seeking an AOC
variance must also provide specific plans for its proposed postmining
land use and accompanying assurances. Finally, SMCRA requires that the
applicant demonstrate that the proposed use would be consistent with
adjacent land uses, existing state and local land-use plans and
programs, and that all other requirements of SMCRA will be met. In
granting a mountaintop removal permit with an AOC variance, a state
must impose certain specific public safety and environmental protection
requirements on the permittee.

Where is the Promised Economic Development? Where are the Post-Mining
Jobs SMCRA Promised as the Trade-off For Allowing Mountaintop
Removal?
In a 1997 interview, longtime West Virginia coal industry lobbyist
Ben Green told Business Week, ``With mountaintop removal, you get 100%
mineral recovery, you can't mine again, and you get better land use
than you ever had in its natural state.'' If by ``better land'' Greene
meant ``flatter'' land then his statement was true. Mountaintop removal
had created tens of thousands of acres of flat land. Greene's claims
echoed the arguments that persuaded Congress to allow the practice only
if the resulting flattened mountaintop was to be used as part of a coal
operator proposed development that would create jobs for coalfield
communities and promote local economies.
Ben Greene was not alone in trumpeting the value of flat land. As
they have from SMCRA's inception, coal industry and government
officials continue to tout flattening mountain ridges as a panacea for
economic development. There was, and is, one problem with the
scenario--mountaintop removal has played a significant role in the
precipitous decline in coal mine employment, and has flattened and
deforested mountaintops that now lay barren, generating weeds rather
than jobs. As explained below, a quarter century after enactment,
SMCRA's promise to coalfield communities of shopping centers,
industrial plants, and new affordable housing--all located on flattened
mountaintops--has been broken.
In August 1997, Penny Loeb, a Senior Editor at U.S. News & World
Report, broke the story of mountaintop removal's adverse impacts on
coalfield residents. Her article, ``Shear Madness,'' exposed to a
national audience the social and environmental injustice attendant the
large-scale expansion of mountaintop removal in the coalfields. Loeb
wrote:
[C]oal companies and some state officials note that strip
mining provides high-paying jobs--weekly pay averages $922. And
some contend that West Virginians are better off with their
mountains flattened--several dozen buildings, including four
schools and three jails, have been built on them so far.

. . .But the costs are indisputable, and the damage to the
landscape is startling to those who have never seen a mountain
destroyed. Topographic and landscaping changes leave some
regions more vulnerable to floods. . .. And state employment
records suggest the jobs argument is not very compelling.
Mountaintop removal accounts for only 4,317 workers in the
state--less than 1 percent of its job force. Overall, mining
employment in the state has fallen from 130,000 in the 1940s
and 1950s to just 22,000 last year. Loeb catalogued multiple
impacts on coalfield communities caused by the proliferation of
mountaintop removal mines:

Thirty floods have occurred in the past two years in areas
where watersheds were bared and redesigned, and several people
have lost their lives in such floods. Whatever the role of
mining in the state's overall economy, its impact on nearby
communities is devastating. Dynamite blasts needed to splinter
rock strata are so strong they crack the foundations and walls
of houses: Homeowners filed 287 blasting complaints with the
state in the past year. Trucks full of coal rumble past some
people's front porches at the rate of 20 an hour, 24 hours a
day. Mining dries up an average of 100 wells a year and
contaminates water in others.
The claims that mountaintop removal would bring economic
development and prosperity to coalfield communities are not supported
by the facts.
Thirty floods have occurred in the past two years in areas
where watersheds were bared and redesigned, and several people
have lost their lives in such floods. Whatever the role of
mining in the state's overall economy, its impact on nearby
communities is devastating. Dynamite blasts needed to splinter
rock strata are so strong they crack the foundations and walls
of houses: Homeowners filed 287 blasting complaints with the
state in the past year. Trucks full of coal rumble past some
people's front porches at the rate of 20 an hour, 24 hours a
day. Mining dries up an average of 100 wells a year and
contaminates water in others.
Loeb's report was followed by a comprehensive series of
investigative newspaper articles in the Charleston Gazette, beginning
in 1998, which examined mountaintop removal mining and its impacts on
the economy and people of the coalfields. The series, ``Mining the
Mountains,'' exposed the myth promoted for two decades by coal industry
advocates. The claims of industry lobbyists, politicians, and
regulators that mountaintop removal would bring economic development
and prosperity to coalfield communities were shown to be demonstrably
false.

State Mountaintop Removal Permitting Receives Scrutiny
The first article in the series described a DEP hearing on the
application for the largest strip mine ever proposed in West Virginia.
The hearing was held in the gymnasium of an aging Logan County
elementary school; more than 125 people jammed the narrow bleachers.
Ward described the scene as follows:
Just over the ridge from the school, Arch Coal Inc. had
stripped 2,500 acres of the Logan County hills around Blair
Mountain. The company has applied for a permit to mine 3,200
more.

If state regulators approve the new permit, giant shovels and
bulldozers will eventually lop off the mountaintops of an area
as big as 4,500 football fields.

Residents of the tiny communities along W.Va. 17 complained
Arch Coal's existing mine already makes their lives miserable.
Why, they asked regulators at the hearing, should the company
get a permit to mine more?

Melvin Cook of Blair was the first to walk across the gym floor
to a microphone and speak up. He complained about the
blasting.... ``You can't bear it,'' Cook said. ``It has torn my
house all to pieces.''

Residents of nearby communities were not the only people who
attended the public hearing.
A solid block of the gym's bleachers was filled with miners and
their families who said that ``they wanted jobs at the new mine. But
they agreed the company should make sure mining doesn't disturb area
residents.''
The Gazette series told of giant machines that ``towered over old-
time shovels and bulldozers'' used in earlier coal stripping. Those
monster machines ``can literally move mountains,'' the newspaper
related; only a few skilled equipment operators stood at the controls.
Gazette readers also learned that in twenty years nearly 500 square
miles of the state had been strip mined; from 1994 to 1998, the average
size of the new mines had doubled each year; and, in 1997, DEP had
issued new permits totaling 31 square miles, an area larger than
Charleston, West Virginia. Today, the areas and coalfield communities
impacted have grown substantially, while coal production continues to
produce high revenues for coal companies--but few of the jobs or
economic development promised by SMCRA.
State Mountaintop Removal Permitting Decisions Questioned by
Environmental Protection Agency
The Gazette also closely examined specific mountaintop removal
permitting decisions by state and federal agencies. The series noted
that Arch Coal, Inc.'s subsidiaries had been seeking agency approval to
permit larger and larger mines which would bury long segments of
mountain headwater streams.

Coal Industry's Initial Response to Media Investigations of Mountaintop
Removal
At the beginning of the ``Mining The Mountains'' series, Ken Ward
Jr. explained the initial response of coal industry officials and state
and federal regulators: ``Coal operators say all of this attention is
unwarranted. Some have hauled out standard jobs-vs.-the-environment
arguments. Others insisted the fight over stopping strip mining ended
decades ago--and that they won.''
A coal mine manager told Ward, ```I want everybody to understand
that we have been trying to work with the community[.]. . .It's not as
one-sided as everybody tries to make it appear.''' An official of the
DEP Office of Mining and Reclamation said, ```We think we're doing a
daggone good job, but we could always do better.''' An environmental
engineer in EPA's Region III told Ward: ```We are definitely evaluating
the overall issue[.]. . .But at this point, we're just talking among
ourselves[.]. . .It's a little early to say what EPA will do right
now.'''

Regulators Ignore SMCRA's ``Approximate Original Contours'' Mandate
As discussed above, SMCRA requires most strip mines to be reclaimed
to their approximate original contours (AOC). SMCRA, however, allows
the AOC requirement to be waived for mountaintop removal mining
operations in certain narrowly circumscribed situations. In order to
qualify for an AOC waiver, a permit applicant is required by SMCRA to
propose commercial, industrial, residential, agricultural, and/or
public uses for the land after it has been stripped, leveled, and
reclaimed. The obvious goal of waiving the AOC restoration mandate was
economic development that would bring new jobs and prime the pump for
coalfield community economies.
A Charleston (W. Va.) Gazette investigation raised serious
questions about state and federal agency oversight of state decisions
to waive AOC restoration requirements for mountaintop removal mines.
The Gazette described a visit to DEP's Logan County office and his
discussions there with officials in charge of permitting mountaintop
removal mines:
Ken Stollings points to the maps and charts on his office wall
to show how Hobet Mining will turn the rugged peaks and valleys
around Blair Mountain into flat plains and a few rolling hills.

Stollings, a Division of Environmental Protection engineer,
shows the changes to his boss, agency permit supervisor Larry
Alt. Asked if this proposal meets the legal mandate that mined
land be reclaimed to its ``approximate original contour,'' Alt
and Stollings just laugh.

``We just can't stack it as high as God did,'' Alt says with a
shrug.
Approximate original contour, or AOC, is the heart of the federal
strip mining law. But among many West Virginia regulators, it's
becoming a joke. The Gazette reported that the AOC waiver rules were
``routinely skirted by dozens of huge mountaintop-removal strip
mines.'' After coal companies blasted and ripped apart mountain
ridgetops to reach multiple coal seams, state regulators allowed them
to avoid the expense of restoring the land to AOC. Instead, DEP
permitted coal operators to take the cheapest path: shoving and dumping
the remains of mountains--millions of cubic yards of rock and dirt--on
top of headwater streams in nearby valleys.
Information contained in DEP's own files revealed a systemic
failure on the part of state regulators to apply SMCRA's AOC
requirements to mountaintop removal mines. An The investigation found
that in 1997 alone, DEP had authorized twenty permits for mountaintop
removal mines to level twenty square miles. That study showed that the
companies obtaining these permits rarely ask for or received
approximate original contour exemptions for mountaintop removal.'' A
West Virginia Freedom of Information Act request revealed that only
one-quarter of active mountaintop removal mines had obtained the AOC
exemption. Thus, 75% of active mountaintop removal mines in West
Virginia were being operated in violation of state and federal law.
A freedom of information Act request led an investigative reporter
to a memorandum written in the early 1990s by OSM officials that, for
the first time, resembled an agency AOC policy. Because the policy
contained no guidance for permit reviewers on how to define AOC, it
served as the basis for state officials' later defense that they had no
idea what AOC meant when it came to mountaintop removal mines. The
upshot of this bureaucratic sleight of hand was that operators could
lop hundreds of feet off mountaintops, dump ``excess spoil'' into
valleys, and level off thousands of acres--all under the guise of
meeting SMCRA's AOC requirement.
By definition a mountaintop removal mine is one that removes entire
coal seams running beneath a mountaintop. Many of the mines permitted
without AOC variances reduced the elevation of mountain ridges by
hundreds of feet. A mountaintop removal mine that reclaims mined land
to its approximate original contours is obviously an oxymoron--but an
oxymoron that regulators were willing to embrace so that coal operators
could avoid SMCRA's strict economic development requirements applicable
to mountaintop removal mining. The most egregious impact of DEP's
failure to enforce the AOC requirement was the denial of jobs and
permanent economic development that should have accompanied mountaintop
removal mining operations.

The Response of Industry and Regulators to the Revelation that AOC
Requirements Had Been Ignored for Two Decades
Upon learning the results a newspaper's investigation of DEP's
systemic violation of AOC permitting requirements, coal lobbyists at
first admitted that problems might exist. However, they insisted that
only technical matters were involved. The president of the West
Virginia Coal Association told the Gazette: ```It sounds like to me
[like DEP] needs to take a look to see if they meet all the
requirements[.]. . .Apparently, there are some issues to be addressed,
but they have little [to] do with environmental compliance.'''
An A.T. Massey public relations officer asserted, ```Massey Coal
companies have complied with the reclamation regulations[.]. . .On any
permit that does not include an AOC variance, the plans for reclaiming
the mine site meet state guidelines for AOC standards.''' David Todd,
then an Arch Coal executive asserted, ```We have been applying for
mining permits and they have been reviewed by and granted by DEP, with
oversight by OSM[.]. . .That's got to be pretty fair evidence that
[mountaintop removal mines] are being approved and operated according
to and in compliance with the law.'''
A supervisor of the OSM Charleston field office was questioned at a
press conference where he appeared with the visiting OSM Director. OSM
maintained that DEP was not issuing mountaintop removal permits without
AOC variances. When later confronted with a list of such permits, the
federal officials promised OSM would look into the allegations.
```Maybe we should put the burden on the state to come up with some
criteria,''' an OSM offical said. ```It's something we might want to
tighten down on. I don't think the state has paid enough attention to
AOC and postmining land uses and configurations.'''
A Promise Broken: Systemic Waiver of Mountaintop Removal Requirements
Negate SMCRA's Economic Development Goal
A Charleston Gazette investigation during the summer of 1998
examined long-standing claims of coal industry advocates and government
regulators, who championed mountaintop removal as an economic
development engine. The Gazette published a devastating article
documenting how SMCRA's promise of economic development had been
ignored by the West Virginia coal industry with the acquiescence of
state and federal regulators.
The Gazette found that for more than two decades, SMCRA's
mountaintop removal requirements had been consistently ignored by
regulators and coal operators. Coal companies had been allowed to
flatten mountains and dump hundreds of millions of cubic yards of
``excess spoil'' in valleys obliterating hundreds of miles of headwater
streams.
The Gazette investigation found that over two decades, DEP had
permitted more than fifty square miles for mountaintop removal mines;
the plans for ``economic development'' at those mines were limited
exclusively to pastures, hayfields, forests, or range lands On the
contrary, the Gazette's investigation showed that the most popular land
use proposed for mountaintop removal sites was ``fish and wildlife
habitat.'' Incredibly, while ``fish and wildlife habitat'' was not a
post-mining land use recognized by SMCRA, it accounted for almost one
third of the total mountaintop removal acreage permitted by DEP. In the
last decade however there has, thankfully been at least some effort to
create post-mining development on MTR mine sites. That effort has been
meager, to say the least. The full potential of SMCRA's post-mining
economic development mandate has been ignored.

The Response of Industry and Regulators to the Lack of Economic
Development
When confronted with the results of the Gazette's postmining land-
use investigation, industry lobbyists agreed there had not been much
development, but claimed it was not the fault of coal operators. ```Are
you going to have a Toyota plant at Wharncliffe, West Virginia?''' one
asked. Answering his own question, he said, ```Probably not. But I
don't think the law obligates the mining industry to put up bricks and
mortar. Our responsibility is to make sure the opportunity is there.'''
The former President of the West Virginia Mining and Reclamation
Association said SMCRA's requirements were outdated and ```too
stringent for today's large mountaintop removal mines.''' An official
with DEP's Office of Mining and Reclamation said that all the involved
parties needed to look at postmining uses: ```There's not a lot of pre-
planning done in terms of development[.]. . .There is a need for some
long-term land use planning considerations. It's hard for us to say
what's going to be out there and who is going to develop what and what
the future holds.'''

Conclusion
It has been more than a decade since these questions were raised
about the failure of state and OSM officials to require coal operators
engaged in MTR mining to provide the SMCRA mandated industrial,
commercial, and residential economic development--the long-term
economic development sorely needed in the Appalachian coalfields.
It is laudable that members of this Committee and the author of the
Bill under consideration seek ways to bring much needed jobs to
coalfield communities. There is no disagreement that unnecessary
regulations can impede economic development and deprive our nation of
much-needed jobs at a time of nationwide concern about our economic
future.
Make no mistake however jobs and environmental protection that
protects coal field communities and their land and water and economic
development--are not mutually exclusive. While the proposed bill is no
doubt well intended, it does not hold out a serious promise for the
creation of jobs in America's coalfields. Removing virtually all power
of the Department of the Interior to take regulatory action to protect
coalfield communities is neither wise policy nor will this Bill impose
legally enforceable standards that could possibly create the employment
opportunities that in the sponsor's goal.
With all due respect, this Committee can take the initiative to
investigate the failure of state and federal regulators to honor
SMCRA's promise of post-mining industrial, commercial and residential
development on lands permitted for MTR mining.
When Congress enacted SMCRA in 1977 it recognized a trade-off--
flattened mountain ridges would be replaced by long term economic
development creating jobs in coal regions where the boom-bust economic
cycle had resulted in high unemployment and few opportunities. For
those who desire jobs in the coalfields one must ask--why has SMCRA's
mandate been almost totally ignored.
This is not to say, however, that jobs are more important than the
homes, water supplies, and the environment of coalfield communities.
Recent studies have raised serious quations about the possible
relationship of large scale coal mining operations and adverse health
impacts on those who live near mines. Moreover, peer-reviewed studies
by scientists indicate very serious concerns about the impact of some
coal mining on water quality of entire watersheds in Central
Appalalachia.
This Committee and this Congress should heed these warnings and
thoroughly examine coal mining's externalities before deciding that
regulation by the Department of the Interior is unnecessary, kills jobs
and inhibits the spirit of creativity and ingenuity that have long
characterized American industry and business.
The lessons of the past provide important messages for the policy
makers of today. Those lessons--of the Buffalo Creek disaster, of the
Farmington No. 9 mine, and more recently of the Massey Energy Upper Big
Branch Mine explosion speak to us today. Black lung disease is on the
rise among coal miners, our coal mines are still not safe enough and
enforcement of SMCRA and the Clean Water Act still does not adequately
protect coalfield communities.
I would be glad to answer any questions and to provide any
additional information that may be helpful to the Committee. Thank you.
______

Mr. Lamborn. OK. Thank all five of you for your testimony.
I appreciate that.
And we will start our first round of questions with myself.
Mr. Dana, as I am sure you are aware, in February the
Administration settled a lawsuit and announced they would be
re-reviewing the current rules for commercial oil shale leasing
and amendments made to the resource management plans.
Can you tell the Committee what this review will do to the
progress of oil shale development in the West?
Mr. Dana. Mr. Chairman, in my opinion, the uncertainty that
is being sown by certain groups that would oppose the industry
has been very effective. Since the Energy Policy Act of 2005,
which instructed Interior to take steps forward to significant
oil shale development, that hasn't occurred. And that, I
believe, more than anything, is slowing down industry.
It has been said, with respect to water and environment,
that these resource management plans have to be reviewed over
and over again. What I believe now is happening is just--it is
never going to end. It is really just a tactic of anti-oil to
stop oil shale development in the U.S.
Mr. Lamborn. And my next question: In 2007, six 160-acre
tracts of land were leased to 3 companies for R&D and
demonstration projects, with the potential to expand each of
those to as much as 5,120 acres. However, in the second round
of leases, the expansion potential was decreased to only 480
acres and, as a result--and I am talking about under the
current Administration--and, as a result, received little
industry interest.
Do you feel that this decision made by the Administration
benefited or injured oil shale development? And are you aware
of the reasons behind this decision by the Obama
Administration?
Mr. Dana. Well, Mr. Chairman, I am not aware of all the
reasons. I can speak from experience.
My small company that I was involved with in Utah, which
has now raised over $100 million for excellent technology, did
not participate in those leases, for the purpose of--the leases
are just not big enough.
It also creates an enormous amount of expense that small
companies like ourselves cannot innovate because of the cost of
NEPA and the EA work that is involved. So what you have is
America's best and brightest trying to develop technologies
that can address water use, lower emissions, and expand our
national security through energy, but we have no ability to
come forward through the gauntlet that is being put forth by
the current Administration to get through the BLM in a
reasonable manner that small companies can innovate.
There is a real need for small-company innovation in this
space, because the major oil companies often weigh their
projects, including oil shale, against their best economic
projects globally. They determine things on a basis of internal
rate of return, and so, as they look at their overall projects
globally, oil shale moves down to the lower end of the internal
rate of return, despite the fact that for the last 6 years oil
has averaged $85 per barrel.
At $85 per barrel, the industry should have been in
operation for the last 6 years. At $50 oil, everybody breaks
even. At $60 oil, you start to do OK. At $70 oil, you do very
well. At $80 oil, you do very, very well, and so forth. This is
similar to the Canadian Alberta tar sands experience. It will
be the same in the United States as we go forward.
Mr. Lamborn. Something I have noticed, and many people have
as well, and that is that most of the innovative energy
production in this country in recent years, since the Obama
Administration came into office, has been on private lands. You
look at the Marcellus gas shale in Pennsylvania, you look at
the Bakken oil shale, the conventional oil from shale deposits
in North Dakota.
And is this also happening with oil shale in the West, in
your experience?
Mr. Dana. Mr. Chairman, absolutely. The private lands and
also the lands under the School and Institutional Trust Lands
of Utah are really America's best hope to open up lands,
whereas the BLM lands have not been allowed.
In the Energy Policy Act of 2005 and in these resource
management plans, they make clear that there are 1.9 million
acres of oil shale lands. Less than 1 percent of 1 percent
since EPACT 2005 has been leased to the private sector to
develop. So not only are companies like ours limited to private
lands and SITLA lands, but now we see major oil companies who
have excellent technology, such as Royal Dutch Shell, have gone
to the Hashemite Kingdom of Jordan, completely out of the
United States, looking for other lands, not only private but
away from our regulatory burden.
Mr. Lamborn. Well, I am glad that those private lands are
available out there, but it is a sad state of affairs when the
2-1/2-billion-acre Federal estate in this country, including
offshore areas, is not open for energy production. And we see
hurdle after hurdle thrown in the way of companies that would
be willing to invest their private dollars at no cost to the
taxpayer. And it is just a sad state of affairs.
I turn over the questioning now to Representative Johnson.
Mr. Johnson. Thank you very much, Mr. Chairman.
Mr. Gardner, I had no idea that you were a tobacco farm
boy. I bet you there is not more than you and myself in here
that know what sand lugs are. We will have to talk about some
of those stories another time.
Mr. Gardner. Yeah, I have the honor of being involved in
the two most politically incorrect industries in the country.
Mr. Johnson. Yeah.
Well, gentlemen, on a more serious note, I can tell you
that I am both shocked and alarmed at your verbal testimony and
your written testimony that has been entered into the record
and some of the clarification that you have provided that
points to some pretty shocking inconsistencies with information
that we have received from OSM and Director Pizarchik in the
past.
On November 4th, the Director testified at that very table
where you are sitting and was specifically asked if any
official at OSM had asked the contractor, and therefore the
subcontractor, to change the assumptions for its economic
analysis, and he replied, and I quote, ``As regarding any
official, anybody in the management level, I don't believe that
occurred.''
However, in your statement, you said that there was a
meeting in February of this year where OSM management demanded
that you revisit the production impacts and, therefore, the
associated job loss numbers and make different assumptions to
show less of an impact.
In your view, does this not contradict the Director's
answer in his previous testimony?
Mr. Gardner. Yes, I felt it did.
Mr. Johnson. Mr. Zaluski?
Mr. Zaluski. Yes, sir.
Mr. Johnson. In fact, was not the main purpose of the
February meeting to figure out a way for the agency and, by
extension, you and the other subcontractors to lower the impact
numbers?
Mr. Gardner. Well, that is what it appeared to us.
Mr. Johnson. Furthermore, was the February meeting between
OSM and the contractors tape recorded or transcribed?
Mr. Zaluski. It was our understanding that, under the
contract between OSM and PKS, the prime contractor, that they
were required to tape or record every meeting, yes, sir.
Mr. Johnson. OK. Were the tape recordings sequentially
numbered?
Mr. Zaluski. I believe so.
Mr. Johnson. Do you have complete copies of all of these?
And, if so, will you provide all of these sequentially numbered
recordings and transcripts to the Committee?
Mr. Zaluski. We don't have those.
Mr. Johnson. You don't have them. Can you tell us who can
provide those to the Committee?
Mr. Zaluski. I would assume PKS. I would assume OSM. I
can't say much more than that, sir.
Mr. Johnson. OK.
Mr. Chairman, as a matter of record, we need to get those
recordings.
Mr. Lamborn. So noted.
Mr. Johnson. This, to me, is, frankly, as I said, shocking
and alarming, that the Administration asked you to make false
assumptions. Some people would call that lying. You know, as a
two-wheeled-wagon-rut, mule-farming farm boy, tobacco-farming
kid, I can tell you that is what it means to me.
And the meeting that you attended in which this happened
could be on tape somewhere. I am looking forward to getting
those tapes. It is imperative to me that the Administration
turn these over to the Committee immediately so that we can
verify and further clarify what we have heard here today.
Mr. Gardner, you said that after the job loss numbers came
back that OSM asked your company, ECSI, to make the assumption
that the 2008 stream buffer zone rule was in effect and being
enforced across the United States, which was not true.
Why was one of the changed assumptions that OSM asked you
to make was that the use of the 2008 stream buffer zone rule--
can you edify that, please?
Mr. Gardner. Well, it was in that February 1 meeting. And,
again, I used the word ``strongly suggested'' that we change
our assumptions to change the end results. That 2008 stream
buffer zone rule proposal would have changed production. There
would have been impacts from that. And it was predicted, and
OSM also agreed, that that would have reduced production across
the country. Therefore, they wanted us to start with that as a
baseline, and that, obviously, would have led to a lower
production impact and then, consequently, plugged into the
economic model, lessen job losses.
Mr. Johnson. OK.
Mr. Chairman, I want to continue with this line of
questioning. I am out of time this time. I am hoping we are
going to have another round.
Mr. Lamborn. OK, our next questioner is Mr. Landry.
Mr. Landry. Mr. Chairman, I would like to yield my time to
the gentleman from Ohio.
Mr. Johnson. I thank the gentleman for yielding.
So, by implementation of the 2008 stream buffer zone rule,
production would have been decreased, and, therefore, the job
loss numbers under the new proposed rule would not reflect
nearly as badly as they did. Is that what I just heard?
Mr. Gardner. Yes, sir.
Mr. Johnson. OK. So is it safe to say that, contrary to
what Director Pizarchik told members of this Committee 2 weeks
ago about the 2008 stream buffer zone rule being a rollback,
that is false? Because, in fact, the 2000 rule added
significant environmental protections that would have increased
costs and reduced the amount of coal available for production
across the board, had it been implemented by OSM. Is that
correct?
Mr. Gardner. That was everybody's belief.
Mr. Johnson. OK.
Were the economic impact numbers just a placeholder? You
talked about that a little bit before. Were the economic impact
numbers just placeholder, numbers that have no basis in fact,
as stated by Director Pizarchik? Either one of you that wants
to answer.
Mr. Zaluski. We took great offense at that, Congressman.
The numbers that the Director refers to as placeholders became
placeholders because OSM changed the assumptions that were used
to create those numbers. Not only was the 2008 stream buffer
zone one of those assumptions, we were told to maintain the
national thermal balance--if coal was lost in one area, how
much coal someplace else would have to be picked up. We were
told to use the 2008 EIA production numbers and then suggested
maybe 2010 numbers might be better. We were told to use a
static model and then, later on, a dynamic model.
And it is like statistics; you can make this say anything
you want it to say, which I think was the driver here. But the
dynamic model would be--the result of that would be, there may
be jobs lost, but they are being lost because of the recession
or decreased demand for coal. Anybody else is responsible--or
greenhouse gas legislation or implementation. So they were
trying to put the job loss, in my opinion, off on anybody else
but OSM's SPR.
Mr. Johnson. OK.
So if Director Pizarchik claims that those numbers were
meaningless placeholders, as he has indicated before this
Committee, and that they had no basis in fact, why would they
need to have an all-day meeting to discuss how to change the
assumption in order to lower the numbers?
Mr. Gardner. Good question.
Mr. Zaluski. Lots of things happened that day, Congressman.
It was a contentious meeting.
Mr. Johnson. OK. But was this change in assumption--first
of all, OSM gave you the assumptions, right?
Mr. Zaluski. Yes, sir.
Mr. Johnson. OK. I want to make sure that that is in the
record.
So was this change in assumptions noticed in the draft EIS
as a placeholder?
Mr. Zaluski. There is a footnote at the beginning of
chapter 4 explaining that these are placeholders because----
Mr. Johnson. Because of the change in assumptions.
Mr. Zaluski. Yes, sir.
Mr. Johnson. OK.
Speaking of the draft EIS, how did Director Pizarchik's
original decision not to include scoping, which would have been
a violation of NEPA, affect the contractor's work on the rule?
Mr. Gardner. That put us behind approximately 4 months
right off the bat.
Mr. Johnson. Were you given any additional time on the end
to do the real tough, heavy-lifting work?
Mr. Gardner. I would have to go back and look at the
schedule. I believe there was a bit of time added, for several
reasons, but not enough time to adequately address what we felt
needed to be done.
Mr. Johnson. OK. So you mean to tell me that, in a process
that the United States and others have said is moving at
breakneck speed, you lost 4 months of that process because of
Director Pizarchik and the Administration's oversight of doing
scoping first? Is that accurate?
Mr. Gardner. Yes, sir.
Mr. Johnson. It seems to me that there is just a pattern of
mismanagement on this rulemaking by OSM.
Mr. Gardner, you have testified that OSM staff were
embedded with you and the other subcontractors, and they were
intimately involved in working on the EIS. Do you believe that
this rule should be considered economically significant? And
did OSM staff agree that the rule was economically significant
and that it would result in job losses?
Mr. Gardner. I believe they did, yes.
Mr. Johnson. OK.
Mr. Chairman, I am down to seconds, so I am going to yield
back the 5 seconds, but hopefully we will get another round
because I am not done.
Mr. Lamborn. Well, we will start our second round here.
Mr. Eikenberry, you said a number of things I disagreed
with, but let me just focus on a couple. And then I will have
Mr. Dana, sort of, give a rebuttal or his version of the
answer.
You said that extracting usable petroleum products from oil
shale is a failed technology. Are you aware that there is not
really any one settled technology, that there is still research
and development and experimentation? And, to me, it is
premature to say that we have a, quote/unquote, ``failed
technology'' when there are companies out there willing and
eager to invest their moneys and try different things.
Mr. Eikenberry. Yeah, I am very much aware of that, and
that is one of the reasons why no one has the technology to
make this oil shale industry viable. It is simply not there. It
won't be. I have been involved in this thing for 40 years----
Mr. Lamborn. OK. Well, then, that leads to my next
question. You said you thought there would be a gamble or a
risk to the taxpayer. I don't see that. If a company thinks
that they have a possibility of getting a good rate of return
and they are willing to invest their own private dollars,
number one, I don't see that that puts the taxpayers on the
hook for anything, and, number two, maybe they will come up
with something and have a breakthrough.
I mean, look at hydraulic fracturing. That has only really
come on--we knew about hydraulic fracturing for a long time,
but only when you married that up--if I understand correctly
the sequence, you know, it is only when you married that up
with horizontal drilling that you could really unleash the
potential of shale gas. And that has just been a few years ago.
So how can you--you don't have a crystal ball that says it
is never going to work. And besides, if they are willing to
invest their own money, why should you or I really care if they
want to throw their money away?
Mr. Eikenberry. Well, as long as they have the resources--
like, Shell has roughly a trillion dollars, supposedly, of oil
shale resources that they are not moving forward with in any
way, shape, or form. If they thought they had a technology and
they thought that this was viable, they would be pushing this.
They are not. They are backing off.
There are just simply too many headwinds associated with
oil shale, not the least of which, any which one, and not the
least of which is just the technology.
Mr. Lamborn. OK, then if, in your opinion, it is never
going to work, why do you care if we let them go out and prove
that?
Mr. Eikenberry. I simply don't care, but don't get the
communities out there in these small--in these areas excited
about a big oil shale industry, because it is simply not going
to happen. And if it does happen, let the big oil, let the
companies provide that infrastructure to these companies when
and if it happens. But don't keep pushing this thing. That is
what I am saying.
Mr. Lamborn. OK.
Mr. Dana, you have heard our interchange. What is your
commentary? And then, also, if you could address the issue, on
top of that, of water, because he expressed earlier a concern
that this would use a lot of water.
Mr. Dana. Thank you, Mr. Chairman.
And with respect to you, Mr. Eikenberry, I completely
disagree. And I think I would just put forth and refer you to
look at what is happening globally right now. In China, the
Fushun Mining Corporation has tens of thousands of barrels of
retorting going on right now. They just recently installed
about a $400 million technology from ThyssenKrupp, the ATP
process. This is all new brand-new technology that is producing
tens of thousands of barrels of oil. In Australia, very large
projects down there proceeding forward with QER backed by very
big people with excellent technology.
I would also refer you to look in Jordan and the progress
that they are making in Jordan. I would refer you to look in
Brazil, where the Petrosix Process has been managed very well
for the last 20 years, and Petrobras has now come to Utah
looking for technology. I would also let you know that Mitsui
and others have been in Utah, including the Estonian Government
just recently bringing their technology from Estonia, which
just recently has been expanded in Estonia with wonderful
technology.
So it is a global resource. It is very real. Unlike the
comments that you made about water--water is abundant. I,
myself, am a very big water owner in Uintah County through our
company. That water was readily available. There is an enormous
amount of water under----
Mr. Lamborn. But does your process that your company is
particularly concentrating on, does it use water at all?
Mr. Dana. I actually innovated a technology, along with Dr.
Jim Patten, for Red Leaf Resources that does not use water. And
so it is very effective. I assigned that to Red Leaf Resources.
So there are people working on environmental solutions. The
water can be mitigated. The emissions, by not going into
burning the rock but using indirect heating, which is through
clean-burning natural gas, is a new innovation.
And I would just say, look back to the efforts made in
Canada. For 40, 50, 60 years, they struggled with the Canadian
Alberta tar sands. What they did is they stuck to it with clear
and defined regulation from the Alberta province that allowed
them to move forward with the Canadian tar sands. In the last
10 years, they have had $100 billion of capital investment.
They are now the number-one supplier of crude oil to the United
States.
The substantial amount of that imported oil is truck and
shovel mining, two tons to make a barrel. It is the same with
oil shale. The difference is that when you pyrolize oil shale,
the resulting crude that you get is actually very premium to--
--
Mr. Lamborn. And, last, what about the impact on taxpayers?
Mr. Dana. Well, the impact on taxpayers is only positive
for oil shale. If you look at 2-1/2 million barrels per day,
which is likely over the next 25 years, you are looking at half
a trillion dollars, based on the taxable income from upgraders,
the taxable income on retorting, and the royalty rate at a flat
8 percent average. We are talking--we have looked at this. It
is very doable.
There has been 4 million barrels produced in the United
States. It was tested for JP-8 fuel back in the first go-
around. This is a wonderful asset. It will create millions of
jobs. It is real. And we need to get rid of the regulation that
is stopping it.
Mr. Lamborn. OK. Thank you.
I am sorry I have gone over my time. Mr. Johnson and then
Mr. Amodei.
Mr. Johnson. Thank you, Mr. Chairman.
Now, in the last round of questioning that I had, we
established that both you, Mr. Gardner and Mr. Zaluski, both
you and your colleagues, as well as the OSM staff, agreed that
the rule was economically significant and that it would result
in job losses, correct?
Mr. Gardner. Yes.
Mr. Johnson. Then if OSM staff thought it was economically
significant and would lead to job losses, why in the world did
Director Pizarchik testify 2 weeks ago that the rewrite of the
rule would actually create jobs?
Mr. Gardner. You would have to ask him that.
Mr. Johnson. OK. Well, I intend to. Thank you.
Furthermore, based on your understanding and expertise in
the coal industry, do you think that the economic analysis firm
was correct to say that the number of direct jobs lost would be
about 7,000?
Mr. Gardner. Frankly--and this is my personal opinion--I
was surprised it was that low.
Mr. Johnson. OK. All right.
Did the firm that did the economic analysis, did they have
any coal experience background, that did this?
Mr. Gardner. I am not sure of their exact experience. I
know they were Ph.D.-level economists, and I am not sure if
they had coal experience or not. They were economic modelers.
Mr. Johnson. OK.
Obviously, once OSM used its influence over Polu Kai to
come to a, quote/unquote, ``mutual decision'' to end the
contract, your contract with Polu Kai and OSM also came to an
end. Since that time, has OSM hired another contractor to
finish the EIS?
Mr. Gardner. Yes. I saw a press release that indicated that
they had hired another contractor, I believe back in June.
Mr. Johnson. OK.
Do you know if there is a balanced approach with industry
and environmentalists on the team working on the EIS now, like
there was when you folks were involved?
Mr. Gardner. I don't know the exact makeup of the team or
the experience. I believe I saw in the press release that
Morgan Worldwide was still working on the revised contract,
along with another company, Energy Ventures Analysis.
Mr. Johnson. OK.
Finally, and just to clarify, the rewrite of the rule would
significantly affect underground mining, correct?
Mr. Gardner. Yes. That was our belief, yes.
Mr. Johnson. OK.
Now, I have also heard that Polu Kai, itself, did not have
the experience and the qualifications to do this job, and,
therefore, that is why OSM basically handpicked and came to you
guys as the subcontractors. Is that an accurate statement?
Mr. Gardner. That was my impression. We were approached
many months in advance of the contract and an RFP that was
issued, and we thought a very good team of experts put together
to work under the PKS contract. And they contributed to the
work. They hired several people, themselves, and they were the
contract administrators and logistical support and contributed
to the NEPA aspects of the project.
Mr. Johnson. But you and your colleagues, you were the
subject-matter experts that were doing the heavy-lifting work?
Mr. Gardner. In the mining, that was our role, was to be
the mining experts on the team.
Mr. Johnson. OK. And if I understood your testimony here
today, as well as Mr. Pizarchik's testimony previous, he has
questioned your qualifications, correct?
Mr. Gardner. That was the impression I got.
Mr. Johnson. OK. Well, but you were handpicked by OSM,
right?
Mr. Gardner. Yes, sir.
Mr. Johnson. OK. All right.
OK. Well, I want to thank you both for your testimony. I
also want to commend both of you for your integrity in standing
up to the Administration when they asked you to use false
assumptions to give them the answers that they wanted. A lot of
folks in your shoes would have taken a different course,
perhaps, to make a quick buck, but you stood up, did the right
thing, and it shows that you and your company and you gentlemen
are men of honor. And I thank you again for being here today.
Mr. Chairman, today some very troubling information has
come to light and makes my legislation all the more important.
I hope that we will begin to receive the answers from the
Administration as to how political appointees are overriding
the judgment of career OSM employees and the very contractors
that OSM selects to do these important jobs.
In my opinion, it is necessary for at least Director
Pizarchik, if not Secretary Salazar, to come back to this
Committee to testify on these new developments. I will not rest
until we have all the answers on this rulemaking process, until
my legislation becomes law, because thousands of jobs in my
district are on the line. The American people demand
accountability in the Federal Government. And I think we have
some very serious concerns here. I want to get to the bottom of
it.
And, with that, I yield back the balance of my time.
Mr. Lamborn. OK, thank you.
Representative Amodei?
Mr. Amodei. Thank you, Mr. Chairman.
Following the lead of the preceding speaker, I will yield
back the balance of my time and----
Mr. Lamborn. OK, if I could reclaim----
Mr. Amodei. Absolutely.
Mr. Lamborn.--the remainder of your time?
And I will just have a couple of wrap-up questions for the
witnesses who talked on the coal issue. This is such an
important issue. And Representative Johnson has done a great
job of drilling down into a very specific sequence of events
that help understand what was really happening, but I would
like to just stand back and ask a couple of general questions.
Are you aware that the stream buffer zone rule--and we got
this in the testimony, and both of us were there, as well as
Representative Shelley Moore Capito, in Charleston, West
Virginia, about a month and a half ago. And we heard testimony
that underground longwall mining will be severely affected and
curtailed by the stream buffer zone rule, not just so-called
mountaintop mining.
Is that something that you both are aware of?
Mr. Gardner. Yes, sir. And that was our analysis in the
production impacts. And, as I said earlier, we had repeatedly
asked if the proposed rule would apply to underground mining
and did not receive that answer until well into the project.
And then that changed the whole scope and the analysis. And we
received conflicting instructions throughout the process on
exactly what OSM personnel thought those impacts would be.
Mr. Zaluski. I would concur, Chairman. The instructions,
the directions changed constantly. The answer to your question
directly is, yes, it will impact underground mining, longwall
mining, for very different reasons, perhaps--the waste
disposal.
At one point--again, I think the fact that they had
knowledgeable people as contractors is what presented OSM with
a problem here, perhaps. But I asked if, in fact, a longwall
permit with less than 400 feet of cover--kind of a technical
term--would even be issued. Originally, the answer was, no, we
will not issue that permit. Well, that sterilizes a lot of
coal. Again, a direct answer to your question. That answer was
reversed a few months later, that, yeah, we will answer that,
we will issue that permit.
So we don't know, because we have been out of the loop now
for a few months, what the final rule is going to look like.
But that is a very important issue. It does apply to
underground mining. It does apply to longwall mining. And they
are all tied to--another issue in the SPR was the definition of
stream. And we talked to the Congressman's staff about this.
One of our assignments was to define a stream. And I know
you have been on this Committee for a while. That is a gigantic
chore. And, again, we are given a few months to do that, but it
impacts everything: where you can mine, where you can't mine.
It also impacts underground mining.
So the answer is ``yes'' for several reasons.
Mr. Lamborn. OK. When I see this Administration time after
time--I mean, the latest, delaying the Keystone XL pipeline
decision--shutting down energy source after energy source. If
it was just one or two isolated things, I wouldn't say there is
a pattern, but I just see a pattern day after day of doing
this.
Do you think there are some in OSM or higher up who have an
agenda of, not just by unintended consequence of bureaucratic
regulation that can't take everything into account, which
happens every day around here, but actively trying to shut down
underground mining and not just the so-called mountaintop
mining?
Mr. Gardner. Let me respond first by saying, I have many
friends that work for OSM. They are professionals, they are
engineers and scientists, they are mining engineers and other
professionals that I feel have great knowledge.
Now, there are some issues. And we were very surprised by a
lot of the instructions that we got and the changing of
instructions. So, to answer your question, I was concerned.
Mr. Lamborn. Mr. Zaluski?
Mr. Zaluski. Thank you for pronouncing that correctly, Mr.
Chairman.
Mr. Lamborn. It took me two times.
Mr. Zaluski. It gets pronounced several ways. When I was a
prosecutor, I was called ``Scruski'' one time.
In any event, I agree with Steve. It is hard to understand
the motivation. It doesn't seem logical, so therefore it must
be something else. That is my, kind of, analysis.
And, again, I am talking about the way it was administered.
It just didn't make sense. I have done this a long time and
been involved in lots of SMCRA programs at the State level and
Federal, and some of this was baffling. And asking simple
questions, like, again, does this apply to underground mining,
that is a yes-no, and it took 4 months to get an answer, and it
really skewed our work significantly.
So I don't know the motivation. It just does not seem
logical.
Mr. Lamborn. Well, I am very concerned, as is
Representative Johnson. I mean, severely affecting and limiting
above-ground mining is one thing. I mean, that alone would be
potentially devastating to the production of coal and
electricity as well as jobs in that area. And I know we have to
keep track of the environmental issues, I understand that, but
we have to balance it with what the impact is. But to include
underground mining in that equation is doubly devastating.
Last, I will just finish with this: Are you in a position
to comment on whether there was adequate notice for comments
given to the States out there? Because some of them complained
bitterly that they were not given enough notice, and it was
almost ridiculous how little time they had to wade through
these huge requests for comments.
Mr. Zaluski. I would love to comment on that.
I think that Director Pizarchik read letters or whatever
from other States that were upset with the quality of the work,
the placeholders and so forth.
In my humble opinion, this was a massive rewrite of the
entirety of SMCRA. This was the guts of SMCRA they were trying
to do. You know, in 2008, it was called the stream buffer zone
rule. Now it is the stream protection rule. They changed the
name, and they really broadened the scope. This was a major
rewrite. The States should have been given plenty of time. The
sister agencies--Fish and Wildlife, EPA, all the alphabet
soup--should have been given plenty of time.
And to give somebody our work--and when I say ``our,'' the
team's work--and say, ``You have until Friday to give us your
comments,'' was absurd. You don't get meaningful comments. And
I think the States--we talked to some of those people. We were
in Wyoming recently, and Montana, for other reasons but talked
to some regulators, and they were still smarting from being put
in that position. You know, if you don't comment, we think you
agree; let's go on. And it was unfair to the States, it was
unfair to the sister agencies.
This, again, was a major rewrite. The schedule should have
been about 3 years. And we were hired in June, as the
Congressman pointed out; we were delayed 4 months, and the
deliverable was February. So we had a very short period of
time. And, by the way, within which, we had three OSM team
leaders in that short period of time, and you would have to ask
the Director why.
But to do something at this level and to affect this many
people and the Nation's energy, you don't do it by Friday. It
just doesn't work.
Mr. Lamborn. OK. Thank you.
That concludes our questioning. Will the two of you be
available as the rule is possibly handed down at some point in
the future to help us understand the impacts of it?
Mr. Zaluski. Well, we make our living in this area, so I
assume we will read it and be glad to give any advice we can,
sir.
Mr. Lamborn. OK. Thank you.
I want to thank all five of you for being here.
Members of the Committee may have additional questions for
you in writing. I would ask that you respond to those if you
are given those.
Mr. Lamborn. If there is no further business, the
Committee, without objection, will be adjourned.
[The prepared statement of the U.S. Department of the
Interior follows:]

Statement for the Record by the U.S. Department of the Interior

Thank you for providing the Department of the Interior the
opportunity to submit this Statement for the Record on several pieces
of recently-introduced legislation, including H.R. 3407, the ``Alaskan
Energy for American Jobs Act;'' H.R. 3408, the ``Protecting Investment
in Oil Shale and Next Generation of Environmental, Energy, and Resource
Security Act;'' H.R. 3409, the ``Coal Miner Employment and Domestic
Energy Infrastructure Protection Act;'' and H.R. 3410, the ``American-
Made Energy and Infrastructure Jobs Act.''
For the reasons discussed below, the Department opposes the
legislation.

Introduction
In his appearance before this Committee on Wednesday, Secretary
Salazar discussed the Administration's commitment to promoting safe and
responsible domestic oil and gas production as part of a broad energy
strategy that will reduce our dependence on foreign oil. Outlined in
the Blueprint for a Secure Energy Future, the strategy will result in
producing more of our oil and natural gas here at home, using cleaner,
alternative fuels, and improving our energy efficiency.
Secretary Salazar has set goals for the Department's energy
programs that will ensure that energy development on our public lands
and oceans is done in the right way, in the right places and with the
right protections for the environment and the safety of workers.
Recognizing that America's oil supplies are limited, we must
develop our domestic resources safely, responsibly, and efficiently,
while at the same time taking steps that will ultimately lessen our
reliance on oil. We are making significant progress toward these ends.
Total U.S. crude oil production was higher in 2010 than in any year
since 2003. Oil production from the federal OCS increased by a third
from 2008 to 2011; from onshore public lands increased 5 percent from
2009 to 2010. U.S. natural gas production is up 7 percent from 2008,
and is at its highest level in more than 30 years.
We are working hard to build on this success. In 2010, the Bureau
of Land Management (BLM) held 33 oil and gas lease sales covering 3.2
million acres and in 2011, BLM scheduled an additional 32 lease sales
and has held 28 to date. The BLM has scheduled an additional 33 lease
sales for 2012. In 2010, the Department offered 37 million offshore
acres in the Gulf of Mexico for oil and gas exploration and production.
And the 2012-2017 Outer Continental Shelf (OCS) Oil and Gas Leasing
Proposed Program, discussed in more detail below, makes more than 75
percent of the estimated undiscovered technically recoverable oil and
gas on the OCS available for development.

Alaskan Energy for American Jobs Act
The Alaskan Energy for American Jobs Act, H.R. 3407, is similar to
legislation introduced earlier this year in the House of
Representatives. Among other things, it directs the Secretary of the
Interior to establish an oil and gas leasing program on the coastal
plain; limits environmental review of the program and related
activities; and limits judicial review of the program.
The National Wildlife Refuge System, managed by the U.S. Fish and
Wildlife Service, is the world's premier system of public lands and
waters set aside to conserve America's fish, wildlife, and plants. The
mission of the system is to manage a national network of lands and
waters for the conservation, management, and where appropriate,
restoration of fish, wildlife, and plant resources and their habitat
for the benefit of the public. Nearly 46 million people visit national
wildlife refuges each year, and visitation generates almost $1.7
billion in sales for regional economies and results in the employment
of tens of thousands of people.
Last year's Deepwater Horizon explosion and oil spill in the Gulf
of Mexico has served to highlight the importance of careful scrutiny of
oil and gas development issues and the need to develop these resources
safely and responsibly. We have been clear that there are some places
where oil and gas development is appropriate and some places where it
is not. The Arctic National Wildlife Refuge, because of its unique
conservation values and importance as wildlife habitat, is a place
where development is not appropriate.
The Arctic Refuge itself is America's finest example of an intact,
naturally functioning community of arctic and subarctic ecosystems.
Such a broad spectrum of diverse habitats occurring within a single
protected unit is unparalleled in North America, and perhaps in the
entire circumpolar north. When the Eisenhower Administration
established the original Arctic Range in 1960, then-Secretary of the
Interior Seaton described it as:
[O]ne of the world's great wildlife areas. The great diversity
of vegetation and topography in this compact area, together
with its relatively undisturbed condition, led to its selection
as...one of our remaining wildlife and wilderness frontiers.
The original ``Arctic National Wildlife Range'' was created in 1960
by Public Land Order 2214 ``[f]or the purpose of preserving unique
wildlife, wilderness and recreational values....'' In 1980, the Alaska
National Interest Lands Conservation Act (ANILCA) enlarged the area,
designated much of the original Range as wilderness under the 1964
Wilderness Act, renamed the whole area the Arctic National Wildlife
Refuge and added four additional purposes: to conserve caribou herds,
polar bears, grizzly bears, muskox, dall sheep, wolves, snow geese,
peregrine falcons, other migratory birds, dolly varden, and grayling;
to fulfill international treaty obligations; to provide opportunities
for continued subsistence uses; and to ensure necessary water quality
and quantity.
And just last December, President Obama recognized the 50th
Anniversary of the creation of the Refuge with a Proclamation stating
that:
[i]n the decades since its establishment, the Arctic National
Wildlife Refuge has continued to be one of our Nation's most
pristine and cherished areas. In the decades to come, it should
remain a place where wildlife populations, from roaming herds
of caribou to grizzly bears and wolf packs, continue to thrive.
The Presidential Proclamation also reiterated the Administration's
commitment to making responsible choices and ensuring the continued
conservation of these wild lands.
The Arctic Refuge's coastal plain is critically important to the
ecological integrity of the whole Arctic Refuge, providing essential
habitats for numerous internationally important species such as the
Porcupine Caribou herd and polar bears. The compactness and proximity
of a number of arctic and subarctic ecological zones in the Arctic
Refuge provides for greater plant and animal diversity than in any
other similar sized land area on Alaska's North Slope, and it is an
important part of a larger, international network of protected arctic
and subarctic areas.
In the spring of 2010, the Fish and Wildlife Service initiated
public discussions about the issues surrounding stewardship of the
Arctic Refuge and future goals for that management. These discussions
served as the foundation for development of a draft Comprehensive
Conservation Plan and Environmental Impact Statement that outlines a
15-year management plan for the refuge. These conservation plans are
revised periodically for every refuge around the country, as a matter
of course.
The draft plan contains six alternatives for long-term management,
ranging from the continuation of current practices to the
recommendation of up to three geographic areas (including the Arctic
Refuge coastal plain) for potential inclusion within the National
Wilderness Preservation System, and the recommendation of four
additional Wild and Scenic Rivers in the refuge. The draft plan does
not identify a preferred alternative and, similar to the current
management plan, will not include any decisions regarding oil
development on the Arctic Refuge. The involvement of the public has
been and will continue to be a critical part of the multi-year
development process. The Service anticipates the release of a revised
CCP and final EIS in the summer of 2012 and a final decision by the end
of 2012.
The Administration is working hard to promote the safe and
responsible development of domestic oil and gas, and Alaska is an
important component of these efforts. But the unique conservation
values contained in the Arctic National Wildlife Refuge make it a world
class natural area and the preeminent remaining American wilderness. As
such, the Administration strongly opposes any industrial development
within the Arctic Refuge.

The PIONEERS Act
H.R. 3408, the ``Protecting Investment in Oil Shale the Next
Generation of Environmental, Energy, and Resource Security Act,'' is
similar to legislation introduced earlier this year in the House of
Representatives. It would deem final regulations relating to oil shale
management that were published by the Bureau of Land Management on
November 18, 2008, and the November 17, 2008, BLM Resource Management
Plan amendments and record of decision to satisfy all legal and
procedural requirements under any law and require the Secretary to
implement those actions without any further administrative action. The
bill would also: require the Secretary to hold, within 180 days of
enactment, a lease sale for additional parcels for oil shale research,
development, and demonstration leases and, no later than January 1,
2016, no less than 5 commercial lease sales in areas with the most
potential for oil shale development; and authorize the Secretary to
reduce royalties, fees, and other payments on leases to incentivize the
development and production of oil shale.
The BLM testified before the Committee's Energy and Minerals
Subcommittee several months ago on the current status of the
Department's oil shale program. At that time, the BLM stated that its
goal was to provide an opportunity for companies to develop a new
generation of oil shale technologies by establishing an orderly and
environmentally responsible program that provides a fair return for
taxpayers.
In 2010, it was explained, the BLM advanced three nominations for a
second round of Research, Development, and Demonstration leases.
Analysis under the National Environmental Policy Act is underway to
examine how the proposed technologies will affect the environment, and
issuance of those leases will depend largely on the results of the NEPA
analyses and other factors as the nominees refine their individual
processes for developing oil shale.
BLM also noted that it had begun a new planning process this year
to take a fresh look at what public lands are best suited for oil shale
and tar sands development, and anticipated taking a fresh look at the
regulations governing oil shale development to ensure they reflect a
sound management approach. It was also noted that the planning process
would not disturb RD&D activities already under way, and that
information developed from these activities could help inform this
process.
Also discussed at that hearing were issues that need to be
addressed before a successful commercial oil shale program could be
economically viable, including whether the technologies currently being
developed can become viable on a commercial scale; the need for a
better understanding of the potential impacts of commercial oil shale
development on Western lands, wildlife, and, particularly in the arid
West, watersheds; and the need to understand the energy demands of
viable commercial production.
BLM concluded that, in light of the many fundamental questions
about oil shale that need to be answered, it is vital that the BLM
administer a balanced, carefully planned RD&D program. The review of
the regulations governing oil shale development will ensure that the
regulations reflect the latest information about water and other
potential environmental considerations, and will allow BLM to uphold
its responsibility to deliver taxpayers a fair return on the
development of this resource.
H.R. 3408 disregards the fact that there are currently no known
economically viable and environmentally sound ways in the United States
to extract liquid fuel or suitable refinery feedstock from oil shale at
a commercial level. Moreover, the legislation would pre-empt BLM's
careful review of the regulations and analysis through a programmatic
environmental impact statement, being carried out, in part, because of
additional information that has come to light since the original work
was done. This includes a Government Accountability Office report
published in October 2010 finding that oil shale development could have
significant negative impacts on the quality and quantity of water
resources. Because the legislation disrupts this careful and important
process, the Department opposes H.R. 3408.

Coal Miner Employment and Domestic Energy Infrastructure Protection Act
H.R. 3409, the Coal Miner Employment and Domestic Infrastructure
Protection Act, would prohibit the Secretary from issuing or approving
any proposed or final regulations under the Surface Mining Control and
Reclamation Act of 1977 (SMCRA) that would adversely impact domestic
coal mine employment; would reduce revenue received from coal by
reducing the amount of coal available for mining; reduce the amount of
coal available for domestic consumption or export; designate any area
as unsuitable for surface mining and reclamation operations; or expose
the United States to liability taking the value of privately owned coal
through regulation.
At a recent hearing before the Committee's Energy and Minerals
Subcommittee, Office of Surface Mining Director Joseph Pizarchik
testified about the importance of domestic coal production to the
economy and to our energy supply. Coal mining provides well-paying
jobs, and produces about half of the Nation's electricity and will
remain an important part of our energy mix for decades to come.
Also discussed at that hearing were the statutory purposes that
Congress specified within SMCRA, including to assure that American coal
mines operate in a manner that protects people and the environment and
that the land is restored to beneficial use following mining; to assure
that the coal supply essential to the Nation's energy requirements is
provided; and to strike a balance between protection of the environment
and agricultural productivity and the Nation's need for coal. SMCRA
requires that surface coal mining and reclamation operations be
conducted to minimize disturbances to fish, wildlife, and related
environmental values ``to the extent possible using the best technology
currently available.''
The Department must carry out the mandates in SMCRA and must do so
using the best available science and technology.
It is with this in mind that revision of the 2008 Stream Buffer
Zone Rule is being considered. In his statement, Director Pizarchik
discussed the many benefits to updating the Rule, that the agency would
make informed regulatory decisions supported by the Draft EIS analysis,
and that additional ample opportunity for public input on both the rule
and its Draft EIS would be carried out.
H.R. 3409 interferes with the Department's ability to meet these
important statutory purposes and requirements and preempts the
Department's ongoing regulatory process, thus preventing regulatory
improvements that will more fully carry out the bureau's mission, make
use of the best available science and technology, better protect
streams nationwide, and provide greater clarity and certainty to the
mining industry and the affected communities.

American-Made Energy and Infrastructure Jobs Act
A number of provisions similar to those contained in H.R. 3410, the
American-Made Energy and Infrastructure Jobs Act, have appeared in
other legislation introduced in the House of Representatives and the
Administration has expressed concern about a number of these issues in
past statements. Generally, H.R. 3410 would require the Department to
open new areas on the Outer Continental Shelf (OCS) to leasing and
would require the inclusion in 5-year oil and gas leasing programs of
oil and gas production goals; would mandate that the Secretary conduct
specified offshore oil and gas lease sales; would repeal the moratorium
on development in the Eastern Gulf of Mexico; would authorize leasing
offshore of the territories of the United States; and would put in
place a new disposition program for revenue received from offshore
energy leases.
In mandating the opening of new areas on the OCS, H.R. 3410 would
provide no discretion to the Secretary to determine which areas are
appropriate and safe for such exploration and development. Moreover,
while it calls for making specific percentages of resources within
different regions available, we would note that the Department of the
Interior's recently released 5-Year Program makes 75% undiscovered
technically recoverable oil and gas resources estimated in federal
offshore areas available for exploration and development.
Secretary Salazar discussed the recently released Proposed 5-year
Program for 2012-2017 before the Committee on Wednesday, noting that
the Department has put in place rigorous standards for safety and
responsibility for the development of oil and gas resources on the
Outer Continental Shelf. These reforms to offshore oil and gas
regulation and oversight are the most extensive in U.S. history, and
strengthen requirements for everything from well design and workplace
safety to corporate accountability. They are helping to ensure that the
United States can safely and responsibly expand development of its
energy resources consistent with our stewardship responsibilities.
The Proposed Program will advance safe and responsible domestic
energy exploration and production by making available for development
more than three-quarters of undiscovered oil and gas resources
estimated on the OCS, and includes substantial acreage for lease in
regions with known potential for oil and gas development. This Proposed
Program promotes responsible development and is informed by lessons
learned from the Deepwater Horizon tragedy and the reforms that we have
implemented to make offshore drilling safer and more environmentally
responsible.
A key part of safe and responsible development of our oil and gas
resources is recognizing that different environments and communities
require different approaches and technologies. The Proposed Program
reflects this recognition, and accounts for issues such as current
knowledge of resource potential, adequacy of infrastructure including
oil spill response capabilities, Department of Defense priorities, and
the need for a balanced approach to our use of natural resources. The
majority of lease sales are scheduled for areas in the Gulf of Mexico,
where resource potential and interest is greatest and where
infrastructure is most mature. But it also includes frontier areas,
such as the Arctic, where we must proceed cautiously, safely, and based
on the best science available.
Moreover, the bill would hastily open areas of the Gulf of Mexico
to leasing, including requiring the Department of the Interior (DOI) to
hold two lease sales in the Gulf of Mexico using outdated NEPA analysis
that was conducted before the Deepwater Horizon oil spill. The
Administration has strengthened NEPA analysis in light of lessons
learned from the spill. DOI intends to hold a Central Gulf of Mexico
lease sale in mid-2012 that would include both of the sale areas
referenced in this bill. Notably, DOI is on track to hold that sale
before the deadline that the bill would mandate for Lease Sale 222.
As we have noted in response to similar legislation, the
Administration is committed to promoting safe and responsible domestic
oil and gas production as part of a broad energy strategy that will
protect consumers and reduce our dependence on foreign oil. H.R. 3410
undermines and circumvents the transparent public process for
determining which new areas are appropriate to lease. For this reason,
the Department opposes the legislation.

Conclusion
For the reasons discussed in this statement, the Department opposes
H.R. 3407, H.R. 3408, H.R. 3409, and H.R. 3410.
______

[Whereupon, at 12:34 p.m., the Subcommittee was adjourned.]

[Additional material submitted for the record follows:]

Statement of Rikki Hrenko, CEO, Enefit American Oil Company

Mr. Chairman, Enefit American Oil Company (``Enefit'') appreciates
the Subcommittee's consideration of and supports H.R. 3408, the
Protecting Investment in Oil Shale the Next Generation of
Environmental, Energy, and Resource Security Act or ``PIONEERS Act''.
This legislation is critical to energy investment, job creation, and
energy security for the United States. Enefit supports passage of this
legislation which will promote further investment and development of
the vast oil shale resource this nation possesses. Enefit submits this
statement for inclusion in the official record.
Mr. Chairman, Enefit submitted a statement for the record in
conjunction with the hearing held on August 24, 2011 in Grand Junction,
Colorado and incorporates those comments herein. Enefit continues to
support the Subcommittee's efforts to promote the development of oil
shale in the United States and believes passage of the PIONEERS Act is
a vital step toward regulatory certainty, access to federal oil shale
resources, and attracting large scale investment in development and
production of this nation's greatest energy resource.

ENEFIT, PROVEN PRODUCTION AND WORLD-WIDE DEVELOPMENT
Enefit, known as Eesti Energia in Estonia, was founded in 1939 and
processes more oil shale than any other company worldwide. Our mines
produce approximately 17 million tons of oil shale per year. We operate
the world's largest oil shale fired power plants with a total output of
2,380 MW. Enefit also owns and operates what we believe to be the
world's most advanced shale oil production technology. In total we have
mined 1 billion tons of oil shale, produced 550 TWh of power and
produced 200 million barrels of oil. Enefit has operations in Estonia,
Latvia, Lithuania, Finland, Jordan, and now the United States, in
eastern Utah. We currently employ over 7,500 people worldwide.
In 2012 Enefit is scheduled to place in service a new shale oil
plant in Estonia using second generation technology which is even more
efficient and is based on our current proven technology. The new
Enefit280 plant will double our current shale oil production capacity,
will consume 2.26 million tons of oil shale per year, will produce over
2,000,000 barrels of shale oil per year, and 75 million m\3\ of high
calorific retort gas per year. The plant will also co-produce 35 MWh
(net) of electricity per year, after covering all of its own electrical
needs, selling this electricity back to the grid. Our new technology
will meet all current European Union environmental standards and our
process to extract oil from shale requires no water.
Enefit American Oil will bring the Enefit280 technology to the
United States and is currently in the process of developing our
resources located in eastern Utah on private, state, and federal lands
which are encompassed in our project. These resources total
approximately 2.6 billion barrels of shale oil in place. Decades of
experience in the mining and development of oil shale resources in
Estonia provide us with the knowledge, technology, and expertise to
responsibly develop oil shale resources in the United States and will
meet all current U.S. environmental standards. Our current plan is to
build the project in two phases with the first phase producing 25,000
barrels per day by 2020 and full production of 50,000 barrels per day
by 2024. We anticipate this project will provide approximately 2,000
direct jobs that will be high-paying, stable and long-term.

ACCESS TO FEDERAL RESOURCES AND REGULATORY CERTAINTY
In order to responsibly develop the oil shale resources of the
United States, estimated at 1.5 trillion barrels of oil, the
Administration and Congress must provide a stable set of rules and
regulations that will attract the billions of dollars that are required
to develop these resources. The 2005 Energy Policy Act set the stage
for this process but full implementation has not been allowed. While
many characterize oil shale development as interesting science
projects, the truth is that shale oil has been produced for decades on
a commercial scale in other countries. In the United States, however,
production is not occurring because a stable U.S. regulatory framework
is what is missing, not proven and capable technology.
Enefit will develop a large scale industrial project in Utah which
requires large scale investment. We are comfortable moving forward
because we are able to develop and operate largely on private lands. We
are in a rare position to have better regulatory certainty on our
Federal RD&D lease owing to the rules set in the 2005 Energy Policy
Act, which are an integral part of our lease. Yet the Enefit project
alone is insufficient for the development of a full scale oil shale
industry in the U.S. The Federal Government controls approximately 80%
of the oil shale resources in the western U.S. and there are
insufficient private and state lands to develop these resources on a
scale that will allow the U.S. to achieve true energy independence.
Regional infrastructure needed to support development will only be
built through the development of additional oil shale projects which
will further incentivize investment in the industry. Growth in the oil
shale industry will result in the creation of thousands of high-paying,
long-term, stable jobs that can provide sustained growth in the U.S.
economy. All of this requires responsible, planned development on
federal lands through a competitive commercial leasing program. The
PIONEERS Act will allow for this to occur as previously contemplated in
2005 by Congress and the President.
The PIONEERS Act recognizes the thorough and lengthy public process
that was completed during the initial implementation of the 2005 Energy
Policy Act which resulted in a regulatory framework that began
attracting companies and interest in the development of oil shale
resources on federal lands. However, lawsuits have led to regulatory
uncertainty, resulting in curtailed investment in the industry and
prevention of broad development and investment in oil shale in the U.S.
As a result, companies are investing significant sums in oil shale
development outside of the US.
Upon complete implementation of the 2005 Act, oil shale resources
will be developed pursuant to all U.S. environmental laws and
regulations, will return a fair royalty to the Federal Government, and
will generate thousands of American jobs. The PIONEERS Act would allow
for the full implementation of the 2005 Act provisions which will once
again attract investment in oil shale in America.
Technologies, such as the Enefit technology, are proven and
producing shale oil in commercial quantities today.. Oil shale deposits
in the U.S. can be developed on an industrial level if the Federal
government will simply provide reasonable access to sufficient
resources for industrial size development as the 2005 Energy Policy Act
and the resulting regulations intended to facilitate. The PIONEERS Act
would mandate Federal lands be available for commercial leasing and
allow the responsible development and production of this vital energy
resource to proceed for the benefit of American workers, energy
independence, and revenue for states and the Federal Government.

CONCLUSION
Enefit American Oil is committed to producing high quality liquid
transportation fuels from oil shale in eastern Utah. This commitment
involves billions in capital investment, thousands of high-paying long-
term jobs, tax revenues for federal, state and local governments and
will make the United States a little less dependent on foreign oil
resources. However, one successful project is not enough to establish
an oil shale industry in the United States. The PIONEERS Act will
provide the required access to 80% of America's best oil shale and
allow the U.S. to build a responsible industry. Enefit supports passage
of the PIONEERS Act.