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

THE AMERICAN ENERGY INITIATIVE, PART 27: A FOCUS ON GROWING DIFFERENCES
FOR ENERGY DEVELOPMENT ON FEDERAL VERSUS NON-FEDERAL LANDS

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

HEARING

BEFORE THE

SUBCOMMITTEE ON ENERGY AND POWER

OF THE

COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

SECOND SESSION

__________

AUGUST 2, 2012

__________

Serial No. 112-170

Printed for the use of the Committee on Energy and Commerce

energycommerce.house.gov

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COMMITTEE ON ENERGY AND COMMERCE

FRED UPTON, Michigan
Chairman

JOE BARTON, Texas HENRY A. WAXMAN, California
Chairman Emeritus Ranking Member
CLIFF STEARNS, Florida JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania EDOLPHUS TOWNS, New York
MARY BONO MACK, California FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska ANNA G. ESHOO, California
MIKE ROGERS, Michigan ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina GENE GREEN, Texas
Vice Chairman DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma LOIS CAPPS, California
TIM MURPHY, Pennsylvania MICHAEL F. DOYLE, Pennsylvania
MICHAEL C. BURGESS, Texas JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California TAMMY BALDWIN, Wisconsin
CHARLES F. BASS, New Hampshire MIKE ROSS, Arkansas
PHIL GINGREY, Georgia JIM MATHESON, Utah
STEVE SCALISE, Louisiana G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio JOHN BARROW, Georgia
CATHY McMORRIS RODGERS, Washington DORIS O. MATSUI, California
GREGG HARPER, Mississippi DONNA M. CHRISTENSEN, Virgin
LEONARD LANCE, New Jersey Islands
BILL CASSIDY, Louisiana KATHY CASTOR, Florida
BRETT GUTHRIE, Kentucky JOHN P. SARBANES, Maryland
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia

7_____

Subcommittee on Energy and Power

ED WHITFIELD, Kentucky
Chairman
JOHN SULLIVAN, Oklahoma BOBBY L. RUSH, Illinois
Vice Chairman Ranking Member
JOHN SHIMKUS, Illinois KATHY CASTOR, Florida
GREG WALDEN, Oregon JOHN P. SARBANES, Maryland
LEE TERRY, Nebraska JOHN D. DINGELL, Michigan
MICHAEL C. BURGESS, Texas EDWARD J. MARKEY, Massachusetts
BRIAN P. BILBRAY, California ELIOT L. ENGEL, New York
STEVE SCALISE, Louisiana GENE GREEN, Texas
CATHY McMORRIS RODGERS, Washington LOIS CAPPS, California
PETE OLSON, Texas MICHAEL F. DOYLE, Pennsylvania
DAVID B. McKINLEY, West Virginia CHARLES A. GONZALEZ, Texas
CORY GARDNER, Colorado HENRY A. WAXMAN, California (ex
MIKE POMPEO, Kansas officio)
H. MORGAN GRIFFITH, Virginia
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)

(ii)

C O N T E N T S

----------
Page
Hon. Ed Whitfield, a Representative in Congress from the
Commonwealth of Kentucky, opening statement.................... 1
Prepared statement........................................... 4
Hon. Bobby L. Rush, a Representative in Congress from the State
of Illinois, opening statement................................. 6
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, opening statement.................................... 7
Prepared statement........................................... 9
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 10

Witnesses

Michael D. Nedd, Assistant Director, Minerals and Realty
Management, Bureau of Land Management, Department of the
Interior....................................................... 12
Prepared statement........................................... 14
Answers to submitted questions............................... 161
Mary Wagner, Associate Chief, Forest Service..................... 20
Prepared statement........................................... 22
Adam Sieminski, Administrator, Energy Information Administration. 27
Prepared statement........................................... 29
Lynn D. Helms, Director, North Dakota Industrial Commission,
Department of Mineral Resources................................ 76
Prepared statement........................................... 78
Dan Sullivan, Commissioner, Alaska Department of Natural
Resources...................................................... 86
Prepared statement........................................... 88
Thomas Clements, Owner, Oilfield CNC Machining, LLC.............. 104
Prepared statement........................................... 106
Kathleen Sgamma, Vice President, Government and Public Affairs,
Western Energy Alliance........................................ 111
Prepared statement........................................... 113
Reed Williams, President, WillSource Enterprise, LLC............. 119
Prepared statement........................................... 121
Christy Goldfuss, Director, Public Lands Project, Center for
American Progress Action Fund.................................. 125
Prepared statement........................................... 127
Corey Fisher, Assistant Energy Director, Sportsmen's Conservation
Project, Trout Unlimited....................................... 137
Prepared statement........................................... 139

Submitted Material

Article, dated July 28, 2012, ``The Conversion of a Climate-
Change Skeptic,'' by Richard A. Muller, The New York Times,
submitted by Mr. Rush.......................................... 157

THE AMERICAN ENERGY INITIATIVE, PART 27: A FOCUS ON GROWING DIFFERENCES
FOR ENERGY DEVELOPMENT ON FEDERAL VERSUS NON-FEDERAL LANDS

----------

THURSDAY, AUGUST 2, 2012

House of Representatives,
Subcommittee on Energy and Power,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 9:08 a.m., in
room 2123, Rayburn House Office Building, Hon. Ed Whitfield
(chairman of the subcommittee) presiding.
Members present: Representatives Whitfield, Shimkus,
Walden, Terry, Burgess, Bilbray, Scalise, Olson, Gardner,
Griffith, Upton (ex officio), Rush, Markey, and Waxman (ex
officio).
Staff present: Maryam Brown, Chief Counsel, Energy and
Power; Allison Busbee, Legislative Clerk; Cory Hicks, Policy
Coordinator, Energy and Power; Heidi King, Chief Economist;
Jason Knox, Counsel, Energy and Power; Ben Lieberman, Counsel,
Energy and Power; Michelle Ash, Democratic Chief Counsel,
Commerce, Manufacturing, and Trade; Greg Dotson, Democratic
Energy and Environment Staff Director; Kristina Friedman,
Democratic EPA Detailee; Caitlin Haberman, Democratic Policy
Analyst; Angela Kordyak, Democratic DOE Detailee; and Elizabeth
Letter, Democratic Assistant Press Secretary.

OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

Mr. Whitfield. We will call today's hearing to order and
certainly want to welcome our witnesses today. We will have two
panels of witnesses. At this time, I would recognize myself for
a 5-minute opening statement.
Today is the 27th day of hearings on what we refer to as
the American Energy Initiative, and in this series of hearings,
we have examined various aspects of the energy needs of our
country, the policies and ways to be more productive, and
today, I think most Americans would agree that we do face two
primary problems. We have many others, but one, of course,
relates to energy production and becoming more energy
independent, and the other relates to our struggling economy
and still relatively high unemployment rate, and today we are
going to be focusing on two States that have different stories
to tell about energy production and lowering unemployment
rates.
First of all, I would like to just talk briefly about North
Dakota. North Dakota has an unemployment rate today of around 3
percent, and so it raises the question on the energy policy and
economic policy, what is North Dakota doing that is different
than other States? And what can we in Washington learn from
that? And while we try to learn what North Dakota is doing
right, we also need to contrast it with another State that has
a lot of energy as well, and I might say that the picture is
not nearly as bright in another oil producing State, Alaska,
where output has been declining over the same span that North
Dakota's output has been increasing.
Now, the main difference between Alaska and North Dakota is
that Alaska has far more areas of federally owned and
controlled lands, and this administration has substantially cut
back on new energy leasing in these Federal lands and offshore
areas, and while that may not be the only factor that has led
to this difference of unemployment and economic growth, we hope
this morning to find out how substantial a factor is it.
Now, Alaska has been a great source of American oil. Since
1970 16 billion barrels have made their way south on the Trans-
Alaska Pipeline. That is a lot of domestic oil and a lot of
jobs associated with it, but Alaska's largest field in Prudhoe
Bay is now declining, and despite vast untapped resources
elsewhere in the State as well as offshore, new exploration and
drilling have been greatly curtailed by policy decisions in
Washington, DC, and it isn't just Alaska. For example, this
administration has cut back on new leasing in the federally
controlled Gulf of Mexico and has also been slow to issue the
necessary permits for previously leased areas, and the red tape
facing energy companies operating on Federal lands throughout
the intermountain west has kept the region below its potential
for energy production and jobs.
In contrast, relatively little land in the energy-rich
Bakken formation in North Dakota is federally owned. There the
oil industry has been allowed to partner with private
landowners to expand production. In the last decade alone,
North Dakota has risen from the eighth largest producing State
to the second largest. An estimated 35,000 new direct jobs and
many more indirect ones are a big part of the reason why the
State's unemployment rate is around 3 percent. In effect, North
Dakota gives us a glimpse of what would be possible in many
other parts of the country if only we could change some policy
in Washington, DC. And I might add that gasoline prices
unfortunately seem to be creeping up again. This should
certainly serve as a reminder that increased production of
domestic oil supply and demand still is an important factor. It
is also worth noting that the oil industry in North Dakota is
regulated by the State government, and the track record for
safety and environmental protection is quite good. It is a
model for reaping the many benefits from domestic oil
production while keeping the risks at a minimum.
We all know that oil production is up in the United States,
and that is a good thing, but we also know that that
production, the reason it is up is because of the increased
production on private lands, and so as I said, we have two
panels of witnesses this morning, all of whom are quite
familiar with the policies and the ins and outs of the oil
production industry, and so we look forward to their testimony.
[The prepared statement of Mr. Whitfield follows:]

[GRAPHIC] [TIFF OMITTED] T2689.001

[GRAPHIC] [TIFF OMITTED] T2689.002

Mr. Whitfield. At this time, I would like to recognize the
ranking member from the great State of Illinois, Mr. Rush, for
5 minutes.

OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS

Mr. Rush. I want to thank you, Mr. Chairman. Mr. Chairman,
while Democrats under President Obama's leadership have put
forth a truly all-of-the-above energy agenda, it appears that
my Republican colleagues are once again taking their cue from
one of their most influential leaders, Sarah Palin, and
reviving their simplistic ``drill, baby, drill'' energy agenda.
Merely a few hours ago, after holding a partisan vote to do
away with new projects under the DOE's loan guarantee program
in the full committee yesterday, which would have invested
Federal dollars into different types of renewable and clean
energy projects to compete with the Republican Party favorite
fossil fuel industry, the majority is here today holding a
hearing on drilling on Federal versus private lands.
Never mind the fact that the Energy Information
Administration has confirmed that domestic oil production in
the U.S. has increased every year since 2008, that we are
importing less oil than anytime in the past 13 years, and that
American demand is actually lower now than it was a year ago.
And, Mr. Chairman, it appears that my Republican colleagues
will continue to ignore the fact that the U.S. has set more
than 40,000 hot temperature records this year alone, and that
the last 12 months have been the hottest ever recorded in our
Nation's history.
Today, fully two-thirds of the country is experiencing
drought, and 30 percent of the Nation's corn crop is in poor or
very poor condition, while at the same time, water levels in
four of the five Great Lakes have actually plummeted down to
unprecedented levels due to high evaporation rates and
insufficient rainfall. In fact, Mr. Chairman, just yesterday
the Agriculture Department designated more than half of all
U.S. counties as disaster areas in 2012. The main reason?
Drought. And the Agriculture Secretary Vilsack signed a
disaster designation for 218 counties in 12 States just
yesterday morning, bringing the national percentages to 50.3
percent.
Mr. Chairman, might I remind you that today, more than 113
million Americans are living under extreme heat advisories, and
yet, despite repeated requests from myself and Ranking Member
Waxman to hold hearings on the science behind all of the
extreme weather events associated with climate change that the
Nation has been experiencing, we have yet to examine this
vitally important issue just one time, just once this year, one
time before this subcommittee.
Mr. Chairman, even former climate change skeptics such as
Richard Muller, who penned in a July 28 New York Times
editorial entitled ``The Conversion of a Climate Change
Skeptic,'' even Mr. Muller has now come out on the record and
joined the overwhelming consensus of scientists and researchers
who have stated that global warming is indeed occurring, and
that human causes are indeed behind it. Yet as America burns,
this committee fiddles.
Even as Congress prepares to vote on a bill, drought relief
bill for farmers this morning, farmers who are suffering from
record drought in the Midwest and beyond, even when you and I
and the other members of this subcommittee, we will be casting
votes sometime this morning, this very subcommittee refuses to
hold one hearing, just one hearing on the causes behind these
droughts, or what can be done for our Nation, for this Federal
Government, for this Congress to lessen the impact of the heat
on the American people.
Mr. Chairman, I support President Obama's all-of-the-above
energy approach, which encompasses increased oil and gas
production here in the U.S., additional conservation and energy
efficiency measures, and a move towards cleaner air, renewable
energy sources for the future, and I urge you once again, Mr.
Chairman, I plead with you, let us hold a hearing on the
science behind climate change. This is a matter of critical
importance to the American people and to the future of farmers
in our Nation, American consumers. This is an important matter.
It is so important, Mr. Chairman, we can no longer afford to
ignore it. I yield back.
Mr. Whitfield. Thank you very much, Mr. Rush.
At this time we will recognize the chairman of the full
committee, Mr. Upton of Michigan, for 5 minutes.

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN

Mr. Upton. Well, thank you, Mr. Chairman. There is a tale
of two energy policies to be told in this country. There are
the States where domestic oil and natural gas production is
growing, and there are the States where it is stagnating. In
some States, oil and natural gas output is sharply increasing
on private and State-owned lands, but in others where this
administration calls the shots on federally controlled lands
and offshore areas, the news is not nearly as good. In fact, a
recent CRS study finds that 96 percent of the increase in
domestic oil supply since 2007 has come from non-Federal lands.
Where production on State and private lands is up, we see the
energy industry creating thousands of high paying jobs,
revitalizing local economies, but where most of the oil and gas
remains untouched beneath the ground or under the sea floor due
to Federal access restrictions, the job potential remains
largely unrealized.
Under one energy policy vision, we see State and local regs
ensuring that energy production is done safely and that public
health is protected. In the other, we see one excuse after
another for preventing energy production entirely or subjecting
it to years of unnecessary delays.
Today we are going to view these two energy policies
through the prism of two States. We can look at the success
story of North Dakota, where growing oil production on private,
State, and tribal lands should serve as a model for the Nation,
and we will compare it to States like Alaska where Federal
control of energy-rich onshore and offshore areas means that
drilling often gets blocked by bureaucrats in DC.
Alaska and other States are blessed with energy but cursed
with Federal red tape, and that is why our committee has been a
leader on measures like the Domestic Energy and Jobs Act that
will reduce the red tape and allow these States to replicate
North Dakota's success. If we take the lessons from this tale
of two energy policies and allow States like Alaska to harness
their resources as they do in States like North Dakota, it
would benefit the national economy, jobs, gas prices, energy
security. It is a powerful story, and I thank the witnesses for
coming to share it with us. Yield back.
[The prepared statement of Mr. Upton follows:]
[GRAPHIC] [TIFF OMITTED] T2689.003

Mr. Whitfield. Thank you very much. At this time, I
recognize the gentleman from California, Mr. Waxman, for a 5-
minute opening statement.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA

Mr. Waxman. Thank you, Mr. Chairman. Today the subcommittee
holds a hearing to compare oil and gas production on Federal
lands to production on private lands. We will hear once again,
as we just heard, that the Obama administration is hostile to
oil and gas production, and we will hear once again that oil
and gas production should be pursued at the expense of
renewable energy and other goals.
Well, that is the rhetoric. Now here are the facts.
Domestic oil and gas production has increased each year of the
Obama administration, and it is the highest it has ever been in
8 years. America's dependence on foreign oil has gone down
every single year for the last 3 years, and oil production from
Federal lands is higher today than it was under the last 3
years of the Bush administration. It is true that oil
production on private lands has increased more than it has on
Federal lands.
Some Republicans have used this as evidence that the
President must be disfavoring the oil industry, but the fact is
that most of the increase in domestic oil production has
occurred from developing shale formations. These formations
happen to be on private lands. The Federal Government manages
only a small portion of these areas.
For instance, the Bakken shale has made North Dakota one of
the country's top States in oil production, but Federal lands
make up a small percentage of it. Even offshore oil production
remains strong. In spite of one of the world's worst
environmental disasters, oil production from the Outer
Continental Shelf in 2011 was equal to or higher than any of
the last 3 years of the Bush administration. The Obama
administration has taken many steps to facilitate oil and gas
production. The Bureau of Land Management has reformed its
leasing process with a tracking system for applications that
shortens wait times. It has implemented a more inclusive
stakeholder engagement that has lowered lease protests and
appeals. The Forest Service has sent officials to drill-
intensive areas to expedite the permitting process. Those are
the facts, and they are completely contrary to the narrative
that the Republican majority is trying to promote today.
But we shouldn't lose sight of the fact that public lands
are not solely for oil and gas production. Our public lands are
held in trust for the American people, not the oil companies.
Public lands are used for conservation, outdoor recreation,
watershed protection, timber, and grazing. They can also be
used for renewable forms of energy. In fact, the Obama
administration recently completed an assessment that will
expedite permitting for solar installations on public lands in
the Southwest. This has the potential to produce enough
electricity to power 7 million homes. The administration's job
is to balance these competing demands and, notwithstanding all
the rhetoric we will hear today, I believe it is doing a good
job.
But I want to refer my colleagues to a blog by Paul Krugman
in The New York Times, a Nobel Prize winner, and he says in
``When Scale Matters.'' ``Judging from comments on my North
Dakota post, there is a lot of confusion about when and why
differences in scale make comparisons between economies
invalid.
``The crucial thing to get is that size, per se, isn't the
issue. It is whether what is going on in the small economy
could be replicated in the large economy.
``I mean, we all know that airplane designs can be tested
with miniature models in wind tunnels, that tsunamis can be
modeled in tanks that fit in a large room and so on. Small-
scale versions of big phenomena are perfectly OK. The baby-
sitting co-op teaches us a lot about the global economic slump.
``But when you are looking at, say, a resource boom--which
is what North Dakota is all about--you have to ask whether a
comparable resource boom is possible in a much more populous
state, or the United States as a whole. One commentator
declared that there is as much oil under California as there is
under North Dakota; quite possibly. The question is, how big a
deal would extracting that oil be in a state with 50 times
North Dakota's population; how much difference would it make
to, say, the state unemployment rate? And the answer, of
course, is virtually none. To have a North Dakota-type boom in
California, you would have to find 50 times as much oil; to
have it nationally, you'd have to find 500 times as much. Not
likely.
``And this is how you want to think about other examples.
Is Iceland too small to be a useful model for other crisis
countries? Well, it could be; Iceland's export sector is,
thanks to its small size, not very diverse, and if the recovery
had been all about fish, or aluminum, it wouldn't be much of a
lesson to anyone else. As it happens, however, that is not what
it is about.
``I guess the general point is that when trying to learn
from some country or region's experience, you should always
ask, `Is this place a reasonably good model for other places?'
It's not a matter of head counts or acreage, it's about the
story.''
Mr. Chairman, this is our 27th hearing. You pointed out we
are interested in energy production and the question of a
struggling economy. Where are the hearings on global warming
and climate change? They affect those two other issues as well,
as many other matters that are affecting the American people. I
yield back my time.
Mr. Whitfield. Thank you very much. And that concludes
today's opening statements, and so at this time, I would like
to introduce the members of the first panel, and first of all,
we have with us this morning Mr. Michael Nedd, who is the
Assistant Director of Minerals and Realty Management at the
Bureau of Land Management; we have Ms. Mary Wagner, who is the
Associate Chief of the U.S. Forest Service; and we have Mr.
Adam Sieminski, who is the administrator of the U.S. Energy
Information Agency.
I want to thank all of you for coming. We appreciate your
being here very much, and we look forward to your testimony,
and each one of you will be recognized for 5 minutes, and I
know you have done this before, but there is a couple little
boxes on the table, and when the time is up, the light will
turn red, and while I won't cut you off immediately, at least
when you see red, you will recognize that, hey, I think my time
is getting close to being up.
So, Mr. Nedd, we will recognize you first for a 5-minute
opening statement.

STATEMENTS OF MICHAEL D. NEDD, ASSISTANT DIRECTOR, MINERALS AND
REALTY MANAGEMENT, BUREAU OF LAND MANAGEMENT, DEPARTMENT OF THE
INTERIOR; MARY WAGNER, ASSOCIATE CHIEF, FOREST SERVICE; AND
ADAM SIEMINSKI, ADMINISTRATOR, ENERGY INFORMATION
ADMINISTRATION

STATEMENT OF MICHAEL D. NEDD

Mr. Nedd. Good morning, Mr. Chairman and ranking members
and members of the subcommittee. Thank you for the opportunity
to discuss the role of the Bureau of Land Management in
facilitating responsible development of oil and gas resources
from our Nation's public land. The BLM is responsible for
protecting the resources and managing the use of our Nation's
public land on over 245 million surface acres, approximately
700 million acres of onshore subsurface mineral estate, and 56
million acres of Indian trust land. We work closely with State
governments and other Federal agencies in the management of
this subsurface mineral estate.
The BLM manages public lands on very complex, multiple use
mandate from Congress, and consider a wide variety of factors
in land management decisions, including industry interests,
conservation value, as well as other potential use of the
public lands.
In addition to oil and gas production, the BLM's unique
multiple use management of public lands also includes
activities such as livestock grazing, outdoor recreation, solid
minerals development, and the conservation of natural,
historical, cultural, and other important resources.
Secretary Salazar has emphasized that the development and
production of conventional energy resources from BLM-managed
public and Indian lands, are an important component of the new
energy frontier and play a critical role in meeting the
Nation's energy needs. In 2011, conventional energy development
from public and Indian trust land produced 14 percent of the
Nation's natural gas, 6 percent of its domestically-produced
oil. In fiscal year 2011, onshore Federal oil and gas
production resulted in nearly $2.9 billion in royalties,
approximately half of which was paid directly to the States in
which the development occurred.
The geography of resource occurrence and the relative
economic attractiveness of development are key factors
impacting discoveries and production level on both Federal and
non-Federal lands. Currently, there are more than 37 million
acres of public lands that are leased for oil and gas
development. Only about 12 million acres are under production.
There are huge potential oil and natural gas plays in the
Marcellus, Fayetteville, Barnett, Niobrara, and Bakken shale
formation where there is an abundance of oil and gas. These
geological formations exist largely on State and private
minerals estate. The fact that only one-third of Federal leases
are in production may be partly attributable to the abundance
of oil and gas in these shale formations on the State and
private land and to low natural gas prices relative to the
price of oil.
The BLM is working on a variety of fronts to ensure that
development occurs efficiently and responsibly, including
implementing leasing reform, implementing a new automated
tracking system designed to expedite the review for a drilling
permit, improving inspection, enforcement, and production,
accountability, reviewing hydraulic fracturing policies and
practices, and carefully planning for development in the
National Petroleum Reserve in Alaska.
Leasing reform is designed to provide greater
predictability and certainty that those leases will ultimately
be developed and produced. The leasing reform also provides
more certainty to industry by enhancing the BLM's ability to
resolve protests prior to lease sales. BLM's ongoing effort to
ensure efficient processing of oil and gas permit applications
on both Indian trusts and Federal lands, the BLM will implement
a new automated tracking system that is expected to reduce the
review period for drilling permits.
The BLM continues to work to strengthen its oil and gas
inspection, enforcement, and production accountability program.
These inspections ensure that leases meet important
environmental and safety requirements, and that the reported
oil and gas volumes matches actual production. Increases in oil
and gas production nationwide are the result of improved
drilling and hydraulic fracturing technique. As part of the
Department's effort to ensure that oil and gas development is
taking place on public land in a responsible and
environmentally sustainable manner, the BLM proposed measures
to create a consistent framework to strengthen the requirements
for hydraulic fracturing performed on Federal and Indian trust
land and protect the health of communities.
Mr. Chairman, thank you for the opportunity to testify. I
will be happy to answer any questions you may have.
Mr. Whitfield. Thank you, Mr. Nedd.
[The prepared statement of Mr. Nedd follows:]

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Mr. Whitfield. And Ms. Wagner, you are recognized for a 5-
minute opening statement. I also want to just make a comment
that I really appreciate the great job you all do managing the
Land Between the Lakes and national forests, 170,000 acres. We
appreciate the good job you do there.

STATEMENT OF MARY WAGNER

Ms. Wagner. Thank you, Mr. Chairman. Good morning, and
members of the committee as well. I appreciate the opportunity
to offer just a few brief points this morning on oil and gas
development on national forests.
Congress entrusted the Secretary of Agriculture with broad
powers to protect and administer the national forest system by
passing laws such as the Organic Act, the Multiple Use
Sustained Yield Act, and the National Forest Management Act.
The Multiple Use Sustained Yield Management Act established
multiple use as the foundation for management of national
forest and grasslands, calling for management of various uses
in a combination that best meets the needs of the American
people.
The people that we serve want many things from our forests:
Clean air, clean water, timber, forage, fish and wildlife
habitat, opportunities for outdoor recreation, and the topic of
this hearing today, oil and gas resources. Congress also
enacted laws giving us the basic framework for making
decisions. The National Environmental Policy Act instructs
agencies to assess environmental effects of proposed actions
before we make decisions. NEPA's major purposes include
disclosure of environmental effects, involvement of the public,
and making informed decisions based on environmental analysis,
which often includes mitigation for the proposed action of the
project implementation.
The Forest Service is committed to effectively managing
mineral resources to facilitate energy transmission in a
responsible manner and to sound development of renewable and
nonrenewable energy. Currently, we have authorized almost
20,000 active wells on national forest system lands in 19
States, and there are over 7,000 oil and gas leases covering
5.5 million acres on national forests and grasslands. While
overall production of oil and gas from national forests is
relatively small, it is an important economic and job-producing
driver. The value of all energy and mineral production from
national forests exceeds $6.5 billion per year, and mineral and
energy development on national forests support an average of
110,000 jobs. This employment is keenly important to local
communities and the Nation.
Oil and gas development is an important component of the
Nation's energy portfolio, with potential to advance our
Nation's energy security, improve air quality, and create jobs.
The responsibility of the Forest Service is to safely and
responsibly develop these resources in a way that ensures the
well-being of surrounding communities and protects our
landscapes and watersheds.
I look forward to working together to ensure the
stewardship of our Nation's forests and grasslands continues to
meet the desires and expectations of the American people. I
look forward to answering your questions.
Mr. Whitfield. Thank you very much, Ms. Wagner.
[The prepared statement of Ms. Wagner follows:]

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Mr. Whitfield. And Mr. Sieminski, you are recognized for 5
minutes.

STATEMENT OF ADAM SIEMINSKI

Mr. Sieminski. Mr. Chairman, members of the subcommittee, I
am really pleased to have the opportunity to appear before you
today. Although I have testified here in the past, this is my
first congressional hearing as EIA administrator. The Energy
Information Administration is a statistical and analytical
agency within the Department of Energy. By law, its data,
analyses, and forecasts are independent of approval by any
other officer or employee of the U.S. Government. Yesterday,
EIA released its 2010 report on U.S. crude oil and natural gas
reserves. The numbers are big.
Net additions to oil and gas proved reserves were, by a
large margin, the highest ever recorded since EIA began
publishing proved reserve estimates in 1977. Oil proved
reserves increased by 12.8 percent during 2010 to 25.2 billion
barrels, led by Texas, North Dakota, and the Federal Gulf of
Mexico. U.S. proved reserves of wet natural gas increased by 12
percent, ending the year above 300 trillion cubic feet for the
first time ever. Texas, Louisiana, and Pennsylvania had the
largest increases. One observation worth noting in figure 5 of
my testimony is that the Nation's shale resource basins, which
have been mainly responsible for the increases, are largely
located outside of Federal lands.
Moving to current production, EIA estimates that oil
production in the U.S. averaged 6.2 million barrels per day
during the first 5 months of this year, the highest level since
1998. The tight oil plays in North Dakota and Texas are leading
the charge in this gain. EIA forecasts that 6.7 million barrels
per day of oil output will be seen in 2013. Oil production on
non-Federal lands increased by 385,000 barrels a day last year,
again, largely because of the tight oil plays in North Dakota
and Texas. This level of output currently stands at about 4
million barrels a day. Oil production from Federal lands is
dominated by the Outer Continental Shelf, which is driven by
the timing of major deepwater development projects. After
increasing for several years to reach 2 million barrels a day,
production decreased in the aftermath of the 2010 Macondo
blowout in the Gulf of Mexico, currently stands a bit under 2
million barrels a day.
U.S. natural gas production has been driven upward recently
by shale gas, especially the liquids-rich production areas such
as the Eagle Ford in Texas and the wet areas of the Marcellus
shale formation in Pennsylvania. EIA expects continued growth
in gas production in 2012 and 2013, though not as strong as the
2010 to 2011 period because of lower natural gas prices.
Current total U.S. gas production is over 68 billion cubic feet
per day. Production of natural gas on non-Federal lands has
increased steadily by over 16 billion cubic feet a day across
the last 6 years, led by shale resources to surpass 50 bcf a
day.
Meanwhile, Federal offshore natural gas production has been
on a downward trend for the last 9 years, falling by more than
50 percent, as commercial development moved from the gas-prone
shallow shelf areas in the Gulf of Mexico to the richer oil-
prone deep waters further out in the Gulf. Production from
onshore Federal lands was generally growing over this period
and actually exceeded the offshore production by 2008.
EIA estimates for the non-Federal oil production are based
on monthly data from State agencies and purchased third-party
data. The lag from when the data are first reported to the time
that they stop changing significantly varies from State to
State. A few States, like North Dakota and Alaska, report
relatively complete data within 2 months of the close of the
production month. Other States with large numbers of producers,
like Texas and Oklahoma, can take a year or two to report
complete data. For the Federal offshore area, EIA relies on the
metered data from the Department of the Interior.
Unlike oil production, EIA collects data on natural gas
production from about 240 operators each month. This EIA survey
primarily covers five States and the Federal offshore Gulf of
Mexico. Though more accurate than the oil production estimates,
the current natural gas monthly production survey does not
collect data on Federal lands or from some of the emerging
shale States like Arkansas and Pennsylvania. In its Federal
year, fiscal year 2013 budget, EIA has proposed a small
increase in funding to improve the timeliness and accuracy of
all of the oil and natural gas production data. This proposal
would increase data quality as well as enable EIA to identify
and report these trends affecting the Nation much sooner.
Finally, Mr. Chairman, I want to highlight for the
committee members the importance of technically recoverable
resources, also known as TRR. This is a common measure of the
long-term viability of U.S. domestic oil and natural gas as an
energy source. These important estimates are a work in
progress. They change with production experience as new
production technologies are applied to these resources. The
uncertainties and complications associated with these estimates
are discussed in my written testimony. Thank you very much for
the opportunity to testify before you today, and I look forward
to your questions.
Mr. Whitfield. Thank you, Mr. Sieminski.
[The prepared statement of Mr. Sieminski follows:]

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Mr. Whitfield. And now we will recognize ourselves for 5
minutes of questions, and I will begin with myself.
So, Mr. Nedd, back in March, former BLM director Bob Abbey
was testifying in a Senate Appropriations Committee, and he
said that since energy companies face fewer costs and
regulations when they operate on non-Federal lands, that many
drilling rigs are moving away from Federal lands to non-Federal
lands, and on the Outer Continental Shelf, many rigs are just
leaving U.S. territorial waters and going elsewhere. Do you
agree with that statement or not? With his statement?
Mr. Nedd. Mr. Chairman, I can say that companies, where
they develop, where they decide to seek development is
economics and is based on their interests.
Mr. Whitfield. Would you mind moving your microphone
closer.
Mr. Nedd. I am sorry, Mr. Chairman, the mic wasn't on. I
would say that companies certainly make decisions based on
economics and other type of factors as to where they will
develop, and so whether companies are developing on Federal
land or State land depends on their economic factors, on what
they are trying to achieve, and the Bureau of Land Management
tries to support based on the interest they express in our
lands.
Mr. Whitfield. I agree with you that they look at economic
circumstances, a lot of different factors, but are you aware
that there is a trend moving away from Federal lands to non-
Federal lands or not?
Mr. Nedd. Well, Mr. Chairman, as we have heard here this
morning, certainly industries are looking to see, they are
moving to where development of oil or where gas, and most of
the large plays are on private and State lands, and so
therefore, industry are going where it is best for them to
develop that energy.
Mr. Whitfield. Secretary Salazar recently made the comment
that he believed that hydraulic fracturing really needed to be
regulated by the Federal Government because a lot of States do
not regulate hydraulic fracturing. Could you tell us what
States do not regulate hydraulic fracturing that you are aware
of?
Mr. Nedd. Mr. Chairman, I don't have that information
directly at hand, and we will be glad to provide it.
Mr. Whitfield. OK. So you are not aware of which States do
not regulate?
OK. Between 2008 and 2011, the number of drilling permits
approved by Interior for drilling on Federal lands decreased
significantly, about 37 percent decrease. Do you have any idea
why it decreased by that amount? To be specific, in 2008, they
approved over 6,000 drilling permits, and in 2011, approved a
little over 4,000, and I was just curious, to what do you
attribute that, the reason for that?
Mr. Nedd. Yes, Mr. Chairman, certainly in 2008 industries,
again, submit applications for drilling permits as they see
fit, and what industries submit we will process, and so, again,
there are many factors that go into why industries may or may
not submit application permit to drill.
Mr. Whitfield. Do you know how many applications were
submitted in 2011?
Mr. Nedd. Mr. Chairman, we indicate somewhere. I don't have
that number right here. I will get it for you. I had it in the
back of my mind.
Mr. Whitfield. Do you know how many were submitted in 2010?
Mr. Nedd. Yes. Applications received or that was submitted
by industry was in 2011 was over 4700 and in 2010 was over
4200.
Mr. Whitfield. In 2010, of that 4200, how many did you all
approve?
Mr. Nedd. Mr. Chairman, we processed 5200 applications in
2010.
Mr. Whitfield. And how many were approved?
Mr. Nedd. Over 4500 was approved.
Mr. Whitfield. And from the time that an application is
submitted to approval, normally how much time would that take?
Mr. Nedd. Mr. Chairman, that depends on a variety of
factors. Certainly from the time an application is submitted,
our records show it takes an average of about 300 days, but
some 200-plus days are spent waiting on industry to submit
information. Once the BLM has a completed application, we
estimate it takes--it varies, but it takes sometime up to about
70 days to process, to approve an application.
Mr. Whitfield. So from the time you get the data you need
from the company, it takes 70 days on the average to approve a
permit?
Mr. Nedd. On an average.
Mr. Whitfield. I see my time has expired, Mr. Rush, so I
will recognize Mr. Rush for 5 minutes.
Mr. Rush. I want to thank you, Mr. Chairman. Mr. Sieminski,
my friends on the other side of the aisle continue to claim
that the oil industry is a victim of the administration's
policies on oil and gas development on public lands. However,
you testified that domestic oil production is actually the
highest it has been since 1998, and that the annual production
of natural gas will continue to rise.
Do you expect this trend to continue? And do you have
anything to say about your forecast for energy, future energy
production in the U.S.?
Mr. Sieminski. Thank you, Mr. Rush. The EIA projects that
U.S. oil production will continue to increase all the way out
to the year 2035. The situation for natural gas is complicated
by the fact that prices have fallen because of the tremendous
productivity of the gas wells that have been drilled recently.
That has caused a rig count, the number of drilling rigs for
natural gas to fall to a very low level. That could begin to
impact production several years out if we don't begin to see
natural gas prices climb back up to levels that support
continued development activity.
I think it is fair to say that there are opportunities for
further production of both oil and natural gas on Federal,
State, and private lands and that some of the policy issues
associated with how quickly those resources are developed drive
the discussion of how high oil and gas production could go and
over what time period. As you know, EIA is not a policy
organization, and our forecasts are based on existing laws and
technology and economics.
Mr. Rush. Right. Well, am I right, or would you agree that
there is a boom in the oil industry right now, that we are in
boom times?
Mr. Sieminski. There certainly is a tremendous rate of
activity taking place, particularly in the shale resource-prone
areas in the United States. Growth in those areas is being
driven by the application of technology, 3D seismic activity,
horizontal drilling, fracturing, hydraulic fracturing, multi-
stage fracturing, completions, multiple completions being done
off of single drilling pad locations. In the offshore area,
subsea completions have enabled development in deeper and
deeper waters. So, yes, Mr. Rush, I agree with you that there
is a boom going on in U.S. oil production.
Mr. Rush. Well, thank you. It seems to me that especially
as it relates to energy, good times are here again.
I want to ask the other witnesses about the role of
industry in oil and gas production. Of course, the government
doesn't drill for oil or gas, the government just makes the
land available to industry so that they can drill for oil and
gas. We might benefit from a better understanding of how they
decide where they would like to operate. Mr. Nedd, can you
discuss the role industry plays, the factors that they consider
when deciding whether to produce oil and gas on land managed by
the BLM?
Mr. Nedd. Yes, Mr. Ranking Member. Certainly industry began
with expressing an interest, and from that expression of
interest, the BLM will complete the required environmental
order type of analysis. Once industry is given a lease,
industry, it is then up to industry to submit an application
for a permit to drill, and then looking at those actions, the
BLM considers, again being a multiple use agency, what are the
other values that may be impacted from that development and how
best to mitigate it. The BLM looks at things such as
conservation, recreation, all that type of factors, and in
trying to strike an environmentally balanced approach to that
development.
Mr. Rush. Can the Federal Government order, force someone
to drill or produce oil and gas to meet the requirements of the
lease?
Mr. Nedd. Absolutely not.
Mr. Rush. So if no drilling occurs on leased lands and the
lease expires, do we have any responsibility to the
leaseholder?
Mr. Nedd. Not if they expire, Mr. Ranking Member.
Mr. Rush. Thank you, Mr. Chairman.
Mr. Whitfield. The gentleman's time has expired. At this
time, I recognize the gentleman from Michigan, Mr. Upton, for 5
minutes.
Mr. Upton. Well, thank you. Thank you, Mr. Chairman, and
Mr. Sieminski, welcome in your new position as--I know you have
been here before, and we are delighted that you are here, and
we look forward to a very good relationship.
Mr. Sieminski. Thank you, Mr. Upton.
Mr. Upton. I have to say, for a long time, I have been an
advocate for a North American energy independent plan. I think
we can actually do it if you put all the pieces together, and I
would like to get your comments on that, and I want to--before
I do, I want to just roll through some numbers and see if you
think that we are right on this.
According to your estimates, we use about and have been
using about 18 million barrels a day of liquid fuels for
transportation, which is about the same volume in the future
because of our auto efficiency standards, we have made great
strides there. On the supply side our, my numbers show that we
produce about half of that now. Oil production, as you said, is
about 6.2 million barrels a day, natural gas liquids nearly 2
\1/2\ million, biofuels account for about a million, so that is
about 9 \1/2\ million. Our imports from Canada and Mexico,
about 3 million barrels a day, I think. I know from Canada oil
sands we get about a million barrels a day, so that leaves us
about 6 million barrels a day that we have to get from
someplace else, mostly overseas.
So some of the outside estimates show that we could bring
in from oil sands like Keystone--Keystone, I think, was about,
what, 700,000 barrels a day in terms of that line? And I know
as I have visited some refineries in the Midwest, the BP--or,
excuse me, the Marathon refinery outside of Detroit just
expanded by $2.2 billion to account for oil sands. I know the
BP refinery over in Whiting, Indiana, they have spent more than
$3 billion expanding their capacity trying to get ready for oil
sands, not necessarily from Keystone. But the Canadian folks
tell us that they are likely to get up to as much as 4 million
barrels a day from Canada before the end of the decade if
things proceed well.
Your testimony cites the tremendous reserve increases with
State and private land shale production, and I think there are
some outside estimates that show that we could see an increase
in production of about 4 million barrels per day before the end
of the decade. I don't know that that is quite your estimates,
but some outside interests show that. Alaska, I don't know that
it is in their testimony today, but the TAPS pipeline capacity
we know has declined, this was a pipeline that was built for as
much as 2 million barrels per day.
Today they are quite a bit less than that. I want to say
600,000 barrels per day, and it has been declining by about 8
percent a year, but if, in fact, we were able to increase
production in Alaska, perhaps we could get back up to where we
thought, and then, of course, as you indicated in your
testimony, production in the Gulf has declined, I want to say
by about 100 million barrels last year. But if, in fact, we
could increase production, some outside estimates again 2 \1/2\
million barrels per day before the end of the decade, we are
there, right? I mean, we are there in terms of what our needs
are and what we can get from Canada, Mexico. Mexico has been
declining, I know, but with the Gulf and Alaska, we really
could get a North American energy independent plan. Is that
right?
Mr. Sieminski. The term that I think I would prefer to use
is ``self-sufficiency.''
Mr. Upton. Works for me.
Mr. Sieminski. Let me try to put some numbers on this for
you, Mr. Upton. I will speak first about just the U.S. Alone.
So, total oil liquids production in the U.S. is running at
about 10 million barrels a day. I mentioned in my testimony the
phrase ``technically recoverable reserves,'' or TRR. Under our
reference case assumptions in the EIA's Annual Energy Outlook,
we believe that production will climb to about 12.5 million
barrels a day by 2035. In the high-TRR case, so that is an
optimistic view of the resource base, tight shale oil
production could climb from a little over a half a million
barrels a day now, maybe, you know, somewhere between a half a
million to a million barrels a day, to well over 2.5 million
barrels a day by 2035. So what that suggests is that there is a
possibility that you could get U.S. oil production up to about
15 million barrels a day by 2035.
In the reference case, as you indicated, with oil demand in
the U.S. running 18 million to 19 million barrels a day, with
population growth and economic growth, EIA actually expects
total oil demand will decline to about 20 million barrels a day
by 2035. However, under a more aggressive efficiency scenario--
higher fuel efficiencies for cars, faster penetration of
electric vehicles--that number could actually come down to
about 18 million barrels a day.
So in the EIA reference case, we have net imports in 2035
falling from about 46 percent last year to 36 percent in 2035.
It could get down to as low as 14 or 15 percent. We would still
be importing oil in the U.S., but a lot of that would be coming
from Canada. And that would lead back to your point.
Mr. Upton. So, as a bottom line, with North America we
could do it when you include Canada and Mexico.
I know my time has expired, and I appreciate the chairman
being generous. Thank you. I yield back.
Mr. Whitfield. Thank you.
At this time, I will recognize the gentleman from Illinois,
Mr. Shimkus, for 5 minutes.
Mr. Shimkus. Thank you, Mr. Chairman.
And it is great to have you here. You know, being on the
Energy and Commerce Committee, we don't normally get BLM folks
and Forest Service folks, so it is, for me, a pleasure to have
you here.
Mr. Sieminski, good to see you again. Appreciate it. And I
am getting a greater appreciation for independent agencies
within bureaucracies. We appreciate your work, the difficult
balance you have to have. But, really, you are just calling the
cards as they are laid out in front of you, and we don't always
do that up here, so I think we--I, personally, appreciate this.
You know, my first analysis as I was listening to the
opening statements and some of the questions is, you know,
there really is no reason we should have a recession currently
if we release our energy companies to explore, identify, and
recover our energy resources. There is really no reason we
should be held captive to imported crude oil if we released our
energy companies to explore, identify, and recover. There is no
reason for us to continue to have a negative balance of trade
and continue to be a borrowing country when we could have a
positive balance of trade and we could turn into a lending
company if we released our energy companies to explore,
identify, and recover.
And I think the analysis here--I think this is a great
hearing. Even in my own district in southern Illinois, where is
my oil and gas exploration and recovery going on? It is going
on on State land and on private property. Our biggest oil well
is under a State wildlife refuge, underneath the lake. It has
been producing now for about 10 years. The fracking boom is
coming to southern Illinois, and there are a lot of exciting
opportunities there, especially for rural, small-town America.
So this is a good comparison and contrast, and I am glad
the chairman has brought it up. I also visited Tulsa, Oklahoma,
and right outside their State capitol they have an oil derrick,
I think it is Old Rosie or something they call it, because they
produce oil right on State lands right next to the capitol. So,
again, a good reason to have this hearing.
Also, Ms. Wagner, I also have a national forest, the
Shawnee National Forest. Allen Nicholas is the supervisor. One
of the benefits--this gives me a chance to publicly proclaim
what a great job he does. What has been beneficial is having a
supervisor stay on site for many years. When I first got on
site, they were swapping them out almost on a yearly basis.
Relationships weren't made with all the exciting parties that
get involved with forest issues.
But I do like the fact that a national forest is for all
citizens, for the recreators, for the conservationists. In your
testimony, you talk about the productive possibilities. We are
now going through a possible timber harvest, and its nonnative
species. So it should be a win-win. Of course, it is not, with
the fights that happen when you have to represent a national
forest.
But we hope that is something that can continue to move
forward, which I do think is a win-win. We have horseback
riders back in the forest with well-maintained trails. But it
takes work, just like anything else. So I want to put that
publicly on record and look forward to working with the Forest
Service, hopefully, if the voters allow me to, for years to
come.
Quickly, I think, Mr. Nedd, I want to talk about the 5-year
OCS leasing plan that is currently being proposed by Secretary
Salazar. It has the fewest proposed number of lease sales ever
submitted by an administration, going back to President Carter.
Is the administration concerned about the possible economic
impact of the fewer leases being available and the possible job
impact that that could have? Do you know?
Mr. Nedd. Congressman, I am sorry. I can take back that
question and have an answer for you.
Mr. Shimkus. Yes, because we always hear--I mean, we got
involved with the rules and regulations, the environmental
concerns, but we want to focus on jobs and the job impact, so
that is why that question kind of comes out.
And let me just follow up on this. There is always this
debate on leases versus drilling. And I heard my colleague from
Illinois mention that also. But just because a private sector
has a lease and they are prepared to drill, they need
permission to drill; is that correct?
Mr. Nedd. Yes. Yes, Congressman.
Mr. Shimkus. And who provides that permission?
Mr. Nedd. If it is a BLM-managed orIndian trust land,
permission to drill, if it is surface-managed by the BLM, will
be BLM. If it is on a Federal surface agency, then it is a
joint effort, where we work with those agencies to ensure the
drilling plan is consistent with the surface use plan and----
Mr. Shimkus. So just because there are numerous leases, no
one should assume that that right to drill is automatically
given to someone who has a lease.
Mr. Nedd. Well, Congressman, I would like to frame--with a
lease, the operator or the leaseholder can submit an
application for drilling anytime. And until that application is
submitted to drill, the agency has no action to take on that
lease.
Mr. Shimkus. Well, and I am not trying to get--but we are
wordsmiths up here, and sometimes we try to leave out some of
the truth in between our provided statements.
The point is, a lease is an attempt for industry to figure
out if there is something to recover. They do the search. Then
they have to, if they find something--they may not find
something, and so then they don't need to operate and continue
forward on the lease. But then if they do, then they have to go
through the process of an application to drill. It is a long
process.
Mr. Nedd. It is a long process. And a lease is issued, a
Federal lease is issued for 10 years, and so there are a number
of factors. And industry tends to look at where developments
are going on and submit for a lease. And so, there are a number
of factors, but, yes, once a lease is issued, it takes an
action from the lessee.
Mr. Shimkus. Thank you very much.
Mr. Whitfield. The gentleman's time has expired.
At this time, I will recognize the gentleman from Virginia,
Mr. Griffith, for 5 minutes.
Mr. Griffith. Thank you, Mr. Chairman. Appreciate it.
Mr. Sieminski, I was listening to your answers to
Congressman Rush, and I got the impression that you feel that
it is likely that natural gas prices will go up because they
are historically at all-time lows and the production will slack
off if they don't go up. So, one way or another, you are going
to have prices go up. They either go up because of natural
economic forces or they go up because the supply starts to
diminish because there is no exploration because the price is
so low. Is that a fair statement?
Mr. Sieminski. Yes, sir.
Mr. Griffith. OK. And I appreciate that.
And I am curious about the U.S. Geological Survey issues
that you raised. It appears that you all rely on their data to
develop resource estimates for oil and gas. And you mentioned
that they have not yet developed resource estimates for
formations that have recently gone into production.
What formations has the United States Geological Service
not yet developed estimates for?
Mr. Sieminski. I think one of the most important ones is
Utica. It covers Ohio and parts of Pennsylvania.
Mr. Griffith. OK.
Mr. Sieminski. They just finished their assessment of the
Marcellus through Virginia, West Virginia, Pennsylvania. And
even that assessment was based on a large sample of vertical
wells and not as many of the horizontal wells which are
typically being drilled by the industry.
Mr. Griffith. Do you think that may have created an
underestimate of the amount of gas that might be available
there?
Mr. Sieminski. I think it is possible that what we will
find is that, as the production data begins to come in--and
Pennsylvania is one of the States that has significant lags in
its reporting of production data--that we will begin to see
those numbers inching up. EIA would reflect that in its
estimates of proved reserves and production potential.
Typically, the Geologic Survey runs on a 5- to 10-year schedule
before they would get back to looking at a formation after they
have done an assessment.
Mr. Griffith. OK.
And are there any other areas that you all believe that the
USGS needs to provide updated information on to better gauge
oil and gas?
Mr. Sieminski. There isn't any other area that comes to
mind right now. I would be happy to come back to you if we
could nail down additional places.
Mr. Griffith. And I don't guess you can shift more of that
Marcellus into Virginia.
Mr. Sieminski. It would be--well, you know, this is
actually a good time to say that the development that takes
place, whether it is on Federal lands, private lands, State
lands, there is a balancing that has to take place. And the
balancing is the economic considerations against environmental
considerations, national security, and lots of other factors
that have to be considered, as have been brought up by my
colleagues from BLM and the Forest Service.
Mr. Griffith. Thank you very much.
Mr. Chairman, with that, I will yield back.
Mr. Whitfield. The gentleman yields back.
At this time, I will recognize the gentleman from Colorado,
Mr. Gardner, for 5 minutes.
Mr. Gardner. Thank you, Mr. Chairman.
And thank you to the panel for joining us today for this
discussion.
And I just wanted to read some statistics that I have
before me from the Western Energy Alliance, who we will hear
from in a few minutes. And their statistics show that, between
2008 and 2011, the Bureau of Land Management offered 81 percent
less acreage, which has resulted in a 44 percent drop in
leasing revenue, and that, nationwide, royalty and leasing
revenue has declined by 12 percent.
In my district, the Niobrara Formation, Denver-Julesburg
Basin, we have seen one county in particular in northern
Colorado, one county, Weld County, has 31 oil and gas operators
in that county. Two of the oil and gas operators recently made
their property tax payments, I believe for 2011. One of the
operators paid $52 million in property taxes. Another operator
paid $57 million in property taxes. This is a county with a
budget of about $200 million, and they paid $109 million. Just
2 out of the 31 paid $109 million in property taxes--money that
goes to the schools, money that goes to the community college,
money that goes to the county.
And so I am very concerned when we talk about 81 percent
less acreage available, a 44 percent drop in leasing, and 12
percent drop in revenue. In Colorado alone, BLM has issued 97
percent fewer leases, just offering four parcels in 2011--a 98
percent decrease in the leases that have been made available in
Colorado. Seventy-one percent of the leases offered have been
protested.
And so I want to clarify, if I could, Mr. Sieminski, a
little bit about something in your opening statement and a
little clarification. You had said that since development is
taking place on non-Federal land--let me rephrase that. You
make a statement in your statement that the fact that
development is taking place on non-Federal land, it is simply
because geology favors non-Federal land. But doesn't that
statement ignore research by other Federal agencies like GAO,
the Government Accountability Office, that has testified that
the Green River Formation, which lies beneath Colorado,
Wyoming, Utah, contains over a trillion barrels of recoverable
oil?
Mr. Sieminski. I think that it is going to vary from State
to State. And as more experience is gained with shale
formations, I think we might discover that there are, indeed,
places on Federal lands that are suitable for development.
Just as another example, in the Annual Energy Outlook that
EIA published last month, we did point out that the trans-
Alaska oil pipeline throughputs are beginning to diminish and
that that could result in flow problems up there. And,
obviously, there are Federal lands in Alaska that could be
developed that would potentially add to oil production.
Mr. Gardner. But it is not entirely true that geology is
vastly different on Federal land and private land. I mean, that
is not entirely true. We have seen reports here.
Mr. Sieminski. Well, it would just depend on where the that
geology happened to fall.
Mr. Gardner. Right. It is going to vary across the--I would
agree with you there. It varies.
To Mr. Nedd and Ms. Wagner: Governor Hickenlooper of
Colorado stated, and I quote, ``There have been tens of
thousands of wells in Colorado that have used hydraulic
fracturing to increase their productivity, and we can't find
anywhere in Colorado a single example of the actual process of
fracturing that has polluted groundwater.''
Mr. Nedd, would you agree with that statement that Governor
Hickenlooper has made?
Mr. Nedd. Congressman, what I can say is, within the
Federal lands that BLM manages, we have nodocumented case of
that. I can speak from the Federal lands.
Mr. Gardner. Thank you.
Ms. Wagner, would you agree with that statement?
Ms. Wagner. That is true for activity on national forests.
Mr. Gardner. And to Mr. Nedd, you are currently undergoing
a rulemaking on hydraulic fracturing. How much will these rules
add to the cost of drilling?
Mr. Nedd. I am sorry, what is the question?
Mr. Gardner. BLM is currently undergoing a rulemaking on
hydraulic infrastructure. Do you know how much these rules will
add to the cost of drilling?
Mr. Nedd. Congressman, based on the assumptions in our
economic analysis, I believe we said it would increase an
average of somewhere around $10,000 to $13,000. I would have to
get that exact figure. But that economic analysis was based on
some assumptions that were made.
Mr. Gardner. And according to some experts, they believe
that the cost will actually be around $250,000 to each new
well, not to mention permitting delays and others. Do you
dispute those numbers, and why?
Mr. Nedd. Well, again, Congressman, I don't know what is
making up those numbers, so I cannot speak to them.
Mr. Gardner. And I have a number of other questions, Mr.
Chairman, but I see my time has expired. If I could be allowed
to submit questions for the record, I would truly appreciate
it.
Mr. Whitfield. Absolutely.
The gentleman's time has expired.
At this time, I will recognize the gentleman from
California, Mr. Bilbray, for 5 minutes.
Mr. Bilbray. Thanks. I appreciate it, Mr. Chairman.
Mr. Nedd, we had an interesting situation in California.
With all the talk of the Interior Department trying to
cooperate on wind and solar projects, how long has it taken to
permit the land for solar or wind in the Mojave Desert? I mean,
how long have we been working on this?
Mr. Nedd. Well, Congressman, I don't have the exact numbers
here. I know we have been working on that process for a little
while. I just don't have the exact--and I will be glad to get
back to you.
Mr. Bilbray. Here is a problem we--my scientists came--in
San Diego, our University of California scientists developed an
algae strain to develop true gasoline, true diesel. When they,
as State employees, when they looked to go to production in the
State of California, they found out that they could not get the
permits to go into production for 7 years. So they literally
packed up and left the State because government regulations
made it impossible to implement a green strategy.
What is the possibility of the Federal Government being
proactive on our lands, such as the area in Imperial Valley,
which scientists have identified as being, they said, quote/
unquote, pristine, perfect for the generation of green fuels
based on slope and sunshine and everything else--what would it
take for us to create a Federal green zone to encourage the
production of algae production on Federal property rather than
these scientists having to leave town and go thousands of miles
to the east?
Mr. Nedd. Congressman, while I can't speak to the specific,
again, issue raised, what I can say is that the BLM is
certainly proactive in trying promote the development and
production of energy--hence, leasing reform. The BLM
implemented that leasing reform to bring more certainty to----
Mr. Bilbray. But you admit that even with a Federal mandate
on--and, in fact, I remember, it was Feinstein who worked this
out--even with a Federal mandate, it has taken years to be able
to permit the siting of green technologies on our Federal land.
That is fair to say, isn't it?
Mr. Nedd. Again, Congressman, I don't have the information
to speak specifically to that. And I would----
Mr. Bilbray. OK. Well, I am just telling from you
observation, it has taken years and years.
My question is, would the administration have opposition to
this Congress setting aside specific locations on Federal
property to be pre-permitted under the Clean Water, Clean Air,
Endangered Species Act for the production of green fuels, so
that when the next group of scientists need to look for a site,
they know they can come to the Federal Government, they won't
have to wait 7 years, and they know where they could go to go
into production? Would the administration support the pre-
permitting of sites on Federal property for the development of
green fuels?
Mr. Nedd. Congressman, that is certainly an interesting
proposition, and I would be glad to take it back and respond to
your question.
Mr. Bilbray. OK. Well, let me just say this, Mr. Nedd. My
concern is that we have spent billions of dollars talking about
green technology, but we have spent such little time talking
about how the government can change our regulations so that the
implementation of a green strategy is actually legal, let alone
more feasible. And it is sad that we haven't talked about the
obstructions that the government regulations have made to
appropriate green technology. We have always talked about how
much money we can give away, rather than talking about how much
we can change our operations.
And, Mr. Chairman, I think that we need to focus more on
that. And I think that is someplace that Democrats and
Republicans ought to agree on, is the fact that, what isn't the
Federal Government, in our regulatory oversight, doing
appropriately to allow appropriate technology to be moved
forward? It is not just about oil and gas. The obstruction of
Federal regulation stands in the way of all kinds of stuff.
And I will give you an example. I have a bill that I have
introduced with the gentleman from Tennessee to streamline the
permitting process for putting solar panels on top of houses.
When the industry comes to me--and I would ask my Democratic
colleague to understand this--when the industry that puts solar
panels on the house says it costs as much to get a government
permit, a license, to put the panels on as it does to make the
panels per kilowatt, that should be something that both sides
can say, if you want to talk about energy independence and if
you want to talk about clean energy, then you have a
responsibility to straighten out the regulatory morass that is
blocking the implementation.
You can talk all you want, you can write as many checks and
give all the grants, but if you are not going to make it legal
to do the right thing from the green fuel technology, I don't
think anyone has a right to stand up and talk about it.
I yield back, Mr. Chairman. Thank you.
Mr. Whitfield. Thank you very much.
At this time, I will recognize the gentleman from Nebraska,
Mr. Terry, for 5 minutes.
Mr. Terry. Well, thank you, Mr. Chairman, for another good,
interesting hearing on an important issue.
Mr. Nedd, I will ask you, the 5-year OCS leasing plan that
Secretary Salazar recently unveiled I believe would reinstate
by regulatory policy the moratorium in the gulf that was lifted
in 2008 when we experienced that incredibly high spike in
prices and people rose up and demanded action. And under a
Harry Reid-run Senate and Nancy Pelosi-run House, there was a
very bipartisan vote and effort to lift the moratorium. That
seems to have been put back in place now, at least for 2012 to
2017, and remove the possibility of even drilling off Virginia
coast, and delays for years any drilling off of the Alaska
coast.
So doesn't this leasing plan encourage energy companies to
move away from Federal lands, even to other countries like
Brazil, which seems to be now part of our DOE policy, and to
develop resources in other areas than Federal lands? Has your
department reviewed whether that is a disincentive to
investment in the United States?
Mr. Nedd. Congressman, I am not aware of whether that has
been analyzed or not. And, again, with respect to that, I would
love to take that question back and provide you with an answer.
Mr. Terry. But everyone is in agreement that this new 5-
year plan from 2012 to 2017, this new 5-year plan reinstates
that moratorium within its rules and regulations as it is
drafted. Is that a fair statement? I think it is fairly
obvious.
Mr. Nedd. Well, again, Congressman, you know, BLM's role is
on onshore. And, certainly, I would be happy to take back this
kind of question and ensure you get an answer.
Mr. Terry. All right. Thank you, Mr. Nedd.
Mr. Sieminski, what do you think? Does this new order from
Interior impact investments in the United States?
Mr. Sieminski. The policy issues surrounding Outer
Continental Shelf leasing is something that EIA would take into
consideration in its forecast, but it is not something that we
would comment on.
Mr. Terry. OK. I appreciate that.
Back to you, Mr. Nedd. I may anticipate the answer to your
question, though, but on the second panel there is a group
called Trout Unlimited. And as a trout fisherman, we have a
family cabin that has been in Rocky Mountains, had it in the
family since the late 1800s, and there is a nice little trout
stream. So I am sympathetic with trout fishing. But they have
consistently opposed any oil and gas operations on Federal
lands.
Now, are you aware of how many lawsuits that Trout
Unlimited has been involved with, or appeals, against Interior
over oil and gas productions in the last 10 years?
Mr. Nedd. Yes, Congressman, I do not have that data, and so
I certainly would be glad to try and get that answer to you.
Mr. Terry. All right. Now, are you aware of--I will ask you
if you are aware of--any conversations between the BLM and
Trout Unlimited to encourage lawsuits to be brought to block
any oil and gas development on Federal lands?
Mr. Nedd. Congressman, I am not aware of any such
conversation.
Mr. Terry. OK. I appreciate that.
I will yield back.
Mr. Whitfield. The gentleman yields back.
At this time, I will recognize the gentleman from
Louisiana, Mr. Scalise, for 5 minutes.
Mr. Scalise. Thank you, Mr. Chairman. Appreciate you
continuing the series of hearings that we have been having on
energy policy, you know, especially the American Energy
Initiative, as we try to go through and look at all of the
different things that are holding our country back from being
energy-independent and ways that we can create more jobs and
also generate billions of dollars more to the Federal
Government. And I think it is not a complex answer; the answer
is pretty basic if you look at American energy.
And I think the focus that you have been doing, Mr.
Chairman, has been important, because it has highlighted so
many of the things that are really impediments to American
energy production, things that are making us more reliant on
Middle Eastern oil and oil from countries that maybe are less
favorable to us.
I know on the second panel I am looking forward to hearing
Mr. Clements, who is from our area in southeast Louisiana. We
have been experiencing a number of different problems. Mr.
Terry touched on a few of those.
But if I can ask, Mr. Sieminski, because I know your agency
puts out a lot of good data to, you know, try to show maybe
where we are, what is out there: When you look at both leases,
where we were before Macondo, where we are now, you know, the
administration has been touting that there is no moratorium in
place now, that permitting is back up. I know Mr. Clements, in
his testimony, talks about the pace of permitting still being
slow, much slower than before the moratorium, highlighting some
of the problems that we have seen. There have been a number of
independent studies in the New Orleans region, as well as
throughout the Gulf of Mexico, highlighting the problems with
getting energy production back on line at its pace that we
should be at, and then the 5-year lease plan that closed off
about 85 percent of the areas that were getting ready to come
open for exploration.
I don't know if you have looked at the testimony of Mr.
Clements, but he does give some, kind of, on-the-ground
experience of what the problems are and the slowdowns that
still are holding back our ability to go and explore safely for
the things that we know are out there. You know, have you
looked at that? And what is your comment on it?
Mr. Sieminski. EIA has not looked at that.
Just from my general understanding of the industry, I think
that there are concerns about the pace of leasing and
resumption activity in the Gulf of Mexico. Companies are saying
that things are getting better.
Largely, I think that a number of the companies are simply
focusing on the onshore possibilities, with all of the activity
in the Eagle Ford in Texas, for example, that has moved
forward. In Louisiana, there is still a great deal of activity
taking place in the Haynesville Shale and other----
Mr. Scalise. Well, we have seen a lot of that in
Haynesville. I have been up there to north Louisiana, the
Shreveport area, which has been just a phenomenal area of
growth with natural gas. And we have seen that in other States,
too. Of course, the irony is that those are areas on private
lands. The Haynesville, the Bakken, the areas where you have
seen tremendous growth in jobs, as well as in energy
production, its been on areas that are private, where the
Federal Government does not currently have the ability--now,
the Obama administration is, through a number of different
agencies, DOI and EPA, even trying to shut some of that down.
But on Federal Government lands, where the Federal
Government actually does have a say, that is where we have seen
the problem. That is where I think Mr. Clements is alluding to
the slow pace of permitting, you know, where the Federal
Government actually does have the ability to control it.
And the President said a lot of times that the United
States only has 2 percent of the world's known reserves. Now,
that is a false number, because I think anybody that knows--I
mean, the Bakken, you wouldn't have known that was out there if
you didn't go and explore for it. And before the exploration
happened, they would have said there is probably nothing down
there. Well, now you go to North Dakota, I think they have 3.5
percent unemployment because you can't even find a place to
live right now because so many people are moving there to work
because they are finding all this energy that wouldn't have
ever shown up on those metrics.
And so I don't know if you all have looked at that, but,
you know, when the President says we have only 2 percent of the
world's known reserves, does he include, for example, what is
very likely out off the coast of Virginia, which right now you
can't even go and look at because of Federalprohibitions? Would
that statement include, you know, what is a known reserve,
would that include what is off the coast of Virginia, for
example?
Mr. Sieminski. The probable reserves would be in there
because the U.S. Geologic Service would have taken some of that
into consideration. I think that----
Mr. Scalise. Well, when he says the world's ``known
reserves''----
Mr. Sieminski. Right.
Mr. Scalise [continuing]. Because they nuance the words. I
mean, what you know is out there and what industry knows is out
there is one thing. But what the administration is saying is
that we only have only 2 percent of the world's known reserves.
Again, it is a misleading number, because we know there is a
lot more out there.
And I just wanted to see if you, you know--make sure that
what I am projecting is accurate in terms of how they describe
it versus what really could be out there if you let them go
look.
Mr. Sieminski. I think what you were speaking to,
Congressman, is the difference between the level of known
reserves and the pace at which they are being developed. And I
understand that some of your constituents are probably wishing
that that development could move along faster. There are
balancing issues that I spoke to earlier, and the
administration has to look at all of those factors in order to
come to a conclusion.
Mr. Scalise. Thanks.
I see I am out of time, Mr. Chairman. I yield back the
balance.
Mr. Whitfield. The gentleman's time has expired.
Does the gentleman from Oregon seek recognition?
I believe we have completed this round of questions with
this panel. I do have one other question, though, I would like
to ask of Mr. Nedd.
I had read some of the testimony of one of the other
witnesses that will be on the second panel, and there was some
discussion about a Shell Oil application off the coast of
Alaska in which they had spent $5 billion asking for a permit
to do an exploratory drilling, and it has already taken 5 or 6
years to obtain this permit; it still is not issued.
And I understand that, while there is split jurisdiction--
EPA has jurisdiction over Clean Air; Department of Interior is
involved in that permit, as well--it is my understanding that
the Department of Interior intends to issue its decision
sometime this month. Is that correct, Mr. Nedd?
Mr. Nedd. Mr. Chairman, I do not have information on that
issue, and so I will be glad to take back that question and see
if we can----
Mr. Whitfield. Are you aware of the issue at all?
Mr. Nedd. Vaguely, but not enough to speak to it, Mr.
Chairman.
Mr. Whitfield. OK. Well, then I will dismiss the first
panel. Once again, thank you very much for being with us and
offering your testimony.
At this time, I would like to call up the second panel.
And on the second panel we have with us this morning Mr.
Lynn Helms, who is the director of the North Dakota Department
of Mineral Resources. We have Mr. Thomas Clements, who is the
owner of the Oilfield CNC Machining company. We have Mr. Reed
Williams, who is the president of WillSource Enterprise. We
have Ms. Christy Goldfuss, who is the director of the Public
Lands Project for the Center for American Progress Action Fund.
We have the Honorable Dan Sullivan, commissioner of the Alaska
Department of Natural Resources; Ms. Kathleen Sgamma, vice
president, Government and Public Affairs, Western Energy
Alliance; and Mr. Corey Fisher, who is the assistant energy
director for Trout Unlimited.
So I want to welcome all of you panel members here this
morning. We appreciate your being with us. We look forward to
your testimony.
And as you know, each one of you will be given 5 minutes to
give your opening statement. And as I said before, there is a
box on the table, two small boxes, and they have red, green,
and yellow. And when it turns red, that means your time is up,
but we will go on and let you complete your testimony.
So, once again, welcome. Thank you for being here.
And, Mr. Helms, we will begin with you for your opening
statement, and you will be recognized for 5 minutes.
And I would ask each one of you, when you give your opening
statement, make sure the microphone is close and it is turned
on. Thank you.

STATEMENTS OF LYNN D. HELMS, DIRECTOR, NORTH DAKOTA INDUSTRIAL
COMMISSION, DEPARTMENT OF MINERAL RESOURCES; DAN SULLIVAN,
COMMISSIONER, ALASKA DEPARTMENT OF NATURAL RESOURCES; THOMAS
CLEMENTS, OWNER, OILFIELD CNC MACHINING, LLC; KATHLEEN SGAMMA,
VICE PRESIDENT, GOVERNMENT AND PUBLIC AFFAIRS, WESTERN ENERGY
ALLIANCE; REED WILLIAMS, PRESIDENT, WILLSOURCE ENTERPRISE, LLC;
CHRISTY GOLDFUSS, DIRECTOR, PUBLIC LANDS PROJECT, CENTER FOR
AMERICAN PROGRESS ACTION FUND; COREY FISHER, ASSISTANT ENERGY
DIRECTOR, SPORTSMEN'S CONSERVATION PROJECT, TROUT UNLIMITED

STATEMENT OF LYNN D. HELMS

Mr. Helms. Well, thank you, Mr. Chairman.
Chairman Whitfield and members of the committee, I am
delighted to have this opportunity to discuss with you the
renaissance that is occurring in the State of North Dakota due
to oil and gas production and energy production.
As you have heard before, the Bakken Formation is the
largest continuous resource that the USGS has assessed in the
lower 48 States. We place the oil in place in this resource at
approximately 300 billion barrels. We currently think we can
recover, with today's technology, somewhere between 7 billion
and 15 billion barrels of that. I think the exciting thing is
that a 1 percent increase in recovery from that represents 5
months' energy supply or oil supply for the entire United
States.
North Dakota is growing in all energy sources. Rather than
contrast renewable versus fossil fuels and that sort of thing,
North Dakota has had a policy of looking for synergies. And one
of our synergies is, we have the only place where anthropogenic
CO2 is being captured, and it is sent to Canada, to
Saskatchewan, for enhanced oil recovery. We are looking forward
to using CO2 from our coal-fired generation as well as our
ethanol plants for enhanced recovery in the Bakken.
This has created growing employment in the State of North
Dakota, rapidly growing employment. We have moved from number
eight, as you stated, to number two in the States among daily
oil production. It has brought investments in pipelines and gas
processing, electric generation. And we are looking at a long-
term sustained employment growth of well in excess of 65,000
jobs in North Dakota.
I know it has been brought into question as to whether that
is scalable. I believe it is 100 percent scalable, both upward
and downward. I have looked at the Fort Berthold Reservation,
in particular, where Bakken development has taken place, and
their unemployment has gone from 40-plus percent to less than 5
percent, with tremendous growth in job opportunities and
economics on that reservation. And I think if you look at
Texas, it is a larger economy than North Dakota, but it is
experiencing the same kind of growth as a result of oil and gas
development in the Eagle Ford shale.
North Dakota's geology is perfect for 21st-century
technology application. We have the entire stratographic
column; each basin is unique. Not all States have that. That is
why oil and gas should be and is currently regulated at the
State level, because it isn't consistent across the entire
United States. It varies from basin to basin and State to
State.
Our geography, too, is perfect. As you stated, 82 percent
of the minerals in North Dakota are owned by private parties;
89 percent of the surface is owned by private parties. And it
is that connection, those private contracts and their
protection under North Dakota State constitution that has
allowed the Bakken boom to take place.
If you look at the map that I presented in my written
testimony, on page 3 you will see a couple of large holes in
the development. Those holes are where the Federal Government
controls the surface and the minerals, and they are being
delayed by Federal policies in terms of development.
Our drilling rig count mirrors that ownership. And, you
know, I sort of bristle at the fact that the Federal Government
makes a big deal out of multiple use of its lands. Private
owners engage themselves in multiple use, as well. It is just
that they don't look at just a single use for each tract of
land, but they are willing to farm the land and have an oil
well on it at the same time. Or they are willing to have an oil
well on their land and have an elk farm or a wildlife refuge.
North Dakota has worked hard to create a stable tax and
regulatory environment that promotes capital investment. Our
oil and gas rules are modified every 2 years. Just this April,
we upped our rules to include banning reserve pits, increasing
bond requirements, and strengthening our hydraulic fracturing
requirements. And had Mr. Mufson of The Washington Post
contacted us, he would have been informed about that, and I
think the Washington Post article would have been very
different.
We have submitted our comments to the Bureau of Land
Management and the EPA on their hydraulic fracturing policies
and guidance. We are opposed to these in many areas. I have
identified the six primary areas, but the main one that I want
to identify is, this really is a States' rights issue. Geology
varies from State to State, and it should be regulated at the
State level. And when you look at the BLM rules, they go way
beyond their jurisdiction into things like the source that the
water is going to come from and the path that it is going to
take from source to fracturing well.
That concludes my prepared remarks, and I will be happy to
answer questions when the time comes.
Mr. Whitfield. Well, Mr. Helms, thank you very much.
[The prepared statement of Mr. Helms follows:]

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Mr. Whitfield. And, Mr. Sullivan, you are recognized for 5
minutes.

STATEMENT OF DAN SULLIVAN

Mr. Sullivan. Thank you, Mr. Chairman. And I have a
PowerPoint slide. I don't know if it is going to be brought up,
but I think some of you have that before you, in addition to my
written testimony.
And what I would like to do very quickly--I appreciate the
opportunity, Ranking Member Rush, to testify in front of the
committee today.
I would first like to start, if you will go to the next
slide, just a little bit of background on Alaska. It is hard to
see here, but obviously the numbers of the State, quite large.
I am sure the members of the committee from Texas have seen
that first bullet under ``Land Base'' a couple times, but more
than twice the size of Texas, of course. But a lot of Federal
land in Alaska, State land, native land.
Next slide, please.
With regard to the estimates, we have huge estimates of
both conventional oil and gas. The USGS did a survey 2 years
ago. In terms of the arctic, estimates are the largest amount
of oil of any arctic nation, including Russia. And we are just
scratching the surface because the unconventionals in Alaska,
again, are off the charts.
But very little, a tiny fraction of production in Alaska is
from Federal lands. It is actually, in terms of the North Slope
oil, it is less than half of a percentage point. So everything
else is from State lands.
Next slide.
Also, very large amounts of strategic and critical
minerals, including rare earth elements, we believe. And that
slide shows that if Alaska were its own country, we would rank
in the top 10 in many of those categories.
Next slide.
As Congressman Barton noted, States--in Alaska, we
certainly take pride in this--love, deeply care about our
environment. The next few slides touch on what we think are
some of the highest environmental protection standards that are
based on State regs and State law literally in the world. So if
you look at this slide, the next slide.
And then we have also been the jurisdiction that has
spurred many of the industry's most sustainable and
environmentally responsible technological innovations. So if
you look at that slide there, it shows the number of
innovations that have occurred in Alaska.
Next slide, please.
But this next slide is really the point, supports the
broader main point of my testimony today, Mr. Chairman, which
is: The U.S. is on the verge of a sustainable energy
renaissance that will have dramatic positive benefits for
America and its citizens. And it is based on three strengths
that we have as a country that pretty much no other country
has. And those are listed, the strengths are listed there: an
enormous natural resource base; leaders in environmental high
standards; and then a financial and legal system that
encourages entrepreneurship, private-sector investment.
So this sustainable energy renaissance could have very
broad-based benefits. In slides 9 and 10, I mentioned these. I
would be glad to talk about them during the Q&A. But everything
from energy security, economic growth, jobs, U.S. trade
deficit, Federal budget deficit, foreign policy and national
security implications, and even global environmental
protection.
But on that resource base point, I know PFC Energy and many
others--Mr. Sieminski today also named some numbers. But there
are estimates that the U.S. could be the largest hydrocarbon
producer by 2020, larger than Saudi Arabia, larger than Russia.
Next slide, please.
But what we think is critical in order to seize this
strategic opportunity, we must focus on regulatory reform and
modernization and increase access to Federal lands,
particularly in Alaska.
Last year, Mr. Chairman, I had the honor of testifying
before this committee and highlighted several areas where delay
and new policies by the Federal Government were undermining
responsible resource development in Alaska. Many of these are
listed in the appendix to my current written testimony. And as
you have mentioned, alluded to, one of the most egregious ones
we have seen in Alaska is the on-again-off-again long delays in
the permitting for Shell to explore exploration wells in the
Outer Continental Shelf of Alaska. Those wells have been
drilled before out there; that is often overlooked in the
debate. Numerous OCS wells in Alaska have been drilled.
Finally, Mr. Chairman, I just want to conclude that on the
regulatory reform and modernization front, I know the House has
taken up many bills. Many States are enacting this kind of
efficient, more certain, more timely permitting reforms.
Canada, as a country, is undertaking a top-to-bottom review.
And that doesn't mean cutting corners on environmental
protection, but it is important to fully realize our potential.
In Alaska, we have a goal, a comprehensive goal, of
achieving a million barrels a day within 10 years through the
trans-Alaska pipeline system. We have undertaken a
comprehensive tax reform, permitting reform, infrastructure,
marketing. Mr. Helms is now number two in production. We want
to get back to number two and eventually get back to number
one. We think we certainly have the resource base to do that,
but we need the Federal Government as a partner in achieving
that million-barrels-a-day goal, not as an obstacle.
Thank you very much, Mr. Chairman.
Mr. Whitfield. Thank you, Mr. Sullivan.
[The prepared statement of Mr. Sullivan follows:]

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Mr. Whitfield. And our next witness is a small-business
man, still creating a lot of jobs in America, Mr. Clements.
You are recognized for 5 minutes.

STATEMENT OF THOMAS CLEMENTS

Mr. Clements. My name is Thomas Clements. I live in
Lafayette, Louisiana, with my wife, Melissa. We are owners of
Oilfield CNC Machining, LLC. It is a machine shop in Broussard,
Louisiana. We have been married for over 7 \1/2\ years and have
three grown children and four grandchildren.
My wife and I really did build our business. We both agree
that I wouldn't be here if the private sector wasn't doing
fine. I would be home, working hard building our business.
Maybe today with my testimony this committee can focus and help
small-business owners, like my wife and I, to continue to build
our business by opening all offshore and Federal land for
energy production.
Energy prices are at an all-time record high in all
sectors. This record-setting pace has to stop. The committee
needs to understand that there is no such thing as bad energy.
All natural energy is good.
For us, everything has changed. That is the first time I
ever heard the President utter the word ``moratorium.'' On May
27th, 2010, the President spoke of a moratorium that would last
6 months. That shocked us all. Two days later, I received an
email stating that all our orders for the remainder of the year
were cancelled. By the first week of June 2010, we were out of
work, and everyone we knew in the industry was also out of
work.
In October 2010, the President announced the moratorium was
lifted. We were relieved, to say the least. We were eager to
get back to work, but no orders came in. For us, no one has
been accountable for their actions in the oil spill. BP said
they would make it right, and the President pretended that a
misguided moratorium was good.
What an outrage when the administration comes out with a
2012-2017 energy plan that does nothing for this country. The
pace of permitting is slow--much slower than before the
moratorium. Second, the 2012-2017 leasing plan fails--fails to
offer access to any new areas offshore. This includes offshore
Virginia, that now must wait until 2017 due to the
administration's plan.
Their plan closes the majority of the Outer Continental
Shelf to new energy production, only allowing lease sales in
areas that were already open to drilling in the Gulf of Mexico
and Alaska, but with delays in sales in the Beaufort and
Chukchi Seas until 2016 and 2017.
Just look at what is happening in the private lands with
shale oil and gas in the Bakken and Marcellus. In the Bakken
and Marcellus, they are using technologies that didn't exist
when old estimates were made. In 2008, after the impact of
active exploration and development with technologies that
enable hydraulic fracturing and directional drilling, estimates
of recoverable oil in the Bakken jumped 25-fold, and estimates
of natural gas supplies in the Marcellus have increased 42-
fold, and liquids 343-fold. This sounds like energy security to
me.
More resources mean more opportunity for people like me to
help produce energy domestically. One study found that opening
up offshore areas could create 1.2 million jobs and produce $70
billion in new wages. It isn't just that large companies will
hire more people; small-business owners like me would have more
work and would be able to employ more workers to produce more
energy in America.
Owning our business and working to produce American-made
energy in the oil field industry is our American Dream. We
believe that the government role is to protect our country and
encourage American workers to develop our natural resources.
But instead, our government seems to be doing more to support
foreign workers to develop energy sources abroad--Brazil,
Mexico.
I am here today because our Nation needs energy, and
thousands of energy workers like me are willing and able to
help produce the energy right here at home. Mr. Chairman and
members of this committee, please let us go back to work.
Let me close with this. How can you have a 5-year leasing
plan with no economic data in the plan? And, by the way, the
President's plan has not worked. I believe that we have
thousands of years of natural good energy here in America. How
will we ever know unless exploration is allowed in our country?
Thank you.
Mr. Whitfield. Thank you, Mr. Clements.
[The prepared statement of Mr. Clements follows:]

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Mr. Whitfield. And, Ms. Sgamma, you are recognized for 5
minutes.

STATEMENT OF KATHLEEN SGAMMA

Ms. Sgamma. Thank you, Mr. Chairman, Ranking Member Rush,
and members of the committee. I am Kathleen Sgamma with the
Western Energy Alliance. We represent 400 countries engaged in
all aspects of environmentally responsible exploration and
production of natural gas and oil in the West. Our alliance
members are mostly small, independent companies and mainly
small businesses.
Because of the huge proportion of public lands in the
American West, my members are particularly affected by
government policies that reduce access to energy that all
Americans own on those public lands. Our Members are proud to
produce 26 percent of the Nation's natural gas and 18 percent
of the oil production, while disturbing less than a tenth of a
percentage of all Federal acreage. So we provide that balance.
And American producers operate under the most stringent
environmental standards in the world, both self-imposed and
those imposed on us as one of the most heavily regulated
industries in the country.
Across America, my industry has been significantly
increasing production of oil and natural gas over the last
several years in spite of, not because of, the Federal
Government. The huge increase in production is the result of
private-sector investment in technology and improved techniques
applied largely on private lands.
Where the government has the most control, on Federal
lands, production is simply not keeping pace with the overall
growth across the Nation. For example, in the West, natural gas
production is down 4 percent since 2008 on Federal lands, while
it is up 29 percent on State and private lands. And we have
heard today from a number of folks that it is because these
shale plays are all on private lands. Well, my number here
compares apples to apples, in that we are looking at those same
unconventional plays, a combination of shales and tight sands
that we have in the West. So it is comparing the same types of
reserves in the West.
If you look at the Bakken, because of the Bakken in North
Dakota, oil production is up 54 percent in the West, but only
26 percent on Federal lands. So it is clearly not keeping pace
on Federal lands. Nationwide, Federal oil production is down 1
percent.
So why this disparity on Federal lands compared to private
lands? The reason is simple: The Federal Government policies
make it extremely difficult to operate on public lands. There
is virtually no certainty of overcoming the bureaucratic
hurdles.
A Federal lease is really a ``definite maybe.'' Maybe you
will get through all the environmental analysis and regulatory
burdens. Maybe you will get permission to drill. Maybe you
won't be sued by an environmental group. And maybe you will
find oil or natural gas. It is really a classic catch-22
situation, where the government has thrown up all these
regulatory hurdles and then turns around and blames companies
for not producing on their Federal leases, with the added
Orwellian twist this year that now the Federal Government is
claiming credit for that increased production.
Whereas on State and private lands production can be
realized in a matter of months to a year or so, on Federal
lands 3 years is the basic minimum. And we have seen projects
stretching 5 to 10 years, and Reed Williams will tell us about
a project that is now in the 16th year.
Policies include obstacles in the leasing process, new
obstacles created since 2010; environmental analysis that is
stretching over 7 years and preventing nearly 65,000 jobs a
year and $15 billion in annual economic impact; ad hoc demands
with no basis in regulation; and settling with environmental
groups on litigation that stops economic growth and job
creation.
On top of all those delays, BLM is undergoing rulemaking on
hydraulic fracturing despite budget for it, manpower, and, more
importantly, expertise. Besides being extremely costly and
time-consuming, these new regulations will add a quarter of a
million dollars onto the cost of every new well. And that just
means less money for job creation, energy production, and
economic activity.
The new requirements are redundant, with State regulations
such as North Dakota--Mr. Helms doing a great job regulating--
and will further drive up permitting times so that--Mr. Nedd
couldn't answer the question today, but it is an average of 298
days. Secretary Salazar and BLM Director Abbey admitted to that
on April 3rd, 2012. And if they add on this new BLM regulation,
it is going to add another 100 days on top of that, I think
minimum.
So, I have provided examples in my written testimony of
other small businesses, like Mr. Clements' and Mr. Williams'.
These regulations are stopping job creation and economic
activity from small businesses. And I look forward to
questions.
Thank you.
Mr. Whitfield. Thank you, Ms. Sgamma.
[The prepared statement of Ms. Sgamma follows:]

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Mr. Whitfield. Mr. Williams, you are recognized for 5
minutes.

STATEMENT OF REED WILLIAMS

Mr. Williams. Chairman Whitfield and Ranking Member Rush
and the rest of the committee members, thank you for allowing
me to be here today to make this presentation. I think I am
here because my specific small oil and gas company is embroiled
in the middle of a vortex of many of these issues that we are
talking about.
Back in 1996, a group of us leased some lands in the White
River National Forest on the western slope of Colorado. Those
lands fit right in the middle of a lot of existing oil and gas
activity. There are more than 50 wells within a few miles of my
exact leases, there are pipelines to those, and there even is a
storage facility for natural gas contiguous with my leases. So
it was a very well-established oil and gas area, and we were
encouraged to go in and lease it. Things change across time,
and we kept working with it and working with it. We believe in
the reserves that exist there.
Over time, some of our offsetting competitors have drilled
some deeper wells, and we believe that our little 8,000 acre
position there will produce, oh, a tcf of gas. Even at $3 a
unit, which hopefully will be greater than that, that is $3
billion worth of gross revenue, and just at 12 \1/2\ percent
royalty flowing just out of that off the top of it, it is over
$350 million of revenue that would flow to the Federal
Government as an asset of the government's, and then it gets
shared back with the States, which would be great for the State
of Colorado.
We have made an effort from day one to be an environmental
steward, we assumed that that would be the only way we would be
able to work on the White River National Forest, and I think
you would find in the record that we have accomplished that one
step at a time. We have invested as private investors, and our
personal accounts. Mostly my company is owned by family members
and myself, some friends of my family. We have invested over
$10 million to date getting ready to produce that reserve off
of that acreage. All along the way, if we have accomplished one
set of regulations from the Forest Service or BLM or EPA, it
seems like the next day a new one comes down that falls in our
path to try to finish getting on to production and develop
those reserves. As an example, and I think this is a clear,
simple one to make: About a year and a half ago, there was a
new onshore order issued that required, according to our
friends at the Forest Service and the local ranger district
there, which is a joint office between the BLM and the Forest,
hopefully working close together, we were told there is a new
rule about the construction and road design on the Forest road
that we use to access our wells. That order came down and said
now all of a sudden you have to stop doing what we told you to
do, and you have to start doing what a civil engineer tells us
we have to tell you to do, and they took away our use for that
road to put drilling rigs on it to earn the leases that are in
question all the time, and for a year and a half, we have been
working with the contracted people to make sure that we get it
done exactly by the new rules, and yet within the last few
weeks, the Bureau of Land Management has been pushed to
consider taking away our leases for failure to perform.
Well, when you are in a situation where one agency's set of
rules make it impossible for you to accomplish another agency's
set of rules, we have got some kind of a trick going on or some
kind of a problem, and we still believe in the project, we
believe these assets are tremendously valuable, and I want to
talk some more about the shales that we are talking about
producing on State lands, they absolutely exist throughout the
Rocky Mountain region on Federal lands. We just haven't yet
been able to start developing them. We have proved it, we will
bring it to the marketplace when we are allowed to, and it will
be a tremendous economic help to our Federal budget. Thank you
very much for the opportunity, and I look forward to answering
your questions.
Mr. Whitfield. Thank you, Mr. Williams.
[The prepared statement of Mr. Williams follows:]

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Mr. Whitfield. Ms. Goldfuss, you are recognized for 5
minutes.

STATEMENT OF CHRISTY GOLDFUSS

Ms. Goldfuss. Chairman Whitfield, Ranking Member Rush, and
members of the committee, thank you so much for inviting me
today. It is a real honor to be here. My name is Christy
Goldfuss. I am director of the Public Lands Project at the
Center for American Progress Action Fund. We are a nonprofit
organization that is dedicated to transforming Americans' lives
by putting progressive value into policy.
I would like to make three major points in my testimony
today about the current state of play between oil and gas
drilling on public lands and private lands. First, simply put,
there is a lot of production happening on public lands and
waters; second, the oil and gas industry has access to an
extensive inventory of leases and permits; and third, although
there is tremendous oil and gas drilling happening on public
lands, market factors have pushed the industry to be more
interested in private lands, and there is a demand problem, not
a supply problem.
Before I go a little deeper into each of those points, let
me start where most of us agree, oil and gas development is an
appropriate use of our Federal lands. It is essential for our
national security to reduce our dependence on foreign sources
of oil, and we are making significant strides in that
direction, but we should also agree that these lands, owned by
all Americans, are inherently different than private lands. In
many cases, by law, the land management agencies are required
to manage for multiple uses, and that includes hunting,
fishing, grazing, hiking, recreation, and not just energy
production.
In other words, an all-of-the-above energy strategy does
not mean an all-of-the-acres strategy or oil above all. If
managed wisely, our public lands and waters can serve multiple
national purposes. Among them, addressing our current energy
needs, ensuring clean air and water for our Nation, providing
places for hunting and recreation, and protecting American
treasures for future generations.
When it comes to this first challenge on the list,
addressing our current energy needs, America's public lands and
waters are doing their fair share. As President Barack Obama
said last March, we are drilling all over the place, and here
is a major point: Oil production from the Federal lands and
waters in fiscal year 2011 was higher than in the last 3 years
of the Bush administration. There has been a 12 percent
increase in production since 2008, and the Bureau of Land
Management held three of the top five largest lease sales in
the agency's history in calendar year 2011. With this level of
activity on public lands, it is clear why The New York Times
said in their recent article about oil and gas drilling on
public lands, the scorecard shows that the industry is winning.
All of these efforts have come while the industry still
holds extensive inventory of idle leases. The DOI found that 56
percent of the leased acres in the lower 48 States and 72
percent of the leased acres offshore are not in production or
exploration. Simply put, the industry currently holds the keys
to vast amounts of publicly owned resources and has decided not
to develop them at this time. And there are many reasons for
that, some of which include the current price of natural gas
and the location of the best quality resources, which are
predominantly on private lands. We even have companies right
now shedding in their wells because they need to increase the
price of natural gas to make it economic for them to continue
to develop.
The extensive natural gas boom does not have everyone
happy, and early in July, I had the opportunity to see for
myself why. I traveled to northeast Utah to one of the most
beautiful places in this country, Desolation Canyon. After
driving through miles of pump jacks on public lands, I felt
like I was in more of an oil and gas city, rather than a
gateway to a natural wonder, and as the pumps finally faded in
the distance, I realized we were driving through the future
site of 1300 new oil and gas wells, just approved by the Obama
administration, which rejected calls from environmentalists to
choose smaller alternatives.
I find myself asking, will the receiving line of pump jacks
impact people's desire to travel to this place to escape it
all? Could the extensive drilling damage the Green River and
the amazing wildlife that people want to see? Just up the road
from that spot in Vernal, Utah, population 9,000, they have
experienced ozone levels that rival those of Los Angeles
because of the increased drilling, much of it on public lands.
We know that sportsmen in Wyoming say that similar
environmental conditions have a negative impact on antelope and
mule deer there, which means less hunting, and that is bad news
for the outdoor industry, which just released a new report
showing that it creates 6.1 million American jobs nationwide,
20 percent of those in manufacturing, and that is about 3-to-1
the number of jobs created by the oil and gas industry.
The very idea that oil and gas drilling on public lands
should track with development on private lands implies that oil
and gas development is the single most important use of these
lands. If we were to take that myopic approach to managing an
asset that belongs to all Americans, we endanger the other
uses. Instead, we need to insert balance into any development
scenario, such as analyzing loss to hunting and fishing habitat
when proposing new acres to be leased for oil and gas.
As President Teddy Roosevelt said, America's great natural
resources must be used for the benefit of all our people and
not monopolized for the benefit of the few. Thank you so much
for inviting me today, and I look forward to questions.
Mr. Whitfield. Thank you very much.
[The prepared statement of Ms. Goldfuss follows:]

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Mr. Whitfield. Mr. Fisher, you are recognized for 5
minutes.

STATEMENT OF COREY FISHER

Mr. Fisher. Mr. Chairman, members of the subcommittee,
thank you for the opportunity to testify today. My name is
Corey Fisher, and I am the assistant energy director for Trout
Unlimited, a national nonprofit conservation organization with
140,000 members and a mission to conserve, protect, and restore
North America's cold water fisheries and their watersheds. I am
also here today on behalf of Sportsmen for Responsible Energy
Development, a coalition of nearly 500 organizations and
businesses. The organizations that I represent support
responsible energy development. We work with numerous
stakeholders, including agencies, industry, and other
sportsmen's organizations to find ways that energy development
can move forward in ways that conserve wildlife and our hunting
and fishing heritage.
I would like to emphasize that Federal public lands are of
great importance to hunting, fishing, and the economy. In my
home State of Montana, 75 percent of hunters, myself included,
hunt on public lands, and in 2010 more than 229 million people
visited Forest Service and BLM lands, with an economic impact
of $21.9 billion. Because public lands are managed for multiple
uses, not only do they provide benefits for sportsmen and the
economy, but they also allow opportunities for energy
development and numerous other uses. This isn't always the case
for private lands and State lands, however. In some cases, they
are not managed primarily for energy development. However, the
vast majority of public lands require a balance where no one
use is allowed to trump another.
Due to the multiple stakeholders on public land, early
collaboration and input from diverse interests is essential to
ensure sound, balanced decisions. This early coordination is a
key component of the Interior Department's 2010 leasing
reforms.
Here is a personal example of the reforms at work. Every
year I camp along Cottonwood Creek, a stream in central
Montana. Cottonwood Creek has been restored with a population
of cutthroat trout. It was also proposed last year for a lease
by the BLM. So when I saw that, I took notice. Working with the
new leasing reforms, Trout Unlimited was able to comment on the
environmental assessment before the lease sale, draw attention
to the trout restoration efforts. The result was that the BLM
applied appropriate stipulations and was able to offer the
lease for sale without any objection from Trout Unlimited. This
is just one example where we have found the BLM to
constructively seek input from stakeholders, allowing them to
sell leases while conserving habitat and preventing future
conflicts.
I believe that smart planning will also prevent negative
impacts to fish and wildlife, impacts that can be difficult or
impossible to fix. For example, in the Pinedale Anticline in
western Wyoming, studies have shown that the sublette mule deer
herd has decreased by 60 percent, and it is no coincidence that
the winter range that these deer depend on to survive has been
extensively developed for oil and natural gas. This population
decline has resulted in a shorter hunting season and a 44
percent decrease in the number of hunters who are allowed to
hunt that deer herd. This loss in hunting opportunities raises
an important point. As valuable as winter range is for mule
deer and clean streams are for trout, this issue cuts much
deeper. It is personal for hunters and anglers in the West.
Public lands are the places where family and friends make
memories on crisp fall mornings spent hunting and where we go
to spend our summers fishing. They are the places where we shot
our first deer and landed our first trout, and it is these
places and experiences that we hope to be able to pass on to
future generations of hunters and anglers.
For us, this is really the core of the issue. These are not
just places on maps, these are places in our hearts, and that
is an important reason why sportsmen and women have a stake in
land use decisions. I believe that collaborating with hunters,
anglers, and other stakeholders is not undue regulation, it is
just good policy. We are not proponents of excess regulation,
but we are proponents of collaboration and seeking early input.
Like energy companies and developers, we deserve a say and a
fair shake, and that is what these leasing reforms and front-
end collaboration have given us.
In closing, public lands are vitally important to hunters
and anglers and our way of life. We also recognize the
importance of energy development on those lands. Through
transparency and opportunities for public input, we can both
develop energy resources and ensure that our public lands
remain a great place to hunt and fish. Thank you for the
opportunity to share my thoughts, and I would be happy to
answer any questions.
Mr. Whitfield. Thank you, Mr. Fisher.
[The prepared statement of Mr. Fisher follows:]

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Mr. Whitfield. Thank all of you for your statements. We
have two votes on the House floor. There is like 4 minutes left
in the first vote, and then there will be a second vote. So
rather than rush, what I am going to do, I am going to adjourn
this hearing. We intend to be back here at 11:30, and I will
ask my questions, and Mr. Rush will ask his questions, and then
any of the other members will ask their questions.
So I apologize to you all. You have already been very
patient. But we will hopefully be back in about 15 minutes. So
the hearing is recessed until 11:30.
[Recess.]
Mr. Whitfield. We will reconvene this hearing, and I, once
again, apologize for the delay. Mr. Rush is on his way, and I
know he has some questions, and I know Mr. Gardner has some
questions, and there may be others that come in, but at this
point, I will recognize myself for 5 minutes of questions and
thank you again for your testimony.
Mr. Williams, I read everyone's testimony, and I am hoping
I am getting some of this correct in my memory, but I believe
your company in Colorado had invested somewhere in the
neighborhood of maybe $10 million. Is that right?
Mr. Williams. That is correct.
Mr. Whitfield. OK. And I don't know the exact number of
years, but I know that this is a process that has been going on
for a number of years, and the regulations have been changed
and demands have been changed. That generally is correct,
right?
Mr. Williams. Correct.
Mr. Whitfield. Now, on this lease or leases that you have
from the Federal Government, if you do not produce by a certain
time, do you lose those leases?
Mr. Williams. Yes, you have certain performance criteria.
Drilling is generally the word they use, that you need to have
drilled within this amount of time or your leases will go away.
Mr. Whitfield. Does that mean drilling for production or
drilling for exploration?
Mr. Williams. We are in an exploration phase, have been in
an exploration phase for different horizons that have showed up
in the last few years, particularly.
Mr. Whitfield. The reason I ask the question, we have had
like 27 hearings on energy, and I hear the President talk about
this a lot and others, and there is a comment, actually Ms.
Goldfuss referenced it to a degree, and that is, that we have a
lot of these companies out here that have a multitude of
leases, and they are not doing anything on them, and when I
hear the President talk about it, the impression that he leaves
is we have these entities that have all these leases, and they
are complaining they want more leases, and yet they are not
even utilizing what they have, and maybe Mr. Helms and Mr.
Sullivan can comment on this because you all are on the
regulatory side as well, and Ms. Sgamma as well, but my
impression is, and you all can correct me if I am wrong, that
one of the primary reasons the drilling is not taking place is
just the multitude of regulations and the obstacles that you
have to go through in obtaining a permit.
Now, I referenced the Shell example off the coast of Alaska
where they spent 5 or 6 billion dollars, and they still don't
even have a permit for exploration, so am I correct in assuming
that the reason a lot of these leases have not been utilized is
the regulatory side of it? Would you agree with that, Mr.
Helms?
Mr. Helms. Chairman Whitfield, let me start by saying yes,
I believe you are absolutely correct. Prior to 2008, we had
this exact problem on the Fort Berthold reservation in North
Dakota. We had a period of time there from 1986 through 2007
where only one well got drilled on the Fort Berthold
reservation. We were drilling all around it, and the tribe
there appealed to Congress and they also appealed to us to step
in and straighten out the regulatory and tax situation so that
they could develop their resources.
Two things happened. The State of North Dakota signed a
regulatory and tax agreement with the tribe which stabilized
taxation and put in place State regulations until the tribe
could write its own regulations. The second thing----
Mr. Whitfield. OK. Forgive me, I have a minute and 20
seconds left.
Mr. Helms. OK.
Mr. Whitfield. Do you agree theoretically with what I said,
Mr. Sullivan, that a lot of this has to do with regulatory?
Mr. Sullivan. Mr. Chairman, I do, particularly as you
mentioned before, the situation with Shell, which is an example
of not only delays in permits, but then at one point the
moratorium that was the Gulf moratorium was slapped on to
Alaska as well.
Mr. Whitfield. Ms. Sgamma?
Ms. Sgamma. The Department of Interior looks at it as if a
switch is flipped, so they don't take into account any of the
work, the environmental analysis, all of that is going on
background.
Mr. Whitfield. Mr. Williams, I think you have already
indicated that you agree generally with that?
Mr. Williams. Correct.
Mr. Whitfield. I have 36 seconds left now. Mr. Helms, the
reason I was moving so quickly, I read this article in The
Washington Post written by Steve Mufson, and it was entitled
``In North Dakota, The Gritty Side of an Oil Boom.'' While most
of the people I have talked to in North Dakota are quite
excited about the economic boom and the unemployment rate being
3 percent, as I read this article, I noticed that in this
article he talks about the problem of the oversize and
overweight trucks, he talks about the need for additional
schools because of all the children that are coming in, he
talks about the increase in the felonies that are being
committed in the State, he talks about the State's
infrastructure needs has been quadrupled since this thing
began, and he also talks about the pollution problems are
totally out of control, and he also talks about--Mr. Schafer of
the Sierra Club says that this thing is like a steamroller
coming toward us, and we have got to change these regulations,
we have got to make it more difficult to do business up here.
So here we have a State with an economic growth needed
production of fuels, domestic fuels. Would you have any comment
on this article? Have you read this article?
Mr. Helms. Yes, Mr. Chairman, and thank you for asking
about it. The article is filled with inaccuracies. For example,
the statement that our regulations are not as strict as many
States or that we don't have enough inspectors to keep up, we
increased staff by 20 percent, and we are increasing by another
10 percent in the first half of this year. Our regulations, our
waste regulations all comply with the EPA class II regulations,
so they meet all standards and exceed all the standards, and in
fact, when it comes to flaring, flaring is down, and natural
gas infrastructure is being built. The quotes from the World
Bank are inaccurate. If you use our actual measured numbers for
flared gas, we wouldn't even make the list of 20 countries, and
yet he puts us at fifth, and then he quotes such problems as no
pool cues for the pool table and a broken--let's see, I think
it is a broken treadmill, and the problem of some folks that
own a restaurant, and they are making more money but working
less hours.
Mr. Whitfield. That is horrible.
Mr. Helms. It is riddled with inaccuracies and
misstatements.
Mr. Whitfield. Thank you. I am not going to belabor the
point. Mr. Rush, I know you have got another engagement, too,
so you are recognized for 5 minutes.
Mr. Rush. I want to thank you, Mr. Chairman, and Ms.
Goldfuss, let me get right to it, in the interest of time. Can
you tell us about opportunities for other resource development
on Federal lands other than gas and oil development?
Ms. Goldfuss. Yes, definitely. When it comes to renewable
development specifically, the Department of Interior has been
trying different approaches, I think to address some of the
concerns and some of the issues that have come up through oil
and gas development to try and make it easier and faster for
solar development. For example, just last week, they released a
new process to speed up development in solar zones, and in the
coming months, we expect they are going to reach the 10,000
target that was laid out for the agency in terms of numbers of
permits released for renewables, and that is nonhydro, so we
are talking about solar, wind, and geothermal projects that
would be on public lands.
So it is a new approach. It is different, it is easier in
some cases, because we know where the sun is, we know where the
transmission is, versus oil which is underground, but it is a
process and an approach that we hope will reduce litigation and
get more solar online faster.
Mr. Rush. Mr. Fisher, I was listening to a lot of
interesting terms in your testimony, and you mentioned a number
of benefits of balancing multiple uses on public lands, but you
didn't put a lot of attention to significant economic benefits
to outdoor recreational activities on Federal lands. Can you
speak briefly to those benefits, those economic benefits?
Mr. Fisher. I can. You know, I mentioned in my testimony
that, you know, Forest Service and BLM lands have an economic
impact from visitors of $21.9 billion, and I know that in my
home State of Montana, you know, during hunting season, it is
hard not to see a blaze orange sign on restaurants, motels, all
across the State, small businesses that says Welcome Hunters.
It is certainly an extremely valuable economic impact for our
rural communities in places like Montana. As far as specific
numbers, you know, I can certainly get back to you with figures
from the U.S. Fish and Wildlife Service's survey.
Mr. Rush. Would you say that recreational use on Federal
lands, that would be a vibrant part of the economy that we
should take into consideration as we consider how Federal lands
are being utilized?
Mr. Fisher. Yes, I would agree with that statement.
Mr. Rush. Ms. Goldfuss, do you have some specific numbers?
Ms. Goldfuss. I can expand a little bit on that. The
Outdoor Industry Association released a report in conjunction
with the Western Governors Association earlier in the summer,
and it had brand new data looking at the outdoor industry as a
whole, and their numbers show 6.1 million direct American jobs,
$646 billion in outdoor recreation spending each year, $39.9
billion in Federal tax revenue, and $39.7 billion in State and
local tax revenue, and frequently, we hear complaints that
these jobs are just in hotels or chambermaids, but they
released an actual breakdown of where these jobs are located,
and 20 percent are in the manufacturing industries, and you
have 12 percent in accommodation and food service, and then a
mix between many other industries.
So it is a huge economic industry, and it is a big driver,
and we are talking about all across many sectors. So the boom/
bust concerns that you sometimes have with fossil fuels you
certainly don't have with outdoor industry, and it has been
growing even despite the great recession. It is one of the few
industries that had growth throughout.
Mr. Rush. Thank you. Thank you very much. I yield back, Mr.
Chairman.
Mr. Whitfield. Thank you, Mr. Rush. At this time I
recognize the gentleman from Colorado, Mr. Gardner, for 5
minutes.
Mr. Gardner. Thank you, Mr. Chairman, and thank you to the
witnesses for joining us today. I would like to, in particular,
welcome Mr. Williams and Ms. Sgamma from Colorado for joining
us today.
Just a couple of questions. Ms. Sgamma, I have seen
statistics, I have seen other numbers out there that talk about
the number of permits that have been denied, delayed over the
past several years by this administration. Do you know how many
jobs are currently being held up as a result of those permit
delays?
Ms. Sgamma. Well, it is a three-pronged approach on Federal
lands. If you can get through the leasing phase and the
environmental analysis phase, and then the permitting phase,
then you can finally drill a well. So right now, we are seeing
a huge backlog in the environmental analysis phase, and from
just 20 projects that are proposed, we could create over
121,000 jobs. That is just from 3,100 wells drilled a year. If
we look at those projects and see which ones have been delayed
over 3 years, we find that the Federal Government is preventing
about 65,000 jobs and $15 billion in economic activity every
year.
So those are long-term jobs over the life of the project
and those projects. So some of those projects are delayed even
over 7 years. So that is a clear example where the Federal
Government is preventing companies from operating on those
leases and creating jobs.
Mr. Gardner. So 65,000 jobs that we could have hired that
could be people back to work, good-paying jobs for their
families, and yet we hear claims from this administration that
it is doing everything, bending over backwards to make things
easier, less red tape. Do you agree that this administration is
making it easier for energy development?
Ms. Sgamma. They have been making it easier for wind and
solar, but certainly not for oil and gas. They have added new
layers of analysis on top of existing layers of analysis on the
leasing phase, they have let very few projects be approved, and
they have--permitting times have increased to 298 days.
Mr. Gardner. Do you believe the Department of Interior has
taken into account your concerns when it comes to rules and
regulations that they are currently issuing or considering?
Ms. Sgamma. No, I don't think they have adequately taken
into account industry information. For example, on the
hydraulic fracturing rule, Mr. Nedd this morning couldn't
answer how much that cost is. We have provided lots of
information on the fact that that well and new wells will have
an added cost of a quarter-million dollars. That is a quarter
of a million dollars to Reed Williams and other small producers
as well as other companies, and that just means that that is
$250,000 less available per well, and in the aggregate about
$1.6 billion annually just from these new BLM fracking rules,
and that just means less money invested in the West in public
land States.
Mr. Gardner. And I hear a lot of concern from opponents of
oil and gas that there are leases that aren't being utilized or
are being underutilized, and Ms. Sgamma, I guess my question to
you, isn't it a little bit like a business with their inventory
where you actually need to have more inventory on hand than you
are going to sell that day because you need to have the
inventory to make your business work, and so if you could
address that a little bit?
Ms. Sgamma. Certainly, appreciate it. Well, right now we
are operating on 49 percent of active leases. That is a huge
number, that is a high utilization rate, and it is up from
about 28 percent in the 1980s. So we were leasing less acreage
and were utilizing more. But the fact of the matter is, the
Federal Government doesn't give us any credit for all the
background work. They don't give us credit for the fact that
they are holding up over 7 years' projects. So those leases to
them look like they are nonproducing, even though the Federal
Government itself is the one holding that up. It is a total
catch-22 situation.
And then there is always going to be a portion of the
inventory that is not developed because an operator goes out,
does some work, determines there is not enough oil and gas or,
you know, it just isn't going to work out, so there is always
going to be an inventory because it is a dynamic industry, we
are going out, discovering, exploring, and sometimes it works
out, sometimes it doesn't. So a lease is just a definite maybe.
Mr. Gardner. And you mentioned 65,000 jobs that number, I
think, about 20 projects. What revenue would that equate to the
Federal Government if they were to go forward?
Ms. Sgamma. You know, I don't remember off the top of my
head. I think it was $139 million a year.
Mr. Gardner. $139 million a year.
Mr. Williams, we have heard a lot of discussion about
debate on whether or not operators are leaving Federal lands
for non-Federal lands. I am wondering if you could talk about
some of the challenges that you faced and heard of from your
colleagues in the industry when it comes to that.
Mr. Williams. Certainly, thank you. Yes, the environment is
tremendously important. Private dollars are supposed to come in
to be an investment in my company's drilling wells, and all of
the difficulties that in the regulatory environment starts
being talked about out there in the world of dollar bills, they
just stop being interested in investing on Federal lands, and
they wait and say, well, go get some lands in east Texas where,
you know, when you lease land there, the guy, the private owner
that owns it will say, Mr. Williams, you want to come drill a
well? You can drill it in my kitchen, you know.
So that whole environment changes everything of our ability
to fund moving projects forward. So regulatory things then pile
up on each other, and they cross each other. We had a situation
where we had an EA done, an environmental assessment, and there
was one well pad that the forest rangers came to us and said,
we have decided we don't like the drainage pattern in that
area, and we would like for you to move that well. So you say
fine, let's go out there together and pick the replacement
site, and we do it, and then we get a call that says, oh, you
have got a new site, and it means you have got to do a new EA,
and it can take 2 more years, another $100,000 of consulting
fees.
Mr. Gardner. The bottom line is people who would say that
you are moving to non-Federal lands because it is just better
there, the fact is that there is a bias, a prejudice when you
do business with the Federal Government on Federal leases?
Mr. Williams. Correct.
Mr. Gardner. Making it difficult, so difficult it is
forcing people out.
Mr. Williams. Very difficult. And it is unnecessary. We are
able to as an industry now drill horizontally and not do damage
to the surface, all goals that were brought to us, and there is
tremendous reserves owned by the Federal Government. You have
got to remember that the whole Louisiana Purchase expands up
right through the Rocky Mountains, and it happens to be where
the Great Cretaceous Seaway was, and it is where all of our oil
and gas reserves are, including off the coast of Texas in
private lands, and we have a choice to drill on them or not.
Thank you for the question.
Mr. Whitfield. The time has expired. I just have one other
question, Mr. Clements, I would like to ask you. You made
reference in your testimony that the President's 2012-2017
energy plan really didn't do anything for the country from your
personal experience and from your company's perspective. Could
you just summarize why you think that is the case?
Mr. Clements. Basically I didn't see any kind of economic
data to where, you know, it didn't seem like it was a great big
announcement. They come out and say we are going to do a
thousand leases and create a million jobs. I didn't see any of
that information in the leasing plan, and then when you look at
it, we are still drilling in the same area for the last decade,
and how can you----
Mr. Whitfield. So no new areas?
Mr. Clements. Yes, there is no new areas.
Mr. Whitfield. OK, thank you.
Did you have anything else, Mr. Rush?
Mr. Rush. No, no thank you.
Mr. Whitfield. OK. Well, first of all, I want you to know
it is kind of rushed this afternoon, but we do have all of your
testimony, and we have read all of the testimony, and it is
part of the record, and I genuinely appreciate all of you
taking time to come and express your views on these important
issues, and those of us in the committee look forward to
working with all of you as we move forward to try to become
more energy independent and stimulate our economy. So thank you
very much.
Mr. Rush. Mr. Chairman, before we conclude this hearing of
the committee, I ask unanimous consent to enter into the record
an article that I mentioned in my opening statement, an article
by Mr. Richard A. Muller, written by Mr. Richard A. Muller that
appeared in The New York Times on July 28, 2012.
Mr. Whitfield. Without objection, we will enter it into the
record.
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Mr. Whitfield. Thank you very much. So that concludes
today's hearing and thank you all once again. We will leave the
record open for 10 days.
[Whereupon, at 12:04 p.m. the subcommittee was adjourned.]
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