[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
OPPORTUNITIES LOST: CONSTRAINTS ON OIL AND GAS PRODUCTION ON FEDERAL
LANDS AND WATERS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON ENERGY POLICY,
HEALTH CARE AND ENTITLEMENTS
of the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
MAY 16, 2013
__________
Serial No. 113-27
__________
Printed for the use of the Committee on Oversight and Government Reform
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee MATTHEW A. CARTWRIGHT,
TREY GOWDY, South Carolina Pennsylvania
BLAKE FARENTHOLD, Texas MARK POCAN, Wisconsin
DOC HASTINGS, Washington TAMMY DUCKWORTH, Illinois
CYNTHIA M. LUMMIS, Wyoming ROBIN L. KELLY, Illinois
ROB WOODALL, Georgia DANNY K. DAVIS, Illinois
THOMAS MASSIE, Kentucky PETER WELCH, Vermont
DOUG COLLINS, Georgia TONY CARDENAS, California
MARK MEADOWS, North Carolina STEVEN A. HORSFORD, Nevada
KERRY L. BENTIVOLIO, Michigan MICHELLE LUJAN GRISHAM, New Mexico
RON DeSANTIS, Florida
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Stephen Castor, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
Subcommittee on Energy Policy, Health Care and Entitlements
JAMES LANKFORD, Oklahoma, Chairman
PATRICK T. McHENRY, North Carolina JACKIE SPEIER, California, Ranking
PAUL GOSAR, Arizona Minority Member
JIM JORDAN, Ohio ELEANOR HOLMES NORTON, District of
JASON CHAFFETZ, Utah Columbia
TIM WALBERG, Michigan JIM COOPER, Tennessee
PATRICK MEEHAN, Pennsylvania MATTHEW CARTWRIGHT, Pennsylvania
SCOTT DesJARLAIS, Tennessee TAMMY DUCKWORTH, Illinois
BLAKE FARENTHOLD, Texas DANNY K. DAVIS, Illinois
DOC HASTINGS, Washington TONY CARDENAS, California
ROB WOODALL, Georgia STEVEN A. HORSFORD, Nevada
THOMAS MASSIE, Kentucky MICHELLE LUJAN GRISHAM, New Mexico
C O N T E N T S
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Page
Hearing held on May 16, 2013..................................... 1
WITNESSES
Mr. Tommy P. Beaudreau, Acting Assistant Secretary for Land and
Minerals Management, U.S. Department of the Interior
Oral Statement............................................... 5
Written Statement............................................ 7
Mr. Frank Rusco, Director, Natural Resources and Environment,
U.S. government Accountability Office
Oral Statement............................................... 12
Written Statement............................................ 14
OPPORTUNITIES LOST: CONSTRAINTS ON OIL AND GAS PRODUCTION ON FEDERAL
LANDS AND WATERS
----------
Thursday, May 16, 2013,
House of Representatives,
Subcommittee on Energy Policy, Health Care &
Entitlements,
Committee on Oversight and Government Reform,
Washington, D.C.
The subcommittee met, pursuant to call, at 10:32 a.m., in
Room 2154, Rayburn House Office Building, Hon. James Lankford
[chairman of the subcommittee] presiding.
Present: Representatives Lankford, Jordan, Chaffetz,
Walberg, Farenthold, Hastings, Speier, and Horsford.
Also Present: Representative Lummis.
Staff Present: Molly Boyl, Majority Parliamentarian; Joseph
A. Brazauskas, Majority Counsel; Daniel Bucheli, Majority
Assistant Clerk; Caitlin Carroll, Majority Deputy Press
Secretary; Sharon Casey, Majority Senior Assistant Clerk; Steve
Castor, Majority Chief Counsel; Brian Daner, Majority Counsel;
Adam P. Fromm, Majority Director of Member Services and
Committee Operations; Linda Good, Majority Chief Clerk; Ryan M.
Hambleton, Majority Professional Staff Member; Laura L. Rush,
Majority Deputy Chief Clerk; Jaron Bourke, Minority Director of
Administration; Nicholas Kamau, Minority Counsel; and Adam
Koshkin, Minority Research Assistant.
Mr. Lankford. The Subcommittee on Energy Policy, Healthcare
and Entitlements come to order.
I would like to begin this hearing by stating the Oversight
Committee mission statement. We exist to secure two fundamental
principles: first, that Americans have the right to know that
the money Washington takes from them is well spent and, second,
Americans deserve an efficient, effective Government that works
for them. Our duty on the Oversight and Government Reform
Committee is to protect these rights.
Our solemn responsibility is to hold Government accountable
to taxpayers, because taxpayers have the right to know what
they get from their Government. We will work tirelessly in
partnership with citizen watchdogs to deliver the facts to the
American people and bring genuine reform to the Federal
bureaucracy. This is the mission of the Oversight and
Government Reform Committee.
To the witnesses, thank you. I am going to do a brief
opening statement. Our ranking member will do an opening
statement. We will go straight to your testimony after that. I
do have to warn you that I have a cold, and for all those who
have compassion for me and my cold, about three days from now,
if you shook my hand, you will have great compassion for me. So
I apologize for that and we will struggle through this
together.
The American people, we as taxpayers, we own millions of
acres of land for our national benefit. We hike, we camp on it;
we boat, fish, and swim in it; we drive through; and we use the
resources from it. We protect it for the future and we manage
it for today. The minerals underlying our public lands are held
in the public trust and the Department of Interior is in charge
of managing these materials for the benefit and the profit of
the American people.
The Department of the Interior administers 700 million
subsurface acres in Federal mineral estate and over 1.7 billion
acres in Federal offshore acreage. There are extraordinary
quantities of oil and natural gas under these lands and waters.
These resources promise to deliver two things unimaginable just
a decade ago: American energy independence and a broad economic
renaissance.
A recent economic study found that increasing access to
Federal resources can generate $127 billion in economic
activity and 552,000 jobs annually over the next seven years.
Americans are trying to explore energy on American land are
facing some roadblocks. At a field hearing last year, this
committee heard a story from Mike McDonald, a small producer
with 11 employees and four decades of experience in oil and gas
production. Mike has a few leases where he has to work with the
Bureau of Land Management. He testified that once those wells
run dry, he will never again bid on another BLM lease. The
reason? He said because he has to interact with the Federal
Government's bureaucracy.
Stories like these are all too common. The simple fact is
the Department's policies have become sometimes onerous, time-
consuming, and costly, so that some producers give up or don't
even try. The result is billions of dollars in capital left on
the sidelines, hundreds of thousands of good paying jobs
foreclosed, and continued dependence on foreign imports. This
is especially difficult to understand in areas of the Country
that want the economic development and jobs that come with
energy exploration.
The committee understands the Department is obligated to
manage our oil and gas resources in accordance with acts of
Congress. However, there is no question that the Department
possesses discretion to facilitate oil and gas production in a
timely, responsible, efficient manner, and environmentally
sensitive. We know the solutions are out there,
noncontroversial policies the Department can begin to implement
immediately. We just ask a few questions of today.
Can we modernize and streamline the permitting process? In
an electronic world, BLM still relies primarily on hard copies
and mail. Real-time interfacing can facilitate complicated
negotiations and dramatically reduce permitting delays.
Can we rededicate ourselves to an existing pilot program
that concentrates resources on the busiest, most overworked BLM
field offices? The program, that was instituted in 2005 to
ensure that staff and diverse Federal regulatory agencies,
including BLM, the Fish and Wildlife Service, and EPA, work in
the same building for each region. This greatly improves
coordination and reduces delays.
Can we open more areas to oil and gas lease sales? At our
confirmation hearing in March, Secretary Jewell stated that her
goal was to bring balance between conservation and energy
development. I couldn't agree more, especially now that only a
tiny sliver, about 5.9 percent of our public lands, are open to
oil and gas leasing.
Can we complete a long-promised seismic study in the mid-
and South Atlantic outer continental shelf? This study is
critical if we hope to take off the blindfold and see what is
out there.
One more thing: Can we answer the question--let me put a
map here on the screen, as well, so everyone can see it. When
we look at some areas of energy exploration, this is a section
of North Dakota, and I think the witnesses have a copy of this.
If you look at the dots, each dot represents a well, and there
are many areas where you will see a dot right next to where
Federal lands are located, but not crossing the border. Rarely
they cross into it. This section of North Dakota has seen a
tremendous amount of energy exploration, but rarely actually
venturing into Federal lands.
The question is, why? They pay less in royalties if they go
into Federal lands, so you would assume the price is less, so
why wouldn't they go into Federal lands and explore, because it
would be cheaper for them? But instead they don't choose to go
into those areas when they have the opportunity. Why?
Ultimately, the goal of this hearing is not to condemn the
Department but, rather, to work with all departments, including
Secretary Beaudreau, to figure out what is going wrong and to
find some common sense solutions.
I now recognize the distinguished ranking member, the
gentlelady from California, Ms. Speier, for her opening
statement.
Ms. Speier. Mr. Chairman, thank you for holding this
hearing.
Secretary Beaudreau and Mr. Rusco, thank you for
participating in it.
I have a slightly different view on this topic. I think
this hearing should focus on the thousands of leases for
millions of acres of Federal land and water that oil and gas
companies are sitting on, but not producing on. For example, in
2012, nearly 46 million offshore acres were under lease or
approved for exploration, while only 6.6 million acres were
producing any oil or gas. A full 70 percent of the open leases
for offshore oil and gas production are inactive.
These are inactive not because they don't have oil and gas.
They are inactive because they are just not drilling on them.
It is estimated to contain 17.9 billion barrels of oil and 49.7
trillion cubic feet of natural gas.
Even more importantly, we ought to be examining the
Department of Interior's failure, and I underscore failure, to
collect the full amount of revenues and royalties that these
companies owe the American people for the oil and gas they are
producing or not producing from publicly owned lands. This
year, the GAO reported to Congress that Government royalty
collection for oil and gas drilling operations on Federal lands
are at high risk for waste, fraud, and abuse. Let me repeat
that: at high risk for waste, fraud, and abuse; precisely the
kinds of issues that this committee should be focused on.
While the total and aggregate revenues lost due to
inaccurate oil and gas production reporting has not been
determined, it is likely to be a very significant amount. When
the GAO looked closely at oil and gas leases in the Gulf of
Mexico, they found that about 5.5 percent of the time companies
did not submit the necessary royalty reports, potentially
resulting in $117 million of uncollected royalties. The GAO
also found that some companies reported negative royalty
values, potentially costing the Treasury another $41 million in
uncollected royalties.
Further, the GAO high risk report to Congress found that
the Interior Department allowed consistent errors in company
reported data on oil and gas production on public lands and
sales data that did not reflect the prevailing market price for
oil and gas. Now, why would we be not using prevailing market
prices for oil and gas?
The GAO also found that the Interior does not utilize
technologies that could dramatically reduce these errors, such
as wireless flow meters, similar to the basic smart meter
technology currently used in 36 million homes nationwide.
The money we are losing to these reporting errors is
significant. But if the American people knew that we in
Congress had authorized royalty-free drilling on public lands,
they would be throwing more than rotten tomatoes at us.
Interior data shows that the royalty-free drilling has
already cost the Treasury nearly $11 billion in lost revenue.
Royalty-free drilling is estimated to cost an additional $15.5
billion in foregone revenue over the next 10 years, and may
ultimately exceed $40 billion, equal to the federal income tax
paid each year by 9.4 million American families.
Then let's add the $7 billion of taxpayer subsidies to the
industry and ask ourselves how many more gifts do we have to
give to an industry already making record profits.
As the Country struggles with sequestration, budget
deficits, and across-the-board cuts, it is truly incredible and
unjustifiable that the Department of Interior is leaving money
on the table and in pockets of the oil and gas industry, rather
than putting it in the people's Treasury.
This is the Oversight Committee, and we should be doing
what our mission statement says: securing an efficient and
effective Government for the American taxpayer. What could be
more deserving a topic than making sure we collect the
royalties the oil and gas industry owes the American people?
Owes. Not prospective; owes. What could be a better time to do
it than now?
I hope Chairman Lankford will join me today in taking the
first steps in that direction by asking the GAO to analyze
Interior's progress in addressing the challenges GAO identified
with respect to revenue collected from oil and gas produced on
lands owned by the American people.
I thank the chairman and yield back.
Mr. Lankford. Thank you.
Members will have seven days to submit their opening
statements for the record.
We will now recognize our first and only panel today.
Mr. Tommy Beaudreau is the Acting Assistant Secretary of
Land and Minerals Management at U.S. Department of Interior.
Mr. Frank Rusco is the Director of Natural Resources and
the Environment, the U.S. Government Accountability Office.
Thank you both for being here. Pursuant to committee rules,
we will swear in all witnesses. If you would please rise and
raise your right hand. Thank you.
Do you solemnly swear or affirm the testimony you are about
to give will the truth, the whole truth, and nothing but the
truth, so help you, God?
[Witnesses respond in the affirmative.]
Mr. Lankford. Thank you. Let the record reflect the
witnesses answered in the affirmative. You may be seated.
In order to allow time for discussion, both of you have
been through this before, you know very well about the five
minute rule on that. We will be a little bit flexible on that
since this is the only panel, but would enjoy having some time
for questions, as well, and some interaction on that.
Mr. Beaudreau, you are first up on this one. Thank you.
STATEMENT OF TOMMY P. BEAUDREAU
Mr. Beaudreau. Thank you very much, Chairman Lankford,
Ranking Member Speier, and members of the subcommittee.
I thank you for the opportunity to appear today to discuss
the Interior Department's work to expand responsible energy
development and production on Federal lands and offshore. I am
pleased to appear with Mr. Rusco from the Government
Accountability Office. We have worked closely with Mr. Rusco
and his team on many issues relating to the stewardship of the
Nation's energy resources, and I appreciate very much their
insight and their recommendations.
Because this is my first appearance before this
subcommittee, I would like to take a moment to introduce
myself. I grew up in Alaska. My father worked on the Prudhoe
Bay oil field, on the North Slope, and he moved our family to
Alaska during the boom times in the 1970s. Like a lot of those
workers, he was laid off after the boom times went bust in the
mid-1980s. So I know firsthand the oil and gas industry's
central role in driving the Nation's economy and our energy
security. It is important to energy producing States like
Alaska, and what the industry means to the men and women who
work in it and to the families who depend on it for their
livelihoods.
I joined the Interior Department in June 2010, in the midst
of the response to the Deepwater Horizon oil spill, to help
lead the Department's broad reforms to strengthen offshore oil
and gas safety and environmental standards, as well as
strengthen Federal oversight, including the sweeping
reorganization of the former Minerals Management Service into
three separate, independent agencies with clear and focused
missions.
Following the completion of the reorganization, I became
the head of the newly formed Bureau of Ocean Energy Management,
which oversees responsible management of offshore oil and gas,
as well as renewable energy resources in U.S. waters. I believe
our reforms have been successful. Offshore oil and gas activity
is now at a pace exceeding that prior to the spill, and is
anticipated to increase even further as new exploration and
development continues and new discoveries are made. And that
work is happening more safely and more responsibly than ever
before.
We have successfully stood up the new oversight agencies,
and while we will always continue to work to enhance our
oversight capability and our regulatory efficiency, GAO has
removed the reorganization from its high-risk list.
In March I was formally appointed to be the Acting
Assistant Secretary for Land and Minerals Management at DOI,
and I now help oversee the stewardship of public lands, as well
as our offshore energy and mineral resources. DOI is an
important contributor in implementing the President's all-of-
the-above energy strategy, which includes expanding safe and
responsible production of our domestic oil and gas supplies,
both offshore and onshore, and seeking our regulatory and
oversight efficiencies so as to create a more efficient and
predictable environment for both Government and industry.
Chairman Lankford, I think some of the suggestions you
pointed out to in your opening are exactly in line with what
our new secretary has in mind and what we have in mind, so I
look forward to discussing those.
One of the keys to further unlocking the vast energy
resources with which our Nation is blessed is ensuring the
American people that development of those resources is being
done responsibly and with appropriate protections for the
environment. The Natural Petroleum Council, NPC, a Federal
advisory committee, recently completed a study requested by the
Energy Department, entitled Prudent Development: Realizing the
Potential of North America's Abundant Natural Gas and Oil
Resources.
I would like to highlight one of the four fundamental
conclusions of that study: that ``Realizing the benefits of
natural gas and oil depends on environmentally responsible
development and that the critical path to sustained and
expanded resource development in North American includes
effective regulation and a commitment of industry and
regulators to continuous improvement and practices to eliminate
or minimize environmental risk.''
This conclusion is premised on a sophisticated and
compelling insight into the relationships between industry,
Government oversight, and the public trust, and I couldn't
agree with it more. And I believe you alluded to these exact
same principles in your opening, Chairman. So I look forward to
discussing more with the committee and the subcommittee today
about what we are doing exactly along these lines and I look
forward to your questions. Thank you.
[Prepared statement of Mr. Beaudreau follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Lankford. Thank you.
Mr. Rusco.
STATEMENT OF FRANK RUSCO
Mr. Rusco. Thank you, Chairman Lankford, Ranking Member
Speier, and members of the subcommittee. I am pleased to speak
with you today about the Department of the Interior's
management of oil and gas produced on public lands and waters.
Interior manages the leasing of public lands and waters for
oil and gas exploration development and production. These
activities provide an important domestic source of energy,
create jobs in the oil and gas industry, and raise revenues
that are shared between Federal, State, and tribal governments.
Revenue generated from oil and gas produced from Federal
leases is one of the largest non-tax sources of Federal
Government funds, accounting for about $10 billion in revenues
annually in recent years.
It is important that Interior strikes the right balance
between providing access to oil and gas resources, while also
making the Nation's lands and waters available for multiple
other uses, including recreation, agriculture, fishing, mining,
and forestry. In addition, Interior is responsible for
protecting the environment and for enforcing Federal laws and
regulations on public lands and waters.
In recent years, GAO has undertaken many evaluations of
Interior's management of Federal oil and gas activities and
found numerous material weaknesses. These weaknesses hamper the
agency's ability to strike the right balance between
encouraging domestic oil and gas production on the one hand
and, on the other, maintaining operational and environmental
safety while providing reasonable assurance that the public is
getting the revenues to which it is entitled.
I will focus the remainder of my remarks on these areas of
concern.
In 2012, we reported on changes to Interior's oversight of
offshore oil and gas activities in the Gulf of Mexico. These
changes were brought about, in part, as a result of findings of
inadequate environmental and safety oversight in the Gulf, as
well as the need to better oversee drilling plans and evaluate
the performance of offshore oil and gas operators. In that
report we found that these changes to oversight had initially
led to increased permitting time frames. At the time, we
reported these time frames had begun to fall as oil and gas
industry and Interior became more familiar with the new
processes.
We also found that Interior was not collecting data needed
to identify and evaluate safety and other violations its
inspectors encountered on offshore drilling rigs and production
platforms. We made a number of recommendations aimed at
improving Interior's oversight and permitting processes.
Interior generally agreed with our recommendations and is
taking steps to implement them.
In a 2010 report to Chairman Issa of the full Committee on
Oversight and Government Reform, we found that Interior has
been unable to complete production inspections, maintain
reliable royalty and production data, and provide reasonable
assurance that the public is receiving its fair share of oil
and gas revenues. Specifically, in the 2010 report we found
that Interior has had longstanding challenges in hiring,
training, and retaining staff in key skilled positions.
For example, we reported that Interior experienced high
turnover rates in key oil and gas inspection and engineering
jobs. In addition to hampering production verification efforts,
these human capital challenges resulted in delays in issuing
leases and permits, and have caused Interior to miss its
statutory and agency goals for performing safety and
environmental inspections of oil and gas on Federal leases.
In a 2009 report we found that Interior lacked consistent
and reliable data on the production and sale of oil and gas
from public lands and, therefore, cannot provide reasonable
assurance that it was appropriately assessing and collecting
royalties.
In 2008 we found that Interior had not comprehensively
evaluated its revenue collection structure in over 25 years,
despite many important changes in the oil and gas industry
during that time.
Based on this body of work, we have made numerous
recommendations to Interior to improve its oversight of oil and
gas produced on Federal leases. Interior generally agreed with
our recommendations and has made good progress in implementing
many of them. However, its management challenges are great and
we have ongoing work looking at revenue collection efforts, as
well as Interior's persistent human capital challenges.
In closing, it is essential that Interior continue to
improve its management of oil and gas produced on Federal
leases and address its material weaknesses. The agency must be
able to provide Congress and the public with reasonable
assurance that billions of dollars of revenues owed the public
are being properly assessed and collected. Also, Interior must
maintain an appropriate balance between efficiency and
timeliness in leasing and permitting on one hand, and
protection of the environment and operational safety on the
other.
Thank you for the opportunity to speak about these issues.
I will be happy to respond to any questions you may have.
[Prepared statement of Mr. Rusco follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Lankford. Thank you.
I will recognize myself for five minutes for the first
round of questioning.
Mr. Beaudreau, I am sure you are hearing all of this from
Mr. Rusco as well on some of the recommendations, and I know
that some of the recommendations have already been implemented
and there is a process going on, but let me talk to you
specifically on some of the Federal permitting issues.
Can you point to a State right now that is not doing a good
job regulating oil and gas? Do you know of a State that is
having an issue with that in their regulatory system?
Mr. Beaudreau. My concern is not with criticizing any
particular State's regulatory and oversight regime with respect
to oil and gas. My concern is with ensuring that the Interior
Department, BLM specifically, fulfill its obligations under its
statutes for Mineral Leasing Act and our broad responsibility
for stewardship of Federal lands, which includes reconciling a
host of multiple uses. It is embedded in our mission.
Mr. Lankford. Sure.
Mr. Beaudreau. So that is what we are focused on, is
fulfilling our responsibilities under Federal law, not to
criticize any particular State. That said, there are a lot of
examples within States, Wyoming, Colorado, just to name two,
that have best practices that we can draw on in utilizing our
oversight as well.
Mr. Lankford. So the question is, from what Mr. Rusco is
mentioning, there are serious issues right now with human
capital, I think was the term that you used, of just managing
what we have now, and then the concern is that Interior is
looking to then add also an additional fracking rule on top of
that, what we already have. We already can't keep up with the
permitting time periods, there are dramatic delays to try to
get a basic permit; there are all kinds of human capital that
is a problem managing now; and then we are talking about adding
another layer on it from there.
I am trying to look for an issue here. They already receive
a State permit to do exploration for energy; they already have
standards they have to abide by. I am trying to figure out why
add an additional responsibility when we are having a tough
time keeping up with the previous responsibilities. Does that
make sense?
Mr. Beaudreau. Yes. And there are a couple components to
it.
Mr. Lankford. Okay.
Mr. Beaudreau. One is fulfilling our underlying
responsibilities.
Mr. Lankford. But can that be delegated to a group? Do you
have the authority to be able to say, okay, I am going to
designate this person or certify this State or recognize a
State that is doing a good job like you mentioned, Colorado or
Wyoming or other areas, and say, okay, they are doing a great
job, they are certified, they have it?
Mr. Beaudreau. To frame it slightly differently, we can't
delegate that authority, but we can draw from best practices
being used by States like Colorado, like Wyoming. So I think
there is something to that and, frankly, that is something we
are considering in the context of our re-proposed hydrofracking
rule.
The second issue, and you alluded to it in your opening, is
a resource allocation issue. We need greater flexibility to be
able to direct BLM's permitting resources to areas with demand.
Your map shows it. North Dakota: tremendous demand, tremendous
opportunity. BLM's resources aren't properly aligned to meet
that opportunity and that demand. And part of what we would
like, and part of what Secretary Jewell has already talked
about, is greater flexibility to match up with a very nimble
industry in the oil and gas industry.
Mr. Lankford. Is that something that is explainable when
you look at that map of North Dakota, to try to figure out why
there is so much energy exploration around Federal lands,
rather than on Federal lands, I mean, literally stationing
wells on the border on private lands all the way around it at
times?
Mr. Beaudreau. I think there are a couple dimensions to it.
I think there is the resource issue that we have discussed. I
also think there is, in general, because of this multiple use
mission that we have on Federal lands and because the American
people have a lot of different interests in how Federal lands
are used, we have to manage those potential conflicts and do
our best to, very early in the process, de-conflict those areas
so that they don't get tied up in litigation.
Mr. Lankford. So how do States manage that and we don't? Is
there something that we can fix legislatively to be able to
repair that, or is it some new authority you need, or just a
reorganization within the structure itself?
Mr. Beaudreau. I think we have undertaken substantial
reforms of our leasing process. We brought protest rates way
down over recent years because of the reforms. So part of it is
public engagement; part of it is the reforms that we have put
in; and part of it, and I do think Congress can help with this,
is additional flexibility in providing us resources and with
how we use those resources.
Mr. Lankford. Okay. We will follow up on that in a moment,
then, and come back from there.
Let me yield to the ranking member, Ms. Speier.
Ms. Speier. Thank you, Mr. Chairman.
Secretary Beaudreau, 76 percent of the offshore acres
leased for development already are not being used for oil
extraction. How many acres has the Department actually leased
out of the total Federal estate?
Mr. Beaudreau. I don't have that precise number. What I can
speak to is some of the reasons why that happens and some of
the reforms we put in place to encourage diligent development
of leases acreage.
Ms. Speier. Well, let me just ask the questions and see
where we go from there, and maybe you can incorporate that
answer.
I am trying to find out whether this is a anti-competitive
action that we are allowing to take place under our watch,
where some companies are buying up leases, not actually
drilling on them, but setting it up so at some future time they
have access to them and no one else can. So I want to know
about whether or not we should create some kind of rule around
use it or lose it, because these leases go on for how long?
Mr. Beaudreau. It depends. There is variability under OCSLA
and how long the leases can be issued for. The maximum is 10
years. So we are quite concerned with diligence, with operators
using drilling, the lease holdings that they have. It is for
those reasons that, with respect to offshore leasing, we have
implemented a number of reforms in that area as well, including
increasing the minimum bid that an operator has to put on the
table to acquire an acre of OCS property or lease. We have
increased that minimum bid from $35 historically to $100 today,
and I think what we have seen over the last couple lease sales
in the Gulf of Mexico is the impact of this focus on diligence.
We are not seeing broad acquisition of acreage; we are
seeing much more focus on highly prospective areas, and that is
encouraging because we want to see investment in areas that are
prospective and we want to see operators drill those areas and
bring it into production.
Ms. Speier. Okay, in 1996 Congress attempted to encourage
deepwater drilling. Do we need to encourage deepwater drilling
today?
Mr. Beaudreau. If the reference is to royalty relief, I
don't believe any form of royalty relief with respect to
offshore oil and gas is appropriate. Our current leases do not
include royalty relief.
Ms. Speier. Okay. I want to talk about the 24 companies
that pay no royalties for the leases they have. Who are they?
Mr. Beaudreau. I can't list for you the companies, but they
are the companies who purchase leases under a regime that
provided royalty relief. Some of those leases are in production
now.
Ms. Speier. Are these big companies?
Mr. Beaudreau. Some of them are, yes.
Ms. Speier. Are they the Exxons, the Mobils, the Standard
Oils? Are these big companies that have these oil-free leases?
Mr. Beaudreau. Some of them are, yes.
Ms. Speier. I mean these royalty-free leases?
Mr. Beaudreau. Royalty-free. Some of them are. Some of them
have lease contracts that provide for royalty relief under
their leases, and that is a legal obligation that we are stuck
with.
Ms. Speier. And how long are those leases good for?
Mr. Beaudreau. Again, variability. Once those leases are
brought into production, the term is indefinite as long as the
lease is producing.
Ms. Speier. So they have an indefinite lease to drill oil
and pay no royalties to the taxpayers of this Country?
Mr. Beaudreau. Under their lease contract, under those
legal terms that were in effect at the time they acquired their
lease, yes, as long as they are producing from that lease,
those terms apply including, the royalty relief.
Ms. Speier. Am I the only one who thinks that is a little
outrageous?
Mr. Hastings. Would the gentlelady yield?
Ms. Speier. Yes. I would be happy to.
Mr. Hastings. Well, the question you ought to ask is why
did the administration in charge then let those leases out. I
mean, a contract is a contract.
Ms. Speier. I understand that.
Mr. Hastings. And while there may be some concerns about
that, I think that the question is why were the leases let out
in the first place.
Ms. Speier. Evidently, the leases were made at that point
in time to encourage this deepwater drilling, I am assuming. Is
that correct?
Mr. Beaudreau. I wasn't here then, and that is not the
policy that I would favor today, let me put it that way.
Ms. Speier. All right, so my time is about to expire, but
when these leases are granted and then they don't act upon
them, is there any cost to the Department?
Mr. Beaudreau. So, in general, again, our policy is to
encourage diligence, because we want to see acreage that we
lease brought into production. We do collect rentals during the
period, during the term of the lease prior to production, but I
think there is an opportunity cost when we see investment in
acreage that isn't drilled, isn't brought into production, as
opposed to acreage that is more prospective. So in that sense I
think there is an opportunity cost to the American people
there.
Ms. Speier. I yield back.
Mr. Lankford. Thank you.
Mr. Chaffetz.
Mr. Chaffetz. Thank you, Mr. Chairman.
Mr. Beaudreau, in the current law there is a use it or lose
it provision, correct? The Secretary of Interior has the power
to cancel a lease if they don't produce within 10 years?
Mr. Beaudreau. There are diligence requirements within the
lease. You have to drill a well under the lease within the
lease term or the lease expires.
Mr. Chaffetz. So there are use it or lose it. A hundred
percent of everything that is leased does not actually get into
production, right, because there isn't necessarily the assets
below the ground that we thought there were going to be,
correct?
Mr. Beaudreau. That is a geologically true statement, yes.
Mr. Chaffetz. And getting into production, I mean, it is
not as if, once you get the lease, you can just flip on the
switch, right? These things can take years, up to 10 years, to
actually get into production, correct?
Mr. Beaudreau. That is correct. And in some of the high-
value prospective areas that are emerging in the Gulf of
Mexico, for example, there is a lot of assessment and work a
company has to do before those areas can be brought into
production. That is true.
Mr. Chaffetz. Secretary Jewell has testified in her
confirmation hearing that there was a need for ``balance
between conservation and energy development on public lands.''
My understanding is that less than 6 percent of all land
actually has oil and gas production on it. Is that number
correct, less than 6 percent?
Mr. Beaudreau. To talk about sort of areas, sort of broadly
is difficult; different areas have different resources.
Mr. Chaffetz. Statistically, though, we are able to look at
the acres that are open for drilling. I mean, it is a fairly
easy statistical thing. I will take your word for it if you
don't have that number right in front of you, but the point I
guess I would like to make is that less than 6 percent of the
land in this so-called balanced approach is actually open to
oil and gas drilling.
Let me move on, because my time is eroding here. I really
would like to explore the personnel challenges that Mr. Rusco
highlighted. I don't know if I have time to go deep into this,
but one of the concerns here is the number of new leases. Let
me kind of read some statistics and see if you think there is
any problem.
Between the fiscal years of 2009 and 2011, the number of
new leases offered by the Department of Interior fell by 42
percent. In Utah we had a drop of nearly 64 percent, and you
can see the concern because these numbers really bear out over
the next 10 years, they don't necessarily show up in the
immediate time. So why is the number of leases dropping so
dramatically at the time that our Country needs so much energy
production?
Mr. Beaudreau. So there are currently 49,000 oil and gas
leases on Federal land. Twenty-three thousand of those leases
are producing. So again, on the issue of leasing reform to try
to encourage onshore development, reduce conflict, we have
focused very intensely on de-conflicting those areas so that,
when leases occur, when we issue leases, operators have a much
easier time, much more straightforward without objection,
without lawsuits, to operating those leases.
Mr. Chaffetz. Okay, well, if that is true, then why, in
2007, of the approved 7,124 permits had an average time of 196
days to get through the process. In 2012 you only approved
4,256 permits, with an average time of 228 days. So States will
take 10 to 15 days to go through this approval process, but you
are actually approving a lot less permits and it is taking more
time.
Mr. Beaudreau. So on the general point of improving the
process, trying to reduce times within recognition of our
responsibilities for stewardship of Federal lands, I agree with
you, I think there is an opportunity, and I think BLM embraces
this, I think there is an opportunity to bring greater
efficiency to the permitting process. There are dimensions to
that; resources is part of it, aligning ourselves with industry
on what the opportunities are part of it, bringing greater
efficiency----
Mr. Chaffetz. Help with the resources, because I am going
to run out of time here. If you are going from 7,000 permits
down to 4,200 permits and you are taking an extra 30 days to do
it, explain to me the personnel changes between 2007 and 2012.
Do you have less personnel? Do you have more personnel? Is
there a turnover problem?
Mr. Beaudreau. Well, GAO has been very helpful in pointing
this out. We do have challenges recruiting petroleum engineers,
for example, the people involved in permitting that activity;
there is a lot of competition for those folks, including with
industry. That is a general problem. There are opportunities
for greater efficiencies. Introducing an electronic system, a
straightforward system could shave weeks off of permitting
times. We are open to that, we want that to happen, and it is
something Secretary Jewell has already focused quite
specifically on.
Mr. Chaffetz. Do you know do you have less people or more
people?
My time has expired, I yield back, but if the gentleman
could answer do we have more personnel or less personnel than
we did in 2007.
Mr. Beaudreau. I can't answer that specifically, but I know
personnel challenges are a persistent issue, well documented by
us and by the GAO.
Mr. Chaffetz. If you could help get back to us, that would
be great.
Thanks, chairman. Appreciate everybody's indulgence.
Mr. Lankford. Thank you.
Mr. Farenthold.
Mr. Farenthold. Thank you very much, Mr. Chairman.
I would like to turn just for a couple seconds to offshore.
As I hear from some of our Texans involved in offshore
drilling, there was, in the past, back when it was MMS and
BOEMRE, there was a much more cooperative attitude between the
regulators and the drillers. Oftentimes, when a drilling rig
would become available on short notice, permits could be pushed
through rapidly. Now the permitting process is taking much
longer and, in fact, sometimes permits aren't being issued
until one or two days before the proposed drilling date, and
the reports that I have heard anecdotally are the Government is
actually sitting on these permits until right before because
they are thinking there might be a change in the law. Doesn't
it seem like you ought to issue the permits when they are done
under current law, and deal with changes in regulations when
and if they actually happen?
Mr. Beaudreau. So following the Deepwater Horizon spill,
part of what we did is we introduced very strong, heightened
standards around drilling safety and environmental protection.
It is true that for a period of time after the introduction of
those standards there was uncertainty around the permitting
process and permits did take a long time to issue. We are three
years removed from that. I met with oil and gas CEOs, along
with Secretary Jewell, just last week in Houston, at OTC, and I
think what we have seen, and this has not been by accident, has
been the product of a lot of hard work and close engagement
with industry is a much more predictable permitting time frame,
and time lines for issuing permits have dropped dramatically
over time. So to answer sort of the last point you made about
whether we are intentionally sitting on permits in anticipation
of regulatory changes, I will tell you that is absolutely not
true.
Mr. Farenthold. Great. That is reassuring to hear. As a
result of the Deepwater Horizon, BSEE is also looking at new
regulations with respect to blowout preventers. Do we have any
idea how that is coming along and when we can expect to see
something?
Mr. Beaudreau. The BOP rule, obviously coming out of
McConda, one of the central issues was the performance of the
Deepwater Horizon blowout preventer. That was a focus of the
President's commission review, as well as DOIs investigation,
and there is substantial need for continued improvement with
respect to BOPs. We put in some rules already. The BOP rule is
a high priority for BSEE. I would expect the draft rule to be
published sometime this year.
Mr. Farenthold. I know the producers are looking forward to
knowing what they have to deal with, so the sooner that comes
down----
Mr. Beaudreau. And we look forward to engaging on it. Part
of what we need to do is continue engagement with industry
around these rules.
Mr. Farenthold. All right. I want to get to some of the
things that some of the other questions have dealt with,
specifically dealing with the allegation that oil and gas
producers are sitting on their Federal leases. What I tend to
hear is there is a permitting issue and it takes them a real
long time to get a permit. Now, I also hear that there are
reports that there are 6,000 approved, but unused drilling
permits. Are you aware of the reporting of that number of
unused permits, we are counting ones that have gone beyond the
two year deadline in the permit and actually aren't still under
an active permit?
Mr. Beaudreau. I am aware that there are a substantial
number of APDs that BLM has approved that have not been drilled
on. That is part of what we are focused on, is how are we using
our resources. Are we lining up our resources with
opportunities that industry wants to pursue? They are waiting
for permits in those areas while, in the meantime, we are
approving permits that don't get drilled. That doesn't make
sense.
Mr. Farenthold. I want to get to that number again, because
I think there is an issue there. Are you all counting, in that
6,000 number, coal bed methane that nobody is really doing
anymore?
Mr. Beaudreau. I can look into that for you.
Mr. Farenthold. I would appreciate it. Now, are you aware
of a problem with unused, undrilled leases and unused permits
on State land, as opposed to Federal land?
Mr. Beaudreau. I am not familiar with that issue, no.
Mr. Farenthold. I think you will find that you don't have
nearly the problem on State land that we do on Federal land.
I see my time has expired. I yield back.
Mr. Lankford. Thank you.
Mr. Hastings.
Mr. Hastings. Thank you, Mr. Chairman, and thank you for
having this hearing.
Mr. Beaudreau, good seeing you again.
Mr. Rusco, I know you have been very quiet. I don't have a
question for you, either.
Mr. Beaudreau. I was just thinking he needs more questions.
Mr. Hastings. Mr. Beaudreau, I noticed in your testimony,
which, of course, is much longer, your written testimony, which
is much longer than your oral testimony, you made no mention of
the impending rule on hydraulic fracking. You mentioned it just
briefly in reference to Mr. Lankford. Why didn't you mention
that in your testimony?
Mr. Beaudreau. My understanding of the purpose of the
hearing was to talk about resource access, so I wanted to
address that in my written testimony. I am happy to talk about
where things stand with hydrofracking.
Mr. Hastings. Where does it stand?
Mr. Beaudreau. The publication of the revised proposed rule
is imminent; not a matter of months, a matter of days.
Mr. Hastings. We heard it is going to be this afternoon.
Mr. Beaudreau. That may be true. I don't know.
Mr. Hastings. Well, if it is, would you convey to Secretary
Jewell that, as chairman of the Natural Resources Committee, we
would very much like her to be there to discuss the rule and
the potential impacts of that rule?
Mr. Beaudreau. I will convey that, yes.
Mr. Hastings. If you will.
Now, were you personally involved at all in that writing of
that regulation, the fracking rule?
Mr. Beaudreau. I, in my capacity as acting ASLM, have
reviewed the rule. I didn't personally draft any of it, but I
have reviewed it.
Mr. Hastings. You say you personally drafted part of it?
Mr. Beaudreau. No, I have not personally drafted it; I have
reviewed it.
Mr. Hastings. Okay.
Mr. Beaudreau. It will be published soon. As far as I know,
it is not final yet, but it will be published soon and I have
reviewed it.
Mr. Hastings. Well, we have heard 3:00.
One issue, though, in that that I do want to ask you
regarding, and that is there have been different costs of what
the rule would cost an individual well. Your Department has at
least made public said that they thought that cost would be
about $11,000 a well, yet other analysts, independent analysts,
have looked at that and they say that the cost could be
$200,000 and maybe as high as $375,000 per well. Why would you
think that, within the industry, there would be that big of a
discrepancy?
Mr. Beaudreau. I think part of what we are asking for
comment on in republishing the rule is on the economic impacts
of the rule. So I think there probably is a range of potential
costs associated with compliance of the rule depending on the
complexity of the well, depending on the technology being used,
depending on the overall drilling program.
Mr. Hastings. Not to get ahead of the game, but going
through that analysis, your $11,000 figure could rise, is that
correct?
Mr. Beaudreau. Part of what we want is we want an
understanding of industry's reaction to the cost analysis, the
economic analysis that is in the report, and I look forward to
getting that.
Mr. Hastings. I always say because what has been sent out
thus far was your $11,000 and independent analysts 20 times
that.
Mr. Beaudreau. There is some economic analysis in the
revised proposed rule.
Mr. Hastings. All right. I only have a minute here. I want
to talk about the national petroleum reserve in Alaska. As you
know, with your new regulations that came out, there is
overwhelming opposition to that, and, yet, you state or imply
in your testimony that there be more access to NPRA. Keep in
mind, NPRA was put in place in the 1920s as a reserve. Your new
rule, it looks to me like, restricts the use of NPRA in
particularly those areas in the eastern part of NPRA, where the
most potential resources exist. Would you comment on that?
Mr. Beaudreau. Based on our current understanding of the
geology, the areas available for potential oil and gas leasing
in NPRA cover 70 percent of the resource potential.
Mr. Hastings. Wasn't NPRA designed to have 100 percent?
Mr. Beaudreau. NPRA includes, among other things, extremely
sensitive----
Mr. Hastings. Wait, wait. I didn't ask you that question.
One could debate that question, because that debate goes on
with ANWR forever. Was not NPR set aside 100 percent as the
potential reserve?
Mr. Beaudreau. NPRA includes reserve around oil and gas,
that is potential development that is included in the plan.
Mr. Hastings. Right.
Mr. Beaudreau. We also, under the law, have responsibility,
consistent with our general resource management, land
management responsibility, to conserve those sensitive
resources, and other interests as well.
Mr. Hastings. My time has expired, but just briefly, if I
may, Mr. Chairman.
Why do you suppose there is so much opposition from the
people in Alaska on your rule on NPRA?
Mr. Beaudreau. As an Alaskan myself, I understand and I
appreciate the concern for resource development; it is the life
blood of the economy of that state, it is what I grew up with.
I also appreciate concern for the conservation of resources and
habitat. Among the Alaska natives, for example, on the North
Slope, there is substantial concern about caribou herd, about
migratory animals, and the potential impact of oil or gas
activity on those uses as well.
Mr. Hastings. My time has expired. I could go on, but thank
you very much, Mr. Beaudreau.
Mr. Lankford. Thank you.
Mr. Walberg.
Mr. Walberg. Thank you, Mr. Chairman.
I thank the panel for being here. Issue of great
importance.
Mr. Beaudreau, there appears to be at least 20 projects on
Federal lands that have been undergoing the NEPA process for
two, three, even five years. These projects would have created,
according to a study commissioned by the Western Energy
Alliance, would have created hundreds of thousands of jobs,
billions in wages, and billions more in economic activity. In
fact, it is indicated by 2020 that the resources that would
have been developed from these projects would have produced as
much oil and natural gas potentially as what the U.S. imports
from Russia, Iraq, Kuwait, Saudi Arabia, Venezuela, Algeria,
Nigeria, and Colombia combined.
Now, if they are off by one country, it is still an awful
lot. So let me ask you, with these 20 projects on Federal lands
that have been undergoing NEPAs process for a significant
number of years, why is it taking so long for the Department of
Interior to perform this analysis?
Mr. Beaudreau. So I am not positive the specific 20
projects you are talking about, but, in general, part of our
responsibility under our operating statutes is to analyze
thoroughly the multitude of uses that are available on public
lands. That includes energy development, oil and gas
development, it includes other uses, and it includes
responsibility for the protection of habitat, as well. So those
are complex issues. There is also a lot of potential for
litigation and conflict. So that sets the stage for all of
these analyses.
That said, I agree with you that for NEPA processes, as
well as leasing or permitting processes, they should be
efficient. And if there are ways to improve the efficiency to
bring closure to those reviews, that is something that we are
quite interested in doing.
Mr. Walberg. Well, I would suggest that we may have some
answers to that and the efficiencies if we look at what States
do themselves, even in the length of permitting. For instance,
North Dakota takes 10 days to get an oil and gas permit, 27
days in Colorado, 14 in my neighboring State of Ohio; whereas,
it takes, on average, 228 days to get a Federal permit.
Wouldn't it be far more efficient for the Federal Government to
take on the best practices of the States in order to reduce the
time?
Mr. Beaudreau. I agree that there are opportunities to
consider and incorporate best practices from the States. Again,
we have to do that within our broad responsibilities as
stewards of Federal lands, so we have issues that we are
responsible for that we have to fulfill. But there is
opportunity to look at States for best practices, I agree.
Mr. Walberg. Well, I would hope that that would be pushed
up in a fast track, because, again, the States certainly have a
concern about what goes on in their State. They want to make
sure that all of the related issues, including animals, that
the environment protection, the uses by humans for various
recreational purposes, they are concerned about that as well;
in fact, maybe more so individually as States than the Federal
Government should be. So I question the fact that it takes
significantly longer, inordinately long times for getting these
permits to get in place resources that we have.
Could you tell us of any specific efforts moving toward?
Mr. Beaudreau. A couple I have mentioned already. We want
to align better resources, align our resources better with the
opportunities. We want to bring additional people onboard, and
that is included in our budget request for 2014, a way to bring
additional people onboard to help manage the workload. And I
think there are a lot of opportunities modernizing our
regulatory process, moving towards a more electronic system
that, if implemented, can shave weeks off of the permitting
process. So there is ample opportunity there.
Mr. Walberg. Mr. Chairman, I yield back.
Mr. Lankford. Mrs. Lummis.
Mrs. Lummis. Thank you, Mr. Chairman.
I want to go through some of the comments that have been
made in the testimony from Mr. Beaudreau and make some comments
on those.
One of the remarks that you made, Mr. Beaudreau, is that
the amount of producing acreages and new wells is up and oil
production rose by 18 percent since 2008, reaching its highest
levels in a decade. You know, I would point out that it takes
about five years after a lease has been issued to get wells in
full production, so most of those wells were issued on Federal
lands during the Bush era. The average number of new leases
under the Obama Administration represents a 35 percent decline
compared to the Bush era, and a 52 percent decline compared to
the Clinton era.
I would also point out that oil production on Federal lands
is down 7 percent; natural gas production in Federal lands is
down 23 percent; coal production on Federal lands is down 7.7
percent; uranium is stymied by BLM regulations; huge reserves
of uranium have been locked away in Arizona.
I would also point out that your thoughts about approval of
APDs that have not been filled represent a misunderstanding, I
believe, of how this works. Industry pays the entire cost of
acquiring an APD, so they don't really have an incentive to get
an APD and not use it. You have to keep a steady stream of APDs
in the pipeline, so to speak, to ensure future production, and
I would point out that, in Wyoming, about 2400 of undrilled
APDs exist; they are all in coal bed methane wells. The
economics of drilling for coal bed methane have collapsed, so
these wells are economically unviable. Hence, using the
argument that industry held almost 7,000 approved APDs that had
not been filled, thereby providing them with sufficient
inventory into the future is simply economically erroneously.
Also, I would add my concern that while, even if BLM is
using 77 days to complete an APD, the law requires that the BLM
complete its APDs in 30 days. So 77 days is still in violation
of the law. As has been pointed out previously, most States are
able to do it in less than 30 days themselves, leaving one to
ponder why BLM continues to violate the law in that regard.
Mr. Chairman, given all these facts and the fact that I
see, in my State, where the vast majority of minerals are
produced on Federal lands and that the Federal Government is,
by far, the largest single landowner in the State, and that I
see part of the reason that our unemployment remains low is
that dozens and, in fact, hundreds of people that I know
personally have pulled up stakes and gone to the Balkan in
North Dakota to work in the oil and gas fields up there because
that is their area of expertise, and that is where the
production is and it is all on private land.
So can you really tell them that the Department of the
Interior is doing all it can to produce domestic energy from
public lands?
Mr. Beaudreau. So, as I have said during the course of my
testimony, we are quite interested and quite committed to doing
even more to encourage production from Federal lands, oil and
gas production, coal production from Federal lands.
Mrs. Lummis. Sir, what specifically?
Mr. Beaudreau. As I have described, so, for example, talk
about unused APDs. From my perspective, and I don't take issue
with your description that companies need to make their own
sort of capital decisions about when and where to drill and
they want to have APDs in their pocket to give them
flexibility, but from the standpoint of overseeing an agency
that is resource constrained, I do have concerns. Why are we
putting time and effort into or are we using our resources
properly?
Mrs. Lummis. Sir, then why are we using BLM resources to
designate things like blueways, which are not authorized by
statute, as new, contrived ways to gain control over lands that
are adjacent to waterways? Why are there BLM guidance on
wildlands management practices when the wildlands designation
was never put into place, yet you are managing by those?
The problem here is that the Department of the Interior, I
believe, is misallocating its resources.
Mr. Chairman, I yield back.
Mr. Lankford. Mr. Beaudreau, did you want to respond to
that? I will let you respond.
Mr. Beaudreau. Only broadly to sort of reemphasize the
point that I do believe there is substantial opportunity to
better align the BLMs resources to be responsive to
opportunities from industry, so that is something that we are
very focused on. We want to bring resources into BLM for a host
of reasons, including to be responsive to observations and
recommendations from GAO. So I take your point. I don't want to
argue it, only to say I do think there is opportunity to align
our resources in a better way.
Mr. Lankford. There was a statement made earlier that it
takes about 228 days to get a permit, on average. Is that you
think is a typical permit for oil and gas wells? Is that the
new number?
Mr. Beaudreau. I think there is variability in that,
depending on what time points you look at and what region you
look at.
Mr. Lankford. So it differs from office to office?
Mr. Beaudreau. Yes.
Mr. Lankford. Is it possible for this committee to get a
copy, then, of the different time periods that it takes for
each office? I am sure you have a master breakdown of all the
offices, the time period it takes for each. To come up with an
average of 228 days, there has to be a compilation of all of
those somewhere. Can we get a copy of that by office?
Mr. Beaudreau. We can look into that. I am not sure what
state the data is in right now, but we can provide something
responsive to your request.
Mr. Lankford. Yes. We want to get something specifically by
office so that we will know. My understanding is some offices
are as short as 90 days. If that is so, then that means some
offices are closer to 400 days.
Mr. Beaudreau. Without getting into the numbers, I am sure
there is variability.
Mr. Lankford. Okay, great. We will look forward to getting
a chance to get that.
Let's talk a little bit about the frac rule. Mr. Hastings
brought that up as well. Talk me through the science behind
that. There seems to be something that is working its way
through the process. Why now, on creating a new frac rule on
Federal lands?
Mr. Beaudreau. So, again, we have our responsibilities with
respect to oversight of Federal lands, and some of the key
areas that we are concerned with, that were reflected in the
original proposed rule, will be carried through to the revised
proposed rule, are basically three areas: one, disclosure of
fracking fluids. And, again, there is a lot of good work being
done in different States on this issue, and part of the reason
why we took a step back to re-propose is to do further
evaluation of those issues.
Mr. Lankford. Right. Something like FracFocus.
Mr. Beaudreau. Something like FracFocus, exactly. And
whether that would sort of be useful and fit in a way to
address the issue.
Second, well integrity issues to ensure and provide public
confidence that there is not comingling between fracking fluids
and aquifers and drinking water, again, within the theme of
giving the public assurance that this activity can be done
safely and responsibly.
And the third big area is managing and dealing with
flowback, how that is managed and how that is contained.
So, again, the rule will be put out soon. Mr. Hastings
suggests this afternoon. I knew it was imminent. That is when
the Department is doing it.
Mr. Lankford. But is there a specific State that raises
this to the top? That is what I am trying to figure out. It is
obvious there has been a repetitive theme here: you are short
of staff; you are short of resources; you are having difficulty
keeping staff that are qualified to do this. So now we are
expanding into a new area. Is there a State in particular that
is driving this, that you would say because of this, they are
not overseeing what is happening in their State, well, we need
to step in and add another layer of something?
Mr. Beaudreau. Again, the perspective here isn't criticism
of any particular State or any particular----
Mr. Lankford. But States all do that already, is that
correct? So they are going to go through a State permitting
process and State requirements to be able to drill, and then
now there is going to be another layer of the Federal process
as well?
Mr. Beaudreau. We want to have a process that is familiar
to operators, that takes best practices from States in which
operators work, but to have it apply uniformly across Federal
lands. That is our responsibility and I think what you will see
in the fracking rule is very commonsense, straightforward
measures that address those three issues that I described that
are primary concerns, but also are ways to address those
concerns that are familiar to industry and that industry can
comply with.
Mr. Lankford. So consistent fracking rules that would go
all the way from Pennsylvania to New Mexico to Oklahoma to
wherever?
Mr. Beaudreau. On Federal land.
Mr. Lankford. Okay. I am still struggling with one of the
big issues here. Well, let me get into a separate issue,
because if we have time we will mention this one last thing.
In California there seems to be an issue going on with some
of the leasing. And my question is did BLM violate the Mineral
Leasing Act of 1920 when they cancelled the sale in California?
Mr. Beaudreau. So those lease sale cancellations I think,
was BLM, and this was a decision that came from the State
office in California, and it was based on resources. It was,
let's try to focus, in budget-constrained times, focus on
permitting and issues under existing leases.
Mr. Lankford. Right. But the law actually states that you
have to do that four times a year. Is there still a plan to
catch up on that, to try to fulfill the requirements of the law
as well?
Mr. Beaudreau. So I believe the office intends to have a
lease sale before the end of the year. We are talking with the
office about ensuring that their leasing program and where they
are in the leasing program is consistent with the requirements
under the Mineral Leasing Act.
Mr. Lankford. But in your testimony you have a statement
that you have accelerated some of the renewable processes in
leasing. By the way, great, all that. I want to see all the
permits and I want all the above coming out as well. All these
need to be fixed on this. But I am a little confused on where
we have resource issues where one that is a consistent sales
process is now cancelled, saying we don't have enough money,
and at the same time we are accelerating other permits. Can you
help me balance those two out?
Mr. Beaudreau. Part of it is just different areas of
expertise. In order to go through a permitting process with
respect to oil and gas APDs and drilling permits, you need
petroleum engineers. Those are people who are in high demand.
Mr. Lankford. So this is not necessarily a we don't have
money because of sequestration or whatever it is, it is the
people that you are lacking to be able to fulfill this.
Mr. Beaudreau. It is a combination of those things; it is
resources where demand is from industry and it is also human
capital and expertise. There are a lot of dimensions to this
issue.
Mr. Lankford. Obvious requirement to fulfill the law in
this as well.
Mr. Beaudreau. Yes.
Mr. Lankford. Ms. Speier.
Ms. Speier. Mr. Chairman, thank you.
On that issue, since it is California and I represent parts
of California, those two leases were two small, I underscore
small lease sales, and the importance here is to note that the
two delayed lease sales would have auctioned off approximately
33,000 acres of public land. But what the industry has declined
to say in their consternation about that was that over the last
month the Bureau of Land Management auctioned off 132,941 acres
of public lands in other States. So let's keep all of this in
perspective.
And to follow up in terms of perspective, Mr. Chaffetz had
asked a question on the amount of time it took to process APDs,
and I can actually give you the data, secretary. BLM processing
time has decreased. In fact, in 2006 it took 127 days; in 2011
it now takes 71 days. You now have the lowest number of pending
APDs since 2004. So let's kind of stay focused on what is
really going on.
Mr. Rusco, we have just ignored you, and it is time to ask
you some questions. You stated that in September 2008 we
reported that Interior collected lower levels of revenue for
oil and gas production in the U.S. Gulf of Mexico than all but
11 of 104 oil and gas resource owners in the Country. So you
are basically saying that our collection rate was lousy, if I
am not mistaken.
Mr. Rusco. We looked at a number of studies that had
compared how much revenue was collected by other countries, by
some States, and some private entities, and the Gulf of Mexico
was definitely in the low end of that spectrum. It is important
to say that since that report, the royalty rates in the Gulf of
Mexico have been raised twice, so I am not sure what the
current state would be if we looked at that.
Ms. Speier. So what is the cost of potential waste, fraud,
and abuse in drilling of oil and gas and collection of
royalties for those activities on Federal lands and water?
Mr. Rusco. We can't make an estimate of that. What we found
is that a number of processes, in particular data processes and
clarity of data elements are lacking, and because of that you
can't tell sometimes when there is something missing. We found
that, systematically, Interior has missed inspection
requirements for reviewing production verification and,
therefore, you don't have assurance that oil and gas is being
measured correctly and you also don't know whether it is being
reported correctly.
We have made recommendations to fix a lot of those problems
and Interior is taking steps to do so, but we are still in the
process of looking at that.
Ms. Speier. So can GAO tell us how much additional revenue
would have been paid if Interior had been utilizing the new
technologies to locate and prevent venting and flaring of
natural gas on Federal lands?
Mr. Rusco. Not precisely, but we did find that the amount
of methane that is vented in the process of gas production and
oil production far exceeded what was reported by several
percentage points difference, and if that were counted, then
royalties would be due on that amount.
Ms. Speier. So you have now placed Interior and this
particular revenue collecting function on your high-risk list
for three years. It seems like they have been dragging their
feet a lot in terms of implementing your recommendations. What
additional recommendations do you think they should be
embracing that they haven't, and what can we do as the chair
and ranking member on this committee to assist you in making
sure that the taxpayers in this Country get their money's worth
from these leases?
Mr. Rusco. I think that Interior has been very diligently
addressing recommendations. What we are looking for is an
overall strategic and high management level approach to
addressing these problems. We want to see Interior taking a set
of problems associated, say, with their IT systems and their
data, and we want them to say this is strategically how we are
going to deal with this, not addressing one recommendation here
and one recommendation there.
We need the same thing in terms of a workforce plan, a
strategic plan for addressing human capital issues. It has been
mentioned that the resources aren't always where they are
needed. There has been a big revolution in shale production,
and a lot of production in the United States has moved from one
area to the next. We have talked about coal bed methane. That
is not economic, so a lot of staff are in offices that were
addressing issues related to coal bed methane development, and
now they are in the wrong place.
So there are some issues that Interior can address, and
some of them are strategic and some of them are some
flexibility to move people around, move resources.
Ms. Speier. All right. Thank you.
Mr. Lankford. Mr. Horsford.
Mr. Horsford. Thank you, Mr. Chairman. Happy belated
anniversary, by the way. Hope you had a good time.
I just came from my Natural Resources Committee and this is
a topic that we have had several hearings on in that committee
as well, and I do want to indicate that although the title of
this hearing is Opportunities Lost, I really feel like there is
a bit of a misnomer on what has been done, and we have covered,
again, this topic many times in our Natural Resources
Committee.
Some say that the Obama Administration is against the oil
and gas industry and has erected artificial barriers to fossil
fuel energy production and generation, but that is simply not
what the facts bear out. In 2011, the U.S. exported more
gasoline, diesel, and other oil-based fuels than it had
imported. This was the first time since 1949 that the U.S. was
a net exporter of oil products. And according to the
International Energy Agency, by 2020 U.S. oil production will
rise to 11.1 million barrels per day, making the U.S. the
largest crude oil producing nation.
So, Mr. Beaudreau, is it fair to say the record high oil
and gas production seen in recent years is the result of the
Obama Administration's all of the above energy strategy?
Mr. Beaudreau. Some of the statistics you described I am
not familiar with, but, in general, yes. This Administration,
this Department is committed to an all-of-the-above energy
strategy that includes oil and gas production on Federal lands
and waters, includes coal production, includes standing up and
developing renewable energy resources. So the Interior
Department is truly where all of the above happens, and I think
we have seen results from that.
Ten years ago nobody would have thought you were sane if
you were talking in realistic terms about the potential for
energy independence. That kind of conversation is happening
now. The natural gas boom has the potential to be truly
transformative not only with the energy industry, but with
manufacturing, transportation, and other industries. So it is
an exciting time and we do embrace all of the above.
Mr. Horsford. Thank you. Just to follow up, some would say
that the Administration should not take credit for the high
record of high levels of domestic natural gas production
because most of it was produced on non-Federal lands. I come
from Nevada, where over 80 percent of our lands are controlled
by the Federal Government but, again, according to the White
House, natural gas production from public lands increased by 6
percent during the first three years of the Obama
Administration, compared to the last three years of the
previous administration. Would this be considered a significant
increase, in your opinion?
Mr. Beaudreau. I think it is a reflection of our commitment
to the development of energy resources. So taking credit or
avoiding blame is not really my interest. My interest is
providing for the Nation's energy security, making resources
available in a responsible and safe way. And as you pointed
out, I think our record bears out that commitment and that
strategy.
Mr. Horsford. Just briefly, Mr. Rusco. Over the past five
years you have found that the Department of the Interior may
not be properly assessing or collecting revenues owed to the
American people. Can you elaborate further on that?
Mr. Rusco. There are a number of facets to that. One is
that, as we talked about, human capital challenges and not
having enough people to go out and do production verification
inspections, so in some cases there are problems with that that
are unresolved.
We have also seen issues with data collection and data
management, where incorrect data elements have been entered in
terms of production or royalties owed or prices, and Interior
is taking steps to sort of improve their IT systems, but there
are still challenges.
Mr. Lankford. I want to do a quick follow up on this as
well. Mr. Horsford's question was an excellent question, but
the wording was important here.
Mr. Beaudreau, he asked you the increased production of oil
and gas in the United States, is that a result of Obama
Administration policy decisions. It almost sounded like you
said yes on it. For instance, the first three years of
increased production of natural gas, those leases were not done
during the Obama Administration time, they were done during the
previous administration time. I am trying to figure out which
policies in particular from the Administration have increased
the production of oil and gas in the United States.
Mr. Beaudreau. Our broad strategy and our broad policies to
promote responsible energy development I think are the right
ones.
Mr. Lankford. So you are saying without those policies we
would not have had increased production of oil and gas in
America?
Mr. Beaudreau. I think the suggestion that this
Administration is somehow opposed to or seeks to obstruct
energy production isn't borne out by the facts.
Mr. Lankford. No, no, that wasn't the question. The
question was the increased production is a result of. That is
different than saying it is opposition, because there is
obviously a lot of oil and gas exploration happening. But the
question was an excellent question: Is it a result of Obama
Administration policies that we have increased oil and gas?
Mr. Beaudreau. I think it is completely consistent with the
Obama Administration policies to promote responsible and safe
energy development, and I think we have seen that borne out and
I think this Administration's record is very good on all of
that.
Mr. Lankford. I think there would be a few studies that
would disagree with that, just in process, and just based on
length of time and process and leases that happened on Federal
lands when the Administration came in and inherited those
leases and the production, versus new leases now. We have
gotten three years previous on the listing, about a 55 percent
decrease of new leases that are happening on Federal lands and,
as I mentioned on the map to you before, in North Dakota it is
interesting to look at and see you have all this production
everywhere but Federal lands, and it seems to me even though
they pay fewer royalties, they tend to go everywhere else but
to try to get away from Federal policies and Federal
implementation of that to go to State or private entities for
that.
So that is the only challenge here, is to say if the
Administration wants to take credit and say what we have done
has led to this is different than this has happened on our
watch and we haven't opposed it. So that is all I am trying to
clarify.
Mr. Beaudreau. And the only point I am making is what is
happening with energy development and the opportunities that we
are seeing as a result of energy development are things that
this Administration supports. We have implemented reforms to
try to promote energy development, reduce conflict, with the
ultimate goal of increasing the economic opportunity offered by
energy, providing for greater energy security and providing for
the economic opportunity that comes with all of that, and to do
it safely and responsibly.
So to talk about credit or blame I think is beside the
point in a lot of respects. I think we do support what is
happening on the energy front; it is good for the Country for
all the reasons we talked about, and we are going to continue
to pursue it.
Ms. Speier. Mr. Chairman, will you yield?
Mr. Lankford. Sure.
Ms. Speier. To give yet another perspective, there is
plenty that the Administration could have done to impede energy
development, you could argue. They did not do that. And whether
these leases originated during the Bush Administration or the
Obama Administration, the fact is it is a good news story and
the Administration hasn't done anything to impede those leases.
Mr. Lankford. I would suggest that there are a lot of
producers around the Country that would argue with that
statement, that there hasn't been something to impede the
production of energy, not just from Interior, but from EPA and
other regulations, and slow-walking permits. There would be
some dispute, I would say, if we had some producers here,
whether there hasn't been a difficulty going after some of
those things.
Ms. Speier. Well, would you admit that we actually have
seen an increase in production? I mean, that is what we are
talking about, who are we going to give credit to for the
increase in production.
Mr. Lankford. We have absolutely seen an increase in
production, and that is based on new technology dealing with
horizontal drilling and fracking. When you do directional
drilling and the fracking in new areas, as has been mentioned
by Mr. Rusco as well, trying to move and shift people into the
correct places to actually do the permitting does a significant
shift to us in the Federal side and trying to permit that. So
they have moved to State and private lands to try to go after
energy that is plentiful there.
Just 20 years ago we thought we were running out of natural
gas and the Federal Government was telling us to only use coal
because we were running out of natural gas. Now there is a
dramatic shift to come back and say we have so much natural
gas, we are seriously looking at exporting and, quite frankly,
I believe we should be exporting.
Ms. Speier. So, Mr. Chairman, would you yield again?
Mr. Lankford. Absolutely.
Ms. Speier. Let me just say that it is not an asset that is
wasted. The asset of oil or gas being drilled on Federal lands,
it does not dissipate because it is not permitted and oil or
gas is not being drilled. One could argue that we are sitting
on a gold mine, and if we wait to permit, we are going to make
more money for the taxpayers of this Country. So there are lots
of different ways to look at this.
I yield back.
Mr. Lankford. Sure. Well, the challenge of that is, in the
days ahead, we need to find every way that we can to be energy
independent as quickly as we can. All the geopolitical reasons,
all the military reasons, everything that we would see as a
super power that we can provide our own energy as fast as we
can, as efficiently as we can, safely, and clean for the
environment as we can.
One last statement, then I am going to close out as well,
and that is that the statement again about States and whether
States can handle overseeing fracking and permitting. The
question just about memorandums of understanding that Interior
commonly does with States that is a common practice, in fact,
around the Federal Government with States, is there a way to be
able to allow States to be able to oversee what happens on
Federal lands to accelerate the permitting process on this and
to have clear guidelines, and then the limited staff that you
have is able to then make sure that those guidelines are being
kept?
Mr. Beaudreau. So, again, we have our authorities; it is
our responsibility to fulfill and to meet those authorities
under Federal law. So we can't delegate any of that to the
States or anybody else. That said, and I think you will see
some reflection of this in the revised proposed fracking rule,
for example, we are quite interested in taking best practices,
looking at what States are doing; not causing duplication for
operators, so that if they can demonstrate compliance with our
standards, because that is what they are doing on State land,
that should make it much more straightforward for operators.
Mr. Lankford. Okay, thank you.
Ms. Speier, do you have any other questions, thoughts?
Ms. Speier. No.
Mr. Lankford. Thank you.
With that, this committee is closed.
[Whereupon, at 11:57 a.m., the subcommittee was adjourned.]