[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                     ENERGY INDEPENDENCE: HOW BURDENSOME 
                       REGULATIONS ARE CRUSHING OFFSHORE 
                       SMALL ENERGY PRODUCERS

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

                                HEARING

                               BEFORE THE

                        SUBCOMMITTEE ON RURAL 
                              DEVELOPMENT,
                       ENERGY, AND SUPPLY CHAINS

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                           SEPTEMBER 28, 2023

                               __________

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
                               
            Small Business Committee Document Number 118-028
             Available via the GPO Website: www.govinfo.gov
             
                               __________

                   U.S. GOVERNMENT PUBLISHING OFFICE                    
53-335                     WASHINGTON : 2024                    
          
-----------------------------------------------------------------------------------     
             
                   HOUSE COMMITTEE ON SMALL BUSINESS

                    ROGER WILLIAMS, Texas, Chairman
                      BLAINE LUETKEMEYER, Missouri
                        PETE STAUBER, Minnesota
                        DAN MEUSER, Pennsylvania
                         BETH VAN DUYNE, Texas
                         MARIA SALAZAR, Florida
                          TRACEY MANN, Kansas
                           JAKE ELLZEY, Texas
                        MARC MOLINARO, New York
                         MARK ALFORD, Missouri
                           ELI CRANE, Arizona
                          AARON BEAN, Florida
                           WESLEY HUNT, Texas
                         NICK LALOTA, New York
               NYDIA VELAZQUEZ, New York, Ranking Member
                          JARED GOLDEN, Maine
                         KWEISI MFUME, Maryland
                        DEAN PHILLIPS, Minnesota
                          GREG LANDSMAN, Ohio
                       MORGAN MCGARVEY, Kentucky
                  MARIE GLUESENKAMP PEREZ, Washington
                       HILLARY SCHOLTEN, Michigan
                        SHRI THANEDAR, Michigan
                          JUDY CHU, California
                         SHARICE DAVIDS, Kansas
                      CHRIS PAPPAS, New Hampshire

                  Ben Johnson, Majority Staff Director
                 Melissa Jung, Minority Staff Director
                           
                           
                           C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Wesley Hunt.................................................     1
Hon. Marie Gluesenkamp Perez.....................................     3

                               WITNESSES

Mike Minarovic, Chief Executive Officer, Arena Energy, LLC.......     6
Paul Danos, Chairman of the Board, Owner & Chief Executive 
  Officer, Danos, LLC, testifying on behalf of National Ocean 
  Industries Association.........................................     8
Alex Epstein, President and Founder, Center for Industrial 
  Progress.......................................................    10
Kathleen Nisbet Moncy, Chief Operating Officer, Goose Point 
  Oyster.........................................................    12

                                APPENDIX

Prepared Statements:
    Mike Minarovic, Chief Executive Officer, Arena Energy, LLC...    27
    Paul Danos, Chairman of the Board, Owner & Chief Executive 
      Officer, Danos, LLC, testifying on behalf of National Ocean 
      Industries Association.....................................    39
    Alex Epstein, President and Founder, Center for Industrial 
      Progress...................................................    50
    Kathleen Nisbet Moncy, Chief Operating Officer, Goose Point 
      Oyster.....................................................    81
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    Amicus Brief on Lease Sale 261...............................    83
    Judge Cain Order in Lease Sale 261 case......................   102
    Oceana Protecting the World's Oceans.........................   132
    SFAA - The Surety & Fidelity Association of America..........   136
    State of Louisiana Financial Assurance.......................   146
    U.S. Small Business Administration Office of Advocacy........   239

 
  ENERGY INDEPENDENCE: HOW BURDENSOME REGULATIONS ARE CRUSHING SMALL 
                       OFFSHORE ENERGY PRODUCERS

                              ----------                              


                      THURSDAY, SEPTEMBER 28, 2023

              House of Representatives,    
               Committee on Small Business,
                 Subcommittee on Rural Development,
                                 Energy, and Supply Chains,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:04 a.m., in 
Room 2360, Rayburn House Office Building, Hon. Wesley Hunt 
[chairman of the Subcommittee] presiding.
    Present: Representatives Hunt, Luetkemeyer, Meuser, 
Stauber, Mann, Gluesenkamp Perez, and Golden.
    Also Present: Representative Williams.
    Chairman HUNT. Good morning, everyone. If you do not mind 
will you please stand for the Pledge of Allegiance?
    I pledge allegiance to the flag of the United States of 
America. And to the Republic for which it stands, one nation, 
under God, indivisible and justice for all.
    Good morning, everyone. I now call the Subcommittee on 
Rural Development, Energy, and Supply Chains to order.
    Without objection, the Chair is authorized to declare a 
recess of the Committee at any time.
    The Committee is here today to hear testimony about the 
role of small businesses in our domestic energy production and 
the regulatory hurdles drillers and service providers are 
facing today.
    I want to thank you all for being with us here today and I 
am looking forward to today's conversation.
    I now recognize myself for my opening statement.
    First, I want to thank all of our witnesses for being here 
today, this morning. I understand you traveled pretty far to be 
here and we appreciate your time. This is a very important 
issue. It is near and dear to my heart being in Houston, the 
energy capital of the world. Energy corridors in my district 
makes me the energy congressman of the entire world. I tell 
myself that every morning when I wake up. It makes myself feel 
better.
    We have had an issue with the oil and gas industry I think 
for the last couple of years. We are seeing gas prices soaring 
and I think it is time for us as a country to unleash American 
energy. I have spoken to many of you in person and no one has 
an issue with renewable energy. No one has an issue with the 
next abundant, affordable source for the future but I think we 
have an understanding that we cannot get there without us.
    Domestic oil and gas is the lifeblood of our economy. And 
when American energy production is strong our country is 
strong. Our allies are strong. American families are strong. 
The world is a stronger and a better place.
    Independent oil and gas producers are feeling the negative 
impacts of regulatory hurdles every single day. It is not just 
regulatory issues; it is also the higher tax rates that we are 
paying and I am sure you will discuss that here in a little 
bit.
    A recent example evolves around BOEM's institution of a new 
rule in June regarding the capital reserve requirements for 
Outer Continental Shelf oil and gas leases and grantees. 
Requirements such as having an investment grade credit rating, 
which are large, upfront expenses for any small business place 
additional burdens exclusively on smaller, offshore oil and gas 
companies. BOEM's rule further tips the scale in favor of large 
companies and small businesses lack the same luxury of access 
to capital and credit.
    Another rule we will focus on today is NOAA's Rice's whale 
rule--I am not going to have Nessie today. Do not worry about 
that--which places undue burdens on offshore operators. The 
National Oceanic and Atmospheric Administration's expansive 
rule about the Rice's whale limits oil exploration and 
dramatically increases cost for producers in the Gulf. This 
rule continues numerous anti-oil and gas provision which the 
sole aim of dismantling our country's offshore production. All 
over a possible sighting of a Rice's whale almost a decade ago.
    As a candidate for president, Joe Biden made a campaign 
promise to end fossil fuels. As president, his administration 
has worked every day to do just that. As I said earlier, it is 
not about ending our industry; it is about finding ways to 
unleash American energy. We need more electrons in the world, 
not fewer.
    I represent Congressional District 38 here in Texas. As I 
told you, and I will probably say it three more times, Energy 
Congressman of the World. That is something that is very 
important to me, and if you are looking at the international 
and the safety of the world, it is literally relying in the 
hands of energy production.
    Look at what is happening in Russia and the Ukraine. Look 
at what is happening all over the world. We have the 
opportunity to lift nations and countries out of poverty by 
just giving them American oil and gas.
    But these oppressive rules and regulations are being forced 
upon our domestic oil and gas producers and are crushing 
production, future investment, and the benefits that American 
consumers could enjoy if we were energy dominant once again. 
And I am confident that we will get there.
    It is my opinion that the word ``transition'' is a myth. 
There is no transition. It is only energy addition. Over the 
course of the next decade we are going to add 2 to 3 billion 
more people to this earth. Last year we had the highest demand 
on earth for oil and gas, and being from Houston and that 
Houston heat, I am not going back. I will continue to turn on 
my air conditioning; otherwise, I will not be very comfortable 
in Houston at all.
    We should be talking about energy addition, not transition. 
And again, this is an ``all hands on deck'' approach.
    I want to thank you all for being here this morning. 
Greatly appreciate it. Thank you for your time. I look forward 
to having a very spirited debate and discussion.
    I now recognize Ranking Member Ms. Gluesenkamp Perez for 
her opening statement. And thank you, ma'am, for being here.
    Ms. GLUESENKAMP PEREZ. Thank you, Mr. Chairman.
    The success of our small businesses and the economic 
security of working families relies on abundant sources of 
affordable energy. As we all know, the high cost of oil and gas 
over the past 18 months has caused significant financial 
distress to many families, particularly those in rural 
communities like mine where we have to drive significant 
distances to access simple services. That is why I am 
supportive of efforts to make our nation more energy 
independent and take advantage of the wealth of natural 
resources available to power our economy long into the future.
    Unfortunately, many of the sources of energy that we rely 
on are vulnerable to foreign manipulation. Just 2 weeks ago we 
saw Russia and Saudi Arabia collude to continue production cuts 
through the end of the year. As a result, oil prices spiked. 
And despite the record amount of oil being produced in the U.S. 
right now, gas prices remain elevated for most of the 
consumers. This is because the price of oil is set on a global 
market as a global commodity. And no matter how much is 
produced at home, it will still be vulnerable to manipulation 
by dictators and despites abroad.
    But what is clear is that while we transition to more 
sustainable and cost-effective renewable energy, we still need 
oil and gas in the meantime.
    One potential source of oil and gas is found off our 
shores. Unfortunately, the process of extracting it comes with 
significant tradeoffs, particularly for coastal communities. We 
know that as offshore oil and gas infrastructure ages it can 
corrode and release harmful chemicals into the water. Idle and 
unplugged wells can leak oil that is toxic to fish, shellfish, 
and marine life, harming local fishermen and rural economies. 
In the event of large spills, oil can reach the shore, 
polluting beaches and threatening coastal tourism.
    One study found the Deep Water Horizon spill cost tourism 
and fishing industries in Alabama, Louisiana, Mississippi, and 
Florida between $15 and $30 billion. This is why I opposed 
offshore drilling off the coast of Washington, and my first 
amendment as a Member of Congress was to prohibit drilling off 
the shore of Oregon and Washington that would adversely affect 
our fisheries.
    We are here today to discuss new actions by the Bureau of 
Ocean Energy Management (BOEM) to better understand these 
tradeoffs to both protect coastal communities and shield 
taxpayers from incurring additional costs when oil companies 
that drill offshore go bust.
    New proposed financial insurance regulations would require 
oil and gas companies conducting business offshore to cover the 
costs of decommissioning upfront in the event their companies 
go bankrupt. While decommissioning wells is already required by 
law, companies often seek to shirk their duties to do so. As a 
result, it is taxpayers who are often left with the expense.
    According to the GAO, the Department of Interior held less 
than $3 billion in bonds to cover the estimated cost of $38.2 
billion for decommissioning these wells in 2015. While I 
sincerely sympathize with the concerns of my colleagues that 
this could negatively impact independent oil producers, it is 
essential that our regulations address the real cost of 
offshore drilling and ensure those costs are borne by the 
companies that profit from the practice, not taxpayers and 
coastal communities. I hope this regulation will adequately 
protect coastal communities from any downstream consequences of 
offshore drilling.
    With that, I thank all of the witnesses for joining us and 
look forward to a productive conversation.
    Thank you. I yield back.
    Chairman HUNT. Thank you, ma'am.
    With that I would like to recognize our Full Committee 
Chair, Mr. Roger Williams from Texas for his opening statement.
    Mr. WILLIAMS. Thank you. And good morning to all our 
witnesses. We appreciate you being here today.
    I want to thank Chairman Hunt for holding today's hearing 
and we greatly appreciate all of your time.
    You know, it is no secret that the Biden administration has 
been at war with the oil and gas industry since day one. 
Countless regulations have created a burdensome environment for 
our nation's small oil and gas producers that are a critical 
component of our domestic energy supply. Some of the 
regulations that we will be discussing today are a continuation 
of this trend that is doing nothing but crippling and harming 
our independent oil and gas producers.
    Our small businesses across every industry are the engines 
of our economy and without them America will struggle and has 
struggled. Requirements like obtaining an investment grade 
credit rating are expensive and put small businesses at a 
competitive disadvantage.
    So as Americans are facing extremely high inflation and 
energy prices we need to be making it easier. I repeat, easier, 
not more difficult for domestic energy companies to succeed.
    I look forward to hearing from our witnesses today. And 
with that, Mr. Chairman Hunt, I want to thank you again, and I 
want to thank our witnesses for being with us. And I yield my 
time back.
    Chairman HUNT. Thank you, Chairman Williams.
    At this time I would like to introduce our witnesses that 
are with us today.
    Our first witness is Mr. Mike Minarovic. He is the CEO of 
Arena Energy, cofounded by Mr. Minarovic in 1999. Arena Energy 
focuses on pursuing the lower risk expiration and production 
opportunities that remain in the Gulf after 50 years of 
drilling by larger oil companies. Since the company startup in 
1999, it has invested over $7 billion in the Gulf of Mexico and 
has paid production royalties of over $1.4 billion to the U.S. 
Treasury. Mr. Minarovic is a graduate of the University of 
Texas in Austin. They are having a pretty good football season 
this year, sir. And his Bachelor of Science in Petroleum 
Engineering. Mr. Minarovic, thank you so much for joining us 
today. We greatly appreciate it. We will look forward to your 
testimony, sir.
    Our second witness is Mr. Paul Danos, who serves as 
Chairman of the Board for NOIA, the National Ocean Industries 
Association. Founded in 1972, NOIA represents all facets of the 
domestic energy related industries. Mr. Danos was reelected as 
Chairman of the Board this past May. Mr. Danos is also the 
owner and CEO of Danos LLC, a family-owned and managed energy 
services provider. He joined the company in 2005 and has been 
the co-CEO through 2020. Mr. Danos graduated from Louisiana 
State University with a bachelor of science in finance and then 
went to Stanford University Graduate School of Business where 
he earned his MBA. Mr. Danos, thank you so much for being here 
today. Greatly appreciate it. Thank you so much for your time.
    Our third witness is Mr. Alex Epstein. He is a philosopher, 
journalist, and author that has covered the energy industry for 
over 2 decades and is the founder and president of the Center 
for Industrial Progress based on San Diego, California. The 
Center for Industrial Progress was founded by Mr. Epstein in 
2011 to offer a positive, pro-human alternative to the Green 
Movement. He is the author of the Moral Case for Fossil Fuels 
and New York Times Best Seller arguing that human flourishing 
and progress requires the use of more fossil fuels, not less. 
Mr. Epstein has spoken to employees and leaders and dozens of 
Fortune 500 energy companies, including Exxon, Mobil, Chevron, 
and Phillips 66. He has also made his moral case for fossil 
fuels at dozens of campuses including Harvard, Yale, Stanford, 
and Duke. Mr. Epstein graduated from Duke University with a 
bachelor of arts in philosophy. Mr. Epstein, thank you, sir, 
for being here. Greatly appreciate your time.
    I now recognize the Ranking Member to introduce the 
minority witness for today's hearing.
    Ms. GLUESENKAMP PEREZ. I am pleased to introduce our final 
witness today, Ms. Kathleen Nisbet Moncy. Ms. Nisbet Moncy is a 
native of Willapa Bay in my district where she is a second 
generation oyster farmer. Working as chief organizing officer 
at her family's business Goose Point Oysters, she grew up in a 
family business farming oysters and working in the processing 
plant before attending college at the University of Hawaii at 
Hilo where she studied marine biology and Spanish. After 
college, she returned to her family business and has worked 
there for the past 15 years. Throughout her time working for 
Goose Point Oysters, she has worked with a variety of 
organizations such as serving on the board of the Pacific Coast 
Shellfish Growers Association and establishing the Willapa Bay 
Grays Harbor Ecosystem Collaborative. She is currently the 
president of the Willapa-Grays Harbor Growers Association with 
the mission to uphold the legacy of environmental stewardship 
and water quality through sustainable shellfish farming. Thank 
you, Ms. Nisbet Moncy for taking the time out of your schedule 
and traveling all the way to D.C. to testify today. We are 
truly honored to have somebody that really works for a living 
and represents their community in the best ways. Thank you so 
much.
    Chairman HUNT. Thank you for being here.
    Thank you, ma'am.
    Before recognizing the witnesses I would like to remind 
them that their oral testimony is restricted to 5 minutes in 
length. If you see the light turn red in front of you it means 
your 5 minutes have concluded and you should wrap up your 
testimony.
    I now recognize Mr. Minarovic for his 5 minute opening 
remarks.

 STATEMENTS OF MIKE MINAROVIC, CHIEF EXECUTIVE OFFICER, ARENA 
 ENERGY, LLC; PAUL DANOS, CHAIRMAN OF THE BOARD, OWNER & CHIEF 
  EXECUTIVE OFFICER, DANOS, LLC; ALEX EPSTEIN, PRESIDENT AND 
FOUNDER, CETER FOR INDUSTRIAL PROGRESS; KATHLEEN NISBET MONCY, 
          CHIEF OPERATING OFFICER, GOOSE POINT OYSTER

  STATEMENT OF MIKE MINAROVIC, CHIEF EXECUTIVE OFFICER, ARENA 
                          ENERGY, LLC

    Mr. MINAROVIC. Thank you, Chairman Hunt, and Ranking Member 
Gluesenkamp Perez, for the opportunity to testify this morning.
    My name is Mike Minarovic, CEO of Arena Energy. We are an 
offshore exploration production company focused on the Gulf of 
Mexico, one of the most active drillers in the Gulf of Mexico. 
Over the past 24 years, as Chairman Hunt mentioned, we have 
invested $7 billion in the Gulf and paid the federal government 
over $1.4 billion in royalties. Last year alone we paid the 
federal government $230 million in combined royalties and 
corporate taxes.
    I also speak to you today on behalf of the Gulf Energy 
Alliance. It is a coalition of independent Gulf producers. 
Although we are not household names, independents are the 
backbone of the offshore industry, producing 35 percent of the 
oil and natural gas from this basin.
    I am here to discuss a new regulation recently proposed by 
the Department of Interior. This hearing is the appropriate 
place to discuss this issue as the Bureau of Ocean Energy 
Management, also known as BOEM, stated that 76 percent of the 
businesses operating offshore are defined as small businesses. 
This totals 407 businesses according to BOEM, and this rule 
poses an existential threat to those companies.
    Also, the SBA Office of Advocacy submitted a very strong 
letter denouncing BOEM's proposed rule. BOEM repeatedly states 
that the goal of this new rule is the protection of the 
American taxpayers from exposure to financial loss associated 
with offshore decommissioning. We firmly believe that it is the 
primary responsibility of the current operators to abandon 
their platforms and wells and that taxpayers should never be 
responsible for abandonment obligations.
    Arena and GEA are willing to work with BOEM to find a 
solution to achieve that goal but this rule as currently 
drafted is a massive overreach to a limited problem. It is 
devastating for small businesses and it is completely 
unworkable in its current form.
    BOEM states that the cases where taxpayers have actually 
paid costs for decommissioning are rare and that since 2009, 
more than 30 corporate bankruptcies have occurred involving 
offshore oil and gas leases with unbonded decommissioning 
liability is $7.5 billion. Those are big numbers.
    So how much has been paid by the American taxpayer for 
their abandonment obligations in the Gulf? Well, that was not 
addressed in the rule. But in July of 2023, BOEM communicated 
to the House Subcommittee on Energy and Mineral Resources that 
U.S. taxpayers have incurred obligations totaling $58 million 
net of bonds. Fifty-eight million dollar total after more than 
30 recent bankruptcies.
    Again, the American taxpayers should never pay for offshore 
abandonment obligations.
    But to put this in perspective, in the last 20 years, 
offshore oil and gas production has generated $124 billion in 
royalty and leased bonuses for the U.S. Treasury, $6 billion a 
year, $500 million a month on average. And how has the taxpayer 
been protected? By law, by regulation, and by practice. All 
current and previous owners stand in front of the taxpayer and 
remain collectively responsible for decommissioning 
obligations. Selling a property in no way relieves the previous 
owner of its continuing decommissioning obligations.
    To address the $58 million in taxpayer exposure BOEM now 
seeks an additional $9.2 billion in new bonding which would 
cost small businesses in the Gulf $5.7 billion over the next 20 
years. Those are BOEM's own numbers. We feel they are much 
higher than that. That money could be used to invest in 
projects and actually decommission these platforms and wells. 
Overkill barely begins to describe BOEM's solution.
    But you do not need to believe an oil and gas guy. The 
comment letters have been submitted. This is what the State of 
Louisiana said. ``The proposed rule falls within the unpleasant 
category of a solution in search of a problem.''
    In reality, there is no problem within taxpayer funded 
decommissioning. There is certainly no problem that would 
justify eviscerating the oil and gas industry. The SBA Office 
of Advocacy said that BOEM's analysis intentionally ignores 
joint and several liability as the way that the taxpayers are 
protected from these unfunded liabilities. It presumes that 
small businesses impose a significant risk to the taxpayer 
despite the full backing of companies that BOEM has already 
exempted. As a result, small businesses are not only 
disproportionately harmed by the proposal, but only small 
businesses are harmed by the proposal. And the Surety and 
Fidelity Association of America, which is a trade organization 
of more than 400 companies that writes 98 percent of the surety 
and fidelity bonds in the United States and are the group that 
BOEM is looking to to solve this problem, what do they say 
about it? They fear that the proposed regulations might have 
unforeseen and possible negative consequences leading to an 
uptick in bankruptcies among small independent operators 
ultimately worsening unfunded decommissioning liabilities. Such 
financial failures will have cascading negative impacts that 
undermine BOEM's stated purpose for increasing access to these 
bonds and alleviating the burden on the taxpayer.
    Given the increased risk in the market created by recent 
bankruptcy rulings, the proposed regulations could have an even 
stronger, chilling effect on the surety industry's appetite to 
participate. As is, players are already exiting the 
marketplace, further exacerbating capacity concerns.
    This rule is not workable. The group they are looking to 
for a solution says it will not work. Additionally, CAC 
Specialty, which is a surety bonding brokerage firm said, 
``Like a Greek tragedy, the BOEM's actions could expediate the 
outcomes that it wished to avoid.'' And once again the State of 
Louisiana said, it is Louisiana's view that supplemental 
bonding is unnecessary. As long as a credit-worthy party exists 
in the chain of title there exists no meaningful 
decommissioning burden on the federal government.
    The solution resides in the BOEM's own analysis. The 
proposed rule states that if BOEM were to take into account the 
financial capacity of the predecessor lessees, the financial 
burden on small companies would be substantially reduced 
compared to that resulting from the proposed rule. And this 
would mitigate the impact of the proposed rule on small 
businesses.
    We remain optimistic that we can work together to create a 
sensible solution that truly protects the taxpayer and 
maintains a strong and viable small business community along 
the Gulf Coast. Thank you.
    Chairman HUNT. Thank you, Mr. Minarovic.
    I now recognize Mr. Danos for his 5 minutes. Thank you, 
sir.

STATEMENT OF PAUL DANOS, CHAIRMAN OF THE BOARD, OWNER AND CHIEF 
EXECUTIVE OFFICER, DANOS LLC, TESTIFYING ON BEHALF OF NATIONAL 
                  OCEAN INDUSTRIES ASSOCIATION

    Mr. DANOS. Thank you, Chairman Hunt, Ranking Member 
Gluesenkamp Perez, and Members of the Subcommittee. Thank you 
for having me here today to testify.
    My name is Paul Danos. I am president and CEO of Danos, 
LLC. We are a 76-year-old family business headquartered in 
south Louisiana. I am also the Chair of the National Ocean 
Industries Association, which for more than 50 years has 
represented the all segments of the offshore industry, 
including oil and gas, offshore wind, offshore minerals, and 
offshore carbon sequestration.
    So in 1947, my grandfather started our company. He had one 
partner. So there were two of them. That is definitely a small 
business. And most of the work happened at my grandmother's 
kitchen table and a boat offshore. They sort of took turns 
between the table and the boat offshore. And we have done a 
pretty good job of preserving history. We put a book out kind 
of capturing some of our history last year on the 75th year 
anniversary. And there are some great stories about why the 
founders of our company started this business. And it was 
certainly like many entrepreneurs they wanted to better 
themselves. They had an opportunity to do that. But also for 
their extended family and their community. And that is the 
fabric of our economy and so many small businesses. People who 
take a risk. My grandfather borrowed $2,000 from his sister, 
bought a boat, and got started. And took that risk and provide 
jobs to people in an industry that provides just an amazingly 
valuable service, the innovation and quality of life that we 
enjoy because of the affordable and reliable energy that comes 
from oil and gas woven into that fabric of our small business 
and so many others.
    So today I am here, our footprint has grown in our company. 
I am representing my family and certainly our employees for our 
business but the employees for our industry which total about 
370,000 direct and indirect employees for the offshore oil and 
gas. So I bring a message from the employees. I spend time at 
crew changes and offshore locations, some of our land locations 
talking to our folks.
    And kind of two things that I would like to convey on 
behalf of our people and our industry. First, I hope you 
realize the massive impact that the regulation that comes out 
of Washington has on the people on the frontlines; the 
frontline heroes who are providing that reliable and affordable 
energy for our country. And I know, sometimes we can get 
disconnected and it is words on paper and it is legislation and 
it is regulatory acts, but at the end of the day we are talking 
about real people on the front lines who are making this work 
happen. So I represent them and just want to just again, you 
know, make sure that we understand the impact that happens on 
families, on people.
    And then the second thing is just when we talk about any 
policy that limits the production of oil and gas here in the 
U.S., I would say that is bad for our country. We have some of 
the lowest carbon intensity barrels in the world produced in 
the Gulf of Mexico. An ICF study that came out recently said 
that the average carbon intensity of barrels produced in the 
Gulf of Mexico are 46 percent lower than the average of the 
rest of the world in terms of carbon intensity. So when we 
restrict supply here in the Gulf--and we have to understand 
something about oil and gas demand and the way it works--it is 
a fungible resource. It is abundant around the world. So if we 
restrict supply, sort of like squeezing a balloon, that supply 
will show up somewhere else and it will be produced somewhere 
else. And most often it is going to be places like Venezuela, 
Iran, Russia.
    So first what we are going to do is we are going to send 
those barrels there. And those are higher carbon barrels. So it 
is a negative impact on the world's environment. We also send 
those jobs somewhere else; right? Back to those guys, those 
people, men and women on the front lines. When we restrict 
supply here in the U.S., we are sending those jobs, we are 
sending the royalties that Mr. Minarovic talked about, $6 
billion in royalties every year. We are sending those to other 
counties. And then we are giving up our energy security at the 
same time. So the idea of moving barrels outside of our 
country, producing them elsewhere is bad policy. Limiting 
production here in the U.S. is bad policy.
    So what do we need? We need good regulations. Part of why 
the barrels that we produce in the U.S. are low carbon barrels 
is because of the way we produce. The regulations that we have 
worked together within industry and regulators over the decades 
that are common sense, that protect our environment, protect 
our people, protect our costs.
    I am from a place called Cut Off, Louisiana. It is a 
coastal south Louisiana community. I grew up fishing and 
enjoying the coast. Some of the best places to fish are around 
platforms and old platforms. I had my daughter and my wife in 
the Gulf of Mexico fishing on an old platform early this 
summer. We had a fantastic experience. So we can co-exist 
environmentally but we need common sense policy. We need a 
regulatory environment that promotes good, common sense 
regulations and policy to protect our environment but encourage 
domestic production.
    So I look forward to the conversation that we will have 
today and any questions that we have going forward. Thanks 
again.
    Chairman HUNT. Thank you, Mr. Danos.
    I now recognize Mr. Epstein for his 5 minutes for your 
opening remarks. Thank you, sir.

  STATEMENT OF ALEX EPSTEIN, PRESIDENT, CENTER FOR INDUSTRIAL 
                            PROGRESS

    Mr. EPSTEIN. Thank you.
    So my name is Alex Epstein. I am a philosopher and energy 
expert representing only myself, and everything I say today is 
my own independent conclusion, not influenced by anyone from 
any industry including the fossil fuel industry but which I am 
a very big admirer of that industry for reasons you will see.
    Because energy is a major input in every business, the 
lower cost and more reliable energy is, the lower cost and more 
reliable everything is. The higher cost and less reliable 
energy is, the higher cost and less reliable everything is, and 
the less efficient and less competitive U.S. businesses are, 
including small businesses.
    Today we are hearing how irrational policies are crippling 
one area of the energy business: offshore oil production, which 
provides almost one-sixth of our domestic oil production, 
production without which gasoline would be far more expensive. 
And I am from California where we are around $7 right now, and 
it would be far, far less secure. So it is really crucial to 
have this production.
    But today I would like to put the irrational attack on 
offshore drilling in its broader context, which is that it is 
just a tiny piece of today's rabidly irrational global anti-
fossil fuel agenda, an agenda that poses as rational and 
scientific but is actually the exact opposite.
    So the dozens of discrete attacks of the Biden 
administration on the fossil fuel industry, they are not 
isolated incidents. They are all attempts to impose an agenda 
that says fossil fuel use must be essentially eliminated by the 
year 2050, which is now very, very close.
    At the beginning of his administration, President Biden 
announced a U.S. ``whole of government'' approach to climate 
change, which in practice means an overarching commitment to 
rapidly eliminate fossil fuels. Every agency was told figure 
out new ways to attack fossil fuels. And that is what they have 
done.
    The Biden administration is systematically committed to 
attacking fossil fuels on four fronts.
    So the first front of attack is fossil fuel investment. 
Fossil fuel investments are long-term commitments that require 
confidence in a payoff. Our government, often colluding with 
activists, incessantly discourages fossil fuel investments, 
directly and by threatening the industry's future, like running 
on ``I guarantee you we are going to end fossil fuel'' and then 
being elected president. The federal government has been a 
major driver of ESG anti-fossil fuel climate policies with 
regulators pressuring financial institutions to declare their 
commitment to getting off fossil fuels. The SEC's recent 
``climate disclosure rules'' so called are taking the damage to 
the next level.
    Now, front two of the attack is on fossil fuel production 
are common. So punishing restrictions and onerous taxes 
specifically on fossil fuel production are common across 
developed countries, unfortunately. And these suppress supply 
from the freest nations on the globe. And unfortunately, we are 
leading this right now.
    One of the many punishments President Biden has inflicted 
on the supposedly preferred fossil fuel industry, which the 
opposite is true, was his early moratorium on issuing oil and 
gas leases on federal lands. And the Biden administration 
continues to delay and decline holding lease sales.
    Now, the third front of the attack on fossil fuels is 
fossil fuel transport. One of the most effective ways of 
punishing the fossil fuel industry has been attacking critical 
transport infrastructure, including pipelines and export/import 
facilities with delays, regulations, and lawsuits.
    Now, we all know about Keystone XL, which has been hugely 
destructive, but perhaps the most destructive way of singling 
out fossil fuel transport for punishment has been killing 
natural gas pipelines. We have a virtually limitless supply of 
natural gas in this country, particularly in Appalachia, and we 
have an incredible ability to ramp up production quickly. But 
we are blocking pipeline after pipeline.
    Now, the final front of the attack on fossil fuels is 
punishing fossil fuel use. So our government's ``whole of 
government attack'' on fossil fuels seeks out every way it can 
to punish fossil fuel use.
    Perhaps the most destructive and underdiscussed form of 
this is punishing reliable fossil fueled electricity generation 
and thereby destroying our grid.
    So as a Californian, I am well aware of the costs of 
punishing fossil fuel electricity generation. Gavin Newsom and 
others prematurely shutting down vital fossil fuel plants led 
to devastating statewide blackouts in 2020. And 5 days after 
pledging to all EVs by 2035, Newsom told us there was not 
enough power to charge or EVs. From his administration, ``avoid 
using major appliances and charging electric vehicles.''
    Nationally, we are in an electricity crisis with reliable 
power plants shutting down far faster than they are being 
built. And the Biden EPA insanely plans to make things much 
worse with seven policies that gravely threaten 10 to 20 
percent of our reliable capacity in the next 7 years.
    So every one of these hundreds of actions the Biden 
administration is taking in terms of its ``whole of 
government'' approach is harmful to American businesses, 
including small businesses who have to struggle with higher 
energy costs and lower reliability.
    Now, the final thing I want to address quickly is just the 
lie that solar and wind can rapidly replace fossil fuels. If 
this were true they would not need massive government 
preferences of their own and they would not need massive 
government punishments of fossil fuels. And if solar and wind 
could actually replace fossil fuels, China, which dominates the 
production of solar and wind components, would not be using 
coal to produce these components and they would not have 300 
planned new coal plants--new coal plants--more than all we have 
in the United States right now to last over 40 years.
    So if you are thinking we are going to have more security 
with this stuff, we are not going to have much energy and it is 
all going to be dependent on China.
    So what I want to encourage everyone here to do, 
particularly small businesses and politicians, pro-freedom 
politicians, is use your powerful voices to advocate for 
liberating all forms of energy, including fossil fuels, not 
limited to fossil fuels, so that America and the world can be a 
better place. Thank you very much.
    Chairman HUNT. Thank you, Mr. Epstein.
    I now recognize Ms. Nisbet Moncy for her 5 minute opening 
remarks. Thank you for being here.

 STATEMENT OF KATHLEEN NISBET MONCY, CHIEF OPERATING OFFICER, 
                      GOOSE POINT OYSTERS

    Ms. NISBET MONCY. Thank you, Chairman Hunt, Ranking Member 
Gluesenkamp Perez, and Members of the Subcommittee for this 
opportunity to testify today. My name is Kathleen Nisbet Moncy. 
I am the COO of Goose Point Oysters. I am a second-generation 
shellfish farmer and a mother to five children.
    Our company is located in the heart of Willapa Bay, 
Washington, where we own 2,000 acres of tidelands. Willapa Bay 
is one of two coastal estuaries in Washington that produce over 
25 percent of the nation's oysters.
    The shellfish industry in Willapa Bay and the surrounding 
areas generates a tremendous economic impact. As the largest 
private employer in Pacific County, local shellfish farmers in 
Pacific County and Grays Harbor are responsible for nearly 
2,000 family-wage jobs, and contribute to over $102 million in 
economic impact.
    Shellfish farmers, while they are the largest private 
employer in our county, our tidelands are the backbone of our 
area. We are locally owned and our tidelands are passed down 
from generation to generation. We have a family farm that has 
been farming there for over 150 years.
    Shellfish farming in Washington State predates statehood. 
We are the backbone of our community in supporting local 
schools, providing employment and, participating in community 
programs. Shellfish farming is a way of life in our community.
    The ecosystem in which we farm is of upmost importance to 
us, as shellfish farmers we depend on clean water and a healthy 
habitat. A single submerged oyster will filter up to 7 gallons 
of water an hour, our responsibility is to protect that clean 
water. We are dedicated to managing the health of our 
ecosystem, and as a result are regarded as one of the 
healthiest working estuaries in the U.S.
    I would promote stricter regulations on offshore energy no 
matter what the company size is. Our oceans are extremely 
fragile environments, and shellfish farmers feel even the 
slightest changes in our ocean conditions. The most recent one 
we have been struggling with is ocean acidification. It came up 
in 2008, and according to NOAA, we are going to continue to see 
shifts in ocean acidification into the future.
    Some of the negative impacts of ocean acidification on 
farmers have been pH shifts, lack of calcium in the water, and 
harmful algal blooms. We must continue to fight for our waters 
and learn how to evolve with the changes instead of adding more 
complications with offshore energy.
    Along with more stringent regulations for offshore energy, 
there also must be adequate funds set aside for any disasters 
or even small leaks that would arise. The Gulf was not prepared 
for the oil spill it endured years ago and the shellfish 
industry is still impaired due to it. We should learn from the 
mistakes and ensure that they do not happen again.
    As an example we have been working with the State of 
Mississippi to assist them in creating hatchery systems so they 
can rebuild their reefs because the industry down there is 
still struggling today. We have sustainable farming mechanism 
in Willapa Bay and they are trying to mimic that down in the 
Gulf States. Knowing how to sustainably farm shellfish will 
provide a consistent food source for the future and water 
quality is a key part of that.
    An oil spill off of our coast would destroy our estuaries 
and the communities that are supported by them. Based on the 
way the waters flow, we get two full tidal fluctuations of 
water a day, anything that happens off of our coastline would 
enter into our estuaries and have a significant impact on 
shellfish, crab, eel grass, and other species that live there.
    Besides some of the local issues that would arise with 
offshore energy, our location does not have adequate services 
to respond to a spill. The Willapa Bay entrance and channels 
have not been properly managed for decades by the Department of 
Army Corps and would pose a danger for any type of response 
team. There is no positive scenario for our fragile ecosystems 
if there were to be any sort of spill off of our coastline.
    Along with the impacts to shellfish in our coastal 
estuaries, we must also consider the Dungeness crab and salmon 
fishing communities. Shellfish tidelands are the rearing 
habitat for Dungeness crab. Dungeness crab fishing grounds are 
directly located off the Washington and Oregon Coast. Access to 
these fishing grounds is currently limited and further 
limitations would risk the livelihood of the fleet and the 
communities that process and sell the seafood. The cumulative 
impacts to the fishing grounds would make it near impossible 
for future generations to be successful in the fishing 
industry. We should be focused on increasing seafood production 
in the U.S. instead of polluting the very waters that provide 
it.
    In conclusion, I would not support reduced regulations to 
offshore energy at the risk of the livelihoods of our rural 
communities. Shellfish is a sustainable seafood that has a huge 
benefit by providing many ecosystem services, including 
purifying the water, reducing carbon and many other essential 
services in the areas we farm. Our fishing communities must be 
able to retain the available fishing grounds for the success of 
their industry so we must stand up and protect the waters from 
contamination and be responsible stewards of the ecosystems in 
which we work in.
    Thank you for your time.
    Chairman HUNT. Thank you, so much for being here.
    And again, I want to thank the witnesses.
    We now move to the Member questions for the under 5 minute 
rule.
    I recognize myself for 5 minutes.
    The first question is for you, Mr. Minarovic. The Financial 
Assurance Rule is said to be put in place to protect the 
taxpayers. Is there currently a real risk to the taxpayer to be 
held accountable for these costs? And if so, what would you 
propose as a solution?
    Mr. MINAROVIC. Thank you, Chairman Hunt.
    You know, I think this is really important. And I have got 
a graphic that I think is in front of each of you that helps 
explain this complicated issue. As Ranking Member Gluesenkamp 
Perez mentioned, the BOEM estimates that current abandonment 
obligations are from the Rule $42.9 billion. I think her 
estimate was in the high 30s from a 2015 study.
    What you need to understand in order to understand the 
exposure to the taxpayer is it is broken up into these three 
buckets here. The dark green is investment grade companies. The 
government is exempting that. Their numbers suggest that is 
$22.6 billion of the abandonment. The bottom number in red is 
noninvestment grade companies, both current and prior owners. 
No investment grade company in the chain of title totals $750 
million. That is where we really need to focus our efforts 
here, and the GEA and Arena Energy support additional bonding 
associated with properties with no investment grade companies 
in the chain of title.
    The thing that is really critical is the box in between, 
$19.5 billion. This is where a previous owner has an investment 
grade rating. And thing is that the government has stated that 
under this proposed rule the government retains the authority 
to pursue predecessor lessees for the performance of 
decommissioning obligation. When a company sells an asset they 
remain in the chain of title. That is what protects the 
taxpayer. Any company that owns or previously owned leases is 
responsible. If Arena sold its assets to another company, we 
would stay in the chain of title and be responsible for that 
abandonment. That is what protects the taxpayer. So none of 
these dark green boxes or light green boxes should be 
considered for bonding. The only risk to the taxpayer is this 
red box and that is what has really resulted in such a small 
loss relative to the exposure in the Gulf.
    Chairman HUNT. Thank you, sir.
    This question is for you, Mr. Danos. America energy 
companies are leaders in innovation and produce the cleanest 
oil and gas in the entire world. And I know. I have been on 
these rigs and I have seen them actually personally. How would 
the rule on the Rice's whale and others like it affect the 
industry's ability to operate at its full capacity and reach 
its full potential?
    Mr. DANOS. Thank you, Chairman. It is a great question.
    Any new regulation needs to make sense. It needs to be 
balanced across all stakeholders and in terms of what it is 
trying to do. And it needs to be effective. And I think the 
Rice's whale, for instance, a couple of notes about that. There 
is very little data that exists that we have the Rice's whale 
in the area that was originally pulled out of the last lease 
sale. So the balance, the effective components of that 
regulation just really did not add up.
    And one thing related to marine operations that I think is 
really important to point out when we think about balancing the 
different stakeholders, oftentimes in the Gulf of Mexico what 
we do is we operate vessels at night so that we can do the 
higher risk work that we do on the platforms during the day. So 
with the Rice's whale regulation prohibiting vessels from 
moving at night what you are doing is you are flipping that on 
its head. And the unintended consequence of that is that the 
people who work for my company and other small businesses and 
large businesses in the Gulf of Mexico, we are increasing the 
risk to those people with the work that they are doing because 
they would have to move more of that work at night as opposed 
to doing it during the daylight hours. And there is plenty of 
work that goes on at night but again, we are increasing that 
exposure. So that is something that needs to be thoroughly 
examined and thought out as we proceed.
    Chairman HUNT. Thank you so much.
    Mr. Epstein, my last question is for you. What do you think 
of Biden's energy policy, and is it good for the country? You 
are allowed to take a little bit more time here if you would 
like. I am not going to need 45 seconds.
    Mr. EPSTEIN. I addressed a lot of it. I mean, the thing 
people need to get is the danger of this whole of government 
approach because it really has a terrorizing effect on industry 
because industry knows that it is not just any given individual 
restriction that is a problem; it is that the government is 
literally trying to shut them down. You see this happening with 
coal right now where the government is trying to shut down all 
of our coal plants which are preventing us from the abyss right 
now. We have catastrophic reliability problems and now we have 
Mike Bloomberg who I offered to publicly debate so far has not 
stood up yet. Jordan Peterson offered to host. So Mike, let's 
do it.
    But he is spending $500 million on top of billions of other 
dollars to shut down our coal plants and he is not willing to 
publicly defend it.
    One other thing. Since the UAW is in the news right now, 
how are you going to get higher wages if you have Joe Biden 
pressuring companies to sell vehicles where they are losing 
billions of dollars? Companies do not give higher wages when 
they are losing billions of dollars due to forced policies by 
the government. So those are just two specific examples but the 
``whole of government'' approach is the overall disaster.
    Chairman HUNT. Thank you very much.
    I now recognize the Ranking Member for 5 minutes for 
questions. Thank you, ma'am.
    Ms. GLUESENKAMP PEREZ. Ms. Nisbet Moncy, you highlighted in 
your testimony the vital role oysters play in filtering water 
in Willapa Bay. Can you explain the fragility in the system and 
the outcome to even minor changes in water quality?
    Ms. NISBET MONCY. Yes, I would love to do so.
    Shellfish are filter feeders and as a result are a product 
of their environment which make them very susceptible to 
environmental changes. Most recently, due to climate change and 
ocean acidification, we are seeing an increase in harmful algal 
blooms or HABs in our estuaries which are having a direct 
impact on the productivity of our shellfish beds. We are 
noticing that after a harmful algal bloom event the oysters and 
other shellfish will perish within 2 to 6 weeks.
    Therefore if we have pollution coming into our water ways, 
our shellfish, eelgrass, Dungeness crab, salmon and other 
species will be negatively impacted. For many decades we have 
been the continued stewards of the estuaries collaborating with 
upland timber companies, private home owners and mills to 
mitigate impacts and protect our clean water.
    Ms. GLUESENKAMP PEREZ. So any minor spill would have a 
negative impact?
    Ms. NISBET MONCY. Any minor spill would have a significant 
negative impact.
    Ms. GLUESENKAMP PEREZ. So fishing off the coast is an 
important implication of our economy alongside oyster fishing 
in the bay. Could you explain any form of offshore energy 
production that Washington endangers commercial fishing 
industry?
    Ms. NISBET MONCY. Currently, there is a limited amount of 
area that our commercial fishermen can fish, with the 
introduction of offshore energy you reduce the areas even 
further. So whether it is a platform, wind energy, or even 
cables underground, you are disrupting the Dungeness fishing 
grounds. Any infrastructure impacts fishing off our coastline. 
The fisheries are very strictly managed and cannot withstand 
any further reduction in the available area to fish.
    Ms. GLUESENKAMP PEREZ. Yeah. We were talking in the 
elevator on the way here and we have talked out in the bay. 
People from more urban communities or other parts, they assume 
nothing is going on. There is this arrogance of like there is 
nothing going on out there. Like, we will just like move it 
somewhere where it is not in my view shed. Or it is somebody 
else's problem. And I think this loss of a sense of agency and 
determination in our rural communities, what happens here, how 
we prefer to make our livelihoods. So I am deeply grateful for 
your advocacy of a way of life that I think is critical to our 
culture as Americans and as Washingtonians.
    So farming oysters is one of the most sustainable sources 
of seafood. Not only purifying the water but also absorbing and 
sequestering carbon emissions. Can you talk about the 
importance of sustainability broadly? Because this is not just 
about dollars and cents but to your business and to your 
philosophy as a business owner?
    Ms. NISBET MONCY. Yes, for us it is our way of life. We 
have always had the mentality that if you take care of the 
estuaries in which you work, that they will take care of you. 
We sustainably farm our products. We have hatcheries that 
produce our own seed which we plant and cultivate to be 
harvested. We are considered a sustainable seafood not a wild 
fishery.
    Our perspective is not just that of a shellfish farmer but 
as a community member with everyone else who works in and 
around the estuary, if we all collaborate our ecosystems will 
flourish. We want to retain the rights to be able to continue 
what we are doing for generations to come. While it has been 
very difficult with climate change and OA (ocean 
acidification), we continue to figure out how to evolve. We are 
huge proponents of finding solutions and must have a voice at 
the table when rules are being made, especially here in DC. I 
recognize, I am a small fish in a big pond but the pond has 
ripple effects and those can cripple our industry and the 
communities we support. Making sure that we are being smart 
with our regulations and understanding the impacts they will 
have down the road is key.
    Ms. GLUESENKAMP PEREZ. It feels like a lot of industries 
you can sort of take the money and run. But it feels like, what 
I really value about our shellfish growers is when you talk 
about the generational wealth, you are talking about the health 
of the estuary. That is where the money is. That is where the 
culture and the community is is in the actual rootedness and 
health of your ecosystem.
    So I cannot say how grateful I am to all the smart, 
hardworking people who have chosen to make and continue to make 
their family livelihoods in these rural communities. And thank 
you. Sincerely, thank you for taking time away from your family 
and your business to be here today.
    Ms. NISBET MONCY. Thank you.
    Chairman HUNT. Thank you, Ranking Member.
    I now recognize Representative Meuser from the great state 
of Pennsylvania for 5 minutes.
    Mr. MEUSER. Thanks. Thank you, Chairman, very much. Thank 
you very much to our witnesses for your work, your business, 
and for taking the trip being here with us.
    So Mr. Minarovic--how do we pronounce that?
    Mr. MINAROVIC. Minarovic.
    Mr. MEUSER. Minarovic, thank you.
    You have got a business. You have got perhaps family 
members and you have a small business. And that business is 
important to you?
    Mr. MINAROVIC. Yes, sir.
    Mr. MEUSER. Okay. So we have small businesses here. Some in 
the energy sector. Some in other industries. I do not think it 
is up to this Committee to decide who is more important. You 
know, that is just me.
    So this BOEM rule, when it perhaps goes into effect, you 
called it existential to you and to, you know, I am just 
reading here, the billions of dollars and other small 
businesses that will be wiped out. Existential means wiped out.
    Mr. MINAROVIC. Absolutely.
    Mr. MEUSER. Okay. You are a highly regulated business 
obviously; right?
    Mr. MINAROVIC. Absolutely.
    Mr. MEUSER. Yeah. And have there been any problems lately? 
I mean, I come from the Marcellus shale region, a new part of 
my district. You can go to a rig site, the level of regulation 
which is great. That is how it should be in the United States. 
And even outdoor rig sites, it is like walking into a clean 
room.
    Mr. MINAROVIC. Right.
    Mr. MEUSER. It is perfect; right? There have not been 
issues. So, and that is a good thing. There should not be. And 
so that is the way it should be.
    So in your business, I expect, not abiding by some of the 
pollutant control requirements which I am all for because this 
is the United States. We want to do things better than every 
other country. But if you were to cross those regulations that 
would also be existential to your business, would it not?
    Mr. MINAROVIC. Absolutely. Yes, sir.
    Mr. MEUSER. Okay. so this BOEM, we will work on this 
because once again these sort of government actions hurt those 
that supposedly it is trying to help. By increasing the level 
of bonds that you need to secure, you expressed it in your 
opening testimony, but is it completely impossible under the 
current rules?
    Mr. MINAROVIC. Yes, sir. Let me respond to your first 
statement.
    It is absolutely the case that we are a heavily regulated 
industry. The Gulf of Mexico has been heavily regulated for 75 
years. The federal waters of the Gulf of Mexico. And there is 
no better place to get our oil than the Gulf of Mexico.
    Mr. MEUSER. Not Venezuela? Not Russia?
    Mr. MINAROVIC. It is going to be a lot cleaner coming from 
the Gulf of Mexico.
    Mr. MEUSER. Do you think the Middle East, do you think they 
have got the same pollutant controls as the United States of 
America?
    Mr. MINAROVIC. Lets get our barrels from the place where 
the states that surround it--Mississippi, Alabama, Texas, and 
Louisiana support it. Lets get our barrels from the place that 
the federal government gets a royalty check.
    Mr. MEUSER. How about Venezuela? Do you think Venezuela's 
standards----
    Mr. MINAROVIC. Absolutely not.
    Mr. MEUSER. We live in a round world; right?
    Mr. MINAROVIC. Absolutely.
    Mr. MEUSER. So those pollutants cause problems everywhere?
    Mr. MINAROVIC. Ranking Member Gluesenkamp Perez said that, 
you know, people do not realize if you do not do it here it is 
going to be done somewhere else. Things move around. If we are 
going to get our oil from somewhere--Iran, Venezuela, Russia, 
Iraq----
    Mr. MEUSER. And what about the costs associated with all 
this? By losing our energy independence, forget about energy 
dominance.
    Mr. MINAROVIC. Yes, sir.
    Mr. MEUSER. Okay, with gasoline 5 bucks a gallon, $4 a 
gallon, $7 a gallon out in Pennsylvania making us highly 
vulnerable to world events. I mean, man, we should have learned 
that when you and I were kids in the `70s. Right? World events. 
I mean, Ukraine, you name is. OPEC decides to cut back, leaves 
us, completely wrecks our economy, causes inflation.
    Mr. MINAROVIC. Absolutely.
    Mr. MEUSER. Or partially causes inflation. That and wildly 
excessive spending. Hurts small business. Hurts the oyster 
business. Right? As your costs go way up you just cannot pass 
all that along.
    So, yes. So I would say we are in a devolving initiative. 
What we should be focused on is energy dominance with the 
highest levels of pollutant controls. You could probably handle 
that. Right?
    Mr. MINAROVIC. Absolutely.
    Mr. MEUSER. I mean, as opposed to having to follow this 
BOEM rule?
    Mr. MINAROVIC. Absolutely. We need to do that. I mean, oil 
prices are being driven by supply and demand imbalances. 
Anything we do to restrict domestic production is going to have 
an impact on the world oil price ultimately. And that is going 
to be a regressive tax on the lower income people of this 
country. We need to move to alternatives. We need to move to 
all the above. The best of the above is the right answer. And 
we need to pursue everything. But we cannot limit fossil fuels. 
We are going to impair our country and our economy.
    Mr. MEUSER. We are going to go to work for you.
    Mr. Danos and then Mr. Epstein and then, I am sorry, Ms.--I 
should know--Ms. Moncy. I am running out of time but I was just 
going to ask what came out of Washington that harmed you the 
most and what has come out of Washington that has helped you 
the most? And maybe we could follow up with that afterwards if 
we have a second round.
    I yield back, Mr. Chairman.
    Chairman HUNT. Thank you so much.
    I now recognize Representative Golden from Maine for 5 
minutes.
    Mr. GOLDEN. Thank you.
    Ms. Nisbet Moncy, I know most of the hearing is focused on 
oil and gas and I wanted to talk a little bit about BOEM and 
offshore wind development. As an oyster farmer specifically, do 
you have any concerns about offshore wind development and how 
could it impact local aquaculture operations?
    Ms. NISBET MONCY. Yes, I do. The proposals that they are 
working on in Oregon and off the Washington coast, we are not 
proponents of those. Our current cost of power that we have 
from hydro in the northwest is about 4 cents per kilowatt-hour 
that goes into our PUDs. The cost for wind would be about a 
dollar. You are looking at a significant increase across the 
board for power to those of us who live in the Northwest, and 
it has been shown that there is zero net gain of wind energy 
off of our coastline. By the time you install it, run it, and 
decommission it, there is really no added benefit for our 
region to have offshore power based on the cost of all those 
components. Our PUDs provide power to other areas such as 
California and profit significantly. As for the fishing 
grounds, you are looking at limiting the area available to fish 
in our region. The infrastructure required for the windmills 
such as cables, diesel/oil tanks and increased boat traffic all 
elevate the risk to our fishing grounds and estuaries.
    Mr. GOLDEN. Do you have any concerns that it could also be 
potentially harmful to the ecosystem?
    Ms. NISBET MONCY. Any sort of offshore spill without a 
proper response would have a negative impact on our 
communities.
    Mr. GOLDEN. Offshore wind that is.
    Ms. NISBET MONCY. Offshore windmills still have diesel on 
them and must be serviced so you will increase the boat traffic 
in our area. There have been several ships that have run 
aground on the Columbia River bar so if you increase boat 
traffic to be more than what it currently is, you increase the 
risk of a spill. We currently do not have an adequate response 
team to the Willapa Bay entrance if there were to be any sort 
of spill.
    Mr. GOLDEN. For aquaculture communities and also fisheries 
in your region, do you feel like BOEM has been a good partner 
in hearing your concerns? Is there any evidence that they are 
working to address those concerns?
    Ms. NISBET MONCY. In our region specifically there has not 
been a direct nexus. No. Down in southern Oregon with the Crab 
Fisherman Association there has been a nexus with BOEM.
    Mr. GOLDEN. Okay. Thank you. That is helpful.
    I guess I will try, Mr. Epstein, but anyone else is welcome 
to try and answer this. And this comes from a genuine place. I 
am not contesting that some of the policies you see coming out 
of the White House are concerning on oil and gas production 
here domestically. You see some good things like approval of 
Willow up in Alaska and then at the same time you see the 
cancellation of permits for leases up in Alaska. Sometimes 
going in the right direction; other times, not. So at the same 
time I have seen no shortage of reports that oil and gas 
production in the United States is up rather than down 
currently compared to let's say 2020. Is that true or is that 
not true?
    Mr. EPSTEIN. I mean, 2020 is very misleading selected time.
    Mr. GOLDEN. Sure. I said general.
    Mr. EPSTEIN. So in general----
    Mr. GOLDEN. You pick your years. Is oil/gas production in 
the United States up or down?
    Mr. EPSTEIN. It is lower. Well, it just depends on your 
starting date but it is up lower than it should be if we were 
free. So all of these things are, you have to look at it, what 
is the opportunity cost.
    Mr. GOLDEN. Sure. I agree.
    Mr. EPSTEIN. So in this case we have a global anti-fossil 
fuel movement that is trying to bring us to net zero, which 
essentially means the elimination of fossil fuel.
    Mr. GOLDEN. Have we ever produced more oil and gas in the 
United States than we are today?
    Mr. EPSTEIN. I am not exactly sure year to year but the 
point is if you look at what has happened, by slowing the 
growth of oil and gas in a world that needs far more energy, we 
have caused a global energy crisis. And yet this administration 
and this global movement is trying to eliminate it. So the net 
zero movement has not even succeeded at reducing fossil fuels. 
They have only succeeded at slowing the growth. And already, we 
have this huge vulnerability to the Russia-Ukraine situation. 
Already, we have these cost increases. So that should be a 
wakeup call that this whole agenda is ill conceived and if you 
want to address emissions you should instead do so with energy 
freedom.
    Mr. GOLDEN. We are running out of time. I just want to be 
clear just that--I am on your side, buddy. Like I want all of 
the above, I want America to be an energy----
    Mr. EPSTEIN. So will you condemn the Biden energy agenda?
    Mr. GOLDEN. I just told you--wow, you are asking me 
questions now. It is like you came here with an agenda 
yourself, my friend.
    Mr. EPSTEIN. I am just a curious guy.
    Mr. GOLDEN. What I would say is that I think that this 
administration is governing over an increase in oil and gas 
production while simultaneously seemingly unwilling to 
celebrate that which they should be celebrating. And I would 
agree with you that some of their policies as I stated earlier 
as an example up in Alaska are the wrong calls. And I would 
condemn that.
    Mr. EPSTEIN. Thank you.
    Mr. GOLDEN. Thank you.
    Chairman HUNT. Thank you so much.
    I now recognize Representative Stauber from Minnesota for 5 
minutes. Thank you, sir.
    Mr. STAUBER. Thank you very much for holding this hearing.
    You know, since taking office, President Biden has sought 
to shut down the oil and gas industry at every turn putting our 
economy and energy security at risk. The week President Biden 
took office, gas on average was $1.87 a gallon in my home 
district in Minnesota. Today, it is nearing $4 a gallon and 
President Biden did that. Rather than develop our abundant 
resources here safely where we have the greatest environmental 
labor standards, this administration would rather beg OPEC, 
Saudi Arabia, and others for more oil. This administration's 
model on energy and mining is clear. Anywhere but America, any 
worker but American.
    The Biden administration has completely neglected its duty 
to support oil and gas development and has failed to properly 
carry out an offshore leasing plan. Even to the point that my 
democratic colleagues had to force the Biden administration to 
do so in the Inflation Reduction Act last year. And still, this 
administration is failing to follow along. Rather than offering 
a robust lease sale, this administration tried to subvert the 
law and pull millions of acres from the proposal for lease sale 
261 due to unfounded concerns over the Rice's whale. Luckily, 
the Western District of Louisiana has intervened in which Judge 
James Cain stated was ``a weaponization of the Endangered 
Species Act.'' After litigation and delay form this 
administration and the environmental activists, they teamed up 
with the courts and have directed the lease sale to move 
forward without the administration's ridiculous conditions by 
early November. I was proud to join Chairman Hunt and several 
of my republican colleagues in filing an Amicus brief in this 
case.
    Mr. Chair, I ask unanimous consent to enter into the record 
a copy of this brief, as well as a copy of the District Judge 
Cain's September 21 order.
    Chairman HUNT. Without objection.
    Mr. STAUBER. Mr. Minarovic, can you share with the 
Committee the history of transactions for offshore properties 
and how smaller producers like Arena Energy came to own 
properties they are developing in the Gulf of Mexico today?
    Mr. MINAROVIC. Thank you, sir. I appreciate the question. 
It is very important to this rule.
    As major oil companies develop this basin in the `60s, 
`70s, and `80s, they installed thousands of platforms, 7,000 in 
total, drilled 50,000 wells in the Gulf of Mexico. At some 
point those assets deplete to a point that they are not 
important to those big companies. And they have a choice to 
produce them and develop them or to abandon themselves. Most of 
them chose to sell them in the marketplace. When a company 
decides to sell, it knows that it stays in the chain of title. 
There is no question about that, so it is well-established in 
regs and law and in practice. No one is fighting that by the 
companies that sold. And so when they do that, they sell to a 
private company like ours or a small public company, they put 
in a certain amount of protection, some bonding, a total of 
about $3 billion of additional private bonds are in place. For 
instance, Arena has about 600 million of abandonment 
obligations and we have 400 million of private bonds. The rule 
that BOEM is proposing does not even account for that 400 
million of bonds.
    And then additionally, the reason those bonds are put in 
place is because the seller, the bigger company, recognizes 
that they have an ongoing chain of title liability for 
abandoning those assets. So there is a negotiation that takes 
place. The selling company decides do they want more insurance? 
Do they want more purchase price? Because the more insurance 
they want, the lower the purchase price. It goes back and 
forth. Ultimately, they decide what risk they want to take. The 
first thing they need to do is make sure they have a good buyer 
that is going to carry through on their obligations but that is 
how it happens.
    Mr. STAUBER. So what is a workable solution in your eyes? 
One that protects the American taxpayers from decommissioning 
liabilities without putting an undue burden on offshore 
operators? What is your----
    Mr. MINAROVIC. Well, it really falls out of what I just 
said on these transactions. And it goes back to that red box 
that I presented earlier. These are the properties that are 
really the taxpayer risk. We need to address those. We need to 
bond those. We need to make sure that the government is 
protected. We should not have taxpayer losses associated with 
those assets.
    The SBA recognized this. And again, this is a Small 
Business Subcommittee meeting and SBA said the BOEM should 
narrowly tailor this rule to cover only those liabilities for 
which there is no predecessor leaseholders that BOEM considers 
creditworthy. That is it. That fixes the problem right there.
    Mr. STAUBER. Thank you.
    Mr. Danos, real quick. If lease sale 261 moved forward as 
the Biden administration and the environmental activists had 
hoped, what kind of impact would the conditions around the 
Rice's whale have on oil and gas companies' ability to operate 
in the Gulf of Mexico?
    Mr. DANOS. It would be significant. There is a significant 
portion of the lease sale that was carved out. And again, the 
question is we are making policy related to one sighting of one 
whale. So let me say this about the Rice's whale. The oil and 
gas industry is in favor of protecting the Rice's whale. There 
is a known habitat area for the Rice's whale that has 
protection and we should maintain that. But the area that we 
are carving our or it is being carved out by the administration 
is an area where there is not good science that the whale is 
there and it is a huge impact.
    Mr. STAUBER. Thank you very much, Mr. Chairman. My time is 
up and I yield.
    Chairman HUNT. Thank you so much.
    I now recognize Chairman Williams from Texas for 5 minutes.
    Mr. WILLIAMS. Thank you, Mr. Chair. And I want to thank 
again the witnesses for being here today.
    Full disclosure, I am a car dealer in Texas so I guess I 
can say I deal with oil and gas quite a bit.
    The Gulf of Mexico produces the cleanest barrels of oil on 
the planet. Instead of acknowledging that, this administration, 
the Biden administration is more interested in virtual 
signaling and has placed burdensome regulations and attempted 
to restrict the sale of oil and gas leases in the Gulf.
    Mr. Minarovic, you highlight the irony that the compliance 
costs, the administration rules, and the BOEM rule in 
particular has required your company's capital to be used for 
compliance as opposed to decommissioning efforts.
    The question is, if regulation and compliance costs were 
eliminated could you elaborate on how your company would use 
this additional capital? Because we see this government 
regulating, regulating, regulating, taking capital away from 
what we can do to create jobs. So could you talk about that?
    Mr. MINAROVIC. Yes, sir. Thank you, Chairman Williams. It 
is an important issue.
    Obviously, every extra dollar that we spend on 
regulations--and there needs to be a level of regulations--but 
every extra dollar we spend on that is a dollar that we cannot 
invest in these properties, continue their life, and also, 
investment that we can make in decommissioning of these assets 
over time. And some of the issues that we got into over the 
last decade with 30 bankruptcies related to overregulation of 
those companies and their inability to perform in that 
environment.
    Mr. WILLIAMS. One of the things that my colleague, Mr. 
Stauber likes to talk about is the Biden administration has 
come in and brought $75 billion worth of regulations. This is a 
real problem. This administration's attempts to rapidly do away 
with and punish the use of fossil fuel is harming Americans.
    Mr. Epstein, you highlight the anti-fossil fuel agenda--
reliable fossil fuels in states like California which is often 
under threat of rolling blackouts. So should the federal 
government adopt these policies at large? And what do you think 
will happen to the U.S. energy supply and our electric grid?
    Mr. EPSTEIN. So should they adopt California energy 
policies? Oh, man. It is rough. I mean, you saw part of what 
happened in 2020 was we saw that other neighboring states were 
starting to import our policies but they did not realize we 
have a parasitical policy. So we shut down reliable power 
plants and then we depend on our neighbors. But the neighbors 
said, hey, we want to look good and we are going to do that, 
too. But then we had a heat wave, the wind died down, of 
course, and then we did not have enough power from our 
neighbors. So, no, it is a parasitical thing. And in general, 
anyone who claims to be net zero or anything like that is 
lying. And these are not things that can scale at all. So we 
need to recognize that fossil fuels are essential for decades 
to come, and if you want alternatives you need to do things 
like liberate nuclear. Liberate mining. I think Representative 
Stauber know, I mean, look at the Biden administration saying, 
hey, we have got an amazing mining property in Minnesota. Let's 
ban mining on that for 20 years and become even more dependent 
on China for crucial minerals. So we need energy freedom, not 
net zero.
    Mr. WILLIAMS. All right. The Biden administration has 
prioritized regulations that hurt the United States energy 
security. That is what we are talking about.
    Mr. Danos, in your testimony you highlight that the 
environmental stewardship and energy process are not mutually 
exclusive. So can you quickly elaborate on how you believe the 
Biden administration has missed the nark on this balancing act?
    Mr. DANOS. Yes. Thank you, Mr. Williams.
    Again, we have a long history in the Gulf of Mexico of 
regulations that are common sense and support good production 
of affordable, low cost energy, reliable energy. And we have 
worked that way together for a long time. And today what we are 
seeing is the president getting up and saying that he wants to 
end production on federal lands; right? And this maybe goes 
back to why production is higher today, and Mr. Golden, it was 
a great question. Much of the increase in production is coming 
from state lands. A lot of that is coming from the Permian 
Basis in Texas. So those are not federal lands. And a lot of 
these investment decisions were years back. Right? So what we 
need going forward is predictability and reliability so that 
those multimillion, even billion dollar investments that will 
create a higher production in the future and we have that 
certainty going forward and the regulatory environment is a big 
part of that.
    Mr. WILLIAMS. In the time I have got left, Ms. Moncy, I am 
from Texas so I listened to your testimony. You have got quite 
an industry. Do you also in your industry run into the 
regulations, this massive amount of regulations the Biden 
administration is putting on Main Street America? I am in the 
car business. We see it in the oil industry. Do you see it, 
too, in your industry, the regulations?
    Ms. NISBET MONCY. We have seen regulations change in our 
industry as well. Yes.
    Mr. WILLIAMS. And it probably affects the cost of goods 
sold for you, too?
    Ms. NISBET MONCY. We do have impacts associated with that.
    Mr. WILLIAMS. Okay.
    Mr. Chairman, I yield my time back. Thank you.
    Chairman HUNT. Thank you so much. I think we are good here. 
We are not going to do another round if I am not mistaken. And 
I want to thank you all so much for being here.
    I want to say this, Ms. Moncy, thank you so much for being 
here. I have learned a lot about your industry. I actually had 
no idea. This is why I love this job. And I have been on Mr. 
Minarovic's rigs. I have spoken to you, sir. We have done 
interviews together in the past, and I would love to come see 
your operation as well to learn more about it and to see 
exactly how we can all coincide and live together.
    What is really important to us, and what is really 
important to me is, as you have heard from these gentlemen, it 
is an ``all hands on deck'' approach is what is necessary. We 
cannot restrict any electrons in the discussion. This is not up 
to the government to pick winners and losers. This is about 
supplying, not just the United States, not just Texas where I 
am from, not just California, but supplying the entire world 
with affordable, clean, and abundant energy from our country 
that does it better than anywhere else in the entire world. 
From somebody that spent 2 years in Saudi Arabia when I was 
deployed there, and they have an abundance of resources there, 
let me tell you. But I was also told that the Marcellus shale 
is actually known as the Saudi Arabia of natural gas. To put 
that in perspective, there is no such thing as an endless 
amount of fossil fuels but Saudi Arabia is pretty doggone close 
to it. And the fact that we are sitting on the Marcellus shale, 
part of it runs into New York, and we cannot drill for any of 
it is actually ridiculous. We as a country have got to get out 
of our own echo chamber and we forget sometimes and in this 
country we have champagne problems. I can tell you that China 
and India, Taylor Swift is pretty popular right now. Oh, Tay 
Tay. I feel sorry for Travis right now. But we do. And if you 
look at what is happening in China, India, and Russia, a lot of 
these countries of the Middle East, OPEC countries, Iran, they 
really do not care about the world's climate at all. I am a 
military guy. I have seen it. This country cares immensely. And 
while we should continue to lead from the front in this, we 
also have got to realize that we are the bridge. Oil and gas, 
natural gas, energy, we are the bridge and it is everything.
    I visited almost every single energy company in my 
district, and there are a lot of them. And I can tell you I 
have never heard a single executive say anything disparaging 
about renewable energy. I have heard nothing but actually I 
want to reinvest in it. Let's talk more about nuclear. Let's 
talk more about hydrogen. I have heard nothing but those 
things. And I can attest to that. It is genuine. It is real. It 
is not just corporate, big oil trying to spin off their ideas 
for world dominance because they really want to keep this going 
forward. These companies are actually literally investing in 
these renewable energy sources because I have seen their books. 
And I have seen what they are trying to actively do. I just 
want to make sure that we are smart about it, that we are savvy 
about it, and we do it in a way where I can continue to eat 
oysters because I love oysters. I had some last night and I am 
not going to stop eating them. And no, I do not want to ruin 
your business and your ecosystem for your small business. And 
also, sir, I want you to continue to strive to provide reliable 
and clean energy for our country.
    So with that said, thank you all so much for being here. 
Greatly appreciate it. I think at some point we will have you 
back. To me this is the most important issue that we are facing 
in our world today.
    And without objection, Members have 5 days to submit 
additional materials and written questions for the witnesses to 
the Chair which will be forwarded to the witness. I ask the 
witness to please respond promptly.
    If there is no further business, without objection the 
Committee is adjourned. And thank you so much.
    [Whereupon, at 11:18 a.m., the subcommittee was adjourned.]

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