[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
EXAMINING SPENDING PRIORITIES AND MISSIONS OF THE BUREAU OF OCEAN
ENERGY MANAGEMENT, REGULATION AND ENFORCEMENT AND THE PRESIDENT'S FY
2012 BUDGET PROPOSAL
=======================================================================
OVERSIGHT HEARING
before the
COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
Wednesday, March 30, 2011
__________
Serial No. 112-13
__________
Printed for the use of the Committee on Natural Resources
Available via the World Wide Web: http://www.fdsys.gov
or
Committee address: http://naturalresources.house.gov
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COMMITTEE ON NATURAL RESOURCES
DOC HASTINGS, WA, Chairman
EDWARD J. MARKEY, MA, Ranking Democrat Member
Don Young, AK Dale E. Kildee, MI
John J. Duncan, Jr., TN Peter A. DeFazio, OR
Louie Gohmert, TX Eni F.H. Faleomavaega, AS
Rob Bishop, UT Frank Pallone, Jr., NJ
Doug Lamborn, CO Grace F. Napolitano, CA
Robert J. Wittman, VA Rush D. Holt, NJ
Paul C. Broun, GA Raul M. Grijalva, AZ
John Fleming, LA Madeleine Z. Bordallo, GU
Mike Coffman, CO Jim Costa, CA
Tom McClintock, CA Dan Boren, OK
Glenn Thompson, PA Gregorio Kilili Camacho Sablan,
Jeff Denham, CA CNMI
Dan Benishek, MI Martin Heinrich, NM
David Rivera, FL Ben Ray Lujan, NM
Jeff Duncan, SC John P. Sarbanes, MD
Scott R. Tipton, CO Betty Sutton, OH
Paul A. Gosar, AZ Niki Tsongas, MA
Raul R. Labrador, ID Pedro R. Pierluisi, PR
Kristi L. Noem, SD John Garamendi, CA
Steve Southerland II, FL Colleen W. Hanabusa, HI
Bill Flores, TX Vacancy
Andy Harris, MD
Jeffrey M. Landry, LA
Charles J. ``Chuck'' Fleischmann,
TN
Jon Runyan, NJ
Bill Johnson, OH
Todd Young, Chief of Staff
Lisa Pittman, Chief Counsel
Jeffrey Duncan, Democrat Staff Director
David Watkins, Democrat Chief Counsel
------
CONTENTS
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Page
Hearing held on Wednesday, March 30, 2011........................ 1
Statement of Members:
Hastings, Hon. Doc, a Representative in Congress from the
State of Washington........................................ 1
Prepared statement of.................................... 3
Markey, Hon. Edward J., a Representative in Congress from the
State of Massachusetts..................................... 4
Prepared statement of.................................... 5
Statement of Witnesses:
Bromwich, Hon. Michael R., Director, Bureau of Energy
Management, Regulation and Enforcement (BOEMRE), U.S.
Department of the Interior................................. 6
Prepared statement of.................................... 9
OVERSIGHT HEARING ON ``EXAMINING THE SPENDING PRIORITIES AND THE
MISSIONS OF THE BUREAU OF OCEAN ENERGY MANAGEMENT, REGULATION AND
ENFORCEMENT (BOEMRE) AND THE PRESIDENT'S FY 2012 BUDGET PROPOSAL.''
----------
Wednesday, March 30, 2011
U.S. House of Representatives
Committee on Natural Resources
Washington, D.C.
----------
The Committee met, pursuant to call, at 10:04 a.m. in Room
1324, Longworth House Office Building, Hon. Doc Hastings,
[Chairman of the Committee] presiding.
Present: Representatives Hastings, Lamborn, Wittman,
Fleming, Thompson, Rivera, Duncan, Tipton, Labrador,
Southerland, Flores, Landry, Johnson, Markey, Kildee, Grijalva,
Boren, Sarbanes, Tsongas, and Garamendi.
STATEMENT OF HON. DOC HASTINGS, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF WASHINGTON
The Chairman. The Committee will come to order and the
Chairman notes the presence of a quorum.
The Committee on Natural Resources is meeting today to
examine the spending priorities and missions of the Bureau of
Ocean Energy Management, Regulation and Enforcement and the
President's Fiscal Year 2012 Budget Proposal.
Under Committee Rule 4[f], opening statements are limited
to the Chairman and Ranking Member of the Committee so that we
can hear from our witnesses more quickly. However, I do ask
unanimous consent that if any Member wishes to submit a
statement for the record, they will be included in the record.
Without objection, so ordered.
The Chair now recognizes himself for an opening statement.
The Bureau of Ocean Energy Management, Regulation and
Enforcement is tasked with the very important role of ensuring
the safety and responsible development of our offshore energy
resources.
Given what is at stake, it is vital that this agency
operate efficiently and aggressively to both encourage American
energy production and ensure that it is done in the safest way
possible. Although it took far too long, the Administration has
started issuing a very small number of deepwater drilling
permits, and after months and months of no permits, they are
now coming at a slow pace.
Clearly, key questions at this hearing will include the
pace of permitting and the certainty employers and leaseholders
need in order to operate. Yet, I want to highlight one
important point. The fact that Director Bromwich, Secretary
Salazar, and the Obama Administration have approved the few
recent permits to drill very clearly demonstrates, in my mind,
that they believe offshore development drilling can go forward
safely.
This is a clear declaration that the Obama Administration
has confidence that drilling can and will be conducted safely
and they deserve credit for these actions. Yet, I do believe
that we must act more swiftly on these permits. The need to act
will I don't doubt require additional resources and inspectors.
The question is how much. During times of record debt and
deficits, Congress cannot and should not simply hand over
millions of taxpayer dollars without knowing exactly how this
money will be spent.
The President's Fiscal Year 2012 budget for BOEM proposes
$119 million, or a 50 percent increase above the 2010 levels. I
hope today to hear specific details on how this increase would
specifically be used to resume offshore drilling.
As I have stated before, bigger government does not equal
better government. Extra funding should improve the process,
not add new layers of bureaucracy. I also believe that enhanced
funding should come from existing revenues generated from
energy production. It should not be paid for by imposing new or
higher taxes on American energy production. This simply leads
to higher gas prices at the gas pump.
Yesterday, I introduced three bills to increase American
offshore energy production. Together these three bills will,
one, end the de facto moratorium on the Gulf of Mexico by
requiring the Secretary to act on permits in a timely manner.
Second, require that lease sales be held in offshore Virginia
and the Gulf of Mexico, lease sales that were canceled or
delayed by this Administration. And third, lift the moratorium
on new offshore drilling by focusing drilling in areas with the
most known natural gas and oil reserves.
The Subcommittee on Energy and Mineral Resources will hold
a legislative hearing on three bills next Wednesday, April 6.
This is the next step in the Committee's active effort to
produce more American-made energy.
Now before concluding, I am compelled to comment on a
report issued yesterday by the Department of the Interior
regarding inactive and active leases. To be blunt, this report
invents the inactive definition used to label two-thirds of
Gulf leases as inactive. This definition of inactive doesn't
exist in law or regulation. It contradicts information posted
March 1 on the Interior Department's own website.
In fact, the report's definition for inactive offshore
leases directly contradicts the definition used for onshore
leases. This inventive definition allows the Administration to
mischaracterize two-thirds of the Gulf as inactive. It appears
this inventive definition was used to generate headlines and I
have to say that disturbs me. But this Committee will continue
to focus on energy development. We will move forward to take
positive actions that will unlock America's energy resources to
create new jobs and strengthen our national security by
lessening our dependence on foreign energy.
And with that, I yield back the time and recognize the
gentleman from Massachusetts, Mr. Markey.
[The prepared statement of Chairman Hastings follows:]
Statement of The Honorable Doc Hastings, Chairman,
Committee on Natural Resources
I believe all Americans understand the importance of energy
production to our everyday lives. It's critical to our country's
livelihood, our economic competitiveness and our national security.
Offshore oil and natural gas production directly supports tens of
thousands of jobs throughout the country, generates millions in federal
revenue, and provides us with American energy to lessen our dependence
on foreign countries.
The Bureau of Ocean Energy Management, Regulation and Enforcement
(BOEMRE) is tasked with the very important role of ensuring the safe
and responsible development of our offshore energy resources.
Given what's at stake, it's vital that this agency operates
efficiently and aggressively to both encourage American energy
production, and ensure it's done in the safest way possible.
Although it took far too long, the Administration has finally
started issuing a very small number of deepwater drilling permits.
After months and months of no permits, they now come at a slow, lagging
pace.
To date, only seven deepwater permits have been approved since the
moratorium was officially lifted last October. To put this into
context, there were 52 permits in the Gulf of Mexico that were approved
before the Administration halted all activity in May 2010. It's been
over 10 months and yet over 40 projects that were already approved and
underway and still waiting to resume work. Thousands of Americans in
the Gulf are out of work, and the agency needs to act to get them back
on the job producing American-made energy.
Clearly, key questions at this hearing will include the pace of
permitting and the need to provide certainty for employers and
leaseholders on how the permit process operates.
Yet, I want to highlight one very important point. The fact that
the Director Bromwich, Secretary Salazar and the Obama Administration
have approved the few, recent permits to drill very clearly
demonstrates they believe offshore deepwater drilling can safely go
forward. This is a clear declaration that the Obama Administration has
confidence that drilling can and will be conducted safely. They deserve
credit for these actions, yet they must act more swiftly to get the
Gulf back to work.
The need to review and act on permits more swiftly will, I don't
doubt, require additional resources and additional inspectors. The
question is how much?
During times of record debt and deficits, Congress cannot and
should not simply hand over millions of taxpayer dollars without
knowing exactly how this money will be spent.
The President's FY 2012 budget proposal includes a $358.4 million
request for BOEM. This is $119.3 million, or a 50 percent increase,
above FY 2010 levels.
I hope to hear today specific details on how the President arrived
at the $358.4 million figure in the budget request and how specifically
it will be used to resume offshore drilling.
As I've stated before, bigger government does not necessarily equal
better government. This extra funding should improve the process, not
add new layers of bureaucracy.
I also believe that enhanced funding should come from existing
revenues generated from energy production--it should not be paid for by
imposing new or higher taxes on American energy production. If you make
energy more expensive to produce, you will make it more expensive to
purchase. This is the last thing Americans need with gasoline prices
climbing towards $4 per gallon.
Addressing high gasoline prices, creating new jobs and reducing our
dependence on foreign energy are what led me to introduce three bills
yesterday to increase American offshore energy production. Together,
these three bills will:
end the de facto moratorium in the Gulf of Mexico by
requiring the Secretary to act on permits in a timely manner,
require that lease sales be held in offshore Virginia
and the Gulf of Mexico that were canceled or delayed by the
Obama Administration,
and lift the moratorium on new offshore drilling by
allowing drilling to occur in areas with the most oil and
natural gas resources.
A legislative hearing will be held on these three bills next
Wednesday, April 6th by the Energy and Mineral Resources Subcommittee.
These are just the first of what will be an array of bills that
this Committee will consider and act upon as part of the House
Republican American Energy Initiative.
Before concluding, I am compelled to comment on the report issued
yesterday by the Department of the Interior regarding active and
inactive leases.
This report was prepared at the direction of the President at his
press conference two weeks ago to defend his Administration's policies
in the face of rising gas prices.
To be blunt, this report flat-out invents the inactive definition
used to label two-thirds of Gulf leases as inactive. This definition of
inactive doesn't exist in law or regulation. It contradicts information
posted March 1st on the Interior Department's own website. In fact, the
report's definition for inactive offshore leases directly contradicts
the definition used for onshore leases.
This invented definition allows the Administration to
mischaracterize two-thirds of the Gulf as inactive.
It also bears stating that under this invented definition, for the
past 10 months, the Administration has single-handedly prevented any
lease-holder to become active due to its refusal to issue new
exploration or development plans.
It appears this invented definition was used to generate headlines.
This Committee will continue to be focused on energy development.
We will move forward to take positive actions that will unlock
America's energy resources to create new jobs and strengthen our
national security by lessening our dependence on foreign energy.
______
STATEMENT OF HON. EDWARD MARKEY, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF MASSACHUSETTS
Mr. Markey. Thank you very much, Mr. Chairman.
For too long the Interior Department agency charged with
overseeing the offshore oil and gas industry was nothing more
than a rubber stamp. The former offshore regulator, the
Minerals Management Service, MMS, came to stand for
Malfeasance, Mismanagement and Spills. But under the leadership
of Secretary Salazar and Director Bromwich, this troubled
agency is being completely reformed from being a lapdog into
being a watchdog.
This budget request represents an investment in the safety
of our workers, our economy, and our environment. We cannot
afford to have more lives lost and more livelihoods destroyed
because of lax oversight and regulation of the offshore oil and
gas industry.
Just last week, it was uncovered that the ultimate failsafe
device touted by the industry, the blowout preventer, may be
that in name only. The independent contractor for the Interior
Department, Det Norske Veritas, concluded that it was the force
of the blowout at the Deepwater Horizon that caused the drill
pipe to buckle and move and kept the blowout preventer from
sealing the well. In other words, the blowout preventer failed
because there was an actual blowout. Far from being a failsafe
device as the oil industry claimed, it appeared that blowout
preventers may be sure to fail if a blowout is underway.
However, rather than focusing on the need for reform, today
we are going to continue to hear the same speed-over-safety
mantra from the Majority that led to the BP spill.
Just yesterday, the Majority introduced legislation that
would not make drilling safer and could put our beaches from
California to Florida more at risk for another catastrophic
spill.
When the American people demanded a ``spill bill''
following the BP disaster, they didn't mean legislation that
could actually increase the chances of another spill occurring.
And the Majority talking points about a de facto moratorium
continued to be unsupported by any actual facts. The Interior
Department has approved seven deepwater drilling permits in the
last month, exceeding the monthly average in 2009 before the
spill. The Department has also approved the first deepwater
drilling plan with new environmental review.
Because the Majority continues to block spill safety
legislation I am worried that these new permits have been
issued, not too late, but perhaps too soon. I believe that in
light of the questions that now surround the adequacy of
blowout preventers to do their job and the failure of proper
oversight and the failure of this Committee and the Congress to
act, the speed at which we are allowing industry to return to
``business as usual'' is ``risky business.''
Thus far, this Committee has not done the job to oversee
the safety of offshore drilling. We have not held a single
hearing on legislation to improve safety. We have not heard
from BP, TransOcean, Haliburton or any of the companies
involved in the Gulf's spill, despite my request for such a
hearing.
We have not heard from Exxon/Mobil, Chevron, Shell, Conoco
Phillips or other companies that are the leaders of this
industry on what, if any, safety reforms they are making,
despite my request that they testify before the Committee. We
have not heard from DNV on their forensic analysis of the BP
Deepwater Horizon blowout preventer or from Cameron, the
company that makes these devices.
But what we have heard just yesterday is a news report
issued by the Interior Department that oil companies are just
sitting on tens of millions of acres of public land which
contains tens of billions of barrels of oil.
According to the report, 70 percent of the offshore public
land held by oil companies is going unused, matching the
average onshore for the past decade. Oil companies have
apparently been engaged in a de facto moratorium on new
drilling until prices climb even higher. That is why
Representative Holt and I have introduced our bill. It is
legislation to create incentives for oil companies to drill on
the public land and water they already have under a lease.
I commend Director Bromwich and Secretary Salazar on the
reforms that they have already implemented and I look forward
to their testimony here today.
[The prepared statement of Mr. Markey follows:]
Statement of The Honorable Edward J. Markey, Ranking Member,
Committee on Natural Resources
For too long, the Interior Department agency charged with
overseeing the offshore oil and gas industry was nothing more than a
rubber stamp. The former offshore regulator, the Minerals Management
Service--MMS--came to stand for Malfeasance, Mismanagement and Spills.
But under the leadership of Secretary Salazar and Director Bromwich
this troubled agency is being completely reformed from a lapdog into a
watchdog.
This budget request represents an investment in the safety of our
workers, our economy and our environment. We cannot afford to have more
lives lost and more livelihoods destroyed because of lax oversight and
regulation of the offshore oil and gas industry.
Just last week it was uncovered that the ultimate fail safe device
touted by the industry--the Blowout Preventer--may be that in name
only. The independent contractor for the Interior Department, Det
Norske Veritas, concluded that it was the force of the blowout at the
Deepwater Horizon that caused the drill pipe to buckle and move and
kept the blowout preventer from sealing the well. In other words--the
blowout preventer failed BECAUSE there was an actual blowout. Far from
being a ``failsafe'' device as the oil industry claims, it appears that
blowout preventers may be ``sure to fail'' if a blowout is underway.
However, rather than focusing on the need for reform, today we are
going to continue to hear the same speed-over-safety mantra from the
majority that led to the BP spill. Just yesterday, Republicans
introduced legislation that would not make drilling safer and could put
our beaches from California to Florida more at risk for another
catastrophic spill. When the American people demanded a ``spill bill''
following the BP disaster, they didn't mean legislation that could
actually increase the chances of another spill occurring.
And the Republican talking points about a ``de facto moratorium,''
continue to be unsupported by any actual facts. The Interior Department
has approved 7 deepwater drilling permits in the last month, exceeding
the monthly average in 2009 before the spill. The Department has also
approved the first deepwater drilling plan with new environmental
review.
Because Republicans continue to block spill safety legislation, I
am worried these new permits have been issued not too late, but perhaps
too soon. I believe that in light of the questions that now surround
the adequacy of blowout preventers to do their job and the failure of
this committee and this congress to act, the speed at which we are
allowing industry to return to ``business as usual'' is ``risky
business.''
Thus far, this committee has not done its job to oversee the safety
of offshore drilling. We have not held a single hearing on legislation
to improve safety. We have not heard from BP, Transocean, Haliburton,
or any of the companies involved in the Gulf spill, despite my request
to for such a hearing. We have not heard from Exxon Mobil, Chevron,
Shell, Conoco Phillips or the other companies that are the leaders of
this industry on what, if any, safety reforms they are making, despite
my request that they testify before this Committee. We have not heard
from DNV on their forensic analysis of the BP Deepwater Horizon blowout
preventer or from Cameron, the company that makes these devices.
But what we have heard just yesterday in a new report issued by the
Interior Department is that oil companies are just sitting on tens of
millions of acres of public land, which contain tens of billions of
barrels of oil. According to the report, 70 percent of the offshore
public land held by oil companies is going unused, matching the average
onshore for the past decade. Oil companies have apparently been engaged
in a de facto moratorium on new drilling until prices climb even
higher. That's why Rep. Holt and I have introduced our USE IT
legislation to create incentives for oil companies to drill on the
public land and water they already have under lease.
I commend Director Bromwich and Secretary Salazar on the reforms
they have already implemented and I look forward to your testimony
today.
______
The Chairman. I thank the gentleman for his statement and
now we are ready to hear from our only witness today, Mr.
Michael Bromwich, the Director of the Bureau of Ocean Energy
Management, Regulation and Enforcement.
And like witnesses that appear in front of the Committee,
your written statement will appear in its entirety in the
record. I would ask that you keep your oral remarks to five
minutes. I know sometimes that is difficult. I will say,
however, at the last hearing we had, we had a panel of five
that were just absolutely excellent, Director Bromwich, so the
pressure is on to keep that record going.
I will also note that there are timing lights in front of
you. The green light goes on when you have five minutes. When
the yellow light goes on, you have 30 seconds. And obviously,
when the red light goes on, the time is up. So once again, Mr.
Bromwich, thank you very much for taking the time to be here,
and you are recognized.
STATEMENT OF HON. MICHAEL R. BROMWICH, DIRECTOR, BUREAU OF
ENERGY MANAGEMENT, REGULATION AND ENFORCEMENT [BOEMRE], U.S.
DEPARTMENT OF THE INTERIOR
Mr. Bromwich. Thank you, Mr. Chairman, Ranking Member
Markey, and members of the Committee.
I very much appreciate the opportunity to testify today on
the subject of the spending priorities and missions of the
Bureau of Ocean Energy Management, Regulation and Enforcement.
Over the past nine months, we have carefully reviewed and
examined our ongoing operations and responsibilities, as have
bodies ranging from the President's Commission on the BP Oil
Spill to DOI's Inspector General to the Department's OCS Safety
Oversight Board to multiple committees of the House and Senate.
The President's Fiscal Year 2012 budget request reflects
the insights of these reviews and examines and supports the
most aggressive and comprehensive reforms of offshore oil and
gas regulation and oversight in U.S. history.
Our Fiscal Year 2012 request is $358.4 million, an
increase, as the Chairman noted, of $119 million over the
Fiscal Year 2010 and active budget after making certain
adjustments. The request is offset by $151 million in offshore
rental receipts, cost recovery fees, and $65 million in
inspection fees.
Now these additional resources are essential to effectively
protect our nation's natural resources as well as to address
the need for an efficient, effective, transparent, and stable
regulatory environment.
On April 20, 2010, as we all know too well, the Deepwater
Horizon rig lost control of the Macondo Well. The loss of well
control resulted in an explosion, fire, and the eventual
sinking of the rig--a disaster that killed 11 workers,
seriously injured many others, and ultimately resulted in the
release of nearly 5 million barrels of oil into the Gulf of
Mexico, creating the largest oil spill ever in American waters.
The Deepwater Horizon blowout and oil spill exposed serious
deficiencies in the regulatory framework for offshore drilling.
Since that time, we at BOEM have worked hard to address these
efficiencies and to restore public confidence in oil and gas
drilling offshore.
As you know, on January 11 of this year, the President's
Commission released its full report containing key findings
from its extensive investigation into various issues relating
to the blowout of the Macondo Well. The Commission concluded
that weaknesses have existed for many years in the regulation
and oversight of offshore drilling, stemming largely from
conflicting missions, a lack of authority, lack of resources,
and insufficient technical expertise.
The reorganization and related reforms that would be funded
by this budget request are intended to address these shortfalls
while at the same time allowing for continuity of operations
and ongoing exploration and production activity.
The Deepwater Horizon tragedy has shaken government and
industry out of the complacency and overconfidence that had
developed over the past several decades and has resulted in
necessary new regulations. We have promulgated new prescriptive
regulations to bolster safety and to enhance the evaluation and
mitigation of environmental risks. We have introduced for the
first time performance-based standards similar to those used by
regulators in the North Sea.
These important steps have been accomplished through two
new rules announced in the fall of 2010 that raised standards
for the oil and gas industries' operations on the OCS. The
first rule is the drilling safety rule, which was an emergency
rule prompted by Deepwater Horizon that has put in place tough,
new standards for well design, casting, and cementing and well
equipment, including blowout preventers. For the first time,
operators are now required to obtain independent, third-party
inspection and certification of each stage of the proposed
drilling process.
The second rule is the workplace safety rule, which aims to
reduce the human and organizational errors that lie at the
heart of many accidents and spills. As a result of these new
regulations, operators are now required to develop a
comprehensive safety and environmental management program that
identifies the potential hazards and risk reduction strategies
for all phases of activity.
Now in addition to these new rules, we have issued Notices
to Lessees that provide additional guidance to operators for
complying with existing regulations. We issued them in June of
2010, in December of 2010, and again one earlier this week.
We think this information will help BOEM evaluate
operators' compliance with current spill response regulations
and help operators understand what is expected of them.
The aim of the reorganization is to create three strong,
independent entities to carry out the missions of promoting
energy development, regulating offshore drilling, and
collecting revenues. In the past, these three conflicting
functions resided within the same bureau, creating the
potential for internal conflicts of interest among the
objectives of the agency. This process began on May 19 when
Secretary Salazar signed an order which dissolved MMS and
called for the establishment of three new entities consisting
of No. 1, the Bureau of Ocean Energy Management, No. 2, the
Bureau of Safety and Environmental Enforcement, and No. 3, the
Office of Natural Resources Revenue. I will skip the detailed
descriptions of those agencies in the interest of time.
The budget request calls for additional resources for a
number of critical functions. One is an increase in inspection
capacity; a second is an investment in permitting; third, it is
an expansion of NEPA and environmental studies staff; fourth is
additional support for high priority environmental studies;
fifth, funding for an environmental and operational oversight
compliance program for the first time; sixth, an investment in
engineering studies; and finally, last but not least, an
increase in oil spill research.
So, in closing, as I have said, the Deepwater Horizon
tragedy exposed significant weaknesses in the way this agency
has historically done business. It had simply not had the
resource to provide an appropriate level of regulatory
oversight of offshore oil and gas development. These
shortcomings have become pronounced as operations have moved
into deeper and deeper waters.
We believe the substantial budget increases contained in
the Fiscal Year 2012 budget is an important step to bridge the
gap between the resources the agency currently has and the
resources it needs.
Mr. Chairman, thank you very much and I look forward to
taking any questions from you and the other members of the
Committee.
[The prepared statement of Mr. Bromwich follows:]
Statement of Michael R. Bromwich, Director, Bureau of Ocean Energy
Management, Regulation and Enforcement, United States Department of the
Interior
Mr. Chairman and members of the Committee, thank you for the
opportunity to appear here today to discuss the President's Fiscal Year
(FY) 2012 Budget request for the Bureau of Ocean Energy Management,
Regulation and Enforcement (BOEMRE) in the Department of the Interior
(DOI).
As the 112th United States Congress begins its work, I want to
discuss a set of issues that we are addressing at the Bureau of Ocean
Energy Management, Regulation and Enforcement (BOEMRE). Over the past
nine months, we have been implementing a number of far-reaching reforms
to strengthen the regulation of offshore oil and gas drilling and
strike the appropriate balance between resource development and
regulatory oversight. I thought it might be useful to describe some of
the initiatives we have pursued during this period and focus on some of
the issues we have been addressing.
My staff and I have been aggressively pursuing reforms that
directly relate to many of the drilling safety, environmental
protection, and regulatory oversight issues recently identified in the
final report of the National Commission on the BP Deepwater Horizon Oil
Spill and Offshore Drilling (Commission). We have been moving forward
with the fundamental reforms and new regulatory measures necessary to
improve the safety of offshore drilling, as well as enhance protection
of the ocean and coastal environments. At the same time, we are working
every day to allow safe drilling and production operations in the Gulf
of Mexico to continue in order to keep production flowing and people
working in an industry that is crucial to our nation's economy and
energy independence.
The challenges presented by offshore oil and gas development--for
both industry and government--are substantial, and so are the changes
that are necessary. These changes include the reorganization of the
former Minerals Management Service (MMS) to provide clarity of mission
and to strengthen oversight. We also have established heightened
standards for drilling practices, safety equipment, and environmental
safeguards. These new rules set forth prescriptive standards that
industry must meet, establish, for the first time in the history of the
U.S. offshore regulatory system, performance-based standards focused on
identifying, and establish barriers against, specific risks associated
with offshore drilling operations.
These reforms are substantial, and much work is being done to
ensure that the change we are seeking to implement is both lasting and
effective. Our ultimate goal is to promote a culture of safety within
industry and to serve as aggressive but reasonable regulators who have
the tools and expertise necessary to do the job. The reforms that we
are pursuing are necessary to allow government oversight and safety
measures to keep pace with the challenges and risks of offshore
drilling, particularly as those operations push into deeper water and
new frontiers, such as the Arctic, and face increased technical
challenges.
I would like to briefly summarize the changes that we have made
since the Deepwater Horizon explosion and resulting oil spill--and that
we are continuing to implement. I will also describe the work we are
doing to ensure that safe and environmentally responsible offshore
drilling operations, in both shallow and deep water, can proceed.
Reform of Offshore Oil and Gas Regulation
Reorganization of the Former Minerals Management Service
As we announced in January, we are continuing to move forward with
the fundamental reorganization and reform of the former MMS. In the
place of MMS, we are establishing three strong, independent agencies,
each possessing clearly defined roles and missions. As became clear
immediately after Deepwater Horizon and as discussed in the
Commission's Report, MMS--with its conflicting missions of
simultaneously promoting resource development, enforcing safety
regulations, and maximizing revenues from offshore operations, and due
to a chronic lack of resources--could not keep pace with the challenges
of overseeing industry operating in U.S. waters. The reorganization of
the former MMS is designed to remove those conflicts by segregating
missions across three new agencies and providing each of the new
agencies with the clarity of mission and new resources necessary to
fulfill its regulatory responsibilities. We are designing and
implementing these organizational changes while respecting the crucial
need for information-sharing and the other links among the functions of
the former MMS. Recognizing and addressing these operational issues is
essential to ensuring that the regulatory processes related to offshore
leasing, plan approval, and permitting do not come to a grinding halt.
The first step of the reorganization was completed on October 1 of
last year, when the revenue collection arm of the former MMS was moved
to the Office of the Secretary, with reporting responsibilities and a
chain of command completely separate and distinct from the offshore
regulator. The establishment of this new agency--the Office of Natural
Resource Revenue (ONRR)--was a crucial first step that addressed one of
the fundamental conflicts--between revenue collection and the offshore
regulator's resource development and safety responsibilities--that
plagued the former MMS.
By the end of the current fiscal year, we intend to complete the
separation of the former MMS resource management and leasing functions
from the safety and environmental enforcement functions. This change is
designed to address the remaining fundamental conflict that existed
within the former MMS--between the promotion of offshore energy
development through leasing and plan approval decisions and the
responsibility for ensuring that offshore operations are conducted
safely and with appropriate protection for the environment. We believe
that the separation of these missions is essential to reforming the
government's oversight of energy development in the nation's offshore
areas. These two new agencies that we have announced are the Bureau of
Ocean Energy Management (BOEM) and the Bureau of Safety and
Environmental Enforcement (BSEE).
BOEM will be responsible for promoting and managing the development
of the nation's offshore resources, including oil, gas, and renewable
resources. This mission involves ensuring that the nation's offshore
energy resources are developed wisely, economically and with
appropriate protections for the environment. The structure that we have
developed and that we are implementing ensures that effective reviews
of the environmental impacts of proposed projects are closely analyzed
and well-understood; that these impacts are given appropriate weight
during decision-making related to resource management; and that the
appropriate balance is struck. These processes must be both rigorous
and efficient so that operations can go forward in a timely way and
with confidence that appropriate steps to mitigate potential
environmental effects are taken. Within BOEM, we are creating the
senior position of Chief Environmental Officer, who will be responsible
for ensuring that environmental concerns are appropriately balanced in
leasing and planning decisions and for coordinating and promoting
scientific research that facilitates sound stewardship of our marine
environments.
By establishing BSEE as the offshore safety agency, we are
separating resource management from safety oversight. This will provide
the engineers who review permit applications and the inspectors who
ensure compliance with our workplace and drilling safety regulations
with greater independence, more budgetary autonomy, and clearer focus.
The mission of BSEE will be to enforce safety and environmental
regulations independently and rigorously. Our goal is to create a
tough-minded, but fair, regulator that can effectively keep pace with
the risks of offshore drilling and promote the development of a safety
culture in offshore operators. We are working now to establish within
BSEE a new environmental compliance and enforcement function, which
never existed as an explicit program in the former MMS. Through BSEE,
we also will establish the review and enforcement of oil spill response
plans as an area of national-level focus and oversight in order to
foster better coordination with other federal agencies involved in oil
spill response.
The structure and functions of BOEM and BSEE are the result of a
thorough and rigorous analysis undertaken deliberately but efficiently
over the past several months. We undertook the process in this way to
ensure that we address the structural and conflict of interest problems
that existed in the former MMS and to plan for the orderly
establishment of the new agencies. We have worked with and received
advice from leading experts in government transformations. We have also
examined closely the offshore regulatory regimes of other nations,
including those of the United Kingdom and Norway. In considering
various options and making these key structural and organizational
decisions, we have sought and received the advice and guidance of
BOEMRE career personnel. We have discussed the reorganization with
employees throughout BOEMRE and received their input; we collected and
analyzed data relating to the Bureau's processes, systems and
regulatory metrics; and we developed a number of alternative models and
options, which we discussed with BOEMRE career leadership, for
restructuring and reforming the Bureau. Finally, we also are
considering, and will continue to bear in mind, the recommendations of
the President's Commission, which has done its own analysis of these
issues and recommends organizations that are in overall general
alignment with BOEM and BSEE.
Implementing Reform and Changing Agency Culture and Practices
New structures and clear missions are essential to establishing
agencies that will be effective in managing the environmentally-
responsible development of the Outer Continental Shelf (OCS) resources
and overseeing the safety of offshore operations. But true reform
requires a fundamental change in an organization's culture. Therefore,
in addition to making structural changes by establishing BOEM and BSEE,
we are working to change the way the former MMS does business. I'll
describe below several of the changes we already have made.
Last August, I directed BOEMRE personnel in the Gulf of Mexico
region to no longer routinely use categorical exclusions under the
National Environmental Policy Act (NEPA) to approve new projects in
deepwater. Instead, we are conducting site-specific environmental
assessments of those exploration and development plans. We are working
closely with industry to implement this new policy in a balanced and
fair way. We also are in the midst of a comprehensive review of our
application of NEPA, including specifically the use of categorical
exclusions, and we are working closely with the Council on
Environmental Quality (CEQ) on this evaluation.
To address another important issue--real and potential conflicts of
interest involving BOEMRE personnel--last year we issued a tough new
recusal policy. Employees in our district offices, where our
inspections and permitting functions reside, must notify their
supervisors about any potential conflict of interest and request to be
recused from performing any official duty in which such a potential
conflict exists. For example, our inspectors now are required to recuse
themselves from performing inspections of the facilities of former
employers. Also, our inspectors must report any attempt by industry or
by other BOEMRE personnel to inappropriately influence or interfere
with their duties. Soon BOEMRE will be issuing a broader version of the
policy that applies these ethical standards across the agency. This
policy presents operational challenges for some of our district offices
in the Gulf region, which are located in small communities where the
primary employers are offshore companies. However, the need for tough
rules defining the boundaries between regulators and the regulated is
both compelling and necessary. These rules are necessary for us to have
the confidence we need to assure the public that our inspections and
enforcement programs are effective, aggressive, and independent.
We also have established within BOEMRE a new Investigations and
Review Unit (IRU), which is comprised of a team of professionals with
investigative and law enforcement backgrounds. The mission of the IRU
is to promptly and credibly respond to allegations or evidence of
misconduct and unethical behavior by Bureau employees; pursue
allegations of misconduct by oil and gas companies involved in offshore
energy projects; and, provide the Bureau with the ability to respond
swiftly to emerging issues and crises, including significant incidents
such as spills and accidents. The IRU took the lead in the report of
the BP Atlantis investigation, which was released on March 4. The
investigation included interviews of 29 individuals, analysis of more
than 3,400 engineering drawings and related documents, and the review
of hundreds of additional documents. Based on a thorough review of the
evidence, the investigation found the majority of the allegations to be
largely unfounded, but did find that there were a number of problems
with the way that BP organized, stored, and labeled engineering
drawings and documents.
As part of our broad and continuing reform efforts, we have created
11 implementation teams that have been hard at work for several months
and are the central organizational focus for our efforts to analyze
critical aspects of BOEMRE's structures, functions, processes,
policies, and procedures. These teams are important in their own right,
but they are also integral to our reorganization efforts. These teams
are considering the various recommendations for improvement that we
have received from several sources, including the President's
Commission, the National Academy of Engineering, the Outer Continental
Shelf (OCS) Safety Oversight Board commissioned by Secretary Salazar,
and the DOI Inspector General. These teams are laying the foundations
for lasting change in the way BOEMRE does business.
The key areas and issues that these teams are working on include:
Permitting. We have a team devoted to reviewing and improving
BOEMRE's drilling permit review and approval process, which is central
to ensuring that proposed drilling operations will be conducted safely
and that permit applications are reviewed in a timely and efficient
manner.
Inspections. We have several teams that are focused on various
issues associated with developing effective, risk-based approaches to
our offshore inspections programs. We also are developing the
infrastructure--and recruiting the expert personnel--necessary to
conduct real-time monitoring of the highest risk operations, such as
deepwater drilling operations. Such monitoring of industry performance
during critical phases of drilling operations is a capacity that we
feel strongly must be developed, and is consistent with the findings
and recommendations of the National Academy of Engineers. We are
developing new training programs and curricula for inspectors,
supervisory inspectors, and engineers involved in BOEMRE's safety
compliance and enforcement programs.
Regulatory Enforcement. We are evaluating the adequacy of the
enforcement tools we have employed, including the system for
documenting and tracking incidents of non-compliance with prescriptive
regulations, the adequacy and use of civil penalties, and the process
for evaluating operator qualifications and the system for debarring
unsafe operators. We are reviewing potential gaps in our regulations,
including a review of the regulatory standards used by other countries,
and we are exploring more effective use of civil penalties for
violations of BOEMRE's safety and environmental regulations. We believe
the current enforcement framework, which limits civil penalties to only
$35,000 per day, per incident, is simply inadequate to deter violations
for large operations where an operator may spend $1 million a day on a
given deepwater lease.
Environmental Compliance and Enforcement. We are designing new
inspections and enforcement programs relating to environmental
compliance, programs that have never previously existed in the agency.
Incident Investigations. We are evaluating and developing
investigative procedures relating to specific categories of accidents
and incidents, including industrial accidents on rigs and platforms,
fires, and oil spills.
Oil Spill Response. We are conducting a comprehensive review of oil
spill response and the adequacy of operators' oil spill response plans
(OSRPs). This team is working closely with the Coast Guard and other
federal agencies to develop enhancements to regulations governing OSRPs
and more effective reviews of those plans in light of lessons learned
from the Deepwater Horizon oil spill response.
Safety and Environmental Management Systems (SEMS). We are
designing an oversight and auditing program for operators' compliance
with the new requirements of the Workplace Safety rule, which
represents a significant advance in the promulgation of performance-
based standards for safety and environmental protection.
Finally, changing the culture of the former MMS and establishing
BOEM and BSEE as vigorous and effective regulators will require the
infusion of new blood into the organizations. Although BOEMRE has many
devoted and competent public servants, we recognize that the former MMS
lacked expertise in important areas related to safety oversight.
Moreover, the sweeping reforms in culture and process that we are
pursuing necessitate, almost by definition, new energy, fresh talent,
and new ways of thinking. Therefore, we will conduct nationwide
searches to identify talented personnel to fill many of the key senior
positions in the new BOEM and BSEE. We also are engaged in an
aggressive recruitment campaign to hire new engineers, inspectors,
scientists and other experts into the Bureau.
All of these measures will help us ensure the rigorous and
independent oversight of offshore drilling.
Making Reform Work: The Need for Additional Resources
As described above, we have laid the groundwork for far-reaching
organizational change. The success of our reforms now depends in large
part on providing the new agencies with the financial resources, tools,
training and culture to be effective. Improving the safety of offshore
drilling and the effectiveness of government oversight of this
inherently risky activity will require a substantial infusion of
resources into the offshore regulator.
As detailed in the Commission's Report, MMS never had the resources
to provide the rigorous and effective oversight of offshore oil and gas
activity that is necessary. This weakness became more significant as
industry continued its pursuit of higher-risk projects in deepwater and
other frontier areas such as the Arctic. We agree with the Commission's
strong recommendation for a substantial increase in the resources
devoted to government oversight of offshore activities because an
effective regulator is so clearly in the public's--and in industry's--
interests.
Industry has expressed its support for providing additional
resources to BOEMRE to the House and Senate Appropriations
Subcommittees on Interior, Environment, and Related Agencies in a
letter, dated November 17, 2010 and signed by the American Petroleum
Institute, the American Exploration & Production Council, the
International Association of Drilling Contractors, the Independent
Petroleum Association of America, the National Ocean Industries
Association, and the US Oil and Gas Association.
FY 2012 Budget Request
BOEMRE's FY 2012 request is $358.4 million, an increase of $119.3
million over the FY 2010 enacted budget after adjusting for funds
transferred to the Office of the Secretary as part of the ongoing
reorganization of the former MMS. This request excludes funds requested
for the newly established ONRR which are being requested separately
within the Office of the Secretary appropriation. The request is offset
by $151.6 million in eligible OCS rental receipts, $8.6 million in cost
recovery fees, and $65.0 million in inspection fees resulting in a net
request of $133.2 million in appropriated funds. These additional
resources are essential to effectively protect our nation's natural
resources as well as to address industry's need for an efficient,
effective, transparent, and stable regulatory environment.
The budget for the Department includes $506.3 million for the
components of the former Minerals Management Service to continue the
reorganization and reform efforts of both offshore energy development
activities and mineral revenue management.
Summary of Requested Budget Changes
The Budget proposes the following discretionary funding increases
and decreases relative to the 2010 enacted level. A portion of the
requested funding ($10.2 million) for the inspection capability/
monitoring initiative was received under the current FY 2011 continuing
resolution and was offset by a rescission of prior year BOEMRE
balances.
Inspection/Monitoring Capability (+$44,483,000; +116 FTE):
Additional staff are needed to accelerate implementation of the new
inspection and oversight regime currently under development. This will
require additional personnel with diverse backgrounds to conduct varied
types of inspections and oversee high risk activities, including
critical drilling activities such as BOP testing and cement/casing
activities as drilling operations approach production zones, and
emergency shutdown tests on production platforms. BOEMRE is actively
evaluating significant process reforms, such as inspecting in teams
rather than solo, implementing a stronger risk-based inspection
strategy that will require additional oversight on higher risk
activities, redesigning training protocols, and incorporating new
technologies such as real-time monitoring of key drilling activities.
The request includes funding for increased offshore transportation
costs. Under the current FY 2011 Continuing Resolution, a net amount of
$10.2 million is available for this purpose, which BOEMRE is using to
begin implementation.
Engineering Studies--TA&R (+$11,360,000; +12 FTE): Deepwater
Horizon brought to the forefront the need to raise the level of
resources dedicated to the evaluation of current and proposed oil and
gas exploration and development technology. Since its inception over
three decades ago, the TA&R Program budget has not kept pace with the
increased cost of research and demands for TA&R managed research. In
its January 2011 report to the President, the Commission identified the
need for increased safety and containment research both within industry
and the federal government in order to maintain the capability to
address emergencies as drilling technology moved operations into deeper
waters and further from shore. The Commission's findings were
substantiated by testimony by industry and experts from academia who
identified the lack of research for the offshore oil and gas sector.
The Commission determined that neither government nor industry had
invested sufficiently in research, development, and demonstration to
improve containment or response technologies. The Commission found
funding to be inadequate and stated that ``Congress needs to make
funding the agencies responsible for regulating the oil and gas
development a priority in order to ensure a safer and more
environmentally responsible industry in the future'' and that the
``desire to tap resources in deeper waters should be accompanied by
equivalent investments in subsea equipment, operator training, research
and development for containment and response technologies.''
In addition to further deepwater research, the Commission
recommended ``an immediate, comprehensive federal research effort to
provide a foundation of scientific information on the Arctic'' and that
``a comprehensive interagency research program to address oil-spill
containment and response issues in the Arctic should be developed,
funded, and implemented within the federal government.'' Although
industry has a significant role and responsibility to conduct this
research to ensure its operations are safe, BOEMRE (and the future
BSEE), as the government safety regulator needs to have sufficient
technical capabilities to conduct its own research and verify that the
information and research provided by industry is accurate.
Examples of near-term deepwater safety and containment research by
the TA&R Program include assessment of subsurface blow-out preventer
design, performance, maintenance, and inspection; well cementing,
barrier, and containment practices and procedures; remotely operated
vehicle intervention and capabilities; and wild well control
technology. The TA&R Program will continue to transfer research results
to rule writers, investigators, plan reviewers, and others that need
this information to improve the safety of offshore operations.
Oil Spill Research (+$8,620,000; +4 FTE): Increased funding for the
Oil Spill Research Program is needed to address several key knowledge
gaps brought to light by the Deepwater Horizon oil spill. The program
leverages its ocean research funding, often providing funds to address
needed data gathering through support to academics and university
partners. Agencies including NOAA, the Navy, and the National Science
Foundation often contribute funds or ship time to these efforts as they
have ancillary needs for information to support their own missions. The
program will continue to play a leadership role in both technology
assessment and spill simulation.
NEPA and Environmental Studies Staff (+$8,063,000; +52 FTE): The
need for additional environmental studies also requires staff to manage
the studies, both scientific staff and coordination staff, including
Contracting Officer's Representatives (CORs) for the Environmental
Studies Program (ESP). As planned in FY 2011, BOEM will continue to
expand its environmental review requirements and capability in FY 2012,
at both the pre-lease and post-lease stages. At the pre-lease review
stage, environmental specialists will begin their coordination efforts
with the environmental compliance activity in BSEE. Coordination with
BSEE will continue at the post-lease stage.
The staff will consist of marine archaeologists; social scientists
and economists; benthic/fisheries biologists; avian and marine mammal
biologists; protected species biologists, air-quality experts and/or
meteorologists; physical, biological and chemical oceanographers;
water-quality/pollution specialists, and other disciplines. Scientific
staff will conduct environmental and socioeconomic resource impact
analyses required for the preparation of environmental impact
statements and for an increased number of site-specific environmental
assessments. These staff will also serve the ESP as CORs for all phases
of studies procurement and monitoring.
Permitting (+$6,945,000; +41 FTE): Additional staff are needed to
review and process lease management, qualification, bonding and
unitization requests and issues, as well as requests for development
activities, such as plan and permit processing and approval. A recently
published report by the Department of the Interior OCS Oversight Safety
Board to the Secretary of the Interior states that the ``Gulf of Mexico
(GOM) district offices are challenged by the volume and complexity of
permit applications and the lack of a standardized engineering review
protocol. In addition, the Pacific Region's permitting staff is facing
significant succession issues.'' It goes on to state that the workforce
associated with regulating day-to-day activities has not increased
proportionately to work demands, creating challenges in the need to
balance an adequate analysis of permit requests with the need to be
responsive to industry. For instance, Applications for Permits to
Modify (APMs) have increased by 71 percent from 1,246 in 2005 to 2,136
in 2009 in the New Orleans District. In the Pacific, 80 percent of
current permitting employees will be retirement eligible in the next
2.5 years. The requested funds will enable BOEMRE to ensure that
staffing levels are commensurate with increasing workloads.
Environmental Studies (+$6,500,000; +0 FTE): In FY 2011, the ESP
began studies needed to support high priority information needs related
to the Deepwater Horizon Oil Spill. Also, renewable energy requirements
are increasing and will include establishment of baselines and
monitoring. Many of these studies will be ongoing for several years,
and the additional funds in FY 2012 are needed to continue these
studies and to initiate additional studies. This information will be
critical in order to comply with NEPA regulations and an extensive
suite of environmental laws (including Marine Mammal Protection Act
(MMPA), Endangered Species Act (ESA), National Historic Preservation
Act (NHPA), Coastal Zone Management Act (CZMA), Magnuson-Stevens
Fishery Conservation and Management Act (MSFCMA), and Migratory Bird
Treaty Act (MBTA). As it has in the past, the ESP will leverage its
funds with other interested Federal and private stakeholders, while
ensuring that it fulfills its mission to acquire applied research
specific to the oil and gas, marine minerals, and renewable energy
programs.
Investigations and Review Unit (+$5,782,000; +20 FTE): Funding is
requested to staff and equip IRU, a team of professionals with law
enforcement backgrounds or technical expertise whose mission is to:
promptly and credibly respond to allegations or evidence of misconduct
and unethical behavior by bureau employees; pursue allegations of
misconduct by oil and gas companies involved in offshore energy
projects; and assure the bureau's ability to respond swiftly to
emerging issues and crises, including significant incidents such as
spills and accidents. The IRU will evaluate all information submitted
and will, where appropriate, conduct further investigation. The IRU
will be consulting and sharing information with the Department of the
Interior's Office of Inspector General (OIG), and they will jointly
determine which office conducts any investigation of those allegations.
Environmental & Operational Oversight Compliance (+$5,115,000; +33
FTE): In FY 2012, BSEE will continue to build its compliance
capabilities, both environmental and operational, and will work closely
with BOEM to:
participate in NEPA activities throughout the
process, specifically in developing post-lease mitigation
measures;
issue safety and environmental protection related
rules and regulations; and
provide independent safety, engineering and technical
authorization before any exploration, development or production
plans are implemented.
Establishing a new environmental enforcement arm and expanding
operational safety capabilities of BSEE is imperative. Development of
appropriate regulations and policies, and subsequent industry and
stakeholder outreach, is necessary to ensure the right mix of safety
and environmental protection to minimize the risk of accidents. BSEE
must coordinate closely with BOEM to capitalize on efficiencies related
to bureau inter-dependencies, while recognizing and avoiding conflicts
that may otherwise result in bureaucratic delays to safe exploration
and development. Frequent independent, technical reviews will ensure
that regulations, policy, and guidance keep pace with the complexities
of OCS activities, including the use of new exploration and development
technologies in frontier areas. Environmental mitigation and safety
measures will need to be tested, verified, and improved in an adaptive
management framework. Information systems may need to be enhanced to
better track compliance with new safety and environmental requirements.
A substantial effort will be required in explaining the new
requirements to industry and interested stakeholders.
Management Operations Support (+$2,860,000; +12 FTE): Funds are
requested to staff leadership and support positions for the new BSEE
bureau directorate. As the bureau becomes further established, funds
will be needed to support the increased operating activities of this
office. While BOEMRE is developing reorganization plans with the goal
of minimizing administrative redundancy, existing leadership funding
will be allocated to BOEM. Therefore, funding to support the leadership
of BSEE is required.
General Support--Resource Management (+$2,527,000; +0 FTE): The
ongoing reorganization and enhancement of BOEMRE activities includes
efforts to attract environmental scientists, engineers, and support
personnel needed to support the thorough review of offshore energy
development activities. These funds will provide for general support
needs such as rent, information technology (IT) and general equipment,
communications, utilities, supplies, materials, and travel for the
additional personnel.
Renewable Energy (+2,050,000; +11 FTE): The requested funds will
set the stage for BOEMRE to work with applicants for offshore renewable
energy/alternative use projects, with a focus on specific needs in the
Atlantic and Pacific OCS. A significant increase in workload is
expected in both the Atlantic and Pacific OCS for conducting
environmental reviews, processing commercial leases, coordinating with
stakeholders, and conducting inspection and enforcement activities.
The Secretary has announced an offshore wind initiative called
``Smart from the Start'' to facilitate the rapid and responsible
development of renewable energy on the OCS. One of the main components
of this initiative is identifying priority areas up and down the
Atlantic Coast for appropriate wind development. BOEMRE and the
Department, in close partnership with states, stakeholders, and tribes
have been working to identify Wind Energy Areas (WEAs) off the Atlantic
coast. These WEAs use coordinated environmental studies, large-scale
planning and expedited approval processes to speed offshore wind energy
development. Based on stakeholder and public participation, BOEMRE will
prepare regional environmental assessments in the WEAs to evaluate the
effects of leasing and site assessment activities in the areas to be
leased. If no significant impacts are identified, BOEMRE could offer
leases in these mid-Atlantic areas as early as the end of 2011 or early
2012. Comprehensive site-specific NEPA review will still need to be
conducted for the construction of any individual wind power facility,
and BOEMRE will work directly with project managers to ensure that
those reviews take place on aggressive schedules.
Fair Market Value (+$1,930,000; +1 FTE): This initiative will
support activities to thoroughly assess the oil and gas potential and
fair market value of OCS tracts offered for lease through purchase of
critical software, hardware, data, and the hiring of an additional
analysis staff member. This funding will contribute to ensuring the
nation receives a fair return for publicly owned energy resources.
General Support--Safety and Environmental Enforcement (+$1,246,000;
+0 FTE): The ongoing reorganization and enhancement of BOEMRE
activities includes efforts to attract additional engineers,
scientists, and support personnel needed to support the thorough review
of offshore energy development activities. These funds will provide for
general needs such as rent, information technology (IT) and general
equipment, communications, utilities, supplies, materials, and travel
for the additional personnel.
Oil Spill Response Compliance (+$1,240,000; +8 FTE): Additional
staff are needed to ensure an adequate level of oil spill response
oversight, including review and approval of OSRP and industry
compliance inspections. OSRP reviews are conducted for new plans,
biennial updates, amendments and plan revisions, and to confirm that an
operator has proper equipment, people, and structures in place to
respond to an oil spill. Compliance inspections, such as unannounced
oil spill exercises and unannounced response equipment inspections,
test and evaluate an operator's preparedness level. Staff also verify
training for response personnel and participate in table top exercises
in which response team members simulate response actions using their
OSRP. The experience with the Deepwater Horizon oil spill highlighted
the need for increased oversight of company OSRPs.
Independent Advisory Board (+$1,200,000; +4 FTE): The Board was
conceived by the Reorganization Team and would be charged with
reviewing BOEM internal policies, procedures, rules, and regulations.
It would also provide peer review through participation of BSEE staff
who would serve as informal advisors. Requested funds would also cover
operating costs such as travel and space.
Fixed Costs (+$1,192,000; 0 FTE): Fixed costs of $1.2 million are
fully funded within this request.
Reorganization Efficiencies and Budget Changes (+$1,058,000; + 1
FTE): A total increase of $3.5 million is required to maintain existing
administrative staff and meet non-variable costs because funding from
revenue management sources will no longer be available. An amount of
$150,000 and one FTE is requested to meet increased administrative
workload resulting from the expansion of the BOEMRE workforce. These
adjustments are offset by anticipated reorganization efficiencies
totaling $2.6 million that will be achieved through more efficient use
of existing facilities and consolidation during the reorganization.
Marine Spatial Planning (+$1,000,000; +4 FTE): The requested funds
will enable BOEMRE to coordinate Coastal and Marine Spatial Planning
(CMSP) efforts with other federal and state agencies, determine
information and data needs, make sure these needs are met to
effectively implement CMSP policy, and fulfill the requirement under
Executive Order 13547 Stewardship of the Ocean, Our Coasts, and the
Great Lakes. BOEMRE has been designated as the lead bureau in DOI for
CMSP and will significantly participate in its implementation. With oil
and natural gas, renewable energy, shipping/navigation, military uses,
recreational and commercial fishing, and others activities competing
for space on the OCS, it is becoming more important to coordinate the
growing demand for multiple uses. This function is critical to the
integrity of the 5-Year Oil and Gas Leasing Program that balances these
various competing interests and contributes to determining the size,
timing, and location of leasing activity on the OCS. This initiative
will complement the FY 2010 Multipurpose Marine Cadastre initiative, a
marine information system that brings together data layers about
environmental, physical, political, and social aspects of the OCS. In a
single, interactively generated map, users can see all official
boundaries, rights, restrictions, and responsibilities in State and
Federal waters. In FY 2012, support for Gulf of Mexico, Atlantic, and
Arctic CMSP activities will be a significant focus of this initiative.
Bid Evaluation (+$310,000; +2 FTE): Additional staff are needed to
interpret data and information in order to complete bid adequacy
determinations, estimate discovered volumes of oil and gas, develop
lease sale analogs for new discoveries, and revise assessments of
undiscovered resource potential. These activities contribute to
ensuring that fair market value is received for public resources.
Inspection Fee (-$55,000,000; 0 FTE): The funding increases
requested in this budget would be partially offset by $65 million in
collections from OCS inspection fees, a $55 million increase in revenue
relative to the 2010 enacted level. New fees would be charged on
drilling rigs (+$17 million) and the existing fees on fixed OCS
structures subject to inspection would be increased (+$48 million).
This proposal will transfer a portion of the cost of offshore
inspections from the taxpayers to the offshore oil and gas industry.
The proposal is consistent with the recommendations of the Commission's
report. In its report, the Commission specifically notes that
regulation of the oil and gas industry should ``no longer be funded by
taxpayers but instead by the industry that is being permitted to have
access to a publicly-owned resource.''
Offsetting Collections (-$5,273,000; 0 FTE): In FY 2012, BOEMRE
requests to retain $160.2 million from eligible offsetting rental
receipts and cost recovery fees to defray the costs of bureau
operations. This is a $5.3 million increase in collections compared to
the FY 2011 level. This net increase is composed of an $8.2 million
increase in projected offsetting rental collections and a $2.9 million
reduction in anticipated revenue from cost recovery fees.
Marine Minerals (-$2,000,000; 0 FTE): This reduction is being
offered to offset priority budget increases and will eliminate funding
for BOEMRE's marine minerals program. Under this program, BOEMRE works
with federal, state and local entities to issue leases for sand and
gravel in the OCS. BOEMRE receives eight to 10 requests per year.
BOEMRE retains the authority to process individual lease requests for
sand and gravel on a case-by-case basis, funds permitting.
Administrative Cost Savings: (-$1,432,000; +0 FTE): In support of
the President's commitment to fiscal discipline and spending
constraints, BOEMRE is participating in an aggressive Department-wide
effort to curb non-essential administrative spending. In accordance
with this initiative, BOEMRE's justification assumes $447,000 in
savings in FY 2012 against actual FY 2010 expenditures. The activities
where savings will be realized include: advisory contracts; travel and
transportation of people and things; printing; and supplies. There will
be no programmatic impact as a result of implementing these savings
initiatives; instead, functions will be performed in a more efficient
and more effective manner. Actions to address the Accountable
Government Initiative and reduce expenses builds upon the management
efficiency efforts in travel, relocation, and strategic sourcing
proposed in the FY 2011 budget request resulting in total savings of
$1.4 million.
Center for Marine Resources and Environmental Technology (CMRET) (-
$900,000; -0 FTE): BOEMRE proposes to eliminate the earmarked funding
for the CMRET in order to redirect the funding to higher priorities.
These resources discussed above are essential to creating an
efficient, effective, transparent and stable energy development process
and regulatory environment. Without them, we will be significantly
limited in our ability to adequately achieve the goals of the
reorganization, follow through on the many reforms we have launched
over the past several months, and implement many of the recommendations
from the Commission's Report and other reviews of this agency. In
addition to these important limitations, we would be unable to devote
sufficient resources to facilitate new exploration and resource
development. That result is unacceptable. It is our collective
responsibility to ensure that we have the resources to carry out the
major changes that are necessary to improve and transform this agency.
Mandatory Proposals and Other Reforms in the FY 2012 Budget:
The Budget includes several mandatory proposals that directly
relate to BOEMRE's programs:
Fee on Nonproducing Oil and Gas Leases: The budget includes a
proposal for a $4/acre fee (indexed annually for inflation) on all new
non-producing federal oil and gas leases (onshore and offshore). This
fee provides a financial incentive for oil and gas companies to either
place leases into production or relinquish them so that the tracts can
be re-leased and developed by new parties. The fee is expected to
generate revenues of $25 million in 2012 and $874 million over 10
years.
Repeal of Deep Gas Royalty Incentives: The budget proposes to
repeal Section 344 of the Energy Policy Act of 2005, which extended and
expanded existing deep gas royalty relief. Based on current natural gas
price projections, the Budget does not assume savings from this change;
however, the proposal could generate savings to the Treasury if future
natural gas prices end up below current projections.
Industry Reform
As the foregoing discussion suggests, we have much work to do
internally to improve the effectiveness of government oversight of
offshore energy development and drilling. These changes are both
substantial and necessary. However, industry must change as well, and
we have an important role in helping to spur that change. We are doing
so through the promulgation of new prescriptive regulations to bolster
safety, evaluate and mitigate environmental risks, and introduce
performance-based standards similar to those used by regulators in the
North Sea. We have heightened the standards for equipment, safety and
environmental safeguards in the drilling and production stages of
offshore operations--and we will continue to do so in open and
transparent ways in the coming months and years.
We promulgated two new rules last fall that raise standards for the
oil and gas industry's operations on the OCS. One of these rules
strengthens requirements for safety equipment and drilling procedures;
the other improves workplace safety by addressing the performance of
personnel and systems on drilling rigs and production platforms.
The first rule, the Drilling Safety Rule, was an emergency
rulemaking that put in place heightened new standards for well design,
casing and cementing, pressure testing, and well control equipment,
including blowout preventers. For the first time, operators are now
required to obtain independent third-party inspection and certification
of each stage of the proposed drilling process. In addition, an
engineer must certify that blowout preventers meet new standards for
testing and maintenance and are capable of severing the drill pipe
under anticipated well pressures.
The second rule we implemented is the Workplace Safety Rule, or the
SEMS Rule, which aims to reduce the human and organizational errors
that lie at the heart of many accidents and oil spills. The development
of this rule was in process well before Deepwater Horizon, but the
promulgation of these performance-based standards was frustrated for a
variety of reasons. Unfortunately, as was the case in other countries
such as the United Kingdom and Norway, it took a major accident to
provide the impetus necessary for these standards to be imposed.
Under the Workplace Safety Rule, operators now are required to
develop a comprehensive safety and environmental management program
that identifies the potential hazards and risk-reduction strategies for
all phases of drilling and production activities, from well design and
construction, to operation and maintenance, and finally to the
decommissioning of platforms. Although many companies had developed
such SEMS systems on a voluntary basis in the past, many had not. And
our reviews had demonstrated that the percentage of offshore operators
that had adopted such programs voluntarily was declining.
In addition to the new rules, we have issued important guidance, in
the form of Notices to Lessees (NTLs), which provides operators
additional direction with respect to compliance with BOEMRE's existing
regulations.
For example, NTL-06 (the Environmental NTL) requires that operators
submit well-specific blowout scenarios and worst case discharge
calculations--and that operators also provide the assumptions and
calculations behind these scenarios. My staff and I are working closely
with operators to ensure that they have the information necessary to
perform their worst case discharge calculations accurately and in
accordance with the guidance set forth in NTL-06.
Following the lifting of the suspension of deepwater drilling
operations, we issued NTL-10, which provides operators with guidance
related to regulatory compliance and subsea containment. First, each
operator is directed to submit a corporate statement that it will
conduct proposed drilling operations in compliance with all BOEMRE
regulations, including the new Drilling Safety Rule. The NTL also
provides that BOEMRE will be evaluating whether each operator has
submitted adequate information to demonstrate that it has access to,
and can deploy, subsea containment resources that would be sufficient
to promptly respond to a deepwater blowout or other loss of well
control. In light of the Macondo well blowout, it is essential that
deepwater operators demonstrate that they have access to vital source
control and subsea containment systems in the event of a loss of well
control.
Finally, in January we announced the formation of the Ocean Energy
Safety Advisory Committee, which will be comprised of representatives
from federal agencies--including BOEMRE, the Department of Energy, the
NOAA, the United States Geological Survey, the Environmental Protection
Agency, and the Coast Guard--as well as the offshore oil and gas
industry, academic institutions, and other non-governmental
organizations. Secretary Salazar has selected Dr. Tom Hunter, the
former head of the Sandia National Laboratory who was central to the
Macondo well control effort, to chair this committee. The Advisory
Committee will be a center of excellence charged with driving research
and development and technical innovation across government and industry
in the areas of drilling safety, well control and subsea containment,
and oil spill response.
Returning Industry to Work Safely
Regulatory and industry reform in the wake of a significant
offshore disaster has happened before. The United Kingdom and Norway
substantially changed their oversight of offshore drilling and
production following the Piper Alpha and Alexander Kielland incidents,
respectively. Australia is currently facing many of the same issues we
are confronting following the Montara well blowout, which occurred only
eight months before the Deepwater Horizon disaster.
The specific challenges facing us, however, are unique in many
significant respects. The scale of the offshore oil and gas operations
in U.S. waters, particularly in the GOM, is vastly greater than those
in the North Sea. The economies of many of the Gulf Coast states,
particularly Louisiana, are closely tied to the offshore industry. The
Gulf accounts for more than 25 percent of domestic oil production and
over 10 percent of domestic gas production. One of the key challenges
that we are addressing--and that cannot be avoided--is for government
and industry to make the fundamental reforms necessary to improve the
safety and environmental protection in this massive industry, while at
the same time allowing operations to continue.
The major challenge facing the country is to dramatically improve
the safety of drilling in the GOM, particularly in deepwater, while
continuing with operations, keeping production flowing and keeping
people working. Drilling in shallow water is moving forward. Since our
first post-Deepwater Horizon safety standards were introduced in June
2010, BOEMRE has approved 38 permits to drill new wells for operations
that have complied with the new requirements. More work remains to be
done in order to keep safe operations working, and we will continue
working with industry and devoting our resources to processing plans
and permits for shallow water drilling. For many months, we were told
that our reforms were too sweeping and that they inappropriately lumped
low-risk shallow water operations with more risky deepwater operations.
The recent loss of well control in the Gulf in connection with a
shallow-water platform operated by Apache substantially weakens this
argument. Offshore operations are inherently risky activities--whether
they take place in shallow or deep water--and safety needs to be
enhanced across the board.
Resuming drilling in deepwater--under conditions that are safe and
environmentally responsible--poses even greater challenges. The
heightened standards and regulatory changes applicable to deepwater
drilling are substantial and have been made rapidly. There have been,
understandably, a number of questions from industry and others about
our new regulations, the NTLs, and how we will apply NEPA going forward
with respect to deepwater drilling operations. We have held dozens of
meetings, both in the Gulf region and in Washington, DC, with federal
and state representatives, industry groups, non-governmental
organizations, and individual operators to answer questions about the
new rules and to provide clarity about the post-Deepwater Horizon
regulatory environment. In December, we also issued a guidance
document, which provides a comprehensive description of the way forward
for permitting in deepwater. We have discussed the contents of the
guidance with a number of companies and have received input from them
and others from industry. While it probably is not realistic that this
guidance will resolve every question that an operator may have about
the deepwater permitting process, we intended for the guidance to
address the significant questions that we have heard and to provide
answers to help operators move forward with the resumption of work in
deepwater.
One of the major issues that must be addressed so that deepwater
drilling can resume in significant measure is subsea containment.
Federal regulations require operators to be prepared to address a loss
of well control in deepwater, and the Deepwater Horizon event quite
dramatically demonstrated the need to have viable subsea containment
measures on hand for every deepwater operation. NTL-10, as discussed
above, asks operators to describe the equipment and systems they can
deploy to shut in a well if necessary.
Industry has formed two subsea containment groups--the Marine Well
Containment Company (MWCC) and a program sponsored by Helix Energy
Solutions Group (Helix)--to provide operators with access to source
control and flow management systems in the event of a loss of well
control in deepwater.
It took longer than we anticipated for these industry groups to
make their subsea containment systems available to individual companies
seeking to drill in deepwater. In fact, the testing of key components
of each of these groups' containment systems, including their capping
stacks, was not completed until very recently. This testing was
witnessed and reviewed by BOEMRE engineers, and both capping stacks
performed according to their specifications.
Until the MWCC and Helix were able to establish the effectiveness
of their containment systems, it was not possible for operators to rely
on these subsea containment systems to demonstrate their ability to
respond promptly and effectively to a loss of well control in
deepwater. We believe industry recognized this, which is why so few
deepwater drilling permit applications have been filed. Now that the
capping stacks have been tested and other components of these systems
reviewed, we will be in a position to review individual drilling permit
applications that designate MWCC or Helix resources. This information
will assist us in determining whether sufficient subsea containment
resources are available to individual operations in light of the
particular well design proposed, reservoir pressures, worst-case
discharge estimates, and other aspects of the operation. As you know,
we approved two deepwater permits since the Deepwater Horizon incident,
and we anticipate that additional deepwater permits will follow.
I hope that the above information provides you confidence that
there is a way forward for drilling on the nation's OCS, and that we
are working very hard to ensure that this activity is conducted in a
manner that is safe for both workers and the environment. The lessons
of the Deepwater Horizon event, as discussed so vividly in the report
of the Commission, cannot be quickly forgotten. It has been less than
one year since the blowout and the spill, and already substantial and
sweeping reforms have been made. Much additional work remains to be
done, for both government and industry, to ensure that offshore
operations are safe, to provide rigorous government oversight, and to
keep people working in this vital industry.
I very much appreciate the opportunity to share with you the
reforms we are implementing and our hopes and expectations for the
future. Mr. Chairman this concludes my statement. Please allow me to
express my sincere appreciation for your support and we look forward to
working with you on these and related issues in the months ahead. It
would now be my pleasure to answer any questions you or other Members
of the Subcommittee may have at this time.
______
The Chairman. Thank you, Mr. Bromwich. I appreciate your
statement.
I just want to make an observation. There has been some
concern about the length time by people on permitting, but I
have noticed a coincidence. And every time that we schedule a
hearing or have a press conference new permits are issued. And
I just wonder if we should maybe have more Committee meetings
and more press conferences if that will help, but you don't
have answer.
Mr. Bromwich. I would love to answer that question. The
fact is, Mr. Chairman, that deepwater permits really were not
eligible to be granted until industry had demonstrated subsea
containment abilities. That did not happen until February 17 of
this year. So people who count from the lifting of the
moratorium on October 12 are counting from the wrong date. And
so within 11 days of that capability having been demonstrated,
we granted the first permit. And I know that Secretary Salazar
testified shortly thereafter, but the fact was that industry
was not ready until February 17.
I exercise no control. Secretary Salazar exercises no
control over permitting. Those are done by our drilling
engineers in our Gulf of Mexico regional office. We receive the
information so that we are ready for it, but we don't direct
them when to issue permits.
The Chairman. Well, I was being facetious, but thank you
very much for your response.
I know that Members here will have questions for you on the
permitting. I don't think that is going to end, and I am sure
that they will explore more deeply. But I want to ask you can
you tell this Committee--you alluded to this in your opening
statements. Can you tell this Committee that this
Administration has confidence that the changes implemented by
your bureau are making offshore drilling safer, that the bureau
has approved the use of new technology to both prevent and
respond to a Deepwater Horizon-like event, and that this bureau
is capable of adapting to future challenges of drilling in both
deep and shallow water?
Mr. Bromwich. Let me answer the different parts of that
question.
The Chairman. Sure.
Mr. Bromwich. Yes, we have confidence that offshore
drilling can be conducted now more safely than it had been
before and that we would be better able to deal with a blowout
than we were before.
The third question you asked is harder because our ability
to adapt to new challenges as industry goes into deeper and
deeper water with higher and higher pressures depend largely on
whether we have the resources.
As I said in my opening statement, and as you know, we have
not had those resources. Historically, for 30 years this agency
has been a stepchild of not only the Interior Department, but
the Federal Government as a whole and has been neglected and
has been starved. So we will be able to keep up. We will be
able to speed up the permitting process. We will be able to
keep up with advances in technology if, but only if we get the
recourse to do the job.
The Chairman. I will note that the CR that we passed has
increased funding for your agency in response to your request.
Obviously, the Senate hasn't acted on that and so you are
stymied. But I just want to note that those at least on this
side of the aisle voted for that CR had increased funding for
what you wanted.
Mr. Bromwich. I understand that, Mr. Chairman and I very
much appreciate it. It is very frustrating for our people
following the proposal by the President last summer for a
hundred million dollars supplemental budget request for us to
have received only to date $10 million and we are midway
through the fiscal year.
The Chairman. I just want to make a note that there has
been a response by the Majority here in the House.
Final question I want to ask you. The President later today
I guess in about a half an hour will talk about a new energy
plan, and I alluded to this in my opening remarks. So can you
tell the Committee where the definition of inactive lease comes
from, from the Department of the Interior that the President is
using?
Mr. Bromwich. My understanding is that the definitions have
been used internally with the Interior Department and I think
with external audiences for a very long time.
You pointed out that there may be inconsistencies between
what is defined as an inactive lease for onshore and offshore.
The explanation would be that they are two different agencies
that are not always synced up as much as you would like within
a single cabinet agency. I frankly don't know that much about
the operations of BLM and don't know what all may have gone
into their definition of inactive leases.
I saw that you issued a statement. I will do my best, if
you want, to answer those questions down the road. I obviously
haven't had a chance to examine the statements in the press
release carefully.
The Chairman. If you would do that I would very much
appreciate that because as I mentioned in my opening statement
it disturbs me that a new definition appears out of nowhere to
make what one hopes, although we are in political world, a
political point and that disturbs me because we need to become
energy independent or less dependent on foreign energy. And
when we have that sort of rhetoric out there, I think it clouds
the issues. So I would very much appreciate your getting back
to me.
Mr. Bromwich. I don't think the definition comes out of
nowhere, but I will supply you with the additional information.
The Chairman. OK. Very good. Thank you very much.
The Chair recognizes the gentleman from Massachusetts.
Mr. Markey. Thank you, Mr. Chairman.
Director Bromwich, the Department's contractor released the
results of its forensics investigation into the failure of the
blowout preventer in the Deepwater Horizon oil spill, which
concluded that it failed because the force of the blowout
caused the drill pipe to move and that is why it couldn't be
sealed and cut.
Now the industry has long maintained that blowout
preventers are a failsafe device of last resort. Do you believe
right now that blowout preventers can be treated as they
presently are designed as a failsafe device, going forward?
Mr. Bromwich. No, I don't.
Mr. Markey. The report also recommended that there be a
full examination of whether blowout preventers can actually
prevent blowouts the way they are supposed to and that design
modifications be required to address any findings. Do you
believe that such examination is necessary in order for us to
ensure that blowout preventers are, in fact, effective?
Mr. Bromwich. Congressman Markey, certainly based on the
DNV forensic report I think the answer would be yes. I would
like to point out that there is a hearing being conducted by
joint investigation team in New Orleans on April 4 that is
designed to get a lot more information surrounding the BOP
report done by the contractor. So I think we will have a better
idea of what the specific lines of inquiry need to be in the
future once that hearing is concluded. But I certainly agree
that a substantial amount of additional work by industry and by
government needs to be done. Yes.
Mr. Markey. Thank you.
The independent BP Spill Commission concluded that the root
causes of the disaster were systemic. We have already learned
that the other major oil companies had spill response plans
that protected walruses in the Gulf of Mexico, even though
walruses hadn't lived there for three million years. We have
learned that the other major oil companies thought the chances
of ail from a spill reaching shore was negligible. We learned
that an actual deepwater blowout could not be contained in
under 87 days.
Now we learn that blowout preventers themselves may not be
able to prevent actual blowout. Doesn't this report add to the
conclusion that the safety systems surrounding deepwater
drilling are systemic across the industry.
Mr. Bromwich. I think there are certainly more questions
now than ever before about blowout preventers, but there were
questions before. We have known since Deepwater Horizon that
the blowout preventer didn't work as anticipated. What we now
know more specifically from the forensic examination that the
specific mechanism by which it didn't work. But we have been
proceeding, certainly since I came on board in June, on the
premise that blowout preventers are not failsafes and we need
to do everything we possibly can to make offshore drilling
safer in other ways.
Mr. Markey. Of the 11 shallow-water permits that are
currently pending, 7 were submitted in March. Similarly, in
deep water, of the 12 pending application, 8 have been
submitted since March. Doesn't all of this show that industry
has confidence that activity is resuming under the new safety
regulations your agency has issued?
Mr. Bromwich. The short answer is yes. They clearly do have
more confidence now. I think they were waiting for the first
deepwater permit to be granted and they were waiting for
further clarity on some of the issues associated with all
drilling, whether in deep water or shallow water. So I think
the surge in permit applications that you just alluded to in
March definitely reflects that industry is gaining confidence
that they are going to be able to move forward.
Mr. Markey. Thank you.
Now there are currently more rigs in the Gulf than there
were one year ago before the spill. There are 124 rigs in the
Gulf now compared to 122 rigs a year ago before the spill.
Would oil companies be moving rigs back into the Gulf if they
thought that drilling was not going to continue and to
increase?
Mr. Bromwich. One would think not.
Mr. Markey. Director Bromwich, the current continuing
resolution expires on April 8, and the possibility still
remains that the Republicans who run the House of
Representatives will force a shutdown of the Federal Government
this spring. A government shutdown could have significant
implications for our production of oil and gas and our ability
to ensure that drill operations on public lands are safe.
Now while I understand that no decisions have been made,
looking at the impacts of the government shutdown in 1995, can
you give us an idea as to what you and Secretary Salazar might
be forced to do if there is a government shutdown?
Mr. Bromwich. Well, as you said no decisions have been
made. I know Secretary Salazar had said publicly that he
doubted permitting would continue. And if you go back to the
historical examples you just referred to in 1995 and 1996, I
believe somewhere between 27 and 40 agency personnel continued
to work, none of them permitting personnel. So that was the
system that we had back then.
Mr. Markey. Thank you. Thank you, Mr. Chairman.
The Chairman. Thank you, Mr. Markey. The gentleman from
Colorado, Mr. Lamborn.
Mr. Lamborn. Thank you, Mr. Chairman. Thanks for being here
today.
According to API, the President's 2012 budget proposal
includes almost $90 billion in tax increases on the U.S. oil
and natural gas industry. What would be the impacts on domestic
energy production, jobs, and future reserves from these tax
increases?
Mr. Bromwich. Mr. Lamborn, I have not myself done the
analysis of that. The Administration obviously did when it put
forward the budget proposal.
Given the current price of oil, and the opportunities that
exist out there, but in shallow and deep water I don't think
the imposition of taxes would have much of a deterrent effect
on industries determination to move forward.
Mr. Lamborn. OK. Interesting. Second, let me ask you this.
As you know three years ago Congress deliberately refused to
extend the outer continental shelf drilling moratorium, despite
that this Administration has reimposed a de facto moratorium in
the Atlantic and eastern Gulf of Mexico. If we could somehow
reverse this Administration's action, wouldn't increased
production and exploration in these areas created jobs, bring
revenue to both state and Federal Governments, allow domestic
energy to be used instead of foreign energy, and lower energy
prices because of more supply in the market?
Mr. Bromwich. You are asking me to speculate. I think
clearly if you develop more areas that would tend to do all of
the things that you suggested. But let me underscore the
reasons why the Administration and Secretary Salazar, in
particular, made the decisions that he did with respect to the
next five-year plan.
Those decisions were made still in the shadow of Deepwater
Horizon with continuing concerns about the safety of offshore
drilling. I think as each day passes, as our rules are fully
implemented, as industry both understands and complies with
them, we are all gaining greater confidence in the ability of
offshore drilling to be done safely.
It is certainly possible that decisions that have been made
could be revised. Plans have been revised before. and in fact,
they were revised a couple of times just within the last couple
of years.
Mr. Lamborn. And let me just ask--thank you. Let me ask you
this. If an industry is applying for something and the same
conditions apply for permit after permit, shouldn't we
reconsider the continued use, as we had in the past, of
categorical exclusions for environmental study purposes?
Mr. Bromwich. Well, as you know Congressman, we were widely
criticized for using categorical exclusions by the Council on
Environmental Quality, by the President's Commission and others
with the claim that those reviews were simply insufficient to
explore all of the environmental issues that needed to be
explored.
We are moving forward, as you know, with respect to
deepwater in doing site-specific environmental assessments
while we undergo a comprehensive review of our NEPA policy. It
is possible that at the end of that review process we could
reinstate categorical exclusions for deepwater, although I
would tend to doubt that. But we are moving forward with the
review and analytic process. And it is in the face of
widespread, almost unanimous criticism that categorical
exclusion reviews did not go deeply enough into the potential
environmental effects of drilling.
Mr. Lamborn. Well, I would like to say something in favor
of categorical exclusions. If you have the same conditions in
Area A as you have in Area B 20 miles away, I think that you
don't have to reinvent the wheel if the exact same conditions
apply.
Mr. Bromwich. But they generally don't, even if they are
relatively close. Geological formations are not consistent
between areas 20 miles away necessarily and therefore you can't
make that assumption that these essentially are cookie cutter
kinds of reviews that you can knock off. If you have seen one
plan, you have seen them all. So I would caution certainly that
just because you have a certain review that you have done in
one area of proposed drilling that that same analysis is
applicable to a nearby area. I don't think that is necessarily
the case and I think we should be careful about making that
assumption.
Mr. Lamborn. OK. We are going to have to agree to disagree
on that. I hope that you would be open-minded that, in some
cases, there is so much overlap that we should reconsider
category exclusions. Otherwise, we are hindering jobs. We are
hindering energy supplies and prices to the consumer and the
economy.
Mr. Bromwich. I would point out that the first site-
specific environmental assessment that we just completed was
done in less than 30 days. So it is not clear that the
environmental assessments will necessarily take much longer
than the categorical exclusion reviews that we did before.
And a point that I have made a number of times recently in
front of industry people is now that we have done the first
site-specific environmental assessment I suspect that they will
take even shorter than the first one did. So let us wait and
see. I don't think the conclusion that they will take much
longer than categorical exclusion reviews is necessarily
justified. And again here, as in so many other areas, the
answer to a quicker process is more resources.
And in fact, in our Fiscal Year 2012 budget request there
is a substantial additional request for people to do the kind
of NEPA analysis, whether it is categorical exclusion reviews
or whether it is environmental assessments. We have a limited
number of people now to do the work. We need more.
Mr. Lamborn. Thank you.
The Chairman. The gentleman from Michigan, Mr. Kildee.
Mr. Kildee. Thank you, Mr. Chairman.
Mr. Bromwich, after the Deepwater Horizon disaster and with
all the knowledge that we have reaped in hearings pursuant to
that, we have learned a lot from testimony at previous hearings
that the Administration is not issuing permits for deepwater
drilling quickly enough. But I believe that speed should not
get in the way of proper safety measures to protect workers and
our environment.
In your testimony you said that subsea containment systems
took longer than expected, but are now available to companies.
With these new safety measures available, do you expect more
companies now will file for and receive permits?
Mr. Bromwich. Yes, I think that is the reason we have seen
a surge in permit applications in recent weeks.
Mr. Kildee. So you expect the number then to grow as time
goes on.
Mr. Bromwich. Yes, I do.
Mr. Kildee. What level of assurance do we have that these
measures are sufficient? I hope we don't have to wait for
another disaster to determine that that is the final test on
the sufficiency of these safety measures?
Mr. Bromwich. No, I don't think it is the only test. I
think everyone, and by that I include people in our agency and
people in industry, got a wake-up call with Deepwater Horizon.
I think the assumptions about the safety of drilling of all
kinds, but particularly deepwater drilling were shaken by that
event.
And so in the wake of that, as I have described on multiple
occasions, we have dramatically enhanced the safety
requirements that exist and that must be followed by all
operators when they apply for drilling permits. So that they
have to have very well-defined plans certified by engineers on
how they will do casting and how they will do their cementing
operations.
There are also a lot of requirements relating to the
blowout preventers that Congressman Markey referred to. And we
are requiring for the first time the kind of subsea containment
capabilities that were never required before and in which
require on an application-by-application basis an operator to
demonstrate that it has access to the resources necessary to
deal with a subsea blowout.
So we have much higher level of confidence than we did
before that, first of all, we have driven down the risk of
blowouts to begin with. And second of all, if God forbid, there
were a blowout that there are the resources available to deal
with it.
Mr. Kildee. How do you actually test these subsea
containment systems?
Mr. Bromwich. There is a testing protocol that both of the
two groups, the Helix Well Containment Group and the Marine
Well Containment Company went through. It was a protocol
defined in advance. And then the testing was done with our
personnel present, which then also reviewed the test results
separate from their having witnessed it. And so that was the
process that was used before we were satisfied that these
containment systems were capable of responding in the way that
the groups had suggested.
Mr. Kildee. Is there any way you can try to replicate the
possibilities in order to test these subset containment
systems?
Mr. Bromwich. I think what you are suggesting is there a
possibility of sort of dynamic testing in the water under spill
conditions. We are exploring that right now. We think that
would add an added measure of confidence to it, and so we are
exploring with both groups what kind of testing of that kind
could be conducted.
I have directed both groups to meet with me on a quarterly
basis to discuss those kinds of issues as well as to discuss
the expansion of their capabilities because as you probably
know right now there are significant limitations to what their
systems can handle, both in terms of water depth and in terms
of pressure.
So hopefully we will continue to learn more as we go
forward, but certainly Secretary Salazar and I felt that we had
seen enough and there had been enough of a demonstration for us
to say, OK, we think that is sufficient. We are now going to
look at individual permit applications that designate those
containment capabilities.
Mr. Kildee. Thank you very much, Mr. Bromwich. I appreciate
all your good work. Thank you.
Mr. Bromwich. You are welcome. Thank you.
The Chairman. I thank the gentleman. The gentleman from
Louisiana, Mr. Fleming.
Mr. Fleming. Thank you Mr. Bromwich for being with us
today.
As I understand it that in your budget request you want a
plus of $6,945,000 for an additional 41 full-time employees for
permitting only, which is about a 50 percent increase in the
funding overall. In fact, in January of this year you were
asked when the pace of permitting would return to pre-April 20,
2010 levels and you responded probably never.
Given the fact that you are requesting a significant
increase in funding and personnel, and assuming that we provide
that, would that still be the case? That we will still see
really permitting levels never attaining what we did before?
Mr. Bromwich. I think you have to understand, as I am sure
you do, that there are now a lot more requirements that our
people who review permits have to confirm. There is a lot more
work the companies have to do on the front end in order to
satisfy those requirements. So there are simply a larger number
of steps that have to be gone through that didn't exist before.
So even if we dramatically increased our permitting personnel,
which is what the budget requests ask for, I don't think we
would fully return to the pace of permits that existed before.
But we would come a whole lot closer than we will without the
budget increases.
Mr. Fleming. Could you candidate it? Would it say be 80
percent of the previous level?
Mr. Bromwich. I would just be guessing. If we get those
people on board or if we get a fraction of those people on
board and then we measure how much more quickly we can do it
with those personnel, I think we would be able to figure it out
more specifically. But right now I would just be guessing.
Mr. Fleming. OK. So you feel like you will be able to give
an estimate at some later date then as to what you think the
steady rate of permit production will be?
Mr. Bromwich. Right, once we have the new people on board
and we train them and we see what rate settles in at. Yes, I
would be able to project based on that. Sure.
Mr. Fleming. OK. Thank you.
You know we are approaching $4 a gallon this summer in
gasoline. Some say it may go higher than that. Federal Reserve
Chairman Ben Bernanke testified on March 1 that--and he said
that ``sustained rises and the prices of oil or other
commodities would represent a threat both to the economic
growth and to overall price stability.''
And yet in still we have supported and encouraged and even
help fund and then sent a rig to Brazil to produce oil there.
So that has obviously created a lot of concern, especially
considering that current estimates of recoverable energy
reserves to the United States if you combine oil, natural gas,
and coal as one 1.3 trillion barrels oil equivalent, which is
the largest in the world.
And then we hear talk about, well, to bring down the prices
we are going to go into the strategic oil reserve, which has
never proven to be any solution to that problem.
So it seems to me if truly oil, certainly hydrocarbons in
general is a commodity. It is price is determined by market
forces that we should move forward and do what we can to
increase production instead of being 30 percent dependent on
foreign oil as we were in the seventies we are now 60 percent.
And so you add on top of that the new technologies that allow
us to explore resources we haven't before more and more oil and
gas reserves that we are finding every day and yet we have
declining producing offshore from 1.7 million barrels a day to
1.59.
Help me with that because it seems to me that we are
falling behind and that is just making the prices go up. That
is hurting Americans at the pump.
Mr. Bromwich. Just a few points. Number one, I think that
your data on our dependency on imports is not correct. I think
our dependency has declined in recent years from approximately
60 percent to approximately 50 percent. So I think that is
point one.
Point two is there is not declining production. Production
is at its highest historical level in the Gulf of Mexico.
Mr. Fleming. Well, there must be tremendous disagreement
over that because we have had testimonies--EIA has said very
clearly that--and it is going down further by as much as
250,000 barrels a day in the next year or so.
Mr. Bromwich. My understanding is that the projection is
that it may go down, but that right now it has not gone down
and that it is at its highest levels ever. That is my
understanding.
Third, what we do now in terms of approving plans and
permits doesn't have an immediate impact. And so even if we
granted every permit that is pending and scores of permits that
are not pending today, it wouldn't have an influence on the
price of gasoline. The process, as I think you and others know,
is a long one. From the time a permit is granted until the time
that an operator can actually begin producing can be two, five,
even ten years.
And so I think we need to be somewhat careful about cross-
walking a slower permitting time we have experienced over the
last few months to the price of gasoline right now. I don't
think it is that simple.
Mr. Fleming. Well, if I could just follow up, Mr. Chairman,
just with a quick statement. And that is that we have had a
number of folks from the Administration continue to claim that
production is not gone down, yet our data shows very clearly
that it does. And yet, the Administration never shows us any
data otherwise. Thank you.
The Chairman. The time for the gentleman has expired. The
gentleman from Arizona, Mr. Grijalva.
Mr. Grijalva. Thank you, Mr. Chairman.
Welcome Mr. Director. Good to see you again.
Mr. Bromwich. Thank you.
Mr. Grijalva. Director, the report issued yesterday by the
Department showed that oil companies are, in essence, squatting
on tens of millions of acres of public land, onshore and
offshore, on which they are not producing oil. Do you believe
that establishing a fee on non-production leases will
incentivize timely oil and gas production and increase the
revenue for the Federal Government?
Mr. Bromwich. Yes, I think it will, and I know that is the
Administration's position. And we are also exploring--one of
the points of doing the report and one of the reasons I think
the President asked for it was to explore a variety of
potential incentives to get oil and gas companies to push
forward with exploration and development.
Mr. Grijalva. Use it or lose it would be one of those
incentives?
Mr. Bromwich. Would be one of them. Yes.
Mr. Grijalva. And the anticipated, hopefully congressional
action to establish such a fee I am assuming you support that
as well?
Mr. Bromwich. Yes.
Mr. Grijalva. Thank you. My colleagues on the other side of
the aisle, and we have heard today, are very concerned about
the slow issue rate of offshore drilling permits by your
agency.
And I think your response to my colleague's question at the
end is not magically going to create this volume of oil and
gas. But it is my understanding that the agency is attempting
to reform this process to prevent the tragedy of last year's
spill. Can you describe your agency's new onsite permitting
process and how it correlates in the long run to lower energy
costs in the long run.
Mr. Bromwich. I think that what we have done through the
development implementation of new safety regulations and new
containment requirements is to make drilling safer than it has
ever been before. There is no doubt that it has imposed new
requirements, obligations, responsibilities on industry.
It has also, as I mentioned in response to your colleague's
question, imposed new responsibilities and obligations on our
permitting personnel to review those applications and make sure
that all the required information has been supplied.
There have been issues over the last many months about
permits being turned in with facially inadequate information.
And our permitting personnel know that they are not to approve
those kinds of permits. They are instead to send them back to
the operator with as clearly as we can a request for the
missing information to fill out the application.
One would hope and think that it just happens one time. We
specify what is missing and it is supplied. Sometimes it has
taken more iterations than that. And one of the things we are
doing is to explore ways to streamline that process so it sort
of quickens the back and forth without for a moment sacrificing
the need for getting complete information and ensuring that we
have everything we need to feel comfortable in approving a
permit.
Mr. Grijalva. Thank you. And I appreciate the answer. I
hope it is not a dilemma for Congress, but the resources being
requested in this budget request are exactly what is needed for
expediting permitting process and more importantly to prevent
the tragedy that everyone dealt with last year. And that
prevention is about regulatory issues in terms of safety, that
prevention is assuring the right containment mechanisms, and I
think that we shouldn't cut our nose to spite our face in this
process.
We can rattle the sword about gas prices, but if we don't
put in the regulatory, environmental, and safety resources
necessary to make this agency run correctly we are going to be
stepping back into the past and we are going to retreat from
the commitment we made the American people that this would not
occur again. And for your effort I want to thank you Mr.
Director and I appreciate all the work that you are done. Yield
back.
Mr. Bromwich. Thank you. Thank you very much. I appreciate
it. And you are exactly right. We need to strengthen all
aspects of our system. We need to have more inspectors out
there looking at rigs and platforms. We need more personnel to
do the important environmental work that needs to be done, and
we need more permitting personnel. So this is one of those
issues, as I have said, that there seems to be consensus in
terms our need for more resources. But as the Chairman and I
discussed before, it simply hasn't happened for us.
The Chairman. The gentleman has yielded back. The gentleman
from Pennsylvania, Mr. Thompson.
Mr. Thompson. Thank you Chairman.
Director Bromwich, thank you so much for your testimony. I
want to revisit the issue that has been talked about a number
of times and has to do with the proposed use it or lose it fee
on non-producing leases.
The Administration claims that it will provide an added
incentive for the industry to either start producing or
relinquish leases so that others can bid on them. Now can you
explain to me what your agency defines as a non-producing
lease? Is it considered inactive or active lease?
Mr. Bromwich. A non-producing lease would be an inactive
lease, unless it is under an exploration plan.
Mr. Thompson. OK, so a non-producing lease is an active
lease?
Mr. Bromwich. No, a non-producing lease is an inactive
lease.
Mr. Thompson. OK, because your website actually which was
updated recently is March 1, 2010 states that a non-producing
lease is an active lease that has not produced.
Mr. Bromwich. Yes, don't have that in front of me.
Mr. Thompson. Well, I just bring that to your attention,
the discrepancy. And I want to explore that further. Now this
is--as you know, the Department of the Interior also deals with
the issue of non-producing leases on Federal lands. And are you
aware of what the Interior Department defines as a non-
producing lease? Does the Department of the Interior consider
this an inactive or active lease?
Mr. Bromwich. You are asking about onshore?
Mr. Thompson. No, this--well, on Federal lands.
Mr. Bromwich. OK, I think there are--as I said at the
beginning there are different definitions that are used onshore
and offshore for what is considered an inactive lease. Should
that be the case? No. But there are two separate agencies that
have been running these programs for decades and so I think
that explains what is an inconsistency.
Mr. Thompson. It certainly may explain it, but I think it
also certainly contributes to some obvious issues of--the
Department of the Interior actually, taking off of their
information, inactive leases are leased areas that are not
producing nor currently covered by an approved exploration or
development plan. So obviously, there is a lot of inconsistency
in terms of your interpretation of it, what your website says
for your agency, what the Interior Department says.
Director Bromwich, it appears to me that these two agencies
run by the same Administration in which both have jurisdiction
over one of the most important issues facing us today,
obviously, our national energy security have polar opposite
definitions of an extremely simple, yet major concept in the
energy industry.
You know what exactly a non-producing lease is--you know,
fundamental in terms of what--within the President's proposal
the definitions are so inconsistent. I mean you provided an
explanation of this in terms of there are two different
agencies, although within the same Administration.
Any other thoughts why these inconsistencies exist? Do you
agree that it would be wise for the Administration to be on the
same page to provide regulatory certainty for the industry?
Mr. Bromwich. Well, these agencies have looked at these
issues differently, not just during this Administration. These
agencies weren't created by this Administration, so the
inconsistency that you are identifying between the definitions
have existed for decades. Is it something that in a perfect
world ought not to exist? Of course.
I don't know all the complications of what goes into the
BLM definition and so I am not sure why they define things in a
way that is different from ours. Obviously, in putting together
this report we defined the inconsistency and I think that the
report attempts to simply note that there is an inconsistency.
We obviously weren't going to change the definitions for the
purpose of this report. We wanted to keep the definitions as
they have existed historically.
Mr. Thompson. I would suggest that, recognizing that there
are lots of folks and administrations that have ownership on
this problem, but I think the Administration--now that the
problem is this clear and this simple--this is the sitting
Administration. I think I would certainly suggest that this is
something that be immediately looked at. It is all under the
same Administration. Now is the time to correct this problem no
matter how far back it goes I think for the industry and
frankly for the future of our energy security that would be a
very good thing to do.
Mr. Bromwich. I am not sure that industry is confused,
frankly. I haven't seen the evidence that they are confused
about the definitions.
Mr. Thompson. Sir, do they get to pick and choose which
definition to go with?
Mr. Bromwich. I am not sure that the definitions have much
direct impact on their operations.
Mr. Thompson. In terms of you are talking about use it or
lose it, and if that is imposed it would seem to me you would
want to know what the definition of an inactive lease is.
Mr. Bromwich. Just because the definitions are different
offshore and onshore, operators who operate in both areas
certainly would have a mature understanding that the
definitions are different and therefore they will act
accordingly. So just because there is an inconsistency in the
definitions between the two agencies doesn't mean that industry
is confused.
Mr. Thompson. Actually, I would suggest that it is
something that the Administration should look at.
Mr. Bromwich. OK.
Mr. Thompson. Thank you, Mr. Chairman.
The Chairman. The time for the gentleman has expired. Ms.
Tsongas from Massachusetts is recognized.
Ms. Tsongas. Thank you, Mr. Chairman. And thank you
Director Bromwich for being here with us.
Director, last summer like much of the country I was so
concerned by the disorganized and inadequate response to the BP
oil spill. And furthermore, I was shocked to learn that oil
companies and the MMS had created nor required plans for a
worse-case scenario oil spill like the BP spill. And we saw the
results.
As you have been testifying today, you have talking about
the efforts that you put in to prevent such spills from
occurring and the kind of efforts around containment and the
technologies that need to be put in place, but what has your
agency been doing to create and put in place realistic, worse-
case scenario oil spill response plans, either from within the
Department or as a requirement of granting a permit?
Mr. Bromwich. We actually have done a lot. We now require
worse-case discharge scenarios to be outlined and calculated by
industry. And we don't just rely on what industry calculates.
We do our own calculations. And so our whole permitting process
depends on an individual operator, in fact, complying with a
very detailed set of requirements in a document called NTL6 or
Notice to Lessees 6 in which they are required to walk through
a worse-case discharge and a scenario for a worse-case
discharge. And then to demonstrate before we will even consider
granting a permit that they have the containment capabilities
that would cover such a worse-case discharge.
So there has been a tremendous amount of work that has gone
in that area. NTL6 actually came out in June of 2010. So within
two months of the spill, and we have worked it through with
industry over the course of many months. There were a number of
questions about it and how the computations worked and so
forth. But we are now at a point that we are now seeing
operators comply fully with the requirements of NTL6 and to
specify their blowout scenarios and to specify their
containment resources. So that is why at the end of March of
2011 we are in a very different place in a good way than we
were on April 20 of 2010.
Ms. Tsongas. And does this also include, for example, how
you would coordinate with the Coast Guard or other entities
that might have to deal with the impact on local communities
and shorelines and all of that as well?
Mr. Bromwich. It doesn't directly connect with that. That
is a longer-term project and that relates to how we are going
to reconfigure the whole oil spill response program. That is
not something we can do by ourselves because of the number of
participants involved, namely, the Coast Guard. We have
initiated an interagency process by which the entire regulatory
structure for oil spill response will be reconfigured. It
hasn't been done yet because that is not something that can be
done overnight or really even in a few months. But it is a
project that has been commenced. And I agree with you it is an
important project.
Ms. Tsongas. I hope you would bring it to us so that we and
the American people can be reassured because on almost every
level we saw an inadequate planning put in place to deal with
this. And I think as we watched this unfold over many, many
months it was quite dismaying and I think to have a plan in
place that can respond more quickly and more effectively would
be reassuring to all of us.
Mr. Bromwich. I understand. Absolutely.
Ms. Tsongas. But also I wanted to ask now that the
deepwater moratorium has been lifted, can you give me any
examples of drilling companies that have made changes to their
drilling procedures and particularly around worst-case
scenarios. You have said you have made them put in place plans,
but can you talk about anything more particular than that.
Mr. Bromwich. For all of the operators for whom we have
granted deepwater permits since February 28, they have all had
to do that kind of work. They have all had to fully comply with
NTL6, the worse-case discharge guidance. They have had to
comply with the new safety regulations that we put out in
October that requires certifications by professional engineers
at various stages of the process, both with respect to well
casting, with respect to cementing.
So you go down the list of the permits that we have
granted--Noble Energy, BHP Billiton, Exxon, Chevron. You go
through the list--ATP. They have all complied with not only the
requirements of NTL6, but all of our safety regulations as
well. And that is what gives me confidence that it is not just
those operators, which obviously represent a significant slug
of the industry doing business in the Gulf, but that other
operators as well are capable of meeting all of those
requirements. It wasn't easy. Didn't happen overnight because
these were tough, new requirements, as they needed to be. But
we are now seeing that operators can comply with them and I
think that there will continue to be a surge in new
applications that, in fact, comply with our new regulations.
Ms. Tsongas. Thank you. And I yield back.
The Chairman. I thank the gentle lady. The gentleman from
South Carolina, Mr. Duncan.
Mr. Duncan. Thank you, Mr. Chairman. And thank you Director
Bromwich for being here.
I have had a fair amount of experience with MMS in the
past, served on the OCS five-year planning subcommittee for
about 18 months. And one question I wanted to ask you is have
you been out to a deepwater production oil drilling platform in
the Gulf of Mexico?
Mr. Bromwich. Yes.
Mr. Duncan. OK. During this de facto moratorium that we
have since the Deepwater Horizon, how many--I know you all have
issued five out of the existing--excuse me, 7 out of the
existing 52 permits that were approved prior to Horizon. How
many of those have been in deep water?
Mr. Bromwich. We have approved seven permits for six unique
wells. In other words, one had to reapply, so we granted that
one twice. So six unique wells, seven permits and that is since
February 28. We only have 12 applications that are pending
currently.
Mr. Duncan. How many were in deep water?
Mr. Bromwich. Those are only deepwater statistics that I
have given you.
Mr. Duncan. There was one deepwater issued on March 18, do
you know who that was issued to?
Mr. Bromwich. I would have to go back. There are six
different operators and I think with Congresswoman Tsongas I
went through virtually all of them. I don't remember which one
it was.
Mr. Duncan. My information shows it was Petrobras.
Mr. Bromwich. No, that is not right.
Mr. Duncan. And 8,200 feet of water, 165 miles----
Mr. Bromwich. No. I think you are confusing two different
things. That was a permit for what is called an FPSO.
Mr. Duncan. OK. Mr. Bromwich. It is not a deepwater
drilling permit. It is something completely different. It
relates to production, not deep water.
Mr. Duncan. Had they been issued a deepwater permit before?
Mr. Bromwich. Pardon?
Mr. Duncan. Are they drilling in that location?
Mr. Bromwich. No. No.
Mr. Duncan. Just offloading? OK.
Mr. Bromwich. They are preparing for production is my
understanding.
Mr. Duncan. I am sorry?
Mr. Bromwich. They are preparing for production is my
understanding.
Mr. Duncan. OK. Last week we saw the President go to Brazil
and applaud the same company for drilling offshore. And he said
this that we want to work with you. We want to help with
technology and support to develop these oil reserves safely and
when you are ready to start selling we want to be one of your
best customers at a time when we have been reminded how easily
instability in other parts of the world can affect the price of
oil and the Unites Stated could not be happier with a potential
for a new stable source of energy.
We have stable sources of energy in this country in shallow
water and deep water, western GOM off the Atlantic Coast with
the Virginia--the permits that have been working toward with
natural gas. Supposedly lands in this country that have been
off the table for energy exploration. And so it concerns me
that the Administration seems to have a drill there and not
here philosophy.
And so when I look at what is going on very closely to the
United States waters based on the chart that I see beside me I
have been looking at all morning, concerns me that other people
are drilling for oil in the Gulf of Mexico that could have an
impact on U.S. waters as well.
And so we want to do it here. We have the resources. We
have the technology. We have issued permits in the past. There
has been over 40,000 wells drilled and oil produced from in the
Gulf of Mexico and we have had one instance, although it was a
terrible instance and I appreciate the ongoing look at safety.
But I am astonished when I hear the Ranking Member say that now
we are pushing for deepwater drilling. Sure we are because it
has been successful in this country.
Being involved with the MMS in the past, I know there are
leases that are expiring. Is there any talk within the
Administration of extending those expiring leases? Those guys
have invested hundreds of millions of dollars in these leases
that they may not ever get to produce from.
Is there any talk about extending those leases? And then if
we are going to meet the American energy independence in this
country, we are going to need new lease sales. And I know the
process is long and convoluted so we don't need to be five or
seven years out with new sales. So I would like to you address
upcoming leases, if you don't mind.
Mr. Bromwich. Yes, let me take a couple of things you said
before. The Administration and I take a drill here position as
well. That is why we are granting these permits. That is why we
have asked for additional budgetary resources so that we can
push forward with granting permits for drilling here.
You point out very importantly that we did have the
horrific accident in April. And I am sure you have studied what
happened in UK and Norway after they had enormous incidents.
Things shut down for much longer than they have here as
regulators and industry reevaluated what had happened and tried
to figure out what additional safety enhancement needed to take
place.
Mr. Duncan. We are out of time. Are you going to extend any
of the existing leases? Are you going to look at that?
Mr. Bromwich. It depends. We are going to do it on a case-
by-case basis. We have had requests for leases expiring in 2020
to extend their leases. That strikes me an outrageous request.
If they have a least that expires in the next year or so, and
they have clearly not been able to move forward because of the
moratorium and the slowdown in permitting, we will grant those
lease extensions.
Mr. Duncan. Thank you.
Mr. Bromwich. But we have had a free rider problem with
people coming in with leases that don't expire for eight, nine,
ten years and saying we want more time on our lease. That
strikes me as inappropriate.
The Chairman. The time for the gentleman has expired. The
gentleman from Maryland, Mr. Sarbanes.
Mr. Sarbanes. Thank you, Mr. Chairman. Thank you Director
for being here. Thank you for I think really putting to bed the
notion that there is a de facto moratorium--I mean that there
isn't a de facto moratorium on drilling. There isn't a de eura
moratorium. There is de nothing out there. I mean you are
issuing permits from what I can gather from what you are
telling us the industry would recognize that the agency is
acting in a responsible way, that the requirements being sought
are appropriate, that the process that they need to go through
to demonstrate that they can handle these projects in a safe
manner makes sense.
So this notion that there is a de facto moratorium in place
I think really it is a dog that won't hunt.
Mr. Bromwich. You are right about that, Mr. Sarbanes. And
it is insulting to our people who are working hard to process
permits, but in deep and shallow water as rapidly as possible.
A de facto moratorium would not require them to work. They
could go home and they haven't done that.
Mr. Sarbanes. I appreciate that.
Now I wanted to ask you--you alluded in responding to a
question from Congressman Kildee and Congressman Grijalva as
well that you feel like the industry has been chastened by this
experience and is ready to step up and be more attentive to its
responsibilities in terms of safety. Obviously, they can see
and the average American can figure out that the cost
associated with a spill happening and the shutdown that that
creates within the industry greatly exceed--exponentially
exceeds any costs associated with putting good safety measures
in place and making sure that that is paid attention to.
So it goes to this question of what the culture is like in
these companies. And there was a sense prior to the spill that
the culture was lax when it came to safety. And we have talked
about the kinds of spill response plans that were developed in
a cookie cutter manner.
We got the impression--I think clear impression from the
research that was done by the BP Commission that the President
set up that corners were being cut and so forth. and it
reflected a culture that just wasn't paying attention to these
things.
I would like you to speak to whether you think that culture
is changing. I would like you to speak to whether you may
remember from the last time at one of the hearings where you
came before this Committee that I broached the idea to you and
Secretary Salazar of requiring that the CEOs of these companies
personally certify as to the adequacy of their oil spill
response plans to make sure that right at the top there was
that commitment to safety.
Now that provision is not in place, but I would like you to
speak to whether you think that could be helpful. And in
addition, speak to whether you think beyond what you can do
from a regulatory standpoint there is still a need and
usefulness to having the Congress act to provide more authority
to enact some of the recommendations of the Commission that was
put forward.
Mr. Bromwich. Let me go first to whether the culture is
changing question. I think it is changing. I think it was, in
your words, a chastening experience for the industry. I don't
want to generalize some of the companies that we dealt with,
including some of the major companies clearly took a lot of
pride over the years in their safety culture and they sometimes
will refer pejoratively to some of the other operators as not
having that culture.
But I think for the industry as a whole Deepwater Horizon
was a massive wake-up call. And I saw that, not only in the
boards and groups that industry formed to look at these issues,
but really in the passion that some of the industry folks
expressed. They had acknowledged that they had been complacent.
They had acknowledged that they had too much discounted the
possibility of a catastrophic spill. So I think that has caused
a reevaluation of those issues in part stimulated by the new
regulations that we have put out there. But part of it is self-
generated by a simple recognition that it can't happen again.
I think Co-Chairman Riley of the President's Commission has
told the industry that if something else like this happens
forget about it. Game over. No more offshore drilling. And I
think industry at some level understands that, that the stakes
are incredibly high.
My concern is how do you sustain that commitment to a
safety culture once the memory of Deepwater Horizon begins to
fade? And one of the things I have been concerned about with
all of the push to grant permits more quickly is it is fading
all to quickly less on the part of the companies themselves and
more on the part of trade associations and frankly some public
officials. It is important to keep in mind that this event was
less than a year ago. Eleven people died and there was a
dramatic need to reevaluate the safety regime that exists and
the requirements that exist.
Moving to one of your other questions, I think personal and
executive accountability is an extremely important principle
and that is why we now have a requirement, not with respect to
oil spill response specifically, but with respect to whether
applications are compliant with all of our new regulations. It
is not a CEO requirement, but an authorized official must
certify it. I apologize.
The Chairman. The time for the gentleman has expired. The
gentlemen from Colorado, Mr. Tipton.
Mr. Tipton. Thank you, Mr. Chairman and thank you Director
for being here.
I just have a couple of quick questions that I wanted some
clarification on. Refer back to the question by colleague from
New Mexico in regards to the use it or lose it fee for non-use.
There is a difference, isn't there, between having a lease and
then a permit to be able to develop the lease, is that correct?
Mr. Bromwich. Yes. The actual steps are is there a lease
and then there is an exploration plan and then there is a
development plan. So you get permits, both with respect to an
exploration plan and with respect to a development plan.
Mr. Tipton. But developed resource to be able to make money
you have to be able to have a permit.
Mr. Bromwich. Yes.
Mr. Tipton. Is your plan to have a fee before we are
allowing people to be able to actually produce?
Mr. Bromwich. I am not sure that is actually the
requirement.
Mr. Tipton. You are not sure? Could you check up on that?
Mr. Bromwich. Sure.
Mr. Tipton. I would like to be able to know that.
Mr. Bromwich. Sure.
Mr. Tipton. And then just going back a little bit to the
Deepwater Horizon in terms of the response of government and
agencies, how many violations did BP have?
Mr. Bromwich. We still have an ongoing investigation, as
you know, that will help to determine----
Mr. Tipton. How does that relate to other companies, do
they have less violations?
Mr. Bromwich. Did they have fewer violations than what?
Mr. Tipton. Than BP.
Mr. Bromwich. I haven't looked at.
Mr. Tipton. We don't have any idea? We might want to check
on that, whether or not it was a failure to address one company
rather than the entire industry as well.
Mr. Bromwich. But as the President's Commission has pointed
out, they were using a TransOcean rig. which is a large
supplier of rigs. And they were using Haliburton cement, which
apparently failed. And so simply pointing at the operator, in
this case BP, really misses the full picture and I think that
is what led the Commission to suggest it was a systemic problem
and not a single operator problem.
Mr. Tipton. I also want to go back to the Ranking Member's
question in regards to the continuing resolution. In the event
that Senator Reid and the President fail to come up with any
ideas of their own and they want to shut down the Federal
Government, since they haven't responded to the House of
Representatives, will that impact the process of permitting?
Mr. Bromwich. Yes.
Mr. Tipton. That will?
Mr. Bromwich. Yes.
Mr. Tipton. We would certainly all like to encourage the
President and the Senate to finally step to the plate.
One other question that I have as well, you are
establishing in your request with $119-million increase in
appropriations two new agencies. As I read through your
testimony in regard to the BOEM it says, ``Develop wisely,
economically, and with appropriate protection for the
environment. Another agency, the BSEE, enforce safety and
environmental regulations.''
Personally, I am going to read into it a little bit more,
but it looks to me like there is a distinction without a
difference.
Mr. Bromwich. That is not true.
Mr. Tipton. We will look into that a bit more.
Mr. Bromwich. You want me to answer your question? Can I
answer your question?
Mr. Tipton. I will tell you, if we could, I would like to
because he has a few specific questions. I would like to yield
the balance of my time to Representative Boren.
Mr. Bromwich. Yes, but I would like to answer that point
because there is not duplication. There are completely
different functions. One is for doing the up-front
environmental work associated with leases and plans.
The other, in BSEE, is relating to environmental compliance
to make sure that the environmental commitments and mitigations
that the companies have committed to in their plans and in
their permit applications are actually followed through on.
That is a capacity that has never existed in the agency that
will exist in BSEE and it is utterly distinct from the kind of
environmental NEPA analysis that would go on in the Bureau of
Ocean Energy Management.
Mr. Tipton. Thanks for the clarification. I yield the
balance of my time, with the Chair's approval.
The Chairman. Thank you. Mr. Bromwich, prior to you getting
appointed to this position, did you have any oil and gas
experience?
Mr. Bromwich. I was a lawyer in private practice and I had
represented some energy clients. But if you are asking whether
I had a specialty in offshore drilling, the answer is no.
The Chairman. OK. Do you know what a half-truth is?
Mr. Bromwich. I think so.
The Chairman. Is a half-truth a lie or is a
misrepresentation of the truth?
Mr. Bromwich. Well, I am not sure I can answer that in the
abstract. Can you give me a specific example.
Mr. Landry. I am trying to figure out if you and the
Administration are just outright lying to the American people
or if you all just want to misrepresent the truth because again
today you pointed to how production is at its highest, yet
your--the Administration--the Energy Information Agency clearly
points out that under the current policy domes to production or
production in the Gulf of Mexico is slated to decline.
Mr. Bromwich. The question was about current production,
not about projected production.
Mr. Landry. But no, you all like to make the assumption.
You like to tell the American people that you all are
responsible for a peak in domestic production.
Mr. Bromwich. I haven't told anybody that I am responsible
for a peak in domestic production.
Mr. Landry. OK, but do you don't you agree that under the
current policy production in the Gulf of Mexico will decline?
Mr. Bromwich. Yes.
The Chairman. OK, and will that have an impact on our
domestic supply?
Mr. Bromwich. Our domestic supply? Yes, in the short term.
Mr. Landry. All right. Thank you, Mr. Chairman.
Mr. Bromwich. I don't think any of that was a lie or a
misrepresentation by me, Congressman.
Mr. Landry. OK, I just wanted to make sure because I needed
to clarify that for my colleague. I didn't want him going out
there and you making that because the Administration continues
to want to pound that at the podium when that is clearly not
factual.
Mr. Bromwich. OK, but his question was about current
production.
Mr. Landry. Current production.
Mr. Bromwich. Just to be clear.
Mr. Landry. OK.
Mr. Bromwich. OK?
The Chairman. The time for the gentleman has expired. The
gentleman from Idaho, Mr. Labrador.
Mr. Labrador. Mr. Chairman, if I could just get a follow up
on these questions. You say that there is not a de facto
moratorium, correct?
Mr. Bromwich. There is definitely has not and has never
been.
Mr. Labrador. OK. So when did energy production actually
peak in the Gulf Coast?
Mr. Bromwich. When did it peak?
Mr. Labrador. Yes.
Mr. Bromwich. I think it is nearly at its peak now.
Mr. Labrador. It is at its peak right now.
Mr. Bromwich. I think or close to it. Yes.
Mr. Labrador. So what is our current level of production
right now?
Mr. Bromwich. In terms of barrels of oil?
Mr. Labrador. Yes.
Mr. Bromwich. I don't have that figure.
Mr. Labrador. OK, when were you told that you were going to
testify at this Committee?
Mr. Bromwich. A couple of weeks ago.
Mr. Labrador. And you don't have that information, which is
what that hearing is about?
Mr. Bromwich. No, this hearing was about our budget
request.
Mr. Labrador. But your budget as so we can actually figure
out----
Mr. Bromwich. If you had asked me in advance to supply
production data, I would have been happy to do that.
Mr. Labrador. No, but you are the one who is saying there
is not a de facto moratorium.
Mr. Bromwich. The de facto moratorium relates to permitting
activities.
Mr. Labrador. OK.
Mr. Bromwich. And I have answered a number of questions
about permitting activities. I am happy to answer any of your
questions about permitting activities.
Mr. Labrador. So you are saying at this point we are at a
peak, but according to information I have in production----
Mr. Bromwich. In production.
Mr. Labrador.--that it peaked in May of 2010.
Mr. Bromwich. OK.
Mr. Labrador. OK, so production at Gulf peaked and then
continued to decline. What is our current--compared to 2010,
which was the highest producing year ever, and I agree with the
Administration there.
Mr. Bromwich. OK.
Mr. Labrador. That it was the highest producing year ever.
Your permitting is proceeding according to plan and would you
expect 2011 to have equal to or greater production than 2010?
Mr. Bromwich. I think it is going to be less.
Mr. Labrador. It is going to be less?
Mr. Bromwich. Yes.
Mr. Labrador. So we are actually reducing. We are actually
going down in the level of production in this year?
Mr. Bromwich. That is my understanding of what the
projections are. Yes.
Mr. Labrador. OK, so we are curious because you know I
don't have any gas companies in my state. I am just worried
about the consumer. I am worried about the people in my
district, in my state who are paying higher gas prices. What do
you expect 2012 to be, according to the current projections?
Mr. Bromwich. I haven't seen a projection for 2012.
Mr. Labrador. Do you expect it to be higher than 2011 or
2010?
Mr. Bromwich. I don't know.
Mr. Labrador. Do you expect it to peak?
Mr. Bromwich. You are asking me questions--I don't do
projections. I run an agency that is responsible for a whole,
large range of activities, but not for making future estimates.
Mr. Labrador. Yes, but it seems like you keep telling us
that we are at the highest levels ever, and the highest levels
ever were at 2010.
Mr. Bromwich. OK.
Mr. Labrador. And the 2010 was because of things that
happened before 2010--was because of Administration decisions
that were made before?
Mr. Bromwich. Yes.
Mr. Labrador. Not because of your Administration's
decision. It was because of what happened before your
Administration was in place, wouldn't you agree with that?
Mr. Bromwich. I never claimed that I am responsible for
high levels of production.
Mr. Labrador. And no one in your Administration is claiming
that?
Mr. Bromwich. I don't know what people in the
Administration may have claimed.
Mr. Labrador. OK. Now when we talk about the oil spill, you
are telling us that we need higher standards, and I can
probably agree with that. But don't you think--I think it was
the Ranking Member who said that there was a lot of rubber-
stamping happening in your office before you came into place,
would you agree with that?
Mr. Bromwich. People have used that description. I think
permits were being processed at a rapid rate in large part
because the number of requirements was far fewer than they are
now.
Mr. Labrador. OK, so you are asking for a 50 percent
increase of your inspectors, was that the right number that I
heard.
Mr. Bromwich. No, somebody else used the number 50 increase
in permitting personnel. It is actually a larger increase than
that.
Mr. Labrador. It is a larger----
Mr. Bromwich. In terms of the number of inspectors, we are
actually asking for a much larger percentage increase. It would
go from a current number of about 55 to--we are asking for an
increase of 116.
Mr. Labrador. So I am still not sure. If you are going to
have that many more inspectors why you are not going to be able
to approve more permits.
Mr. Bromwich. Inspectors don't approve permits. They go out
on rigs to ensure the safety of the rigs and the platforms.
Mr. Labrador. Yes, but why aren't you going to be able to--
with all the extra funding that you are going to have why
aren't you able to approve more permits?
Mr. Bromwich. We are. That is why we requested sufficient
funding for 41 additional permitting personnel.
Mr. Labrador. But according to your something you said to a
newspaper you said that we are not going to have permits than
pre-spill oil.
Mr. Bromwich. I said the pace of permitting will likely not
return to where it was previously because of all the additional
steps that our permitting personnel need to go through to
confirm that operators when they submit their permit
applications are in full compliance with all the rules.
Mr. Labrador. So I want to be clear. What that means to you
then is that the pace--so each permit will take longer, but it
doesn't mean that we are not going to have as many permits?
Mr. Bromwich. Yes.
Mr. Labrador. Is that what you mean?
Mr. Bromwich. Yes.
Mr. Labrador. OK. Thank you.
The Chairman. The time for the gentleman has expired. The
gentleman from Louisiana, Mr. Landry.
Mr. Landry. Mr. Bromwich, I was somewhat pleased to see
that you approved Shell's first, new deport exploration plan. I
understand that there are several environmental groups that are
considering filing challenges to that.
Our Chairman has introduced some legislation that helps to
streamline the judicial process. You are a very bright lawyer.
I will recognize that. Do you support that legislation?
Mr. Bromwich. Is this one of the bills that the Chairman
introduced yesterday?
Mr. Landry. Yes.
Mr. Bromwich. I haven't had enough time to really study it
to give you an informed opinion.
Mr. Landry. OK, I would like you to supplement an answer to
that question once you have an opportunity to review. If you
wouldn't mind, if you could take a look at that map. That is a
map of Cuba. That is Cuba's lease blocks. I don't guess that
you have any jurisdiction over how they drill in Cuba.
Mr. Bromwich. Not that I am aware of.
Mr. Landry. OK, one of those lease blocks has been leased
to Petrobras and did you recommend to the President that maybe
we should require Brazil to meet the same standards you are
inflicting on our oil and gas industry as they drill in Brazil?
Mr. Bromwich. There is a lot of discussion and activity
within the Department about trying to internationalize
standards.
Mr. Landry. No, no, no. I mean the money is already lent. I
mean when they lent Brazil some money to drill off our coast.
Does Brazil meet the--could under your requirements could
people drill in Brazil--would they meet your requirements in
Brazil? Are they doing the IS's and duplicative environmental
studies?
Mr. Bromwich. I don't know very much about Brazil's
regulatory system, so I can't answer that.
Mr. Landry. That is a great answer because me neither, but
I don't know why we are spending all that money increasing
their offshore capacity and we are strangling our industry
here.
You know we have been talking a lot about irresponsibility
on behalf of the industry and I would like to get back to that.
But you have indicated that a government shutdown would impair
your ability to issue permits. Would you say that a government
shutdown is an irresponsible act?
Mr. Bromwich. I think that is a rhetorical question, isn't
it?
Mr. Landry. I don't know. I mean would you say that
shutting the government would be irresponsible?
Mr. Bromwich. I think shutting down the government and
sending the bulk of our employees home is an irresponsible act.
Mr. Landry. OK. Well, then would you agree that it was
irresponsible for the Democrats not to pass a budget last year.
Mr. Bromwich. I am not going to answer that question.
Mr. Landry. Well, now wait a minute. I mean come on now. I
mean you can't just----
Mr. Bromwich. I am here to supply information. Congressman,
I am here to supply information about things that is within my
jurisdiction, not to opine political questions.
The Chairman. If I may, Mr. Landry.
Mr. Landry. Yes, sir.
The Chairman. The gentleman is here on his--listen, I am
very interested in that answer too.
Mr. Landry. But it gets to it, Mr. Chairman. It does.
The Chairman. OK. He has declined to answer it and I think
we need to respect that.
Mr. Landry. Let me ask you a question. If we were to shut
the government down, how much money would you need to continue
your permitting process?
Mr. Bromwich. The answer is I don't know. And the second
answer is I am not able to pick and choose which operations I
can select. The shutdowns that took place I don't know if you
were here at the time. I was in 1995 and 1996.
Mr. Landry. I was a taxpayer at that time.
Mr. Bromwich. Well, sir, I have been a taxpayer all alone.
So in----
Mr. Landry. In the government? You were in the government.
Mr. Bromwich. I was in the government in 1995.
Mr. Landry. Getting a government check. I was getting a
private check back then.
Mr. Bromwich. OK. I have had some private checks, too.
Mr. Landry. OK.
Mr. Bromwich. So in 1995 and 1996, there was--most of the
government was shut down. There was a very skeletal crew in
most agencies. That was true with the Justice Department where
I served and----
Mr. Landry. OK, so how much money----
Mr. Bromwich.--and I----
Mr. Landry. How much money do you need--if you have all
that experience you should then be able to tell me relatively
how much money you would need to continue to the permitting
process under a government shutdown.
Mr. Bromwich. I don't know.
Mr. Landry. I mean you just told me about the vast
experience that you have and that you were here when the shut
the government down.
Mr. Bromwich. I was not in the Interior Department and I
wasn't running this agency.
Mr. Landry. Yes, but you evidently have some experience.
Could you give me a roundabout park? Would it be 10 million, 15
million, 20 million.
Mr. Bromwich. I don't know.
Mr. Landry. OK, by your own admission earlier, you agree
that there is adequate spill response capabilities in the Gulf
of Mexico.
Mr. Bromwich. No, what I said was in the context of
individual permitting application we are satisfied that with
respect to each of those applications that we approved that
each of them has demonstrated adequate access to containment
resources.
Mr. Landry. Does the government have access to adequate
spill response capabilities in the Gulf of Mexico today--the
government. Do you have the ability to go and if you needed it
and you had the budgetary ability could you go and access
adequate spill response capabilities in the Gulf of Mexico
today?
Mr. Bromwich. That is not a government responsibility under
our current laws.
Mr. Landry. I am just asking you if you did have it, could
you?
Mr. Bromwich. We could perhaps commandeer the resources of
the various private groups, but that is not the way the system
works.
Mr. Landry. I am going to respect my time. If I had some
more we could finish up.
The Chairman. The time for the gentleman has expired.
Mr. Kildee. Mr. Chairman, point of personal privilege.
The Chairman. The gentleman is recognized and will state
his point of personal privilege.
Mr. Kildee. I came over here to get answers to questions
relevant to the purpose of this hearing. I think we are
straying a bit from that and I appreciate the fact that you
have tried to bring it back into the direction in which this
hearing was called.
Let the record show that I was in government when the
government was closed down and I was drawing a government
paycheck and still am.
The Chairman. Let me just simply respond and I know that
the Director was asked to come here and talk about the budget.
There are many, many facets to the budget. I would just say to
my friend from Michigan that the gentleman from Louisiana has
constituents that are badly impacted by this. What has happened
in the BP and he is trying to get answers on behalf of his
constituents by his line of questioning.
I interrupted him because I respect the fact that Director
Bromwich was asked probably a rhetorical question, but I
understand the passion. And frankly, there is passion on both
sides of the aisle and that is the reason for these hearings.
But I think we do need to conduct it in as civil way as we
possibly can. And certainly that is my intent as Chairman and I
know Members want to respect that. But we need to understand
sometimes why the passion arises of all of our Members in their
effort to represent their constituents.
Mr. Kildee. And I appreciate Mr. Chairman. That is one of
the reasons you are considered to be one of the most decent
Chairmen in this House and I have been in this House for 34
years. And I can't find anyone who surpasses you in decency.
And I want to work with my colleague from Louisiana. Live in
the State of Michigan. That is surrounded by the largest body
of fresh water in the world. So while you have the Gulf of
Mexico, which is, of course, the sea water I can understand
your passion. And we all get passionate at time, and don't ever
lose your passion. That can be a positive thing.
The Chairman. I think the gentleman. The Chair recognizes
the gentleman from Ohio, Mr. Johnson.
Mr. Johnson. Thank you, Mr. Chairman. Director Bromwich, I
am a little bit confused. I would like to go a little deeper
into your budget request. It is my understanding that your
department has requested an increase of almost $120 million in
funding compared to 2010 levels. Can you tell me real briefly
what was your funding level for your permitting process in
2006?
Mr. Bromwich. I don't have that number. I can supply it to
you, but I don't have it right now.
Mr. Johnson. OK. But is it safe to say that it is probably
a lot lower than the 120 million that you are requesting for
increase in 2010?
Mr. Bromwich. Certainly, the part of the budget request for
Fiscal Year '12 that goes to permitting would put us at a level
of personnel that I would imagine would be significantly in
excess of what existed in 2006, although I don't know those
numbers.
Mr. Johnson. All right, I appreciate that. In 2006,
according to the records that I have, your department approved
381 permits. In '09, 171 permits. In 2010, 104. And this year
so far 20. Can you please explain to my colleague and I why
your department needs 120 million more dollars in the budget to
do what you were doing for a lot less in 2006? Why do you need
$120 million to improve a process that, at least according to
current statistics today was working pretty good back in 2006
because we getting a lot more permits through the system?
Mr. Bromwich. Well, it depending on what you consider doing
pretty good. If by that you mean proceeding at a level of
safety requirements and regulations that are now largely viewed
as completely insufficient.
Mr. Johnson. Well, let us get to that. Let us talk about
safety and regulation.
Mr. Johnson. Are you considering in your evaluation the
fact that some 40,000 wells have been drills in the coastal
waters of America?
Mr. Bromwich. Yes, I am.
Mr. Johnson. Before the Deepwater Horizon incident, right?
Mr. Bromwich. Right, with 79 loss of well control incidents
in the period of----
Mr. Johnson. Out of 40,000, correct?
Mr. Bromwich. Yes, but that is 79 almost Deepwater
Horizons.
Mr. Johnson. Almost. Almost.
Mr. Bromwich. Yes.
Mr. Johnson. They did not occur.
Mr. Bromwich. They did not occur.
Mr. Johnson. We have had one deepwater incident out of
40,000 plus.
Mr. Bromwich. Right.
Mr. Johnson. We were implementing 381 in '06. We have done
20 this year. And it takes the acts of Federal judges finding
the Department is in contempt to get our oil drilling process
moving. All the while we are sitting here while America is
paying $4 plus for gasoline at the tank. We have a President
who goes to Brazil and encourages the Brazilians to drill so
that America can become one of their best customers. Mr.
Bromwich, is this your idea or the Department's idea of an
adequate energy policy for America?
Mr. Bromwich. First of all, your numbers in terms of
permits for this year is very low. You said 20. The actual
number is 73.
Mr. Johnson. Seventy-three? OK. Compare that to 381. I will
give you that.
Mr. Bromwich. Well, we are only about a quarter of the way
through the year. So if you trick that out for about 280. I am
not saying that is what it will be, but it shouldn't take a
quarter of a year and match it up against a full year. I think
you will agree with that.
Mr. Johnson. I certainly agree we are not all the way
through the year. So back to the question, do you consider the
President's urging Brazil to drill while we have pretty much a
de facto moratorium on our drilling here in America an adequate
energy policy for the American taxpayer.
Mr. Bromwich. Sir, we don't have a de facto moratorium. If
we had a de facto moratorium, we wouldn't have 73 permits this
year. I understand that that is the phrase that is being used
and used repeatedly. So has the phrase ``permitorium.'' They
are meaningless phrases in the face of permits being granted.
Even the industry in the last few weeks has welcomed our
issuance of both deepwater and shallow-water permits.
So I would suggest that the phrase de facto moratorium has
outlived its usefulness and we ought to talk about real numbers
rather than a phrase that is now meaningless.
Mr. Johnson. Well, I would encourage you--I don't
understand the 120 million to do something that is going to
cost a lot more now that you were spending a lot less on in
2006. And I think the American taxpayers want answers and they
are not getting them.
Mr. Bromwich. To finish the chances of another Deepwater
Horizon.
Mr. Johnson. I yield back my time, Mr. Chairman.
The Chairman. The time for the gentleman has expired. The
gentleman from Oklahoma, Mr. Boren.
Mr. Boren. Thank you, Mr. Chairman. Thank you Director
Bromwich. I think we have had several different meetings over
the past few months and I think you know I am obviously a big
supporter of the oil and gas industry, but at the same time I
do want to take the tone down a little bit and thank you for
your service.
I know this is a tough job that you have got. You have to
balance--we all want safety. We all want a clean environment.
You have to balance a lot of different things. You answer to a
lot of different bosses, including the President of the United
States and all of us. So I do want to say thank you for doing
this, at least for undertaking this job.
But I do want to advocate for some of the things that the
other Members were talking about. I think we do need to get
drilling underway. I do think we need to encourage resource
development.
Now according to your website, you all have so many permits
kind of in the queue. I think there are like 12. It may be
different. And then you also you have what I call a different
category and I want to go into that.
I visited with some of the industry folks and they say the
number in the queue is misleading. I have gotten here late and
so may I may be restating some things. But there are other
permits that are waiting that are what they called deemed
submitted which are needed before they are officially pending
on the website. And they say this process takes about 60 days.
Am I right on that or wrong? Could you inform me or educate me
a little bit better on how that works?
Mr. Bromwich. Sure. I am not sure what the industry folks
have exactly told you because what you said doesn't completely
make sense to be. But let me just tell you where we are.
Mr. Boren. OK.
Mr. Bromwich. And hopefully that will be a good start. We
have seven permits for six unique wells in deep water that we
have granted, all since February 17 when industry demonstrated
that it had subsea containment capabilities. There are
currently 12 applications pending.
Now that does not include applications that may have been
submitted that have been sent back to the operator because they
did not contain all of the required information. Now we haven't
talked a lot about this issue at the hearing, but one thing
that we did talk about a little bit is we would like to try to
reduce the number of times that permit applications get kicked
back. And so we are working to figuring out, along with
industry, ways to streamline the process.
Mr. Boren. Are these large--I mean are they like didn't dot
the I's and cross the T's or are these big things that are
being left out, are they small things?
Mr. Bromwich. These are most frequently large things.
Mr. Boren. What would they be?
Mr. Bromwich. For example, failure to supply a description
of what their containment plan is. We have had a number,
despite all of the publicity associated with the need to supply
a plan that designates the containment resources for a deep sea
blowout we have operators who have put in applications that
don't have a containment plan.
Mr. Boren. Just kind of blank or is it just not a
sufficient plan.
Mr. Bromwich. Not sufficient--it is not a sufficient plan.
Mr. Boren. OK.
Mr. Bromwich. There are other instances in which, for
example, there is not a certification by a responsible
corporate official that all of the new regulations have been
complied with. It really is an assortment of deficiencies and
gaps in the applications. Most of them fairly significant. Some
of them less significant. But all of them ones that our people
in the field feel that they must return the application to the
operation.
And I know that at times that has been frustrating. We have
worked with industry every day. I have had more than a hundred
meetings with groups of operators and individual operators in
which I invite them to describe for me problems that they are
having with our process. And I take those suggestions and I go
back to our folks in the Gulf and we try to fix things. And
that is a continuing process.
Mr. Boren. I am running out of time. I just want to end on
this. So we have still got some work to be done on some of
these applications. The staffing level, and that was mentioned
a little bit before. I think it is a good thing that we staff
up, that we have more staff.
Do you need--I think there were a number of 41 drilling
permit personnel that you are wanting, but why is that not
happening right now or what is going on with that 41? And then
how many total? You have 500 people involved in inspections.
What is the level that you actually need? I mean can you give
us some figures on that?
Mr. Bromwich. Yes, let me give you very quickly. The
request in this budget is for 41 additional permitting
personnel. That will almost double the number of people that we
have assigned to permitting-related responsibilities and
therefore would quite significantly accelerate and expedite the
process by which we review permits.
On the inspection side we currently have in the mid-
fifties, believe it or not in terms of inspectors nationwide.
The bulk of those are obviously in the Gulf of Mexico. The
budget request asks for an additional 116, so it would
effectively triple our inspections corps, which is something
that is decades overdue.
Mr. Boren. Thank you so much, Mr. Chairman and I want to
end by saying the faster we can get these things out the better
for good, hardworking people in the oil and gas industry who
contribute so much to our economy.
Mr. Bromwich. I completely agree with you.
The Chairman. The time for the gentleman has expired. The
gentleman from Florida, Mr. Southerland.
Mr. Southerland. Thank you, sir, for being here today. I
wanted to ask regarding the blowout preventer. You had stated
that we need to do more to make oil drilling safer and that is
a statement I think people agree with. And that the blowout
preventers were not failsafe.
Define for me, and I am not in the oil drilling industry,
so I will just throw that out there. I mean what is failsafe?
Define that for me.
Mr. Bromwich. Failsafe I think means in just a lay sense
that if all else fails that will prevent something very bad
from happening. And it is true that people in the industry have
used that as a descriptor for blowout preventers. I never have.
Mr. Southerland. What would be the word you would use,
though?
Mr. Bromwich. I would use it as a very important backup
system that if all else fails would be able the large
percentage of the time to stop a catastrophic blowout.
Mr. Southerland. But a large percent of the time. I mean is
there in your efforts, in your desires to have, and again not
to use the word that has been used before ``failsafe.'' If that
is not your word----
Mr. Bromwich. No.
Mr. Southerland.--that you would use I am trying to see how
you are pursuing an effort to guarantee, 100 percent prevention
of any accident.
Mr. Bromwich. It can't happen. And something this highly
technical, offshore drilling in deepwater with extraordinary
pressures there is no guarantee.
Mr. Southerland. Right. So with that being said, then your
pursuit, OK, and this Administration's pursuit, which I believe
is very clear to the American people. I mean we can haggle and
we can talk about things here on this Hill and talk about
things. But the brilliance of the American people to be able to
connect the dots your pursuit then to have something that is,
and again I know this is not your word, failsafe or 100 percent
guarantee or safer you would have to say is an illusive pursuit
that will never truly be accomplished if 100 percent prevention
is the goal?
Mr. Bromwich. Yes, I agree with that. But that is having no
impact on the way we are currently reviewing and approving
exploration plans or permits. If we were waiting for the
perfect, and you are absolutely right, unattainable blowout
preventer we wouldn't have approved all these permits and have
others that are getting ready to be approved.
Mr. Southerland. Let me ask you this. The budget request,
this $750 million increase----
Mr. Bromwich. No, that is not right. It is a $118 million
increase, $750 million if you would like to give that to us,
but we will take it. But that is double what we are asking for.
Mr. Southerland. If I am wrong, then I apologize. I am
looking at the--I am sorry, the 2010 enacted I guess compared
to the President's 2012 request.
Mr. Bromwich. The request is about I think 118 or $119
million in excess of Fiscal Year 2010. It is a very substantial
increase. That is true.
Mr. Southerland. And obviously, I am interested in your
thoughts that if the American people are having to learn--the
American family is having to survive on 2008 levels, do you
feel that the government, both state and Federal, should be a
reflection of the challenges and the pains that the American
people and small businesses are going through?
Mr. Bromwich. I think on the whole yes. But I think you
have to be alive to the complexities of the real world. The
real world for our agency is that this agency has been starved
for decades when other agencies have not. And I that is why----
Mr. Southerland. With all due respect, I think that is a
hard sell to tell the American people that the Federal
Government and the $14 trillion debt we now face has come from
starvation.
Mr. Bromwich. My agency. I didn't say the Federal
Government.
Mr. Southerland. So last question. Do you feel at all--
because I asked this, and I want to be fair, do you feel that
the Federal Government should share any of the blame in
oversight failures leading up to the oil spill.
Mr. Bromwich. Absolutely.
Mr. Southerland. A percentage. I am curious, 5 percent.
Mr. Bromwich. I can't estimate it. I will say that in the
wake of the explosion and the sinking and the deaths the media
and some public officials put a lot of the blame on the agency,
which was deeply unfair.
Mr. Southerland. I missed those news reports.
Mr. Bromwich. There were a lot of them.
Mr. Southerland. Well, thank you. Let me say this. I have
asked a lot of people from the top that have come and testified
before and you are the first individual as a representative of
government that has stated that the government bore any
responsibility and I commend you for your statement. Thank you
very much. Mr. Chairman, I yield back.
The Chairman. The time the gentleman had expired. The
gentleman from California, Mr. Garamendi.
Mr. Garamendi. We are not going to get 100 percent on
anything. However, I think your effort is to maximize the
opportunity to avoid a spill and loss of life and accident, is
that correct?
Mr. Bromwich. That is absolutely correct.
Mr. Garamendi. OK. And the program that you have undertaken
with your committee process, much of which has been discussed
here, but I don't think understood yet is designed to do that,
as I understand it, not to achieve 100 percent. The only way
you will achieve 100 percent is not to do it.
Mr. Bromwich. Correct. And we do feel, not to take your
time, but we do feel that the new regulations that we put in
place has dramatically reduced the risk.
Mr. Garamendi. Just listening to the back and forth
questions here, there is a great deal of confusion about what
is being done with regard to permitting. I would appreciate a
detailed exposition of the permits prior to the blowout, where
they were in the queue, and then the permits afterwards and a
time line associated with that. My sense of this is that there
was an extraordinary and powerful need to stop, take a look,
and then move forward with appropriate procedures, which I
think is what you did. But back and forth here, there seems to
be a confusion as to exactly what is and where it is.
Mr. Bromwich. You are absolutely right, Congressman. In the
wake of Deepwater Horizon, Secretary Salazar imposed a
moratorium on deepwater drilling that was lifted on October 12.
During that process, he asked me to go around the country and
hold a series of forums, which I did, including in your state
to gather information on whether developments since Deepwater
Horizon in terms of drilling safety, spill containment, and
spill response had changed things such that the deepwater
drilling moratorium could be lifted early.
Originally, it was set to expire on November 30. Because of
the information that we gathered during those public forums the
moratorium as lifted on October 12.
But the major gap that existed was the lack of subsea
containment resources. And that wasn't filled until February
17.
Mr. Garamendi. And that was the industry's responsibility.
Mr. Bromwich. Correct.
Mr. Garamendi. Unless we didn't care about containment,
which I think is not the case.
Mr. Bromwich. Exactly right.
Mr. Garamendi. OK. It would be very, very useful for you to
present to this Committee a detailed exposition of exactly
where the permits are and the process, those that have been
returned back. Incidentally, I spent eight years of my life as
a regulator and I know exactly what you are going through. And
when some consulting company comes in with a half-baked
proposal and then blames you for their half-baked work, and I
suspect that is what is happening to you. I will talk to you
offline about how you might get around that problem.
The other thing has to do with this budget increase of 118.
My friend Mr. Southerland seems to have left, but I suppose we
could just stay with the old and then spend how many billions
of dollars of both government and BP and other money cleaning
up a mess. I think that would be a bad idea, would you agree?
Mr. Bromwich. I totally agree with that. And the other
thing, and I am also sorry he is not here, is that the goal
that he wants to achieve, which is expedited permitting would
be defeated if we don't get more money, which includes 41
additional people for permitting.
Mr. Garamendi. Unless you just issue a permit without
caring what is they are doing.
Mr. Bromwich. That is right.
Mr. Garamendi. Which I think the American public would have
a problem with.
Mr. Bromwich. I think so too.
Mr. Garamendi. The next question has to do with the
question of the 118, plus the existing budget. Where does that
come from?
Mr. Bromwich. The money right now comes largely from
appropriates.
Mr. Garamendi. So that is the general fund. That is the
taxpayers of America.
Mr. Bromwich. It is the general fund, but that is offset to
some extent right now by inspections fees and cost recoveries
and rental fees. And so I have in my prepared testimony what
the net figure out of the Treasury is. I think it is something
on the order of 130 million.
Mr. Garamendi. Why is the oil industry not paying for 100
percent of the cost of regulating their problem?
Mr. Bromwich. That is the statutory system that currently
exists.
Mr. Garamendi. I think it is wrong. I think if they want a
permit to drill--the second thing I would ask you to do is to
present to this Committee a detailed description of the leases
that are under production, that are under exploration, and then
those that are not either under exploration or production.
Mr. Bromwich. OK.
Mr. Garamendi. So that we get passed the confusion, which I
have heard back and forth here. And that is for all parts of
the American waters.
And then finally with regard to definitions. We had a
discussion here about definitions from Mr. Thompson about
whatever it was and I went back and just looked here and I have
on this piece of paper, let us see, House of Representatives,
Congress, Senate. There seems not to be a clear definition, one
word that would describe this body. There is a House of
Representatives. There is a Congress. I suspect that causes
confusion.
I do know as a person that worked in the Department of the
Interior that the BLM operates on the land and you operate on
the water. And yes there are definitions, but your people know
what it is. Thank you, Mr. Chairman.
Mr. Bromwich. Thank you.
The Chairman. The time of the gentleman has expired. The
gentleman from Florida, Mr. Rivera.
Mr. Rivera. Thank you very much, Mr. Chairman.
During our last hearing two weeks ago, I mentioned how on
average gas prices in my home state of Florida were $3.56.
Today, the average price in Florida stands at $3.60. And while
a four cent increase in two weeks may seem insignificant to
some, the ramifications are felt across the economy when you
take into account hidden costs associated with these increases
and when you especially consider it was $2.80 just a year ago.
Consumers see the affects, as you well know of rising fuel
costs in their daily lives from the increased price of
transportation cost, the increased cost of moving goods for
producers, moving those goods to store fronts, to the market,
the increased cost of utilities, the increased cost of feeding
their families and so on.
My constituents are being squeezed by these increased costs
and it seems the Administration does not have a coherent plan
to expand supplies and help ease the price pressures. Without
these additional supplies, the tight market conditions that
have put pressure on our constituents are going to persist, I
believe.
To address our current situation, we need to increase
capacity and explore for new domestic sources of oil and
natural gas. I think we can all agree that this issue has now
gone to be one of both an economic security and a national
security issue.
Mr. Bromwich. I agree.
Mr. Rivera. Since the Deepwater Horizon accident, my
understanding is production in the Outer Centennial Shelf has
fallen by 270,000 barrels per day. Can you please comment for
us on the impact that the Administration's policies,
specifically related to whether it be drilling, previous
moratoria, drilling generally and the permitting process have
had on this domestic production?
Mr. Bromwich. I think, as I have discussed before, there is
a very substantial lag between the permitting process and
production coming online. So if there is a decline right now or
projected over the next six months, it is hard to point back to
the Deepwater Moratorium as the immediate or proximate cause of
that. It may have impacts down the road, but because of the
time lag between the granting of permits, particularly for
exploration it doesn't have an immediate impact.
Let me just make one point that I think is sometimes missed
in this discussion. There was never any interruption of
production. There was no moratorium on production. Production
continued uninterrupted and unabated from the time of Deepwater
Horizon up until today. And so the fact that production was at
high levels and now is projected to lag the second half of this
year really has comparatively little to do with what happened
in the immediate wake of Deepwater Horizon in terms of the
moratorium.
As the Congressman suggested a couple of minutes ago, the
moratorium was in the Secretary's judgment made before I ever
got to Interior necessary to take stock of what the risks were
in offshore drilling and to try to figure out ways that safety
and environmental protection could be enhanced. And that has
been done. And that is why we are now on a trajectory of
approving deepwater permits and have continued to approve
shallow-water permits.
And so both I and the Administration and the President
agree that we do need to push forward with domestic production,
both onshore and offshore.
Mr. Rivera. Then let me follow up on that last statement.
As I understand it, the Energy Information Administration
expects Gulf of Mexico production to fall by 250,000 barrels
per day each year over the next two years. And I also
understand the EIA lowered their annual energy outlook because
of a--and this is a quote from their report--``expected delays
in near-term projects, in part, as a result of the drilling
moratoria.'' Do you agree with this assessment? Have you
considered any of the projected declines from the EIA as you
consider where we are going strategically?
Mr. Bromwich. I think we are all concerned about projected
declined. We were also very concerned about moving forward with
a drilling regime that wasn't premised on tighter standards for
offshore drilling. We now have those. And we are now in a
position, and industry is in a position to move forward with
deepwater permit applications and deepwater exploration plans.
One of the Members earlier commented that we had approved
the first, new deepwater exploration plan. And that is right.
And there will be others in the near future. So we are moving
ahead. And one of the reasons that our budget request is so
critical is that will allow us to move ahead even more swiftly
than we currently are. But our personnel in the Gulf of Mexico
have never been told to slow down or not issue permits or only
issue a few permits at a time.
Their understanding is that if a permit application meets
all of the requirements they are to approve it without delay.
And I have confidence that that is exactly what they are doing.
Mr. Rivera. Thank you, Mr. Chairman.
The Chairman. The gentleman from Texas under our system,
even though it looks like he came in late, he was here when the
gavel started. And so I know Director Bromwich you don't have
to comment on that at all, but Mr. Flores is recognized for
five minutes.
Mr. Flores. Thank you, Mr. Chairman. I was in a Budget
Committee meeting. And if we don't fix the budget, then this is
going to be irrelevant, to be candid.
One of the things that--and I apologize if I am asking a
question that has already been answered. But can you explain to
me the dramatic slowdown in shallow-water drilling. I mean the
Macondo Well accident was a deepwater accident and there are
huge differences in the risk profiles of deepwater drilling
versus shallow-water drilling. Can you explain to me just, and
I need short answers because I have to move on to other
questions, why we had to slow down the shallow-water side when
it has been proven to be relatively safe?
Mr. Bromwich. Two quick points. Number one, it is not
riskless. And there was a loss of well control recently on an
Apache project, as I am sure you are aware of. So the risks are
less, but they are not zero.
Second of all, there has really not been much of a slowdown
in shallow-water permits if measure particularly since October.
We have granted permits roughly at the rate of six shallow-
water permits per month. Historical average is eight shallow-
water permits per month, so that is a decline but not much of a
decline.
The main reason there is a decline is that even shallow-
water drillers are required to comply with our new safety
requirements, which we think are equally applicable to shallow-
water drillers as they are to deepwater drillers, and we think
it would be irresponsible to not apply them to shallow-water
drillers.
Mr. Flores. I would say that a 25 percent decline is not an
insignificant number, not an insignificant decline.
Moving on, there has been a lot of discussion now in terms
of the definition of active leases verus inactive leases. If
you have a lease, whether you classify it as active or
inactive, does the classification of inactive, no matter what
definition you are using--your definition, the Department of
the Interior's definition, the President's definition--all
these new definitions that have come up in the last 24 hours or
so, does the fact that it is classified as inactive mean that
the leaseholder is not complying with the terms of the lease?
Mr. Bromwich. No.
Mr. Flores. OK, it means the leaseholder has paid his bonus
payment. He has paid his delay payments, if he had any. He is
fully complying with the lease--the company is fully complying
with the lease.
Mr. Bromwich. Right. The mere fact that it is inactive
doesn't mean they are noncompliant. That is exactly right.
Mr. Flores. Right. And what is it that determines when
hydrocarbons exists on a lease?
Mr. Bromwich. What determines when they exist?
Mr. Flores. Right.
Mr. Bromwich. I am not sure I understand the question.
Mr. Flores. I mean what we have heard some of our
colleagues on the other side of the aisle say is that companies
are not using these resources and leaving them undiscovered.
Some of these leases, in fact, do not have hydrocarbons on
them, right? And the way you find that out is when you drill
it.
Mr. Bromwich. Right.
Mr. Flores. OK.
Mr. Bromwich. But my understanding of the most widely used
definition of inactive is that kind of exploration, exploratory
drilling, for example, has not taken place.
Mr. Flores. Right. But the implication from the other side
is that all leases have hydrocarbons on them and not all leases
have hydrocarbons on them.
Mr. Bromwich. That is right.
Mr. Flores. That is where I was trying to go. I am going to
yield back the rest of my time for now. We will see if there is
another round.
The Chairman. Gentleman from Virginia, Mr. Wittman.
Mr. Wittman. Thank you, Mr. Chairman. Thank you, Mr.
Bromwich for joining us today. We appreciate your efforts.
I wanted to talk a little bit about your testimony. You had
said that the bureau had established some heightened standards
for drilling practices, safety equipment, and environmental
standards with the effort to improve safety and essentially
mitigate some of the risks that have been associated with what
we have learned from the Macondo accident, disaster or however
you want to term it.
In looking at that going forward then, you would think that
that would frame public policy decisions going forward. And my
question is this is as you know off the Virginia coast the
leases there were canceled. They were a part of the five-year
plan, the 2007 to 2012 five-year plan. Those leases were
canceled. And I was wondering with what the Administration has
learned, with what the bureau has learned with this in putting
these new standards in to increase the safety of drilling,
hopefully mitigating those risks is there any plan to go back
on schedule with the five-year plan to open up the leasing
process for lease 2020 of Virginia.
Mr. Bromwich. There is not a plan that I am aware of. But
as I am sure you know, there have been changes to five-year
plans in mid-course, many such changes in the past and one
would not be precluded in the future.
Mr. Wittman. Do you think that it is reasonable to put off
until as early as 2017 for any lease sale off of Virginia in
relation to what we have learned about the Macondo accident and
where we should go with developing what are known sources of
hydrocarbons, especially off Virginia, which is one of the
first leases that was going to be pursued five years----
Mr. Bromwich. Let me answer the question this way. I know I
have a higher level of confidence in offshore drilling wherever
it takes place from this point forward than I had previously.
The decision on the five-year plan was obviously made by
Secretary Salazar for good and sufficient reasons. I think he
was concerned that we didn't have enough experience yet with
the new regulatory regime. He wanted to focus attention on the
central and western Gulf where we had had the most experience
and see how that went.
Mr. Wittman. I would certainly hope in context--it appears
the Administration is making decisions about deepwater drilling
leases and starting that process in the Gulf. I would hope that
that would set the precedent to reconsider the leasing
cancellation decision there for Virginia. That delay I think
has lots of ramifications about this nation's future energy
needs, and especially being able to learn how we can do that
safely. And with the instances off of Virginia where we know at
least the initial geologic survey showed the preponderance of
resource there to be natural gas.
To me, that is a great opportunity to say let us take what
we have learned in the Gulf, let us apply those new public
policy principles in drilling procedures, in environmental
practices, in safety standards and show that not only can we do
it in the Gulf, but that we can do it in other areas in
Virginia where you have a state that is interested in wanting
to go forward with that. I would hope that the Administration
would look very carefully at that and do everything they can to
reinstate the leasing process there. And in any way, shape, or
form to not delay the lease process there off the Virginia
offshore water. So I would like to get your comment on where
you think this could possibly go as far as what the
restrictions will be.
Mr. Bromwich. I don't know where it will go. I will
certainly take your comments and your sentiments back to the
Department.
Mr. Wittman. OK. Very good. Thank you, Mr. Chairman. I
yield back.
The Chairman. I thank the gentleman. There has been a
request for Members to have a second round. We just completed a
first round and Director Bromwich was courteous enough to say
that he could say that he stay here I think until 1:00.
Mr. Bromwich. That is right.
The Chairman. And so we want to take advantage of that. And
I do want to say I really do appreciate your willingness to
give us that much time because you can tell by the questioning
there is a huge interest here.
So let me start then on the second round. You testified in
front of the House Appropriations Committee. I don't know if it
was the Subcommittee or the full Committee. I am sure you have
testified elsewhere to. But you were quoted as saying, and let
me read the quote, ``That if companies find oil or gas on one
out of three offshore leases they are doing well.'' Do you
recall making that statement?
Mr. Bromwich. I recall quoting an industry person who told
me that. Yes.
The Chairman. Would you agree with that then?
Mr. Bromwich. I don't have much of an independent basis for
knowledge, but certainly based on what operators have told me
that seems to be their view.
The Chairman. And was that reference just to the Gulf of
Mexico, do you know?
Mr. Bromwich. As I recall it, it was a general reference
made by a CEO of an oil company in the last month.
The Chairman. All right, they would apply to all offshore,
presumably, whether you are talking West or East Coast or
Alaska, for that matter.
Mr. Bromwich. That was my understanding of what was said.
Yes.
The Chairman. That being the case does it not seem logical
since we--I think Mr. Wittman alluded to seismic efforts that I
know the Department of the Interior has and we know that there
are huge resources elsewhere that our efforts needs to be
trying--if one out of three works that means two out of three
don't.
Mr. Bromwich. Right.
The Chairman. Wouldn't it be as a matter of policy smarter
to try to focus where we think there are more resources than
not more resources just to kind of up the ante, if you will, up
the percentage? Does that seem like a logical result?
Mr. Bromwich. It does seem like a logical suggestion and I
understand that that is one of the proposals that is in one of
your bills. The truth is that I don't know all of the factors
that have historically gone into prescribing what is contained
in a particular lease sale and the extent to which the kinds of
considerations that you are advocating have been included. I
don't know. I am going to find out. But I just don't know at
this point.
The Chairman. Listen, I appreciate that. I mean there is a
lot of discussion about energy. And because of the unrest
obviously in northern Africa and the Middle East and the fact
that energy is such an integral part of our economy, it just
seems common sense. And I think the American people probably
are way ahead of us on this, that we should be less dependent
as possible.
And when we are sitting on known reserves, and I think Mr.
Fleming made the observation that there are potential resources
in excess of a trillion barrels equivalent. You know when we
use roughly 20 million barrels a day, obviously that is a lot.
And if we can focus on pinpointing where we can get it at a
higher percentage it just seems to me from just pure economics
the costs go down and the American people are better served. So
I just wanted to focus because Mr. Flores alluded to that fact
that not every well produces and I think that is something that
is not understood by a lot of people in this whole debate.
Mr. Bromwich. Yes.
The Chairman. If you have any more comments, you are
welcome.
Mr. Bromwich. No, I don't. I think it is something I need
to learn more about again in terms of understanding what all
the factors historically that have gone into lease sales. As
you know, they are projected out many years in advance and I am
not sure the different kinds of data that are used to configure
specific lease sales. But I think your bill will cause me to
look at that and I would be happy to do that.
The Chairman. I appreciate that. Thank you very much. And
we will have a hearing on that. I might next week--now I know
the witness list is being put together, but anything that yo
could add on that we would certainly appreciate that.
Mr. Bromwich. We will try to get that to. I am not going to
be here. And I am not sure you were inviting me to appear next
week, but I am not going to be here.
The Chairman. I am not sure I was either. I was just making
an observation.
[Laughter.]
The Chairman. All right, I will yield back my time and
recognize the gentleman from Michigan, Mr. Kildee.
Mr. Kildee. Thank you, Mr. Chairman. Mr. Bromwich, earlier
it was suggested that the Deepwater Horizon disaster was an
isolated event because there have been 40,000 wells drilled in
the Gulf. But isn't drilling in shallow water, which is what
the vast majority of these wells were, very different from
drilling in ultra-deep water where the Deepwater Horizon was
operating?
Mr. Bromwich. It is different, which is not to say that
shallow-water drilling, as a mentioned before is riskless. But
certainly, shallow-water drilling has fewer associated risks, a
lower risk profile generally than deep water. And you are quite
right the vast majority of 40,000 have been in shallow water.
Mr. Kildee. Thank you. And in fact, there have been only
407 wells drilled in more than 500,000 feet of water. The
Deepwater Horizon was operating in water depths of roughly
500,000 feet. So it is really 1 out of 400, not 1 out of
40,000, isn't it?
Mr. Bromwich. I think that is a more accurate way to look
at it. Yes.
Mr. Kildee. Thank you. And as you pointed out earlier,
there have been 79 loss of well control events. Each of these
could have been a Deepwater Horizon-type disaster had it been
in a different location.
Mr. Bromwich. That is the concern. That is right.
Mr. Kildee. And I appreciate your testimony. That is why I
think we need better safety standards and I appreciate the work
you are doing on that.
Mr. Bromwich. Thank you.
Mr. Kildee. And I yield back.
The Chairman. The gentleman yields back. The gentleman from
Colorado, Mr. Lamborn.
Mr. Lamborn. Thank you, Mr. Chairman.
Mr. Bromwich, and thank you for staying as long as you can
here today. We all appreciate that.
Mr. Bromwich. Sure.
Mr. Lamborn. Recently, your agency approved a new
exploration plan. And my understanding is that this plan was
done within the 30-day time frame required by law, is that
correct?
Mr. Bromwich. Yes, with this amendment. It was resubmitted
by the operator, Shell. It was sent back to them. They
recognized that there was additional information they needed to
furnish. And under our rules that restarted the clock, OK.
Mr. Lamborn. OK.
Mr. Bromwich. So once the clock restarted, it was then
within 30 days of that.
Mr. Lamborn. OK. Thanks for that clarification. And your
agency was able to approve that without sacrificing the
responsibility you have to do so appropriately and correctly.
You were not so rushed that you couldn't do it correctly.
Mr. Bromwich. I have a high level of confidence that the
work that was done was of high quality. Yes.
Mr. Lamborn. OK. That is great. And now backing off and
looking at a more general question, which is more complicated
an exploration plan or the actual permit?
Mr. Bromwich. It really depends. An exploration plan is
more high level. It outlines the full set of activities that
may be envisioned, but individual permit applications can
themselves be very complex. I was told the other day that one
permit application recently was 3,600 pages long.
And now I think a large part of that is the containment
package that operators submit, which is in excess of a thousand
pages. But I just wanted to try to accurately convey to you
that they are very substantial submissions and therefore they
are submissions that could in certain instances take a
significant amount of time to review.
Mr. Lamborn. Now the containment package portion of that
that you just referred to when industry realizes that there are
best practices out there that will best do the containment in
that plan isn't there going to be a lot of agreement from one
application to another and from one company to another?
Mr. Bromwich. Let me clarify the terminology. The
containment issue comes with the permit, not the plan.
Mr. Lamborn. Right.
Mr. Bromwich. So it comes with the permit application.
Mr. Lamborn. Exactly.
Mr. Bromwich. OK. So I am sorry. What was your question?
Mr. Lamborn. But isn't there going to be a lot of agreement
on the best practices in a containment plan so that there is
going to be a lot of similarity from one containment plan to
the next for deepwater drilling?
Mr. Bromwich. There in the sense that operators are
designating, generally, one of the two existing industry
containment systems, either the Marine Well Containment Company
or the Helix Well Containment Group. But each permit review
requires on a well-by-well basis analysis of whether the
containment resources that have been designated are adequate to
deal with a subsea spill. And that depends entirely on
characteristics of the specific well.
So yes the containment packages are now understood. The
equipment that the two groups have has been tested and
understood by our people. But that doesn't mean you can just
flip a switch when a permit to drill application comes in
designating one of those groups. You have to do the analysis.
Now it has been actually a great example of cooperation
between our agency and industry in developing a software tool
that facilitates that analysis. The idea for the software tool,
again, to expedite the process came from our agency. We then
worked with operators who were very interested in moving
forward. And through back and forth we now have developed this
tool that is, in fact, used in the context of reviewing
specific permit applications, but on a well-by-well basis.
Mr. Lamborn. I guess what I am getting at is looking at how
you are able to do a good and proper and thorough job in 30
days on an exploration plan and knowing that those are in
general more complicated than the actual permit decision I am
hoping that you would be able to apply that same diligence and
competence to the permitting also and be able to do those
routinely within a 30-day time frame.
Mr. Bromwich. One, I think there are number of issues with
that that I would be happy to discuss with you and the
Chairman. I am sure aware that when exploration plans are
submitted frequently permit applications are submitted at the
same time. So if you had a 30-day clock running, which is a
clock now under law with an exploration plan you could have the
clock for the permit starting at the exact same time. And so
you would, in fact, instead of having 30 days for the
exploration plan and that gets approved and then you move to
the permit you would actually have zero days rather than 30.
Mr. Lamborn. OK, but apart from that.
Mr. Bromwich. But that may be a big ``apart from.'' You may
have a lot of plans that come in at the same time as permits,
in which case our permitting personnel would not have any time
under the proposal to review the proposal separate from the
exploration plan. And I want emphasize there are different
groups of people who look at plans versus permits.
Mr. Labrador. To be continued.
The Chairman. Yes. The time for the gentleman has expired.
The gentleman from California, Mr. Garamendi.
Mr. Garamendi. I would like to continue on that line of
questioning. It explored I think a very important area, which
is personnel and the need for the additional personnel. It
seems as though, just to carry on from the gentleman's
questions, that without adequate personnel the permit cannot
be--either exploration or a drilling permit cannot be
adequately reviewed, is that the case?
Mr. Bromwich. That is exactly right.
Mr. Garamendi. And that is why you are asking for this
additional amount of money.
Mr. Bromwich. Both on the plan side and on the permitting
side. Absolutely right.
Mr. Garamendi. And then you have broken that down in detail
for the budget and the appropriations, as I recall.
Mr. Bromwich. Yes.
Mr. Garamendi. So now back at it, and a question was raised
earlier, is, oh, My God, we are spending all this money in the
Federal Government. Yes, but what for? Now I guess we don't
have to spend it. We can have a blowout every year, in which
case we are spending billions either directly by the government
or indirectly through the production company. So I think we
ought to be clear about this.
The Chairman. Will the gentleman yield?
Mr. Garamendi. Yes.
The Chairman. The gentleman wasn't here when I made my
opening statement. And in my opening statement I made the
observation that there may be a need for more people. I am
certainly willing to look at that. And I also made the
observation that in our CR there is more money for this agency
to do what they want to do.
So that is certainly acknowledged, but I want to make the
point that that has been acknowledged obviously by Members of
our side and we are willing to work. Since you are pursuing
that part, don't leave the implication that this side is not in
favor of that. We just want to make sure that we get the right
part.
And I appreciate the gentleman yielding, but to follow up
the line of questioning of the gentleman Colorado, if there is
an adequate number of people, and I should probable ask this to
Mr. Bromwich. If there is an adequate number of people, could
you comply with the 30-day line of questioning that Mr.
Labrador was suggesting?
Mr. Bromwich. The answer is I don't know. We could
obviously do better than we will be able to do now. But this
simultaneous filing of exploration plans and APDs or permits to
drill is quite troubling to me.
The Chairman. OK. Well, I just wanted to point it out. And
I thank the gentleman for yielding.
Mr. Kildee. No, I am not at all surprised, Mr. Chairman,
that you were on top of this issue. You are on top of most
issues and you are headed down the right track. I think we need
to be very careful and understand the implications of the
various ways in which the permits and requests for exploration
come in and so that we provide adequate personnel and money to
properly analyze the permits.
And once again, I have had eight years of experience from
industry. It is a completely different industry, insurance
industry, presenting permits, licenses and the like to the
Department of Insurance. And all too often they come in
incomplete. And you go back and forth. It is the back and forth
that is really troublesome. And there are things that can be
done in the regulatory process to reduce the back and forth.
And I will take that up with Mr. Bromwich and share my
experience with it. He is probably already ahead of it, but
that is a real serious problem, back and forth. And I would
blame the insurance industry. They would blame me. But
nonetheless, it was time-consuming.
I think the other point is, and I just want to drive this
one home is that you did issue a report in this month of March
about the number of leases that are out there that are simply
not being pursued. However you define it, they are not being
pursued.
Mr. Bromwich. Right.
Mr. Garamendi. There is a very interesting and, I think, a
very, very necessary thing to understand here. And that is when
an oil company acquire a lease how do they book that as an
asset. Do they book that as an asset that is unexplored but
potential resource? Is it as an actual resource that has been
proven?
There are different words that are used by the industry in
their accounting and in their reporting. I don't know if this
is your turf, but I think we need to understand that. And it is
one of the reasons from my history in this is that many of
these leases are not pursued because they can still book it as
an asset, even though they are not actively pursuing it, giving
the appearance that the company may be worth a lot of money
because it has a lease.
Mr. Bromwich. It is not my field, unfortunately, so I can't
help you very much with that. But I understand the point.
Mr. Garamendi. I think I will just let it hang out there
and see what comes my way on this question.
The Chairman. The time for the gentleman has expired. The
gentleman from Louisiana, Mr. Fleming.
Mr. Fleming. Thank you, Mr. Chairman.
Mr. Bromwich, you said earlier, I am quoting you now, and
correct me if this is incorrect. We were talking about the
drilling in the Gulf of Mexico. You said, ``Right now it has
not gone down,'' talking about production. ``And it is at its
highest levels ever.'' Secretary Salazar said something very
similar, ``When you look at the production within the Gulf of
Mexico, even within the midst of the national crisis of the
Deepwater Horizon, the production has remained at an all-time
high and we expect that it will continue as we bring new
production online.''
So I want to draw your attention to this blue line here.
You see where you see kind of a zigzag coming in my direction.
Is that line, sir, going down or up?
Mr. Bromwich. The blue line?
Mr. Fleming. Yes, sir.
Mr. Bromwich. The blue line looks like it is flat right
now.
Mr. Fleming. From the peak.
Mr. Bromwich. From the peak? I am sorry. It is down from
the peak.
Mr. Fleming. OK. And what about the red line?
Mr. Bromwich. The red line is down from the peak, although
up from the low point.
Mr. Fleming. Quite sharply. Now this is done by EIA. Are
they a flim-flam organization in the pockets of big oil, the
Energy Information Administration?
Mr. Bromwich. No.
Mr. Fleming. So they are legit.
Mr. Bromwich. Right.
Mr. Fleming. Would you say?
Mr. Bromwich. Yes.
Mr. Fleming. What you are telling me is totally different
than this. Where do you get your data and what is your data?
What are the numbers and who do you get that from?
Mr. Bromwich. Well, what I was telling you was based on my
understanding of the fact that--of what the level of production
was. If I was in error, I inadvertently made an error. I know
that the projections for the second half of 2011 are supposed
to go down.
My understanding, again perhaps incorrect, was that we were
now at the highest levels we have been. If you are telling me
that the highest levels based on data you have in front of me--
I don't have data in front of me--was reached in 2010 I am not
going to reject that.
Mr. Fleming. Yes, sir. It was 1.7 million barrels a day in
2010. So it is down substantially as of the last quarter of
2010, 1.59. The red line shows that based on the rate that we
are putting rigs back online and drilling that it is going to
continue to drop off. And right here 2012, fourth quarter we
are looking at 1.18.
Mr. Bromwich. When was that estimate developed, do you
know?
Mr. Fleming. March 8, 2011.
Mr. Bromwich. OK. I would just point out that the bulk of
our deepwater permits have been issued since then.
Mr. Fleming. OK. Now I would also like to point out that
the peak that hit at 1.7, the EIA tells us that that is from
leases issued from 1996 to 2000. So we are talking about there
is lag, so in a certain sense the Obama Adminstration got the
benefit of previous leases and previous permits in terms of
showing high levels of production because they were going up.
That line was going up before, but that was based on activity
years ago.
Mr. Bromwich. In the Clinton Adminstration.
Mr. Fleming. In the Clinton Adminstration.
Mr. Bromwich. Right.
Mr. Fleming. Yes, sir. And maybe some in the Bush
Administration as well. And what you are talking about, and you
have described very well.
And I understand there is going to be a lag time for these,
so my concern is that we have passed a peak. And even though,
again, we have 1.3 trillion barrels of oil equivalent in our
country, not just in the Gulf of Mexico that while we are
finding more and more out there and more and more ways to get
to it, we are actually seeing the production go down while we
are encouraging other countries like Brazil to produce and then
we buy from them.
And I think you are right. We did peak at 60 percent
foreign oil dependency and it has come down but I think it is
going to go right back up and maybe higher based on that. And I
will let you summarize any other comments.
Mr. Bromwich. No, I appreciate that. We are pushing ahead
with offshore, both exploration and production. I would simply
say, as I have said before, that production was never
interrupted. No moratorium affected production. It did
obviously affect exploratory drilling and other kinds of
development drilling.
I think that that was a necessary byproduct of this tragedy
that shook the industry, shook the country, shook the
Department of the Interior, shook the Administration, and shook
the Congress. And so I think without periodically pointing out
what the causes of the permitting slowdown are is not a
complete picture.
Now we have, as I have said, addressed the most dramatic
deficiencies in the regulatory regime. I am comfortable that we
have done that. For a time, industry was concerned that we
would continue to roll out new rules and requirements and that
we were moving the goal posts, in their phrase.
I think they know that is not true anymore because there
haven't been new regulations issued since October. And I have
been very open about what the future trajectory of additional
rules will be. And none of those will be emergency rules. They
will go through the normal notice and comment process and will
take significant amounts of time to be developed and then
implemented with full input by industries and other interested
stakeholder.
Mr. Fleming. Thank you very much.
The Chairman. The time for the gentleman has expired. The
gentleman from Louisiana, Mr. Landry.
Mr. Landry. Mr. Bromwich, I know it is unfortunate that you
get caught up sometimes because you are sitting there. And I
would like the record to reflect that it was the Ranking Member
who opened up the issue of a government shutdown in his
remarks, which brought me to those questions.
And I also want to tell you that I really appreciate the
comments you made earlier that you feel that the industry is
much safer today wherever it drills than it was prior to the
Macondo because I believe that too. And I think that is a fair
assessment. I think the industry is safer today, not because of
government intervention, but because of the fact that there is
no oil and gas company out there that wants to lose the amount
of money that BP lost or had to expend in that accident. So
that is a very fair statement.
I also appreciate the fact that when you realize you made a
misstatement not try to do the same, that you could recognize
that.
I do want to talk about the systemic failure, but I want to
also point a comment you made just a minute ago that production
was never in jeopardy. But isn't it true that during the
moratorium even work over permits would be denied as well in
deep water.
Mr. Bromwich. I don't believe that is right.
Mr. Landry. So in other words, if someone wanted to do work
in deep water, well, you all would have been able----
Mr. Bromwich. There were a series of activities even in
deep water that were permitted, that is, allowed to go forward
under the moratorium and I believe those included work over. I
can confirm that, but I know, for example, water injection
wells were permitted in deep water during the moratorium as
were another set of activities. So I think work overs and
completions were permitted. Let me double-check that and I will
let you know.
Mr. Landry. OK. And real quickly, I know that there is a
continual statement about how illogical it was that there were
walruses involved in spill response plans in the Gulf of
Mexico, and I agree with that. But I also want to bring to your
attention that I know an oil and gas company that, during the
process after the moratorium in shallow water, they applied for
a construction permit to provide a flow line between a wellhead
and a production facility and BOEM--and it was a gas line.
And they wanted to know what their spill response plan was.
So that is almost as bad as a walrus because if there is a
release on a natural gas line there is not a whole lot to
spill. It just kind of dissipates or comes out of the water.
On the systemic failure, when you go back and you look at
it and you say--I think it is unfair that you categorize
Transocean and Haliburton and say that every process that
Transocean and Haliburton uses to drill a particular well is
all the same.
Mr. Bromwich. I didn't say that.
Mr. Landry. But then how to you come to a systemic failure
because what you all like to utilize is the fact that
Transocean and Haliburton do so much work in the Gulf of
Mexico?
Mr. Bromwich. The question I believe suggested that it was
all BP's fault and therefore how could I say that it was--how
could I agree with the President's Commission and say that it
was a systemic failure? And I simply was repeating what the
President's Commission report found, which was one of the bases
for their finding that it was a systemic problem is that
Transocean and Haliburton participated in the failure to some
degree, according to the analysis that the President's
Commission did, and that Transocean and Haliburton were widely
active in the Gulf. Very different from suggesting that
everything they are involved in is flawed, which they do and I
certainly didn't do.
Mr. Landry. Right. Because if another major oil and gas
company who designs a deepwater well differently than BP
designs it, then they would instruct Transocean and Haliburton
to use different processes and meet their specifications,
wouldn't you agree?
Mr. Bromwich. Yes. But my understanding is that there is a
lot of interaction in the drilling process between multiple
companies, not just the operator in terms of going forward with
the drilling of the well, which is why laying responsibility on
a single company is not really faithful to the facts.
Mr. Landry. But the company, at the end of the day, designs
the well according to their specifications. And there are
companies out there, and it has been shown, it has been
published in not only oil and gas journals, but the Wall Street
Journal did a great article on it to show the difference of
well designs between some oil and gas companies.
And I guess to me it is an unfair statement to think that
Transocean and Haliburton could convince say another oil and
gas company to do something that would be in their opinion not
as safe of a process than they believed.
Mr. Bromwich. But you are not suggesting, are you, that if
an oil company specified that they wanted to do things a
certain way that other participating companies like a
Transocean or Haliburton wouldn't have a duty to say, well, no
I don't think that would work safely? So they are involved,
right?
Mr. Landry. Well, no. I would say that the oil and gas
company would issue their well design and their engineering
specs and then have Transocean and Haliburton bid that
particular job based upon those specifications.
Mr. Bromwich. I understand that.
Mr. Landry. They should follow those specifications. And so
there certainly exists different specifications in the industry
that are much different than the well design that occurred in
Macondo.
Mr. Bromwich. Sure. Yes. That is right.
Mr. Landry. I yield.
The Chairman. I allowed that question to go because I know
there was continuity to it. The gentleman from Texas, Mr.
Flores.
Mr. Flores. Thank you, Mr. Chairman.
In light of the ``Use It or Lose It'' mantra that is being
bandied about these days, what would your recommendation be for
current leaseholders in terms of how to comply--in terms of
what they should do that they are not doing today?
Mr. Bromwich. I think the paper that Interior delivered to
the President at his request was laying out data that we have
for onshore and offshore. There are no specific recommendations
in there about other ways to incentive oil and gas companies to
move forward aggressively with exploiting the natural resources
on their leases. We have been actually experimenting with some
of those in some of our most recent sales by shortening some of
the lease periods, by providing extensions if wells are spud
within that period by varying, graduating some of their rental
rates. So we think that there are range of potential ways to
incentive the industry and to produce more hydrocarbons, oil
and gas that will benefit the American people.
Mr. Flores. I mean we previously discussed that today
leaseholders are completely complying with their leases, even
though they may be in an inactive status and so one of the
things you talked about is ways to incentive people to do
things. We don't really have the legal right to do it on an
existing lease, right? We cannot, as the Federal Government,
unilaterally change the terms of the lease.
Mr. Bromwich. I think that is right almost across the
board. Yes.
Mr. Flores. We would be breaching the contract that we have
with the leaseholder.
Mr. Bromwich. Right.
Mr. Flores. The only thing I have heard about is charging a
per-acre fee while leases are not being drilled. This would be
over and above the delay rentals that companies pay today,
right?
Mr. Bromwich. Yes.
Mr. Flores. So we are just increasing the cost of doing
business in the offshore lease environment, is that right?
Mr. Bromwich. That would be the result. Yes.
Mr. Flores. Thank you. At this point there is really
nothing we can do to get them to do more, to get a leaseholder
to do more unless you would come up with a better incentive
that you talked about, and I will be curious to see what those
turn out to be later on.
Going back to Mr. Fleming's production graph for a minute,
if that blue line had stayed flat across versus the drop that
we see in the red line, what is your estimate on what would
have happened to gasoline prices? Would they have gone--would
they be higher than they are today or lower than they are
today?
Mr. Bromwich. I have been persuaded, and I am sure you
have, that we are talking about a world market for oil and gas
where there are multiple producers and deliverers of oil and
gas. And so while pursuing aggressively, but safely development
and production in this country is very important, and that is
what we are doing, it is not going to move the needle very
much. And in fact, the needle is affected a lot by external
forces that we can't control.
Mr. Flores. Correct. But more is always better than less
when it comes to providing supply in order to meet the demand.
Mr. Bromwich. Yes, more is better than less, but we ought
to be realistic about how much more we are talking about and
how much that would really impact gas prices because to
suggest, for example, as many people have that our slowdown in
permitting is the cause of high gas prices, as I think you will
agree, is ridiculous.
Mr. Fleming. Well, it is a contributing factor.
Mr. Bromwich. Well, I don't even think it is a contributing
factor, but you and I can disagree about that.
Mr. Fleming. I suggest that it is a contributing factor
because if you look at the price of supply and demand it is the
incremental shortfall barrel, the incremental barrel that you
are along that makes the needle move the most with respect to
the price of oil or the underlying price of gasoline.
Mr. Bromwich. I would suggest that it is more turmoil in
the Middle East that is raising current gas prices than moving
the needle the marginal amounts you are talking about.
Mr. Flores. There is some to the turmoil, but it is also
that last barrel. When you are a barrel short, the price of oil
is going to rise dramatically versus when you are just adding a
barrel down here when you have plenty of oil. I yield back.
Thank you.
The Chairman. Will the gentleman yield? In that context,
when we had the spike in gas prices in 2008 and when the
moratoria went off, the congressional and Presidential
moratoria went off the gas price dropped. And I think part of
the reasons why, and I think it is applicable here and I think
Mr. Flores was onto something in that regard and that was
sending a message to the world market because I agree crude is
a worldwide commodity. And with the known resources we have
here, if we send a signal to the markets that we are serious
about utilizing these resources in the long term that would
have the effect, in my view, of moving the needle. I think that
is what Mr. Flores was getting to. Would you agree with that?
Mr. Bromwich. Yes, I would agree with that. And that is why
we are pursuing things as aggressively as we are and that is
why we need the money from the Congress to do more.
The Chairman. Well, that is a good place I suppose to stop.
And I could stop over with my opening remarks in that regard.
But Mr. Bromwich, thank you very much for taking the time. And
I want to thank all of the Members. There may be a possibility,
as happens from time to time, where an issue comes up and more
information is needed. We ask that if a request is sent to you,
you respond back as quickly as possible. We would certainly
appreciate that.
Mr. Bromwich. Absolutely, will do that.
The Chairman. Thank you very much for being here. And
without objection, the meeting will adjourn.
[Whereupon, at 12:48 p.m., the Committee was adjourned.]