[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
EVALUATING PRESIDENT OBAMA'S OFFSHORE DRILLING PLAN AND IMPACTS ON OUR
FUTURE
=======================================================================
OVERSIGHT HEARING
before the
COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
Wednesday, May 9, 2012
__________
Serial No. 112-110
__________
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 Democratic Member
Don Young, AK Dale E. Kildee, MI
John J. Duncan, Jr., TN Peter A. DeFazio, OR
Louie Gohmert, TX Eni F.H. Faleomavaega, AS
Rob Bishop, UT Frank Pallone, Jr., NJ
Doug Lamborn, CO Grace F. Napolitano, CA
Robert J. Wittman, VA Rush D. Holt, NJ
Paul C. Broun, GA Raul M. Grijalva, AZ
John Fleming, LA Madeleine Z. Bordallo, GU
Mike Coffman, CO Jim Costa, CA
Tom McClintock, CA Dan Boren, OK
Glenn Thompson, PA Gregorio Kilili Camacho Sablan,
Jeff Denham, CA CNMI
Dan Benishek, MI Martin Heinrich, NM
David Rivera, FL Ben Ray Lujan, NM
Jeff Duncan, SC Betty Sutton, OH
Scott R. Tipton, CO Niki Tsongas, MA
Paul A. Gosar, AZ Pedro R. Pierluisi, PR
Raul R. Labrador, ID John Garamendi, CA
Kristi L. Noem, SD Colleen W. Hanabusa, HI
Steve Southerland II, FL Paul Tonko, NY
Bill Flores, TX Vacancy
Andy Harris, MD
Jeffrey M. Landry, LA
PJon Runyan, NJ
Bill Johnson, OH
Mark Amodei, NV
Todd Young, Chief of Staff
Lisa Pittman, Chief Counsel
Jeffrey Duncan, Democratic Staff Director
David Watkins, Democratic Chief Counsel
------
CONTENTS
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Page
Hearing held on Wednesday, May 9, 2012........................... 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:
Beaudreau, Tommy P., Director, Bureau of Ocean Energy
Management, U.S. Department of the Interior................ 6
Prepared statement of.................................... 8
Response to questions submitted for the record........... 12
OVERSIGHT HEARING ON ``EVALUATING PRESIDENT OBAMA'S OFFSHORE DRILLING
PLAN AND IMPACTS ON OUR FUTURE.''
----------
Wednesday, May 9, 2012
U.S. House of Representatives
Committee on Natural Resources
Washington, D.C.
----------
The Committee met, pursuant to notice, at 10:04 a.m., in
Room 1324, Longworth House Office Building, Hon. Doc Hastings
[Chairman of the Committee] presiding.
Present: Representatives Hastings, Duncan of Tennessee,
Gohmert, McClintock, Thompson, Duncan of South Carolina,
Flores, Harris, Landry; Markey, Kildee, Pallone, Napolitano,
Holt, Costa, and Tonko.
The Chairman. The Committee will come to order. The
Chairman notes the presence of a quorum, which, under our
rules, are two Members. And thank goodness the Chairman and the
Ranking Member are here this morning. After last night, I
suppose--wait, I forgot. Mr. Kildee is here. So we are 50
percent over our quorum. That is good.
Today the Committee on Natural Resources is meeting today
to hear testimony on an oversight hearing on evaluating
President Obama's offshore drilling plan and impacts on our
future. Under Rule 4(f), opening statements are limited to the
Chairman and Ranking Member. However, I ask unanimous consent
that all Members be allowed to submit an opening statement, as
long as it is into the Committee prior to the close of business
today.
[No response.]
The Chairman. And without objection, so ordered.
I will now recognize myself for my opening statement.
STATEMENT OF THE HON. DOC HASTINGS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WASHINGTON
The Chairman. American offshore energy production plays a
vital role in our country's economic security. It supports over
a million American jobs, accounts for 30 percent of our
Nation's oil production, reduces our dependence on foreign oil,
and generates billions of dollars in Federal revenue.
Now more than ever, with gasoline prices still hovering
near $4 a gallon, and unemployment above 8 percent, the United
States should be doing everything it can to ensure the timely
and responsible production of our domestic energy resources.
Unfortunately, the Obama Administration is instead pursuing
an agenda that keeps 85 percent of our offshore areas closed to
new American energy production.
Every five years, the Federal Government releases a plan
directing the development of our offshore resources. It
includes specific locations and timelines for where and when
energy production will occur. This Administration's draft plan
includes no new areas, no goals, and no new energy resources.
It is a plan that reinstates the drilling moratoria lifted in
2008, and locks up vital American energy resources.
When President Obama took office, there was a plan in place
to conduct lease sales in the new areas that were no longer
under the moratoria. Instead of seizing this opportunity to
vastly increase American energy production, President Obama
discarded that plan and canceled lease sales, including one off
the coast of Virginia that was scheduled for 2011.
The draft plan released last fall from the Obama
Administration closes the entire Atlantic and Pacific Coasts to
drilling, along with parts of the Arctic. The only areas this
plan would allow energy production are in the Gulf of Mexico
and, very late in the plan, in small parts of Alaska, areas
that have been open in some cases for decades.
President Obama claims to support expanded offshore
drilling, but the reality is that no new drilling will occur
anywhere during his term in office. Or, if this plan is
enacted, for the next half decade.
What is even more troubling is that, due to this
Administration's delays, on July 1, 2012, the United States
will have no plan to develop our offshore energy resources.
Offshore drilling plans are subject to multiple levels of
public comment and review. One of the final steps is that the
plan must be submitted to Congress for a 60-day review. That is
the law.
In order to complete all the legally required steps to have
a new plan in place by the time the current one expires on June
30th, the President would have had to submit his plan to
Congress by May 1st. They let that deadline come and go without
any action.
This will be the first time the U.S. will not have a plan
in place since that requirement became law in the 1970s. And I
also want to quickly address the Obama Administration's
deliberately misleading claim that their draft plan opens 75
percent of the known offshore resources. This is a calculated
and outdated talking point meant to provide cover for a failed
record on offshore drilling.
This Administration is using seismic data from the 1980s to
estimate offshore oil and natural gas potential. Using
scientific data nearly 30 years ago to shape significant energy
policy is not only completely unacceptable, but shows a
fundamental lack of understanding of offshore energy
development. We don't know the oil and natural gas potential of
new areas until we begin development of those areas.
For example, just over a decade ago, the USGS believed that
the undiscovered technically recovered resources of the
Marcellus Formation was 1.9 trillion cubic feet of natural gas.
Today, it is estimated that Marcellus has 44 times that amount.
Certainly nobody here is using a computer from 30 years ago.
And this Administration shouldn't rely on 30-year-old data.
The United States' economic competitiveness is at risk if
we don't act now to expand production of our resources. Last
week, the Chinese announced an offshore plan to double output
by 2030. World markets are not waiting for us. And if we don't
plan for increased energy production now, we will surely pay
for it in the future through increased dependence and higher
energy prices.
Now is the time to make these important decisions and set
the stage for an energy renaissance in the United States.
And with that I yield back my time and recognize the
distinguished Ranking Member, Mr. Markey.
[The prepared statement of Mr. Hastings follows:]
Statement of The Honorable Doc Hastings, Chairman,
Committee on Natural Resources
American offshore energy production plays a vital role in our
country's economic security. It supports over a million American jobs,
accounts for 30 percent of our Nation's oil production, reduces our
dependence on foreign oil and generates billions of dollars in federal
revenue.
Now more than ever, with gasoline prices still hovering near $4 a
gallon and unemployment above 8 percent, the United States should be
doing everything we can to ensure the timely and responsible production
of our domestic energy resources.
Unfortunately, the Obama Administration is instead pursuing an
agenda that keeps 85 percent of our offshore areas closed to new
American energy production.
Every five years, the federal government releases a plan directing
the development of our offshore resources. It includes specific
locations and timelines for where and when energy production will
occur. President Obama's draft plan includes no new areas, no goals and
no new energy resources. It's a plan that reinstates the drilling
moratoria lifted in 2008 and locks up vital American energy resources.
When President Obama took office, there was a plan in place to
conduct lease sales in the new areas that were no longer under
moratoria. Instead of seizing this opportunity to vastly increase
American energy production, President Obama tossed aside that plan and
canceled lease sales--including one off the coast of Virginia scheduled
for 2011.
The draft plan released last fall from the Obama Administration
closes the entire Atlantic and Pacific coasts to drilling, along with
parts of the Arctic. The only areas this plan would allow energy
production are in the Gulf of Mexico and, very late in the plan, small
parts of Alaska--areas that have been open in some cases for decades.
President Obama claims to support expanded offshore drilling, but
the reality is that no new drilling will occur anywhere during
President Obama's term in office, or if this plan is enacted, for the
next half decade.
What's even more troubling is that due to the Obama
Administration's delays, on July 1, 2012 the United States will have no
plan to develop our offshore energy resources.
Offshore drilling plans are subject to multiple levels of public
comment and review. One of the final steps is that the plan must be
submitted to Congress for a 60-day review. That's the law. In order to
complete all the legally required steps to have a new plan in place by
the time the current one expires on June 30th, the President would have
had to submit his plan to Congress by May 1st.
The Obama Administration let that deadline come and go without any
action. This will be the first time the U.S. will not have a plan in
place since it became a requirement in the 1970s.
I also want to quickly address the Obama Administration's
deliberately misleading claim that their draft plan opens 75 percent of
the known offshore resources. This is a calculated and outdated talking
point meant to provide political cover for a failed record on offshore
drilling.
The Obama Administration is using seismic data from the 1980s to
estimate offshore oil and natural gas potential. Using scientific data
from over 30 years ago to shape significant energy policy is not only
completely unacceptable but shows a fundamental lack of understanding
of offshore energy development. We don't know the oil and natural gas
potential of new areas offshore until we begin development.
For example, just over a decade ago, the USGS believed that the
Undiscovered Technically Recoverable Resources of the Marcellus
Formation was 1.9 trillion cubic feet of natural gas. Today, it is
estimated that Marcellus has 44 TIMES that amount. We know that
technology has come a long way in 30 years--certainly no one here is
using a computer from 30 years ago--and the Obama Administration
shouldn't be relying on 30 year old data.
The United States' economic competitiveness is at risk if we don't
act now to expand production of our resources. Last week, the Chinese
announced an offshore plan to DOUBLE output by 2030. World markets are
not waiting for us and if we don't plan for increased energy production
now, we will surely pay for it in the future through increased
dependence and higher energy prices.
Now is the time to make these important decisions and set the stage
for an energy renaissance in the United States.
______
STATEMENT OF THE HON. EDWARD J. MARKEY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MASSACHUSETTS
Mr. Markey. Thank you, Mr. Chairman, very much. The beloved
children's writer, Maurice Sendak, passed away yesterday. But
here in the Natural Resources Committee, witnesses still get to
come to the place where the wild questions are.
So, welcome, Director Beaudreau, to the place where
proponents of drilling gnash their terrible teeth, show their
terrible claws, and roar their terrible roars. But before we
let the wild rumpus start, let us just consider a few facts.
Because today, once again, is Groundhog Day in the Natural
Resources Committee, where the Majority has a hearing based
upon knowingly erroneous premises, but they continue to try to
propound them to the American public.
The Interior Department's proposed five-year offshore
drilling plan would make more than 75 percent of our offshore
oil and gas reserves available for drilling. Oil production has
increased under the Obama Administration. In fact, last year,
onshore oil production was as high or higher than it was during
each of the last three years of the Bush Administration. Oil
companies are drilling in the Gulf. In fact, there are now
nearly one-third more floating rigs working in the Gulf than
there were before the BP spill. By the end of the year, there
will be nearly 50 percent more floating drilling rigs in the
Gulf, according to the industry analysts, than were there
before the BP spill.
But the Interior Department's plan for offshore drilling is
only one aspect of the all-of-the-above energy plan we should
be debating. We need a plan to end excessive Wall Street
speculation in oil markets. We need a plan to get oil companies
to start drilling on the tens of millions of acres they already
have under lease, and to ensure that they are doing so safely.
We need a plan to ensure that American fuel and natural gas
stays here to help American consumers, and is not just
exported.
Yet, the Republican Majority in the House tried to cut the
funding for the Commodity Futures Trading Commission, the cops
on the Wall Street speculation beat, by 30 percent last year.
The Majority should end its opposition to fully funding the
CFTC Wall Street cops to end excessive speculation in oil
markets and protect consumers. The Majority has also opposed
Democratic efforts to get oil companies to start drilling on
the leases they already have. Oil companies already hold the
offshore drilling rights to an area the size of Kentucky on
which they are not producing a single barrel of oil.
Last year the Interior Department found that there was
nearly as much oil and more natural gas under these non-
producing leases--non-producing because the oil companies
refuse to drill on them--than we could ever get from drilling
up and down the entire East and West Coast of the United
States.
The Majority has refused to debate legislation that I have
introduced to implement the recommendations of the independent
BP Spill Commission, improve the safety of offshore drilling.
The Spill Commission recently gave this Congress a grade of D
on its legislative response to the worst environmental disaster
in American history, and only refrained from handing out an F
because it didn't want to ``insult the whole institution.''
And the Majority has repeatedly voted down Democratic
amendments to ensure that the oil and natural gas produced from
public lands here in the United States stays here in the United
States to benefit American consumers here in the United States,
even as oil companies exported more than one billion barrels of
American fuel last year to other countries, rather than selling
it here in the United States to American consumers. The
increase in gas prices we saw this spring was not the result of
the White House. It was the result of Wall Street speculators.
It was not about Obama. It was about OPEC.
The Interior Department's all-of-the-above energy strategy
includes a five-year offshore drilling plan, but it also
includes permitting five times the amount of renewable energy
approved by all previous Administrations, combined. It is part
of a larger strategy that has reduced our dependence on foreign
oil from 57 percent at the end of the Bush Administration to 45
percent last year.
But once again, those on the other side of the aisle appear
focused solely on a drill baby, drill strategy that only
benefits big oil. It is time to debate the other pieces of a
real energy plan that benefit all American consumers and our
economy.
I yield back the balance of my time.
[The prepared statement of Mr. Markey follows:]
Statement of The Honorable Edward J. Markey, Ranking Member,
Committee on Natural Resources
Thank you, Mr. Chairman.
The beloved children's writer Maurice Sendak passed away yesterday,
but here in the Natural Resources Committee witnesses still get to come
to the place where the wild questions are. So welcome, Director
Beaudreau [pronounced Bo-Dro], to the place where proponents of
drilling gnash their terrible teeth, show their terrible claws, and
roar their terrible roars!
But before we let the Wild Rumpus Begin, let's just consider a few
facts.
The Interior Department's proposed five-year offshore drilling plan
would make more than 75 percent of our offshore oil and gas reserves
available for drilling.
Oil production has increased under the Obama Administration. In
fact, last year, offshore oil production was as high or higher than it
was during each of the last three years of the Bush Administration.
Oil companies are drilling in the Gulf. In fact, there are now
nearly one-third more floating rigs working in the Gulf than there were
before the BP spill. By the end of the year there will be nearly 50
percent more floating drilling rigs, according to industry analysts.
But the Interior Department's plan for offshore drilling is only
one aspect of the ``all of the above'' energy plan we should be
debating. We need a plan to end excessive Wall Street speculation in
oil markets. We need a plan to get oil companies to start drilling on
the tens of millions of acres they already have under lease and to
ensure that they are doing so safely. We need a plan to ensure that
American fuel and natural gas stays here to help American consumers and
is not just exported.
Yet the Republican Majority in the House tried to cut the funding
for the Commodity Futures Trading Commission--the cops on the Wall
Street speculation beat--by 30 percent last year. The Majority should
end its opposition to fully funding the CFTC Wall Street cops to end
excessive speculation in oil markets and protect consumers.
The Majority has also opposed Democratic efforts to get oil
companies to start drilling on the leases they already have. Oil
companies already hold the offshore drilling rights to an area the size
of Kentucky on which they are not producing oil. Last year, the
Interior Department found that there was nearly as much oil and more
natural gas under these nonproducing leases than we could ever get from
drilling up and down the East and West Coasts.
The Majority has refused to debate legislation that I have
introduced to implement the recommendations of the independent BP Spill
Commission improve the safety of offshore drilling. The Spill
Commission recently gave Congress a grade of ``D'' on its legislative
response to the worst environmental disaster in American history, and
only refrained from handing out an ``F'' because it didn't want ``to
insult the whole institution.''
And the Majority has repeatedly voted down Democratic amendments to
ensure that the oil and natural gas produced from public lands here in
the United States stays here to benefit American consumers, even as oil
companies exported more than 1 billion barrels of American fuel last
year.
The increase in gas prices we saw this spring was not the result of
the White House, it was the result of Wall Street speculators. It was
not about Obama, it was about OPEC.
The Interior Department's ``all of the above'' energy strategy
includes a five-year offshore drilling plan but it also includes
permitting five times the amount of renewable energy approved by all
previous administrations combined. It is part of a larger strategy that
has reduced our dependence on foreign oil from 57 percent at the end of
the Bush Administration to 45 percent last year.
But once again, those on the other side of the aisle appear focused
solely on a ``drill, baby, drill'' strategy that only benefits Big Oil.
It is time to debate the other pieces of a real energy plan that
benefit American consumers and our economy.
I yield back.
______
The Chairman. I thank the gentleman for his statement. And
I am very pleased to welcome on our panel today Director Tommy
Beaudreau, the head of the Bureau of Ocean Energy Management.
Welcome back. As we spoke earlier, I am happy to see you are
getting your feet wet now in your new responsibilities. No pun
intended, I might add.
You have been here before, and you know how the timing
lights work. When the green light is on you are doing very,
very well. Yellow light means you have one minute left. And
when the red light comes on, it means your five minutes have
expired. Your full statement, however, will appear in the
record. So I invite you to summarize.
And with that, Director Beaudreau, I welcome you to the
Committee. And you are recognized for five minutes.
STATEMENT OF TOMMY BEAUDREAU, DIRECTOR,
BUREAU OF OCEAN ENERGY MANAGEMENT
Mr. Beaudreau. Thank you, Chairman Hastings, Ranking Member
Markey, and members of the Committee on Natural Resources. I
appreciate very much the invitation to appear before you today
to discuss the Department of the Interior's proposed Outer
Continental Shelf Oil and Gas Leasing Program for 2012 to 2017,
referred to as the Five Year Program.
My Agency, the Bureau of Ocean Energy Management, is
committed to promoting safe and responsible oil and gas
exploration and development offshore the United States as a
cornerstone of the all-of-the-above energy strategy that the
President has stressed is necessary to grow America's energy
economy and continue to reduce our dependence on foreign oil.
BOEM is working to finalize our Five Year Program for 2012
to 2017. I would like to take a moment to discuss what we are
doing to promote responsible development by providing industry
with access to vital offshore oil and gas resources, which
fundamentally is what the Five Year Program is about.
Simply put, our plan proposes leasing where the oil is.
BOEM's current offshore oil and gas resource estimates, updated
last November, make this clear. The central Gulf of Mexico
remains, by far, the offshore area with the richest oil and gas
potential: nearly 31 billion barrels of undiscovered but
technically recoverable oil. The Chukchi Sea is second, with
about half that, approximately 15 billion barrels. Next are the
western Gulf of Mexico and the Beaufort Sea, with more than 12
billion and 8 billion barrels, respectively.
All of these areas are included in the proposed Five Year
Program. Together, these areas, along with the Cook Inlet and
the portion of the eastern Gulf of Mexico not subject to
congressional moratorium, which are also in the proposed Five
Year Plan, contain more than 75 percent of the untapped oil and
gas resources that we estimate exist offshore of the United
States.
Our program is premised on resource development and leasing
strategies that are specifically tailored to the resource
potential and conditions of individual regions. In the Gulf of
Mexico, where the resource potential is the highest, and the
infrastructure to find resources, bring them to market, and
respond in the event of an accident is the most mature, we
propose continuing with annual area-wide lease sales. We held
an extremely successful sale in the western Gulf last December,
and we will be holding a central Gulf sale next month on June
20th. We anticipate holding the first lease sale under the new
Five Year Program in the western Gulf in November or December
of this year. This is consistent with the traditional rhythm of
alternating annual lease sales for the two major Gulf of Mexico
planning areas.
The proposed Five Year Plan includes potential lease sale
in each of the Alaskan Arctic planning areas, the Beaufort and
the Chukchi Seas. We are taking a careful and balanced approach
to leasing in the Arctic that considers resource potential, the
unique environmental needs and sensitivities in the Arctic, and
concerns about native Alaskan culture and the reliance of many
North Slope communities on subsistence hunting and fishing. We
are already working on planning related to a potential special
interest sale on the Cook Inlet. And in March we issued a
formal request to gauge whether industry is interested in oil
and gas exploration in that area.
Now, turning to the mid and south Atlantic, we are pursuing
a specific strategy to develop modern scientific information
about oil and gas resource potential in that region, both the
size of the resource and its location. As the Chairman pointed
out, seismic data that currently exists for these areas is
decades old.
Therefore, in March, BOEM issued a draft EIS concerning the
seismic surveys necessary to understand the magnitude and
location of potential oil and gas resources in the mid and
south Atlantic. We expect to complete this EIS by the end of
the year, which may enable seismic surveys to move forward
early next year.
The other major issue that must be thought through as we
consider the future of potential oil and gas exploration in the
mid and south Atlantic is reconciling offshore oil and gas
activity with existing uses, including military training and
operations.
For example, the Defense Department has raised substantial
concerns about the compatibility of military operations in the
Atlantic with oil and gas activity. For example, DoD identified
significant conflicts in the Sale 220 area offshore Virginia,
such that it believed that ``no oil and gas activity'' would be
appropriate in 72 percent of the sale area, and that no
permanent oil and gas facility should be located in an
additional 5 percent of the Sale 220 area.
For all of these reasons, I believe our proposed Five Year
Program is a major step forward in helping secure the Nation's
energy future by making areas containing the vast majority of
our shared OCS oil and gas resources available for development,
while also protecting sensitive environmental areas, respecting
other uses such as fishing, subsistence, and military
operations, and considering the interests of the states in what
happens off of their shores.
Thank you very much.
[The prepared statement of Mr. Beaudreau follows:]
Statement of Tommy P. Beaudreau, Director, Bureau of Ocean Energy
Management, United States Department of the Interior
Chairman Hastings, Ranking Member Markey, and Members of the
Committee, I am pleased to appear before you today to discuss the
Bureau of Ocean Energy Management's (BOEM) offshore oil and gas leasing
under the current Five Year Outer Continental Shelf (OCS) Oil and Gas
Leasing Program (Five Year Program), as well as our development of the
next Five Year Program for 2012-2017. As the President has stressed,
the Administration is committed to promoting safe and responsible
domestic oil and gas production as part of a comprehensive, all-of-the-
above energy strategy to grow America's energy economy and continue to
reduce our dependence on foreign oil. Expanding safe and responsible
development of the nation's offshore oil and gas resources through
leasing under the Five Year Program is an important part of that
strategy.
Leasing Under the 2007-2012 OCS Five Year Program
BOEM's offshore leasing activity under the current Five Year
Program reflects the Administration's overall approach to promoting
safe and environmentally responsible oil and gas resource development,
including encouraging exploration and development in the Gulf of Mexico
(GOM), where resources and industry interest are most extensive, and
where mature infrastructure exists to support oil and gas activities.
Since the start of this Administration, BOEM and its predecessor agency
have held four lease sales in the GOM under the current Five Year
Program, generating more than $2 billion in bonus payments, as well as
more than $144 million in rental and royalty payments.
Most recently, on December 14, 2011, BOEM held Western GOM Lease
Sale 218. This lease sale was the first offshore oil and gas sale
following the Deepwater Horizon explosion and oil spill and DOI's
implementation of sweeping safety and environmental reforms, which
heightened standards and improved oversight of offshore drilling. Sale
218 followed supplemental environmental analysis that considered new
information--including information in light of the Deepwater Horizon
event. The sale offered over 21 million acres for oil and gas
exploration and development, and BOEM received bids on blocks covering
over one million acres. The sale netted over $324 million in bonus bids
and over $11 million in first year rentals.
BOEM will hold Consolidated Central GOM Lease Sale 216/222, the
last remaining sale scheduled in the current Five Year Program, in New
Orleans on June 20, 2012. The sale will include all available unleased
acres in the Central Planning Area offshore Louisiana, Mississippi and
Alabama. The proposed lease sale includes approximately 7,250 unleased
blocks covering nearly 38 million acres in the Central GOM, a region
that BOEM estimates contains close to 31 billion barrels of oil and 134
trillion cubic feet of natural gas that are currently undiscovered and
technically recoverable. BOEM estimates that the Central GOM sale could
result in the production of 1 billion barrels of oil and 4 trillion
cubic feet of natural gas. Sale 216/222 also follows the completion of
supplemental environmental analysis in light of the Deepwater Horizon
event.
The terms of recent sales reflect a range of administrative
measures to ensure a fair return to taxpayers and encourage prompt and
diligent development, consistent with policies articulated in the
Administration's Blueprint for a Secure Energy Future. These include
escalating rental rates to encourage prompt exploration and development
of leases, as well as the opportunity for additional time if the
operator demonstrates a commitment to exploration by drilling a well
during the base period of the lease. The durational terms of leases are
graduated by water depth to account for differences in time needed for
analyses, planning safe and appropriate exploration, and if resources
are found, production facility design and construction.
Moreover, beginning with Sale 218 last fall, BOEM increased the
minimum bid for deepwater to $100 per acre, up from only $37.50, to
ensure that taxpayers receive fair market value for offshore resources
and to provide leaseholders with additional impetus to invest in and
hold only those leases that they are reasonably likely to develop.
Rigorous analysis of the last 15 years of lease sales in the Gulf of
Mexico showed that deepwater leases that received high bids of less
than $100 per acre, adjusted for energy prices at time of each sale,
experienced virtually no exploration and development drilling.
The terms of BOEM's lease sales also include a number of conditions
to protect the environment. For example, the forthcoming Central GOM
Lease Sale 216/222 will include stipulations to protect biologically
sensitive resources, mitigate potential adverse effects on protected
species, and avoid potential conflicts associated with oil and gas
development in the region.
The 2012-2017 OCS Oil and Gas Leasing Program
With the current Five-year Program nearing its end date, BOEM is
finalizing the Proposed Final OCS Oil and Gas Leasing Program for 2012-
2017. We are also completing the corresponding Programmatic
Environmental Impact Statement that analyzes the potential
environmental effects of the Five Year Program and provides the basis
for subsequent environmental analysis throughout the implementation of
the Program. DOI expects to finalize and issue both documents by the
end of June, when the current Five Year Program expires. The first
lease sale under the new Five Year Program is tentatively scheduled in
the Western GOM in November or December of 2012.
The Proposed 2012-2017 OCS Oil and Gas Leasing Program
BOEM published the Proposed Five Year Program for 2012-2017 in
November 2011. It proposed making available offshore areas that contain
more than 75 percent of undiscovered technically recoverable oil and
gas resources that the OCS is estimated to hold. It will, as the Outer
Continental Shelf Lands Act requires, represent a proper balance among
the potential for environmental damage, the potential for the discovery
of oil and gas, and the potential for adverse impact on the coastal
zone.
Two primary guiding principles underlie this Proposed Program.
First, the Proposed Program is designed to promote the diligent
development of the Nation's offshore oil and gas resources, which are
and will remain central to the Nation's energy strategy, economy, and
security. The Proposed Program is in alignment with the
Administration's energy Blueprint, which aims to promote the Nation's
energy security and reduce oil imports by a third by 2025 through a
comprehensive national energy policy that includes a focus on expanding
safe and responsible domestic oil and gas production.
Second, this Proposed Program is grounded in the lessons learned
from the Deepwater Horizon tragedy, which caused the deaths of 11
workers and resulted in the release of nearly five million barrels of
oil into the GOM. Since the Deepwater Horizon event, DOI has raised
standards for offshore drilling safety and environmental protection in
order to reduce the risk of another loss of well control in our oceans
and improve our collective ability to respond to a blowout and spill.
While offshore oil and gas exploration and development will never be
risk-free, the risk from these activities can be minimized and
operations can be conducted safely and responsibly, with appropriate
measures to protect human safety and the environment.
Based on these principles, the Proposed Program provides for lease
sales in six offshore areas where there are currently active leases and
exploration and where there is known or anticipated hydrocarbon
potential. This represents a regionally targeted approach that is
tailored to the specific needs and environmental conditions of
different areas in order to best achieve the dual goals of promoting
prompt development of the Nation's oil and gas resources and ensuring
that this development occurs safely and with the necessary protections
for the marine, coastal and human environments. This approach accounts
for the differences between different areas--including differences in
current knowledge of resource potential, adequacy of infrastructure to
support oil and gas activity, accommodation of regional interests and
concerns, and the need for a balanced approach to our use of natural
resources.
Therefore, the Proposed Program in the GOM is designed to be
commensurate with the maturity of the infrastructure necessary to
support offshore oil and gas activity, including infrastructure for
spill containment and response, as described below. I would also like
to emphasize that OCS leasing should not be ``one size fits all,'' and
consideration of lease sales in the Beaufort and Chukchi Seas will be
specifically tailored to those regions. The traditional area-wide
leasing model that has been used in the Western and Central GOM is not
appropriate for the Arctic, and BOEM is working to develop alternative
leasing strategies specifically for the Arctic in order to focus
potential leasing on areas that have significant resource potential
while also mitigating the impact of offshore oil and gas activity on
the unique Arctic environment and its subsistence resources. I will
address our regionally-tailored approach to offshore oil and gas
leasing under the next Five Year Program below.
Gulf of Mexico
Of the 15 lease sales included in the Proposed Program, 12 are in
the GOM, where infrastructure is unparalleled and the oil and gas
resource potential is best understood and known to be most prospective.
The GOM currently supplies more than a quarter of the Nation's oil
production, and both current and ongoing evaluation of offshore
resources in the GOM is extremely sophisticated, contributing
significantly to industry's and BOEM's understanding of this region's
oil and gas potential. Moreover, the infrastructure supporting the oil
and gas industry, to bring resources to market and to respond in the
event of an emergency, is the most mature and well developed in the
GOM. Therefore, the Proposed Program schedules regular, area-wide lease
sales in the Western and Central GOM throughout the Five Year Program.
The Proposed Program also includes lease sales gauged to accommodate
anticipated industry interest in the portion of the Eastern GOM that is
not currently subject to congressional moratorium. Other areas in the
Eastern GOM are not included in this Proposed Program because they are
under a congressionally-mandated leasing moratorium until June 30,
2022.
Alaska
The Proposed Program schedules one sale each in the Beaufort and
Chukchi Seas, deliberately set late in the Program, as well as a
special interest sale in the Cook Inlet if industry demonstrates
sufficient interest. With respect to the Cook Inlet Planning Area, BOEM
published a Request for Interest in the Federal Register on March 27,
2012 to gauge industry interest in a potential lease sale in that area
under the next Five Year Program. The period to respond to that Request
for Interest closes on May 11, 2012.
The schedule with respect to the Beaufort and Chukchi Planning
Areas is designed to allow for the development of a leasing approach
that is appropriate for these Arctic areas and fully considers their
resource potential, their specific environmental needs and
sensitivities, concerns related to Native Alaskan culture, and the
reliance of many Arctic communities on ocean resources such as marine
mammals and fish for subsistence. The later scheduling of the potential
sales in the Beaufort Sea and Chukchi Sea Planning Areas represents a
balanced and careful approach to leasing in the Arctic. This approach
takes into account the significant inventory of existing offshore
leases in the Beaufort and Chukchi Seas. Most important, this approach
is designed to allow time for further work in a number of critical
areas.
First, the schedule allows time for further scientific study and
environmental assessment of the Arctic. In June 2011, the United States
Geologic Survey issued its Evaluation of the Science Needs to Inform
Decisions on Outer Continental Shelf Energy Development in the Chukchi
and Beaufort Seas, Alaska, as requested by the Secretary of the
Interior. The report recognizes that a substantial body of scientific
work and knowledge exists with respect to the Arctic and recommends
areas of focus for ongoing and future study, as well as further
synthesis of existing scientific information from various sources
within and outside of the government. Moreover, this approach is
consistent with Executive Order 13580, which was issued by President
Obama in July 2011 and established a high-level Interagency Working
Group on Coordination of Domestic Energy Development and Permitting in
Alaska. This working group is chaired by the Deputy Secretary of the
Interior and is focused on facilitating coordinated and orderly
decision making in Alaska, including development and sharing of
scientific information in support of regulatory processes.
Second, the Proposed Program is specifically designed to ensure
that planning and designing lease sales in the Beaufort and Chukchi
Seas take into account any information about geology and resource
potential that may be developed as a result of exploration of current
leases in those areas. Exploration may provide valuable data for
defining the best areas for potential development and for assessing
reservoir characteristics such as volumes and pressures that are
central to ensuring that appropriate safety measures and spill response
resources are in place.
Third, as offshore exploration and development in the Arctic moves
forward, so too must the development of spill response preparedness and
infrastructure. Current spill response planning is focused on certain,
limited near-term proposed drilling operations in the Arctic OCS.
Longer term planning and infrastructure development are also necessary,
particularly if major oil deposits are found and producers seek to
engage in year-round production activities. Longer term planning is
another major focus of the interagency working group. The potential
evolution toward additional drilling activities in offshore waters in
the Arctic could raise significant additional complexities regarding
the availability of adequate response capability and infrastructure in
this difficult frontier environment. The Proposed Program provides time
for contingency planning and infrastructure development that is needed
to address these issues.
Atlantic
This Proposed Program does not include lease sales in the North-
Atlantic, Mid-Atlantic, and South-Atlantic planning areas based on, and
in alignment with, the principles that underlie the entire Program.
Many Atlantic states expressed concerns about oil and gas development
off their coasts. While an OCS development strategy announced in 2009
included the Mid- and South-Atlantic under consideration for potential
inclusion, a number of specific considerations supported the
Secretary's decision not to schedule lease sales in these areas under
this Proposed Program. Accordingly, BOEM is proceeding with a specific
strategy to address these considerations and support decision-making on
whether potential lease sales in the Mid- and South-Atlantic would be
appropriate in the future.
First, the oil and gas resource potential in the Mid- and South
Atlantic is not well understood and surveys of these areas are
incomplete and out of date. Prior to scheduling lease sales in these
planning areas, it is prudent to develop information evaluating the oil
and gas resource potential of these regions. Accordingly, BOEM is
moving forward expeditiously to facilitate resource evaluation in these
areas, including conducting a programmatic Environmental Impact
Statement (EIS) relating to seismic surveys in the Mid- and South-
Atlantic. BOEM announced on March 28, 2012 the publication of the draft
EIS and has just concluded a series of public hearings across the Mid-
and South-Atlantic states. Second, there are complex issues relating to
potentially conflicting uses, including those of the Department of
Defense, which should be addressed so that any potential future leasing
activity in these areas is designed appropriately. Finally, while
evaluation of the resource potential of the Mid- and South Atlantic
regions moves forward, so too should analysis and planning regarding
the additional infrastructure necessary to support potential oil and
gas activities, including spill response resources.
Pacific
Areas off the Pacific coast are not included in this Proposed
Program. This approach is consistent with Section 18 of OCSLA, which
gives priority leasing consideration to areas where the combination of
previous experience; local, state, and national laws and policies; and
expressions of industry interest indicate that potential leasing and
development activities could be expected to proceed in an orderly
manner. The Proposed Program specifically seeks to accommodate the
recommendations of governors of coastal states and local government.
The exclusion of the Pacific Coast is consistent with state interests,
as framed in an agreement between the governors of California,
Washington, and Oregon signed in 2006, which expressed their opposition
to oil and gas development off their coasts. Western states have
continued to voice these concerns.
Finalizing the 2012-2017 OCS Oil and Gas Leasing Program
The Proposed Program, released in November of 2011, led to a
significant outpouring of public interest. BOEM received over 280,000
comments during the 90-day comment period that followed the release of
the Proposed Program. These comments came from a variety of sources,
including affected states and local governments, including Native
Alaskan villages and associations; congressional members; Federal
agencies; the energy industry; non-energy industries, including small
businesses; public interest and environmental groups; and the general
public.
In addition to receiving written comments, BOEM held a series of
public hearings in GOM states, Washington D.C., and across Alaska's
North Slope. I personally presided over a number of these hearings--
including a number of the hearings in Alaska, which provided an
invaluable opportunity to hear directly from native communities about
their needs and concerns, and to learn from their traditional knowledge
about the environment, marine mammal populations, and other natural and
cultural resources. BOEM is committed to integrating this critical
information into the scientific and environmental analysis that informs
our decision-making.
My agency takes this input very seriously, and we are working hard
to consider the feedback we received and to integrate comments into our
Proposed Final Program, as you will see in the coming months.
Conclusion
BOEM is working to help secure our energy future by contributing to
an all-of-the-above energy strategy, including safe and responsible
development of our conventional energy resources on the OCS. Mr.
Chairman, thank you again for the opportunity to be here today to
discuss the Bureau's effort in creating an oil and gas leasing program
that will safely and responsibly reduce our dependence on foreign oil
and create jobs through the development of these important energy
resources. I am happy to answer any questions that you or the Committee
may have.
______
Response to questions submitted for the record by Tommy P. Beaudreau,
Director, Bureau of Ocean Energy Management, U.S. Department of the
Interior
Questions from Chairman Hastings:
1. In your testimony, you alluded to a solicitor's opinion supporting
the ability of Bureau of Ocean Energy Management to issue a
Notice of Sale and take other steps to move forward with lease
sale plans prior to the final enactment (under Section 18 of
OCSLA) of the upcoming 5-Year Plan, which as you clarified in
testimony will not complete its 60 day Congressional review
prior to July 1, 2012. Please provide the Committee with the
full documentation of that opinion and any other support for
the Bureau's opinion that moving forward with a sale without
having a final plan in place can occur.
Response: On February 10, 1986, then-Solicitor Tarr issued
Solicitor's Opinion M-36954, 93 I.D. 125; 1986 LEXIS 10, which
concludes that the Department of the Interior may engage in pre-sale
procedures for a lease sale before the approval of the five-year
schedule on which it is listed. Therefore the Department can notice
this fall's Western Gulf of Mexico lease sale before the Five Year
Outer Continental Shelf Oil and Gas Program has been finalized. We have
routinely issued the proposed notices of sale for a program's first
sales prior to the finalization of a program, going back to the first
Five Year Program issued in 1980 and this practice is consistent with
the requirements of the OCS Lands Act. I also want to clarify a
statement made during the hearing that this would be the first time the
July 1 date has not been met for finalizing a program. The Five Year
Program for 1987--1992 was finalized after July 1, 1987. As will be the
case with the upcoming Five Year Program, this had no effect on the
lease sale schedule.
2. In testimony, you mentioned a letter that you had received from the
Department of Defense expressing significant concern over
offshore drilling in certain areas of our nation's OCS. Please
furnish the Committee with a copy of that letter. In addition,
can you update the Committee steps you have taken to address
the concerns raised by the Department?
Response: Attachment 1 is an April 30, 2010, letter from the
Department of Defense to the Director of the then-Minerals Management
Service. The letter provided DoD's review of the Preliminary Revised
Five Year Program for 2007-2012.
The Proposed Final Five Year Program for 2012-2017 does not include
areas off the Atlantic coast for leasing. The Bureau of Ocean Energy
Management is pursuing a specific strategy for the Atlantic that is
focused on expediting efforts to facilitate updated resource evaluation
to support future leasing decisions. This includes completing an
environmental review that could support approval of new seismic and
other survey activity in the Mid- and South Atlantic as early as 2013.
BOEM continues to work with DoD and others to identify and resolve
potential conflicts that have been identified in this region.
3. Can you define for the Committee the differences between the
position of the Department of Defense with regards to lease
sale 220 as expressed in the question above and the responses
that the Bureau received from the Department of Defense during
the development of the 2007-2012 OCS plan that included the
Virginia sale area in the 2007 plan when the Defense Department
agreed to the sale inclusion in the plan?
Response: There is no difference between the position of the DoD
with regard to Sale 220 and its comments concerning the Mid-Atlantic
area. DoD expressed concerns over the lease sales in the Mid-Atlantic
throughout the preparation of the 2007-2012 Five Year Program, as
indicated in Attachments 2 (April 10, 2006, letter on the February 2006
Draft Proposed Five Year Program) and 3 (November 27, 2006, letter on
the August 2006 Proposed Five Year Program). As noted in the response
to the previous question, DoD's April 30, 2010, letter on the
Preliminary Revised Five Year Program for 2007-2012 presented its
analysis of possible oil and gas activities in the area.
4. Can BOEM provide to the Committee an estimate of the amount of
undiscovered technically recoverable resources in the Southern
California OCS Planning Area in lease blocks that currently
remain undeveloped, but are accessible from existing developed
lease blocks using modern technological advances?
Response: The longest reach well in the Pacific OCS Region is
slightly greater than six miles, therefore BOEM estimated resources
within six miles of existing platforms. BOEM estimates of potential oil
and gas resources located within 6 miles of existing Santa Maria Basin
and Santa Barbara Channel OCS platforms range from about 146 million
barrels of oil and 130 billion cubic feet of natural gas for Contingent
Resources (defined below), to about 650 million barrels of oil and
1,090 billion cubic feet of natural gas for Undiscovered Resources
(also defined below).
To add perspective to these numbers, BOEM expects the production of
the remaining reserves of the producing Pacific OCS fields to be about
307 million barrels of oil and 667 billion cubic feet of natural gas.
As noted above, two categories of resources were identified and
assessed: Contingent Resources, and Undiscovered Resources. These
categories are distinguished by the level of uncertainty of both the
existence and volume of recoverable oil and gas of the postulated
accumulations.
Contingent Resources consist of accumulations that have been
discovered by drilling, but where certain factors prevented commercial
development of the accumulation. Based on our level of knowledge, this
category can be considered informally as ``probable resources.''
Undiscovered Resources consist of resources postulated to exist on
the basis of geological and geophysical information, but not yet
drilled and discovered. This category can be considered informally as
``possible resources.'' The estimated volume of Undiscovered Resources
is less certain than the volume of Contingent Resources.
Questions from Rep. Hanabusa:
1. Several of the official reports on the Deepwater Horizon spill
noted the need for increased understanding of our oceans,
including assessments of baseline environmental conditions. The
Gulf Coast Ecosystem Restoration Task Force report specifically
noted the need for a robust data collection regimen. In light
of the budget pressures facing your agency, how does the FY
2013 budget baseline support environmental data collection
activities? Is the Department of the Interior considering
persistent, unmanned vehicles to enhance these data collection
efforts?
Response: The increases requested in BOEM's Fiscal Year (FY) 2013
Budget consist of $700,000 for Environmental Studies.
In each fiscal year, the majority of the Environmental Studies
Program's budget supports data collection activities and generates the
scientific information needed to support decision making for the
Bureau. A list and description of all environmental studies proposed
for consideration in FY 2013 are contained in the BOEM Environmental
Studies Development Plan, which is available on the BOEM website at
http://www.boem.gov/uploadedFiles/2013-
2015_Studies_Development_Plan.pdf. The approved studies list for FY
2013 will be available on the BOEM website in the near future. BOEM has
requested an additional $700,000 for high-priority baseline
characterization and monitoring studies.
The use of autonomous underwater vehicles is a topic of much
discussion within the federal and academic research communities, and
BOEM is a highly active participant in these discussions.
2. At the recent Offshore Technology Conference, Dr. Watson discussed
the importance of the offshore oil and gas industry adopting
innovative technologies to improve spill response
capabilities.'
What role does your agency play in the development and adoption of
these technologies?
Response: The Bureau of Safety and Environmental Enforcement,
through the Oil Spill Response Research Program, evaluates industry
innovations in spill response technology and uses these evaluations in
the Oil Spill Response Plan review process. Frequently, these
evaluations are conducted at Ohmsett--the National Oil Spill Response
and Renewable Energy Test Facility (www.ohmsett.com). Ohmsett is a
unique oil spill response research test facility located at the U.S.
Naval Weapons Station Earle, Leonardo, New Jersey which is managed by
BSEE and operated by a contractor.
With an increased budget allocation for oil spill response since FY
2011, BSEE has initiated a development project to utilize ultrasound
technology to determine the effectiveness of subsea dispersant
applications by measuring oil droplet size in the immediate vicinity of
the subsea release. Additionally, BSEE is examining possibilities for
modifying conventional dispersants to accommodate the dispersion of
emulsified oil. In FY 2012, BSEE awarded funding for research and
development projects geared toward advancing technology to enable
detection and mapping of oil under ice, as well as subsea containment
systems.
All research that is not deemed proprietary is published on the
BSEE web site and is thus publicly available to inform science and
promote innovations in mechanical and alternative response
technologies.
BSEE cannot endorse specific products, but requires operators to
show that they have under contract the appropriate response equipment
to respond to a worst case discharge scenario from one of their
facilities. BSEE has recently funded a research project to assess
planning standards for offshore operations and will use the data to
establish new policies that will promote the use of the best available
technology, thus incentivizing the development, acquisition, and use of
newer technologies that promise greater recovery or treatment
efficiencies in offshore environments.
BSEE and BOEM are members of the Interagency Coordinating Committee
on Oil Pollution Research, a committee mandated by the Oil Pollution
Act of 1990 in order to coordinate research activities, disseminate
research findings, prepare National research priorities, and report to
Congress on completed research as well as plans. BSEE staff also
participate in the National Response Team Scientific and Technical
Subcommittee, providing yet another venue for sharing information on
research, coordinating interagency research programs, and establishing
policies on the use of new technologies.'
Is the Department of the Interior considering the use of unmanned
maritime platforms to allow immediate detection of and response
to oil spills?
Response: Offshore facilities are already equipped with safety
devices that can detect drops or spikes in pressure, changes in flow
rates, and other variables that can be indicators of system upsets or
leaks, and, based upon these variables, are equipped to shut down
affected production systems or pipelines as needed. These safety
systems are subject to routine inspection by BSEE staff and are
effective in immediately activating block valves and/or subsurface
safety valves to stop oil flow at the source. Immediate detection and
abatement is thus already built into offshore safety systems.
BSEE has participated in a pilot program with the National Oceanic
and Atmospheric Administration on the use of satellite imagery for the
detection and delineation of oil spills in offshore waters and has also
funded research on other remote sensing devices that can be deployed on
fixed wing aircraft.
Questions from Rep. Tonko:
1. Mr. Beaudreau, I have several follow-up questions regarding the
time and investment required to develop oil and gas resources in the
Arctic, and the potential challenges and risks associated with expanded
development of oil and gas resources in the region. Is the current
infrastructure, including facilities the Trans-Alaskan pipeline, that
supports production and distribution of oil from Prudhoe Bay sufficient
to support additional safe oil and gas production and distribution from
leases in the Beaufort and Chukchi Seas?
' Are the potential environmental impacts of any additional
infrastructure that may be needed to support development and
distribution of oil and gas resources from these two areas
included in the impact evaluation done by the Bureau?'
What are the estimated amounts of private and government investment
in additional infrastructure that would be required to support
development of these resources and to ensure that it is done
safely including the infrastructure required to support
additional personnel working the industry who would be based in
the area?'
You indicated in your testimony before the Committee that there is a
significant inventory of existing offshore leases in Beaufort
and Chukchi Seas. How many of these are currently being
development?
Response: BOEM does not have jurisdiction over onshore pipelines,
and it would be difficult to project future infrastructure needs at
this time--given significant uncertainty regarding future activity
levels and the need to account for findings from any near-term
exploration. However, BOEM actively coordinates with agencies across
the Federal government with jurisdiction over issues related to long-
term infrastructure planning. This is an important area of focus for
the Interagency Working Group on Coordination of Domestic Energy
Development and Permitting in Alaska, established by executive order in
July 2011 and chaired by the Deputy Secretary of the Interior. BOEM
will continue to factor new information and projections into the
environmental and economic analyses that support leasing decisions.
There are 670 current leases offshore Alaska. A complete list of
current leases is available on BOEM's website at: http://www.boem.gov/
uploadedFiles/BOEM/Oil_and_Gas_Energy_Program/Leasing/Regional_Leasing/
Alaska_Region/detailed_active_leases.pdf. Of the 670 current leases, 19
are currently active--including those covered by proposed or
conditionally approved exploration plans. Current information regarding
the status of current exploration plans on existing leases is also
available on BOEM's website at: http://www.boem.gov/About-BOEM/BOEM-
Regions/Alaska-Region/Leasing-and-Plans/Plans/Index.aspx.
2. The U.S. is not the only country interested in expanding oil and
gas production in the Arctic. A recent report by the largest
insurance company, Lloyd's of London, ``Arctic Opening:
Opportunity and Risk in the High North'', predicts the Arctic
region is likely attract significant investment over the next
decade especially in the oil and gas, mining, and shipping
industries. The report also points out unique risks and
challenges associated with expansion of these activities in the
Arctic region, and the need to develop strategies to address
them. The report also notes there are major differences between
regulatory regimes, standards and governance across the Arctic
states, and that some spills or accidents that may occur will
impact more than one nation's resources.'
As the Bureau is developing its policies to govern oil and gas
exploration in the OCS, are we also working with other nations
through the Arctic Council to ensure that exploration and
development occurring in other Arctic nations will not place
communities and resources in Alaska at undue risk?
Response: The Department, acting through BSEE, is a leader in the
work of the Arctic Council on spill prevention, preparedness and
response, including development of the Arctic Offshore Oil and Gas
Guidelines and Guidelines for In-Situ Burning, an Arctic-wide
instrument for Emergency Prevention, Preparedness and Response, and
other projects. Examples of work with other Arctic nations include
shared research between the U.S. and Canada in spill response in the
U.S.-Canada Northern Oil and Gas Research Forum. Results of these
studies, assessments, programs, as well as our experience in offshore
Arctic operations, are valuable to Arctic nations. Our active
participation in the Arctic Council and communications with other
northern nations complement efforts within the Federal government to
ensure readiness to respond in the event of an oil spill.
Questions from Rep. Markey:
1. Mr. Beaudreau, the Department recently reached an agreement on the
exploration and development of oil and natural gas reservoirs along the
maritime boundary between the United States and Mexico in the Gulf of
Mexico to remove uncertainties regarding the development of oil and gas
resources in the area. This agreement will allow for the development of
nearly 1.5 million acres of the Gulf containing as much as 172 million
barrels of oil and 304 billion cubic feet of natural gas, according to
the Department. The Department will soon be submitting legislation to
Congress relating to the Transboundary Agreement. Why is legislation
action needed by Congress and what would happen to the possibility of
developing these substantial resources should Congress not act? When
does the Department anticipate leasing and development would occur in
these areas?
Response: On Monday, February 20, 2012, the Agreement between the
United States of America and the United Mexican States Concerning
Transboundary Hydrocarbon Reservoirs in the Gulf of Mexico was signed
by U.S. Secretary of State Hillary Clinton and Mexico's Foreign
Minister Patricia Espinosa at a meeting of the Group of 20 nations in
Los Cabos, Mexico. The Agreement was approved by the Mexican Senate on
April 12th. Legislation is needed to enable the United States to fully
comply with the agreement and the Administration looks forward to
working with Congress.
The main area of interest is in the Perdido Fold Belt area of the
Alaminos Canyon Protraction Area, in the Western Gulf of Mexico
Planning Area about 225 statute miles off the coast of Galveston Texas.
To date, no transboundary reservoir has been discovered by drilling,
but there are 8 active U.S. leases adjacent to the maritime boundary
and a few dozen additional leases within 10 miles of the boundary.
Shell operates the Perdido Hub production facility 7 to 8 miles from
the maritime boundary, with the capacity to produce 100,000 barrels of
oil per day and 200,000 cubic feet of gas per day.
2. Director Beaudreau, how does the fact that the United States has
not yet ratified the Law of the Sea treaty affect our ability
to lay claim to oil and gas resources in areas such as the
Arctic or the Gulf of Mexico where we share maritime boundaries
with other nations? Is industry less willing to make
investments to access oil and gas resources unless a Nation has
had their territorial claim approved by the Law of the Sea
Commission on the Outer Continental Shelf, as evidenced by the
fact that the American Petroleum Institute, the International
Association of Drilling Contractors, and the National Ocean
Industries Association, along with many other industry trade
groups support ratifying the Law of the Sea? Does the
Department have estimates for the amount of oil and natural gas
that could be accessed if the United States ratified the Law of
the Sea treaty and was able to resolve territorial claims in
the Arctic or in the Gulf of Mexico?
Response: The U.S. has the world's second longest coastline, so we
benefit greatly from the Convention's favorable provisions on offshore
natural resources. Only as a Party to the Convention can the United
States fully secure its sovereign rights to the vast resources of our
continental shelf beyond 200 miles from shore (the ``extended
continental shelf''), an area likely to be at least 385,000 square
miles and potentially extending beyond 600 nautical miles off the coast
of Alaska. The Convention provides the needed international recognition
and legal certainly regarding shelf areas beyond 200 nautical miles
that will allow oil and gas companies to attract the substantial
investments needed to extract these far-offshore resources. The energy
resources contained in the U.S. extended continental shelf are believed
by many to be significant, potentially equaling billions of barrels of
oil and trillions of cubic feet of natural gas.
3. In explaining the decision to keep the Atlantic off the table in
the proposed 2012-2017 OCS Oil and Gas Leasing Program, BOEM
cited ``lack of infrastructure to support oil and gas
exploration and development, as well as spill preparedness and
response.'' Drilling in the Arctic comes with these same
challenges on an even greater scale. Please explain the
Department's decision to include new lease sales in the Arctic
Ocean in the new plan despite the clear lack of infrastructure
and spill response capabilities.
Response: The region-specific strategies reflected in the Proposed
Final Five Year Program's approach to offshore areas across the OCS are
designed to take into account current and developing information about
resource potential, the status of resource development and emergency
response infrastructure to support oil and gas activities, recognition
of regional interest and concerns, and the need for a balanced approach
to our use of the Nation's shared natural resources.
In the Arctic, current spill response planning is focused on
certain, limited near-term proposed drilling operations. Longer term
planning and infrastructure development are also necessary,
particularly if major oil resources are found and producers seek to
engage in year-round production activities. As offshore oil and natural
gas exploration under existing leases moves forward, so too must near-
and long-term planning with respect to infrastructure, including spill
response preparedness. Potential, single sales in the Beaufort and
Chukchi Seas are deliberately set late in the program, in part to
provide time for the contingency planning and infrastructure
development needed to address these issues.
______
The Chairman. Thank you very much, Director Beaudreau, for
your testimony. We will now begin the question period, and I
will recognize myself for five minutes.
The offshore drilling plan that you are about to complete
originated in 2008, which is nearly 4 years ago. And that plan
was originally proposed to begin on July 1, 2010 to be the
2010-2015 plan. That plan has had repeated delays. And now you
are working on a new plan for 2012. But it now appears that
that deadline, as I alluded to in my opening remarks, will not
be met on July 1st, because of the 60-day requirement. Now,
that is the first time, as I also mentioned in my testimony,
that that deadline has not been met by any administration.
So, my question to you, then, when will the new deadline
that was July 1st now be, in order to satisfy the 60-day
requirement of notice to Congress?
Mr. Beaudreau. Thank you, Mr. Chairman. Just to be clear,
the current plan under which we are holding lease sales--we
held a lease sale on the western Gulf last November under the
current plan, we are holding a central Gulf sale on June 20th
under the current plan----
The Chairman. I understand.
Mr. Beaudreau [continuing]. Does not expire until the end
of June.
The Chairman. I understand. I am talking about the new
plan.
Mr. Beaudreau. Right. So there is a plan in place. The new
plan, which covers 2012 through 2017, will be issued by the
Department of the Interior, the EIS completed, which takes into
account the effects following the Deepwater Horizon oil spill
only two years ago, and is a major consideration in the
development of our current plan. The EIS will be complete, and
the program will be issued by the Interior Department before
the expiration of the current plan, which is June 30th of this
year.
The Chairman. So, June 30th--and so then, the 60-day clock
for us, then, starts on June 30th. Is that correct?
Mr. Beaudreau. We will issue on or before June 30th. It
will be delivered to the Hill. There are some mechanics, and
then the congressional review period under OCSLA will begin at
that time.
The Chairman. So June 30th--and so that means that the end
of August is when the 60-day review period would apply. Is that
correct?
Mr. Beaudreau. Approximately, depending on the mechanics.
And there are no lease sales anticipated during that period.
And so there is absolutely no consequence or significance to
the timing of the issuance of this plan. The first sale--which,
again, is consistent with the traditional rhythm of alternating
lease sales in the Gulf of Mexico--is scheduled for November or
December, later this year.
The significance of having a plan in place is under OCSLA
you can't have a sale unless the plan is in place and approved
by Congress, or has gone through that process. We are not in
jeopardy of postponing any sales as a result of the issuance of
our plan.
The Chairman. Well, depending on the timing of that, then,
let me just ask this question. Do you have an opinion that you
can notice a sale before this plan is complete?
Mr. Beaudreau. Yes. We are going through that process right
now. For example, in the Cook Inlet, we have already issued
request for industry interest, whether they would be interested
in a sale in the Cook Inlet under the new plan, assuming that
plan is approved and goes forward.
And so, the machinery----
The Chairman. But my observation was, do you have an
opinion that you can notice a sale prior to this plan being
completed?
Mr. Beaudreau. I believe we can go forward----
The Chairman. I can understand the interest. I am sure
there is a lot of people that have an interest. I am talking
about the procedure of noticing the sale.
Mr. Beaudreau. Yes. We can go through all the mechanics
based on the Secretary of the Interior's approval of the plan,
go through all the mechanics that we need to, the regulatory
process that we need to, in anticipation of this sale.
Now, if for some reason Congress delays the finalization of
the program, and we don't have a plan----
The Chairman. That hasn't happened, to my knowledge. So,
assuming everything goes well--my question to you is this. The
timing of the final plan kicks in a 90-day requirement for the
notice of a sale. And so, you said you think it is going to be
the end of June. That means that the end of August is when the
final plan would be. Then your 90-day kicks in after that.
So, my question is, can you proceed with the notice of a
sale prior to the finalization of the plan?
I understand everybody is going to be looking at this. It
doesn't come out of mid-air, saying, ``OK, all of a sudden we
want to bid.'' I understand the interest. I am talking about
the legal requirement of noticing before a final plan.
Mr. Beaudreau. Yes. Based on the Secretary of the
Interior's issuance or approval----
The Chairman. Would you share that with the Committee, that
opinion?
Mr. Beaudreau. I have shared that opinion now, but----
The Chairman. Well, but--I mean there has to be some
written statement, I guess, in order for that.
Mr. Beaudreau. Yes.
The Chairman. If you could share that with the Committee, I
would very much appreciate it. All right.
My time has expired. I recognize the gentleman from
Massachusetts.
Mr. Markey. I thank you, Mr. Chairman, very much. As I said
earlier, Director Beaudreau, the bipartisan BP Spill Commission
led by William Reilly, who was the EPA Administrator under
George Bush I, has given the Congress a D for its legislative
response to the BP spill.
Now, the Department, DoI, has taken a number of reforms and
put them in place in response to the spill. But there are many
other reforms which you do not have the actual authority to
implement. So, my question to you is, would you support
codification of your reforms, so that they are not just
temporary, but permanent, so that those safety reforms that you
have already put on the books are not rolled back in the
future?
Mr. Beaudreau. Yes. And I believe we, the Interior
Department and the Administration, have been very clear in our
support for that type of legislation. And to be clear--and I
believe the Commission, in its report card, said this as well--
there have been attempts in Congress to pass that sort of
legislation. Unfortunately, they have been stymied for various
reasons. But we continue to be supportive of that----
Mr. Markey. But you do want that, your reforms, made
permanent?
Mr. Beaudreau. Yes.
Mr. Markey. And next, an increase in the liability cap to
ensure that oil companies are held fully responsible for their
spills. You do want to see a legislative----
Mr. Beaudreau. Yes.
Mr. Markey [continuing]. Increase in the liability----
Mr. Beaudreau. Yes. We have done what we can,
administratively, to increase that liability cap. We are
continuing to explore ways to effect that administratively. But
legislation would be extremely helpful.
Mr. Markey. And creating a dedicated funding stream paid
for by the oil industry for offshore regulators, that area has
been woefully funded, historically. You do agree that that
should be put in place?
Mr. Beaudreau. Yes. Secure funding for both of the new
Bureaus established following the Deepwater Horizon oil spill
is a major priority to ensure that offshore oversight remains
vigorous, and that safety enforcement remains vigorous.
Mr. Markey. And you also want 80 percent of the Clean Water
Act fines to go to the Gulf States. Is that correct?
Mr. Beaudreau. Consistent with legislative proposals that
the Administration----
Mr. Markey. We did not pass that legislation, either. And
you also support an increase in the civil penalties for
companies who violate the law, so that it is a real financial
deterrent. Is that correct?
Mr. Beaudreau. Absolutely. And again, we have done what we
can, administratively. But legislative solution to increase
those penalties, again, would be extremely helpful.
Mr. Markey. Again, none of that has happened. None of that
legislation has yet been brought up by the Majority in order to
ensure much greater safety for drilling in the United States.
And, as you know, in 2010 the Democrat-controlled House passed
that legislation that would have effectuated those kinds of
reforms so that they would be on the books permanently as a
deterrent to the kind of nefarious activity that BP and the
other companies were engaging in in the Gulf of Mexico.
And Director Beaudreau, the Majority has alleged that
offshore drilling has slowed. But according to industry
analysts, there are now nearly one-third more floating rigs
operating in the Gulf than there were before the BP spill. And
by the end of the year there are scheduled to be nearly 50
percent more rigs operating in the Gulf.
So, that is a sign, is it not, of success, that now the oil
industry is viewing the Gulf of Mexico has a place where they
want to drill if there is going to be upwards of 50 percent
more drilling rigs by the end of this year than there were
before the BP spill?
Mr. Beaudreau. I meet frequently with operators to discuss
their forward-looking plans, strategic plans for activity in
the Gulf of Mexico. And I do this for a lot of reasons,
including to have an understanding so that we can align our
resources with those plans.
Industry, in my view, is extremely optimistic about the
Gulf of Mexico, and is making aggressive capital plans to
expand exploration and development in the Gulf of Mexico, all
being done more safely now, in light of the heightened
standards that we put in place since the Deepwater Horizon
spill. That is good news.
Mr. Markey. No, and I think it is a big success story for
President Obama. He has cleaned up a mess that had been
created, put in place the safety standards--although it would
be great if the Republican Congress would pass the additional
safety standards, especially the penalties on oil companies, we
just wish that they would do that so that, going forward, even
more rigs--that is, it is not just a 50 percent increase in the
total number of rigs that were there during the Bush
Administration, which is what Obama has done, but an even
higher number.
And I know that is President Obama's goal. And I hope that,
you know, this Congress would recognize that and praise him for
his excellent work in restoring confidence by the oil industry
in the--drilling possibilities in the Gulf of Mexico.
The Chairman. The time of the gentleman has expired. The
Chair recognizes the gentleman from Louisiana, Mr. Landry.
Mr. Landry. Thank you, Mr. Chairman. Mr. Beaudreau, I would
like to commend you for reaching out to the industry. What you
just said earlier is a testament from what I hear back home.
And I appreciate you working on solutions to get the people of
South Louisiana and the Gulf Coast back to work.
Do you have a production goal that you all are going to try
to set for the new Five Year Plan?
Mr. Beaudreau. No, we do not. As the Government, we do not
set production goals for private industry. We have projections,
based on the resource potential and anticipated levels of
activity that we believe is the potential there. But actual
production over time, especially over a long period of time,
depends on a lot of different factors, including prices and
other factors.
Mr. Landry. And, of course, and one key component of that
would be actual expiration, actually drilling test wells. Well,
you know, first of all, doing seismic drilling test wells,
trying to see what the reserves are.
My concern is that the general manager for the Chinese
national offshore company last week in Houston made a comment
that their goal in the South China Sea was to have a 159-
reserve replacement ratio in 2011. And that is a very
aggressive replacement of minerals in that area and to that
country. I mean I don't know that we have that type of
replacement going on in the OCS.
And so, I wanted to mention that to you because there has
been a lot of criticism about speculation and speculators. And
I believe that the President, if anyone is affecting
speculators, it would be the President. Because when you take
off the table potential reserves, or the ability to determine
what other areas of the OCS have the potential for finds such
as the Gulf of Mexico, then you affect a speculator, because he
recognizes that there is going to be a restriction in supply.
And we know right now, because of a downturn in the
European economy which could affect the globe, we are seeing a
depression of all prices. So we do know that supply and demand
affects the price. And if there is anyone that is guilty of
causing speculators to raise the price, I believe that it is
the Administration, by taking off the table the ability of the
United States to adequately tap the supplies that are out
there.
And so, I wish you would take that message back up the
chain of command. Because I think if we went out and we did
some good seismic data out in the Mid-Atlantic, we would find
that there are great potentials out there. I mean 20 years ago
they said the Gulf of Mexico was dead. That is what the
Government estimates were. And think about where we are today.
And so, I just would appreciate if you would take that back
to the Secretary, and let them know that these Five Year Plans
are important, not only to Americans for lowering their costs,
but also to the markets, as well.
Thank you, Mr. Chairman. I yield back.
Mr. Beaudreau. May I respond?
Mr. Landry. Sure.
Mr. Beaudreau. Thank you. Let me just respond by making
clear that the Five Year Plan--and we designed it specifically
for this reason--does include the areas that we know have the
most abundant resource potential, that those areas are well
understood, there is good seismic in those areas, and good
resource potential, and we understand that potential.
With respect to other areas such as the mid and south
Atlantic, while we don't schedule lease sales, we understand
and agree with what you just said about the need to develop
additional scientific information about the resource potential
in those areas. It is for that reason that my agency issued a
programmatic EIS, a draft programmatic EIS, last month
regarding geological and geophysical surveys in the mid and
south Atlantic. We aim to finish that EIS by the end of this
year, after receiving public comment, which would put us in a
position to permit seismic surveys in the mid and south
Atlantic as early as next year to develop that type of
information, and to supplement our knowledge of the resource
potential in that area.
And so, we are moving forward with that. That is the
Administration policy.
The Chairman. The time of the gentleman has expired. The
Chair recognizes the gentleman from Michigan, Mr. Kildee.
Mr. Kildee. Thank you, Mr. Chairman. Director Beaudreau,
last week BP unveiled a 500-ton spill containment device that
is designed to be flown to any part of the world at a moment's
notice. BP's containment kit would be flown on 5 huge cargo
planes with wing spans approaching the size of a football
field, as well as 2 Boeing 747 planes.
Director Beaudreau, has the Department evaluated the
efficiency of BP's new containment device, which the company
claims can operate at depths of 10,000 feet and withstand
pressures up to 15,000 pounds per square inch?
Mr. Beaudreau. One of the major reforms coming out of the
Deepwater Horizon oil spill was we established the requirement
that companies operating in U.S. waters and deep water in the
U.S. need to have the ability to cap a well. That didn't exist
prior to the Macondo accident, as we are all painfully aware.
And those systems were improved and developed on the fly to
respond to that incident, and took nearly three months. That is
not the case any more. So any deep water operation in U.S.
waters must have a system.
Now, the Secretary of the Interior has leaned forward very
hard on the international front to encourage the development of
these systems around the world, any place where deep water
activity is happening, because the risk potential is there, as
well.
And so, speaking for myself, I applaud BP's efforts to make
a mobile system available globally for its operations in order
to respond in the event of an accident in the North Sea, off of
Africa, any place else that these multinational oil companies
have interests and are drilling. I think it is extremely
important.
We have not--BSEE, our counterpart agency, as far as I
know, has not tested that system. But again, I applaud BP for
developing this technology and making it available for their
operations, globally.
Mr. Kildee. Has the Department evaluated whether BP would
be able to deliver this containment device to remote locations
such as the Arctic?
Mr. Beaudreau. With respect to----
Mr. Kildee. It is a huge device, huge combination of
devices. Is it deliverable, practically?
Mr. Beaudreau. We have not analyzed the delivery of that
system you are referring to. But with respect to potential
operations in the U.S. Arctic, such as Shell's operation that
is contemplated for this summer, we are requiring specific
containment systems to be on hand in the Arctic, not dependant
on, you know, mobile deployments or anything else, but to have
a tested containment system on hand if those operations go
forward. So they are not dependent on the logistics and
mobilization that BP describes with respect to that system.
Mr. Kildee. Would you comment on the Department's
evaluating BP's new device if it could be used in U.S. waters?
Mr. Beaudreau. Under our regulatory regimes, under our
requirements, we are not dependent on the mobilization of
equipment such as the system that you are describing that BP
has developed. We require those systems to be on hand already,
where the drilling is. That is our policy for operations in the
U.S. waters, including the Arctic.
Mr. Kildee. Should all oil companies be required to have
such a device?
Mr. Beaudreau. Operating in deep water, in light of the
risks of deep water? I believe so, yes.
Mr. Kildee. Thank you. Thank you very much.
The Chairman. Would the gentleman yield?
Mr. Kildee. Happy to yield to the Chairman.
The Chairman. I am very pleased that Director Beaudreau
applauded BP, and I will take the opportunity to extend that to
the whole industry. Because over a year ago we had a Committee
meeting in Houma, Louisiana, where in testimony, the industry
had come together, and to a direct question that I asked, if
something similar to a BP spill had happened, would they be
able to respond to it, in both cases, two independent--one
witness represented a consortium of a number of companies and
another was a private company--said that they would be able to
respond and have it capped in a timely manner--a very timely
manner--like less than, I think, within the 60 days.
And so, I appreciate the line of questioning that the
gentleman from Michigan presented, because I have said right
from the get-go on this that the industry has a responsibility
to respond. And I appreciate the Director's remarks in that
regard, and I appreciate the gentleman from Michigan for
bringing that to attention.
The Chair recognizes the gentleman from Texas, Mr. Gohmert.
Mr. Gohmert. Thank you, Mr. Chairman. Thank you, Mr.
Beaudreau.
Let me just follow up on that. With regard to the Gulf
Coast, you had indicated that you are utilizing more strict
scrutiny with regard to safety violations. You know, we came to
find out through hearings and evidence that was obtained that
British Petroleum had had nearly 800 egregious safety
violations out there in the Gulf. Was there any other operator/
driller in the Gulf that even came close to having that many
egregious violations?
Mr. Beaudreau. With respect to the safety records of
companies in general, I don't know the answer to that question.
I will say that----
Mr. Gohmert. You don't know if anybody has got up to 800
safety violations, but you are using strict scrutiny to check
them out?
Mr. Beaudreau. Yes----
Mr. Gohmert. They don't seem to be in concert with each
other.
Mr. Beaudreau. Our standards, particularly the heightened
standards in place following the spill, apply to all operators
in the U.S.----
Mr. Gohmert. And that, the new standard, would apply even
to companies--as far as I know, British Petroleum was the only
operator in the Gulf Coast that was about to endorse the
Administration's cap and trade bill, and were negotiating for
the big rollout of that endorsement at the very time Deepwater
Horizon blew.
So you are saying the new policy now, even if a company is
willing to endorse cap and trade and Obamacare, you are still
going to scrutinize them closely. Correct?
Mr. Beaudreau. Absolutely.
Mr. Gohmert. All right.
Mr. Beaudreau. Politics has nothing to do with our safety
regime following the spill----
Mr. Gohmert. Well, I don't think you can honestly say that
when Deepwater Horizon blew.
But let me take you over to the Southern California Coast.
We know that from 30 years ago, information existed that there
was perhaps 5.74 billion barrels of oil just off the Southern
California Coast. We know there are some old rigs in the area
that are offshore that are producing.
You know, you had said that your plan opens up 75 percent
of undiscovered resources. So let me ask you. Since our old--
our analysis of the Southern California oil is so old, if it
turned out there were seven or eight billion barrels of oil off
the coast of Southern California, would you then be willing to
allow permits in that area?
Mr. Beaudreau. Our resource estimate for Southern
California is that there are 5.32 billion barrels----
Mr. Gohmert. Well, that wasn't my question. So if you
would, just answer my question. I am asking you a hypothetical.
You say you are going after resources. If it turned out that
there were information that came out that there were seven or
eight billion barrels of oil, and it was reliable information,
would you then open up that area to permitting for drilling?
Mr. Beaudreau. So resource potential is one factor. Another
factor that we must consider under OCSLA is the interest of the
States off of whose coast this activity would be----
Mr. Gohmert. OK. So it is OK to mess up the Louisiana
Coast, but Southern California, being Democratic, is much more
delicate to allow to be----
Mr. Beaudreau. There has been consensus from all of the
West Coast States for decades, across Administrations,
Republican and Democrats----
Mr. Gohmert. All right. Well, that is not what I am asking.
I am asking if there were seven or eight billion barrels of
oil, and it could be established by a clear evidence, would you
then open that area up?
Mr. Beaudreau. There are nearly six billion barrels that we
believe exist there. That is one factor. Other factors are the
States' interests in those----
Mr. Gohmert. If there were 10 or 15 billion barrels of oil,
would you open that area?
Mr. Beaudreau. We would still have to consider other
factors, including----
Mr. Gohmert. If there were 20 to 50 billion barrels of oil,
would you open that area up for the good of our own national
security?
Mr. Beaudreau. I am describing the OCSLA process. Resource
potential is one issue. The fact is, the resource potential----
Mr. Gohmert. So you can't say, even if there were 50
billion barrels, that you would open that area, that that would
be so persuasive that you--and you knew how many billions of
dollars we were sending to people that are funding terrorism,
you would still say it is too politically indelicate to risk
smudging the California beaches like we did the Florida
beaches.
Mr. Beaudreau. I am saying I always respect the interests
of the states that are involved. That is an important factor
for us to continue, and we will always consider that.
Mr. Gohmert. Well, that is apparent. Thank you. I yield
back.
The Chairman. The time of the gentleman has expired. The
Chair recognizes the gentleman from New Jersey, Mr. Pallone.
Mr. Pallone. Thank you, Mr. Chairman. I wanted to say right
from the beginning that I have great concerns with the
Department of the Interior's Five Year Plan, and the path it
has placed on us.
In particular, I strongly oppose the plan to move forward
with seismic testing in the Atlantic Ocean. And my opposition
includes any preparatory steps, including seismic testing in
our waters off the Atlantic Coast. The time and resources that
the Department of the Interior is allocating to seismic testing
could be better used on higher priorities that will allow us to
move away from dirty fuels and faster achieve U.S. energy
independence through renewables, such as wind and solar power.
New Jersey's beaches, like those up and down the Atlantic
Coast, are incredibly important, not only to residents, but
also for countless visitors. They are the primary driver of the
New Jersey tourism economy that supports nearly 500,000 jobs
and generates 38 billion in economic activities each year.
Seismic testing is the first step in the direction of opening
up the Atlantic Coast to oil drilling.
In the two years since the BP spill, none of the proposals
recommended by the National Commission on the Deepwater Horizon
Oil Spill and Offshore Drilling have been put in place. And
most of the drilling off the Atlantic will be in deep water,
which is at least as deep as the--or even greater, I should
say--than with the BP oil spill. And the BP spill, in my
opinion, the technology doesn't exist, and the protections are
not available to prevent another BP spill from happening off
the coast of the Atlantic.
I am simply asking--which I have many times in the past--
that the Department halt the process that will lead to drilling
off the coast of the Atlantic. There isn't enough potential in
the Atlantic to offset the potential damage to the tourism and
economy, and the jobs it generates at the off-the-Atlantic
Coast.
Recently the Department held a public listening session in
Atlantic City, New Jersey on the process leading to seismic
testing. Local environmental organizations, fishermen, divers,
and people from all backgrounds were there to oppose this
decision. And I really call on the Department to earnestly
listen to the concerns and opposition.
I don't want to get into the comments you made about the
West Coast, but it is certainly true that on the Atlantic Coast
there is overwhelming opposition to offshore drilling. And I
don't really understand how you can say that, you know, you are
listening to the people off the Western Coast and saying there
shouldn't be drilling there, yet when we do the same thing off
the Atlantic Coast and say we shouldn't have drilling, that
somehow it is going to be allowed here. It makes no sense to
me. I think the decision that led the Administration to say
that the West Coast is off the table should be the same for the
Atlantic Coast.
I have a couple of questions in the two minutes that I have
left here. So let me just say that, as I said, we should be
prioritizing the development of clean, renewable energy. Yet
the Department is clearly placing considerable funds and
resources toward drilling in the Atlantic that will not yield
any reduction in price at the pump for years to come.
How much will it cost BOEM and the Department of the
Interior to manage this program over the next 10 years? What is
the cost of, you know moving forward with the seismic testing
and other things that would lead to drilling off the Atlantic?
Mr. Beaudreau. Yes, thank you for those comments. And I do
want to be clear that we do respect the interests of the States
along the Atlantic, as well. There are no lease sales planned--
--
Mr. Pallone. No, I understand that. But look, to suggest
that you can do it in Virginia or Delaware and that it is not
going to impact New Jersey is absurd. I mean we know that the
BP spill, which was off of Louisiana, was impacting the coast
of Florida, which is much further away than from Virginia to
New Jersey. So no use going down that road. It doesn't----
Mr. Beaudreau. Well, and that is why, despite the fact that
New Jersey, strictly speaking, it doesn't border the planning
areas we were talking about, we did have a hearing in New
Jersey, out of consideration that any activity may----
Mr. Pallone. No, I appreciate that. But could you answer my
question? The cost.
Mr. Beaudreau. The cost? We don't conduct these surveys
ourselves. And so the costs for our bureau relate to the
environmental assessment of the potential impacts these surveys
may have.
Mr. Pallone. Well, --could I ask you, Mr. Chairman, if they
could get back to us in writing with--to respond to the
question about the costs? I would appreciate that.
The Chairman. If the gentleman would yield, this is
typical. And I would ask--there are further questions--and this
is a very legitimate question--and so I would ask that the
Department do respond in due time with that.
Mr. Beaudreau. Yes, absolutely.
Mr. Pallone. Let me just ask one more thing, because I only
have 30 seconds.
The DoI has said that these seismic surveys will be needed
for renewable energy siting. But explain how knowing what is
buried miles below the seafloor helps us to understand where
to--I don't understand how this seismic testing helps you with
renewables. How is that the case?
Mr. Beaudreau. It doesn't. The EIS covers geological and
geophysical surveys, geological being bottom surveys. The EIS
relates to that. Seismic surveys, I agree with you, they don't
have relevance to the siting of renewable----
Mr. Pallone. Mr. Chairman, let me just express my
opposition to one more thing. We had requested extending the
deadline for the 60 days comment period, and that was denied. I
wish you would reconsider that.
I mean this plan took your office two years to come up
with, and yet you ask us to, you know, to turn around the
comments in two months. I really don't understand why they
didn't--they rejected the request to extend the comment period
beyond the 60 days. And if you could reconsider that, I would
appreciate it.
Mr. Beaudreau. I will take that into consideration.
Mr. Pallone. Thank you. Thank you, Mr. Chairman.
The Chairman. The time of the gentleman has expired. The
Chair recognizes the gentleman from Pennsylvania, Mr. Thompson.
Mr. Thompson. Thank you, Chairman. Good morning, Director.
Director, in some of the past hearings you suggested that
the reason the Administration is prohibiting drilling in new
areas is because you are focusing on areas where there are
known resources.
Let me tell you a story about my home state, Pennsylvania.
Ten years ago the Federal Government thought that the Marcellus
Shale Formation contained 1.8--1.925 trillion cubic feet of
natural gas. You know what the Federal Government believes we
have today? 84.2 trillion cubic feet. That is 44 times the
amount that the Federal Government ``knew'' we had, and that
was in 2002. If you look at other analyses, the size of
Marcellus is over 500 trillion cubic feet.
Now, the data you are using to come up with these
assessments for areas off the coast of Virginia were--quite
frankly, where they want to drill--is from the late 1970s and
early 1980s, at best. I mean that is the era of the floppy
disk.
Mr. Beaudreau. That is true.
Mr. Thompson. The advancements since then have been
amazing. Major places like the Marcellus Shale have changed the
face of natural gas in our country, and gas--natural gas prices
are a sixth of what they were in 2008. And I can tell you
firsthand that it has generated thousands of well-paying jobs
in Pennsylvania, as well as provided very affordable energy.
Now, as we see in Pennsylvania, when areas are made
available, generally production will happen. So, a couple of
questions.
Do you believe that this plan that opens no new areas for
offshore drilling is going to keep our Nation competitive in
the coming years?
Mr. Beaudreau. I do. This plan keeps areas open that have
established resource potential, that we know have significant
resource potential----
Mr. Thompson. So, if you could, tell me what has changed
since 2002, when known resources--you used that term again in
just your current statement, and I referenced that before. I
mean the Government was only off by a factor of 44 in 2002. So
what has changed that would make me believe that the Federal
Government has any--has done a better job of going in and
assessing what actual resources are owned by the American
taxpayers?
Mr. Beaudreau. Going to your earlier point about how dated
the geological information is in the mid and south Atlantic, I
agree with you completely. It is 30 years old. We don't know--
we don't have modern data about the magnitude of the resource
or the location of the resource. It is for that reason that we
are moving forward with this EIS, to allow seismic surveys to
go forward in the mid and south Atlantic, so that we can
develop that scientific information.
Mr. Thompson. Well----
Mr. Beaudreau. That is exactly why we are doing it.
Mr. Thompson. I appreciate that. But let me speak to the
practical parts of that. You are going to allow them to go
forward. I mean do you really think operators are going to go
out on that limb and--given the performance, especially the
past number of years--to invest in seismic activity conducting
that, when that land is not open to--and I don't see any
prospects of the Federal Government at this point, or this
Administration, opening that land to actually production? Why
would somebody make that kind of a business decision?
Mr. Beaudreau. I believe that the oil and gas industry has
every incentive to develop that scientific information about
the resource potential for exactly the reason you describe.
Find out what is there. Find out if it is worth the investment.
When you are talking about drilling, you are talking
about--especially in Deepwater, you are talking about the
investments of hundreds of millions, billions of dollars. These
seismic surveys, compared to that, are relatively inexpensive.
And I believe industry has every incentive to move forward with
them. We have had expressions of interest from seismic
contractors to do just that. We need to have the EIS completed
so that we can make sure that this activity is done in an
environmentally responsible way, including marine mammal
protections. But we are moving forward with that----
Mr. Thompson. Well, I----
Mr. Beaudreau [continuing]. For exactly the reasons you
described.
Mr. Thompson. You know, the best predictor of future
performance is past performance. I don't see that in the
actions of locking that, and making that out of bounds, I don't
see where that message is coming through. And so I really doubt
that seismic activity is going to occur. And it is the Federal
taxpayers that are the losers. Let's not just talk about
energy, but do you know how much money in taxes the oil and gas
industry pays to the Federal Government?
Mr. Beaudreau. I don't know the specific number. I know
that there are----
Mr. Thompson. It is obviously a significant amount. Now,
granted, this is onshore and offshore, but it is about $87
million a day. So, just from that point, when we are in a
budget situation that we are in today--so--but appreciate your
candid responses.
Thank you, Chairman.
The Chairman. The time of the gentleman has expired. The
Chair recognizes the gentleman from New Jersey, Mr. Holt.
Dr. Holt. Thank you. Let me just say a word about drilling
off the Atlantic Coast. It doesn't make sense for all sorts of
reasons, not the least of which is strong public opposition to
it. And so, it does not make sense to be proceeding with the
preliminaries now.
I would also join in the request that the comment period be
reopened. The plan to move forward with seismic exploration is
not necessary. Nothing is going to be happening soon, and it
shouldn't be.
Now, the draft EIS for seismic surveys, you know, is out
there. It is my understanding that some of my Republican
colleagues have proposed legislation--and this is in keeping
with what Mr. Thompson was asking about--proposed legislation
to provide taxpayer subsidies for the oil companies to conduct
this seismic work. Do you see any reason for that at all?
Mr. Beaudreau. No.
Dr. Holt. Any reason for additional taxpayer subsidies to
oil companies to do this?
Mr. Beaudreau. No, no.
Dr. Holt. Good. Well, thank you. Recently Representatives
Waxman, Bobby Rush, Ranking Member Markey, and I sent a letter
to the Department having to do with enforcement of air
standards for drilling activities in the Arctic Ocean. The
other signers, Representatives Waxman and Rush, are involved in
legislative oversight of the Clean Air Act, which doesn't apply
exactly here.
And so, we are asking that the Department apply all
existing regulations in a way that would protect the air
quality if this were done in other locations. When can we
expect a reply from the Department on this?
Mr. Beaudreau. It takes more time to respond to letters
that are as thoughtful as yours, frankly. It touched on a lot
of the same issues that we are considering internally, and I
found it to be an extremely helpful letter.
And so, we are lining up some of the suggestions in that
letter with our work that is ongoing with respect to how to
implement this authority that was bestowed upon us last
December. We will get back to you promptly. I want to provide
you with a thorough response that reflects the thoughtfulness
that went into the letter.
But let me just say this. We are--and we talked a little
bit about this in my last appearance before this Committee--we
are taking an approach on air permitting in the Arctic that is
very focused on ensuring that the highest evaluation of air
quality and the highest application of air quality standards is
made use of in the Arctic. That includes through our regs, it
includes through NEPA, it includes our close work with the
operator and with the EPA, to make sure that there is no
slippage in the evaluation of air quality. And we are also
working on how we evaluate air quality in the Gulf of Mexico,
as well. So these are significant issues for us.
Dr. Holt. I appreciate hearing you say that. The flattery
in saying that we gave you a thoughtful letter----
Mr. Beaudreau. Was sincere.
Dr. Holt [continuing]. In no way diminishes our
determination to get from you a prescription for strong
protection of the air.
Offshore wind leasing, I think, requires a different
approach from the purely financial auction approach that has
been used for offshore oil and gas leasing. And I am very eager
to see this move along. We have only a couple of seconds, but
considering the fact that offshore wind doesn't actually exist
as an industry, what can you say about the role of States in
determining the feasibility of the projects and the ability to
go ahead with leasing?
Mr. Beaudreau. Yes, and especially on the economic terms,
we are working very closely with States, including New Jersey,
to make sure that our auction process lines up with the States'
goals and the States' incentives with respect to standing up
offshore wind projects. And so we are quite focused on that, we
are quite engaged on it. I meet with Commissioner Martin on
this issue.
We are also focused on making sure that once leases are
issued, that analysis and development actually happens. And so,
I know that is a concern that many States have, that these
leases may lie fallow. And so we are developing lease terms to
ensure diligence in the development of those leases, as well,
so that these projects come to fruition.
Dr. Holt. Thank you. And thank you, Mr. Chairman, for your
generosity.
The Chairman. I will note that, for future reference.
[Laughter.]
The Chairman. The Chair recognizes the gentleman from
California, Mr. McClintock.
Mr. McClintock. Thank you. I would like to continue the
line of questioning that Mr. Thompson started, to which you
informed us that the Administration is confining its
exploration activities, its development activities, to those
areas where we have known reserves. Did I hear you correctly?
Mr. Beaudreau. The Five Year Program, which is a leasing
program, covers areas where there are active leases.
Mr. McClintock. Right.
Mr. Beaudreau. We are pursuing strategies with respect to
other areas, such as the mid and south Atlantic, that do not
currently have active leases.
Mr. McClintock. But again, if we are confining it to areas
where we know we have resources, we are not looking for new
resources.
You know, I remember in the 1960s we were told that we were
going to run out of petroleum by the 1980s. I remember the dire
warnings of Jimmy Carter that we were going to be out of oil by
the turn of the century. And the funny thing about that is we
kept looking for oil where we didn't know it was, and we kept
finding it. If we had confined our development to areas of
known reserves back in those days, we would have run out of
oil. But we kept looking in the areas where we didn't know.
That seems to be the difference between this and prior
Administrations, is when the President said we are--he is
directing his Administration to open more than 75 percent of
our potential offshore oil and gas resources, we began
scratching the surface of that and found out that is the areas
where we have already explored. It excludes the entire Atlantic
Coast, the entire Pacific Coast, nearly all of the eastern Gulf
of Mexico, which have been little explored. If the
Administration would allow leasing in those areas, exploratory
work could proceed, and we would have a much better sense of
what is out there, which is probably a lot more than the
Administration assumes.
The fact remains that, under these policies, about 85
percent of our offshore areas remain off limits. And what my
constituents want to know of this Administration is what in the
world are you people thinking?
Mr. Beaudreau. So, let me give you an example of just what
you described, that through the development of scientific
information, through the development of technology, areas that
once upon a time were predicted to be limited or near
exhaustion actually have tremendous potential. And that is the
central Gulf of Mexico.
I meet with operators regularly----
Mr. McClintock. But why is that an argument not to look
everywhere else within our vast borders?
Mr. Beaudreau. The central Gulf of Mexico is--and it is
funny to talk about it this way, but this is the way the
companies talk about it--is a burgeoning frontier for oil
development, because of developments in technology-related----
Mr. McClintock. Well, pardon me, but the oil companies make
money by producing lots of oil. They produce lots of oil
because they go out and look for it and they find it. And it
seems to me that is what this Administration is standing in the
way of.
You know, those who know me know I have very few nice
things to say about the Bush Administration. But at least it
did one thing. It passed on to the Obama Administration a
thriving U.S. oil and gas industry. The industry was investing
record sums in new exploration and development, which meant
record investments in our communities, as well as huge streams
of revenues for our States and Federal Government.
When this Administration took office, this industry was
poised to produce more American energy than we had at any time
in our past. And the Federal Government stood as a ready
partner to provide reliable, predictable, regulatory structure,
and an ambitious agenda of opening public lands and waters to
develop for the public's benefit. That is a pretty stark
contrast with what we have three years later.
This Administration has sharply reduced the acreage
available for offshore leasing. It has increased the length of
the regulatory process. It has removed any shred of certainty
that that process once held. And that is just for offshore
development. When you look at what the Department of the
Interior is doing to promulgate new regulations for onshore
development, where our shale reserves alone dwarf those of
Saudi Arabia, you begin to realize what damage this
Administration's policies have done to our energy situation.
I mean, can people honestly say that our Nation is more
energy-independent today than it was four years ago? I think
not.
Mr. Beaudreau. I think the facts bear out that we are, in
fact, more energy independent, through the development of
domestic resources' increased efficiency and other factors. We,
in fact, are.
And if you look at the production estimates, especially
offshore--onshore, as well, but offshore is my area--EIA, all
objective observers, anticipate burgeoning production offshore,
as well, a large part coming out of the Gulf of Mexico. It is
the crown jewel of the U.S. OCS.
Mr. McClintock. Because that is about the only area that
you are allowing American enterprise to develop. And that is an
outrage.
Mr. Beaudreau. And it is being done more safely than it
ever has been before, as well.
The Chairman. The time of the gentleman has expired. The
Chair recognizes the gentleman from New York, Mr. Tonko.
Mr. Tonko. Thank you, Mr. Chair. Director Beaudreau,
welcome.
In your response to a letter from Ranking Member Markey
sent to the Secretary earlier this year regarding the December
Gulf of Mexico lease sale, you state--and I quote--``While
there are well over 100 companies qualified to operate on the
OCS, only a relatively small subset of them has the technical
capability and financial wherewithal to manage or operate deep
water projects while meeting the environmental and safety
standards required. In addition, the costs in deep water limit
the number of projects any one company will invest in and
undertake.''
In the December lease sale on the western Gulf, just 20
companies bid on 191 offshore tracts covering 1.1 million
acres. More than 3,700 tracts covering 20 million acres
received no bids at all. ConocoPhillips, ExxonMobil, and BP
combined to submit 71 percent of the bids. This is typical. The
oil industry does not even bid on most offshore areas that are
offered to them.
If oil companies apparently cannot handle the volume of
valuable areas currently being offered, do you think that they
could quickly and effectively develop new areas where there is
little or no existing infrastructure, such as off the East and
West Coast, as the Majority has proposed?
Mr. Beaudreau. I do not. I believe, for a number of
reasons, including the current economic environment and the
prices of oil, that they are going to go where they know the
resource is, and they are going to develop that resource as
quickly as possible.
Mr. Tonko. And, Director, as Mr. Markey asked earlier,
right now oil and gas companies hold roughly 26 million acres
offshore on which they are not producing oil. Last year the
Department concluded that there was nearly as much oil and more
natural gas under these idle leases than there is off the East
and West Coasts. The Department has implemented a number of
reforms designed to incentivize more timely production
offshore, such as establishing and increasing a rental rate for
leases that are not producing, and shortening the length of
leases.
What is going on here, when oil companies already are not
producing oil on an area offshore that is the size of the State
of Kentucky, but are saying that we need to open up new areas
in the Atlantic and Pacific, and risk those coastal economies?
Mr. Beaudreau. It is hard for me to speculate on what the
companies' interests are, or what they believe is in their
interests. Let me just say that--and this is part of the reason
why we have raised the minimum bid--if we open an area up for
sale, and we don't have robust information about the resource
potential, or we are selling it for too cheap, the companies
will purchase those leases. Why not? Hold them in their
inventory.
The strategy this Administration is taking is to make areas
available where the resource potential is there, where we know
companies can bring the resources to market, provide fair value
to the American taxpayer, and for other areas that may be more
marginal, or there may be less information about. Keep that in
the people's inventory, develop information about it, and then
consider leasing only when we have that scientific information.
Mr. Tonko. Thank you. Director Beaudreau, you stated in
your testimony that the central GOM lease sale will include
provisions to protect biologically sensitive resources,
mitigate potential adverse effects on protected species, and
avoid potential conflicts associated with oil and gas
development.
Would you elaborate on these provisions, and just how do
they differ from requirements for other lease sales?
Mr. Beaudreau. So, in light of Deepwater Horizon, we had
to, and this was the right call. We had to take a step back,
and we had to evaluate what the impacts of that oil spill may
have been, develop some baseline information about what those
impacts may have been, before moving forward with the sales.
So, we did supplemental EISs in both the western and the
central Gulf to inform the decision as to whether to go forward
with the lease sales.
Now, of course, we have. But it was only after doing an
analysis of the best available information of what the impacts
of those spills might have been.
Mr. Tonko. Thank you. And what infrastructure is available
now, and what additional infrastructure is required to support
safe oil and gas development in the Beaufort and Chukchi Seas?
Mr. Beaudreau. So, Shell has pending applications to move
forward with drilling in the Beaufort and Chukchi Sea this
summer. One of the key systems that they must have online and
must be tested by our counterpart agency, BSEE, before it goes
forward, is a devoted capping and containment system in those
theaters before any activity may go forward. That
infrastructure has to be established on a case-by-case basis at
this point.
Part of our strategy on the Five Year Plan is to consider
if any additional lease sales are to be held in the Arctic,
what established infrastructure--rather than working on a case-
by-case basis, what established infrastructure would be
appropriate for the Arctic.
Mr. Tonko. Thank you. Thank you, Mr. Chairman.
The Chairman. The time of the gentleman has expired. The
Chair recognizes the gentleman from South Carolina, Mr. Duncan.
Mr. Duncan of South Carolina. Thank you, Mr. Chairman. And
what we see out of this Administration, it appears that they
are wanting really to handcuff or hold the reins back on
American energy independence. I go back to the days in the
latter years of the Bush Administration, when I served on the
Five Year Planning Subcommittee under MMS, and a precursor to
your agency, and the discussions that went on during that time
about the next Five Year Plan, the input that we had to get
from the outside groups, the citizens, before we made the
recommendation to the whole OCS Planning Committee of what we
thought the next Five Year Plan should look like.
And I know it is a long, convoluted process to pick those
areas that the Nation is going to say, ``You know what? We
believe we have the resources there. We need to put our efforts
there, we need to have a lease sale there, we need to allow the
exploration to happen there, we need to allow the production
there to meet the Nation's energy needs.'' And there is a lot
of input from the States, there is a lot of input from the
environmental groups during that process.
The delaying tactics of the Administration--if you look at
some of the information we were provided that goes from
chronological order from 2007 to current, and you see the
delaying tactics of a Five Year Plan, and even the court being
involved, as well, I am reminded of the words of Senator John
Kerry about 10 or 11 years ago when he said, you know, even if
we open up areas to exploration and drilling, and we started
drilling, it would be 10 years before those resources came
online to meet our energy needs. That was 10 years ago, pushing
11 years ago. Those resources would be online, providing
gasoline and hydrocarbon products to the Nation today. But yet
we keep delaying, and keep tying the hands.
I think the gentleman from California was exactly correct
in that we are finding more and more resources as we, as a
Nation, allow that exploration to take place.
Off the coast of South Carolina in the Atlantic Ocean there
hasn't been any seismic or exploration work done in at least 30
years. Probably longer. But you are going to make the
determination that there is probably not any resources out
there. And I am not saying today, I am just talking about over
the last--since the Bush Administration opened up the whole OCS
for exploration, we seem to hear from the Administration that,
``Oh, we don't believe there is any resources out there, so we
are not going to allow the exploration to take place, we are
not going to allow the lease sale, we are going to close these
areas that the Bush Administration--and Congress, I might add--
had opened up for energy exploration. Not necessarily
production, but the exploration side of it, to find out what is
out there.
So, the question I have--you said earlier that it was
fundamentally important to consider the opinion of the State
when you are crafting the future lease sales. And we see in
Virginia that Virginia's Governor, their General Assembly, the
bipartisan congressional delegation, all supported going
forward with a Virginia lease sale. And that was 220, I
believe. So why, exactly, were they kept out of your plan?
Mr. Beaudreau. There are a couple of reasons why we didn't
schedule lease sales at this time in the current Five Year
Plan. One is the need to develop exactly the type of seismic
scientific information that you described, both to inform the
magnitude of the resource, but also its location, so that if a
lease sale occurs in the future it is situated properly where
the resource is.
Mr. Duncan of South Carolina. But----
Mr. Beaudreau. The other major issue is there are major
concerns expressed by the Department of Defense about their
activity, which I know we all respect. Everybody on this
Committee respects the mission of the military in protecting
our shores and our country's interests. We need to work through
those issues with DoD.
Mr. Duncan of South Carolina. Let me ask you this, because
before you--and even the Obama Administration felt like it was
appropriate back then. That is why it was in the last plan. So
why is it inappropriate now? Why, all the sudden, is that
inappropriate?
Mr. Beaudreau. For the reasons I described. One, we need to
find out what the resource is. Two, we need to resolve the
conflicts with DoD. DoD, after the definition of the Sale 220
area, sent a letter to the Interior Department saying, ``We
have major issues with 80 percent of that area.'' How could we
go forward with a lease in that area encumbered by concerns
from the military? What would an operator even do with it?
So we are very serious about resolving those conflicts,
understanding what the resource potential is here. We haven't
kicked the can. We are moving forward with a concerted strategy
to develop exactly the type of information you described about
what is the resource potential, where is it, and can it be
developed in an unconflicted way. That is what our strategy is.
Mr. Duncan of South Carolina. It appears to us, as
Americans, that it is a delaying tactic before you have a lease
sale. And so my time is up, Mr. Chairman. But----
The Chairman. The time of the gentleman has expired. The
Chair recognizes the gentlelady from California, Mrs.
Napolitano.
Mrs. Napolitano. Thank you, Mr. Chair. And it is very
interesting. I don't have any areas that I have direct concern
with, but California has a white coast, a long stretch, and
listening to some of the comments of my colleagues makes me
wonder. If they had as many earthquakes as we do in California,
you expose them to seismic exploration--you know, those
tectonic plates do move--and conceivably we could have more
frequent, heavier earthquakes, or more--stronger than the 7.5
that we have had not too past.
There is very strong public opposition from all of the
Western Coastal states that I know. The Nation enjoys the
revenue that California produces, whether it is in
transportation, agriculture, the tourism. All of that has an
impact on what the rest of the Nation gets, so to speak. So, to
me, I am very sure that folks understand that they may--there
are leases offshore, I just don't know how many.
I would like to ask a question and be able to have a
response to all the members of this Committee of how many
current leases there are off the coast of California, Oregon,
and Washington. How many are active? How many have been taken
out but not put into effect? So that we have a better idea of
what is happening in that coast or not happening, for that
matter.
We do need to leave resources for future generations. We
can't just go in--and I am--he is--the gentleman was right, it
does take over 10 years for even just the beginning, from
determining where they can drill or how much they are going to
drill.
The opposition isn't for the drilling, it is for the
drilling. It is for the safety of the drilling for the spills
that are going to affect--maybe some of the other States like
to have the additional work, which is very, very commendable,
of the drilling, the revenue it brings in to the coastal
cities. And yet--Texas and Louisiana, they have enjoyed for
years, and I commend them. We just want to be sure they are
safe in the future, as we want to be safe in our area.
I am not sure whether I have really a real critical
question. But could you tell us, this Committee, the drilling
industry, how are they, the industry itself, how are they
responding to your drilling safety rules and the workplace
safety rules?
Mr. Beaudreau. Yes, I will say this. The industry has--
following the accident, Deepwater Horizon, the industry has
stepped up in a number of ways. While it is our requirement
that they have these systems, the industry invested tens of
millions of dollars into the development of sub-sea containment
systems that could respond to a blowout like Macondo and
Deepwater. Industry, through two consortia, have made that
investment. And they deserve all the credit in the world for
doing that. They have invested not only in the development of
the systems, but in ongoing readiness in the event that the
systems need to be deployed. They conduct drills, they conduct
testing, and we are continuing to oversee that and push them on
that. But industry deserves credit.
For the most part, industry--and it has taken time and it
has taken hard work, both on industry's side and on
Government's side, on our side, to promote compliance with the
new standards. And industry, in large part, has done that. And
that is the reason why we are seeing the increased activity in
the Gulf of Mexico that we have been.
There is increased activity. I anticipate that that
activity will grow even further. And deep water drilling will
be conducted more safely and more environmentally responsibly
than it ever has been before. Industry deserves its share of
credit for that.
Mrs. Napolitano. Thank you, Director. And having been born
and raised in southern Texas off of the shores of, well, Padre
Island, to be exact, and also being a Californian now and
taking my children over to the beaches, and sometimes finding
the pollution of tar on those beaches is not necessarily
something that anybody would look forward to. So, the more we
protect those coastlines and keep them clean and safe so that
it is not only recreation, but it is safe for the environment
and for the rest of the folks that want to be able to see it
stay clean.
I don't have any other questions. I may have some, and I
will submit them for the record. Thank you, Mr. Chair.
Mr. Beaudreau. Thanks.
The Chairman. The time of the gentlelady has expired. The
Chair recognizes the gentleman from Texas, Mr. Flores.
Mr. Flores. Thank you, Mr. Chairman. Thank you, Mr.
Beaudreau, for being here today. I have a few questions for
you.
First of all--and I have a statement that seismic activity
and oil and gas activities does not cause earthquakes. I need
to disabuse anybody of that notion.
Now, what is the definition of an area with known
potential, in the eyes of your agency?
Mr. Beaudreau. [No response.]
Mr. Flores. I mean you refer to that many times in your
report. You are making areas with known potential available.
What is the definition of that?
Mr. Beaudreau. So we do a resource evaluation of all the
OCS areas. And as I have described, there are varying amounts
of resource available in those areas. They are not all created
equally. The resource isn't spread evenly across the OCS.
Mr. Flores. OK.
Mr. Beaudreau. So the areas that are included within our
lease sale are areas where: A, have the most significant
resource potential; and B, there are active leases there.
Mr. Flores. OK.
Mr. Beaudreau. So, there have been exploratory drilling----
Mr. Flores. So my next question is there are areas that are
not included in your lease sale that do have known potential,
though, correct?
Mr. Beaudreau. That we have estimates around. And speaking
of the mid and south Atlantic, we have recognized and want----
Mr. Flores. Just yes or no. I mean the answer is yes,
right? There are areas that are off limits in your lease sale
plan that do have known resource potential.
Mr. Beaudreau. That we estimate have a certain degree of
oil and gas----
Mr. Flores. OK, thanks. Now, why do companies lease? I mean
they lease because they want to find oil and gas, right?
Mr. Beaudreau. Right. Presumably, yes.
Mr. Flores. OK. So, if there is an area that is in a lease
sale area that is available, but it is not leased--this is to
Mr. Tonko's point, who is not here--the reason they are not
leased is because the companies that would notionally lease
that area don't think there is anything but goat pasture there,
so they are not going to lease it. Right?
Mr. Beaudreau. As to specific decisions about leasing----
Mr. Flores. I will just answer it. The answer is yes. They
don't lease it because there is nothing there. It doesn't mean
that they are trying to inventory acreage, or hold acreage off
for some, you know, hidden reason.
Mr. Beaudreau. And I wasn't being pejorative about it.
There are----
Mr. Flores. No, I am just trying to be quick, because I
have only got a limited amount of time.
In the areas that are off limits, are we allowing any sort
of seismic data activity to go there? Seismic acquisitions, so
that we can determine with better fidelity what is available?
Mr. Beaudreau. Yes, that is our----
Mr. Flores. OK.
Mr. Beaudreau [continuing]. Specific strategy with respect
to the mid and south Atlantic.
Mr. Flores. OK. So we are allowing seismic activity. That
is good.
Mr. Beaudreau. We are trying to move forward in that
direction.
Mr. Flores. I applaud you for that. Eastern Gulf areas that
are currently excluded from the sale, do they have known
resource potential?
Mr. Beaudreau. We have resource estimates. The areas that
are not included in the eastern Gulf are currently subject to
congressional moratorium.
Mr. Flores. Correct. But there is--I mean--I an not trying
to--I am just saying they have known resource potential.
So we got in a jam and we wanted to drill and there was no
mandate--no moratorium, we could drill?
Mr. Beaudreau. If Congress took action in that area, we
would consider what to do there.
Mr. Flores. OK. The Atlantic. One of the questions--one of
the statements says that the reason you are not doing anything
in the Atlantic is because there is no infrastructure and no
containment. So this is kind of what comes first, the chicken
or the egg. How do you--how are you ever going to develop the
infrastructure if you never allow the leases to take place?
Theoretically, you know, when I was in the oil and gas
business, we would lease an area and then the infrastructure
would follow. So, you know, we are not going to have somebody
just plunk down the tens or hundreds of millions of dollars to
build the infrastructure or build the containment capabilities
if the lease is not available--I mean if you are not going to
put it in the plan, right?
Mr. Beaudreau. Yes. I want to be clear on that. What we say
in the plan is we need additional information about the
resource. We need to deconflict. While we are doing that, as a
matter of smart planning, let's think through and start talking
about what infrastructure--both to bring the resource to
market, but also to deal with the potential of an accident--
would have to be in place there, and to work with the States on
that.
Mr. Flores. OK. And Mr. Duncan covered my issue about, you
know, on one coast you listen to the Governors, on the other
coast you don't listen to the Governors.
Now, what are you doing in terms of deconflicting with the
DoD? I mean are you having substantive discussions, or just
say, ``OK, we have buried this baby for five years, we don't
have to worry about it''?
Mr. Beaudreau. No, I personally met with officials from DoD
a number of times----
Mr. Flores. OK.
Mr. Beaudreau [continuing]. On this issue.
Mr. Flores. OK. Very good. I will yield back the balance of
my time, and then I will have more questions later, if somebody
yields time to me.
The Chairman. OK. The gentleman yields back. The Chair
recognizes the gentleman from Tennessee, Mr. Duncan.
Mr. Duncan of Tennessee. Well, thank you, Mr. Chairman. And
I will yield my time to the gentleman from Texas, Mr. Flores.
Mr. Flores. Thank you, Mr. Duncan. What is the resource
potential off the Pacific?
Mr. Beaudreau. Our current estimates from November is--for
Southern California, 5.32 billion barrels of oil; central
California, 2.4 billion barrels; northern California, 2.08
billion barrels; and Washington/Oregon, .4 billion barrels.
Mr. Flores. OK, so it----
Mr. Beaudreau. All oil. Natural gas estimates is----
Mr. Flores. Right, OK. Substantial resource potential,
then. I mean has there been any conversation with the Governors
to talk about the impact on their economic activity that this
could have? The potential to help alleviate the energy resource
concerns from a--probably--you know, California probably, per
capita, uses more energy than anybody else.
So, I mean, are we having any of those discussions to say,
``Hey, you know, why don't we try to find a middle ground where
we can make some of these areas available for your own economic
benefit?'' I mean California's fiscal situation is a basket
case. I would think they would want to be looking at something
like this.
Mr. Beaudreau. Just to put those numbers in perspective,
though, to understand how they fit--you know, the central Gulf
of Mexico, for example, is 31 billion barrels----
Mr. Flores. I understand.
Mr. Beaudreau [continuing]. Of potential. So those numbers,
on their own, are less significant than if you compare them
with other regions.
Mr. Flores. I understand, but----
Mr. Beaudreau. With respect to the West Coast and the
Governors' offices there, yes. In the context of our evaluation
under the Five Year Plan and the EIS that we conducted with
respect to the Five Year Plan, there has been engagement with
the States on those issues. They expressed a point of view, as
representatives of their States, and we take that into
consideration.
Mr. Flores. OK. Back to Virginia for a minute, how long do
we think it will take to have--conclude the deconflict
conversations with DoD?
Mr. Beaudreau. I don't know. And it will require creative
thinking on both parties. I mean I will say this. The
Department of Defense has not been--the Department of Defense
has been cooperative on this, they really have been.
Mr. Flores. I assume that they----
Mr. Beaudreau. Yes. They have legitimate needs, legitimate
concerns. We all respect it. But they are not, you know,
putting us off. They are engaging on it. They are willing to
make accommodation where they can. So----
Mr. Flores. What----
Mr. Beaudreau [continuing]. I can't predict how long that
process will take. But I will tell you that I am pleased with
the constructive tone of the conversations.
Mr. Flores. I mean do we have a feel? Are we talking 1
year, 2 years, 10 years?
Mr. Beaudreau. I can't predict it, I am sorry.
Mr. Flores. I would think that shorter would be better than
longer. I mean, after all, the military is one of our biggest
users of fuels, and it is important to our national security,
as we go forward.
Mr. Chairman, I think that is all I have for today. I yield
back to Mr. Duncan, if he has any----
Mr. Duncan of Tennessee. No.
The Chairman. OK. The gentleman yields back his time.
Director Beaudreau, thank you very much for being here. And
as I stated earlier in response--kind of follow-up to what Mr.
Pallone--a lot of times there are questions that are--come up
after testimony, and they will obviously be submitted to you in
a very timely manner. And I ask your response be submitted also
in a timely manner.
Two other issues. One I covered on the solicitor's opinion
that you and I talked about in my line of questioning. If you
could just simply give us that solicitor's opinion, I would
very much appreciate it. And the other one is regarding the
Gulf of Mexico, the trans-boundary legislation that the
Administration is going to send up. One of the ironies of this
is that Secretary Salazar was somewhat critical of our not
acting on it--of course it hasn't been sent up. Now, I
understand we have our view and they have their view.
So, my question to you is when will that be sent up, and
can you tell us what likely will be in that legislation?
Mr. Beaudreau. Yes. It will be sent up very soon.
The Chairman. OK.
Mr. Beaudreau. It is going through final review. The
Secretary, obviously, is quite anxious to get it to you. And we
will do that very soon.
It is a straightforward piece of proposed legislation for
you to consider that simply codifies and implements the
agreement. And so we, in working with State Department and
others, try to craft the legislation to be as bare bones and
straightforward as possible, with an eye toward making it
easier for you to consider.
The Chairman. OK, very good. I appreciate that. And if you
could convey to the Secretary that, you know, we will pass
something when we get it, I--you get my point.
Mr. Beaudreau. I do.
The Chairman. OK. With that, if there is no other business
that comes before the Committee, thank you very much again,
Director Beaudreau, for being here.
The Committee stands adjourned.
[Whereupon, at 11:39 a.m., the Committee was adjourned.]