**OPENING STATEMENT OF**

**REBECCA WATSON**

**ASSISTANT SECRETARY FOR**

**LAND AND MINERALS MANAGEMENT**

**UNITED STATES DEPARTMENT OF THE INTERIOR**

**BEFORE THE**

**HOUSE GOVERNMENT REFORM COMMITTEE**

**SUBCOMMITTEE ON ENERGY AND RESOURCES**

**SEPTEMBER 14, 2005**

Chairman, members of the committee, I appreciate the opportunity to
discuss the role of the Department of the Interior in meeting America's
demand for natural gas.

I would first like to acknowledge our Gulf State communities. It is
difficult to comprehend the horrific impacts of Hurricane Katrina on so
many people in the Gulf of Mexico region. The Minerals Management
Service is part of the New Orleans family. Last week, 67 MMS employees
were unaccounted for. Today, we have located all but two individuals,
and every effort is being made to find them. All of us at Interior
extend our condolences to every individual impacted by Hurricane
Katrina.

Hurricane Katrina has dealt the Central Gulf of Mexico region, its
people, and the oil and gas industry a heavy blow, but we will recover.
MMS, from a satellite office in Houston, is working with industry to
assess damage, facilitate repairs, expedite critical business processes,
and resume full production of oil and gas on the Outer Continental Shelf
as rapidly as possible to meet the nation's energy needs.

The oil and gas produced from the Gulf of Mexico's Outer Continental
Shelf plays a major role in supplying our daily energy needs, accounting
for 29 percent of domestic oil production and 21 percent of domestic
[natural gas production](../Gas_production_federal.ppt). The future of
natural gas production in the Outer Continental Shelf lies in the
technically challenging frontier of deep shelf and deep water gas.

MAP: The map shows that Hurricane Katrina moved through a core area of
offshore operations. At its peak on August 30, 95 percent of daily oil
production and 88 percent of daily gas production was shut-in. As of
this morning, those shut-in numbers stand at 56 percent of oil
production and 37 percent of gas production.

Gulf of Mexico production facilities accounting for 90 percent of Gulf
production escaped significant damage. However, it is important to note
that critical onshore support facilities and infrastructure sustained
serious damage. The availability of these facilities will be a crucial
factor in the recovery of Outer Continental Shelf production.

Well before Hurricane Katrina, however, supplies of natural gas were
tight and getting tighter. Demand for natural gas is expected to
continue to increase dramatically both here at home and globally well
into the future.

The federal government plays a significant role in helping the nation
meet this growing demand. Thirty-five percent of domestic natural gas
comes from federal resources and more than 50% of undiscovered natural
gas is expected to underlie Federal lands -- onshore and in the Outer
Continental Shelf.

Accordingly, developing federal natural gas is a high priority of the
President's National Energy Policy and the recently enacted bipartisan
National Energy Policy Act of 2005.

Five Rocky Mountain basins hold the second largest resource of natural
gas after the Outer Continental Shelf. These onshore basins contain an
estimated 139 tcf of natural gas \-- enough to heat 55 million homes for
almost 30 years. More than half of these lands are public lands under
federal management.

With high natural gas prices, development interest is also high. For the
past several years, the Interior Department has been implementing a
balanced program to aggressively make available federal natural gas
resources and to require industry to develop those resources in an
environmentally responsible manner consistent with the laws Congress has
put in place.

CHART: As a result, the Bureau of Land Management issued more than
17,000 permits to drill over the last four years -- a 74 % increase from
the previous administration Natural gas production was up 17.4% during
the period 2001 -- 2004, when compared to the previous administration
(1997 -- 2000).

CHART: During the same time period, however, [pre-lease
protests](../COGA_RWW_protest_slide.ppt) rose 664 percent while lease
appeals were up 253 percent. These protests slow energy development by
delaying lease or APD issuance. Leases are held up while protests are
resolved; BLM staff works on resolving protests rather than processing
APDs.

High gas prices and high demand create high workloads from frequently
changing plans of development. Federal agencies are not as nimble as the
private sector at responding to this demand. Implementation of the
Energy Policy Act will enhance our ability to process oil and gas leases
and APD permits in a high demand environment.

The Act eliminates redundant processes and increases coordination
between agencies and Departments. It establishes strict timeframes,
requires development of best business practices, and authorizes pilot
offices for one-stop processing of permits in five Rocky Mountain States
where oil and gas activity is high.

As we work with Congress, one of the top priorities at the Department of
the Interior is to diversify supplies of energy while striking the right
balance between a high quality of life provided by a clean and healthy
environment and a high quality of life provided by an abundant supply of
clean, affordable energy. The comprehensive National Energy Policy Act
will help us achieve this. I look forward to answering any questions you
may have.