**STATEMENT OF DIRK KEMPTHORNE**

**SECRETARY OF THE INTERIOR**

**BEFORE THE SENATE COMMITTEE ON ENERGY**

**AND NATURAL RESOURCES**

**ON THE 2008 PRESIDENT'S BUDGET REQUEST**

**FEBRUARY 15, 2007**

It is a pleasure to appear before you today to discuss the President's
FY 2008 budget for the Department of the Interior. This is my first
appearance before this Committee since my confirmation hearings last
March. During my time in the Senate, I had the pleasure of serving with
eleven of the current members of this Committee. I considered you my
friends and colleagues then and hope to work with all of you in that
capacity now as we chart the future course for what I consider to be one
of the most interesting and important cabinet agencies: the Department
of the Interior.

Since becoming Secretary, I have traveled extensively in order to see
Interior at work and to talk with Interior employees. I have addressed
thousands of Interior employees. I have been impressed by the dedication
and experience of the talented and dedicated Interior workforce. Every
day, a Bureau of Indian Education teacher, a park ranger, a biologist,
geologist, naturalist, or land manager is making a difference to help
Interior fulfill its responsibilities.

Developing a budget for the Department of the Interior is an
extraordinary exercise. We have an extensive mandate that rivals just
about any governmental agency in its breadth and diversity -- and its
importance to the everyday lives of our citizens. Our 73,000 employees
live and work in communities across America and its territories. We have
2,400 field offices. We manage 145,000 assets -- second only to the
Department of Defense. Our work stretches from pole to pole from
wildlife refuges in the Arctic to scientific research at the South Pole.

Managing one in every five acres in the United States, we oversee land
and resources that stretch across 12 time zones from the Caribbean to
the Pacific Rim. The sun literally never sets on the Department of the
Interior. We have the third largest contingent of Federal law
enforcement officers, with 3,400 officers and agents. We oversee over
800 dams and irrigation projects. Interior-managed lands and water
generate one-third of the Nation's domestic energy supply. The
Department serves American Indians, including 561 federally recognized
Tribes, Alaska Natives, and our Nation's affiliated island communities.
We undertake research and provide information to understand the Earth
and assist us in the management of the Nation's water, biological and
mineral resources, and monitor all manner of natural hazards including
volcanoes, earthquakes, and landslides. We also work with States to
restore abandoned mine land sites and protect communities.

Our overall 2008 request for the Department of the Interior is \$10.7
billion. Taking into account the shift of funding for the Abandoned Mine
Land program from discretionary to mandatory, the budget is \$448.5
million, or 4.4 percent, above the 2007 continuing resolution spending
level. Our comparison throughout the 2008 budget is with the most recent
action taken by Congress to fund our bureaus and programs, specifically,
with the third Fiscal Year 2007 continuing resolution, which is
effective through February 15, 2007.

The 2008 budget is carefully crafted within the President's commitment
to continue to fund the nation's highest priorities while eliminating
the deficit in five years. The administration is on track to achieve
this goal.

At the heart of our budget are four major initiatives:

-   The National Parks Centennial Initiative to enhance National Parks
    as we approach their 100th anniversary in 2016;

-   The Healthy Lands Initiative, which will allow access to public
    lands for a number of uses and provide for energy for the nation
    while also protecting critical lands and habitat;

-   The Safe Indian Communities Initiative to combat the methamphetamine
    crisis on Indian lands; and

-   The Improving Indian Education Initiative that will enable Indian
    children to grow up in an environment that allows them to achieve
    their dreams.

#### The National Parks Centennial Initiative

The President's 2008 parks budget totals a historic \$2.4 billion. The
park operating budget, at \$2.1 billion, provides an increase of \$290
million over the continuing resolution spending level, the largest
increase in park operations funding ever proposed. This is \$258.3
million over the 2006 level and \$230 million over the President's 2007
budget for parks.

Last August, in honor of the 90th Anniversary of the National Park
Service, and with an eye on the upcoming centennial in 2016, President
Bush directed me to establish specific performance goals to help prepare
the national parks for another century of conservation, preservation and
enjoyment. In addition, the President asked that I identify signature
projects and programs consistent with these goals and that continue the
NPS legacy of leveraging philanthropic, partnership, and government
investments for the benefit of the national parks and their visitors.

The President's budget for FY 2008 sets the stage for the next 100 years
of our national parks. It includes the National Parks Centennial
Initiative, one of my highest priorities. This Initiative proposes up to
\$3 billion in new funds for the national park system over the next ten
years.

Within our operating budget increase, we propose a \$100 million
Centennial Commitment over 10 years, for a total of \$1 billion
dedicated to park operations. Our Centennial Initiative will also
inspire philanthropic organizations and partners to donate \$100 million
per year over 10 years to the National Park Service. The Centennial
Challenge Federal Fund will match all private donations up to an amount
of \$100 million. These Federal mandatory matching funds and
philanthropic contributions, together with the \$100 million annual
Centennial Commitment in discretionary funds for park operations, would
infuse up to \$3 billion into the park system over the next decade.

During the last five years, the NPS has built a strong foundation of
improving parks, with more than 6,600 park improvements completed or
underway. The Centennial Inititive funds are in addition to the nearly
\$1 billion in the President's budget for National Park maintenance and
construction programs. The proposed FY 2008 budget will further improve
our national parks during the next decade leading up to the 2016
centennial celebration.

The 2008 budget and the National Parks Centennial Initiative emphasize
three key goals:

-   To engage all Americans in preserving our heritage, history and
    natural resources through philanthropy and partnerships, with a
    special emphasis on linking children to nature. An increase of \$100
    million is proposed for these programs, plus another \$100 million
    in mandatory funds to match donations.

-   To reconnect people with their parks through enhanced technology and
    the seamless network of the trails system. An increase of \$3.8
    million is proposed for these programs.

-   To build capacity for critical park operations to sustain these
    efforts over the next century. An increase of \$126.2 million is
    requested for these programs.

The Department will be submitting legislation that proposes the creation
of the Centennial Challenge matching fund.

Each year, the NPS welcomes more than 270 million visitors as they
discover America the beautiful, the historical, the cultural. Our
national parks preserve majestic natural wonders. They keep watch over
battlefields hallowed by red badges of courage. They keep culture alive
at sites dedicated to the performing arts, poetry, and music. Parks
offer recreation and discovery through spectacular backcountry hiking
and climbing. They honor great leaders like Thomas Jefferson, Abraham
Lincoln, Frederick Douglass, Chief Joseph, John Muir, Eleanor Roosevelt
and Martin Luther King, Jr. As havens of enjoyment, recreation, learning
and personal renewal, national parks must endure. Our budget sets the
stage for a new century of park excellence.

#### Healthy Lands Initiative

Another priority for me is my Healthy Lands Initiative, which will
ensure continued access to public lands for traditional uses and
recreation, while maintaining strong environmental protections for
wildlife and habitat.

As activities on public land increase, we are seeing growing conflicts
among recreation users, energy developers, hunters, ranchers, and others
all competing to protect, access, and use these public lands. BLM will
join with the U.S. Geological Survey and the Fish and Wildlife Service
to identify, restore, and mitigate the potential impacts of increased
energy production in wildlife-energy interface areas and potentially
prevent the listing of certain species such as sage grouse.

The potential listing of sage grouse as an endangered species could
severely constrain public land use, particularly for current and future
energy production. The habitat of the sage grouse covers over 100
million acres. Our Healthy Lands Initiative of \$22.0 million will
implement a strategic vision to protect and restore sage grouse habitat,
maintain migratory corridors for other species, and assure continued
access to energy. These investments will support new land use planning
techniques and new policy tools that will complement current activities
and enable us to work with non-Federal partners to restore and conserve
habitat and maintain access for energy and other uses.

Focused on six strategic areas, these funds will transform land
management from the current parcel by parcel approach to landscape-scale
decision making, drawing upon partnerships and new policy tools to help
BLM provide increased access for energy and other uses, while
simultaneously preserving important habitat corridors and sites for the
benefit of species. In 2008, including this increase, over 400,000 acres
will be restored in partnership with Federal leaseholders, private
landowners, state, local, and tribal governments -- to benefit wildlife.
The Healthy Lands Initiative includes \$15.0 million for BLM to conduct
landscape-scale conservation, \$2.0 million for FWS, and \$5.0 million
for USGS.

### The Methamphetamine Crisis in Indian Country

I would like to highlight two other 2008 priorities, our Safe Indian
Countries and Indian Education Initiatives. While I recognize that the
Senate Indian Affairs Committee has jurisdiction over these matters, I
also know many of you represent States and Tribes that are struggling
with the impacts associated with methamphetamine.

Methamphetamine is a highly addictive synthetic stimulant that creates
intense euphoric highs for periods up to 24 hours.  It is inexpensive
and, unfortunately, has rapidly become the drug of choice for an
increasing number of Americans.  Organized drug cartels have targeted
reservations to establish methamphetamine operations.

The President of the National Congress of American Indians has stated,
"Meth is killing our children, affecting our cultures and ravaging our
communities."  Many tribal leaders have told us methamphetamine is
destroying lives in Indian country.  Some leaders believe that on their
reservations a whole generation of young people may soon be lost to this
one drug. 

The social effects of methamphetamine use are tragic.  Addicted mothers
are giving birth to drug-addicted babies. The drug is fueling homicides,
aggravated assaults, rape, child abuse, and other violent crimes.
Violent crime in Indian Country is reaching crises levels at twice the
national average.

Our budget includes \$16 million for a Safe Indian Communities
initiative that reconfigures and tailors our focus to combat organized
crime, break up drug trafficking, and interrupt the drug supply.

#### Improving Indian Education

Improving Indian education is also a priority. One of only two school
systems operated by the Federal government, the Bureau of Indian
Education should oversee schools that are models of performance for the
No Child Left Behind Act. Yet only 30 percent of the schools in the
Bureau of Indian Education system are meeting NCLB goals.

In recent years, we have improved school facilities by replacing 32
schools and renovating another 39 schools. It is now time to focus on
the classroom. Our 2008 budget proposes to invest \$15.0 million to
improve the performance of students in Indian schools. Additional
funding will provide educational program enhancements and tools for
lower performing schools and educational specialists to guide Indian
schools in achieving academic success. The request also provides
additional funding for transportation to reduce the redirection of
education dollars to pay for buses and fuel.

#### Supporting the Department's Mission

The 2008 budget aligns resources to achieve these and other
high-priority goals guided by the Department's integrated strategic
plan. Recently revised for 2007 -- 2012, the Department's strategic plan
links the Departments diverse activities into four common mission areas:
Resource Protection, Resource Use, Recreation, and Serving Communities.
A fifth area, Management Excellence, provides the framework for improved
business practices, processes, and tools and a highly skilled and
trained workforce.

Using our strategic plan as the blueprint for improved performance and
accountability, since 2001, the Department has:

-   Increased access to meet the Nation's energy needs and enhanced
    energy security by more than doubling the approval of applications
    for permits to drill; provided greater opportunities for development
    of alternative energy, including wind energy; advanced oil shale and
    methane hydrates for potential future domestic use; and
    significantly expanded environmental protections with inspection and
    monitoring programs.

-   Collected \$56.4 billion in revenues from offshore and onshore
    mineral leases that provided income for Indian communities, funded
    State infrastructure, and helped to finance Federal programs.

-   Expanded relationships with partners to restore, improve, and
    protect three million acres of wetlands and other habitat for
    migratory birds, anadromous fish, and threatened and endangered
    species.

-   Reduced risks to communities from the threat of fire, conducting
    over 6.7 million acres of fuels treatments through the President's
    Healthy Forests Initiative.

-   Improved park facilities for visitors by undertaking more than 6,600
    projects at national parks and earned a 95 percent satisfaction rate
    from park visitors.

-   Completed condition assessments and performance measures for all
    park facilities and nearly all Interior facilities.

-   Improved the educational environment for Indian children by funding
    32 new Bureau of Indian Education replacement schools and 39 major
    school repair projects.

Looking to the future, the Department of the Interior is committed to
achieving the goals of our four initiatives and other priorities. Our
budget will:

-   Prepare the national park system for another century of
    conservation, preservation and enjoyment through the President's
    National Park Centennial Initiative.

-   Encourage increased donations for signature projects and programs in
    our national parks with up to \$100.0 million a year in matching
    funds through the National Parks Centennial Challenge.

-   Increase energy security for the Nation through a new Outer
    Continental Shelf five-year plan (2007-2012).

-   Launch a Healthy Lands Initiative to help meet the Nation's needs
    for access to public lands for energy and other uses while
    protecting wildlife and habitat in the West.

-   Leverage Federal funds through partnerships and cooperative
    conservation to restore 800,000 acres and 734 stream/shoreline
    miles. These efforts will support the President's government-wide
    goal of increasing the Nation's wetlands by three million acres by
    2009.

-   Improve educational programs and meet the requirements of the No
    Child Left Behind Act by completing educational reforms in the
    Bureau of Indian Education.

-   Help Indian Country reduce methamphetamine crime and the afflictions
    it has brought to many Tribes through a new Safe Indian Communities
    Initiative.

-   Manage a network of parks, sanctuaries, reserves, and refuges to
    protect ocean and coastal resources as envisioned in the President's
    Ocean Action Plan.

-   Implement the master agreement for the Arizona Settlements Act,
    paving the way for reallocating water from the Central Arizona
    Project to address the water needs of Indian and other communities.

## Budget Overview

The 2008 budget request for current appropriations is \$10.7 billion.
Permanent funding that becomes available as a result of existing
legislation without further action by the Congress will provide an
additional \$5.1 billion, for a total 2008 Interior Budget of \$15.8
billion.

The 2008 budget reflects the changes made in financing for the Abandoned
Mine Land Reclamation Fund in the Office of Surface Mining that were
required by the Surface Mining Control and Reclamation Act Amendments of
2006. Funding for State and tribal AML grants are no longer subject to
appropriation and are funded as a mandatory appropriation. Federal AML
components continue to be subject to appropriation.

The change results in a reduction of \$134.2 million in discretionary
budget authority in 2008. After taking into account the AML shift of
funding from discretionary to mandatory funding, the 2008 budget request
reflects an increase of \$448.5 million, or 4.4 percent, over the 2007
continuing resolution; \$309.0 million, or 3.0 percent, over the 2007
President's budget; and \$119.7 million below the 2006 enacted level.

The 2008 request includes \$9.7 billion for programs funded within the
Interior, Environment and Related Agencies Appropriations Act n increase
of \$239.4 million above the 2007 continuing resolution and \$100.7
above the 2007 President's budget. After taking into account the AML
shift of funding from discretionary to mandatory funding, the 2008
budget request is \$370.1 million above the 2007 continuing resolution
and \$231.4 million above the 2007 President's budget.

The request for the Bureau of Reclamation and the Central Utah Project
Completion Act, funded in the Energy and Water Development
Appropriations Act, is \$1.0 billion. The request includes a net
programmatic increase of \$78.5 million, or 8.5 percent, above the 2007
continuing resolution and \$77.6 million above the 2007 President's
budget.

In 2008, Interior will continue an exemplary record of producing revenue
for the Treasury. Estimated receipts collected by the Department in 2008
will be \$15.6 billion, a record level of collections that offsets
Interior's discretionary budget by nearly 1.5 to one.

The 2008 budget assumes enactment of a number of proposals for which
legislation will be transmitted to the Congress. These include the
Centennial Challenge, as well as proposals to change the manner in which
bonus bids for coal sales are received consistent with oil and gas
programs, institute a net receipt sharing provision to return to a more
equitable Federal-State distribution of onshore mineral revenues, and
repeal of deep gas and deep water OCS incentives that were included in
the Energy Policy Act of 2005. These and other new proposals are
summarized at the end of this testimony.

The 2008 budget also contains proposals included in the 2007 President's
budget for the Range Improvement Fund and the Federal Lands Transaction
Facilitation Act. As in the 2007 President's budget, the 2008 budget
proposes to repeal sections of the Energy Policy Act of 2005, including
energy permit processing and geothermal revenues and geothermal payments
to counties.

The budget also proposes leasing in the 1002 area of the Alaska National
Wildlife Refuge, which significantly increases anticipated revenues in
2009 and later years. These proposals, in conjunction with the revenue
enhancements described above, will increase revenues by \$136.3 million
in 2008 and a total of 5.0 billion through 2012.

#### Maintaining Core Programs

Department of the Interior programs encompass 390 parks and 547 wildlife
refuges; 261 million acres of multiple use public land; 12 regional
offices, 83 Indian agencies locations, and 184 elementary and secondary
schools in Indian Country; 472 dams and 348 reservoirs operated by the
Bureau of Reclamation; and numerous laboratories, field research
facilities, and other offices.

At each of these sites, the Department's 73,000 employees maintain
facilities and resources and provide services to those who use or rely
on them: park visitors, wildlife watchers and hunters, stockmen and
miners, Tribes and individual Indians, farmers and electric power users.
In my travels, Interior's managers have told me that funding for fixed
costs is their highest priority need.

Pay and benefits for the Department's workforce are a significant cost
component of Interior's core programs, comprising 58 percent of
operating budgets. The proportion of Interior's budget committed to
personnel costs places it among the top three Federal agencies. Only the
Departments of Justice and Commerce have a higher proportion of salary
and benefit costs to total budget. Maintaining this dedicated cadre of
professionals is essential for the uninterrupted delivery of programs
and services.

The Department's 2008 budget request includes \$214.2 million to fully
fund increases for pay and other fixed costs. Of this amount, nearly 85
percent, or \$184.4 million, supports increases in employee
compensation, including scheduled 2008 pay raises; two additional paid
days; and projected increases in health benefits. The budget assumes a
three percent pay raise in January 2008. The request also funds
increases in workers' and unemployment compensation; rental payments for
leased space; and centralized administrative and business systems,
services and programs financed through the Working Capital Fund.

#### Other Budget Priorities

In addition to the four key initiatives I have already highlighted, the
budget includes the funding for key goals and objectives.

**Achieving Energy Security** -- In his State of the Union address,
President Bush underscored that America must enhance energy security.
The Department of the Interior plays a key role in advancing this goal.
Nearly one-third of the energy produced in the United States each year
comes from public lands and waters managed by Interior. To carry out the
goals of the Energy Policy Act and enhance the availability of
affordable oil, gas, and alternative energy sources, the 2008 budget for
Interior programs includes \$481.3 million for energy programs, an
increase of \$25.5 million over the 2007 continuing resolution. With
these resources, the Department will enhance energy security through
increased production, protect the environment, promote conservation, and
expand the use of new technologies and renewable energy sources.

The BLM 2008 budget request for energy is \$142.9 million, an increase
of \$6.0 million above 2007. Included in the BLM request is an increase
of \$3.1 million for inspection and monitoring to ensure environmentally
responsible energy development on public lands and proper reporting of
production. The additional funds will provide BLM with the capacity to
conduct an additional 1,572 inspections by 2009, with 522 additional
inspections occurring in 2008. Also included is an increase of \$2.0
million for the Mining Law Administration program. This increase is
expected to be fully offset by anticipated mining claim maintenance
fees.

In 2008, BLM will implement fees for processing drilling permit
applications to fully replace rental revenue currently available for
processing oil and gas use authorizations, thereby maintaining BLM's
capacity for timely permit processing. A legislative proposal will be
transmitted to the Congress that proposes to repeal Section 365 of the
Energy Policy Act. Section 365 redirected rental revenue deposits to the
Treasury to fund BLM pilot offices. Estimated collections of permit
processing fees in 2008 is \$21.0 million.

The MMS 2008 budget request for energy is \$290.8 million, \$16.7
million above 2007. The budget includes increases to facilitate OCS
development and deepwater activities by implementing the 2007-2012
Five-Year OCS Oil and Gas Leasing program and completing environmental
analyses necessary for newly available areas where data are old and for
future OCS lease sales.

The Gulf of Mexico Energy Security Act of 2006, signed into law on
December 20, 2006, significantly enhances OCS oil and gas leasing
activities and production potential in the Gulf of Mexico. The Act opens
up 8.3 million acres in the GOM for leasing, including 5.8 million acres
previously withdrawn under Congressional and Presidential moratoria. The
Act also shares revenues with Gulf-producing States and with the Land
and Water Conservation Fund, with the first distribution estimated to
take place in 2009.

The budget assumes an increase in the royalty rate for new offshore
Federal oil and gas leases. The Department will begin implementing the
royalty rate increase in the upcoming 2007 lease sale in the Western GOM
planning area (Sale 204) scheduled for August 2007. The new rate is
expected to increase royalty revenues by \$4.5 billion over the next 20
years, and substantially more after that.

The President's National Energy Policy aims to improve America's energy
security by increasing domestic production of fossil fuels, promoting
increased energy conservation, and stimulating the development of
alternative fuels. The coastal plain in the Arctic National Wildlife
Refuge is the Nation's single greatest onshore prospect for future oil.
The 2008 budget assumes enactment of legislation opening the Section
1002 area of the coastal plain in ANWR to energy exploration and
development, with a first lease sale occurring in 2009 that would
generate \$7.0 billion in bonus receipts. The budget estimates a total
of \$8 billion in revenue would be generated through 2012. These
receipts would be split 50:50 between the U.S. Treasury and the State of
Alaska.

#### 

#### Cooperative Conservation - Through partnerships, Interior works with landowners and others to achieve conservation goals across the Nation and to benefit America's national parks, wildlife refuges, and other public lands. The 2008 budget includes \$324.0 million for the Department's cooperative conservation programs, \$34.6 million over 2007. These programs leverage Federal funding, typically providing a non-Federal match of 50 percent or more. They provide a foundation for cooperative efforts to protect endangered and at-risk species; engage local communities, organizations, and citizens in conservation; foster innovation; and achieve conservation goals while maintaining working landscapes.

The 2008 cooperative conservation budget includes \$21.0 million of the
Department's Healthy Lands Initiative. Also new to the suite of
cooperative conservation programs highlighted in 2008 are the
multi-agency Open Rivers Initiative and the National Fish Habitat Action
Plan. These fisheries conservation programs will leverage \$16.2 million
in Federal resources with State, Tribal, local, nonprofit and private
groups to protect, enhance, and restore aquatic habitats. A program
increase of \$6.0 million for the Open Rivers Initiative will allow FWS
to enhance its fish passage program by eliminating an additional 190
obsolete stream barriers such as small dams and open an additional 1,300
stream miles. The 2008 budget includes an additional \$2.3 million to
implement the National Fish Habitat Action Plan, which will leverage
resources provided by State, tribal, local, private, nonprofit, and
private groups to protect, enhance, and restore aquatic habitats.

The 2008 budget continues funding for high-priority cooperative
conservation activities, including \$13.3 million for the FWS Coastal
Program, \$69.5 million for State and Tribal Wildlife Grants, \$4.0
million for Neotropical Migratory Birds, and \$80.0 million for the
Cooperative Endangered Species Conservation Fund. The 2008 budget
request for the North American Wetlands Conservation Fund is \$42.6
million, an increase of \$6.0 million above 2007. Funding for the
Partners for Fish and Wildlife program is \$48.4 million, a net increase
of \$5.7 million over 2007. These programs provide an effective,
cooperative approach to conservation and leverage Federal funds. In
2008, these programs will attract over \$274 million in non-Federal
matches and restore over 800,000 acres of habitat for species at-risk
and migratory birds.

In 2008, Interior does not request funding for the Landowner Incentive
and Private Stewardship Grant programs, in order to concentrate
conservation funding in a smaller number of high-performing programs.
This results in a \$22.0 million reduction from the 2007 level. The
conservation of at-risk species would benefit from shifting resources
from these two programs to other programs that can demonstrate increased
results, such as the Partners for Fish and Wildlife and North American
Wetlands Conservation Act programs. The Landowner Incentive and Private
Stewardship grant programs will continue to allocate and administer
grants from funds appropriated in prior years.

**Water in the West** -- The Department, through the Bureau of
Reclamation, is the largest supplier and manager of water in the 17
western States. The 2008 budget emphasizes Reclamation's core mission of
delivering water and power. Reclamation priorities include a focus on
ensuring facility integrity and site security and resolving major
western water challenges.

The budget includes \$1.0 million for a new loan guarantee program, a
cost-effective strategy to address Reclamation's aging infrastructure
and associated asset management issues. The loan program recognizes the
obstacles facing water districts regarding securing funds for expensive
rehabilitative repairs without being able to use Federal facilities as
collateral to obtain financing. The budget also includes \$11.0 million
for Water 2025 to enable Reclamation to help prevent water crises and
conflict in the West. Water 2025 includes 50:50 challenge cost-share
grants for on-the-ground improvements to existing facilities,
implementation of water management tools, and system optimization
reviews to identify system or basin wide improvements that will maximize
efficiency. Legislation will be transmitted to Congress to seek
authorization for the Water 2025 program.

The budget requests \$31.8 million for CALFED pursuant to the October
2004 authorization for this water management, ecosystem restoration,
water quality, water supply, and flood protection program. This adaptive
management program in California's Central Valley and the San Francisco
Bay-Delta is addressing conflicts over water supply.

A total of \$77.0 million is requested for the Safety of Dams program,
an increase of \$8.0 million from 2007 that is primarily for corrective
actions at Folsom Dam. The request for the Central Valley Project is
\$124.8 million, an increase of \$4.6 million over 2007. A total of
\$27.2 million is requested for the Central Arizona Project, continuing
the 2007 level. The budget includes \$58.0 million, continuing the 2007
level, for the Animas La Plata project to implement the Colorado Ute
Settlement Act. The Klamath Basin project is funded at \$25.0 million
and the Middle Rio Grande project is funded at \$23.2 million, both
essentially at the 2007 level. The request funds rural water supply
projects at \$55.0 million, \$13.7 million below the 2007 level. Funding
is requested for the Mini Wiconi, Garrison, and Lewis and Clark
projects.

Our budget includes \$35.5 million for site security of dams to ensure
the safety and security of facilities. The 2008 budget assumes that,
consistent with the practice for other operation and maintenance
expenses, the operation and maintenance-related security costs for
Reclamation facilities will be reimbursed by project beneficiaries.

**Refuge Operations and Species Protection** -- Targeted increases for
the National Wildlife Refuge System and other FWS species conservation
programs will focus new resources on conserving and restoring the
habitat necessary to sustain endangered, threatened, and at-risk species
and prevent additional species from being listed under the Endangered
Species Act. A program increase of \$4.7 million for refuge wildlife and
habitat management will allow the refuge system to increase the number
of recovery plan actions completed in 2008 by 111; protect or restore an
additional 57,983 acres; and fill three new positions to manage the new
Northwestern Hawaii Marine National Monument. The 2008 budget also
includes \$2.2 million in programmatic increases for the recovery of the
gray wolf and the Yellowstone grizzly bear.

**Healthy Forests Initiative** -- The 2008 budget for the Healthy
Forests Initiative, a total of \$307.3 million, supports the
Department's efforts to reduce the threat of catastrophic wildfire and
improve forest and rangeland health. The 2008 budget request funds the
Hazardous Fuels Reduction program at \$202.8 million, an increase of
\$3.0 million for fixed costs over the 2007 level. An additional \$1.8
million in the hazardous fuels program will be shifted from program
support activities to on-the-ground fuel reduction to help treat
high-priority acres.

**Wildland Fire Management** -- The 2008 budget proposes \$801.8 million
to support fire preparedness, suppression, fuels reduction, and burned
area rehabilitation. This amount represents a net increase of \$32.6
million above 2007, including an increase of \$37.4 million for
suppression operations. This budget will fully fund the expected costs
of fire suppression in 2008 at \$294.4 million, based on the ten-year
average. The 2008 Preparedness program is funded at \$268.3 million, a
net reduction of \$6.5 million from the 2007 level. A significant
portion of this reduction will be achieved by eliminating management and
support positions and lower-priority activities. The 2008 Wildland Fire
Management program will realign its preparedness base resources to
better support initial attack capability, which will include the
addition of over 250 firefighters. These actions will help maintain
initial attack success.

**Oceans Conservation** --Interior bureaus conduct ocean and coastal
conservation activities that significantly advance understanding of the
processes and status of ocean and coastal resources. The 2008
President's budget includes \$929.5 million to support the President's
Ocean Action Plan. This funding will allow Interior bureaus to continue
their high-priority work within the U.S. Ocean Action Plan and includes
an increase of \$3.0 million for USGS. In 2008, USGS will begin to
implement the Oceans Research Priorities Plan and Implementation
Strategy by conducting observations, research, seafloor mapping, and
forecast models. USGS will also begin to implement an interagency
national water quality monitoring network. Also included is \$600,000
for three new positions to support management of the new Northwestern
Hawaiian Islands Marine National Monument.

**Indian Trust** -- The 2008 request for Indian Trust programs is
\$489.9 million, \$17.6 million above 2007. The Indian Land
Consolidation program is funded at \$10.0 million, \$20.7 million below
2007. The 2008 budget also includes \$4.6 million in reductions to
reflect efficiencies and improvements in services to beneficiaries, the
completion of trust reform tasks, the completion of project task
efforts, and management efficiencies. The budget includes a \$3.6
million increase for the Office of Historical Accounting to assist with
the increased workload associated with additional tribal trust lawsuits.

The Office of the Special Trustee for American Indians is responsible
for financial management of the funds held in trust for tribal and
individual Indian beneficiaries. Currently, the sum of all positive
Individual Indian Monies account balances is approximately \$6.0 million
less than the sum of all financial assets currently invested by OST on
behalf of the IIM beneficiaries. To address this imbalance the
Department will transmit legislation to balance the accounts that would
authorize up to \$6.0 million be made available to credit the investment
pool.

**Payments in Lieu of Taxes --** PILT payments are made to local
governments in lieu of tax payments on Federal lands within their
boundaries and to supplement other Federal land receipts shared with
local governments. The 2008 budget proposes \$190.0 million for these
payments. The 2008 request is a reduction of \$8 million from the 2007
level. This level of funding is significantly above the historical
funding level for PILT. From the program's inception in 1977 through
2001, the program was funded in the range of \$96 - \$134 million.

#### Mandatory Proposals

The 2008 budget assumes enactment of a number of legislative proposals.
Some of these were discussed earlier, including the National Parks
Centennial Challenge and Arctic National Wildlife Refuge.

The 2008 budget also contains proposals that were assumed in the 2007
President's budget. Included are proposals to discontinue mandatory
appropriations from the Range Improvement Fund and amend the Federal
Land Transaction Facilitation Act to update the public lands available
for disposal, authorize the use of receipts for restoration projects,
and change the distribution of revenue. As in 2007, the 2008 budget
proposes repeal of authorizations provided in the Energy Policy Act of
2005. Repeal of Section 365 would redirect rental receipts to the
General Fund and authorize BLM to promulgate regulations to phase in
cost recovery for energy permits, repeal of Sections 224 and 234 would
restore the historical formula for distribution of geothermal energy
receipts.

In addition, the 2008 budget assumes enactment of proposals including
the following:

**National Park Centennial Challenge** -- The President announced a
proposal to provide up to \$100 million a year for ten years in
mandatory funds to match private donations for signature projects and
programs. These projects and programs will be identified in the
Secretary's report to the President this May, after a number of public
listening sessions and recommendations from park professionals. The
costs for this proposal, contained in a legislative proposal transmitted
to Congress, are offset within the President's 2008 budget.

**Coal Bonuses** -- The 2008 Interior budget assumes increased revenue
from coal bonuses over the next five years by requiring the full payment
of bonuses on all new coal leases at the time of lease sale, consistent
with oil and gas leases. The Administration will propose legislation to
amend the Mineral Leasing Act to require the payment of bonuses at the
time of sale. The Act currently allows deferral of bonus payments for at
least 50 percent of the total acreage offered for lease in any one year.

**MMS Net Receipt Sharing --** A simplified net receipt-sharing
provision is proposed in order to return to a more equitable
Federal-State distribution of revenues by amending the Minerals Leasing
Act. Currently, States receive an equal share of the revenues from
Federal energy production without sharing in the administrative costs of
permitting that production. Instead of attempting to allocate specific
program costs on a State-by-State basis, the Department proposes a flat,
two percent deduction from the State share of revenues, or one percent
of total mineral revenues, prior to making individual State allocations.

**Deep Gas and Deep Water Incentives** -- Repeal of Sections 344 and 345
of the Energy Policy Act would eliminate incentives and royalty relief
that are unwarranted in today's price environment. Section 344 extended
deep gas incentives and Section 345 provided mandatory royalty relief
for certain deep water oil and gas production.

**Pick-Sloan Missouri Basin Program** -- This proposal would re-allocate
the repayment of capital costs of the Pick-Sloan Missouri Basin program.
Power customers would be responsible for repayment of all construction
investments from which they benefit, whereas to date they have only been
responsible for a portion of the costs.

**San Joaquin River Restoration Fund Proposed Legislation** -- The 2008
budget reflects the settlement of NRDC v. Rodgers. The Administration
will submit the San Joaquin River Restoration Settlement Act, which will
include a provision to establish the San Joaquin River Restoration Fund.
The legislation will propose to redirect approximately \$7.5 million per
year of payments from the Central Valley Project Friant Division and
\$9.8 million from the Reclamation Fund, which would be available
without further appropriations to implement the provisions of the
settlement.

## Conclusion

I believe that our 2008 budget will -- in its entirety -- make a
dramatic difference for the American people. We will better conserve our
public lands. We will improve our national parks. We will protect our
wildlife and its habitat. We will help craft a better future for Indian
country and particularly for Indian children. And we will produce the
energy that America needs to heat our homes and run our businesses. This
concludes my overview of the 2008 budget proposal for the Department of
the Interior and my written statement. I will be happy to answer any
questions that you may have.