# Presentation: 916828

## OCS Resource Managementand Sustainable Development

- Carolita Kallaur, Associate Director
- Minerals Management Service
- U.S. Department of the Interior

**Notes:**
I would like to open by thanking the organizers of Offshore Europe and specifically Allan Sefton who is chairing this session for providing this opportunity for dialogue on the topic of Sustainable Development and the relationship to offshore oil and gas development.
In June 1993, President Clinton formed a council composed of leaders from industry, government, nonprofit organizations, and Native American groups to recommend a national action strategy for sustainable development.
The President’s Council on Sustainable Development recommended that the Federal Government, in collaboration with the private sector and non-governmental organizations, develop national indicators of progress toward sustainable development and regularly report on these indicators to the public.
The Department of the Interior, of which the Minerals Management Service (MMS) is a part, has played an active role in the Interagency Working Group on Sustainable Development Indicators that grew out of that recommendation.
While the Minerals Management Service itself has only recently become involved in explicit discussions of sustainable development, the agency has been working toward similar goals for years.
We believe that the production and consumption of energy is one of the fundamental components of economic development and societal well being.  However, development and use of fossil fuels depletes non-renewable natural resources, and is not without cost to society, both environmental (e.g., in terms of air and water quality) and social (e.g., in terms of socioeconomic impacts of development on local communities). 
Therefore initiatives in the energy sector are an important consideration in any discussion of sustainable development. But before I go any further, let me start with an introduction to MMS and its role in sustainable development issues.

## U.S. Outer Continental Shelf

- Administration
- 1.5 billion acres; ~8,000 leases; 4,000 platforms
- Production
- 22% of U.S. oil; 25% of U.S. natural gas
- Revenue
- Since 1953 - $123 billion from OCS leases
- Last 10 years - 78% royalties, 19% bonuses,  3% rentals

**Notes:**
MMS has 2 main functions — to manage mineral extraction on the Federal Outer Continental Shelf,  or OCS, and to collect mineral revenues for all Federal and Indian lands. 
Within MMS, the Offshore Minerals Management program manages 1.5 billion acres of submerged lands on the OCS, which produce 22 percent of the United States’ domestic oil and 25 percent of its natural gas. 
We estimate that at least $123 billion in government receipts has been generated by the OCS program and has directly contributed to the Nation’s economic wealth.
Over the last 10 years the vast majority of OCS revenue has come from the royalties we collect from oil and gas companies for the production that they sell in the marketplace.

## MMS Responsibilities

- Legislative mandate
- Expedite exploration & development on OCS
- Protect human, marine, & coastal environments
- Obtain fair & equitable return for public
- Preserve & maintain competition
- Balance objectives under _**all**_ market conditions

**Notes:**
The Outer Continental Shelf Lands Act, enacted in 1954, established the authority for the U.S. Federal government to provide access to the U.S. outer continental for the exploration and production of mineral resources.  
The Federal government designated to MMS the responsibility to implement the provisions of the OCS Land Act . MMS sees its responsibilities under OCSLA as: 
to expedite exploration & development of the OCS
to protect the human, marine, & coastal environments
to obtain a fair & equitable return for the public on OCS resources and
to preserve & maintain free enterprise competition.
Since 1954, the U.S. Congress has passed other legislation that has a direct impact on the conduct of the MMS management activities.  Some of the more significant legislation includes the National Environmental Policy Act, the Coastal Zone Management Act, the Endangered Species Act, and the Oil Pollution Act.
What this means is that MMS has a large number of stakeholders whose interests must be considered to ensure a consistent and stable oil and gas program
Additionally, unlike the Department of Energy and other agencies with more focused mandates, MMS is obliged to pursue a very broad range of objectives under all market conditions.

## Sustainable Development 

- Production - crucial component of energy supply
- Money from OCS leasing and production
- Generates _**wealth**_ for economy
_**Reinvestment**_ can support sustainable development
- Natural gas a cleaner fuel & bridge to future
- MMS must
- Enforce standards to protect environment
- Work with industry to improve processes
- Promote sharing of best practices

**and OCS Program**

**Notes:**
Today I would like to talk about how MMS views the concept of sustainable development within the context of ongoing OCS oil and gas development.
It is clear to us that the supply of fossil fuels is not only crucial to our Nation’s energy supply, but it also generates wealth for the local and national economies. 
This wealth in turn when properly reinvested can support sustainable development goals. 
MMS has taken steps to examine how it can orient its program to be consistent with the goals of sustainable development.  We realize that we must both have an appreciation for the big picture, and as a small agency maintain a focus on where we can have an impact.  
We believe that for the foreseeable future fossil fuels will remain the energy resource of choice, but an increased emphasis on natural gas allows us the opportunity to help build a bridge to the future.  In the meantime, MMS can best contribute to achieving the goals of the sustainable development movement by continuing to 
Enforce standards to protect the environment, 
Work with industry to improve processes, and 
Promote sharing of best practices nationally & internationally.

## Developing a Position

- Relationship of OCS production & energy use to Sustainable Development (SD)
- Important part of a broad-based discussion
- Implementation of SD concepts
- Analysis of MMS program’s & industry’s role in meeting goals
- Report available at _[www.](http://www.mms.gov/)__[mms](http://www.mms.gov/)__[.](http://www.mms.gov/)__[gov](http://www.mms.gov/)_

**Notes:**
The production and consumption of energy is one of the fundamental components of economic development and societal well being.  However, development and use of fossil fuels depletes non-renewable natural resources and can impose environmental and other costs on society.  
Therefore, initiatives in the energy sector are an important consideration in any broad-based discussion of sustainable development. 
Because of the importance of OCS resources–including not only oil and gas but also environmental resources to the current standard of living and to the long-term well being of the Nation, MMS has been working to assure that the OCS program is consistent with a sustainable future.   
OMM recently undertook an analysis of the relationship between the OCS oil and gas industry and sustainable development, as well as how OMM policies could more effectively contribute to a better future.
This report will soon be available on the MMS web site, at www.mms.gov.

## Defining Concepts

- Environmental sustainability
- Emphasizes preservation of natural capital
- Economic sustainability
- Allow substitution of one set of assets and/or liabilities for another
- Net outcome must be better than starting point
- Sustainable development - evolving process
- Improves economy, environment, & society for present & future generations

**Notes:**
Some observers may ask how the use of a nonrenewable resource can be consistent with sustainable development.  To answer this, we have to look at what sustainable development means.
While the specific definition of sustainable development used by various groups can differ considerably, one may consider two uses of the related term “sustainability.”  Environmental sustainability requires that we leave future generations an environment at least as good as our own. 
Economic sustainability is a broader term that requires leaving future generations no worse off than we are.  Either definition can embrace at least some substitution of one set of assets or liabilities for another, so long as the net outcome clearly is an improvement.
The most widely accepted definition of sustainable development is that of the Brundtland Commission, which you can find in the Conference Programme.  Going a little further, the U.S. Interagency Working Group on Sustainable Development Indicators defined sustainable development as an evolving process that improves the economy, the environment, and society for the benefit of current and future generations.  Many observers see these aspects of life - economic growth, the environment, and social needs - as the three pillars on which any sustainable development strategy must rest.
The use of an exhaustible resource is not necessarily inconsistent with any of these definitions.  The relevant question is not whether something is lost but whether what is gained over a period of generations clearly is worth more than what was lost over the same time period.  

## Oil & Gas Remains Crucial

- Oil & natural gas to meet energy demand
- Next 20 to 30 years
- MMS committed to fulfilling its obligations
- Global climate change concern a factor in SD debate
- Natural gas - a bridge to the future?
- Cleaner burning fuel
- Feedstock for promising alternative fuels

**Notes:**
Future generations eventually will have to (and may even want to) rely more heavily on other energy sources. Today, in the United States, natural gas and oil account for nearly two-thirds of total energy consumption, and oil accounts for about 97 percent of consumption in the transportation sector. Production from the Outer Continental Shelf (OCS) is critical in helping reduce the need for imported oil and provides major economic and energy benefits to the Nation, including taxpayers, States, and local communities.  
However, despite promising new sources of energy that appear on the horizon, our reliance on oil and natural gas is not likely to change dramatically over the next 2 to 3 decades.  Until alternative energy sources become viable, obtaining sufficient supplies of fossil fuels at reasonable prices will continue to be crucial to our energy security and the well being of the national and international economies. 
MMS is committed to fulfilling its obligations to provide for the orderly development of OCS oil and gas resources, all the while protecting the environment, obtaining a fair return for the public for the use of its resources, and meeting a variety of other goals.
One of the most significant environmental issues of the coming century will be global climate change. The Report of the Secretary-General of the United Nations through the Commission on Sustainable Development stated that the development and use of natural gas is increasingly being advocated because it emits lower levels of greenhouse gases and has a less adverse environmental impact.
As I mentioned early, the OCS accounts for about a quarter of our Nation’s natural gas production. More than 60% of the energy currently produced offshore (on a BTU basis) is natural gas—an environmentally preferred fuel that will likely play a key role in the Nation’s efforts to reduce air pollution. 
Natural gas and, to a lesser extent, crude oil are the feedstock for many of the most prospective alternative fuels.  This is especially true for transportation fuels.  It is likely that natural gas and oil-based alternative fuels will be a vital element of the "bridge" taking the economy to a sustainable future over the next 20 or more years.

## Wealth & Reinvestment

- OCS production creates wealth for U.S.
_**Wise**_ wealth reinvestment - OCS development can support SD
- Alternative fuels & new technologies
- Economic growth
- Preservation of land, water, & cultural resources
- Education
- Social progress in local communities

**Notes:**
The Offshore oil and gas program plays an important role in the creation of wealth in the U.S. economy. The market value of oil and gas produced, since OCS leasing began in 1953, totals about US$385 billion, and we estimate that at least $123 billion of that value directly contributed to the Nation’s economic wealth in the form of government receipts and corporate/stockholder equity. 
The remainder of the $385 billion was economic cost incurred primarily to employ workers and buy goods and services from other companies. Payments to government for future production rights add another $23 billion to this total.
Society is not limited to using this income solely to develop new energy sources or infrastructure to support these new sources.  The U.S. Interagency Working Group on Sustainable Development Indicators identified three kinds of indicators, one of which was “process indicators,” which include the processes and driving forces that affect long-term endowments and conditions.
So, investments that facilitate a sustainable future can include development of new technologies that reduce or mitigate damage to environmental systems, innovations in health care technology or delivery systems, improvements in education systems, and a host of other investments that enable improved quality of life in the future.
The majority of government receipts from the OCS oil and gas program, now about US$4 billion annually, go to the General Fund of the U.S. Treasury.  There the money can be used to reduce the deficit or to help support Federal programs that assist with education, housing, transportation, etc. 
Since the early-to-mid-1980s, 15 to 20 percent of OCS receipts have gone to the Land and Water Conservation Fund and the Historic Preservation Fund, which provide grants for recreation and historic preservation projects to be maintained for the benefit of current and future generations.

## Resource Protection

- MMS must focus on core responsibilities
- Environmental protection & safe operations
- MMS must ensure
- Orderly development process
- Conservation of resources
- Improve systems & knowledge base
- Performance-based regulations
- Environmental & technology research programs

**& System Improvement**

**Notes:**
While MMS has provided comments and supporting analysis for coastal impact assistance proposals and the current administration’s Lands Legacy proposal, it has no authority over the spending of the revenues it collects.  MMS does, however, have considerable influence over the program itself.
By providing for orderly development and conservation of OCS oil and gas resources, MMS helps to ensure maximum recovery of those resources, now and in the future.  For example, MMS lets the market determine the rate of production, rather than enforcing quotas, which can lead to destruction of reservoir integrity.  In addition, MMS has strict controls on flaring of natural gas, promoting reinjection instead.
MMS enforces strict safety and environmental protection requirements on oil and gas operators but has moved increasingly towards performance-based regulation, to promote development of less expensive and more innovative ways of achieving desired results. 
For example, MMS and industry recognize that most of the incidents resulting in injury or pollution stem from human error.  So MMS allows companies that have superior performance to use alternative methods to meet safety and environmental performance objectives under their own company-specific Safety and Environmental Management Programs (SEMP), which integrate people, equipment, and operating techniques in ways that maximize operating efficiency and minimize incident rate and severity. 
In addition to its work on improving regulatory efficiency and effectiveness, MMS has invested hundreds of millions of dollars to increase scientific understanding of the oceans and coastal environments, including the socio-economic environments in coastal communities.  This knowledge base increases the ability of current and future generations to reduce damage to, and in some cases improve, coastal ecosystems.

## Getting the Word Out 

- Share information & best practices
- Domestic - workshops, safety alerts, recognition of superior performance
- International - government to government interaction & meeting/conference participation
- Recognize globalization of offshore industry
- Committed to involvement in international standard-setting groups
- International Regulators Forum

**Notes:**
MMS believes that it is crucial that regulatory agencies–and individual companies–share information on what works well and what doesn’t.
MMS and industry groups periodically co-sponsor “best practices” workshops and MMS recognizes top industry performers through the annual MMS Safety Award for Excellence and the Corporate Citizen awards for companies and individuals. 
Today’s offshore oil and gas industry is global in scope, and MMS finds itself regulating what is clearly an international industry.  The MMS is committed to becoming more involved in international activities that potentially could affect our domestic program, as well as collaborative projects with other countries to promote safe and environmentally sound oil and gas operations worldwide. 
Increasingly, other nations and international organizations seek MMS participation when discussing offshore issues such as the development of guidelines for satisfactory safety and environmental management systems and the regional goals that such systems should aim to achieve.  The MMS takes an active approach to identify and become involved in international initiatives that promote better integration of safety and environmental concerns into offshore development decision-making. 
Through direct involvement with international organizations (such as the International Maritime Organization, the International Regulators Forum, the Exploration and Production Forum, the ISO and the Arctic Council) and being knowledgeable of practices of other regulatory regimes, the MMS is better able to know, understand, and influence international activities.  

## Where Do We Go From Here?

- Develop internationally recognized guidelines
- Comprehensive & consistent with SD goals
- Standardization of SD indicators
- Develop performance measures consistent with SD principles
- Ensure safe & environmentally sound development
- Create bridge to sustainable future

**Notes:**
There is a heightened interest in the global environment as reflected by such international treaties as the Kyoto Protocol on greenhouse gases.  This translates to a worldwide interest in increasing the production of natural gas, so there can be a greater reliance on this environmentally preferable fuel.  This is not only true in the U.S., but also in Europe and Asia.  The gas resources in the Caspian and the Russian Far East will play an important role in addressing Asian environmental objectives.  It is also why so many nations have an interest in gas hydrates as a potential energy source.
MMS should pursue a leadership role in the development of a comprehensive set of internationally recognized standards through active participation in organizations and fora that set international standards (such as, ISO and the United Nations Commission on Sustainable Development Expert Meeting on Environmental Practices).
While MMS has made considerable progress just by seeking to follow good regulatory practices, the concept of sustainable development needs to be more explicitly internalized within MMS programs and plans.  One way to achieve this is to incorporate discussion of sustainable development objectives in strategic and annual performance plans. 
The allocation of OCS revenues is outside MMS’s authority, but OMM can continue its efforts to advocate the safe and environmentally sound production of offshore natural gas, as a preferred energy source of the future.  Outreach materials, publications, and workshops are all useful in providing this message to the public, states and other federal agencies and groups.
MMS should take a leadership role in activating thought in the US offshore oil and gas industry on how best to measure progress in meeting the goals of sustainable development.   This can take the form of developing standardized measurement of indicators that correspond to specific industry activities.  The progress made in the area of SEMP should help lead to this being a consensus-based undertaking between industry and government.

## In Summary

- OCS oil & gas program crucial source of energy & wealth
- Sustainable development requires long-term action
- Alternative fuels & new technologies
- Environmental protection
- Improved human capital & processes
- Cannot achieve sustainability in isolation

**Notes:**
In short, while OCS oil and gas will remain crucial to the well being of the American people for the next few decades, and the use of those resources can be consistent with sustainable development, there is much to do.  
The U.S. and the rest of the world must develop cleaner fuels sooner, rather than later, and we must invest some of the wealth of today into technologies that will provide the fuels of tomorrow.  
MMS and other energy-production regulators must strive to be more effective and more efficient, encouraging–and in some cases, requiring–better systems to protect the environment.
However, we must not lose sight of the big picture.  True sustainability of life on earth depends upon the collective behavior of the world’s population, as well as on a host of other factors.  Energy production and use only make up one important part of the challenge ahead.
We need to invest in human capital and improved processes as well.  And we need to work toward collaborative, rather than confrontational, solutions to societal problems.
At the Minerals Management Service, we are looking for ways that we can contribute to this vital, long-term effort.
I appreciate having been invited to the conference, and I look forward to hearing the other speakers and participating in the discussion that will follow.