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[Senate Hearing 109-95]
[From the U.S. Government Publishing Office]

                                                         S. Hrg. 109-95

                    OFFSHORE HYDROCARBON PRODUCTION

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                                   TO

 DISCUSS THE CURRENT STATE OF OUR NATION'S OFFSHORE ENERGY PRODUCTION 
 AND THE RECENT TECHNOLOGICAL ADVANCEMENTS MADE IN THE EXPLORATION AND 
PRODUCTION OF TRADITIONAL FORMS OF ENERGY, STEPS THAT THE OFFSHORE OIL 
    AND GAS INDUSTRY HAS TAKEN TO ENSURE WORKER SAFETY AND TO MEET 
ENVIRONMENTAL CHALLENGES, THE WAYS IN WHICH THE FEDERAL GOVERNMENT CAN 
 FACILITATE ADDITIONAL EXPLORATION AND PRODUCTION OF RESOURCES IN THE 
     OUTER CONTINENTAL SHELF WHILE ENSURING WORKER SAFETY AND THE 
  MAINTENANCE OF ENVIRONMENTAL INTEGRITY, AND NEW APPROACHES TO HELP 
        DIVERSIFY THE ENERGY MIX ON THE OUTER CONTINENTAL SHELF

                               __________

                             APRIL 19, 2005

                       Printed for the use of the
               Committee on Energy and Natural Resources

                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
22-930                      WASHINGTON : 2005
_____________________________________________________________________________
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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                 PETE V. DOMENICI, New Mexico, Chairman
LARRY E. CRAIG, Idaho                JEFF BINGAMAN, New Mexico
CRAIG THOMAS, Wyoming                DANIEL K. AKAKA, Hawaii
LAMAR ALEXANDER, Tennessee           BYRON L. DORGAN, North Dakota
LISA MURKOWSKI, Alaska               RON WYDEN, Oregon
RICHARD M. BURR, North Carolina,     TIM JOHNSON, South Dakota
MEL MARTINEZ, Florida                MARY L. LANDRIEU, Louisiana
JAMES M. TALENT, Missouri            DIANNE FEINSTEIN, California
CONRAD BURNS, Montana                MARIA CANTWELL, Washington
GEORGE ALLEN, Virginia               JON S. CORZINE, New Jersey
GORDON SMITH, Oregon                 KEN SALAZAR, Colorado
JIM BUNNING, Kentucky

                       Alex Flint, Staff Director
                   Judith K. Pensabene, Chief Counsel
                  Bob Simon, Democratic Staff Director
                  Sam Fowler, Democratic Chief Counsel
                       Frank Macchiarola, Counsel
                Patty Beneke, Democratic Senior Counsel

                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Alexander, Hon. Lamar, U.S. Senator from Tennessee...............     3
Allen, Hon. George, U.S. Senator from Virginia...................    47
Angelle, Scott A., Secretary, Louisiana Department of Natural 
  Resources......................................................    61
Bingaman, Hon. Jeff, U.S. Senator from New Mexico................     2
Bunning, Hon. Jim, U.S. Senator from Kentucky....................    26
Boger, Debbie, Deputy Legislative Director, Sierra Club..........    55
Burr, Hon. Richard M., U.S. Senator from North Carolina..........     8
Burton, R.M. ``Johnnie'', Director, Minerals Management Service..    26
Corzine, Hon. Jon, U.S. Senator from New Jersey..................    49
Davidson, Charles, Chairman, President and CEO, Noble Energy, 
  Inc............................................................    71
Domenici, Hon. Pete V., U.S. Senator from New Mexico.............     1
Feinstein, Hon. Dianne, U.S. Senator from California.............    10
Landrieu, Hon. Mary L., U.S. Senator from Louisiana..............     4
Martinez, Hon. Mel, U.S. Senator from Florida....................     6
Murkowski, Hon. Lisa, U.S. Senator from Alaska...................    11
Talent, Hon. James M., U.S. Senator from Missouri................     2
Thresher, Dr. Robert, Director, National Wind Technology Center..    37
Wagner, Frank W., Senator, 7th District, State of Virginia.......    69
Watkins, Admiral James D., Chairman, U.S. Commission on Ocean 
  Policy.........................................................    13

                                APPENDIX

Responses to additional questions................................    79

 
                    OFFSHORE HYDROCARBON PRODUCTION

                              ----------                              

                        TUESDAY, APRIL 19, 2005

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:05 a.m., in 
room SD-366, Dirksen Senate Office Building, Hon. Pete V. 
Domenici, chairman, presiding.

          OPENING STATEMENT OF HON. PETE V. DOMENICI, 
                  U.S. SENATOR FROM NEW MEXICO

    The Chairman. Thank you, everyone, for being here. I think 
it should be pretty obvious to everyone that we cannot possibly 
mark up an energy bill and take it to the floor without a clear 
understanding of the current situation with reference to 
offshore oil and gas production and its current limitations. 
The gas industry is a tremendously important one now and 
obviously will continue into the future.
    The question will be: Are there any significant changes 
that can be made so as to make those assets even more important 
to America in the future? So as we consider the state of oil 
and gas production on the Outer Continental Shelf and the 
technological advancements made in offshore exploration and 
production, we are going to hear testimony on the emergence of 
renewable sources of energy, such as wind, wave, tidal and 
ocean thermal along with it that is in the OCS.
    We are going to look at what the Federal Government might 
do to advance that renewable project in the OCS. Oil and gas 
production amounts to approximately 1.7 million barrels of oil 
per day and 12.5 billion cubic feet of natural gas per day. 
Annually, this production equals approximately 600 million 
barrels of oil per year, 4.7 trillion cubic feet of natural gas 
per year.
    These numbers amount to about 30 percent of our U.S. 
domestic oil production and 23 percent of our domestic natural 
gas production. It is estimated that by next year production of 
OCS will amount to 40 percent of domestic oil production and 25 
percent of the domestic natural gas production. Now that is not 
singularly or solely from offshore or--this is a living--this 
is the reality of America's onshore production having peaked 
out and coming down.
    With respect to the natural gas in the Gulf, this is a--it 
is failing to maintain its level of contribution to domestic 
natural gas supply. In fact, the natural gas production has 
fallen off in 1997 from its peak of 5.1 trillion cubic feet 
down to 4.7. Rather than decrease, I wish there was some 
politically acceptable way that the OCS production would 
increase. And I will be watching and listening and reviewing 
the suggestions made by the Senator from Tennessee, Senator 
Alexander, and his natural gas bill. He appears to have some 
very exciting proposals for this resource.
    In 2004, the United States consumed 20 million barrels of 
oil a day. In 2025, the United States is predicted to require 
27.9 million barrels a day. I think it makes more sense from an 
economic and environmental perspective to meet that consumptive 
demand through domestic production, if we can, and with 
increasing our reliance upon imported natural gas or crude oil.
    However, I am pragmatic about the politics and realize how 
challenging the position is. Nonetheless, I am more than 
willing to address it if the committee wishes to address it.
    Our witnesses today will share their diverse views on these 
challenges. And we thank them in advance for being here today 
and for giving us their time and their expertise.
    Senator Bingaman, do you have an opening statement that you 
would you like to give now?
    [The prepared statement of Senator Talent follows:]

         Prepared Statement of Hon. James Talent, U.S. Senator 
                             From Missouri

    Mr. Chairman, Thank you so much for holding this hearing and thank 
you to our witnesses for their testimony today.
    We are facing an energy crisis and we need to take quick action to 
address a problem that has been decades in the making. I realize that 
we need a balanced, comprehensive approach to energy policy which 
includes conservation and improved technologies, but we can't ignore 
that there is something fundamentally wrong with our energy policy.
    Our country has contradictory policies on natural gas--on one 
front, we encourage its use. On the other front, we limit access to its 
supply. We must amend our country's contradictory policy on natural gas 
access.
    For example, U.S. natural gas consumption is expected to grow from 
22 trillion cubic feet (tcf) in 2003 to almost 31 tcf in 2025. Domestic 
production, however, is predicted to grow from 19.1 tcf to 21.8 tcf, 
meeting only about 30 percent of projected growth demand.
    We have a tremendous supply of oil and gas just off our shores, but 
we can't touch it. The economy is suffering because of the decisions 
we've made regarding domestic energy reserves.
    Everyone agrees that the OCS holds the greatest potential for 
development, but approximately 85% of lower-48 state OCS acreage is 
off-limits to leasing activities. At the same time, Canada and other 
countries are not hindered by these same regulatory burdens. They have 
access to these resources and they are taking advantage of our 
moratorium.
    Sen. Alexander has done a tremendous job looking at the state of 
the natural gas industry and I support his efforts. He has worked 
tirelessly and developed an extremely comprehensive bill that strives 
to strike a balance between conservation and increased supply.
    I strongly support the concept of additional state authority on the 
outer continental shelf It seems clear to me that these states should 
be able to decide what is best for their coastline, not the federal 
government.
    I support Sen. Alexander's bill and I will continue work with him 
to support finding a workable solution that address both the demand and 
supply side of the equation.

         STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR 
                        FROM NEW MEXICO

    Senator Bingaman. Thank you very much, Mr. Chairman.
    Thanks for calling this hearing. I want to first welcome 
Admiral Watkins back before the committee. He has made many 
contributions to this country and this government in many 
different capacities. I understand he is here now as the 
Chairman of the U.S. Commission on Ocean Policy, which I think 
his expertise will be very valuable to us.
    I know that the other witnesses are also extremely capable, 
and I look forward to hearing from them. Thank you.
    The Chairman. Thank you very much.
    Senator Alexander, I understand you would like to make a 
statement. And you are welcome to do so. Do not cut it short, 
whatever you would like to say. You have been working hard on 
this issue.

        STATEMENT OF HON. LAMAR ALEXANDER, U.S. SENATOR 
                         FROM TENNESSEE

    Senator Alexander. Well, thank you, Mr. Chairman. I want to 
thank you for having this hearing. And what I wanted to do, and 
I can summarize it, is to mention the proposal that Senator 
Johnson and I made in our natural gas legislation that has to 
do with what happens offshore. I mean, we have $7 natural gas 
in this country, which is hurting blue collar workers. It is 
hurting farmers. It is hurting homeowners. And with the 
encouragement of Chairman Domenici, Senator Johnson and I have 
put together a comprehensive natural gas bill to try to address 
this aggressively on all fronts to see if any of these ideas 
might be useful for the energy bill as it comes along.
    So we were aggressive on conservation and aggressive on 
alternative fuels, aggressive on research and development, 
aggressive on importing liquified natural gas, and also on 
supply. And as Chairman Domenici said here and as he said last 
year on the floor, if you address supply and do not address 
offshore supply, you are not addressing supply.
    So what we have tried to do is to think of environmentally 
sensitive ways to take more advantage of natural gas supply 
offshore as a way of bringing down the $7 price. This comes 
from a Senator who supports mandatory caps on carbon.
    So we--and, Senator Domenici, what I wanted to do was 
mention in a sentence or two the three areas that are in this 
bill, so that if any of the witnesses want to comment on it, 
they could. I will also ask questions about it.
    The first proposal was to permit the Department of the 
Interior to issue natural-gas-only leases. A State might find 
it easier to work with such a lease, not deal with the possible 
environmental problems that may come from oil.
    The second proposal was to instruct the Secretary of the 
Interior to draw the State boundary between Alabama and Florida 
out into the ocean. We call this lease 181. If it is in 
Alabama, it would be leased. If it is in Florida under the 
current moratorium and rules, it would not.
    And the third is to create a way that the Governor of, say, 
Virginia, whose legislature recently acted a similar way, that 
they could find out whether they have gas offshore, decide 
whether they wanted to lease it and give them a share of the 
revenue. And that proposal is in the legislation, but basically 
it allows the Governor to write, on behalf of the State and the 
Secretary of the Interior, and say: May we have an inventory of 
what is offshore? He is trying to get one for the whole 
inventory, but--and then an explanation of the planning 
process.
    And the Secretary would then provide that to the Governor. 
The State would then decide what it wanted to do. If Virginia 
wanted to put a gas-only rig 20 miles offshore, further than 
they can see it, and use the revenues to improve its university 
system or reduce its taxes, it can do that.
    There would also be a conservation royalty on top of that 
that would go to conservation purposes all across the country. 
And adjacent States could veto it, if they could see it.
    So that is the idea. And it is a different way of 
approaching it. But I--one thing, Mr. Chairman, as these tens 
of thousands of jobs move overseas and as farmers' prices go 
higher and as home heating and cooling prices go higher, 
somebody is going to ask us: What did you do to increase the 
supply of natural gas?
    And if we do not deal with offshore gas, I do not see, as 
well as conservation research and development, alternative 
fuels and liquified natural gas, I do not see that we are doing 
our job properly.
    Thank you for your time.
    The Chairman. Senator Alexander, before you stop 
addressing, could I just inject a question and could you answer 
it with reference to in your legislation or what you--what 
about offshore production of renewable energy, like wind? Can 
you address it? What is the current status, I guess is the real 
question.
    Senator Alexander. Well, we felt that--the current status 
is that it is confused.
    [Laughter.]
    Senator Alexander. But it is offshore. It is not clear who 
is in charge of what. The current status also is--and, you 
know, I care about visual pollution. I do not want to see a gas 
rig. I do not want to see 46 square miles of windmills that are 
100 yards tall either.
    So one area we might want to address, and maybe our 
witnesses can help us with it, is: How could we make it clear 
who is in charge of that?
    There are also, so far as I can find, no real clear rules 
about what to do about highly scenic areas offshore, how they 
might be protected. And perhaps that is part of our 
responsibility. The short answer is we do not try to clarify 
that situation offshore in our bill.
    The Chairman. Okay. Now I understand that Senator Landrieu 
would like to comment. And I think that both Senators on this 
side would like to also.

       STATEMENT OF HON. MARY L. LANDRIEU, U.S. SENATOR 
                         FROM LOUISIANA

    Senator Landrieu. Thank you, Mr. Chairman. Just briefly, I 
would like to follow up on some of the things that the Senator 
from Tennessee mentioned. But before I do, let me just thank 
you, Mr. Chairman, for calling this very important hearing, 
because this issue is going to be a crucial piece and a 
foundation, really, for our energy bill. And I think the 
testimony that we are going to receive this morning is going to 
be extremely helpful on that line.
    On the second panel, we are pleased to have Scott Angelle, 
who is the Department Secretary of Natural Resources from 
Louisiana, a former parish president, a real expert on the 
subject. And I am really happy that our committee could have 
such a man testify this morning on a subject that is so 
important.
    Mr. Chairman, thank you for visiting Louisiana, for flying 
out to an offshore rig, for standing on the beaches and the 
barrier islands of Louisiana and really getting a firsthand 
look at the situation that exists today in the Gulf, which is 
extremely promising. And so much progress has been made.
    I want to thank Senator Bingaman for doing the same, for 
flying over the largest coastal wetland in the United States, 
seeing the oil and gas production, and how things are managed 
well and wisely. We can create jobs, preserve the environment, 
and create prosperity and wealth and, most importantly in this 
time and age, economic security and military security for our 
nation.
    I want to just begin by saying that I guess in the last 200 
years the country has become very comfortable with the focus on 
the Western frontier. It is really what, you know, manifest 
destiny and the concepts of that frontier and the West meant to 
the development of our country.
    I think we sit on the beginning of looking at our oceans as 
a new frontier. And of course, we have space as an additional 
frontier, physical frontiers. There are others. Technology is 
in a different category. But I would like us to think, as we 
begin this hearing this morning, of this great frontier that is 
our ocean, as our Outer Continental Shelf, and ways in which in 
this energy bill we could lay down policies that respect that 
frontier but put the resources that are available there to work 
for the American people and for the world in general, and 
having the right balance between developing that frontier and 
preserving that frontier.
    When we think of Louisiana, of course we know that 
Louisiana, Texas, Mississippi, and Alabama have probably 
experimented more with that concept than any State in the 
Union. Not only do we have offshore oil and gas production, but 
we are also a robust fisheries. We have commercial shipping 
through these channels, inland waterways, fishing, all sorts of 
economic activities that have benefited not just our States, 
Mr. Chairman, but the entire Nation and, I would say, the 
world.
    And so we have also known over the course of our using this 
great frontier, which is the Outer Continental Shelf, there 
have been some mistakes made. But having the benefit of 
hindsight, having the new technologies that are in place, can 
help us to lay out a plan for using this great frontier to the 
benefit of our Nation.
    Just two points in particular: The OCS, the Outer 
Continental Shelf, has generated $145 billion for the U.S. 
Treasury since offshore oil and gas production began. It is the 
second biggest contributor of revenue to the Federal Treasury 
after the income tax. This is not pocket change. It is not 
money that can be left on the table.
    America is desperate for revenues and resources. And if we 
do this correctly, we can provide riches and investments for 
our nation.
    One comment about the environment: I understand the 
history, as many of us do, with the terrible spill that 
occurred--Senator Feinstein is here--off the coast of 
California and how so much of this regulatory regime came into 
place. And I am aware of the dangers associated with offshore 
oil and gas drilling.
    But I will say that from 19--the new technologies that 
exists today are not your grandfather's technologies. 97 
percent of offshore oil spills were less than one barrel or 
less in volume. From 1985 to 2001, pipelines accounted, Mr. 
Chairman, for only 2 percent of the oil released in U.S. 
waters. There is more oil released from underground natural 
reserves of oil and gas than there is from our pipelines or 
from our OCS activity. Now having said that----
    The Chairman. From seepage.
    Senator Landrieu. Seepage. I am sorry. Natural seepage.
    Having said that, I am aware that the politics is very 
different across the country. And as I look at my colleagues 
and I want to work with them to try to find the appropriate 
ways that are sensitive to the different regions. I am 
confident, Mr. Chairman, with your leadership and Senator 
Bingaman, that we can find a way to use these resources in a 
responsible way, to be good stewards of our oceans, invest back 
some of these billions of dollars in protecting and enhancing 
our environment for future generations and create jobs for the 
here and the tomorrow.
    Thank you.
    The Chairman. Thank you very much.
    Senator Martinez.

         STATEMENT OF HON. MEL MARTINEZ, U.S. SENATOR 
                          FROM FLORIDA

    Senator Martinez. Mr. Chairman, I want to thank you and the 
ranking member for holding this very important hearing.
    And I would like to have my full statement be part of the 
record.
    The Chairman. It will be made part of the record.
    Senator Martinez. Thank you. I would like to make a few 
comments, I think, that would be helpful. As the new Senator 
from the State of Florida, I follow in the footsteps of former 
Senators Connie Mack and Bob Graham, as well as my Senate 
colleague, Senator Bill Nelson, as well as our Governor Jeb 
Bush and almost, I would say, the entire Florida delegation, in 
my firm opposition to drilling off Florida's coast.
    You know, Mr. Chairman, every State has differences, and 
every State has their own unique situation. And Florida's is 
certainly driven by what is in our State our No. 1 economy, 
which is tourism, the fact that people come to our State by the 
millions, 58.9 million in the most recent years, to come to our 
State to enjoy its wildlife, its natural beauty, its privileged 
climate, as well as amusement parks and other amenities.
    The tourism industry alone directly employs nearly 840,000 
Floridians and provides an economic impact of about $47 billion 
a year for our State's economy. For the 58.9 million visitors, 
a great many of them come to Florida to enjoy the pristine 
coastline and the wonderful climate. And they return year after 
year to their favorite vacation spots to relax under our skies, 
as well as the beautiful beaches and the wonderful waters off 
our coast.
    And our appreciation for this very unique ecosystem in 
which we live in Florida is a combination of the Atlantic 
coast, the Gulf of Mexico, and then these vast areas of inland 
wetlands that all work together to create this complex 
ecosystem.
    And the reason I bring up these facts is to just share a 
concern of the people of Florida that drilling off of our 
coast, the need that there is for furthering the sources of 
energy for our country's security and for the cost that it 
represents and the burden that it is on people, that the 
solution to that does not rest on Florida's coastline. We are 
adamantly opposed in Florida to oil and gas exploration on our 
coastal waters.
    It is something that has become clearly entrenched as a 
Floridian point of view. I understand it differs from those of 
our other Gulf coast neighbors. But it is one that I think 
nonetheless ought to be strongly expressed in this committee.
    As we seek solutions to energy independence, to the issues 
of cost, please be assured that the people of Florida do not 
wish for there to be oil exploration off of our coast. And it 
is something that there is a fairly strong consensus of opinion 
by the leadership of our State, shared by both parties, that 
this is just simply off limits, that our coastline ought to be 
maintained and ought to remain as the pristine coastline that 
it is today.
    I thought it was important--and I appreciate the entire 
statement going into the record--but I thought it important to 
express our strongly held point of view. I realize that as 
technologies change, that there may be a temptation to view 
things differently. The people of Florida do not. The people of 
Florida want to continue to maintain the very strong position 
in opposition to drilling off of Florida's coast, and also, of 
course, as we define that coast to be.
    So thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    [The prepared statement of Senator Martinez follows:]
   Prepared Statement of Hon. Mel Martinez, U.S. Senator From Florida
    Mr. Chairman, I am pleased to attend today's hearing and listen to 
our witness panel discuss an issue that is of great concern to 
Floridians--the development of offshore energy resources.
    I follow in the footsteps of former Senators Connie Mack and Bob 
Graham as well as my Senate colleague, Senator Bill Nelson, our 
governor Jeb Bush, and almost the entire Florida congressional 
delegation in my firm opposition to drilling off Florida's coasts.
    Every year roughly 58.9 million people visit the Sunshine State to 
enjoy its beautiful beaches, exciting amusement parks, and wonderfully 
abundant wildlife and natural splendor. The tourism industry alone 
directly employs nearly 840,000 Floridians and provides an economic 
impact of $46.7 billion to our state's economy. Of the 58.9 million 
visitors, a great deal come to Florida to enjoy its pristine coastline 
and wonderful climate. Families return, year after year, to their 
favorite vacation spots to relax under our brilliant blue skies, 
powdery white beaches, and crystal-clear emerald waters. The people of 
Florida share a love and appreciation of the Atlantic Ocean and the 
Gulf of Mexico, its coastal habitat, and our wetlands which make it a 
very complex ecosystem; and a very special place to live.
    I share these facts, for one reason: the people of Florida are 
concerned that their coastal waters are coming under increased pressure 
to exploit its possible oil and gas resources. The people of Florida do 
not want that to happen.
    Floridians are adamantly opposed to oil and gas exploration off its 
coastal waters. They have serious concerns that offshore drilling will 
increase the threat of potential oil spills, seriously damaging and 
threatening marine wildlife and their coastal habitat.
    In addition, Floridians are extremely concerned that drilling 
operations would produce massive amounts of waste mud and drill 
cuttings that would be generated and then sent untreated into the 
surrounding waters.
    Our fears are by no means unfounded. We have seen what has happened 
to the beaches of Texas and Louisiana as a result of offshore drilling 
in those states.
    I am in no way making light of the energy crisis we are facing in 
this country.
    Over 90 percent of all new power plants are being fueled by natural 
gas.
    Currently, our nation relies on coal for 52 percent of our nation's 
electricity generation. By far, this is our cheapest and most abundant 
energy source, with enough domestic supply to meet our country's 
electricity needs for the next 250 years. However, we must continue to 
fund new technologies that will address the impacts this abundant 
resource has on our environment. We must provide long-term incentives 
for other renewable energy sources, like solar and wind energy, as well 
as promoting new technologies like coal gasification and carbon 
sequestration.
    Mr. Chairman, the time for action on a national energy policy is 
now.
    Without a comprehensive energy policy that adequately examines and 
addresses our energy and conservation needs, we will remain in this 
frustrating and increasingly expensive situation. According to the 
Energy Information Administration, Florida is the third largest energy 
consuming state in the country; consuming 20.8 million gallons of oil a 
day.
    We must have a more balanced energy portfolio that also focuses 
more federal resources on renewable energy sources, which currently 
make up about 6 percent of nation's energy consumption. There are other 
promising new discoveries through research and development that could 
also reap environmental benefits for my state, like desalination, that 
will reduce our dependence on groundwater in my fast growing state.
    I will say Mr. Chairman, that I look forward to working with you 
and Senator Bingaman to reach a bipartisan solution to our energy 
problems.
    There is much work to do, but we must work to solve our nation's 
energy problems without looking to Florida's coasts. They are not open 
for consideration.

    The Chairman. Senator Burr.

         STATEMENT OF HON. RICHARD BURR, U.S. SENATOR 
                      FROM NORTH CAROLINA

    Senator Burr. Thank you, Mr. Chairman. And, Mr. Chairman, I 
thank you and Senator Bingaman and your staff for a very open 
process, one that I think has looked at all options that might 
be incorporated. And those talks continue. And I do not think 
that we could ask for any more than what you have provided.
    I have the distinct honor or the curse of being, I believe, 
the only member here who has drafted, debated, and voted on 
twice in the House of Representatives an energy bill. As Vice 
Chairman of the Energy and Commerce Committee, we voted out of 
committee 2 years ago a bill that I believe will be very close 
to what we mark up hopefully in this committee.
    One of the issues that the House did not include was an 
inventory of potential oil and gas reserves in the Outer 
Continental Shelf, areas designated to be under the moratorium 
for drilling. The issue of prohibiting drilling off the coast 
of North Carolina has been active for the past three decades 
and one that has transcended political parties. Local, State, 
Federal Government officials, environmentalists, property 
owners, conservationists, and fishermen, overwhelmingly they 
have shared the view that the moratorium in North Carolina 
should be honored.
    When developing my position to support exploration in ANWR, 
I took into account the local communities closest to ANWR, who 
overwhelmingly supported exploration. I also took into account 
the support of the Alaskan State House and Senate, as well as 
the support of the last two governments, Democratic and 
Republican, for exploration.
    And I took the Alaskan congressional delegation's support 
for ANWR into consideration when deciding to support 
exploration there. I used the same rationale, but came to a 
different conclusion while formulating my opinion to support 
the OCS moratorium off the coast of North Carolina. This is not 
a view that I developed over the past 12 months, even though 
North Carolina's Fifth Congressional District was landlocked.
    I heard from a number of my constituents who either 
vacationed or owned property on the Outer Banks about their 
support for a moratorium. Over the course of deliberating two 
energy bills in the House, I came to a better understanding of 
the views of our General Assembly, the past three Governors, 
Democratic and Republican, in support of the drilling 
moratorium.
    I came to a better understanding of the support for a 
moratorium within our State's congressional delegation and the 
support of Senator Dole and my two predecessors in this seat, 
Republican and Democrat. In fact, it was former Senator Lauch 
Faircloth, a Republican, who successfully lobbied President 
Clinton, to have North Carolina added to the moratorium list in 
late 1990.
    Taking all these views into consideration, I came to the 
conclusion that the moratorium off the coast of North Carolina 
should be honored as long as North Carolinians remained in the 
overwhelming support of such restrictions. As I stated earlier, 
this is a view that has evolved over time and one that I came 
to when natural gas was cheaper and more readily available.
    Now we find ourselves in a time when the demand for natural 
gas is at an all-time high and domestic supply is stretched 
thin. The promise of importing liquified natural gas must be 
tempered with the reality that these imports will most likely 
come from regions of the world with the greatest political 
unrest.
    So in light of this challenge, I do not want my support for 
the moratorium to preclude other States from reviewing their 
inclusion in the OCS moratorium. I will take under 
consideration any proposals that incorporate the idea that each 
State wishing to review and possibly repeal its inclusion under 
the moratorium be given that opportunity.
    But let me make clear this one point: I will have serious 
reservations about any legislation or amendment that repeals or 
compromises the OCS moratorium before a State has taken action 
to request the inventory of its prohibitive offshore waters. 
Some of the proposals I have reviewed would lift the moratorium 
before a State had a chance to take the appropriate steps to 
request an inventory of its resources.
    Any moratorium repeal should only be triggered after the 
appropriate State officials have made the formal request of an 
appropriate Federal agency that an inventory be conducted. 
Endeavors like these can only be successful if they are done in 
a bottom-up process that incorporates the support of local, 
State, and Federal Governments, in conjunction with property 
owners, conservationists, outdoor enthusiasts, in an open and 
inclusive process.
    That is why they call this a groundswell of support. Any 
approach that advocates a top-down, one-size-fits-all approach 
is doomed for failure, I believe, and leaves us nowhere closer 
to addressing the overwhelming challenge of the energy crisis.
    Mr. Chairman, I look forward to working with you and the 
rest of my colleagues. We may hold a very specific belief in 
North Carolina. But I do believe that States should have the 
ability on their own to make determinations about how they 
should proceed here. And I appreciate the Chairman's 
willingness to let me clarify my statement on this. And I yield 
back the time.
    The Chairman. Well, I really appreciate your observations 
and your conclusion. I think your contributions to this 
committee are going to reflect the fact that you have spent a 
lot of time and a lot of effort in this area from your 
immediate past life in the House. And we are glad to have you 
on board.
    Senator Burr. Thank you.
    The Chairman. Senator Feinstein. First, let me suggest, if 
you do not mind, Senator, I made this rather generous decision 
to let you all speak when there were only three of you present.
    [Laughter.]
    The Chairman. As more of you have arrived, my generosity is 
changing.
    [Laughter.]
    The Chairman. Nonetheless, I certainly would not 
discriminate, Senator.

       STATEMENT OF HON. DIANNE FEINSTEIN, U.S. SENATOR 
                        FROM CALIFORNIA

    Senator Feinstein. I appreciate that, Mr. Chairman. And let 
me just say that I think Florida and California have a similar 
point of view here. And I very much appreciate the comments 
from the Senator from Florida.
    I want to just point that with respect to California, we 
are adamant on maintaining a moratorium. Governor 
Schwarzenegger has publicly opposed offshore drilling. He has 
called for the Federal Government to buy back the remaining 36 
undeveloped Federal offshore oil and gas leases from the Outer 
Continental Shelf off the coast of central California.
    California's Resources Secretary Mike Chrisman, the 
Secretary of the California Environmental Protection Agency 
Alan Lloyd, and the Lieutenant Governor have all been on record 
opposing any effort to lift the congressional moratorium on 
offshore oil and gas leasing activities.
    As someone earlier pointed out, we are all too familiar 
with the consequences and what happened in 1969. And I think 
Californians--and I think Floridians possibly share this--
really believe that a healthy coast is vital to a healthy 
economy and to our quality of life. We also believe that the 
oceans are a unique preserve. And they should be kept that way.
    And there is already tremendous oil and gas production on 
the Outer Continental Shelf amounting to approximately 1.7 
million barrels of oil a day, 12.5 billion cubic feet of 
natural gas a day. Annually the production equals approximately 
600 million barrels of oil per year. That is 30 percent of U.S. 
domestic production. And 4.6--4.7 trillion cubic feet of 
natural gas a year.
    According to the Minerals Management Service, activity on 
the Outer Continental Shelf has produced approximately 15 
million barrels of oil and more than 155 trillion cubic feet of 
natural gas. The estimate is that by 2006 this will be 40 
percent domestic oil and gas. I think we really need to protect 
our Outer Continental Shelf.
    There are so many things that are happening that I see that 
are carried in scientific journals that really worry me 
tremendously. And this is a very unique preserve. And we ought 
to preserve it as much as we can. But I can tell you this: 
Californians feel very strongly about the moratorium. And I 
think in this instance Florida and California will mount a real 
challenge to any effort to remove that moratorium.
    Thank you very much.
    The Chairman. You did not comment on what you would like to 
happen for other States. And I will not ask you at this point.
    Senator Feinstein. I agree, I think individuals States 
should play a role in this.
    The Chairman. Good.
    Senator Feinstein. I think, for example, my colleague, 
Senator Landrieu, and I are really poles apart on this. And 
Louisiana may have very different needs than California does. 
But I think, too, the Outer Continental Shelf is, you know, not 
close to land. And it represents a unique challenge of how we 
come together as people from States in a Federal Government. I 
do not have all the answers to that.
    The Chairman. Thank you very much.
    The Senator from Alaska. Again, you do not have to have any 
comments, but we welcome them.

        STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR 
                          FROM ALASKA

    Senator Murkowski. Well, I cannot resist, Mr. Chairman. So 
thank you for your indulgence. And I am most appreciative of 
the comments from my colleagues very clearly stating the 
positions from their States, because I think it is important to 
this debate that we know where the individuals, where the 
residents come down when it comes to drilling off of their 
coast. And we do need to listen to their opinions. We do need 
to pay attention.
    I am appreciative of the fact, Mr. Chairman, that we are 
holding this hearing this morning on OCS energy development 
nationwide, but not just on oil and gas but also on the 
renewable forms of energy that can be produced off the coast. 
When it comes to the oil and gas, we know that the 
administration is now in its final process of looking at what 
areas to even consider for possible oil and gas leasing between 
2007 and 2012.
    And when we look at the estimates that are out there, 50/50 
chance that there is 76 billion barrels of oil, 406 trillion 
cubic feet of conventional gas in the OCS, at this point in 
time we are looking at a domestic energy shortage and 
incredibly high prices, I think it makes sense for us to look 
at whether the technological conditions have changed to permit 
environmental safe extraction of oil and gas from the offshore 
areas.
    The Senator from California has made reference to the 
incident off Santa Barbara in 1969. I would like to think that 
since 1969 we have made advancements to our technology, so that 
we can prevent incidents and accidents like that from ever 
happening again. We are very mindful of the environmental 
issues relating to oil production and, to a lesser extent, to 
the gas production, the integrity of the ocean pipelines to 
carry the oil, the ability of leak detection systems to work to 
stop the leaks in the event of a pipeline leak, some of these 
things that might mitigate against development in some high 
valued areas.
    Alaska has a microcosm in this debate. We have a number of 
basins off of our 33,000 miles of coastline that may contain 
oil and gas. We are currently estimating that Alaska's OCS may 
hold up to 40 billion barrels of oil and 220 trillion cubic 
feet of gas in our 6 main lease areas. But for various reasons, 
whether it is a valuable commercial fisheries, whether it is 
the difficulty of development in northern icing conditions, we 
do have a Presidential moratorium in one of our potential lease 
areas and partially restricted in two other areas.
    We have potential up there. I mentioned the renewables. I 
just got an opportunity to sit and listen to proposals to 
generate power from ocean current generators and from offshore 
wind generators. So there are some ideas that are flowing 
around that are worthy of exploration.
    Some of the issues about revenue sharing that I know my 
friend from Louisiana has raised, you experience a great deal 
of impact to your State as a result of leasing and drilling off 
your areas, and yet the return to your State, we have talked 
about the inequity there. And that is something that needs to 
be addressed, needs to be looked at.
    If we were to have offshore development off of Alaska's 
coast, we would not be seeing the same revenue sharing that we 
currently enjoy from our onshore. So there is inequity there 
that needs to be addressed. And I look forward to doing that 
with you, Mr. Chairman and members of the committee.
    Thank you.
    Senator Feinstein. Mr. Chairman.
    The Chairman. Thank you very much, Senator Murkowski.
    Senator Feinstein.
    Senator Feinstein. I neglected to do something. And Admiral 
Watkins is, I think, one of the most respected people I know. 
He was Chief of Naval Operations when I was mayor.
    He has done so many fine things in his life. And I have not 
seen him for a while. I have the greatest respect for him.
    And I just wanted to say welcome. It is great to see you.
    Admiral Watkins. You should know, Mr. Chairman, that Mayor 
Feinstein and Admiral Larkins, when I was Commander in Chief of 
the Pacific Fleet, came together and we brought the Navy back 
to San Francisco. It had disappeared after World War II. And we 
brought it back, did we not, Dianne?
    Senator Feinstein. That is right.
    The Chairman. Well, I would assume that today's mayor of 
San Francisco could not bring the Navy back to San Francisco.
    Senator Feinstein. We will not get into that.
    The Chairman. We will not get into that.
    [Laughter.]
    The Chairman. Even with your tremendous power, I do not 
know that that would be possible. In any event, that is enough 
from me.
    [Laughter.]
    The Chairman. Now we have to get to you-all. Frankly, I 
thought it was good that we let the Senators talk about this 
issue, because it is volatile, but it is big, important.
    And we would like to hear from you, Admiral Watkins. I did 
not say anything at the beginning, but you already know what I 
know about you and what I think about you. My respect for your 
public service is just immeasurable.
    So with that, I do now want to tell you that I will do 
exactly what you think about our offshore resources, but I am 
sure we will all be interested in what you think.

       STATEMENT OF ADMIRAL JAMES D. WATKINS, CHAIRMAN, 
                U.S. COMMISSION ON OCEAN POLICY

    Admiral Watkins. Thank you, Mr. Chairman, members of the 
committee. I am pleased to be here today with you in my 
capacity as the Chairman of the U.S. Commission on Ocean 
Policy, to discuss Outer Continental Shelf energy-related 
recommendations and the Commission's final report, which I have 
here in front of me, if I can lift it, ``An Ocean Blueprint of 
the 21st Century.''
    Before I proceed, I would like to briefly summarize the 
Commission's core recommendations, which should help put my 
comments in the proper context.
    There is virtually universal agreement that our oceans are 
in trouble. And the current governing system is poorly 
structured to address the complicated cross-jurisdiction, 
ecosystem-based problems we are facing. In our final report, 
the Commission recommends a new approach to the national ocean 
policy that focuses on the transition toward ecosystem-based 
management, a process that will require changes in three major 
areas, and one with which all stakeholders agree. That is, the 
administration, Congress, Governors, and the public.
    So first we need to create a new national ocean policy 
framework to streamline and improve how the government makes 
and implements decisions that must be horizontally integrated 
across multiple agencies, multiple legislative committees, and 
the States.
    Concurrently, we need to strengthen science and generate 
high quality, credible, accessible information, particularly 
that emanating from the new Global Earth Observing System 
Initiative now committed to by the Administration. This will 
require support for basic and applied research, as well as the 
development of new sensing and observing technologies and a 
capacity to manage and fully utilize the huge amount of data 
that is being generated by these systems.
    And finally, we need to greatly enhance ocean education to 
inspire the current and future leaders and citizens to adopt a 
strong stewardship ethic. Knowledgeable citizens and 
policymakers will be the driving force behind this new approach 
to ocean and coastal management. And progress is needed in all 
three areas if we are to have a comprehensive national ocean 
policy.
    Let me now focus on the Commission's recommendations 
related to Outer Continental Shelf energy management. As 
Congress considers expanding energy-related activities in 
Federal waters, it should reevaluate current management regimes 
and consider how to coordinate the growing sweep of activities 
in these areas. The Nation's vast offshore ocean areas are 
becoming increasingly appealing places to pursue economic 
activities, such as wind farms, agriculture, eventually bio-
prospecting. And yet there is no coherent management regime for 
these activities, as the wind farm debate in the Northeast has 
clearly demonstrated.
    A comprehensive offshore management regime is needed that 
enables us to realize the ocean's potential while safeguarding 
human and ecosystem health, minimizing conflicts among users, 
and fulfilling the Government's obligations to manage the sea 
in a way that maximizes long-term benefits for all the Nation's 
citizens.
    The Commission has recommended that each current and 
emerging activity in Federal waters be administered by a lead 
Federal agency, which would coordinate with other applicable 
authorities to ensure full consideration of the public 
interest. For example, we recommend establishment of a coherent 
and predictable Federal management process for offshore 
renewable sources, such as offshore wind energy, wave energy 
conversion, and ocean thermal energy conversion.
    This renewable energy focus management process would in 
turn eventually be fully integrated into a balanced ecosystem-
based comprehensive offshore management regime that sets forth 
guiding principles for the coordination of all offshore 
activity. Such a regime is crucial, if we are to balance 
competing activities on the OCS.
    Now let me turn my attention to environmental issues 
related to offshore oil and gas. Along with the economic and 
energy-related benefits of OCS oil and gas production are 
actual and perceived risks with the environment, coastal 
community, and competing users. Since the 1969 Santa Barbara 
blowout, the U.S. oil industry's environmental and safety 
record has improved significantly. Today, safety stipulations 
are more stringent, technologies are vastly improved, 
inspections are regular and frequent, and oil spills response 
capabilities are in place.
    Nevertheless, there remains numerous environmental issues 
associated with development and production of oil and gas in 
the OCS. The most obvious of these is more of a perceived risk, 
as we now understand it. The one most commonly cited is the 
potential for oil spills, including drill rig blowouts, 
pipeline spills, and releases from production platforms. 
However, information compiled by the Minerals and Management 
Service indicates that OCS offshore facilities and pipelines 
accounted for only 2 percent of the volume of oil released into 
the United States waters for the period 1985 to 2001, as 
mentioned by Senator Landrieu.
    By comparison, the National Research Council recently 
reported that 690,000 barrels of oil entered North American 
ocean waters each year from land-based human activity. And the 
other 1-million-plus barrels result from natural seeps 
emanating from the sea floor. Well, those 690,000 barrels from 
urban runoff highlight the importance of education and outreach 
if we are to be successful in changing perceptions and the 
behavior of the Nation's citizens.
    The Commission also highlights the need to increase support 
for science and technology. The desire for increased 
exploration and production and increasing capability of 
drilling in even deeper waters requires a better understanding 
of the cumulative, synergistic, and long-term impact of OCS oil 
and gas development.
    The Environmental Studies Program and the Minerals 
Management Service and other agencies need to be fully funded 
to ensure public confidence and guide the decision of 
policymakers. They have been on a serious decline in the last 
few years, and they have to be brought back or we are not going 
to have the credibility with the American people.
    This is an essential ingredient to measuring the 
feasibility of bringing the vast reserves of methane hydrate 
for practical use, for example.
    And this brings me to the final issue, and that is funding. 
There is a clear nexus between activities in Federal waters and 
the programmatic, regulatory, and management responsibilities 
they engender. The critical nature of ocean assets and the 
challenges faced in managing them justify establishment of an 
ocean policy trust fund in the U.S. Treasury to assist Federal 
agencies in Coastal States in carrying out the comprehensive 
ocean policy recommended by our Commission.
    The trust fund will be composed of returns from commercial 
uses of offshore resources, including OCS oil and gas revenues 
not currently committed to other programs from allowed uses of 
Federal waters. Trust fund money should be disbursed to Coastal 
States, other appropriate coastal authorities, and Federal 
agencies to support improved ocean and coastal management based 
on an allocation determined by the Congress. The trust fund 
should be used to supplement, not replace, existing 
appropriations for ocean and coastal programs.
    Let me close by saying the Commission recognizes the 
importance of balancing the economic needs of the Nation with 
the protection and conservation of the ecosystems and natural 
resources that are of economic, as well as aesthetic, 
importance to our citizens. To utilize these resources in a 
manner that does not jeopardize the health of the ecosystem 
requires a much greater degree of coordination and integration 
among all the entities that have a vested interest in their 
long-term welfare.
    The Commission's report provides a comprehensive strategy 
for moving our Nation toward such an ecosystem-based management 
approach. Its implementation requires great political will and 
new fiscal investment and strong public support, but in the 
long run all of America will benefit. Leadership from this 
committee, Mr. Chairman, and others in the Congress and from 
The White House are essential.
    Thank you, Mr. Chairman.
    [The prepared statement of Admiral Watkins follows:]

 Prepared Statement of Admiral James D. Watkins, U.S. Navy (Retired), 
               Chairman, U.S. Commission on Ocean Policy

    Mr. Chairman and Members of the Committee, I am pleased to appear 
before you today in my capacity as the Chairman of the U.S. Commission 
on Ocean Policy, to discuss Outer Continental Shelf energy-related 
recommendations from the Commission's Final Report, ``An Ocean 
Blueprint for the 21st Century.''
    As you may be aware, in keeping with the broad mandate given to us 
by Congress, the Commission's report covers a huge range of topics--
from coastal watersheds out to the deepest ocean and from fundamental 
science to practical problems. It includes over 200 recommendations, 
primarily directed at the executive and legislative branches of 
government. I will focus my remarks on the issues related to the topic 
of this hearing, energy resources on the Outer Continental Shelf. 
However, I would like to take this opportunity to familiarize the 
Members of Committee with the report's key findings and recommendations 
so you can more fully appreciate the broader context in which I am 
making my comments today.

                       OUR PRICELESS OCEAN ASSETS

    America is a nation intrinsically connected to and immensely 
reliant on the ocean. All citizens--whether they reside in the 
country's farmlands or mountains, in its cities or along the coast--
affect and are affected by the sea. Our grocery stores and restaurants 
are stocked with seafood and our docks are bustling with seaborne 
cargo. Millions of visitors annually flock to the nation's shores, 
creating jobs and contributing substantially to the U.S. economy 
through one of the country's largest and most rapidly growing economic 
sectors: tourism and recreation.
    The offshore ocean area under U.S. jurisdiction is larger than its 
total land mass, providing a vast expanse for commerce, trade, energy 
and mineral resources, and a buffer for security. Born of the sea are 
clouds that bring life-sustaining water to our fields and aquifers, and 
drifting microscopic plants that generate much of the oxygen we 
breathe. Energy from beneath the seabed helps fuel our economy and 
sustain our high quality of life. The oceans host great biological 
diversity with vast medical potential and are a frontier for exciting 
exploration and effective education. The importance of our oceans, 
coasts, and Great Lakes cannot be overstated; they are critical to the 
very existence and well being of the nation and its people. Yet, as the 
21st century dawns, it is clear that these invaluable and life-
sustaining assets are vulnerable to the activities of humans.
    Human ingenuity and ever-improving technologies have enabled us to 
exploit--and significantly alter--the ocean's bounty to meet society's 
escalating needs. Pollution runs off the land, degrading coastal waters 
and harming marine life. Many fish populations are declining and some 
of our ocean's most majestic creatures have nearly disappeared. Along 
our coasts, habitats that are essential to fish and wildlife and 
provide valuable services to humanity continue to suffer significant 
losses. Non-native species are being introduced, both intentionally and 
accidentally, into distant areas, often resulting in significant 
economic costs, risks to human health, and ecological consequences that 
we are only beginning to comprehend.
    Yet all is not lost. This is a moment of unprecedented opportunity. 
Today, as never before, we recognize the links among the land, air, 
oceans, and human activities. We have access to advanced technology and 
timely information on a wide variety of scales. We recognize the 
detrimental impacts wrought by human influences. The time has come for 
us to alter our course and set sail for a new vision for America, one 
in which the oceans, coasts, and Great Lakes are healthy and 
productive, and our use of their resources is both profitable and 
sustainable.
    It has been thirty-five years since this nation's management of the 
oceans, coasts, and Great Lakes was comprehensively reviewed. In that 
time, significant changes have occurred in how we use marine assets and 
in our understanding of the consequences of our actions. The final 
report from the U.S. Commission on Ocean Policy provides a blueprint 
for change in the 21st century, with recommendations for creation of an 
effective national ocean policy that ensures sustainable use and 
protection of our oceans, coasts, and Great Lakes for today and far 
into the future.

                   THE VALUE OF THE OCEANS AND COASTS

    America's oceans, coasts, and Great Lakes provide tremendous value 
to our economy. Based on estimates in 2000, ocean-related activities 
directly contributed more than $117 billion to American prosperity and 
supported well over two million jobs. By expanding the area to include 
economic activities along the coast, the numbers become even more 
impressive; more than $1 trillion, or one-tenth of the nation's annual 
gross domestic product, is generated within the relatively narrow strip 
of land immediately adjacent to the coast that we call the nearshore 
zone. When the economic activity throughout the entire area of all 
coastal watershed counties are considered, the contribution swells to 
over $4.5 trillion, fully half of the nation's gross domestic product, 
accounting for some 60 million jobs (Figure 1*).
---------------------------------------------------------------------------
    * All exhibits have been retained in committee files.
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    The United States uses the sea as a highway for transporting goods 
and people and as a source of energy and potentially lifesaving drugs. 
Annually, the nation's ports handle more than $700 billion in 
merchandise, while the cruise industry and its passengers account for 
another $12 billion in spending. More than thirteen million jobs are 
connected to maritime trade. With offshore oil and gas operations 
expanding into ever deeper waters, annual production is now valued at 
$25-$40 billion, and yearly bonus bid and royalty payments contribute 
approximately $ 5 billion to the U.S. Treasury.
    Ocean exploration has also led to a growing and potentially multi-
billion dollar industry in marine-based bioproducts and 
pharmaceuticals. The commercial fishing industry's total annual value 
exceeds $28 billion, with the recreational saltwater fishing industry 
valued at around $20 billion, and the annual U.S. retail trade in 
ornamental fish worth another $3 billion. Nationwide, retail 
expenditures on recreational boating alone exceeded $30 billion in 
2002. In fact, tourism and recreation is one of the nation's fastest-
growing business sectors, enriching economies and supporting jobs in 
communities virtually everywhere along the shores of the United States 
and its territories.
    These concrete, quantifiable contributions are just one measure of 
the value of the nation's oceans, coasts, and Great Lakes. There are 
many even more important attributes that cannot be given a price tag, 
such as global climate control, life support, cultural heritage, and 
the aesthetic value of the ocean with its intrinsic power to relax, 
rejuvenate, and inspire.

                          TROUBLE IN PARADISE

    Unfortunately, our use and enjoyment of the ocean and its resources 
have come with costs, and we are only now discovering the full extent 
of the consequences of our actions. In 2001, 23 percent of the nation's 
estuarine areas were considered impaired for swimming, fishing, or 
supporting marine species. In 2003, there were more than 18,000 days of 
closings and advisories at ocean and Great Lakes beaches, most due to 
the presence of bacteria associated with fecal contamination. Across 
the globe, marine toxins afflict more than 90,000 people annually and 
are responsible for an estimated 62 percent of all seafood-related 
illnesses. Harmful algal blooms appear to be occurring more frequently 
in our coastal waters and non-native species are increasingly invading 
marine ecosystems. Experts estimate that 25 to 30 percent of the 
world's major fish stocks are overexploited, and many U.S. fisheries 
are experiencing serious difficulties. Since the Pilgrims first arrived 
at Plymouth Rock, over half of our fresh and saltwater wetlands--more 
than 110 million acres--have been lost.
    Coastal waters are one of the nation's greatest assets, yet they 
are being bombarded with pollutants from a variety of sources. While 
progress has been made in reducing point sources of pollution, nonpoint 
source pollution has increased and is the primary cause of nutrient 
enrichment, hypoxia, harmful algal blooms, toxic contamination, and 
other problems that plague coastal waters. Nonpoint source pollution 
occurs when rainfall and snowmelt wash pollutants such as fertilizers, 
pesticides, bacteria, viruses, pet waste, sediments, oil, chemicals, 
and litter into our rivers and coastal waters. Other pollutants, such 
as mercury and some organic chemicals, can be carried vast distances 
through the atmosphere before settling into ocean waters.
    Our failure to properly manage the human activities that affect the 
nation's oceans, coasts, and Great Lakes is compromising their 
ecological integrity, diminishing our ability to fully realize their 
potential, costing us jobs and revenue, threatening human health, and 
putting our future at risk.

          U.S. COMMISSION ON OCEAN POLICY CORE RECOMMENDATIONS

    Last year the President stated, ``We have a changing world. And, 
yet, the fundamental systems haven't changed . . . (they) were created 
for the world of yesterday, not tomorrow.'' Our Commission 
wholeheartedly agrees with him. While he made these statements in the 
context of economic policy reforms, they are equally applicable to the 
management of our oceans and coasts.
    There is virtually universal agreement that our oceans are in 
trouble and the current governance system is poorly structured to 
address the complicated, cross jurisdictional, ecosystem-based problems 
we are facing. There is a lack of coordination at all levels. Rather 
than continue on this path and deal with problems piecemeal as we do 
now, we have recommended a new approach to national ocean policy, one 
grounded in an understanding of ecosystems, guided by strong science, 
and capable of addressing the complex interrelationships among the 
ocean, land, air, and all living creatures, including humans.
    In our Final Report, the Commission identified three major 
categories of recommendations, each of which is a critical component in 
supporting the overarching goal of transitioning towards ecosystem-
based management:

   First, we need to create a new national ocean policy 
        framework to streamline and improve how the government makes 
        and implements decisions. A new governance regime is essential 
        if we are to make the transition toward ecosystem-based 
        management.
   Concurrently, we need to strengthen science and generate 
        high-quality, credible, accessible information. This will 
        require support for basic and applied research, as well as the 
        development of new sensing and observing technologies and a 
        capacity to manage and full utilize the huge amount of data 
        that are generated by these systems.
   And at the same time, we need to greatly enhance ocean 
        education to inspire future leaders and instill citizens with a 
        strong stewardship ethic. Knowledgeable citizens and policy 
        makers will be the driving force behind this new approach to 
        ocean and coastal management.

    I want to make it clear that an effective, coordinated and 
comprehensive national ocean policy will require action in each of 
these cross-cutting areas: governance, science and education. There is 
no ``silver bullet'' or single action that can replace a balanced 
approach to reform, progress is needed across all three areas. However, 
we recognize the need to take advantage of opportunities for 
improvement when they arise; and one area that appears ripe for making 
progress is the management of federal waters.

               COORDINATED GOVERNANCE OF OFFSHORE WATERS

    As Congress considers expanding energy-related activities in 
federal waters, it should take the opportunity to reevaluate the 
current management regimes and consider how to coordinate the growing 
suite of activities in these areas. The nation's vast offshore ocean 
areas are becoming an increasingly appealing place to pursue economic 
activities (Figure 4). Well-established institutional frameworks exist 
for longstanding ocean uses, such as fishing and energy extraction; 
however, authorities governing new activities, such as the placement of 
wind farms or aquaculture facilities, need to be clarified. A 
comprehensive offshore management regime is needed that enables us to 
realize the ocean's potential while safeguarding human and ecosystem 
health, minimizing conflicts among users, and fulfilling the 
government's obligation to manage the sea in a way that maximizes long-
term benefits for all the nation's citizens.
    The Committee on Ocean Policy, which was established by the 
President through Executive Order 13366 in December, 2004, supported by 
congressional action where necessary, should ensure that each current 
or foreseeable activity in federal waters is administered by a lead 
federal agency. Well-developed laws or authorities that cover existing 
programs would not be supplanted, but the lead agency would be expected 
to continue and enhance coordination among all other involved federal 
partners. For emerging ocean activities whose management is ill 
defined, dispersed, or essentially non-existent, the Committee on Ocean 
Policy and Congress, working with affected stakeholders, should ensure 
that the lead agency provides strong coordination, while working toward 
a more comprehensive governance structure.
    Based on an improved understanding of offshore areas and their 
resources, the federal government should work with appropriate state 
and local authorities to ensure that the many different activities 
within a given area are compatible, in keeping with an ecosystem-based 
management approach. As the pressure for offshore uses grows, and 
before serious conflicts arise, it is critical that the Committee on 
Ocean Policy review the complete array of single-purpose offshore 
programs with the goal of achieving coordination among them.
    Ultimately, a streamlined program for each activity should be 
combined with a comprehensive offshore management regime that considers 
all uses, addresses the cumulative impacts of multiple activities, and 
coordinates the many authorities with interests in offshore waters. The 
Committee on Ocean Policy, the proposed President's Council of Advisors 
on Ocean Policy, federal agencies, new regional ocean councils, and 
states will all have roles to play in realizing more coordinated, 
participatory management of offshore ocean activities.
   exercising jurisdiction over nonliving resources in federal waters
    In addition to its responsibilities for living marine resources, 
the federal government also exercises jurisdiction over nonliving 
resources, energy and other minerals located in the waters and seabed 
of the more than 1.7 billion acres of the Outer Continental Shelf 
(OCS). Offshore oil and gas development has the most mature and 
broadest management structure of all such resources. It also has the 
longest and richest history, characterized by major changes to the 
underlying law that established the more comprehensive administrative 
regime, as well as intense political conflict resulting from divisions 
among stakeholders and tensions inherent in American federalism. The 
development of other ocean energy resources--some of which are newly 
emerging technologies--have differing levels of management, but none 
are currently making any noteworthy contributions to domestic 
production numbers. Historically, there also have been varying 
expressions of commercial interest in non-energy minerals in the U.S. 
exclusive economic zone (EEZ), but only sand and gravel have been used 
in recent years by coastal states and communities, because of a change 
which eased access to those resources.

                MANAGING OFFSHORE OIL AND GAS RESOURCES

    OCS oil and gas development is a classic example of the politics of 
multiple-use resource management, including federal-state tensions, 
competing user issues, arguments over the interpretation of data, and 
disagreements concerning tolerable levels of risk. Despite its 
political problems, which are best understood through an awareness of 
the historical context associated with it, today the OCS oil and gas 
program has a well institutionalized and reasonably comprehensive 
management regime. While not without its critics, the program seeks to 
balance the many competing interests involved in offshore energy 
activity, requires state and local government input in federal 
decisions, and specifies detailed procedures to be followed by those 
seeking offshore leases. It also manages the various processes 
associated with access to non-energy minerals on the OCS. Energy 
development in federal waters is big business and has become an 
important part of the fabric of the U.S. ocean policy mix. Most 
observers agree that the federal OCS oil and gas program benefits 
America by helping to meet energy needs, creating thousands of jobs, 
and contributing billions of dollars to the U.S. Treasury. Despite the 
limited offshore geographic area from which production flows and in 
which leasing is authorized, the amount of oil and gas production from 
the OCS is significant.

    ENVIRONMENTAL ISSUES RELATED TO OFFSHORE OIL AND GAS PRODUCTION

    As with most industrial development activities, along with the 
economic-and energy related benefits of OCS oil and gas production, are 
actual and perceived risks to the environment, coastal communities, and 
competing users. Since the 1969 Santa Barbara blowout, the U.S. oil 
industry's environmental and safety record has improved significantly, 
as has the regulatory regime of DOI. Today, safety stipulations are 
more stringent, technologies are vastly improved, inspections are 
regular and frequent, and oil spill response capabilities are in place. 
Nevertheless, there remain numerous environmental issues associated 
with the development and production of oil and gas from the OCS. 
Foremost among these are:

   Physical damage to coastal wetlands and other fragile areas 
        by OCS-related onshore infrastructure and pipelines.
   Physical disruption of and damage to bottom-dwelling marine 
        communities.
   Discharge of contaminants and toxic pollutants present in 
        drilling muds and cuttings and in produced waters.
   Emissions of pollutants from fixed facilities, vessels, and 
        helicopters.
   Seismic exploration and production noise impacts on marine 
        mammals, fish, and other wildlife.
   Immediate and long-term ecological effects of large oil 
        spills.
   Chronic, low-level impacts on natural and human 
        environments.
   Cumulative impacts on the marine, coastal, and human 
        environments.

    The most obvious of these risks, and the one most commonly cited, 
is the potential for oil spills including drill rig blowouts, pipeline 
spills, and chronic releases from production platforms. The impacts of 
large oil spills can last from years to decades, particularly in 
critical habitats, such as wetlands and coral reefs. According to MMS, 
97 percent of OCS spills are one barrel or less in volume and U.S. OCS 
offshore facilities and pipelines accounted for only 2 percent of the 
volume of oil released into U.S. waters for the period 1985-2001.\1\ 
The total volume and number of such spills over that period declined 
significantly due to industry safety practices and improved spill 
prevention technology. By comparison, the National Research Council 
(NRC) estimated that 690,000 barrels of oil enter North American ocean 
waters each year from land-based human activities, and another 
1,118,000 barrels result from natural seeps emanating from the 
seafloor.\2\
---------------------------------------------------------------------------
    \1\ Minerals Management Service. ``OCS Oil Spill Facts'' 
Washington, DC: U.S. Department of the Interior, September 2002.
    \2\ National Research Council. Oil in the Sea Ill: Inputs, Fates 
and Effects. Washington, DC: National Academy Press, 2003.
---------------------------------------------------------------------------
    Since 1981, the volume of oil spilled from OCS pipelines is four to 
five times greater than that from OCS platforms.\3\ Third party impacts 
due to events such as anchor dragging and ship groundings, and damages 
resulting from natural disasters such as hurricanes and underwater 
landslides, are leading causes of pipeline spills. As noted by the NRC, 
spills due to structural failures in aging pipelines are also a growing 
concern.\4\
---------------------------------------------------------------------------
    \3\ Minerals Management Service. OCS Oil Spill Facts. Washington, 
DC: U.S. Department of the Interior, September 2002.
    \4\  National Research Council. Oil In the Sea Ill: Inputs, Fates 
and Effects. Washington, DC: National Academy Press, 2003.
---------------------------------------------------------------------------
    Long-term exposure to weather and marine conditions makes pipelines 
older than twenty-five years considerably more susceptible to stress 
fractures and material fatigue that can lead to spills and leaks. In 
addition, older pipelines do not incorporate the advanced oil spill 
detection and prevention technologies that have been developed in 
recent years.
    The MMS Environmental Studies Program (ESP) is a major source of 
information about the impacts of OCS oil and gas activities on the 
human, marine, and coastal environments. Since 1986, annual funding for 
the program has decreased, in real dollars, from a high of $56 million 
to approximately $18 million in 2003. Even accounting for the 
contraction in the areas available for leasing, the erosion in ESP 
funding has occurred at a time when more and better information, not 
less, is needed. There continues to be a need to better understand the 
cumulative and long-term impacts of OCS oil and gas development, 
especially in the area of low levels of persistent organic and 
inorganic chemicals, and their cumulative or synergistic effects.
    Also, as noted, OCS oil and gas exploratory activities in the Gulf 
of Mexico are now occurring in water depths approaching 10,000 feet 
with projections that the industry will achieve 15,000 feet drilling 
capabilities within the next decade. The technological ability to 
conduct oil and gas activities in ever deeper waters on the OCS places 
a significant and important responsibility on MMS to collect the 
essential environmental deep-water data necessary for it and other 
agencies to make informed management and policy decisions on 
exploration and production activities at those depths. Thus, as the 
knowledge base increases and the industry expands its activities 
further offshore and into deeper waters, new environmental issues are 
emerging that cannot all be adequately addressed under the current ESP 
budget.
    Therefore, the Commission recommended that the U.S. Department of 
the Interior should expand the Minerals Management Service's 
Environmental Studies Program. Priorities for the enhanced 
Environmental Studies Program should include:

   conducting long-term environmental research and monitoring 
        at appropriate outer Continental Shelf (OCS) sites to better 
        understand cumulative, low-level, and chronic impacts of OCS 
        oil and gas activities on the natural and human environments.
   working with state environmental agencies and industry to 
        evaluate the risks to the marine environment posed by aging 
        offshore and onshore pipelines, particularly in the Gulf of 
        Mexico.

    This is one of many examples where Congress and the Administration 
can act now to respond to outstanding ocean-related funding needs, 
needs that should not have to wait until a comprehensive national ocean 
and coastal research strategy is developed.

          ASSESSING THE POTENTIAL OF OFFSHORE METHANE HYDRATES

    Conventional oil and gas are not the only fossil-based fuel sources 
located beneath ocean floors. Methane hydrates are solid, ice-like 
structures composed of water and natural gas. They occur naturally in 
areas of the world where methane and water can combine at appropriate 
conditions of temperature and pressure, such as in thick sediment of 
deep ocean basins, at water depths greater than 1,650 feet.
    The estimated amount of natural gas in the gas hydrate 
accumulations of the world greatly exceeds the volume of all known 
conventional gas resources.\5\ A 1995 U.S. Geological Survey (USGS) 
estimate of both marine and Arctic hydrate resources revealed the 
immense energy potential of hydrates in the United States.\6\ These 
deposits have been identified in Alaska, the east and west coasts of 
the United States, and in the Gulf of Mexico. USGS estimated that the 
methane hydrates in U.S. waters hold a mean value of 320,000 trillion 
cubic feet of natural gas, although subsequent refinements of the data 
have suggested that the estimate is a slightly more conservative 
200,000 trillion cubic feet.\7\ Even this lower estimate is enough to 
supply all of the nation's energy needs for more than 2,000 years at 
current rates of use.\8\
---------------------------------------------------------------------------
    \5\ U.S. Department of the Interior, U.S. Geological Survey. ``Gas 
Hydrates--Will They be Considered in the Future Global Energy Mix?'' 
public/press/public_affairs/press_releases/pr1824m.html> 
Posted December 10, 2003; accessed March 12, 2004.
    \6\ National Oil and Gas Resource Assessment Team. 1995 National 
Assessment of United States Oil and Gas Resources. U.S. Geological 
Survey Circular 1118. Washington, DC: U.S. Government Printing Office, 
1995.
    \7\ Congressional Research Service. ``Methane Hydrates: Energy 
Prospect or Natural Hazard?'' nle/crsreports/energy/eng-
46.pdf> Updated February 14, 2004; accessed March 12, 2004.
    \8\ Monastersky, R. The Ice That Burns: Can Methane Hydrates Fuel 
the 21st Century? Science News 154, no. 20 (November 14, 1998): 312.
---------------------------------------------------------------------------
    However, there is still no known practical and safe way to develop 
the gas and it is clear that much more information is needed to 
determine whether significant technical obstacles can be overcome to 
enable methane hydrates to become a commercially viable and 
environmentally acceptable source of energy.
    In the United States, federal research concerning methane hydrates 
has been underway since 1982, was intensified in 1997-98, and received 
further emphasis with the passage of the Methane Hydrate Research and 
Development Act in 2000. That Act established an interagency 
coordination mechanism that includes the U.S. Departments of Energy, 
Commerce, Defense, and the Interior, and the National Science 
Foundation, and directed the National Research Council to conduct a 
study on the status of research and development work on methane 
hydrates. At the time that the Commission's final report went to press 
the NRC report had not been released.
    In our report, the Commission recommended that the proposed 
National Ocean Council, working with the U.S. Department of Energy and 
other appropriate entities, should review the status of gas hydrates 
research and development to determine whether methane hydrates can 
contribute significantly to meeting the nation's long-term energy 
needs. If such contribution looks promising, the President's recently 
established Committee on Ocean Policy, should recommend an appropriate 
level of investment in methane hydrates research and development, and 
determine whether a comprehensive management regime for industry access 
to hydrate resource deposits is needed.

             DEVELOPING OFFSHORE RENEWABLE ENERGY RESOURCES

    Environmental, economic, and security concerns have heightened 
interest among many policy makers and the public in renewable sources 
of energy. Although offshore areas currently contribute little to the 
nation's supply of renewable energy, the potential is significant and 
could include wind turbines, mechanical devices driven by waves, tides, 
or currents, and ocean thermal energy conversion, which uses the 
temperature difference between warm surface and cold, deep-ocean waters 
to generate electricity.

                    OFFSHORE WIND ENERGY DEVELOPMENT

    While the offshore wind power industry is still in its infancy in 
the United States, it is being stimulated by improved technology and 
federal tax credits that have made it more attractive commercially. 
Additionally, developers are looking increasingly to the lead of 
European countries such as Denmark, the United Kingdom, and Germany, 
where growing numbers of offshore projects are being licensed. In fact, 
the United States already has a wind energy management program 
applicable on some federal lands onshore. This comprehensive program is 
carried out by DOI's Bureau of Land Management under broad authority 
provided by the Federal Land Policy and Management Act.
    Conversely, there is no comprehensive and coordinated federal 
regime in place to regulate offshore wind energy development or to 
convey property rights to use the public space of the OCS for this 
purpose. In the absence of a specific regime, the U.S. Army Corps of 
Engineers (USACE) is the lead federal agency responsible for reviewing 
and granting a permit for this activity. Its authority, however, is 
based on Section 10 of the Rivers and Harbors Act, which, although it 
has a public interest requirement, primarily regulates obstructions to 
navigation, including approval of any device attached to the seafloor. 
In reviewing a proposed project under Section 10, the USACE is required 
by the National Environmental Policy Act to consult other federal 
agencies. Depending on the circumstances, these agencies and 
authorities may include:

   The U.S. Coast Guard, which regulates navigation under 
        several federal statutes.
   The Federal Aviation Administration, which regulates objects 
        that may affect navigable airspace pursuant to the Federal 
        Aviation Act.
   The U.S. Environmental Protection Agency, which may conduct 
        a review for potential environmental impacts of a project 
        pursuant to the Clean Water Act and Clean Air Act.
   The National Marine Fisheries Service (NMFS), which may 
        review projects for potential impacts to fishery resources 
        pursuant to the Magnuson-Stevens Fishery Conservation and 
        Management Act. In addition, NMFS' review includes assessing 
        potential impacts to endangered or threatened species under the 
        Endangered Species Act or the Marine Mammal Protection Act.
   The U.S. Fish and Wildlife Service, which may review 
        projects for potential impacts to endangered species or marine 
        mammals under its jurisdiction pursuant to the Endangered 
        Species Act or the Marine Mammal Protection Act.
   In addition, depending on its location, a wind energy 
        project, or at least its Section 10 permit, may be subject to 
        review by one or more state coastal management programs in 
        accordance with the CZMA federal consistency provisions.

    The Section 10 review process stands in stark contrast both to the 
well established DOI regulatory program for onshore wind energy and, in 
the marine setting, to the robust regulatory program for offshore oil 
and gas that has developed under the Outer Continental Shelf Lands Act 
(OCSLA). Using the Section 10 process as the primary regulatory vehicle 
for offshore wind energy development is inadequate for a number of 
reasons. First and foremost, it cannot grant leases or exclusive rights 
to use and occupy space on the OCS. It is not based on a comprehensive 
and coordinated planning process for determining when, where, and how 
this activity should take place. It also lacks the ability to assess a 
reasonable resource rent for the public space occupied or a fee or 
royalty for the energy generated. In other words, it lacks the 
management comprehensiveness that is needed to take into account a 
broad range of issues, including other ocean uses in the proposed area 
and the consideration of a coherent policy and process to guide 
offshore energy development.

               WAVE ENERGY CONVERSION--CURRENT AND TIDAL

    Various technologies have been proposed to use wave or tidal 
energy, usually to produce electricity. The wave energy technologies 
for offshore use include floating or pitching devices placed on the 
surface of the water that convert the horizontal or vertical movement 
of the wave into mechanical energy that is used to drive a turbine. 
Currently, the offshore wave, tidal, and current energy industry is in 
its infancy. Only a small proportion of the technologies have been 
tested and evaluated.\9\ Nonetheless, some projects are moving forward 
in the United States, including one to install electricity-producing 
wave-energy buoys more than 3 nautical miles offshore Washington State, 
in the Olympic Coast National Marine Sanctuary. Internationally, there 
is considerable interest in wave, tidal, and current energy, but the 
projects are almost all in the research and development stage.
---------------------------------------------------------------------------
    \9\ California Energy Commission. ``Ocean Energy.'' 
development/oceanenergy/> Accessed December 16, 
2003.
---------------------------------------------------------------------------
    The Federal Energy Regulatory Commission (FERC) asserts 
jurisdiction, under the Federal Power Act (FPA), over private, 
municipal, and state (not federal) hydropower projects seaward to 12 
nautical miles. FERC has formally asserted jurisdiction over the 
Washington State project, and is likely to assert jurisdiction over all 
forms of wave, tidal, or current energy projects whose output is 
electricity, from the shoreline out to 12 nautical miles offshore, on 
the basis that they are ``hydropower'' projects under the FPA. Although 
in issuing a license for a wave, current, or tidal project, FERC is 
directed by the FPA to equally consider environmental and energy 
concerns, it is not an agency with a broad ocean management mission. As 
with wind energy, several other federal laws may apply to ocean wave 
projects. For example, NEPA, the federal consistency provision of the 
CZMA, the National Historic Preservation Act, and the Fish and Wildlife 
Coordination Act may apply, as may the consultation provisions of the 
Endangered Species Act and the Marine Mammal Protection Act. But there 
is no comprehensive law that makes clear which of these individual laws 
may be applicable, nor is there any indication that overall 
coordination is a goal, thus leaving implementation to mixed federal 
authorities.

                    OCEAN THERMAL ENERGY CONVERSION

    The surface waters of the world's tropical oceans store immense 
quantities of solar energy. Ocean thermal energy conversion (OTEC) 
technology could provide an economically efficient way to tap this 
resource to produce electric power and other products. The U.S. 
government spent over $200 million dollars in OTEC research and 
development from the 1970s to the early 1990s that produced useful 
technical information but did not result in a commercially viable 
technology.\10\ Early optimism about the potential of OTEC led to the 
enactment of the Ocean Thermal Energy Conversion Act in 1980, and the 
creation of a coordinated framework and licensing regime for managing 
that activity if and when economic considerations permitted. NOAA 
issued regulations to implement the Act, but because of investor risk 
for this capital-intensive technology and relatively low fossil fuel 
prices, no license applications were ever received and NOAA 
subsequently rescinded the regulations in 1996. Thus, the United States 
currently has no administrative regulatory structure to license 
commercial OTEC operations.
---------------------------------------------------------------------------
    \10\ Jones, A.T., and W. Rowley. ``Global Perspective: Economic 
Forecast for Renewable Ocean Energy Technologies.'' Marine Technology 
Society Journal 36, no. 4 (Winter 2002-2003).
---------------------------------------------------------------------------
         COMPREHENSIVE MANAGEMENT FOR OFFSHORE RENEWABLE ENERGY

    Offshore renewable technologies will continue to be studied as a 
means of reducing U.S. reliance on potentially unstable supplies of 
foreign oil, diversifying the nation's energy mix, and providing more 
environmentally benign sources of energy. Similar to offshore 
aquaculture described in Chapter 22 of the Commission's report, the 
offshore renewable processes described in this section present obvious 
examples of the shortcomings in federal authority when it comes to 
regulating specific new and emerging offshore activities. As long as 
federal agencies are forced to bootstrap their authorities to address 
these activities, the nation runs the risk of unresolved conflicts, 
unnecessary delays, and uncertain procedures. What is urgently needed 
is for the Committee on Ocean Policy to develop a comprehensive 
offshore management regime (as recommended in Chapter 6) that considers 
all offshore uses within a larger planning context. A coherent and 
predictable federal management process for offshore renewable resources 
that weighs the benefits to the nation's energy future against the 
potential adverse effects on other ocean users, marine life, and the 
ocean's natural processes, should be fully integrated into the broader 
management regime.
    In light of the growing interest in renewable energy, the 
Commission has recommended that Congress, with input from the Committee 
on Ocean Policy, should enact legislation providing for the 
comprehensive management of offshore renewable energy development as 
part of a coordinated offshore management regime.
    Specifically, this legislation should:

   be based on the premise that the oceans are a public 
        resource.
   streamline the process for licensing, leasing, and 
        permitting renewable energy facilities in U.S. waters.
   subsume existing statutes, such as the Ocean Thermal Energy 
        Conversion Act.
   ensure that the public receives a fair return from the use 
        of the resource and that development rights are allocated 
        through an open, transparent process that considers state, 
        local, and public concerns.

   DEDICATING REVENUE FROM OCEAN USES FOR IMPROVED OCEAN MANAGEMENT 
                       EXISTING AND EMERGING USES

    Various parts of the Commission's report discuss federal revenues 
that are, or may be, generated from offshore activities. Chapter 6 
introduces the concept of resource rents, the economic value derived 
from the use or development of a natural resource. It recommends that 
the use of a publicly-owned resource by the private sector be 
contingent on providing a reasonable return of some portion of the 
revenues to taxpayers. Chapter 24, on nonliving resources in federal 
waters, discusses the substantial revenues already flowing into land 
conservation and historic preservation funds and the U.S. Treasury from 
outer Continental Shelf (OCS) oil and gas development. The Commission 
goes on to suggests that a greater share of the revenues received from 
the extraction of OCS oil and gas resources should be granted to 
coastal states for the conservation and sustainable development of 
renewable ocean and coastal resources. OCS oil and gas producing states 
would receive a larger portion of such revenues to address the impacts 
in their states from the activity in adjacent federal offshore areas.
    Chapter 24 also addresses the potential emergence of offshore 
renewable energy resources, including the growing interest in offshore 
wind farms, and wave and ocean thermal gradient energy conversion. As 
recommended in Chapter 6, these emerging activities will require a 
comprehensive management regime that ensures a fair return to the 
public for the use of marine resources.

 REVENUES FOR OCEAN AND COASTAL MANAGEMENT: THE OCEAN POLICY TRUST FUND

    The nexus between activities in federal waters and the 
programmatic, regulatory, and management responsibilities they engender 
is clear. The actions recommended in this report are all linked in some 
way to our use of the ocean. The critical nature of ocean assets, and 
the challenges faced in managing them, justify the establishment of an 
Ocean Policy Trust Fund in the U.S. Treasury to assist federal agencies 
and coastal states in carrying out the comprehensive ocean policy 
recommended by this Commission. The Trust Fund would be composed of 
returns from commercial uses of offshore resources, including OCS oil 
and gas revenues not currently committed to other programs, and any 
future revenues from allowed uses of federal waters. The Land and Water 
Conservation Fund, the National Historic Preservation Fund, and the OCS 
oil and gas revenues currently allocated to coastal states from the 
ocean areas that lie 3 nautical miles seaward of state waters would not 
be affected. Only after the revenues for those programs were provided 
in accordance with law, would any remaining OCS monies be deposited in 
the Trust Fund.
    As a practical matter, now and for the foreseeable future, all the 
revenues flowing into Trust Fund would come from OCS oil and gas 
revenues, virtually all of which are derived from activities in the 
central and western Gulf of Mexico. The drilling in the Gulf is an 
ongoing activity and an important contributor to our domestic supply of 
energy. The revenues coming from the Gulf that are not allocated to 
other purposes are currently credited to miscellaneous receipts of the 
Treasury. They are either used for other governmental activities or are 
counted against the deficit. The Commission has determined that funds 
generated from activities in offshore waters are an appropriate and 
important source of revenues to dedicate to a new and comprehensive 
national ocean policy.
    Approximately $5 billion is generated annually from the various 
forms of OCS oil and gas revenues. Protecting the three programs noted 
above would remove about $1 billion. Thus, some $4 billion a year of 
oil and gas money remains available for the Ocean Policy Trust Fund 
under current projections, enough to fund the full cost of implementing 
the Commission's recommendations. While it would be purely speculative 
to estimate the amount and timing of revenues that might be produced by 
newer uses in federal waters, such resource revenues should also be 
deposited in the Trust Fund as they begin to flow.
    Consequently, the Commission has recommended that Congress should 
establish an Ocean Policy Trust Fund in the U.S. Treasury, composed of 
unallocated federal revenues from outer Continental Shelf (OCS) oil and 
gas activities, plus revenues from any new activities approved in 
federal waters, to support the nation's new coordinated and 
comprehensive national ocean policy. Trust Fund monies should be 
disbursed to coastal states, other appropriate coastal authorities, and 
federal agencies to support improved ocean and coastal management, 
based on an allocation determined by Congress with input from the 
Committee on Ocean Policy. The Trust Fund should be used to 
supplement--not replace--existing appropriations for ocean and coastal 
programs.
    The Ocean Policy Trust Fund should be distributed as follows:

   $500 million in the first year, increasing to $1.0 billion 
        in the third and subsequent years, among all coastal and Great 
        Lakes states, territories, and federally-recognized tribes with 
        coastal resource treaty rights. A larger share should go to OCS 
        producing states to address offshore energy impacts. The funds 
        should be used for the conservation and sustainable development 
        of renewable ocean and coastal resources, including any new 
        responsibilities that arise as a result of Commission 
        recommendations and the expansion of programs and activities 
        that are currently underfunded.
   the remainder of the funds to federal agencies to address 
        the new or expanded activities assigned to them as a result of 
        Commission recommendations.

    The sole intent of the Trust Fund is to ensure a dedicated source 
of funding for improved ocean and coastal management, including the 
sustainability of renewable resources. It is not intended to either 
promote or discourage offshore uses authorized under existing laws, and 
the Fund itself would not drive activities in offshore waters. Rather, 
all proposed actions would be evaluated under established statutes and 
governance structures, including the NEPA process. Chapter 6 recommends 
an offshore management regime in which all activities in federal waters 
are better coordinated and are guided by principles including 
sustainability, stewardship, good science, ecosystem-based management, 
and preservation of marine biodiversity. Once an activity is deemed 
acceptable, the resulting resource rents due to the American taxpayer 
for the use of a public resource would be deposited into the Trust Fund 
to be devoted exclusively to ocean and coastal issues, as noted above.
    The design and establishment of the Trust Fund are within the 
jurisdiction of Congress. Thus, Congress will need to determine how the 
Fund will be set up, the process and criteria for the distribution of 
the monies, the formula or method for allocating the funds among 
coastal states, the eligible uses of the funds, and appropriate 
connections to existing laws and authorities. The Committee on Ocean 
Policy and the proposed nonfederal President's Council of Advisors on 
Ocean Policy will be in an excellent position to provide input on these 
questions.

                           CLOSING STATEMENT

    The Commission fully understands the importance of balancing the 
economic needs of the nation with the protection and conservation of 
the ecosystems and natural resources that are of such economic as well 
as aesthetic importance to our citizens. To utilize these resources in 
a responsible manner, in a manner that does not jeopardize the health 
of the ecosystem, requires a much greater degree of coordination and 
integration among all of the entities that have a vested interest in 
their long-term welfare. The Commission's report provides a 
comprehensive strategy for moving our nation closer to implementing 
such an ecosystem-based management approach.
    While I have discussed those recommendations most closely 
associated with activities in federal waters on the Outer Continental 
Shelf, I hope that you and your staff take the time to review the 
comprehensive suite of recommendations we have developed at your 
request. It has taken more than 35 years for the nation to refocus its 
attention on these vital resources. Our report provides a blueprint for 
the 21st century. Its implementation will require great political will, 
significant fiscal investment, and strong public support, but in the 
long run all of America will benefit. The time to act is now and 
everyone who cares about the oceans and coasts must play a part. 
Leadership from this Committee and others in Congress, and from the 
White House, will be essential.

    The Chairman. Admiral, did you read your entire statement?
    Admiral Watkins. Yes, sir, I did.
    The Chairman. Could I just inject an observation? And then 
we will proceed right to you, ma'am.
    I think heretofore when we consider offshore resources and 
drilling, one of the principal objectives had always been: How 
much revenue does the national treasury get? And, Senator 
Landrieu, you stated in your opening remarks the terrific 
amount of money that has gone into the treasury.
    This is just your chairman's observation. I think the time 
has come to change. And I do not think the primary concern 
ought to be how much money goes into the treasury. I think the 
concern should be: How do we better distribute the money so as 
to get conservation and assurances that the program will yield 
better results in terms of safety and welfare?
    Simply put, I think we ought to decide where the money goes 
rather than just simplistically saying the Federal Government 
gets it and it will do the right thing. I think we should be 
saying what we think it should be used for. Maybe it goes to 
the States for their use, if they are the ones put at risk. And 
I just state that as a part of any consideration that we might 
have as a committee.
    Now having said that, I want to thank the Senators that 
have just arrived. Thank you very much for coming. Senator 
Bunning, thank you.
    We are going to move along unless you have statements that 
you want to give now.
    Yes, Senator Thomas.
    Senator Thomas. I just wanted to welcome Johnnie Burton to 
the panel, who of course is a Wyoming native and has done a 
great deal for us in Wyoming. And we are delighted to have you 
here, Johnnie.
    Ms. Burton. Thank you, Senator.
    The Chairman. Senator Bunning.
    Senator Bunning. Mr. Chairman, I would just like to enter a 
statement into the record.
    The Chairman. It will be done.
    [The prepared statement of Senator Bunning follows:]
     Prepared Statement of Jim Bunning, U.S. Senator From Kentucky
    Thank you, Mr. Chairman.
    I am happy we are having this hearing today to discuss the 
important topic of examining OCS to increase our domestic energy 
production.
    Natural gas and oil prices are an important issue for many 
businesses and consumers in Kentucky and the rest of the country.
    Many businesses have talked to me about the financial crunch they 
are experiencing from the high price of oil and natural gas. The high 
prices are having an effect on Americans' wallets too.
    Americans need to have access to adequate supplies of energy at 
affordable prices in order to keep our economy running.
    Now is the time for us to boost our domestic energy sources as well 
as promote conservation.
    I hope that we can learn more about the possibilities of OCS today 
and how it could affect our country's supply of energy.
    I appreciate the time our witnesses have taken today to come 
testify.
    Thank you.

    The Chairman. Now, ma'am, would you proceed, please? Your 
statement will be made a part of the record as if read. And go 
ahead and abbreviate your statement, if you would.

   STATEMENT OF R.M. ``JOHNNIE'' BURTON, DIRECTOR, MINERALS 
                       MANAGEMENT SERVICE

    Ms. Burton. Mr. Chairman, before I start I would like to 
draw the attention of the committee to the fact that you should 
have a package of visual graphics that I will refer to when I 
talk. And I would like this to be made part of the record, if I 
could.
    The Chairman. It will be attached to the record, but we do 
not have it here. They are getting it. Are you going to put it 
up there?
    Ms. Burton. No, sir, I was not planning to.
    The Chairman. But what are those things up there for? Are 
they for us? For the second panel. Okay.
    All right. Please proceed.
    Ms. Burton. Thank you. Mr. Chairman, members of the 
committee, I appreciate the opportunity to appear here today to 
highlight for you the important and vital role Federal offshore 
lands continue to play with respect to our Nation's energy 
future.
    In passing the OCS Lands Act, the accompanying 
congressional declaration of policy states, ``The OCS is a 
vital national resource reserve held by the Federal Government 
for the public, which should be made available for expeditious 
and orderly development.'' The administration has directed the 
Minerals Management Service to meet this mandate through 
specific policy initiatives provided in the President's 
national energy policy. This policy direction is critical in 
the face of the worldwide energy-tight markets. The situation 
in which we find ourselves today did not develop overnight and 
cannot be fixed overnight.
    The Federal OCS is a major supplier of oil and natural gas 
for the domestic market. OCS production accounts for over 30 
percent of domestic oil production and 23 percent of domestic 
gas production.
    Today, MMS administers over 8,200 leases and oversees about 
4,000 offshore facilities. As you can see from chart one, this 
represents 190 percent increase in leases since MMS was formed 
in 1982. As chart two illustrates, the OCS is projected to 
increase its share of oil production to over 40 percent within 
the next 5 years.
    For natural gas, although the near-term projections 
indicate a slight decline in OCS production, as shown on chart 
three, it is estimated that the OCS will provide an increased 
share in the future as deep gas play in shallow water is 
developed.
    Clearly, the most significant trend on the OCS is the surge 
of interest in the deep water areas of the Gulf. There have 
been about 150 discoveries in deep waters over the past 10 
years with about 90 fields now in production. Over the past 3 
years, in ultra-deep water, there have been 24 significant 
discoveries.
    We are similarly enthused about the potential for deep and 
ultra-deep drilling for natural gas on the traditionally 
explored areas of the shelf. Some of the ultra-deep gas plays 
currently being targeted are estimated to contain as much as 4 
trillion cubic feet of natural gas. MMS has approved five such 
exploration plans in the last year.
    The positive trends in both deep water and deep geologic 
horizons are in part a result of the National Energy Plan 
directives to provide royalty incentives for these high-cost 
frontier provinces. MMS has established a suite of economic 
incentives to promote discovery of new sources of energy and to 
stimulate environmentally preferred natural gas production both 
in the Gulf of Mexico and offshore Alaska.
    Regarding the long term, we must understand that there are 
long lead times for accessing frontier areas of the OCS. Lease 
sales cannot be held unless they are part of the 5-year 
program. Once a lease sale is held, it could take 5 to 8 years 
before drilling starts and another 5 years before production 
flows.
    In the last 30 years, technological advancements in the 
offshore industry have made production safer and more 
environmentally sound. Technological advances help companies 
better identify prospects, allow for more efficient well 
placement, and improve the chances of success. A single 
platform today may accommodate five or six fields. Other 
improvements include better treatment of produced water, better 
air pollution control, and more energy efficient production.
    MMS has increased its inspection activities over 60 percent 
since 1999, as chart four demonstrates. Thanks to technological 
advances and industry's commitment to safety, the number of 
lost workday incidents is down 65 percent since 1996, as 
illustrated in chart five.
    The OCS environmental record is exemplary and improving. As 
chart six indicates, the spill rate for a billion barrels of 
oil produced has decreased dramatically over each of the past 
three decades. There has not been a significant OCS platform 
spill for the past 35 years. As the recent National Academy of 
Sciences report revealed, the offshore operations contribute 
about 2 percent of the total oil in the sea, as shown on chart 
seven.
    MMS has worked diligently for the past 20 years to create a 
framework for science-based decision in consultation. The U.S. 
Ocean Commission on Ocean Policy in its report stated, ``The 
scope and comprehensiveness of the OCS oil and gas program can 
be a model for the management of a wide variety of offshore 
activities.''
    The OCS is estimated to hold about 60 percent and 41 
percent of the Nation's remaining undiscovered oil and gas 
resources, respectively. However, there is great uncertainty 
regarding the potential in areas where the last geophysical 
surveys and drilling exploration occurred more than 25 years 
ago. We simply do not have specific reliable estimates without 
the information new geophysical and exploration methods would 
provide.
    Over the past few years, we have witnessed increased 
interests in alternative uses of the OCS, such as wind and wave 
energy, which was mentioned before. However, we are confronted 
with a lack of legislative authority to consider some of these 
proposals. The administration developed a legislative proposal 
to address these alternative use issues. Enactment of this 
proposal is called for in the President's Ocean Action Plan.
    In conclusion, Mr. Chairman, MMS stands ready to apply our 
management experience to implement whatever policy decision is 
directed. And I will answer questions when you are ready, sir.
    The Chairman. Thank you very much.
    [The prepared statement of Ms. Burton follows:]

   Prepared Statement of R.M. ``Johnnie'' Burton, Director, Minerals 
             Management Service, Department of the Interior

    Mr. Chairman and Members of the Committee, I appreciate the 
opportunity to appear here today to highlight for you and Members of 
the Committee the important and vital role Federal offshore lands 
continue to play with respect to our Nation's energy future.
    America faces an energy challenge. Energy use sustains our economy 
and our quality of life, but high prices and increasing dependence on 
foreign energy supplies raises important national policy issues. There 
is no one single solution. Achieving the goal of secure, affordable and 
environmentally sound energy will require diligent, concerted efforts 
on many fronts on both the supply and demand sides of the energy 
equation.
    President Bush's National Energy Policy (NEP) report laid out a 
comprehensive, long-term energy strategy for securing America's energy 
future. That strategy recognizes that to reduce our rising dependence 
on foreign energy supplies, we must also increase domestic production, 
while pursuing energy conservation and the use of alternative and 
renewable energy sources.
    Most media coverage focuses on the parts of the National Energy 
Policy that discuss production of traditional energy, but increased 
energy conservation and alternative and renewable sources are also 
critical components of the President's balanced, comprehensive policy. 
Good stewardship of resources dictates that we use energy efficiently 
and conserve resources. Thus, fossil fuel development is only a part of 
the solution to our Nation's energy issues.
    The Outer Continental Shelf Lands Act directs the Secretary of the 
Interior to make resources available to meet the nation's energy needs. 
The accompanying Congressional Declaration of Policy states, ``The OCS 
is a vital national resource reserve held by the Federal Government for 
the public, which should be made available for expeditious and orderly 
development.'' As the Department of the Interior's offshore resource 
management agency, the Minerals Management Service (MMS) has a focused 
and well established ocean mandate--to balance the exploration and 
development of oil, gas, and marine minerals resources of the Outer 
Continental Shelf (OCS) with environmental protection and safety.

                         CURRENT ENERGY PICTURE

    Oil is vital to the American economy. Currently, it supplies more 
than 40 percent of our total energy demands and more than 99 percent of 
the fuel we use for cars and trucks. According to the Energy 
Information Administration, over the next 20 years Americans' demand 
for energy is expected to grow at an annual rate of 1.4 percent. This 
growth projection incorporates continued gains in energy efficiency and 
movement away from energy-intensive manufacturing to service 
industries. Despite a continuing emphasis on expanding other sources of 
energy, petroleum products and natural gas are projected to account for 
almost 65 percent of domestic energy consumption in 2025, a slightly 
larger share than today.
    U.S. natural gas consumption is expected to grow from 22 trillion 
cubic feet (tcf) in 2003 to almost 31 tcf in 2025. Domestic production, 
however, is predicted to grow from 19.1 tcf to 21.8 tcf, meeting only 
about 30 percent of projected growth demand. In the past, any 
difference between the growth in demand and the growth in domestic 
production was predominantly met by imports of gas from Canada. 
However, Canada's National Energy Board has concluded that their future 
production will not support increased U.S. import requirements. Most 
additional supplies will need to come from Alaskan natural gas, coalbed 
methane, the OCS, imports of LNG, or possibly other undeveloped 
sources.
    Predictably, markets are responding to this outlook with higher 
energy prices, and an increased demand for OCS resources. This is 
apparent from recent interest in lease sales and an increasing pace of 
exploration and development. The mandate of the OCSLA and prudent 
policy considerations also warrant an increased examination of the OCS 
energy option.

            OFFSHORE FEDERAL OCS OIL AND NATURAL GAS PROGRAM

    The Federal OCS is a major supplier of oil and natural gas for the 
domestic market, contributing more oil and natural gas for U.S. 
consumption than any single state or country in the world. As steward 
of the mineral resources on the 1.76 billion acres of the Nation's OCS, 
MMS has, since 1982, managed OCS production of 9.6 trillion barrels of 
oil and more than 109 tcf of natural gas for U.S. consumption.
    Today, MMS administers approximately 8,200 leases and oversees 
approximately 4000 facilities on the OCS. This compares to about 2,800 
leases and 2000 facilities in 1982. OCS production accounts for over 30 
percent of the Nation's domestic oil production and approximately 23 
percent of our domestic natural gas production. Within the next 5 
years, offshore production will likely account for more than 40 percent 
of oil and 26 percent of U.S. natural gas production, owing primarily 
to deep water discoveries.
    As the OCS resource management agency, MMS has worked diligently 
for over 20 years to create a framework for OCS mineral resource 
development. Principles guiding our management of the resources of the 
OCS include: conservation of resources by providing for their most 
efficient use; assurance of a fair and equitable return to the public 
for rights conveyed; protection of the human, marine, and coastal 
environments; involvement of interested and affected parties in 
planning and decision-making; and minimization of conflicts between 
mineral activities and other uses of the OCS. MMS also has over two 
decades of experience working with coastal states regarding coastal 
zone issues related to development on the OCS. The U.S. Commission on 
Ocean Policy in its report, ``An Ocean Blueprint for the 21st 
Century,'' stated, ``the scope and comprehensiveness of the OCS oil and 
gas program can be a model for the management of a wide variety of 
offshore activities.''

          ECONOMIC/ENERGY BENEFITS FROM THE OFFSHORE PROGRAM 
                (REVENUES, RESOURCE ESTIMATES, HYDRATES)

    OCS lease sales and production have generated more than $156 
billion in revenue from bonus bids, rentals, and royalty payments. The 
OCS oil and gas industry directly employs about 42,000 workers, mostly 
in the Gulf of Mexico area. Spending by suppliers and other companies 
that support the industry, as well as by employee households, account 
for another 90,000 or more jobs throughout the country.
    The billions of dollars in revenue collected by MMS annually from 
energy companies for offshore and onshore oil and gas leasing and 
production is one of the largest sources of non-tax revenue to the 
Federal Government. OCS leasing and production provides the majority of 
oil and gas annual revenue collected by MMS--about 66 percent of the $8 
billion collected in FY 2004. Annually, nearly $1 billion from OCS 
revenues go into the Land and Water Conservation fund for the 
acquisition and development of state and Federal park and recreation 
lands. Additionally, more than $3 billion from OCS oil and gas 
production royalties has been disbursed to the Historic Preservation 
Fund to help protect and preserve hundreds of American battle fields, 
historic building, historic landmarks, and tribal properties and 
cultural traditions.

                      NATIONAL ENERGY POLICY ROLE

    The President's NEP provides us with directives to diversify and 
increase energy supplies, encourage conservation, and ensure adequate 
energy distribution. One of the NEP challenges is to increase energy 
supplies while protecting the environment. MMS has implemented a number 
of NEP directives to increase domestic energy supplies and enhance 
national energy security by ensuring continued access to Federal lands 
for domestic energy development, and by expediting permits and other 
federal actions necessary for energy-related project approvals.
    For example, we are helping to ensure that the OCS remains a solid 
contributor to the Nation's energy and economic security by holding OCS 
lease sales in available areas on schedule. Since May 2001, DOI has 
held 14 OCS oil and natural gas lease sales on schedule while going 
through a comprehensive consultation process with other Federal 
agencies, State and local governments, and the public. These sales 
resulted in leasing of almost 19 million acres of OCS lands to industry 
for oil and gas exploration and development, and generated about $2.4 
billion dollars in bonus bid revenue (not counting future royalties and 
rentals) for the U.S. Treasury. Production from leases issued as a 
result of these sales will contribute substantially to future domestic 
oil and gas production. MMS is on track for completing the next 5-Year 
Program by July 2007, which will establish the schedule for future OCS 
lease sales during the 2007-2012 timeframe.
    The NEP also recommended that we consider economic incentives for 
environmentally sound offshore oil and gas development where warranted 
by specific circumstances. MMS has established a suite of economic 
incentives to promote discovery of new sources of energy for the Nation 
and stimulate domestic oil and natural gas production. For 2001-2005 
OCS lease sales, we continued the royalty incentive program--first 
established by the Deep Water Royalty Relief Act of 1995--to promote 
interest in deep water leases, and expanded the incentive program to 
promote development of new natural gas supplies from deep horizons in 
the Gulf's shallow waters. A new regulation in January 2004 extended 
the deep gas incentive to leases issued before the incentives were 
first provided in 2001, to promote additional deep drilling for natural 
gas on the shelf. MMS has, also developed policies for extending lease 
terms to aid in planning wells to be drilled to sub-salt and ultra-deep 
prospects, accounting for the additional complexity and cost of 
planning and drilling such wells.
    MMS has also provided economic incentives for all Alaska OCS lease 
sales to promote leasing interest and encourage oil and gas exploration 
development in this area of high cost and little infrastructure.
    The NEP also directs us to permit energy production in an 
environmentally sound manner by expediting permits and other Federal 
actions necessary for energy-related project approvals. To help 
streamline our procedures, the offshore program is implementing an e-
Government Transformation project known as OCS Connect, to reform and 
streamline MMS's offshore program operations by 2008. It is foremost an 
integrated business process re-engineering project that will change the 
manner in which MMS delivers its mission. By moving to online service 
delivery, our organization will be more ``connected'' to our customers: 
industry, citizens and other government agencies. OCS Connect will:

   Maximize citizen involvement by delivering essential 
        information and allowing input via the Internet
   Streamline mission delivery by automating major business 
        transactions and providing ``digital'' data management, such as 
        plan review, resulting in more timely decisions
   Simplify and unify government by minimizing redundant 
        reporting, and streamlining government interactions with 
        industry and the public
   Leverage market-based practices by using common oil and gas 
        standards and solutions (e.g., data model, exchange standards)
   Ensure timely approvals of plans and permits

    In addition, we have been working closely with other agencies to 
develop a more efficient means of issuing permits. We have been working 
with NOAA to achieve prompt and efficient consultations under the 
Endangered Species Act and rulemakings under the Marine Mammal 
Protection Act; and on revisions to their Coastal Zone Management Act 
consistency regulations.
    MMS also is working in partnership with the U.S. Coast Guard to 
improve regulatory oversight of oil and gas operations where there is 
overlapping jurisdiction. Under a new Memorandum of Understanding 
(MOU), we have streamlined the process for inspections of offshore 
facilities, improving government efficiency and reducing a reporting 
burden on industry. The NEP also directed that the Administration 
determine whether or not to resume deliveries of oil for the Strategic 
Petroleum Reserve (SPR), the nation's supply of emergency crude oil. 
Responding to a Presidential directive issued in November 2001, the 
Department of the Interior (DOI), in partnership with the Department of 
Energy, launched the SPR Fill Initiative to fill the SPR to 700 million 
barrels using royalty in kind oil produced from OCS Gulf of Mexico 
leases. This initiative should be completed by summer 2005.

                             CURRENT STATUS

Technology Advances
    In the last 30 years, technological advancements in the offshore 
oil and natural gas industry that make production safer and more 
environmentally sound have occurred in every step of the process. In 
the area of exploration, technological advances help companies better 
identify prospects, allow for more effective well placement, improve 
the development of resources, reduce the number of dry holes, and cut 
exploration time. This reduces the footprint left by exploration, 
generates less waste, and improves understanding of reservoirs to 
improve production.
    Once production begins, combined with advances in extended reach 
and directional drilling advanced recovery techniques allow for 
increased production, recovering 50 percent more oil and 75 percent 
more gas from a well than was recovered 30 years ago. Improved 
reservoir management reduces the amount of water produced. Other 
improvements include better treatment of produced water, better air 
pollution control, more energy-efficient production, and reduced 
emissions of greenhouse gases.
    Additionally, using new techniques in reservoir management, more 
oil and natural gas can be produced today, with fewer wells than 30 
years ago. Technology applied to reservoir management includes 
artificial lift, for increased production; downhole oil/water 
separation; and advanced data management. And advancements in materials 
engineering have led to the increased use of advanced composite 
materials for parts of structures and mooring systems. These materials 
are strong, lightweight, and able to withstand the offshore 
environment. This allows for platforms that are lighter and smaller, 
leaving a smaller footprint. These platforms also require less 
maintenance and repair.

Deep Water Gulf of Mexico
    The strongest trend on the OCS today is the continuing development 
of the Gulf of Mexico deep water acreage. The U.S. is now in its ninth 
year of sustained expansion of domestic oil and gas development in the 
deep water area of the Gulf of Mexico (GOM). Deep water means that from 
water surface to where a drill bit first touches mud is at least 1,000 
feet--that is almost twice the height of the Washington Monument. So 
for a moment imagine a floating drill ship perched in water the height 
of two Washington Monuments, subject to the forces of waves and ocean 
currents, maintaining its position while remotely directing drilling 
operations through 1,000 feet or more of pipe casing to reach a 
reservoir of oil or natural gas, while controlling for extreme 
temperature and pressure.
    In 2004, operators announced 14 new deep water producing projects 
and 12 new deep water discoveries. Anticipated production from these 
facilities will help sustain production increases in deep water, and 
fields with names such as Thunder Horse, Atlantis, and Mad Dog will 
dramatically raise production in 2005 and 2006. We expect that it will 
be several years before deep water areas of the Gulf of Mexico reach 
their full potential. The continued use of royalty incentives in the 
deep waters of the Gulf is intended to keep industry moving forward on 
new technologies and exploring deeper water frontiers. The deep water 
activity in the Gulf of Mexico has been a major success story. Deep 
water oil production has risen 386 percent and deep water gas 
production is up 407 percent since 1996.
    There are now about 140 deep water discoveries of which more than 
90 are producing. This has helped to increase total offshore production 
from 980,000 barrels per day in 1995 to 1.7 million barrels per day in 
2003. Additional deep water rigs are being built or moved to the Gulf 
from other parts of the world. The number of deep water exploration 
wells drilled in 2004 increased 27 percent compared to 2003.
    This steady advancement in deep water production over the last 
decade and for the coming decade would not be possible without major 
advances in offshore technologies that are truly amazing. Advances that 
allow remote control of drilling operations from control rooms that are 
miles away; dynamic positioning of drill ships using multiple engines 
that are the size of the meeting room we are sitting in; floating 
production platforms with surface area the size of football fields; 
anchoring cables to hold facilities in place that are made up of a 
combination of traditional steel and synthetic materials; pipe laying 
ships that can lay miles of pipeline in thousands of feet of water. In 
fact, the recent Thunder Horse development required over one hundred 
technological advancements--things that had not been done before--to 
bring online the largest oil field discovered in the U.S. in the last 
30 years.
    The industry ingenuity that we see in deep water is the same 
approach that is being used in deep shelf drilling operations on the 
traditional shelf where operators are targeting deep natural gas 
reservoirs that require drilling 15,000, 20,000 and in some instances 
35,000 feet deep through extremely high temperature and pressure 
conditions.
    As we sit here, operators are drilling the Blackbeard project to 
more than 35,000 feet--6 miles. This well will take almost a year to 
drill and there is no ironclad guarantee of success.

Managing Other Uses
    For much of the past 50 years offshore development has been largely 
focused on producing oil and natural gas. However, over the last decade 
MMS has nurtured the development of an OCS hard minerals program. MMS 
has established partnerships with 14 coastal states focusing on 
collecting and providing geologic and environmental information to 
identify and make available sand deposits in Federal waters suitable 
for beach nourishment and wetlands protection projects.
    To date, more than 23 million cubic yards of OCS sand has been used 
in 15 projects that nourished 76 miles of shoreline in Florida, 
Louisiana, Maryland, South Carolina, and Virginia. Most recently, 
Florida has come back to MMS to identify possible OCS sand sources to 
repair coastlines damaged by the 2004 hurricane season, and Louisiana, 
which has lost half a million acres of wetlands to coastal erosion 
since the 1950s, has requested OCS sand to restore barrier islands and 
coastal wetlands.
    The oceans may also hold the key to realizing significant potential 
new energy sources to support America's growing energy needs--for 
example: natural gas hydrates, and renewable energy such as wind, wave, 
and solar.
    In addition, the oil and gas industry is contemplating ancillary 
projects, such as staging and emergency medical facilities, to support 
ongoing activities in the deep water Gulf of Mexico. MMS, as a leader 
in reviewing environmental and safety issues pertaining to facilities 
placed on the OCS, is actively providing guidance and review of the 
various new technologies and projects proposed for offshore areas.
    MMS' expertise in resource assessment, regulation of offshore 
energy and mineral development, environmental protection, and design, 
fabrication, construction, operation, maintenance, and inspection of 
offshore facilities has put the Agency in the forefront of planning for 
appropriate government oversight for such projects.
    For example, to support the increased need for liquefied natural 
gas (LNG) imports, and for safety and efficiency reasons, many proposed 
LNG terminals may be located on the OCS, with some terminals using 
existing OCS infrastructure such as pipelines, platforms, and salt 
cavern storage.
    The U.S. Commission on Ocean Policy recommended the development of 
legislation providing for the comprehensive management of offshore 
renewable energy development as part of a coordinated offshore 
management regime. The Commission's report cited the Department's 
experience in managing the oil, gas, and mineral programs on the OCS as 
providing a successful management model for a wide variety of offshore 
activities. The Administration proposed legislation during the 108th 
Congress, which has been reintroduced this Congress, that would amend 
the Outer Continental Shelf Lands Act by establishing a uniform 
permitting process coordinated across appropriate Federal agencies, 
with DOI serving as the lead Federal agency. The Administration's 
proposed legislation would direct the Secretary of the Interior to 
establish an authorization process and regulatory framework for non-
traditional energy projects including, but not limited to, renewable 
energy projects such as wind, wave, and solar energy. The 
Administration's bill would also authorize DOI to permit OCS facilities 
to be converted to other approved uses. The President's Ocean Action 
Plan, in response to the final report and recommendations of the U.S. 
Commission on Ocean Policy, calls for enactment of the Administration's 
proposal. The purpose of the legislation is to provide clear authority 
for oversight of energy-related activities on the OCS.

OCS Resource Assessments
    OCS oil production could increase to as much as 40 percent by 2010. 
Its contribution is projected to grow significantly over the next few 
years as the OCS is believed to hold about 60 percent and 41 percent of 
the Nation's remaining undiscovered oil and gas resources, 
respectively. It also may hold a potential future supply of methane 
hydrates that could, if it proves safe to develop, supply another 
important source of natural gas for domestic consumption.
    MMS recently completed an interim update of estimates for 
undiscovered technically recoverable resources underlying the OCS. Our 
mean estimate is 76 billion barrels of oil and 406 tcf of natural gas, 
which is a 12 percent increase since 2000 for natural gas because of 
new information obtained from recent exploration in the Gulf of Mexico. 
MMS conducts a comprehensive national assessment of the undiscovered 
oil and gas resources on the OCS every 5 years. The main objective of 
these assessments is to forecast the oil and natural gas endowment of 
the U.S. OCS for planning purposes, but there is much uncertainty in 
the estimates for those areas which have been off limits to exploration 
and development for many years due to a lack of data. In portions of 
the eastern Gulf, the west coast and the Atlantic OCS, the last 
acquisition of geophysical data and drilling of exploration wells 
occurred more than 25 years ago.
    Yet, in the interim there have been enormous advances in 
exploration and production technologies and a myriad of new drilling, 
completion, and production technologies that could be used in these 
frontier areas today. Additionally, worldwide, there has been an 
enormous amount of exploration and production activity in frontier 
offshore basins that would provide new geologic analogs and exploration 
and production insights to use in exploring frontier U.S. offshore 
basins.
    The Nation's energy potential may not rest entirely on conventional 
hydrocarbon resources. Scientists are now studying the possibility that 
a unique and puzzling frozen ``ice'' crystal may hold the key to future 
energy resources. Methane hydrates are naturally occurring ice-lie 
solids in which water molecules have trapped gas molecules. Hydrates 
are found in locations with high pressure and low temperature--over 98 
percent of natural gas hydrate resources are estimated to occur in 
offshore ocean sediments. Discovering a method to locate, produce and 
transport the gas from formations to the market is key to their 
potential use.
    The next MMS resource assessment, to be completed this summer, will 
also for the first time include a preliminary estimate of technically 
recoverable methane hydrate resource potential for the OCS. MMS is 
working closely with USGS to develop the methodology used in the 
hydrate assessment. In anticipation of industry's move to develop 
natural gas from methane hydrates, MMS is also developing a methodology 
for tract-specific resource economic evaluation for bid evaluation, 
mapping the Gulf of Mexico seafloor to assist in assessing hydrate 
resources, and funding studies on hydrates extraction technologies and 
their potential environmental impacts to facilitate development of 
environmentally protective measures. We are also participating in the 
Joint Industry Drilling Project (JIP) in the Gulf of Mexico. This 
project is a joint industry/Government research consortium to address 
the location and possible production of methane hydrates in the Gulf. 
Under the JIP, the consortium is now preparing to drill the first 2 
boreholes in the Gulf of Mexico in order to assess drilling conditions.
    Other information gathering efforts include the study of 
chemosynthetic communities that are associated with hydrate deposits, 
mapping the Gulf of Mexico seafloor to assist in assessing hydrate 
resources, and funding hydrate research activities conducted at the 
Center for Marine Resources and Environmental Technology.

               5-YEAR OIL AND NATURAL GAS LEASING PROGRAM

    The OCS Lands Act requires the Secretary of the Interior to prepare 
and maintain a schedule of proposed oil and gas lease sales on the 
Federal OCS that is determined to best meet national energy needs for 
the 5-year period following program approval. The 5-year program 
specifies the size, timing and location of areas proposed for Federal 
offshore oil and gas leasing. In order for a lease sale to be held on 
the OCS, the sale must be included in the 5-year program. To be on this 
schedule, the area must have been part of the multi-phased analyses 
required under section 18 of the OCSLA.
    MMS's goal is to develop a program that is responsive to the 
Nation's energy needs, ensures environmental safeguards, and addresses 
public concerns. In developing the 5-year program, section 18 of the 
OCSLA requires that we analyze and compare areas of the OCS in terms of 
hydrocarbon potential, environmental sensitivity, and other factors. We 
also take into consideration laws and policies of affected coastal 
States.
    MMS will soon commence the process for development of a new program 
for 2007-2012. Throughout the 2 to 3 year process of developing a new 
5-year program, MMS consults with its constituents, ensuring that the 
program takes into account the concerns of all parties. The MMS 
requests comments from states, local and tribal governments, American 
Indian and Native Alaskan organizations, the oil and gas industry, 
federal agencies, environmental and other interest organizations, as 
well as the general public. Consultation with affected parties also 
occurs at the local level through MMS regional offices.
    The current 5-year program for 2002-2007 includes 20 sales in eight 
OCS planning areas--annual sales in the Central and Western Gulf of 
Mexico and periodic sales in part of the Eastern Gulf of Mexico, 
Beaufort Sea and Cook Inlet, Alaska. Three other planning areas in 
Alaska--Norton Basin, Chukchi Sea, and Hope Basin--also have sales 
scheduled if there is any interest expressed by industry at the 
beginning of the sale process. Part or all of nine OCS planning areas 
are currently withdrawn from leasing consideration by the President 
under section 12 of the OCSLA until 2012 and by annual Congressional 
moratoria. These include North Aleutian Basin (recently Congress voted 
to eliminate the North Aleutian moratorium but the Presidential 
withdrawal is still in place), Alaska; Washington-Oregon; Northern, 
Central, and Southern California; most of the Eastern Gulf of Mexico; 
and South, Mid, and North Atlantic.

                     PROTECTION OF THE ENVIRONMENT

    MMS requires all operator plans for exploration and development 
have associated environmental documentation under the National 
Environmental Policy Act and they are also subject to CZMA provisions 
that allow review by coastal states. The OCSLA 1978 amendments mandated 
that the Department have a comprehensive environmental studies program 
to provide sound scientific analysis of the potential impacts of 
offshore development, and an Oil and Gas Information Program to provide 
offshore operators and Federal and State governments with data and 
information from OCS activities.
    For example, in the Gulf of Mexico the development of deep water 
oil exploration and extraction has increased rapidly in recent years. 
During the last couple of years, strong bottom currents were reported 
during deep water exploratory operations. As a result, a series of deep 
mooring stations designed by MMS have been established to study the 
shelf/slope/rise dynamics to fill the information gap. One of the pilot 
studies for deep water currents was completed last year. The data 
collected included bottom pressure, velocity, temperature, and salinity 
depth profiles from various current meters and other sensors. After 
peer review of the findings, the results will be incorporated into our 
regulatory decision-making process and shared with all stakeholders.
    In general the MMS regulatory requirements and monitoring of 
operations are specific and stringent concerning the performance of 
offshore oil and gas operations. For example, we require

   specific training for offshore workers in well control or 
        production safety systems;
   installation, regular testing, and maintenance of drilling, 
        production, and pipeline safety systems;
   submission for approval of exploration and development/
        production plans that include comprehensive environmental 
        reports and oil spill contingency plans before operations 
        start; and
   use of the best and safest technology available.

    MMS also has a comprehensive accident investigation program 
followed by safety alert to all companies to prevent recurrence of 
similar incidents; and an effective and vigorous civil and criminal 
penalties program.
    Over the past three decades, MMS has established an .enviable 
environmental and safety record. We have seen the oil-spill rate 
continue to drop from decade to decade resulting in a 67 percent 
decrease over this 30 year period. Offshore production is one of the 
safest ways to provide for our nation's oil and natural gas energy 
needs.

                            SAFE OPERATIONS

    The past five decades of experience and events have led the U.S. to 
a regulatory system that has a strong emphasis on environmental 
protection and safety of offshore workers. Indeed, the statistics show 
offshore to be one of the safer workplaces in America. The most recent 
MMS and Bureau of Labor Statistics data indicate that the offshore 
industry's injury and illness rate was almost 50 percent less than the 
petroleum industry as a whole.
    The OCSLA mandates that MMS ensure safe and environmentally sound 
operations on the OCS through its regulations, including crucial and 
applicable applied research that supports regulatory requirements 
relative to safety and pollution-free operations. A wide variety of 
laws, regulations, and other communications between MMS and industry 
govern all offshore oil and gas leasing, exploration, development, and 
production activities.
    The MMS and the offshore oil and gas industry share the paramount 
goal of preventing offshore accidents. Both work cooperatively to 
protect the environment and to keep workers safe. MMS also promotes 
international cooperation for research and development initiatives to 
enhance the safety of offshore oil and natural gas activities and the 
development of appropriate regulatory program elements worldwide.
    MMS has a permanent workforce inspecting offshore facilities for 
compliance with safety regulations and has particular expertise in the 
engineering, structural, and environmental issues related to building 
fixed facilities in the ocean. The MMS conducts over 20,000 inspections 
of offshore facilities a year and recently began an interagency 
partnership with the U.S. Coast Guard, in which MMS conducts 
inspections on behalf of that agency. The MMS also partners with 
Federal, state, and local agencies in standardizing oil spill plan 
requirements, response standards and in conducting regular drills. In 
addition, our comprehensive regulatory program includes:

   Technical and environmental reviews of all plans of 
        exploration and development.
   A comprehensive program of inspection and enforcement which 
        includes the issuance of civil and criminal penalties.
   Accident investigations, data collection, and analysis.
   An annual awards program that recognizes operators who 
        conduct safe and environmentally sound operations.
   Technical research related to operational safety and oil 
        spill response.
   Coordination with other agencies to ensure protection of our 
        ocean resources as well as the Department of Homeland Security 
        to ensure the security of critical assets.

    To continue this admirable safety record, our goal is to use the 
``best available and safest technologies.'' We must therefore continue 
to investigate technology, practices, and procedures that might further 
reduce risks to offshore workers and the environment. In that regard, 
our offshore program has benefited tremendously from our international 
research partnerships. For the past 25 years, we have worked with 
international agencies on offshore safety research projects--one 
quarter of our 529 safety and pollution prevention projects have 
involved international partners or contractors. Participating countries 
have included Canada, Norway, the UK, Sweden, Germany, France, Italy, 
Mexico, Brazil, Argentina, the Netherlands, Kazakhstan, Japan, Russia, 
Australia, and South Korea. This cooperation has enabled us to leverage 
our research funds and have access to the world's leading technical 
specialists.

                     SCIENCE BASED DECISION-MAKING

    MMS is committed to strong scientific research to ensure that 
decisions are based on the best available information. Reviewing 
environmental and technological issues that have been raised by state 
and local governments, other federal agencies, environmental groups, 
industry, as well as issues identified by MMS staff have helped shape 
our research agenda since the agency's beginning. Working with colleges 
and universities, other federal and state agencies, and a variety of 
research firms, MMS identifies partnerships and opportunities to 
maximize research funding. Much of MMS research is accomplished through 
co-operative funding with universities, inter-agency agreements, and 
joint funding with industry.
    MMS conducts research specific to issues associated with OCS 
mineral leasing and development.

   The Environmental Studies Program assesses the potential 
        environmental risks of offshore development, provides 
        information necessary to minimize any adverse risks, and 
        provides a comprehensive database of baseline science that is 
        critical to the OCS program decision-making. For example, MMS 
        is working collaboratively with other agencies and academic and 
        international experts to determine if offshore industry noise 
        and marine seismic operations represent a threat to marine 
        mammals and, if so, how to mitigate those effects. The U.S. 
        Ocean Action Plan also recognizes MMS for its leadership in 
        promotion of deep sea coral conservation and education through 
        its ongoing survey of deep sea coral communities in the Gulf of 
        Mexico.
   The Oil Spill Research Program provides information on oil 
        spill response capabilities and conducts studies on spilled oil 
        and its effect on the marine environment.
   The Technology Assessment and Research Program investigates 
        and assesses safety and engineering related technologies. The 
        results support the technology basis for MMS's permitting of 
        drilling and production operations as well as other regulatory 
        requirements.

    The U.S. Commission on Ocean Policy in their final report to the 
President and to the Congress, acknowledged the role, and the success, 
of the MMS Environmental Studies Program (ESP). The Commission cited 
that the ESP ``is a major source of information about the impacts of 
OCS oil and gas activities on the human, marine, and coastal 
environments.'' To meet the increased demand for environmental 
information and to compensate for shrinking budgets, the MMS has 
aggressively sought opportunities to leverage its resources through 
partnering. For example, through close collaboration, the USGS 
continues to focus about $2.5 million annually to meet some of the 
biological research needs of the MMS. MMS has also created research 
partnerships with universities in Louisiana and Alaska, leveraging 
federal funds on a one-to-one basis amounting to over $3.0 million per 
year. MMS partners with other federal agencies including NASA, NOAA, 
EPA, DOE, and the Office of Naval Research on research projects when 
common interests exist, and recently has accomplished a number of its 
research objectives through leveraging opportunities under the auspices 
of the National Ocean Partnership Program.
    This is a particularly exciting time for ocean science and resource 
management, and the MMS is in a unique position to participate with 
other agencies as a developer, implementer, and user of our Nation's 
(Coastal) Integrated Ocean Observing System (IOOS) system being planned 
today. MMS has been involved in the development and planning of this 
System from the beginning. The MMS is a charter member of the National 
Oceanographic Partnership Program (NOPP) and the Executive Committee of 
its Ocean U.S. office, which stemmed from a congressional request to 
NOPP's governing body, the National Ocean Research Leadership Council 
(Council), for ``a plan to achieve a truly integrated ocean observing 
system.''
    Even as the IOOS is being developed, the MMS and its industry 
partners are already contributing. Due to a need for more site-specific 
data for forecasting ocean currents that may affect structural design, 
fatigue criteria, or daily operations, MMS established and implemented 
an ocean current monitoring and data-sharing program in the Gulf of 
Mexico. Under this program, deep water oil and gas platform operators 
will collect ocean current data from deep water drilling and production 
sites, and report to the National Oceanic and Atmospheric 
Administration National Data Buoy Center internet website making it 
publicly available to help ensure that OCS activities are conducted in 
a safe and environmentally sound manner.
    Other ongoing MMS monitoring programs such as the Flower Garden 
Banks National Marine Sanctuary Monitoring Program, our Bowhead Whale 
Aerial Surveys, and our support for inter-tidal monitoring are well 
past the decadal mark and well placed to contribute to the biological 
components of IOOS.
    MMS has been an active participant in Federal ocean efforts as a 
member of the National ocean partnership program and all of its 
subsidiary bodies. The Ocean Action Plan specifically recognizes its 
Deepwater Ocean Currents Monitoring Program as an important component 
of the proposed Integrated Ocean Observing System (IOOS).
    MMS also supports the goal of advancing international ocean science 
and policy. MMS's expertise in managing OCS oil and gas and marine 
minerals has been acknowledged internationally. The MMS takes an active 
approach to identify and to become involved in international 
initiatives that promote better integration of safety and environmental 
concerns into offshore decision-making. To do this MMS focuses on:

   monitoring, developing, and refining safety and 
        environmental standards;
   technical and information exchanges with our international 
        regulatory counterparts; and
   providing technical advice to the U.S. Department of State.

                               CONCLUSION

    The Department of the Interior remains committed to the production 
of traditional energy, as well as increased energy conservation, and 
alternative and renewable sources as critical components of the 
President's balanced, comprehensive policy. For this reason, the 
Department of the Interior has ensured that the OCS remains a solid 
contributor to the nation's energy needs. The relative contribution 
from federal offshore areas will increase in the upcoming years due to 
activity in deep water areas of the Gulf of Mexico.
    Regarding the longer term, I should note that there are long lead 
times for accessing frontier areas of the OCS. Lease sales cannot be 
held unless they are part of the current 5-year program. Once a lease 
sale is held, it could take 5 to 10 years for drilling to commence. 
Production could take another 5 years after a discovery. In a very real 
sense, regarding OCS policy decisions, there are few ``quick fixes.''
    The environmental record of the OCS program is outstanding. There 
has not been a significant platform spill in the last 35 years. Natural 
gas production offshore represents one of the most environmentally 
sound energy investments this country could make. A decision to not 
produce OCS resources also carries consequences. Mostly, it will mean 
more imported oil and LNG. Mostly, it will mean more imported oil and 
LNG from countries with less stringent environmental requirements and 
increased tanker traffic into U.S. waters.
    In this time of uncertainty, MMS stands ready to respond--to apply 
our best science, technical experience, and sound management principles 
to benefit the nation.
    Mr. Chairman that concludes my statement. Please allow me to 
express my sincere appreciation for the continued support and interest 
of this committee for MMS's programs. It would be my pleasure to answer 
any questions you or other members of the Subcommittee may have at this 
time.

    The Chairman. You may proceed, Doctor. Feel free to 
abbreviate your testimony. Please proceed.

        STATEMENT OF DR. ROBERT W. THRESHER, DIRECTOR, 
  NATIONAL WIND TECHNOLOGY CENTER, NATIONAL RENEWABLE ENERGY 
                     LABORATORY, GOLDEN, CO

    Dr. Thresher. Yes. Thank you. Thank you, Mr. Chairman.
    I am pleased to appear before the committee as it considers 
the future of energy production on the Outer Continental Shelf. 
I am the Director of the National Wind Technology Center, which 
is located at the National Renewable Energy Lab and is DOE's 
primary renewable energy research organization. I will talk 
about wind and wave technology and some of the associated 
environmental concerns.
    First with regard to wind technology, in the United States 
today there are 6,700 megawatts of wind installed. And 
worldwide, there are 47,000 megawatts of wind. It is one of the 
fastest new growing energy technologies. Offshore, the United 
States has no wind energy installed at this time. The European 
Union has about 600 megawatts installed. And they have plans to 
install about 50,000 megawatts of wind in shallow water in the 
Baltic primarily.
    The U.S. offshore potential is fairly large for wind 
energy. Our estimates show about possibly 50,000 megawatts of 
potential wind in shallow water and 10 to 20 times that amount 
if you go to deeper water. So the United States is blessed with 
a huge amount of wind potential, both onshore and offshore.
    For the United States to exploit this, we see the evolution 
of the technology and the R&D needed needs to proceed in three 
steps. Currently, wind turbines installed offshore are 
basically onshore turbines put on a tower and put in the water 
with a marinization package. And they are not cost optimized at 
this point, nor are they necessarily designed for all the 
environmental effects that are out there.
    So the first step would be to optimize the shallow water 
turbines that are currently being used and then to move to 
slightly deeper water, say out to 60 meter, using some of the 
technology from our oil and gas friends to put them on towers. 
That needs to also be cost optimized. The ultimate vision would 
be to go to deep water. And in deep water, we would probably 
float the turbines, maybe on a buoy or some kind of a platform. 
That is really an open issue at this point.
    The vision would be in the longer term to be able to build 
the turbines and floating structures in a dry dock locally, 
float them into place, drop anchor, and plug it into a cable to 
shore. These would be installed in very large arrays to be cost 
effective. But that technology basically is not here today. It 
is probably 10 to 15 years off at the minimum.
    Moving to wave technology, wave technology is currently in 
its infancy. And in Europe and to some degree in the United 
States, people are building and developing prototype machines.
    In the U.K., there is an aggressive R&D program. And they 
have just commissioned the European Marine Energy Center on 
Orkney Island in Scotland where the first prototype is under 
testing now. They just started that in the last few months.
    In the United States, the Electric Power Research Institute 
just completed a year-long research study on the feasibility of 
wave technology. And the next year they are working on tidal 
and current stream technology. They have been working with five 
Coastal States. And from the study, EPRI estimates shows that 
the incident wave energy flux for the United States is roughly 
equivalent to about 60 percent of the yearly electricity 
consumption. So it also is a fairly large resource.
    Right now in the United States there is one prototype under 
development. Eight companies at last count were developing 
prototype systems someplace in the development stage. And my 
own opinion is that wave energy is about where wind was 20 to 
25 years ago. I also believe that the wave energy has the 
potential over the long term to be as cost effective and 
competitive as wind is today.
    Moving just for a minute to talk about environmental 
issues, wind and wave power generate no greenhouse gases. There 
is no fuel consumed. So they are environmentally sound in that 
sense. But you do have to worry about siting issues. As has 
already been discussed by the committee, visual acceptance is 
one thing, but interference with sea birds, marine life, visual 
noise, conflicts with other uses such as fishing, do come up. 
There is also sediment transport issues associated with the 
structures and some downstream blocking effects. You block the 
flow or you block the waves as you put these systems in.
    However, preliminary environmental studies in the EEU have 
shown that there are no significant impacts due to wind energy. 
And the same is expected of wave, to be not an issue or at 
least a small issue.
    The United States needs to start to investigate some of 
these wind and wave environmental issues to establish baselines 
and set the R&D, just as the oil and gas industry has done with 
Minerals Management Service.
    So in conclusion, the U.S. is blessed with a great 
potential for both wind and wave technology, which is at this 
point not be harvested.
    Thank you. I am open to questions at the committee's 
request.
    The Chairman. Thank you very much.
    [The prepared statement of Dr. Thresher follows:]

   Prepared Statement of Robert W. Thresher, Director, National Wind 
  Technology Center, National Renewable Energy Laboratory, Golden, CO

    Mr. Chairman, I am pleased to appear before the Committee as it 
considers offshore hydrocarbon production and the future of alternative 
energy resources on the Outer Continental Shelf. The National Renewable 
Energy Laboratory (NREL) is the Department of Energy's primary 
laboratory for renewable energy and energy efficiency research and 
development. I am the director of the National Wind Technology Center 
at NREL. My testimony will address the opportunities and challenges 
facing offshore wind energy and wave energy development.

                              INTRODUCTION

    Oil and gas produced on the Outer Continental Shelf have made 
significant contributions to the U.S. energy supply since the 1960s. 
Oil and gas offshore industries have developed technologies to overcome 
barriers resulting from increasing water depths, harsh ocean 
conditions, and growing environmental constraints to exploit the 
nation's domestic petroleum reserves. In a similar fashion, wind and 
wave energy technologies can make a significant contribution to the 
nation's domestic energy supply at a reasonable cost, while sustaining 
the environment by reducing emissions and strengthening our national 
security.

                         WIND ENERGY TECHNOLOGY

    Wind energy is currently cost competitive in many areas of the 
country, producing electricity at 4-6 cents/kilowatt-hour (kWh) at good 
wind speed sites. Approximately 6,700 megawatts (MW) of wind capacity 
is installed in the U.S. Worldwide capacity is more than 47,000 MW. 
Building on this technology base, further development of offshore wind 
energy technologies has the potential to provide up to 70,000 MW of 
domestic generation capacity to the nation's electric grid by 2025, 
based on estimates using the National Energy Modeling System (NEMS).
    European nations have announced plans for deployment of almost 
50,000 MW of wind power in shallow offshore waters by 2025. NREL 
studies indicate more than 50,000 MW of shallow offshore resources 
(900
------------------------------------------------------------------------
Energy Potential (Megawatts)     50,000    200,000    500,000    250,000
------------------------------------------------------------------------

    The United States, however, has no direct experience with offshore 
wind turbines or the infrastructure to install them, and experience 
worldwide is still relatively limited. About 600 MW is currently 
installed offshore versus 47,000 MW installed onshore. No offshore 
turbines been installed in waters deeper than 20 meters.
    To enable commercial exploitation of the domestic offshore wind 
resource at a competitive cost, research and development is needed to 
overcome current depth limits, improve accessibility and reliability, 
develop design methods, establish safety and environmental standards, 
and demonstrate the technology through testing and operational 
experience.
    As illustrated in Figure 1,* the next technology step envisions a 
taller truss structure to support the wind turbine, allowing 
installations in waters up to about 60 meters.
---------------------------------------------------------------------------
    * All figures have been retained in committee files.
---------------------------------------------------------------------------
    The final and most difficult technology step allowing access to 
deeper waters requires R&D to develop floating platforms similar to 
those used for offshore oil rigs. This step would open vast sea regions 
for wind deployment and increase the wind resource potential to 750,000 
MW, as shown in Table 1, for water depths less than 900 meters. The 
vision for floating platform systems is that they will be mass produced 
and assembled in a local dry dock facility, towed out to sea, anchored, 
and plugged into the electrical connector to an undersea cable that 
delivers the power to shore. Through economies of scale and mass 
production at local U.S. shipyards, work at sea would be minimized, 
high paying manufacturing jobs would be created, and competitive energy 
costs could be achieved. The goal of an R&D program would be to achieve 
a 3 to 4 cents/kWh cost of energy by 2020.
    There are significant advantages to deepwater floating turbine 
systems. They can be installed in higher wind regimes farther from 
shore where they will be out of sight and away from environmentally 
sensitive areas closer to shore.
    In summary, the U.S. can begin tapping into the vast resource of 
offshore wind power on the Outer Continental Shelf (OCS) today to 
diversify our domestic energy sources and strengthen our national 
security.

                         WAVE ENERGY TECHNOLOGY

    Wave energy is currently in its infancy. Although there are 
currently no commercial-scale installations that are similar to wind 
energy, a number of companies are developing prototype systems for sea 
trials and demonstration projects. These development activities are 
most active in Europe, where multi-million dollar R&D funding is 
provided by the European Union and individual countries. The United 
Kingdom is particularly interested in exploiting marine energy sources, 
and they have established an aggressive R&D program, including the 
recently commissioned European Marine Energy Center on Orkney Island 
for testing wave energy machines.
    Wave power has significant potential in the U. S. as well. A recent 
study conducted by the Electric Power Research Institute (EPRI) 
estimated that the total incident wave energy flux for the U.S. is 
about 2,300 TWh/year, which is about 60% of the electrical energy 
consumption of the entire country.
    The current status of development for wave technology is roughly 
equivalent to where wind energy was about 25 years ago. There are a 
wide variety of technologies with different physical operating 
principles under development both in the U.S. and in Europe. The first 
full-scale prototype wave energy machine is currently being sea tested 
at the European Marine Energy Center. In addition, two other wave 
energy machines are being tested, one in Denmark and another in 
Portugal. In the U.S., there are four projects at various stages of 
development, and one is undergoing ocean testing. At the time of the 
EPRI study, eight U.S. companies were developing wave energy 
generators.
    Wave energy machines will need a sustained period of R&D. U.S. 
companies could benefit greatly from a comprehensive research, 
development, and operational testing program. These new prototype 
machines will need to be perfected and demonstrated to prove cost 
effectiveness and reliability, prior to large-scale deployment. With 
adequate R&D, wave energy systems have the potential to become as cost-
effective and reliable as wind turbines.

                  ENVIRONMENTAL ISSUES AND PERMITTING

    The most important environmental benefit from utilizing wind and 
wave energy technologies is that they generate no greenhouse gas 
emissions, or other pollutants. The environmental and security risks 
associated with the production and transportation of fuel are 
eliminated because no fuels are consumed. There are, however, several 
environmental issues that need to be considered when siting wind and 
wave facilities. The most important considerations are: interactions 
with marine life and seabirds, visual appearance and noise; conflicts 
with other uses of the sea space; construction and decommissioning 
impacts; changes in sedimentary transport in the local region; and low-
energy zones downstream of the facilities that may be created by the 
use of the wind and wave energy. Preliminary European studies on 
offshore wind facilities indicate that these potential impacts are not 
significant, nor are they expected to be for wave energy projects. The 
U.S. needs to begin investigating these issues just as the oil and gas 
industry and Minerals Management Service have collaborated over the 
last several decades on offshore oil and gas production.
    Environmental studies required for permitting are expensive and 
time consuming. More than three years are required to permit an 
offshore project in Federal waters. Due to the fact that renewable 
energy technologies are new and unfamiliar to these permitting 
agencies, the evaluation of issues and impacts lack hard data and 
scientific baseline studies. There are many regulations and agencies 
with no clear jurisdictional responsibilities making each state and 
project a unique case. The primary Federal agencies with ocean 
jurisdiction include: the Federal Energy Regulatory Commission, the 
U.S. Army Corp of Engineers, the National Oceanic and Atmospheric 
Administration and the Minerals Management Service. In addition, there 
is no ``fast track'' approval process for short-term demonstration and 
testing of projects.

                               CONCLUSION

    Renewable electricity generation from wind and wave energy has 
significant potential for contributing to the country's energy supply 
and national security. However, major technical challenges must be 
addressed before this potential can be realized. Mr. Chairman, I 
appreciate the opportunity to testify before you today and I will be 
pleased to answer any questions the Committee might have.

    The Chairman. Let me say the interest is obvious, but the 
time is short. So I am going to try to--I know the next panel 
is of great interest to a number of Senators. And we have a 
vote at a quarter of, which probably means we have to be out of 
here by 12 noon. And I do not think anybody will come back, 
because we both have meetings after that.
    So what would you think of moving rapidly in terms of 2 
minutes each on questions? Unless you did not give any opening 
remarks; then you can have a little bit more time. Is that fair 
enough? Is that all right?
    Senator Bingaman, you can go first. I will go second. And 
we will go around.
    Senator Bingaman. Thank you very much, Mr. Chairman. I 
thank all the witnesses for your testimony.
    Let me try to just see if I--maybe this would be a 
question, I am sort of leading up to a question for you, 
Director Burton, I am trying to understand what the obstacles 
are to developing these resources offshore that we are all 
talking about. My understanding is there are two obstacles 
currently. One is congressional moratoria, which we enact. As I 
understand it, we enact it every year as part of the Interior 
appropriation bill. And that congressional moratoria covers a 
lot of States.
    And then there are Presidential orders withdrawing lands 
from leasing. And we gave the President that authority under 
the Outer Continental Shelf Lands Act. We gave the President 
authority to withdraw lands from leasing. And the President has 
used that authority in several occasions. So those are the two 
big obstacles.
    The proposal here is that we should pass authorizing 
legislation to authorize States to go ahead with leasing or 
make decisions to go ahead with leasing off their own shore. If 
a State desires to do that, I would think a more direct way to 
do it would be to just amend the language that we put in the 
Interior appropriation bill every year, which provides this 
moratorium.
    The States of Maine, New Hampshire, Massachusetts, Rhode 
Island, Connecticut, New York, New Jersey, Delaware, Maryland, 
Virginia, North Carolina, South Carolina, Georgia, Florida, 
part of Alaska, Washington, Oregon, and California all are 
covered by this language in the appropriations act. It would be 
very easy to just put a proviso in there saying that this 
moratoria language does not apply to the State of South 
Carolina or New Jersey or whichever State wanted out. That 
would be the simplest way to eliminate the legal impediment to 
leasing off the shore of any State.
    Am I right about that?
    Ms. Burton. Yes, sir. If the moratorium is lifted from a 
congressional viewpoint, then you still have the Presidential 
withdrawal in place. But because this administration is very 
mindful of the States' needs or wants, I think that the 
administration would seriously again study its own withdrawal, 
if Congress signified that the State wanted to move off the 
moratorium.
    This is the situation right now in the North Aleutian Basin 
in Alaska, where part of that basin was under congressional 
moratorium. It was lifted in September 2003 at the Alaskan 
delegation's request. We would like to study this area, if the 
President decides to consider changes to the Presidential 
withdrawal. So certainly that can be done that way, if Congress 
would like to do it that way.
    Senator Bingaman. I see my time is up, Mr. Chairman. I had 
some other questions, but I will wait for another round.
    The Chairman. And we all can submit questions. I think 
everybody wants to get something in.
    Let me move to our side, and I will come back to myself. 
Shall we go in the order of arrival? Is that all right with 
everybody?
    Okay.
    Senator Alexander would be next on our side.
    Senator Alexander. Thank you, Mr. Chairman.
    In continuing the discussion about the State option, 
Federal law treats States differently in terms of offshore 
production, as opposed to onshore production. For example, in 
Wyoming, if there is drilling on Federal lands, Wyoming gets a 
royalty of 50 percent of that before the money comes in to the 
Government. Alaska gets 90 percent.
    Now, offshore, if you get beyond 9 miles, States get 
nothing from Federal lands. So our proposal was to give States 
12.5 percent of that, which they might use to lower taxes or 
improve universities or whatever.
    Admiral Watkins, this question is for you. It also suggests 
we take another 12.5 percent and create in effect a 
conservation royalty; the idea of taking some of the money that 
comes from drilling offshore and using it to fully fund the 
land and water conservation fund, wildlife preservation, or 
others.
    In addition to that, Senator Landrieu and I have introduced 
legislation which we call the American Outdoors Act, which also 
relies upon a conservation royalty of about $2 billion a year 
for coastal management of the type Louisiana needs, as well as 
other conservation purposes. Now as I understand your proposal, 
you would in effect create a trust fund funded by some of the 
money from offshore drilling, which we might call a 
conservation royalty. And it would go to help the ocean.
    Does all of this seem consistent? One reason we call it a 
conservation royalty is we are trying to avoid the budget act. 
Because if the money comes into the State treasury or to the--
or if it is a royalty and never gets here, then it is scored in 
a different way. And I will not get into all that. So this 
concept of a conservation royalty, I wonder if you would talk 
about that a little more and whether it is consistent with 
these other proposals that have been made to use these funds in 
that way.
    Admiral Watkins. Well, Senator, what we recommended was an 
ocean policy trust fund. And we debated long and hard about 
this. And we recognized that is very difficult to do. It does 
come under the appropriations control process up here in the 
Congress. But today, $5 billion comes in annually from oil and 
gas revenues, basically, off the coast. Of that $5 billion, $1 
billion is allocated. Land and water conservation fund, some 
other--we would not touch any of that.
    But to us, it is illogical. If we want an ocean policy that 
is integrated and cuts all these issues and brings them all to 
the fore, be able to fund that--and our total funding of the 
entire recommendation in this report was $4 billion over 
current investment. That is about a 50-percent improvement in 
the investment in the oceans today, which we all agree is 
inadequate. Thirty-seven Governors agreed with that. Thirty-
seven Governors said, ``Give us a break. Do not give us 
unfunded mandate. We want to get some additional help from the 
Government to carry out these very complicated issues.''
    So we said, ``Let us set that up and grow over time into 
something that's predictable.'' The States can involve 
themselves up front in the planning process instead of being 
tail-end Charley on these issues. And these were unanimously 
supported. We went across the country to listen. So we came up 
with this fund.
    Now some of the things you said, Senator, were very 
consistent with that. So, you know, I am not saying we have all 
the answers. I am just saying there needs to be a predictable 
source of moneys, if we are going to do this. Otherwise it is 
just superficial, fig leaf cover, rhetoric only, and we are not 
going to do anything. So I really believe that needs to be 
looked at.
    I have talked to Senator Stevens, when he was still 
chairman of the Appropriations Committee, about it. He seemed 
to think it had some merit, although it was going to be tough. 
Everybody wants to go after those moneys. There is $4 billion 
unallocated going into the treasury. We do not think that is 
the right way to put that money. We think it ought to be 
tailored to what Congress says.
    And I think Senator Domenici said, ``We ought to tell them 
how to do that.'' We ought to protect it so it does not become 
an incentive for States to drill and break moratoria. 
California people are very worried about that, that somehow 
additional moneys flow back, we will break the moratoria. I do 
not think so. We have no indication that the States considered 
the $1 billion that is allocated across the Coastal States to 
help them out from the current revenues that kept them from 
issuing the moratoria. So I do not know where that comes from. 
I think it is a red herring that is floated out there 
constantly.
    So I think that what we have recommended here is the right 
thing to do. But I am not saying it is the only thing. I think 
what I heard you say was somewhat consistent with that, with 
that, with the trust fund concept.
    Senator Alexander. Thank you.
    The Chairman. Thank you very much.
    Let us see. We can move over the Democrat side.
    Senator Landrieu.
    Senator Landrieu. Thank you.
    Admiral, you may want to qualify, or ``clarify'' is a 
better word, about this trust fund concept, because the core of 
what I think we are all working on, although we come from 
different viewpoints, is to try to open up opportunities in the 
Outer Continental Shelf, the appropriate opportunities for 
development and investment and conservation.
    In some States, like Louisiana, Mississippi and Alabama, 
Texas, where we are more familiar with oil and gas drilling, we 
also want to do a better job of that, open up opportunities for 
wind and wave and new technologies. Since our States pioneered 
those technologies, we are well positioned to pioneer new 
technologies for using the resources in the Outer Continental 
Shelf.
    But I would just like it if you could clarify the policy of 
the Oceans Commission, that you do think that some sort of 
revenue-sharing provision is important to the Coastal States. 
Is that why you included it in your report?
    Admiral Watkins. We made it very clear, Senator Landrieu, 
in our report. And it is in my longer statement for the record, 
a whole section devoted to the Ocean Policy Trust Fund. It is 
shared. It is a shared responsibility, we think, that the 
Federal Government has to be a good steward of the ocean, along 
with the States. The States have to do the hard work.
    And as I said, they were very supportive of our 
recommendations here to get some kind of predictable money 
stream in there to come back to them to help them out, to carry 
out these varied provisions, because they are expensive.
    So yes, it is shared. It is not one way. It is give back to 
the States at least $1 billion of the unallocated moneys today. 
That is right off the bat to get going on this and to kick 
start it and really move out, and then gradually migrate up to 
the $4 billion a year that are required to carry out an 
integrated national ocean policy, as was recommended, or 
something equivalent to that.
    Senator Landrieu. Mr. Chairman, to briefly follow up on 
this point, as we come up with the details of this trust fund 
proposal that I think in large measure we all agree on, just 
not the details, thinking about sharing with the Coastal States 
on a production-based formula, but I mean production not just 
of oil and gas. But if you produce wind, you share in wind. If 
you produce tidal energy, you share in that. If you produce 
hydro, you share.
    But as a producing State, I want to say for the record in 
this questioning, the other Senators can imagine the difficulty 
in Louisiana Senators, Texas Senators, Alabama Senators, and 
Mississippi Senators saying: Okay, we agree to do all the 
production of everything, but we are happy to share our money 
with everyone.
    Now, you all understand we could not possibly sell that in 
Louisiana, Mississippi, Texas, and Alabama. So we have to come 
up with a way that each State can produce what it can and what 
it wants and then share those fairly. And that is just what I 
ask this committee to focus on, as we go down this path.
    Admiral Watkins. But, Senator Landrieu, one of the things 
we put in our report that was very clear is that it is not only 
the current oil and gas revenue stream that we are talking 
about here. It is the future revenue stream. There is no 
structure out there. There is no regime right now----
    Senator Landrieu. Correct.
    Admiral Watkins [continuing]. Under which wind and thermal 
and all these other things can be brought in. Do you know what 
we are doing today? The Corps of Engineers has the sole 
responsibility off Cape Code under the Rivers and Harbors Act 
of whenever. And that has got to stop. I do not see how the 
States can bring these kinds of new sources of renewable energy 
and everything else to bear without some kind of a framework 
that the Congress has laid. That is where the revenue stream 
can be identified. That is how this policy trust fund could be 
running.
    It is a total package. It is not just a simple thing of 
sending--allocating some moneys down to through the trust fund. 
It is a matter of bringing this all together, getting all 
revenue streams identified, and do not allow entrepreneurs to 
go out there and not return to the American citizens what they 
should in Federal waters. So it is a total package. And I think 
we have a very extensive review of that in our ``Ocean 
Blueprint for the 21st Century.''
    The Chairman. Well, thanks for the answer. Thanks for the 
questions. We are going to move this as quickly as we can.
    Senator Martinez, you are next.
    Senator Martinez. Thank you, Mr. Chairman. I will be very 
brief.
    Ms. Burton, the offshore drilling in the Gulf of Mexico, 
the production, it seems, is moving in the direction of deep 
water oil, as opposed to shallow. And also I am sure you would 
understand the great concern of any potential for drilling in 
the future that would be close to the Florida coast.
    With that in mind, would the Mineral Management Services 
support an effort by those of us who are concerned about 
drilling off Florida's coast to buy back existing leases that 
are apparently mostly in shallow water and also fairly close to 
our Florida coast?
    Ms. Burton. Mr. Chairman, we--at this point, I cannot 
answer the question, because it is not a matter of the Minerals 
Management Service supporting it. It is an administrative 
position that has not been taken yet. But certainly we are 
aware of it. And we know exactly how many leases are there, and 
we can look at that. But the administration has not taken any 
position on that yet.
    Senator Martinez. So that would have to be a broader 
position than just MMS would----
    Ms. Burton. That is correct, sir. MMS cannot make that 
decision. This is an administration's decision.
    Senator Martinez. In addition to that, I know we have 
talked about the potential for spillage and so forth. But would 
you agree that there are other environmental risks, 
environmental hazards, that come about as a result of drilling, 
such as the water that is withdrawn and other issues along 
those lines that create other environmental problems?
    Ms. Burton. There are certainly environmental problems, but 
they are studied before any license, any permit, is given out. 
And we have a whole group of scientists. We work very closely 
with NOAA, the National Oceanic and Atmospheric Administration. 
We ensure that there is enough mitigation of any issue that we 
see that the marine environment is kept safe. Not to say there 
are no issues, but we take care of them. And we think the 
regulations are such that it really is done very safely for the 
environment, as well as for the people, by the way.
    Senator Martinez. It mitigates them. It does not eliminate 
them.
    Ms. Burton. It mitigates it to a point where it is a fairly 
reasonable risk that we are taking. And I think that everything 
we do, if there is any kind of impact, we mitigate it to where 
the impact is not lasting and not damaging.
    Senator Martinez. Thank you, Mr. Chairman.
    The Chairman. Thank you very much, Senator.
    Let us see. Where are we?
    Senator Feinstein.
    Senator Feinstein. Thank you very much, Mr. Chairman.
    My question is for Ms. Burton. And it concerns the 36 
Federal oil and gas leases offshore of California. These leases 
were issued decades ago, between 1968 and 1984. They have never 
produced oil and gas. They are mired in litigation. Two new 
marine sanctuaries have been established in the area that could 
be affected. California has maintained a complete statutory ban 
since 1995 on the areas surrounding the 36 leases.
    I am told the following: Notwithstanding specific direction 
from the Ninth Circuit Court of Appeals to do a thorough 
environmental evaluation of the impacts of these leases, MMS 
has failed to prepare an environmental impact statement, failed 
to analyze the cumulative and future impacts of a decision to 
grant suspensions.
    For example, the MMS failed to adequately analyze 
cumulative impacts and the effects of extending the life of 
existing platforms that the lessees propose to use--proposed to 
use and has failed to adequately address the need for new 
infrastructure for the leases, which cannot be developed from 
existing facilities.
    Is it true that MMS again failed to comply with the 
National Environmental Protection Act in preparing its 
environmental assessments for the lease suspensions for the 36 
leases? Is not failure to comply with NEPA the basis for 
additional legal actions that have been filed against MMS?
    Ms. Burton. Senator, as you very well know, MMS was under 
court order to prepare all the environmental assessments 
required under the court order that an extension of a lease is 
considered an action that needs to go through the NEPA process. 
We presented the court with a list of what we were going to do 
and a timetable. The court accepted it. I would seriously doubt 
that the court would accept something that is in violation of 
law.
    We have done the environmental assessments. We have filed 
them with the court. And we are now waiting to see what the 
next step will be.
    I want to also assure you that should there be any kind of 
activity on those leases, there are more environmental 
assessments that will be done. This was strictly for a 
temporary suspension of operations on the leases. But there 
would be more work done if they were to file, for example, an 
exploration plan or a development plan.
    All along the way there would be new assessments done. And 
the State of California would have a chance to review them and 
decide whether they are acceptable or not.
    What I do want to tell you also, Senator, regarding those 
36 leases, the administration has agreed to buy them back. And 
we are in--we have been actually in negotiation for 3 years 
with the companies to buy the leases back. As we follow the 
court's path to do what is ordered in the California v. Norton 
litigation, on a parallel path we are trying to buy those 
leases back.
    If we were to succeed in a settlement, the whole litigation 
becomes moot. The leases would go away. The Department of 
Justice is the lead agency for negotiation. The problem we are 
having is that the Department of Justice assessment of what 
those leases are worth and the company's assessment are so far 
apart that so far we have not been able to reach an agreement. 
We even went through mediation that was ordered by one of the 
judges. We are continuing. We have not given up. We are 
continuing our effort to buy them back.
    The Chairman. Senator, your time is up.
    Senator Feinstein. Thank you very much. I appreciate your 
answer. Thank you very much.
    The Chairman. Senator Murkowski.
    Senator Murkowski. Mr. Chairman, I will yield to my 
colleague.
    The Chairman. Go ahead, Senator Allen, please.

         STATEMENT OF HON. GEORGE ALLEN, U.S. SENATOR 
                         FROM VIRGINIA

    Senator Allen. Thank you, Senator Murkowski.
    Mr. Chairman, thank you for holding this hearing. It is a 
very important issue. We need to become less dependent on 
foreign sources of energy. The Outer Continental Shelf is 
clearly an area of great interest where we can become less 
dependent and get increased production here, rather than 
relying on foreign gas or liquified natural gas, which costs 
more.
    As you may know, Mr. Chairman and members of the committee, 
this has been an issue in Virginia, particularly this last 
year. And I am very much looking forward to putting out the 
real facts here in this committee and get this issue on the 
table. And I thank all our witnesses.
    There is a lot of emotion on this issue. And there has been 
no one more knowledgeable and articulate in Virginia than a 
State Senator, who I want to introduce, who will be on the 
second panel. I am going to have to leave. And that individual 
is State Senator Frank Wagner from Virginia Beach.
    You have chosen a great witness to testify today. He has a 
long history in our Virginia General Assembly and honorable 
service to our country as well, as an engineering and diving 
officer in the Navy, success in the manufacturing industry, and 
he even has a bachelor of science degree in ocean engineering 
from the U.S. Naval Academy.
    He introduced a measure and passed a bill in the General 
Assembly this year that surely showed his interest and the 
interest of the people of Virginia in clean, responsible 
solutions to the current energy crisis. He is well qualified 
for the task of speaking on the energy needs of manufacturing 
and the promising advances of OCS technology.
    Senator Wagner's hearing will bring some insight. I was 
following that legislation. He understands how important this 
is for people who heat and use natural gas in their homes, as 
well as manufacturers and the jobs therefrom and the 
competitiveness of our country.
    And so I am not going to ask any questions now of these 
witnesses. But, Frank, Senator Wagner, if you would just stand 
up, I am just introducing you now. Thank you for taking your 
time to be here.
    And, Mr. Chairman and members of the committee, thank you 
for bringing forward an outstanding witness for not only 
Virginia but the country.
    The Chairman. Thank you very much, Senator.
    We look forward to your testimony, sir.
    Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman.
    Very quickly to you, Ms. Burton. There has been so much 
concern and controversy over OCS development as it relates to 
oil, perhaps not so much concern and controversy over the 
natural gas. My question to you is whether or not you believe 
it might make sense for the Congress to consider permitting 
gas-only leasing in the OCS areas.
    Ms. Burton. There is no doubt, Senator, that gas does not 
pollute like oil might. And that is a lot safer type of 
activity from that standpoint. There are areas that are known 
as being gas prone. We feel, or at least our solicitor feels, 
that we do not at MMS, at Interior, have the authority right 
now to issue gas-only leases. Gas and oil are tied in the OCSLA 
statute. We would need some amendment to the statute to issue 
gas-only.
    Is it something that we think should be done? I am really 
not qualified to tell you that at this point, because I think 
the people that are going to drill for it are the ones 
qualified to answer this question. And I think industry has to 
make that known to you.
    Can they drill and produce only gas? And what happens when 
they find oil with it? Because a great percentage of the time, 
oil and gas are associated. And it would be very difficult to 
say, ``I am going to produce only gas.'' What happens when you 
find oil?
    I think the challenge for the MMS will be to find proper 
regulation to see how can we regulate drilling activities that 
may produce oil when they do not have an oil lease. So what do 
we do? Do we make them reinject it? How do we handle that?
    This is something we will come to grips with, if Congress 
gives us the authority and shows a desire for gas-only leases. 
But I suspect the industry will have to tell you whether that 
is feasible or not.
    Senator Murkowski. Thank you, Mr. Chairman.
    The Chairman. Thank you very much. That is an excellent 
suggestion, and we had better make some inquiries with 
reference to that, because we do not have time for another 
hearing on the subject. So we had better find out.
    Now I think following along here, the next Senator would be 
Senator Thomas.
    Senator Thomas. Thank you, Mr. Chairman. I am not as 
familiar with this as I might be. We have relatively little 
offshore in Wyoming.
    [Laughter.]
    Senator Thomas. But I do--we do have Federal land. So as 
you talk about where the money goes from these things, remember 
that Federal land and Federal water may be kind of the same. 
And it does not all go to the States where we are.
    Johnnie, where do you think are the most likely areas for 
movement and production? And other than the law, what are the 
greatest obstacles to moving forward?
    Ms. Burton. Well, I think that besides the law and the 
moratoria, et cetera, you have the technological challenges 
that industry faces every day. They are going to new frontier 
areas, extremely deep drilling. There is a well being drilled 
right now that is trying to reach 35,000 feet on the Shelf. I 
do not know how they will reach it or when, but I think they 
think it will take at least a year.
    There are challenges when you drill in extremely deep 
water. We hold the record in the Gulf of Mexico with a little 
over 10,000 feet of water. So these are some of the problems.
    But I think that what I--at least when I talk to the people 
who do it--because, remember, MMS does not produce one barrel 
of oil or one MCF of gas. All we do is regulate the people who 
do produce it and, to some extent, facilitate that production.
    When I talk to them, they tell me that the biggest obstacle 
they have is a lack of access. When you look at the OCS, and it 
is about 1.76 billion acres, we really have only about 40 
million acres under lease at this point. But there is plenty of 
oil and gas in the Gulf of Mexico, as our production has proven 
in the last few years and the number of discoveries.
    So I really think that technology is a big obstacle. But 
industry has shown that they are very capable of moving along 
into tougher and tougher environments. And of course, access is 
another issue.
    The Chairman. Thank you very much, Senator.
    Now we are going to have Senator Corzine and then Senator 
Salazar. And we will get the next--and I will have a question 
then.
    Senator Corzine. Thank you, Mr. Chairman. I appreciate very 
much you holding the hearing. And I have a statement for the 
record to be included.
    The Chairman. It will be part of the record.
    [The prepared statement of Senator Corzine follows:]
  Prepared Statement of Hon. Jon Corzine, U.S. Senator From New Jersey
    Thank you for calling this hearing today Mr. Chairman, on this most 
important issue. Proper stewardship of our coastal areas and energy 
resources is vital for the continued health of our economic security 
and environmental stability.
    For more than twenty years, a strong, bipartisan moratorium has 
protected coastal areas from offshore oil and gas development. This 
moratorium on the Atlantic Coast began with the support of President 
Reagan in 1982. It was later extended by President George H.W. Bush in 
1990, by President Clinton in 1998, and is now set to expire in 2012.
    It is my firm belief that this moratorium should be made permanent. 
Coastal tourism is New Jersey's second-largest industry, and the New 
Jersey Shore is one of the fastest-growing regions in the country. 
Tourism at the shore directly and indirectly supports more than 500,000 
jobs, more than 12% of total State employment, generates more than 
$16.6 billion in wages and brings in more than $5.5 billion in tax 
revenues to the State.
    In the last two Congresses, I introduced the COAST Act, which would 
make permanent the moratorium on oil and gas leasing activity in the 
Mid-and North-Atlantic.
    As all of my colleagues from coastal states know, keeping our 
shores free of drilling will not be easy. We have formed successful 
bipartisan coastal coalitions in the past to keep our shores clear of 
this kind of activity. In 2001, we fought off the Department of the 
Interior. And during the past few Congresses, we banded together to 
prevent Outer Continental Shelf inventory provisions from being adopted 
as part of the final Energy Bill.
    It is clear that this moratorium has had bipartisan support for 
over two decades, yet since the beginning of this Administration, we 
have seen efforts to weaken this moratorium under the guise of trying 
to reduce U.S. dependence on foreign oil.
    Increasing domestic energy production is, of course, a necessary 
component of a balanced energy policy. However, considering the minimal 
amount of oil and gas resources located in the Mid-Atlantic outer 
Continental Shelf--estimated in 2000 by the Minerals Management Service 
to be approximately 196 million barrels of oil, enough to last the 
country barely 10 days--I am concerned a rush to open up the Atlantic 
Coast may result in economic consequences that far outweigh the 
benefits.
    I urge my colleagues and the Administration to protect these vital 
coastal communities across the nation by continuing to oppose any 
effort to weaken the moratorium on new mineral leasing activity on 
submerged lands of the Outer Continental Shelf.

    Senator Corzine. Unlike Senator Thomas, New Jersey has just 
a little bit of shoreline--127 miles of it. And the second 
largest industry in our State is tourism. So there is more than 
just a little concern in New Jersey with regard to the issues 
of offshore drilling.
    And the point that Ms. Burton just made with regard to 
inter-mixing of oil and gas, if you were to take one approach, 
it is certainly a concern to our citizens, as are a number of 
things.
    I have actually been listening to the hearing in my office. 
And, Admiral, you talked about what you thought was stated in 
your Ocean Blueprint with some incoherency with regard to our 
overall management of policy relating to coastal and ocean 
areas. If we were to follow the approach that is contained in 
the language known as SEACOR, would that contribute----
    Admiral Watkins. Language? I am sorry, Senator.
    Senator Corzine. SEACOR is an attempt to devolve more of 
the authority for offshore drilling and exploration to the 
States. What kind of impact would that have with our overall 
management of coastal and ocean efforts?
    Admiral Watkins. I do not know that I can answer that, 
Senator. You know, we had a very clear line given to us in 
Oceans Act 2000. We debated on this commission throughout. Can 
we cross the line into energy generation? And I kept saying, 
``No, we cannot.'' It was never in our mandate to do that.
    I was the Energy Secretary. I understand the energy 
problem. And I understand the interaction with energy and our 
ocean policy. So I have to stay pretty much out of any 
specifics like that. I would love to have the capacity to get 
into something like that, because it seems to have potential 
merit. On the other hand, I am so worried about the fact we 
have no regime offshore at all that to throw anything into the 
mix without having some overall congressional policy and regime 
setup would be a mistake. That is all I can go on from my 
commission experience.
    Obviously, I have some personal views that are really 
irrelevant at this point. I am an old, antique Energy 
Secretary, been out of the business for 14 years. So I think 
that I would have to stop there, Senator Corzine. I would love 
to be able to answer you, but I cannot do it.
    Senator Corzine. I appreciate your work on raising the 
issue that the overall policy needs to be established, which I 
think is fundamental.
    Thank you.
    The Chairman. Senator Salazar.
    Thank you, Senator Corzine.
    Senator Salazar. Thank you. Let me first of all just say 
welcome to the panel and particularly to Dr. Thresher from 
NREL. I appreciate you being out here. And all of us, I know, 
on this committee appreciate the great work that NREL is doing 
for our country, especially as we deal with the huge energy 
challenge.
    My question for you simply is this: With respect to wind 
and power technology, and the offshore development of those two 
technologies, what more could we be doing as a country to 
further explore those technologies? And what is the realistic 
possibility, especially with respect to wave energy, of ever 
being able to look at that as a useful energy source for the 
nation?
    Dr. Thresher. Thank you, Senator. Right now our activities 
at NREL are almost totally directed at land-based technology. 
And that is where the emphasis has been. We have very small--
less than 10 percent of the wind budget is going toward looking 
at offshore. And as the oil and gas folks know, it is very 
expensive. It is difficult in the environment.
    And so some expanded R&D in that activity, as I mentioned, 
kind of first optimizing the shallow water technology, much in 
the same way the oil and gas industry has done, shallow water, 
intermediate depths.
    But the ultimate vision is to be able to float the 
technology, get it out of sight, kind of over the horizon, 
where the winds are better and it does not interfere with the 
environment quite as much out in the deep waters.
    So with regard to wave energy, it is absolutely in its 
infancy. There are only prototype systems around. There is no 
Federal program to support those activities, no R&D. It is all 
company sponsored. And it is a little bit fragmented, as 
opposed to in the U.K., where there is a concerted effort to 
develop that technology.
    And as I indicated, the incident energy in waves coming 
into this country is about, on a yearly basis, 60 percent of 
the electric consumption in the year. So there is a large 
resource potential. But it will take time and money to--and a 
sustained effort over at least 10 to 15 years to bring that to 
fruition.
    Senator Landrieu. Mr. Chairman, I know we have to move to 
the other panel, but could I just get on the record, since 
several members have mentioned the distance from the shore, to 
keep out of eyesight the production of whatever we are going to 
try to produce, what is the distance? Is it 10 miles, 15 miles, 
or 25 miles that the human eye can see?
    The Chairman. You are speaking of wind now?
    Senator Landrieu. Speaking of any kind of production 
platform, how far do you have to be offshore to not see it?
    Ms. Burton. From an oil and gas viewpoint, a production 
platform is not visible after 15 miles.
    Senator Landrieu. Would wind be visible after 15 miles?
    Dr. Thresher. At 5 miles, it looks like on the horizon 
about my finger, about an inch as to how----
    Senator Landrieu. So 15 miles, you could not see it at all.
    Dr. Thresher. Fifteen miles with a little bit of haze, you 
could not see it.
    Senator Landrieu. Okay.
    The Chairman. I just have two questions, one first for you, 
ma'am. First I want to tell you what a good job I think you do, 
and I hope you stay with us, as we try to sort through this 
policy.
    Ms. Burton. Thank you, sir.
    The Chairman. When you give us our estimates of what the 
resources are out there, when--nobody will let us adopt the 
policy that says ``Let us go on and do a real, current, best 
technology estimate of the resources,'' where every time we 
talk about it, it is the end of the world. But I note that 
whatever estimates you all have given us have been always on 
the low side versus reality.
    Is it fair to assume that the estimates you are giving us 
are vested with the same quality?
    Ms. Burton. Yes, sir.
    The Chairman. So if we are looking out there, we probably 
could expect more resources rather than less from these 
offshore resources?
    Ms. Burton. I think so. And until we get more drilling and 
more exploration, there is no real knowledge. The Gulf 10 years 
ago looked like it was a dead province. Look how much it is 
producing today.
    The Chairman. Yes. My second question is: I am now 
knowledgeable about the dramatic change in technology in on-
land development of oil and gas from drilling from 25 years 
ago, Prudhoe Bay 1 to Alpine 1 in Alaska. The same increase in 
technology, has that occurred in offshore drilling, also?
    Ms. Burton. I think it is as much or more. It is incredible 
what is happening offshore today. I just went to a platform 
that had 100 new technological advances. It is absolutely on a 
par with the space program.
    The Chairman. So does that mean from the footprint being 
this platform, that you go out long distances with many, many 
drills off of one platform, as compared with many more than we 
did when you started the program?
    Ms. Burton. Yes, sir. They can go drill holes from a drill 
ship and then the drill ship moves away, then they put in a 
production platform. And they can tie in several fields long 
distances away from the platform, up to 50 miles away. So 
fields that might be even marginal and could not have their own 
platform, which would not be economical, now can be produced 
because they are all tied back to one central platform. One 
footprint, five fields.
    The Chairman. Now both you and Admiral Watkins have alluded 
to the pollution risk. Admiral, you talked about the fact that 
there is the real risk and the perceived risk, I think, of 
spills. And you talked about what you found, what your 
commission found, versus what some environmental group that you 
mentioned was using. Would you state that again? I do not 
remember what you said.
    Admiral Watkins. What I said, Mr. Chairman, was that I 
believe, because of the technological advances that have been 
made in 25 years since the blowout in Santa Barbara, that we 
need to review those kinds of things on the basis of the kind 
of technology explosion that we have had in this interim 
period. It is impressive.
    I have been out on the deep rigs in the Gulf that were then 
drilling to 5,000 feet. The environmental sensitivity, I can 
tell you, is as high there as it is anyplace in the country. 
Those people are worried about the environment. They also want 
to preserve and have sustainable oceans around them.
    You cannot shut the drill--as you know, you cannot shut a 
drill platform down now, because they are fish habitats.
    The Chairman. Right.
    Admiral Watkins. So we have learned a lot over time about 
these things. And I say perception is--it is not that there is 
not a risk. It is just that to stay on the same old issue, 
whether it is Exxon Valdez or whether it is a blowout off Santa 
Barbara or some tanker off the coast of France, we have got to 
start thinking about: What is it 25 years later? It is a 
different ball game.
    And I just say periodically, as I recommended when we built 
the energy strategy in 1991, we should take the energy bill 
that came out of that in 1992 and we should have upgraded every 
5 years, because of the technology explosion. Did we do it? No. 
We have not had a policy now since 1992.
    The Chairman. We are going to do it now.
    Admiral Watkins. We have to do it now. So this is the 
problem I have with perception versus actual. I think actual 
changes over time, and perceptions do not. That is the problem.
    The Chairman. Yes. The problem in that regard is that even 
if we have the reality rather than the perception because of 
the new changes, those who are opposed use the old evidence and 
continue to tell the public it is the current evidence. And so 
it is a great PR battle. And it is a question of who has the 
facts. And I do not think it can be doubted that the transition 
period has caused it to be much, much safer, rather than less, 
and it is obvious. But yet some will not acknowledge it at all. 
So we are going to proceed.
    My other observation for you, Admiral, as you discuss this 
trust fund concept, which you understand is very difficult to 
do--I know it better than you because I know what the budgets 
are all about. And it is hard to set up a trust fund. And it is 
clearly hard for this kind of committee to set one up. I 
guarantee you. First you have to get it into the budget. And 
that is a devil. And then you have to follow it and put it in 
some kind of mandated approach.
    But it does seem to me that there is a fallacy in your 
argument, in the rationale of your argument, that you should 
take a very large portion of the new money that will come from 
offshore drilling and put it into a trust fund for the purpose 
you say, in that the relationship of how much of the ocean 
problem has been caused by drilling is certainly not 
established.
    It is not as big as the proportion that you are going to 
take of the royalty. In other words, if there is a problem in 
the ocean, how much of it is caused by drilling? And it is 
probably small. If you are suggesting that we should take a 
huge portion of the royalty and apply it to that problem, I am 
saying we should apply it, but I do not know if we should apply 
as much as you say, based upon just common reasoning about 
which contributed to the problem, what contributed to the 
problem.
    I just throw that out. I do not mean to be argumentative.
    Admiral Watkins. No. I think you made a good point, Mr. 
Chairman. You know, we were talking about the existing revenue 
flows. Only $1 billion goes back to use for work----
    The Chairman. Right.
    Admiral Watkins [continuing]. And the rest goes into the 
Treasury's slush fund. Okay. I am just saying there is a logic 
to taking the same revenue stream and apply it back to the 
oceans which surround these platforms.
    The Chairman. You are right.
    Admiral Watkins. I think the Gulf of Mexico is taking the 
heavy load for this country and all of the others that will not 
have a refinery, will not have any sources, all griping about 
it. They do not mind the Gulf States taking the burden 
environmentally. So I believe there is a need to go back and 
use these funds for that purpose.
    I think it is a tribute to the stewardship ethic that we 
are trying to build in this country, that we should be good 
stewards of that ocean. And I think that this is a source, one 
source, of revenue that has a logic train. It is called the oil 
and gas business. It has matured. It has been there for years. 
And we ought to capitalize on it.
    The Chairman. Thank you. Thank you, panel.
    We are going to proceed to the next panel.
    Senator Landrieu. And, Mr. Chairman, just for the record, 
it is a $1 billion authorization. But last year the actual 
money was only, I believe, around $450 million. So I just want 
to clarify for the record that it is a $1 billion 
authorization, but we never hit that mark. And it was only 
about $400 million.
    The Chairman. That is true. It enhances his argument more, 
even more so.
    All right. Next panel, please. We do not have but 10 
minutes, because there is a vote up. But we are going to do 
this. And we are going to ask them to hold the vote.
    Is there a vote following this vote? Could you find out?
    Okay. I am very sorry about the time problem. In the event 
we cannot get enough done here, would each of you tell me, 
starting right there, ma'am, the Sierra Club, if we waited 
until after lunch, could you come back?
    Ms. Boger. Yes, sir.
    The Chairman. Okay. And how about you, sir?
    Mr. Angelle. Yes, sir.
    The Chairman. I have a 2:15 here and here. Could you be 
back at 1:30?
    Senator Alexander. Mr. Chairman, I will do my best. I am 
supposed to be--the Foreign Relations Committee is considering 
Mr. Bolton this afternoon. And I need to be at that when they 
vote. Otherwise I will be here.
    The Chairman. Okay. How about--can any Democrats be here at 
1:30? I should ask that.
    Why do we not do that? Let us go right now until 12 
o'clock. If we do not get enough in, we will just recess until 
1:30, quarter of 2, and do another 30, 40 minutes.
    Please proceed. Let us start right with you, and you can 
give your testimony. Whatever you have in writing will be made 
a part of the record. We would appreciate it if you would try 
and summarize it.

         STATEMENT OF DEBBIE BOGER, DEPUTY LEGISLATIVE 
                     DIRECTOR, SIERRA CLUB

    Ms. Boger. Good morning. My name is Debbie Boger. I am the 
deputy legislative director of the Sierra Club. And I am here 
representing over 750,000 members nationwide. Thank you for the 
opportunity to testify, Mr. Chairman.
    The Sierra Club strongly opposes any moves to open the 
moratorium areas of the Outer Continental Shelf to drilling for 
hydrocarbons of any sort, including both oil and natural gas. 
We oppose lifting the moratorium for six reasons.
    First and most importantly our beaches and coastlines are 
special, irreplaceable places. It is our responsibility to 
protect them. And the existing moratorium is the primary tool 
we have used to protect them for over 20 years now.
    Second, allowing drilling off our coasts would have very 
damaging consequences for our beaches, for marine life and its 
habitat, and for the broader environment.
    Third, the National Academy of Science has determine we do 
not have enough information to ensure that the environment will 
be protected if we drill offshore.
    Fourth, drilling for oil and gas could have serious 
consequences for local tourism and fishing economies.
    Fifth, there is no need to sacrifice our coasts in search 
of natural gas. Most of the natural gas estimated by MMS as 
recoverable is already available for leasing. So there is no 
justifiable reason to turn to our special places for drilling.
    Finally, there are smarter ways that we can and should 
address our energy needs rather than allowing our coastlines to 
be threatened with oil and gas drilling.
    While there have been significant advances in oil and gas 
recovery technologies in recent years, many serious 
consequences still result from exploration and drilling for 
either oil or natural gas. Seismic surveys, which are an 
inventory technology, have been linked to numerous whale 
beachings, making fish deaf, and rupturing swim bladders.
    People might think, ``Well, who cares if a fish is made 
deaf?'' But fish use their hearing to locate prey, avoid 
predators, communicate, and sense their surroundings. So 
essentially what we are talking about is killing huge numbers 
of fish. Salmon are one example of vulnerable fish with swim 
bladders.
    Other exploratory technologies have been shown to be 
extremely destructive to marine life and habitat. There are 
also serious consequences onshore from the extensive web of 
pipes in sensitive areas like marshes and wetlands.
    In addition, exploratory drilling for oil or gas generates 
serious air and water pollution. These are numbers from the 
2000 lease sale of 181 in the Gulf of Mexico. An average 
exploration drill well generates about 50 tons of nitrogen 
oxides, 13 tons of carbon monoxide, 6 tons of sulfur dioxide, 
and 5 tons of volatile organic hydrocarbons, all released into 
the air. And an OCS well will also generate about 180,000 
gallons of mud waste and drill cuttings and hundreds of 
thousands of gallons of water containing pollutants like 
mercury, benzine, arsenic, and lead, and can contain varying 
amounts of radioactive pollutants.
    There is also the serious, but not well known or well 
debated, threat of methane hydrate concentrations in the OCS.
    Methane is 20 times more potent as a global warming 
pollutant than carbon dioxide. So the release of these hydrates 
could be very dangerous.
    The National Academy of Sciences found in 1981, after a 
study at the request of Former President Bush, that there is 
insufficient scientific data available to permit leasing in the 
moratorium areas and ensure that the environment can be 
protected.
    The industrial nature of oil and gas drilling often is at 
odds with the economic base of coastal communities, which rely 
on tourism and marine industries like fishing. In the case of 
the recent Virginia bill, which we will hear about, both the 
Outer Banks Visitors Bureau in North Carolina and the Virginia 
Beach Hotel/Motel Association oppose the bill because of their 
concern for the effects on tourism.
    We submit that there is no need to look to additional 
natural gas or oil resources because enough is available 
already. Eighty-five percent of Federal onshore oil resources 
and 88 percent of Federal onshore natural gas resources in the 
Rocky Mountain region are already available for leasing and 
development. Only 12 percent of Federal onshore natural gas 
resources are off limits to leasing. Eighty percent of the 
national economically recoverable OCS gas is located in the 
central and western Gulf of Mexico, which is not subject to 
moratorium.
    Importantly, instead of drilling off our coasts, there are 
smarter, cheaper, and faster solutions for rising gasoline and 
natural gas prices. The United States has about 5 percent of 
the world's population, but we consume about 25 percent of the 
world's energy. There is no way we can drill our way to energy 
independence.
    The Union of Concerned Scientists found that by getting 20 
percent of our energy from clean sources, like wind and solar, 
we can reduce natural gas consumption by 6 percent by 2020. 
This step will save more than all the natural gas off the 
Pacific Coast. Increasing renewables and efficiency would cut 
consumers' energy bills, encourage innovative and new 
technology, create jobs, and decrease our reliances on foreign 
sources of energy.
    In conclusion, we are at a crossroads in terms of how we 
produce energy for our country. There are those who believe we 
should open up remaining wild and special places to drill for 
oil and natural gas. We are seeing efforts to open the Arctic 
Refuge, record applications for permits to drill in the West, 
and proposals to open our shorelines for drilling. This adds up 
to an approach where few places, no matter how special they 
are, are off limits to oil and gas.
    There are, however, places, that are too special to 
develop. I believe we need to make a choice now for a future 
where our beaches and offshore waters are free of oil and gas 
drilling.
    Thank you very much.
    The Chairman. Thank you very much.
    [The prepared statement of Ms. Boger follows:]

   Prepared Statement of Debbie Boger, Deputy Legislative Director, 
                              Sierra Club

    Mr. Chairman and members of the Committee, good morning. My name is 
Debbie Boger, and I am the Deputy Legislative Director of the Sierra 
Club. I am here representing over 750,000 Sierra Club members who 
belong to more than 65 chapters and 450 groups nationwide. We are the 
largest environmental grassroots organization in the country. I'm very 
appreciative of the opportunity to testify this morning on the question 
of oil and gas activity on our Outer Continental Shelf (OCS).

    SIERRA CLUB OPPOSES LIFTING THE COASTAL DRILLING MORATORIUM AND 
   SUPPORTS PERMANENT PROTECTIONS FOR BIOLOGICALLY SENSITIVE MARINE 
                                HABITATS

    Sierra Club strongly opposes any moves to open the Outer 
Continental Shelf to drilling for hydrocarbons of any sort, including 
both oil and natural gas. We believe instead that there should be 
permanent protections for biologically sensitive marine habitats. We 
oppose lifting the existing moratorium for a number of reasons. First 
and most importantly, our beaches and coastlines are special, 
irreplaceable places. It is our responsibility to protect them, and the 
existing moratorium is the primary tool we have used to protect them 
for over 20 years. Second, allowing drilling off our coasts would have 
very damaging consequences for our beaches, for marine life and its 
habitat, and for the broader environment. Third, any Congressional 
decisions about drilling for oil and gas off our coasts should be based 
upon accurate science, and the National Academy of Science has 
determined we do not have adequate information about appropriate steps 
yet. Fourth, drilling for oil and gas could have serious consequences 
for local tourism and fishing economies. Fifth, there is no need to 
sacrifice our coasts in search of natural gas. Most recoverable natural 
gas estimated by the Minerals Management Service is already available 
for leasing, so there is no justifiable reason to turn to our special 
places for drilling. Finally, there are smarter ways that we can and 
should address our energy needs rather than allowing our coastlines to 
be threatened with oil and gas drilling.

  LIFTING THE OCS MORATORIUM WILL HAVE DAMAGING CONSEQUENCES FOR OUR 
    BEACHES, FOR MARINE LIFE AND THEIR HABITAT, AND FOR THE BROADER 
                              ENVIRONMENT

    Damage to Marine Life and habitat: While there have been many 
advances in oil and gas recovery technologies in recent decades, many 
serious consequences still result from exploration and drilling for 
either oil or gas.

Seismic Surveys
    The first step to drilling for oil and gas involves doing an 
inventory of estimated resources. One technology used for this type of 
inventory is a ``seismic survey.'' This technology involves ships 
towing multiple ``airgun'' arrays with tens of thousands of high-
decibel explosive impulses to gather geologic profiles of seabed rock 
structures. These airgun arrays fire regular bursts of sound at 
frequencies in the range of 20 to 150 Hz, which is within the auditory 
range of many marine species, including whales.
    Marked changes in behavior in marine species in response to loud 
underwater noises in the ocean have been well documented. Seismic 
survey devices and military sonars (which operate at a similar decibel 
level) have been implicated in numerous whale beaching and stranding 
incidents, including a December 2001 mass stranding of 16 whales in the 
Bahamas, an incident of Cuvier's beaked whales being beached and 
stranded in the Galapagos Islands and a more recent stranding in the 
Canary Islands.\1\
---------------------------------------------------------------------------
    \1\ NMFS, NOAA Fisheries Status Report: Preliminary Findings on the 
Stranding of Beaked Whales in the Bahamas (June 14, 2000); NMFS, NOAA 
Fisheries Status Report; NMFS, NOAA Fisheries Status Report on the One 
Year Anniversary of the Stranding of Beaked Whales in the Bahamas (Mar. 
26, 2001).
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    The auditory organs of fish are particularly vulnerable to loud 
sounds such as those produced by survey airguns. As fish rely on their 
ability to hear to find mates, locate prey, avoid predators, and 
communicate, damage to their ears can seriously compromise their 
ability to survive.\2\ In addition, mortality is possible in species 
like salmon that have swim bladders (the flotation organ that fish use 
to orient themselves vertically in the water), which have been shown to 
rupture on exposure to intense sounds.\3\
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    \2\ McCauley, R.D., J. Fewtrell and A.N. Popper, 2003. ``High 
intensity anthropogenic sound damages fish ears.'' J.Acoust.Coc.Am. 
113, January 2003.
    \3\ Id.
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``Dart Core'' Seabed sample extractions
    ``Dart core'' sampling, another survey technique, consists of 
dropping large hollow metal tubes from ships to vertically puncture the 
seafloor. The samples are retrieved and analyzed for information about 
subsea rock structures. This technique is extremely destructive to 
seafloor benthic organisms and fish habitat, discharging silt plumes 
that are transported on ocean currents and smothering nearby life on 
the seabed.

Seafloor ``Grab samples"
    ``Grab samples'' are retrieved from the seafloor sediments with 
large hinged ``buckets'' dropped from the shipboard into the seafloor 
to analyze silt, rocks, and seabed sediments and seafloor organisms. 
These buckets damage benthic organisms at the seafloor and cause silt 
plumes.

Directional Drilling
    Directional drilling has been used to access oil and gas reserves 
under our National Parks, the Great Lakes, and the Gulf of Mexico. In 
the case of drilling off shore, the well head is on shore while the 
bottom of the well may be thousands of feet offshore. In 1997, Governor 
Engler of Michigan directed the Michigan Environmental Science Board to 
study the impacts of directional drilling on environmental and human 
activities. This study concluded impacts from directional drilling 
could result in the contamination of groundwater aquifers and loss of 
habitat while also increasing noise levels, odor, and congestion, 
impacting recreation and tourism.\4\
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    \4\ Long, D.T., W.E. Cooper, W.B. Harrison III, R.H. Olsen, B.J. 
Premo and K.G. Harrison. 1997. Evaluation of Directional Drilling under 
the Great Lakes, October 1997. Michigan Environmental Science Board, 
Lansing, Michigan.
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    Onshore damage: The onshore infrastructure associated with offshore 
oil or gas causes significant harm to the coastal zone. For example, 
OCS pipelines crossing coastal wetlands in the Gulf of Mexico are 
estimated to have destroyed more coastal salt marsh than can be found 
in the stretch of coastal land running from New Jersey through 
Maine.\5\
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    \5\ Boesch and Rabalais, eds., ``The Long-term Effects of Offshore 
Oil and Gas Development An Assessment and a Research Strategy.'' A 
Report to NOAA, National Marine Pollution Program Office at 13-11.
---------------------------------------------------------------------------
    Water pollution: Drilling muds are used to lubricate drill bits, 
maintain downhole pressure, and serve other functions. Drill cuttings 
are pieces of rock ground by the bit and brought up from the well along 
with used mud. Massive amounts of waste muds and cuttings are generated 
by drilling operations--an average of 180,000 gallons per well.\6\ Most 
of this waste is dumped untreated into surrounding waters. Drilling 
muds contain toxic metals, including mercury, lead and cadmium. 
Significant concentrations of these metals have been observed around 
drilling sites.\7\
---------------------------------------------------------------------------
    \6\ MMS, 2000. Gulf of Mexico OCS Oil and Gas Lease Sale 181, Draft 
Environmental Impact Statement (DEIS), p. IV-50.
    \7\ Id.
---------------------------------------------------------------------------
    A second major polluting discharge is ``produced water,'' the water 
brought up from a well along with oil and gas. Offshore operations 
generate large amounts of produced water. The Minerals Management 
Service estimates that each platform discharges hundreds of thousands 
of gallons of produced water every day.\8\ Produced water typically 
contains a variety of toxic pollutants, including benzene, arsenic, 
lead, naphthalene, zinc and toluene, and can contain varying amounts of 
radioactive pollutants. All major field research programs investigating 
the fate and effects of produced water discharges have detected 
petroleum hydrocarbons, toxic metals and radium in the water column 
down-current from the discharge.\9\
---------------------------------------------------------------------------
    \8\ Id., p. IV-32.
    \9\ Id., pp. IV-32-33.
---------------------------------------------------------------------------
    Air pollution: Drilling an average exploration well for oil or gas 
generates some 50 tons of nitrogen oxides (NOX), 13 tons of 
carbon monoxide, 6 tons of sulfur dioxide, and 5 tons of volatile 
organic hydrocarbons. Each OCS platform generates more than 50 tons per 
year of NOX, 11 tons of carbon monoxide, 8 tons of sulfur 
dioxide and 38 tons of volatile organic hydrocarbons every year.\10\
---------------------------------------------------------------------------
    \10\ Id., p. IV-40.
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    Global Warming pollution: Methane hydrates are ice-like structures 
formed from frozen water and methane. These structures are found in 
Arctic permafrost and beneath the seafloor of the Outer Continental 
Shelf where water depths are greater than 500 feet. The Congressional 
Research Service reports that ``safety problems related to gas hydrates 
may be anticipated. Oil and gas operators have recorded numerous 
drilling and production problems attributed to the presence of gas 
hydrates, including uncontrolled gas releases during drilling, collapse 
of well casings, and gas leakage to the surface.'' The report continues 
that methane hydrates easily become unstable, potentially triggering 
seafloor subsidence and catastrophic landslides. In addition, a single 
unit of methane hydrate can release 160 times its own volume in 
gas.\11\ As methane is a greenhouse gas more than twenty times more 
potent than carbon dioxide in contributing to global warming, this 
volume of gas release would be extremely dangerous.
---------------------------------------------------------------------------
    \11\ Congressional Research Service, Report RS20050, ``Methane 
Hydrates: Energy Prospect or Natural Hazard?'' James E. Mielke. 
February 14, 2000.
---------------------------------------------------------------------------
    Oil spills: If offshore areas are leased for gas exploration there 
is always the possibility that oil also will be found. There is no 
known example of a case where a lease prohibits an oil company from 
developing oil if oil is found in a ``gas prone'' region. There is no 
documented instance of any company ever agreeing to such a condition in 
the history of the OCS leasing program. Without such a restriction 
included in a lease there would be no assurances that oil would not in 
fact be developed, raising the possibility of an oil spill. According 
to statistics compiled by the Department of the Interior, there were 
some 3 million gallons of oil spilled from OCS oil and gas operations 
in 73 incidents between 1980 and 1999.\12\ Oil is extremely toxic to a 
wide variety of marine species, and as noted by a recent National 
Academy of Sciences study, current cleanup methods are incapable of 
removing more than a small fraction of the oil spilled in marine 
waters.
---------------------------------------------------------------------------
    \12\ MMS, 2000. Gulf of Mexico OCS Oil and Gas Lease Sale 181, 
Draft Environmental Impact Statement (DEIS), p. IV-50.
---------------------------------------------------------------------------
    It is important to note that, with the exception of oil spills, the 
environmental damages described above result from drilling or exploring 
for either oil or natural gas, so any suggestion that restricting 
leases to natural gas drilling only will not adequately reduce risk of 
environmental impacts.

   SCIENCE SHOULD GUIDE FUTURE CONGRESSIONAL DECISIONS ABOUT COASTAL 
                                DRILLING

    The prestigious nonpartisan National Research Council (NRC) of the 
National Academy of Sciences (NAS) issued a peer-reviewed finding in 
1991, after a year-long study conducted by this body at the request of 
former president George Herbert Walker Bush, Sr. The NAS found that 
there is insufficient scientific data available to permit leasing in 
the moratorium areas and ensure that the environment can be protected. 
The Minerals Management Service (MMS) Environmental Studies Program has 
done virtually no new work to fill these identified data gaps found 
within the OCS moratorium areas since the NAS study, in spite of the 
fact that the Congressional moratorium does not preclude this type of 
scientific research by the MMS Environmental Studies Program. Current 
concerns about the cumulative impacts of ongoing routine marine 
discharges of spent drilling muds, cuttings, and produced waters were 
highlighted by the recent late-2004 report of the President's own US 
Commission on Ocean Policy as a primary priority topic needing serious 
scientific evaluation.

   DRILLING IN THE OCS COULD HAVE DAMAGING EFFECTS ON LOCAL ECONOMIES

    The industrial character of offshore oil and gas development is 
often at odds with the existing economic base. of the affected coastal 
communities, many of which rely on tourism, coastal recreation and 
fishing. In Dare Country, NC, the Outer Banks Visitors Bureau has been 
fighting efforts to lift the ban on coastal drilling precisely because 
it realizes what a crushing effect coastal drilling could have on the 
Outer Banks' tourist economy. Carolyn McCormick, managing director of 
the Visitors' Bureau, was quoted in the Virginian Pilot last month 
saying, ``If there's one spill or one disaster, you could destroy us 
for a very long time.''\13\ In Virginia Beach, the Hotel-Motel 
Association has supported the mayor's request to veto the recent bill 
to lift the drilling moratorium.
---------------------------------------------------------------------------
    \13\ The Virginian-Pilot, Norfolk, VA. Friday, March 25, 2005. 
``Offshore Drilling Issue Pits Energy against Tourism.'' Page A1
---------------------------------------------------------------------------
    In addition to potentially catastrophic effects on the tourism 
industry, drilling for gas and oil off our coasts could have 
significant negative impacts on commercial fishing. In a Norwegian 
study conducted in the central Berents Sea, seismic shooting severely 
affected fish distribution, local abundance, and catch rates over a 
large geographic area. In this study, catch of cod and haddock fell 
precipitously within a 38-nautical-mile by 38-nautical-mile area, and 
remained depressed for at least five days following the conclusion of 
seismic survey activities.\14\
---------------------------------------------------------------------------
    \14\ ``Engas, Arill, Svein Lokkeborg, Egil Ona, and A.V. Soldal. 
Institute of Marine Research, 1996. Effects of Seismic Shooting on 
Local Abundance and Catch Rates of Cod (Gadus morhua) and Haddock 
(Melanogrammus aeglefinus). Can. J. Fish. Aquat. Sci. 53: 2238-2249.
---------------------------------------------------------------------------
    In addition, the Canadian T. Buck Suzuki Environmental Foundation 
and the United Fishermen and Allied Workers Union--CAW recently weighed 
in on the Canadian Statement of Practice on the Mitigation of Seismic 
noise, citing their concern for the B.C. marine-based industries, which 
employ over 20,000 and contribute over $2 billion in revenues and 
$600,000 in total GDP. These groups point to mortalities in fish eggs, 
fish and shellfish larvae, and adult fish with swim bladders; trawl 
catch declines from 50 to 70% and longline catch declines by 44% for 5 
days after cessation of seismic shooting; and the particular concern 
about seismic activity during salmon migration or herring spawning. 
Salmon are of particular concern because of the endangered status of 
some populations off the Atlantic and Pacific coasts, and because of 
their apparent inability to detect and avoid low-frequency sound until 
damaging levels are reached.

  PLENTY OF NATURAL GAS IS ALREADY AVAILABLE FOR LEASE AND PERMITTING

    The majority of federal oil and gas resources are already available 
for development. According to the 2003 Energy Policy and Conservation 
Act (EPCA) report issued by the Department of the Interior, 85% of 
federal onshore oil resources and 88% of federal onshore natural gas 
resources (122.6 trillion cubic feet, or tcf) occurring on federal 
lands in Montana, Colorado, New Mexico, Utah and Wyoming are already 
available for leasing and development. Only 12% of federal onshore 
natural gas resources are off-limits to leasing.\15\ Eighty percent of 
the nation's undiscovered, economically recoverable Outer Continental 
Shelf (OCS) gas is located in the Central and Western Gulf of Mexico, 
which is not subject to the moratorium.\16\ Thus, a permanent 
protection for the coastal moratorium areas will leave the vast 
majority of the nation's OCS gas available to the industry.
---------------------------------------------------------------------------
    \15\ BLM, ``EPCA Inventory Fact Sheet,'' 1/15/03, p. 3
    \16\ U.S. Department of the Interior, Minerals Management Service 
(MMS), 2000. Outer Continental Shelf Petroleum Assessment, 2000, page 5 
and Gulf of Mexico Assessment Update.
---------------------------------------------------------------------------
    In addition to availability for leasing, Bureau of Land Management 
(BLM) data indicates that the vast majority of federal lands currently 
under lease are not being developed. Of the more than 35,000,000 acres 
of public lands under lease, development is occurring or has occurred 
on approximately 12,000,000 acres.\17\ Drilling permit approvals on 
Western public lands by the BLM increased by 62 percent in 2004, to a 
record number of 6,052, while the number of new wells that were drilled 
declined by nearly 10 percent, to 2,702.\18\
---------------------------------------------------------------------------
    \17\ BLM, ``Total Number of Acres Leased'' (unpublished table, 
January 31, 2005) and BLM, ``Number of Producible Acres on Federal 
Lands'' (unpublished table, January 31, 2005)
    \18\ BLM, ``Number of APDs approved by Year on Federal Lands'' 
(unpublished table, January 31, 2005) and BLM, ``Number of Well Spud 
During the Year on Federal Lands'' (unpublished table, January 31, 
2005)
---------------------------------------------------------------------------
    Based on this data, it is clear that the vast majority of federal 
oil and gas resources occurring on federal lands in the Rockies are 
available for development. In addition, most of the leased lands are 
not in development, and the BLM has issued thousands more drilling 
permits than the industry is actually able to drill. The oil and gas 
industry clearly has plenty of access to our public lands already; 
there is no reason to grant access to additional areas currently under 
moratorium for additional leasing.

 THERE ARE SMARTER, CHEAPER, AND FASTER SOLUTIONS FOR RISING GASOLINE 
                         AND NATURAL GAS PRICES

    The United States has about 5% of the world's population but 
consumes about 25% of the world's energy. There is no way we can drill 
our way to energy independence. We must decrease our energy dependence 
by other means. Instead of opening up more of our lands to exploration 
and drilling, the Sierra Club proposes that we invest more time and 
money into clean energy solutions. A recent study by the Union of 
Concerned Scientists found that by getting 20% of our energy from clean 
sources like wind and solar by 2020 we can reduce natural gas 
consumption by 6% by year 2020. This step would save 20.6 Tcf 
cumulatively, more than all the natural gas off the Pacific Coast.\19\ 
According to an April 2005 study by the American Council. for and 
Energy Efficient Economy, if we use technology available today to make 
our homes, buildings, and industry more energy efficient, we can save 
up to 12.6% of the natural gas they project we would be using by 
2020.\20\ Studies have indicated that implementing these programs would 
create thousands of new jobs and save consumers hundreds of dollars a 
year in energy bills every year.\21\ Promoting renewable energy and 
efficiency would also encourage innovation and new technology, reduce 
pollution, and decrease our reliance on foreign sources of energy.
---------------------------------------------------------------------------
    \19\ Union of Concerned Scientists. Fact Sheet: ``Renewable Energy 
Can Help Ease Natural Gas Crunch"
    \20\ Nadel, Steven. ``A Choice of Two Paths: Energy Savings from 
Pending Federal Energy Legislation.'' April 2005. American Council for 
an Energy Efficient Economy
    \21\ World Wildlife Fund: ``Clean Energy: Jobs for America's 
Future'' October, 2001 and Redefining Progress: ``Smarter, Cleaner, 
Strong: Secure Jobs, A Clean Environment, And Less Foreign Oil'' 
October 2004
---------------------------------------------------------------------------
         THE PUBLIC SUPPORTS THE BAN ON DRILLING OFF OUR COASTS

    Concerns over environmental consequences of offshore oil and gas 
development have led Congress to impose restrictions on OCS activities 
in sensitive areas off the nation's coasts every year since 1981. These 
moratoria now protect the east and west coasts of the U.S. and most of 
the Eastern Gulf of Mexico. The moratoria reflect a clearly established 
consensus on the appropriateness of OCS activities in most areas of the 
country, and have been endorsed by an array of elected officials from 
all levels of government and diverse political persuasions, including 
former Presidents George H.W. Bush and Clinton and the current 
President Bush.

                               CONCLUSION

    Right now we are at a crossroads in terms of how we produce energy 
for our country. There are those who believe we should open up most 
remaining wild and special places to drill for oil and natural gas. We 
are seeing efforts to open the Arctic National Wildlife Refuge, record 
applications for permits to drill for oil and gas in the West, and 
proposals to open our shorelines to oil and gas drilling. This adds up 
to an approach where few places, no matter how special, are off limits 
to oil and gas drilling. My strong belief is that there are places that 
are too special to drill, and some of those areas are along our coasts 
and beaches. We can choose to set aside invaluable places to preserve 
for our children, or we can choose to open the majority of our country 
for oil and gas development. I believe we need to make the choice now 
for a future where our beaches and offshore waters are free of oil and 
gas drilling. There are appropriate places to drill and inappropriate 
places to drill. Our beaches deserve our protection as places that are 
inappropriate to drill. There are smarter and better choices we can and 
need to be making.
    Thank you for the opportunity to testify to the perspective of the 
Sierra Club.

    The Chairman. Let us now proceed to with Mr. Angelle.

           STATEMENT OF SCOTT A. ANGELLE, SECRETARY, 
           LOUISIANA DEPARTMENT OF NATURAL RESOURCES

    Mr. Angelle. Mr. Chairman, Mr. Ranking Member, 
distinguished----
    The Chairman. Help me out. Say your last name.
    Mr. Angelle. Sure. Angelle.
    The Chairman. Thank you.
    Mr. Angelle. Mr. Chairman, Mr. Ranking Member, and 
distinguished members of the Senate Energy and Natural 
Resources Committee, I would like to thank you for the 
invitation to come here before you. I congratulate all of you 
on providing the leadership style on America's energy issues. 
And on behalf of the great State of Louisiana, a special thanks 
to Senator Landrieu.
    I hope that my comments will aid you in making the 
important decisions that you are considering in this Congress 
to shape the future our Nation's energy supply. It is 
imperative that we, as a Nation, stop reacting to energy 
situations imposed on us by outside forces, and instead 
proactively start shaping our own energy future.
    One of the ways to do that is to develop the full potential 
of the Nation's offshore energy resources and to assist those 
States that make that production possible off their coasts by 
sharing some of the offshore revenues. This would encourage 
those States to pursue more development. And it would help 
offset infrastructure costs those States incur that is 
associated with that development.
    Louisiana has a long and distinguished history of oil and 
gas production, providing much of America's energy supply. 
Currently, 34 percent of the Nation's natural gas supply and 
almost 30 percent of the Nation's crude oil supply is either 
produced offshore in Louisiana or moves through the State and 
its coastal wetlands. Together with the infrastructure in the 
rest of the State, this production is connected to nearly one 
half of the total refining capacity in the United States.
    It is our State's desire to not only continue this 
production, but to seek additional ways to increase it and to 
continue to ensure that this supply is provided to the rest of 
the Nation. You see, we in Louisiana understand just how vital 
these energy resources are to the Nation's economy. At the same 
time, Louisiana can look at experience and footnote that 
offshore development and associated onshore infrastructure 
construction and operations can be done in an environmentally 
responsible way today.
    Louisiana, like other coastal producing States sustains 
impacts on coastal communities and bears the cost of onshore 
infrastructure to support this production activity. In my 
State, pipelines, canals, and other infrastructure features 
exacerbate the loss of more than 24 square miles of our coastal 
land each year, believed to be the fastest rate of land loss 
anywhere on the planet.
    In fact, Mr. Chairman, you have heard me say before that if 
what is happening today in coastal Louisiana were happening in 
our Nation's capital, the Potomac River would be washing away 
the steps of this building today, the White House next year, 
and the Pentagon soon thereafter. During the course of this 
morning alone, Louisiana will lose a football-field-wide area 
from the Capitol Building to the Washington Monument.
    When States like yours, Mr. Chairman, force drilling on 
Federal lands onshore, they receive 50 percent of those 
revenues in direct payments and consequently have the financial 
resources to support that infrastructure. In fiscal year 2004, 
Wyoming and New Mexico together received about $928 million 
from those revenues, which we believe it is an appropriate 
revenue-sharing procedure.
    In contrast, for example in 2001, of the $7.5 billion in 
revenues generated in the Federal Outer Continental Shelf area, 
only a fraction of 1 percent came back to those States. This 
inequity is truly profound.
    Does it not make sense to encourage the coastal producing 
States which provide that revenue for the benefit of the rest 
of the Nation, does it not make sense that when so many, like 
the U.S. Ocean Commission, are targeting offshore OCS revenues 
to pay for worthwhile preservation of natural resources, that 
this Nation first protect those who make these resources 
possible?
    While we are all interested in new sources of energy, might 
I suggest that we make sure to protect our current sources? In 
this case, a bird in the hand is better than two in the bush.
    Stepping up to the plate to help the Nation obtain new 
supplies of energy including LNG, Louisiana is home of one of 
the four country's existing LNG import terminals built some 20-
plus years ago. And when high energy prices and Alan 
Greenspan's comments caused an increase in the siting of LNG 
facilities, Louisiana answered the call for America once again. 
The world's newest LNG permitted facility, which is also now 
the continent's largest permitted facility, accomplished in a 
record-setting permit application time of 364 days, is in 
Louisiana, all because the Federal Energy Regulatory Commission 
and the State of Louisiana did it right.
    But again, our Governor has said time and time again: While 
we remain open to LNG activity, we will not forsake protecting 
our land, air, water, and public safety. We just seem to 
understand perhaps more than other States our need to help 
America in these critical times. But it also is important to 
understand that there is no free lunch. And we are now in here 
to get help to save coastal Louisiana.
    To help bring the point of infrastructure vulnerability, we 
need only look at this past summer and the effects of Hurricane 
Ivan. While the storm made landfall some two States away, much 
of the damage occurred along pipeline routes. It made a 
significant impact on oil and gas production. I shudder to 
think of the environmental damage and economic impacts to this 
Nation had Ivan gone a relatively few miles further west with a 
direct hit on the infrastructure off Louisiana's shore.
    According to analysts, oil prices would realistically be at 
$75 a barrel. In fact, some of our production in Louisiana is 
still shut-in from the effects of that storm some 7 months 
after making landfall.
    In conclusion, it is vital to the Nation's security and 
prosperity that new energy sources be developed. The Federal 
Government has proven that it has the ability to steer 
investment, as in the case of deep water drilling in the Gulf 
and coal seam gas.
    Section 29 of the Internal Revenue Service Code granted tax 
relief, a tax credit for the production of natural gas from 
unconventional resources. The effect of the application for 
coal bed methane gas production was astounding. The section 29 
credits need to be instituted for State borders and onshore 
areas, at least in those States allowing Federal offshore 
production.
    The Chairman. We are just about to run out of time. I want 
to tell you, hold you to your agreement to come back and holds 
us to ours. We will be here at 2 o'clock. We will take your 
testimony and ask some questions. You use your own judgment.
    We may or may not have questions, but if you want to be 
there in case we do--thank you. We will recess temporarily.
    [Recess.]
    Senator Landrieu [presiding]. We will go ahead and, at the 
chairman's instructions, proceed to continue the hearing. I 
know that Senator Domenici is on his way. And I am trusting 
that some of the other members will be joining us shortly.
    But I thank you all for your patience and for being 
flexible because of the schedule and the votes that occurred 
right before we were going to break for lunch.
    But I think, Mr. Angelle, you were in the middle of 
wonderful, inspiring, and encouraging testimony. So would you 
continue? And then we will hear from Senator Frank Wagner and 
also our noble Energy Director.
    Mr. Angelle. Thank you, Senator.
    I would just wrap up very briefly by saying: With effective 
policies and incentives, the Federal Government can steer 
investment into the offshore areas. And by receiving an 
equitable share of revenue generated offshore, the coastal-
producing States can be in a position to ensure that this 
production will be made available to the rest of the Nation.
    As the granddaddy of all producing States, Louisiana 
desperately needs immediate revenue-sharing financial 
assistance from a source that is not subject to annual 
appropriations, to continue to maintain existing and to develop 
future energy supplies for the nation. It would be a travesty 
for the Congress to enact national energy legislation without 
substantial OCS revenue sharing in the form of direct payments 
to the coastal-producing States from the revenue derived from 
offshore productions similar to the automatic payments for 
drilling on Federal lands onshore and before any other 
disbursal of those moneys.
    Thank you.
    Senator Landrieu. Thank you, Mr. Angelle.
    [The prepared statement of Mr. Angelle follows:]

          Prepared Statement of Scott A. Angelle, Secretary, 
               Louisiana Department of Natural Resources

    Mr. Chairman, Mr. Ranking Member, and distinguished members of 
Senate Energy and Natural Resources Committee, I would like to thank 
you for your invitation to come before your Committee today. I hope 
that my comments will aid you in making the important decisions that 
you are considering in this Congress to shape the future of our 
nation's energy supply. It is imperative that we, as a nation, stop 
reacting to energy situations imposed on us by outside forces, and 
instead, proactively start shaping our energy future. One of the ways 
to do that is to develop the full potential of the nation's offshore 
energy resources and to assist those states that make that production 
possible off their coasts. This can be accomplished by sharing with 
those coastal producing states some of the offshore revenues generated 
off their coasts. This would encourage those states to pursue more 
development, and it would help offset infrastructure costs those states 
incur that is associated with that development.

          LOUISIANA'S ROLE AS A PRODUCING AND CONSUMING STATE

    Energy is the lifeblood of an industrialized nation and a key 
economic driver for the country. A reliable and affordable supply of 
energy is necessary for economic development, prosperity, and 
expansion. Although technological improvements and investments in 
energy efficiency have reduced this country's energy consumption per 
unit of Gross Domestic Product over the past 20 years, increased 
economic prosperity is still dependent on increased energy consumption. 
In the U.S., the availability of energy has generally been taken for 
granted, but recent blackouts in California and other parts of the 
country, the emergence of 50 plus dollar per barrel oil and $7 to $8 
per million BTU natural gas, and the drive to build terminals to import 
foreign natural gas in the form of a cryogenic liquid, have highlighted 
the need for addressing energy supply.
    I come to you representing a state to which energy is its middle 
name. The words Louisiana and energy are almost synonymous. Among the 
50 states, Louisiana ranks (2003 Energy Information Administration--EIA 
data):

    1st in crude oil production
    2nd in natural gas production
    2nd in total energy production from all sources

    The importance of energy to Louisiana is further highlighted in the 
following rankings in which Louisiana is (2002 EIA data latest 
available):

    2nd in petroleum refining capacity
    2nd in primary petrochemical production
    3rd in industrial energy consumption
    3rd in natural gas consumption
    5th in petroleum consumption
    7th in total energy consumption
    but, only 22nd in residential energy consumption

    Usually, when national energy issues are discussed, Louisiana is 
cast in the image of a rich producing state floating in a sea of oil 
and gas that is being inequitably shared with the consuming states. 
Often misunderstood or overlooked, is the fact that about two thirds of 
the production from the state is in the Louisiana federal OCS territory 
and, hence, produces no revenue for the state, while at the same time 
incurring significant infrastructure support costs to the state, which 
I will discuss in more detail later.
    Also often overlooked or not explained, is the fact that, though 
Louisiana is the 2nd highest energy producing state in the nation, 
Louisiana is also 7th highest in total energy consumption. Therefore, 
Louisiana is more of a consuming state than 43 other states! This story 
is never told, nor are Louisiana's difficulties as a key consuming 
state given much concern at the federal energy policy level. Thus, when 
Louisiana, the energy producing state speaks, it is also Louisiana, the 
energy consuming state speaking. Louisiana is inexorably tied into the 
issues of all states in the nation, whether considered producing states 
or consuming states. However goes the energy situation in Louisiana, so 
goes the energy situation in the United States of America.

       SUPPLYING THE NATION: LOUISIANA--AMERICA'S ENERGY CORRIDOR

    Louisiana has a long and distinguished history of oil and gas 
production, providing much of America's energy supply. Currently, 
nearly 34% of the nation's natural gas supply and almost 30% of the 
nation's crude oil supply is either produced in Louisiana, produced 
offshore of Louisiana, or moves through the state and its coastal 
wetlands. Together with the infrastructure in the rest of the state, 
this production is connected to nearly 50% of the total refining 
capacity in the United States.
    When it comes to developing the nation's offshore energy resources, 
there would not be much if it were not for Louisiana's leadership and 
participation. The OCS territory offshore Louisiana is the most 
extensively developed and matured OCS territory in the world. According 
to preliminary 2004 data, the Louisiana OCS presently produces 
approximately 91% of oil and 75% of natural gas production in the OCS. 
Louisiana OCS territory has produced 88.7% of the 15.5 billion barrels 
of crude oil and condensate and 83.2% of the 154 trillion cubic feet of 
natural gas ever extracted from all federal OCS territories from the 
beginning of time through the end of 2004.
    Stepping up to the plate to help the nation obtain new supplies of 
energy including liquefied natural gas (LNG), Louisiana is the home of 
the largest throughput facility (Southern Union in Lake Charles) of the 
four existing LNG import terminals in the U.S., and it is undergoing 
more than a doubling of capacity from 1 billion cubic feet per day to 
2.5 billion cubic feet per day. While almost every state in the nation 
is trying to prevent the siting of any new LNG facilities, Louisiana is 
the site of the newest permitted LNG terminal (Shell's 1 billion cubic 
feet per day Gulf Landing facility offshore Louisiana) and of the 
largest permitted LNG import terminal in the nation (Cheniere Energy's 
2.6 billion cubic feet per day facility in Sabine Parish).
    The vehement opposition to LNG facilities almost everywhere but in 
Louisiana and Texas is causing developers to get creative. Such is the 
case with the offshore Energy Bridge LNG gasification terminal promoted 
by El Paso Energy and sold to private interests. It is simply a seabuoy 
attached to a pipeline header to shore. The gasification facility 
equipment is all located onboard specially constructed LNG tankers 
using an open seawater system as the heat source for regasification of 
the LNG. Three such tankers are on order. The first is already 
operational and has just made its first delivery to the U.S. Although 
this onboard ship system avoids much of the controversy of siting a 
permanent LNG terminal, it also liberates the ship from having to 
unload its cargo at an expensive fixed terminal, enabling it to easily 
deliver its cargo of LNG to any place in the world that it can merely 
hook up into a receiving pipeline. This lack of a physical dependence 
on a limited number of expensive receiving terminals is good for the 
supplier, but not necessarily for the purchaser, who in the future 
could be outbid by another purchaser virtually anywhere in the world, 
which might just not be a seabuoy in the U.S.
    Louisiana is also the home LOOP (Louisiana Offshore Oil Port), the 
only deepwater offshore oil import terminal in the world.
    All of this represents only the direct supply line of oil and 
natural gas. Additionally, Louisiana's 7th highest ranking among the 
states in energy consumption is attributable to the fact that Louisiana 
is consuming most of this energy as a through-processor of energy 
supplies for the rest of the nation, consuming colossal amounts of 
energy for their benefit. An example of how Louisiana is consuming 
energy resources for the primary benefit of other states is petroleum 
refining. The energy equivalent of 10% of Louisiana's entire petroleum 
product consumption is required just to fuel the processes that refine 
crude oil into gasoline, diesel fuel, jet fuel, heating oil and other 
products consumed out of state. The oil refining industry employs only 
about 10,400 workers in the state; whereas tens of millions of jobs 
throughout the country are dependent on the affordability and 
availability of the products from the continued operation of these 
refineries and associated petrochemical facilities in Louisiana.
    Many other examples could be cited of the numerous energy intensive 
natural gas and oil derived chemical products Louisiana (and also 
Texas, Oklahoma, and California) through-processes for the rest of the 
U.S. Per unit of output, these industrial processes in Louisiana are 
characterized as capital (equipment), energy, raw material, and 
pollution discharge intensive, and low in labor requirements and dollar 
value added, essentially the opposite of the downstream industries in 
other states that upgrade these chemicals into ultimate end products. 
Much of the energy Louisiana technically consumes is really the 
transformation of oil and gas into primary chemical building blocks 
that are shipped to other states where the final products are made, 
whether it be plastic toys, pharmaceuticals, automobile dash boards, 
bumpers and upholstery, electronic components and cabinets, synthetic 
fibers, or thousands of other products dependent on this flow of energy 
and high energy content materials out of Louisiana.
    Governor Blanco has asked me to convey to you today the State's 
desire to not only continue this production, but to seek additional 
ways to increase it and to continue to insure that this supply is 
provided to the rest of the nation and to ask for your help in doing 
so. You see, we in Louisiana understand just how vital these energy 
resources are to the nation's economy.

              OCS INFRASTRUCTURE AND ITS IMPACTS AND NEEDS

    It is important to understand that there is no free lunch. 
Louisiana, like other coastal producing states, sustains impacts on 
coastal communities and bears the costs of onshore infrastructure 
required to support this production activity. In Louisiana, pipelines, 
canals, and other infrastructure features contribute to the loss of 
more than 24 square miles of our coastal land each year. In fact, and 
Mr. Chairman, you have heard me say before, that if what is happening 
today in coastal Louisiana were happening in our nation's capital, the 
Potomac River would be washing away the steps of this building today, 
the White House next year, and the Pentagon soon after that. In fact, 
during the course of this morning alone, Louisiana will lose a football 
field wide area from the Capitol Building to the Washington Monument.
    There are many causes of this coastal erosion in Louisiana, 
including what may be the most significant factor: building levees and 
channeling the Mississippi River. Whatever the cause of its demise, the 
health and restoration of Louisiana's coastal wetlands are vital to 
protecting the offshore and onshore infrastructure that is essential 
for the continuation, as well as the expansion, of offshore energy 
production in the Gulf of Mexico.
Obsolete Practices of the Past Cause Louisiana's Problems Today
    This raises one issue I would like to address. If offshore 
exploration and production causes or adds to coastal erosion and other 
environmental harm, why would any state want to support it? Simply 
stated, Louisiana's environmental damage issues pertaining to petroleum 
drilling and production are primarily related to two issues:

    (1) Forces of nature that have nothing to do with the petroleum 
industry, but which threaten its existence, and
    (2) Impacts from legacies of obsolete practices of the past 
continuing to cause problems in Louisiana's ultra-fragile mostly marsh 
coastline.

    Louisiana's first well was drilled in 1868. The first oil well over 
water in the world was in Louisiana in 1910 in Caddo Lake. The first 
well drilled offshore Louisiana was in 1933 near Creole, Louisiana. 
Louisiana was the site of the first well drilled out of sight of land 
in 1947.
    Things have changed dramatically since 1910, 1933, 1947, or even 
1960, 1970, or 1980. Offshore drilling was pioneered in Louisiana, long 
before modem sensitivity to the environment, advanced technology and 
environmental regulations. Simply put, it was like the old Wild West 
out there. Once, hardly anybody gave a second thought to the oil 
companies slicing and dicing the coastline to build canals and 
pipelines or to discharging produced water and drilling fluids 
overboard; it was all considered a sign of progress.
    Everything is different now. That world and those practices have 
nothing more in common with modem exploration and production techniques 
than Conestoga wagons crossing the Oregon Trail in the 1800's have in 
common with jet airliners flying overhead today. Offshore development 
and the associated onshore infrastructure construction and operation 
are done in an environmentally responsible way today and under the 
oversight of several State and federal regulatory agencies.
    Once the State realized magnitude of the coastal erosion problem, 
we got serious about doing something about it. In 1980, the coastal 
restoration permitting program was moved to the Department of Natural 
Resources (DNR). In 1981, $40 million of state oil and gas revenue was 
set aside in a legislative trust fund for coastal restoration projects. 
The State has a dedicated revenue stream of up to $25 million per year, 
depending on the level of revenue collections from oil and gas 
production within the state, to replenish the fund. In the past few 
years, that replenishment stream has been at the $25 million level. In 
1989, the Office of Coastal Restoration and Management was created in 
DNR, and the magnitude of the program was greatly expanded.
Extent of Louisiana Infrastructure Supporting OCS Production
    The total value of the Louisiana OCS infrastructure and the onshore 
infrastructure supporting it is difficult to ascertain. The estimated 
depreciated investment in offshore production facilities is over $85 
billion, depreciated offshore pipeline infrastructure is over $10 
billion, and public coastal port facilities is $2 billion, for a total 
of approximately $100 billion, depreciated, and not counting highways, 
sewer, water, fire and police protection, schools, and other public 
works structures that also have ongoing operation and maintenance 
costs. The replacement of all of this would be several times the $100 
depreciated figure. It also does not count the onshore coastal 
infrastructure of pipelines, storage facilities, pumping stations, 
processing facilities, etc.
    This infrastructure is vulnerable if not protected by the State's 
barrier islands and marshes. As these erode and disappear, 
infrastructure is exposed to the open sea and all of its fury. As the 
coast recedes, near shore facilities become further offshore and 
subject to greater forces of nature, including subsidence, currents, 
and mudslides. Erosion in the coastal zone is already beginning to 
expose pipelines that were once buried.

A Wake-up Call from Hurricane Ivan
    To bring home the point of infrastructure vulnerability, we need 
only look back to this past Summer. Hurricane Ivan was not even a 
direct hit on Louisiana's offshore and coastal oil and gas 
infrastructure, striking two states away; yet, its effects on the 
nation's supply of oil and gas were significant, even many months after 
it hit. Most of the damage occurred along pipeline routes rather than 
actual structural damage to the producing platforms. As of February 14, 
2005, when the Minerals Management Service (MMS) released its final 
impact report on Ivan, 7.42% of daily oil production and 1.19% of daily 
gas production in the Gulf of Mexico was still shut-in. The cumulative 
shut-in production through February 14 was 43.8 million barrels or 
7.25% of annual Gulf of Mexico OCS production and 172.3 billion cubic 
feet of natural gas or 3.9% of annual Gulf of Mexico OCS gas 
production.
    As more of the protection from Louisiana's barrier islands and 
coastal wetlands wash away, increasingly more of this offshore 
production will be damaged or destroyed by even less powerful storms 
than Ivan, and particularly by storms whose paths more directly pass 
through the producing areas off of Louisiana's coast. Direct hits to 
the prime production area by hurricanes and tropical storms will cause 
incalculable damage to this production infrastructure, as well as to 
the onshore support infrastructure.

               HOW TO INCREASE OFFSHORE ENERGY PRODUCTION

Share Offshore Revenue with the States that Allow Offshore Production
    When states like yours, Mr. Chairman, host drilling on Federal 
lands onshore, they receive 50% of those revenues in direct payments, 
and consequently have the financial resources to support that 
infrastructure. In Fiscal Year 2004, Wyoming and New Mexico together 
received about $928 million from those revenues, which is an 
appropriate revenue sharing procedure.
    In contrast, for example in 2001, of the $7.5 billion in revenues 
produced in the federal outer continental shelf area, only a fraction 
of one percent came back to those states. The inequity is truly 
profound.
    We are pleased this committee is investigating ways to increase 
offshore energy supply. The need to sustain the existing supply that 
Louisiana provides must simultaneously be addressed. The most effective 
answer to both issues is share offshore revenues with the coastal 
producing states that make that production possible. It is critical 
that coastal producing states receive a fair share of revenues to build 
and maintain onshore infrastructure and, in Louisiana's case, to help 
stem our dramatic land loss, which is occurring at a rate believed to 
be the fastest on the planet.
    Production off Louisiana's shores alone contributes an average of 
$5 billion a year to the Federal treasury, its second largest source of 
revenue.
    Does it not make sense to encourage the coastal producing states 
which provide that revenue for the benefit of the rest of the nation? 
Does it not make sense, that when so many, like the U.S. Ocean 
Commission, are targeting offshore OCS revenues to pay for worthwhile 
preservation of natural resources, that this nation first protect those 
who make these resources possible?
    Already, in Louisiana's coastal zone, many of the pipelines and 
other infrastructure that our wetlands have historically protected are 
now exposed to open Gulf of Mexico conditions.
    I shudder to think of the environmental damage and the economic 
impacts to this nation, had Ivan gone a relatively few miles further 
west with a direct hit on the infrastructure off Louisiana's shore. 
According to analysts, oil prices would realistically have hit $75 
dollars a barrel.
    Maintaining any ongoing operation requires reinvestment to 
maintain, repair, and replace worn out or outdated equipment and 
facilities. As any farmer can tell you, you cannot just take from the 
land forever without putting something back into the operation. Out of 
the harvest of crops, the farmer has to set aside a portion as seed to 
plant for the next harvest. He has to fertilize the land to replace 
depleted nutrients, plow and till the soil, rotate crops, control 
runoff and erosion, irrigate, apply pesticides and herbicides, buy and 
repair machinery. Likewise, to maintain, much less increase, production 
from off our coasts, we must reinvest in the infrastructure that makes 
all of the activity possible, whether it be port facilities, roads to 
transport equipment and supplies, erosion control, or barrier island 
and wetlands storm protection.

Extend Section 29 Tax Credits to Deep and Ultra-Deep Production in 
        States Allowing Offshore Production
    Section 29 of the Internal Revenue Service (IRS) Code granted a tax 
credit for the production of natural gas from unconventional resources 
(coal bed methane and tight sands gas). The effect of the application 
to coal bed methane gas production was astounding in those areas of the 
country that have significant deposits of this kind, which is not along 
the Gulf Coast. Natural gas reserves from coal bed methane rose from 
6.3% of U. S. reserves at the end of 1993 to 9.9% at the end of 2003. 
Annual natural gas production from coal bed methane rose from 4.2% of 
U. S. dry gas production in 1993 to 8.2% by the end of 2003.
    Deep natural gas reserves (15,000-24,999 feet sub-surface) and 
ultra-deep gas reserves (greater than 25,000 feet sub-surface) are the 
next most immediate resources for meeting the supply and deliverability 
needs of the U. S. market. These resources should be granted the same 
tax credit as was granted to coal bed methane producers. The resulting 
stimulus to production should be at least equal to the coal bed methane 
results, and would very likely far exceed it in time as capital is 
brought to bear on this drilling domain. The MMS has recently 
instituted significant deep shelf royalty incentives for the shallow 
federal waters of the Gulf of Mexico shelf. This does no good for the 
adjacent state waters and onshore areas. The Section 29 credits need to 
be instituted for state waters and onshore areas, at least in those 
states allowing federal offshore production.

Encourage New Energy Sources and Technology
    Recent studies show that the Gulf of Mexico has a significant wind 
energy potential. Although wind power does not have the energy density 
of petroleum, it is an inexhaustible, renewable source of clean energy. 
Again, much to my consternation, it appears that there are many parts 
of the country that use a lot of energy and want it low prices, but do 
not want the production of any kind, anywhere near them, including wind 
energy. Again, Louisiana is stepping up to help encourage this clean 
energy source. The State of Louisiana is currently working with private 
sector investors who are interested in developing wind farms in state 
and federal waters off Louisiana's coasts. My office is submitting wind 
power legislation before the Louisiana Legislature in the session 
starting later this month, to facilitate offshore wind power 
development in Louisiana's State offshore waters.
    Natural gas hydrates probably offer the greatest untapped energy 
resource the nation has. The Oil and Gas Journal recently reported that 
the U.S. Geological Survey estimates that methane hydrate deposits are 
greater than all other forms of fossil fuels combined. Large deposits 
of gas hydrates are believed to lie below the offshore waters of the 
U.S. Unfortunately, technology to tap these resources needs to be 
developed. Once the technology is available, the first areas to be 
developed will be the areas adjacent to the existing offshore producing 
areas where the infrastructure is in place to get it to shore and into 
the nation's pipeline distribution system. The federal government needs 
to fund meaningful research into developing the technology to produce 
gas hydrates, assessing the resource base, and producing it.

                             IN CONCLUSION

    It is vital to the nation's security and prosperity that new energy 
sources be developed. The federal government has proven that it has the 
ability to steer investment, as in the case of deep water drilling in 
the Gulf and coal seam gas. In addition to its significance in 
producing 30% of oil and 23% of natural gas produced domestically, 
which is mostly off Louisiana, the OCS is probably the single most 
promising area for the U.S. to obtain significant new energy supplies. 
These supplies, whether conventional oil and gas, imported oil, 
imported LNG, wind and ocean energy, or gas hydrates, need the support 
of coastal states to cooperate and to supply and maintain critical 
production and support infrastructure.
    LNG facilities are being built where the existing U.S. pipeline 
infrastructure exists (essentially Louisiana and Texas) in order to get 
the gas from the coast into the delivery system to supply the nation. 
The same will be true when the technology is developed to commercialize 
methane hydrate production off the coasts. This Louisiana and Texas 
infrastructure will also be used when deep and ultra-deep shelf 
production comes on stream. This is another reason why offshore revenue 
should be shared with the coastal producing states and why the 
extension of Section 29 tax credits should be extended to deep gas 
exploration at least in the states that are allowing onshore and 
offshore drilling and allowing the siting of LNG facilities to make 
energy available to the rest of the country.
    With effective policies and incentives, the federal government can 
steer investment into the offshore areas, and by receiving an equitable 
share of revenue generated offshore, the coastal producing states can 
be in a position to ensure that this production will be made available 
to the rest of the nation. As the granddaddy of all producing states, 
literally and figuratively, Louisiana desperately needs immediate 
revenue sharing financial assistance from a source not subject to 
annual appropriations, to continue to maintain existing, and to develop 
future energy supplies for the nation. Governor Blanco is submitting 
legislation for a State constitutional amendment to dedicate to coastal 
projects, any future new OCS revenue the State may receive, to show 
Louisiana's commitment to use money the federal government shares with 
the State to put into coastal restoration to rebuild and protect the 
OCS production infrastructure.
    It would be a travesty for the Congress to enact national energy 
legislation without substantial OCS revenue sharing in the form of 
direct payments to the coastal producing states from the revenue 
derived from offshore production, similar to the automatic payments for 
drilling on federal lands onshore, and before any other dispersal of 
those monies.
    Thank you for this opportunity to appear before you.

    Senator Landrieu. Senator Wagner.

     STATEMENT OF FRANK W. WAGNER, SENATOR, 7TH DISTRICT, 
                       STATE OF VIRGINIA

    Mr. Wagner. Thank you, Madame Chairwoman.
    During the 2005 session of the Virginia General Assembly, I 
introduced Senate bill 1054, which, after amendment, requested 
the Virginia Liaison Office to lobby in Washington, to lobby 
Congress on behalf of Virginia to lift the moratorium for 
development of natural gas off the Atlantic Seaboard with a 
shared royalty plan with States and coastal localities similar 
to that proposed in the SEACOR legislation.
    Madame Chairwoman, this is a win-win-win situation, as I 
see it. The Federal Government wins because it is going to 
derive royalty payments currently not available to them. The 
States and local jurisdictions win because they will receive a 
new stream of revenue that is currently not available to them. 
However, the biggest winners are the American people, those 
Americans who are struggling to pay their energy bills, those 
whose jobs rely on reasonably priced, reliable sources of 
natural gas, those American farmers whose very livelihood 
depends on access to reasonably priced fertilizers, and those 
Americans who will be employed harnessing our own domestic 
energy.
    Madame Chairwoman, the inclusion of a conservative estimate 
of 30 trillion cubic feet of natural gas off the Atlantic 
Seaboard will not solve our nation's energy problems, but it is 
one brick in a wall that we must build.
    I was also surprised to learn that the moratorium on 
offshore drilling in the Atlantic Basin has already been 
lifted, not by the United States, but by our friends to the 
north, Canada. Canada is presently recovering over 500 million 
cubic feet of natural gas per day off of Nova Scotia. This 
supply of gas provides much of eastern Canada's natural gas 
needs, as well as the gas that is currently exported to the 
Northeastern United States.
    The fact that this offshore operations are adjacent to the 
Grand Banks, arguably one of the most important fishing grounds 
in the world, is a testament to the innovations and engineering 
and technology that have made offshore drilling a safe, cost-
effective, and reliable method of recovering natural gas.
    Senate bill 1054 was an outgrowth of the joint legislative 
study on the needs of the future of manufacturing in Virginia. 
Virginia has lost 70,000 manufacturing jobs in the past decade, 
many attributable to threefold increase in the price of natural 
gas over the past 5 years. A reliable and reasonably priced 
source of natural gas is vital to Virginia's pulp and paper 
industry, chemical and fertilizer industries, and those 
manufacturers who rely on heat treating as part of the 
manufacturing process. Every new electric generation plant 
built in Virginia over the past 10 years burns natural gas due 
to air permitting requirements.
    And then there are constituents, the families in my 
district or your State who are working hard to pay their bills 
and are now faced with soaring prices at the gas pump along 
with skyrocketing utility bills.
    Senate bill 1054 passed the General Assembly in a 
bipartisan manner. And while the Governor vetoed the bill, in 
his veto explanation he cited only two reasons. He felt it was 
not within the purview of the General Assembly to direct the 
Virginia Liaison Office. And second, he did not feel it was 
appropriate to begin lobbying efforts before a formal bill had 
been introduced in Congress.
    And, Madame Chairwoman, I can tell you I sat down at length 
with the Governor. And I told him that I felt we probably ought 
to get on board, because I felt this year Congress was going to 
move if not on an energy bill, certainly a natural gas bill. 
And I believe us being up here today probably says I was more 
correct than I thought I was.
    The Governor also directed that a study be conducted on 
offshore operations and has indicated to me that he has a very 
decidedly open mind on the issue. I am quite certain that when 
his study is complete, the Governor will come to the same 
conclusion that many of us already have, that given the 
technological advances over the past 20 years, that offshore 
development of our natural gas reserves is altogether 
appropriate and the moratorium should be lifted.
    Virginia's General Assembly has spoken. We want to develop 
our offshore resources, and we would like to share in any 
royalty payments that are made. I would also like to add that 
since the Virginia General Assembly's passage of Senate bill 
1054, the positive responses I have gotten from my constituents 
have far outweighed the few negative letters on the issue.
    I thought I might have gone out on a political limb by 
pushing this legislation. However, I find I have climbed an oak 
tree as solid as any in Virginia. I can only conclude that 
Virginians recognize there is something fundamentally wrong 
with our energy policy. They understand that our foreign 
policy, our trade deficit and inflation concerns are, to a 
certain degree, driven by our need for foreign energy.
    They also are reminded constantly at the gas pump and when 
they open their utility bills that there is a growing problem.
    To the maximum extent possible, they want domestic 
solutions to our energy problems, solutions that employ 
Americans, using American technology to provide energy for 
American use.
    Madame Chairwoman, I believe Virginia has spoken. We in 
Virginia and indeed the entire nation look to your committee to 
provide us the legislative framework to move America toward a 
sound and progressive national energy policy.
    Thank you.
    Senator Landrieu. Thank you, Senator, for your good work.
    Mr. Davidson.

  STATEMENT OF CHARLES DAVIDSON, CHAIRMAN, PRESIDENT AND CEO, 
                       NOBLE ENERGY, INC.

    Mr. Davidson. Thank you, Madame Chairwoman. I truly 
appreciate the opportunity to be here today. My comments are 
going to focus on technology and some of the questions that we 
heard earlier today in terms of what is evolved in terms of 
technology and our industry. And I will be making a few brief 
comments that basically supplement the written testimony that 
was provided earlier.
    I am Charles Davidson, chairman, president, and CEO of 
Noble Energy, a leading independent here in the United States. 
I am also vice chairman of the Domestic Petroleum Council. I 
also chair the Offshore Committee of the IPAA. And my comments 
today are on behalf of both of those organizations. And also 
supporting our testimony is the International Association of 
Drilling Contractors, the International Association of 
Geophysical Contractors, the National Ocean Industries 
Association, and U.S. Oil and Gas. So I had lots of help, and 
some say I need it.
    But anyway, in looking at technology, it has had truly an 
amazing impact on our industry. And it is a real shame that we 
have lost sight of the fact that when we first began putting 
coastal waters into moratoria in the early 1980's, a lot of 
that technology was not available then. And we have lost sight 
of how it has evolved since then.
    So what I want to do is talk a bit about our exploration 
technologies, our drilling technologies, and some of the things 
that are allowing us to develop further offshore with greater 
and much reduced impact on the environment as we go forward. So 
if you will permit, I am going to show a few slides, as I think 
really pictures are worth a thousand words here.
    This is focuses more on exploration. And it just shows that 
with new technology, in terms of seismic and visualization 
techniques, our explorationists can now look and see much more 
clearly the reservoirs and targets they are going for. The 
impact is that we have greater success with our drilling. It 
takes fewer wells to develop these fields.
    So I will move this forward a little bit.
    You can see this is a visualization. We are looking down on 
top of the well right now. That colored surface down there is 
actually salt. This particular field was drilled through salt 
in the Gulf of Mexico with the field actually below it. And so 
as we let it roll further, we suddenly see the visualization of 
the field, which was again done by using seismic imaging along 
with a great computing technology we have. And they would say 
even sometimes a CEO could pick out a few locations there.
    But what it is doing is it is showing the seismic is 
actually in the background. The red represents hydrocarbon-
bearing strata; the blue, water-bearing. And as you can see, 
you can optimize your well location, find out perhaps where 
there are some new locations. Again, it allows the industry to 
better develop fields, fewer wells, more successful wells, as 
we go forward.
    Other areas that we have looked at in terms of advanced 
drilling technologies--and again, I will just add a couple of 
points to what is in the written testimony--you can see some of 
the benefits here, as we are able to reach multiple targets 
with fewer well bores, better environmental capabilities.
    The advanced drilling technology is just truly amazing. A 
question was asked this morning about how does it compare 
offshore with some of the other areas we have seen, say in 
Alaska. And I think Director Burton answered it very well. But 
they are truly amazing. And the things that we are doing, 
directional drilling offshore, where we link multiple 
reservoirs that may not be aligned with a single well, or we 
use horizontal drilling that puts a well bore through a large 
portion of the reservoir, extended reach, where we can go out 
very long distances away from a platform to get to remove 
reservoirs, or multilateral drilling, where we actually take a 
well bore and split it so that we can go two opposites 
directions to develop reservoirs.
    Subsea tiebacks. This is a technology that has truly 
evolved and, as you know, has been a major development offshore 
Louisiana in some of the deep water areas. This is an example 
my company is involved in. It is 5,000 feet of water, basically 
a mile deep. There was a smaller prospect, called Ticonderoga 
that you can see there. It could not justify its own surface 
penetrating facility, but we put the well heads on the floor, 
we flow it back to an existing spire. Actually, this one is 
being built right now. And so as a result, we are able to 
recover additional resources that would not have been recovered 
before.
    The amazing thing about these is that it is growing very 
rapidly. This just shows in the Gulf of Mexico how subsea well 
completions are evolving. But when you look at this technology 
throughout the world, there is many other places in the North 
Sea and others where it has gone even more rapidly.
    But I think the key is resources. And again, this is a 
point that was raised this morning. Early on, our resource 
estimates tend to be low. And you can see here in 1974, the 
Gulf of Mexico's gas resources were estimated to be 50 trillion 
cubic feet. Since then, we have produced 160 trillion cubic 
feet, and the estimate is there is another 232 trillion cubic 
feet left. Clearly, a tremendous growth in the resources.
    And again, it is interesting to note that that 1974 Gulf of 
Mexico resource estimate of 50 trillion cubic feet is about now 
what is estimated for the Atlantic and Pacific areas. Although, 
as was noted earlier, there is very limited data.
    So again, it is a real pleasure to be here. I think that in 
just a few minutes it is hard to describe all the technology 
our industry has developed over the past few years, but it has 
clearly enabled us to do so much more than we were ever capable 
of doing 15 years ago.
    Thank you. It is a pleasure.
    Senator Landrieu. Thank you, Mr. Davidson.
    [The prepared statement of Mr. Davidson follows:]

 Prepared Statement of Charles Davidson, Chairman, President and CEO, 
                           Noble Energy, Inc.

    Thank you, Mr. Chairman, for the opportunity to be here today to be 
part of an increasingly important national energy policy discussion.
    I am Charles Davidson, Chairman, President and Chief Executive 
Officer of Noble Energy, Incorporated, one of the largest independent 
natural gas and oil exploration and production companies in the United 
States.
    I am also vice chairman of the Domestic Petroleum Council that 
represents the largest US independents, and I chair the Offshore 
Committee of the Independent Petroleum Association of America (IPAA) 
that represents thousands more independents of all sizes. I am 
providing comments today on behalf of both organizations.
    Members of the DPC alone have approximately 4,500 Gulf of Mexico 
lease interests, including operator designations on some 2,900 leases, 
400 in ultradeepwater (1,600 meters or deeper). With the other IPAA 
members who are active offshore, you can see that independents are 
truly leaders in providing natural gas and oil from the US waters that 
are open to exploration and production. And we are leaders around the 
world.
    The sad fact, however, is that only some ten percent of US waters 
outside of Alaska are available for us to apply the best energy 
technology in the world.
    Put another way, the United States is the only developed country in 
the world with our type of ``blanket moratoria'' areas that have 
prevented even the consideration of energy development for decades.
    When we began placing coastal areas off limits to energy 
development in 1981, many of the technologies we use today were not 
available--and perhaps not even imagined. Today we have an important 
opportunity to focus on the future--and different policies that may 
allow careful consideration of offshore energy activity in selected 
areas--building on exciting technology improvements.
    Today I want to build on that point, and in doing so answer a 
number of questions about the 21st Century technology that

   increases our ability to find resources;
   decreases the number of wells needed in both exploration and 
        development of those resources;
   decreases the need for surface facilities;
   decreases the visibility of our operations; and,
   does all this in ways that are very compatible with the 
        environment. In the few minutes I have, I would like to touch 
        on each of these topics.

    First, geoscience improvements, including use of 3-D seismic and 
visualization technologies.*
---------------------------------------------------------------------------
    * All illustrations have been retained in committee files.
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    These may also involve the most sophisticated use of supercomputer 
analyses to allow us to better ``see'' and understand geology and 
potential resource deposits deep underground. These improvements allow 
better success in finding natural gas and oil, more accurate targeting 
of wells--meaning fewer, more successful ones--and less capital 
investment risk.
    Drilling technology continues to rapidly advance resulting in many 
benefits, including fewer surface penetrating facilities such as 
platforms and the ability to develop distant reservoirs.
    Specific examples include directional drilling that allows 
development of reservoir or several reservoirs not directly beneath a 
platform. Other examples are shown in the graphic.
    There has also been rapid growth in the number of ``subsea'' well 
completions--placing wellheads and other facilities on the ocean floor 
rather than on the surface.
    These subsea completions include both shallow water and deepwater 
production facilities that utilize the latest technology. One benefit 
is to reduce the visibility of offshore platforms.
    One of the best tools for offshore producers in the Gulf of Mexico 
is the utilization of subsea tiebacks to central manifolds. These 
tiebacks, some of which cover over 20-30 miles, allow producers to 
produce natural gas and oil over great distances from a single 
production platform. The graphic of the Ticonderoga project, in 5,000 
feet of water, provides an excellent example of subsea technology put 
to use.
    The U.S. and worldwide increase in subsea projects has been 
dramatic. This technology can allow many wells to be produced from 
fewer facilities, perhaps well over the horizon. In addition, subsea 
developments enable smaller reservoirs to be developed that were not 
justified in the past.
    Which brings us to estimates of resources in areas under moratoria.
    As you see here, our estimates of U.S. offshore resources have 
grown substantially over time in areas that have been open to 
exploration.
    In essence, the more we explore, the better we are able to estimate 
resources.
    Look at the 1974 Gulf of Mexico natural gas resource estimate of 
some 50 trillion cubic feet. Compare that to today's estimate of 232 
trillion cubic feet--on top of the 160 trillion cubic feet that has 
already been produced from the Gulf of Mexico. We have produced three 
times what we thought existed in 1974--and we now estimate almost five 
times more remaining. The more we explore, the more we know.
    (It is interesting to note that the current natural gas resource 
estimates for the Atlantic and Pacific add up to about what we thought 
was in the Gulf of Mexico in 1974.)
    In conclusion, we are very pleased to see serious discussion of how 
we as a nation might approach making decisions as to whether to open 
some additional offshore areas to help meet the energy needs of 
consumers. We are convinced that the technology used around the world 
today in the search for, and production of, natural gas and oil will 
provide a solid underpinning for sensible policies that move in that 
direction.
    Thank you.
    I'll be glad to answer questions.

    Senator Landrieu. I do have a couple of questions, and I 
would like to start on this technology question. Because some 
of the members, I think, are particularly interested in this 
and the extraordinary advancements of technology.
    I want to just be sure for the record that we got the final 
slide, which I think is very telling, that according to MMS 
with sort of the old technologies that existed in the last 20 
years, it was predicted that where we are drilling now would 
result in 51 trillion cubic feet of gas. But the fact, as we 
have actually put the actuals, it is like the difference 
between what you have budgeted and what you actually spent, we 
have found our identified 380 trillion. Is that basically what 
I heard you say?
    Mr. Davidson. Yes. Yes. Between what we have produced since 
then plus what is still remaining, when you add up those two 
bars. So it is roughly five times more remaining than what we 
had in the original estimate.
    Senator Landrieu. And talk a moment, if you would, about 
the new technologies for inventory. When you showed the slide 
up there that actually could show a picture under the lease 
tracks of what is there, what is not there, actually there was 
a map as to almost how you would get to it, what are some of 
the things that you would share with members that are either 
for or have not made their mind up or might even be negative 
about the inventory and exploration? Can that inventory be 
done, at least the inventory of what might be there, without 
intrusive or negative environmental effects, with the new 
technologies, whether they be satellite or others? Could you 
comment for the record about that?
    Mr. Davidson. Yes, I would. Clearly, there can be better 
resource estimates made today with our technology. But it is 
still going to be limited. And the reason is that in really 
providing and developing good resource estimates, it takes a 
combination of some of the new seismic data that we have now. 
But it also takes integrating that with geological data.
    And as you know, in some of these areas there have been 
very limited wells drilled. And as a result, as we explore, as 
the slide kind of noted at the top, as we explore more, we 
learn a lot more. I think that exploration, as we as an 
industry have shown, can be done in a very compatible way with 
the environment, not intrusive to the environment. But as we 
learn, it will give us a better sense as to the total resources 
that are there.
    Generally, my experience has been, in almost basin, is they 
tend to grow. Because what happens is our technology builds, we 
go after new targets that we did not think we had seen before 
or were too small before, and we just increment and increment. 
And so as we get into a basin, we almost always tend to see the 
resources grow as we develop it.
    Senator Landrieu. Well, that is a big help.
    Senator Wagner, I understand there was a lot written about 
this subject, as you were moving this bill through with really 
phenomenal success and bipartisan support. And despite the 
veto, as you have qualified what the basic issues of that veto 
revolved around, what were some of the kind of comments or 
unexpected editorial support that you might want to add to the 
record?
    Mr. Wagner. Well, Senator, I really have been overwhelmed 
since the bill has passed of just the people that have come up 
to me that said, ``I am glad somebody is pushing something and 
moving something forward.'' I suspected it earlier, when we did 
the study on the needs of manufacturers in Virginia and had a 
gentleman from the Gas Institute tell us initially about the 30 
trillion cubic feet conservative estimate off the eastern 
seaboard that was available. And after that meeting, he pulled 
me aside. He said, ``You have no idea that, you know, there is 
absolutely no will or no support for this.''
    And I told him that I felt just the opposite, that there 
has been a paradigm shift in this country, that it started with 
9/11, and I think that has been aggravated certainly by what we 
have seen recently at the gas pump and what we are seeing with 
the utility bills, the loss of jobs. In one plant alone, 
Senator, we have--Honeywell is the largest user of natural gas 
east of the Mississippi. It is down in Hopewell, Virginia, 15 
million cubic feet a day. And it has had to lay off 750 people 
just from the rise of natural gas at that particular plant.
    People want sources. People, as I indicated earlier in my 
testimony, have watched our national foreign policy being 
dictated by our energy needs. They have tied inflation to that. 
And I think clearly that is an issue. Even as near as retail 
sales that we have seen recently fall directly attributable to 
people having to make a decision, do they buy the clothes or do 
they pay to fill up their gas tank.
    And people are looking for solutions. And I have just been 
overwhelmed by the amount of support that I have gotten. As I 
mentioned in my testimony, I thought I might be going out on a 
limb. And just the opposite. There have been a few naysayers, 
but overwhelmingly it has been a very positive support base. It 
has only encouraged me to push it even harder. And I am really 
thankful for this opportunity to come up and explain to this 
body that you have a lot more support out there than you think. 
And in fact, I really think that it is just the opposite. 
Americans are looking to you now. This is incredibly important 
to us. It cuts across all fields and all income levels. And it 
is absolutely imperative that we come up with some policy here.
    And more and more people are wanting to look at nuclear 
power again as a viable alternative. And they do not understand 
why we are not producing more nuclear power in this country. 
They want cleaner coal burning and are willing to bring it 
online and do it. And as I mentioned, natural gas is just one 
solution. But it is going to take all of that to solve the 
energy problems we have. And I have just been overwhelmed with 
support.
    Senator Landrieu. I just got a note that there is a quorum 
call. So I only have just a few more minutes. But I have more 
question, if I could try to get it in to you and then Mr. 
Angelle. You also, I think, represent, if I read correctly, the 
Virginia Beach area. And that is an area that attracts a lot of 
tourists and tourism. Virginia is a place where a lot of people 
want to go and visit and spend time on the beach.
    Can you mention a minute about how that particular coastal 
area reacted to this and what the political response was right 
there on the coast?
    Mr. Wagner. And as you are aware, Senator, and you more so 
than everybody because of the State you represent, you 
understand the industry, and you understand the technical 
innovations that have happened and what it means to the 
Louisiana economy, as well as what it is perceived, as well as 
what the reality is in terms of the environmental threat.
    When I was able to explain that in the General Assembly, 
every member, and there are three Senators and six delegates 
that represent the city of Virginia Beach in the General 
Assembly, every one of us voted in favor of it. Every member of 
the Black Caucus, Legislative Black Caucus, be it in the Senate 
or the House, voted for this particular measure, because so 
many of our African-American citizens in our area depend on the 
waterfront for their livelihood. They work in the shipyards, 
they work in the longshoreman's industry. It indeed is a 
regional input in our area.
    And we are also experiencing defense cutbacks, particularly 
in the Navy in our area. And over and over we have recognized 
the need to be able to diversify our economy in the Hampton 
Roads area. And certainly supporting offshore exploration and 
drilling would go a long way to provide a diversification in 
our economy.
    And so our--and even in our city council, our mayor, who 
objected to the legislation and asked the Governor to veto it, 
put in front of our city counsel a resolution to the effect of 
the same thing. And I went down and basically gave an extended 
version of what I am giving today to the city council. And her 
resolution was defeated six-three. And so there is the advice 
of the city council here in Virginia Beach.
    And so we recognize that we can have a tourism industry and 
we can have--we can take advantage of the offshore deposits 
that may be off Virginia's coast. And they can happen together. 
They can happen in tandem. And in the end, we will have a much 
stronger economy in Hampton Roads, much more diversified 
economy in Hampton Roads. And we feel it is a net positive. And 
we just want the opportunity to be able to do it.
    Senator Landrieu. Thank you for sharing that. I think that 
is important, because we heard from several of our Senators 
about the fact that their State's economy rests on tourism. And 
I think it is one of the things that we want to stress in terms 
of the ability, if this is done correctly, for those industries 
to basically share the resources.
    Secretary Angelle, not only are you a great leader on oil 
and gas, but you also are a pretty good fisherman, I hear. You 
have caught a few in your day.
    I was given this Eco Rig's study that came out several 
years ago. And I remember when there was a series of articles 
written about it. I will just read the first sentence. ``There 
are 4,000 offshore oil and gas platforms in the Gulf of Mexico. 
They produce one of the most prolific ecosystems by area on the 
planet.'' This particular report reported that 30,000 adult 
fish reside around the platforms in an area about half the size 
of a football field. Protected fish, endangered species, are 
either attracted to or the studies, some of them believe are 
actually produced by the artificial reef system that is 
produced by these structures in an otherwise sort of 
continental shelf that is filled with sand and silt coming down 
from our rivers.
    As a fisherman yourself, I mean, do you have to read this 
report or could you tell us some things about fishing on the 
rigs in Louisiana?
    Mr. Angelle. What I can tell you, Senator, is that one of 
the most difficult things to try to suggest is to actually 
remove these rigs once they are up, because of the structure 
they create. And, you know, one of the great things about 
Louisiana's coastal area is that it is a coastal wetland. And 
we have people who hunt and fish and recreate. And we have 
ports that are operational. I think five out of the largest ten 
ports in America are in coastal Louisiana.
    And so we see just a tremendous merging, if you would, of a 
lot of different kind of activities in an area that is 
productive, not the fourth or fifth or sixth largest, but 
perhaps the largest in terms of productive ecosystems in 
America. And there is no question that we have found ways in 
Louisiana to do this in an environmentally correct way Mr. 
Davidson with Noble has done a tremendous job in their 
discovery and exploration of some of the resources in 
Louisiana.
    So we are working in Louisiana right now on two separate 
fronts utilizing rigs. One is in a mari-culture type situation 
that the House of Representatives and the State Senate approved 
last year. And second to see if we can perhaps use wind energy 
in the oil and gas rigs to support that infrastructure.
    So there is a way for all these things to happen, we 
believe, simultaneously without a doubt. And we have proved it 
in Louisiana.
    Senator Landrieu. Thank you.
    I am down to my last 2 minutes. And I have to get to the 
floor for an unexpected quorum call. But I think that this has 
been a very productive session. I thank all of you for your 
patience, for coming back after lunch. Your testimony is going 
to be considered with a great deal of thought and care, because 
I will agree with all the panelists today that I think the time 
is for us to move an energy bill. And there are pressures that 
are coming to bear to see that this energy package moves.
    And the offshore Outer Continental Shelf piece will be a 
very big piece, I think, of that energy bill, how we resolve 
these issues about balancing the needs of our coastal 
community, being sensitive to the individual States, but also 
mindful of the great demands that our Nation has regarding the 
production of energy for our economic security and our military 
security in the future.
    Thank you all for coming. The meeting is adjourned.
    [Whereupon, at 2:34 p.m., the hearing was adjourned.]

                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

   Responses of Robert W. Thresher to Questions From Senator Domenici

    Question 1. What accounts for the wide discrepancy between the 
current 600 megawatts of wind energy offshore and 47,000 megawatts 
onshore? How can we close this gap?
    Answer. There are several key factors that account for the wide 
discrepancy between the 47,00MW of land-based turbines and 600MW of 
turbines in the water. As you know, these are global figures. The U.S. 
has no offshore projects operating and 6700 MW of land-based projects. 
The offshore wind industry began in the early 1990's in northern Europe 
with small projects, 2 toll turbines, driven primarily by the limited 
onshore wind resource. Of the 600 MW of offshore wind in Europe, about 
400 MW is in Denmark. These early research, development and 
demonstration projects were funded primarily by the national 
government, with support from the European Union.
    In the United States, industry and government research and 
development (R&D) focused on land-based technologies because of the 
tremendous windy land resources available in the Midwest. Land-based 
projects are much less costly and complex and today are nearly cost 
competitive with conventional fuel generation sources. In addition, 18 
states and the District of Columbia have Renewable Portfolio Standards 
(RPS) to encourage wind development. One reason that offshore wind 
facilities are now being considered is that they are the most viable 
source for renewable energy needed to meet RPS requirements in some 
states, and it is not currently possible to transport large amounts of 
electricity from the wind-rich Midwest to the coasts, where the major 
load centers are located. Over 50% of the electrical load for the 
country is located on the coasts.
    Developing an offshore turbine is much more challenging than 
developing an onshore turbine because of the need to design for not 
only the wind loads, but also wave and current loads. Another challenge 
is installation, which must be done at sea from ships with all of the 
associated weather challenges. Furthermore, maintenance is much more 
complicated, and access for repairs can frequently become impossible 
for extended periods during storms necessitating a much higher 
reliability for offshore turbines.
    Corrosion protection is also a significant issue, particularly for 
the electronic components. All of these factors drive up the initial 
capital cost of the turbine and in order to pay for these added costs 
each turbine must produce more energy, which forces designers to put 
the largest rotor possible on the turbine in order to increase energy 
capture. At this point in time, offshore R&D prototype turbines are in 
the range of 4 to 5 MW with rotor diameters of about 100 to 120 meters 
and they are estimated to cost about twice as much per megawatt as an 
onshore turbine. Today, the energy generated by an offshore wind plant 
is about twice as expensive as a land-based facility.
    To close the gap in cost will require a significant investment in 
an aggressive R&D program to overcome current water depth limits, 
improve accessibility and reliability, develop design methods, insure 
safety, and establish environmental baselines and standards, as well as 
demonstrate the technology through testing and operational experience. 
Due to these challenges, developing offshore wind technology capable of 
cost-effectively harnessing a substantial portion of the Nation's 
offshore wind resource base will take at least a decade of research, 
development and demonstration, funded at about the same level as the 
program for land based turbines. More funding could accelerate the 
development and less would stretch it out. To put this in perspective, 
current estimates indicate that a single offshore R&D prototype turbine 
for shallow water will cost about $50M to design, fabricate, install 
and fully test.
    The government role should also include support for research on 
environmental issues to establish environmental baselines and standards 
to determine possible usage benefits and impacts. There is a need for 
hard scientific data to environmentally baseline the most likely 
regions where wind energy facilities are to be built. This could 
include the development of regional programmatic environmental 
assessments that map the many uses of a region, screening the areas 
with criteria to protect sensitive environmental areas (exclusion 
zones), and mitigate potential competing uses of the ocean area. An 
important and difficult issue that will need to be addressed is the 
impact of cumulative effects on the outer continental shelf. This 
requires consideration of the impacts due to all activities, including 
oil and gas production, wind, wave, tidal, and current energy 
facilities, as well as all other activities. It is essential to 
consolidate the leadership for this important environmental work and 
permitting at a single federal agency that can permit offshore ocean 
renewable energy facilities in a timely fashion at a reasonable cost.
    The ultimate vision for offshore wind technology is a floating 
platform system that will be mass produced and assembled in a local dry 
dock facility, towed out to sea, anchored, and plugged into the 
electrical connector to an undersea cable that delivers the power to 
shore. Through economies of scale and mass production at local U.S. 
shipyards, work at sea would be minimized, high paying manufacturing 
jobs would be created, and competitive energy costs could be achieved.
    Question 2. Why have no offshore turbines been installed in waters 
deeper than 20 meters?
    Answer. The European offshore wind industry has been fortunate to 
have an abundance of shallow water sites (less than 20 meters) for 
deployment of all of their offshore wind power facilities installed to 
date. The cost and complexity of an offshore wind generating facility 
increase with water depth. Two critical factors limit today's 
technology to water depths of 20 meters or less. First, currently the 
turbines are supported on the seafloor by a simple tube structure, 
which is driven into the sea bottom. This type of support is too 
flexible to withstand the wave loading in water deeper than about 30 
meters. The second reason is that the ships used to drive these 
monopoles into the bottom cannot operate in deeper water. Research and 
development is needed to adapt the technology used by the oil and gas 
industry for offshore wind turbines in depths of 30 meters and beyond. 
This includes truss structures for use at intermediate depths of about 
30 to 60 meters, and floating wind turbine platforms (similar to 
floating oil platforms) for water depths above 60 meters. The R&D 
challenges must focus on minimizing the cost of these supporting 
structures. Offshore wind facilities must have a much lower capital and 
operating cost than an oil production platform in order to be cost 
effective.
    Question 3. If administrative problems get worked out and 
technology allows access to deep waters on the OCS, what is the best-
case scenario for the amount of wind energy production that you 
envision?
    Answer. Current projections using the National Energy Modeling 
System (NEMS) developed by the Energy Information Administration (EIA) 
show that wind energy could provide up to 70 GW on the national 
electric grid by 2025, assuming an aggressive R&D program. This 
projection is based on no additional government sponsored incentives 
(e.g. production tax credit, carbon credit). The very crude estimates 
that have been made to date indicate that in the zone from 5 to 50 
miles off the coast there is sufficient resource for up to 900 GW of 
installed wind capacity, a figure based on exclusion of about 40% of 
this area from development. It is extremely unlikely that all of this 
remaining area would be developed; however, it does show the resource 
base is large. Without storage, and assuming today's electrical grid, a 
practical ``best-case'' scenario for wind is about 30% of the 
electricity supply for the nation, including both onshore and offshore 
generating facilities. Today, we get less than \1/2\% of our nation's 
electricity from wind. Currently, Denmark is generating about 20% of 
its electricity using wind, and they have a national goal of supplying 
50% of their electricity using wind, with the majority coming from 
offshore installations.
    Question 4. With respect to wave energy technology, you assert in 
your written testimony that, ``the current status of development for 
wave technology is roughly where wind energy was twenty-five years 
ago.''
    What can we do to ensure that wave energy on the OCS is not bogged 
down with the same types of problems, so that twenty-five years from 
now we do not say (as you say about wind technology today) that we have 
no direct experience or infrastructure?
    Answer. To ensure that wave energy technology, as well as other 
potentially viable fluid-dynamic forms of ocean energy--tidal and 
current technologies, are developed in a timely and cost effective 
manner, the following steps should be taken.
    First and foremost, authorize and fund an ocean wave, tidal, and 
current energy research, development and demonstration program to work 
in partnership with the nation's embryonic ocean renewable energy 
industry to evolve the technologies and make them reliable and cost 
effective. This can best be accomplished by developing design methods, 
ensuring safety, establishing environmental baselines for offshore 
ocean renewable energy facilities, and setting standards, as well as 
demonstrating technologies through testing and operational 
demonstrations. As part of this R&D program, a federal test site should 
be identified that is permitted to allow testing of single experimental 
units, as well as small demonstration projects without the cost and 
time consuming effort of a project-by-project environmental assessment, 
as is currently required.
    The R&D should assess and estimate the ocean wave, tidal, and 
current energy resource potential of the nation by region, and at the 
same time perform an offshore environmental inventory in collaboration 
with appropriate federal and state government agencies and 
environmental stakeholders. This should be done to understand the 
highest potential regions for early deployment of demonstration 
generating facilities, while assuring minimal negative environmental 
impacts.
    An important and difficult issue that will need to be addressed is 
the impact of cumulative effects on the outer continental shelf. This 
requires consideration of the impacts due to all activities, including 
oil and gas production, ocean renewable energy facilities, as well as 
all other activities. It is essential to consolidate the leadership for 
this important environmental work and permitting at a single federal 
agency.
    The R&D effort should investigate approaches for integrating large 
offshore electrical generation facilities with variable output into the 
nation's electrical transmission system at minimal costs and with 
minimal impact on the system's operation and stability. Additional 
study and experimentation is needed to optimize integration of 
fluctuating generating system output in the electrical system.
    There are a number of economic and knowledge enhancing benefits 
that could be realized by a combined ocean renewable energy program. On 
the technical side, both wind and water-based renewable technologies 
are machines that operate at high torque and low speed. They must both 
operate in the same offshore ocean conditions and they will have 
similar interactions with marine flora, fauna and the seafloor. 
Consolidating all of this R&D effort in one organization would greatly 
accelerate learning, and would prevent a duplication of efforts.
    The development and use of wave, tidal, and current technologies 
can be accelerated by participating in international partnerships. The 
Europeans have been actively developing these technologies for several 
years and have developed several prototype ocean renewable energy 
electrical generators. In particular, the United Kingdom has an 
aggressive R&D program in wave, tidal, and current energy, and they 
have just opened the European Marine Energy Center on the Island of 
Orkney in Scotland. We could greatly accelerate this nation's rate of 
knowledge and development of ocean renewable energy technologies in a 
very cost effective fashion by authorizing and funding multilateral and 
bilateral cooperative research projects with European countries active 
in this research. These collaborations could include: participating in 
the TEA Ocean Energy Systems Agreement, scientist exchange programs, as 
well as joint funding of high value fundamental research and testing 
programs.
   Responses of Robert W. Thresher to Questions From Senator Bingaman
    Question 1. Do you have suggestions on how renewable energy 
facilities can be sited to minimize local impacts? What infrastructure 
is necessary for the facilities associated with the different types of 
energy development contemplated on the OCS?
    Answer.

                           SITING SUGGESTIONS

    Ocean renewable energy facilities are made up of arrays of machines 
that are structurally supported from the seabed or, if they are on 
floating platforms, moored to the seabed using anchors and cables. To 
deliver the electricity to shore a cable is trenched into the seabed, 
or laid on top of the seabed, depending on the site conditions. The 
primary interaction with marine flora, fauna and seafloor is through 
direct contact. Marine animals interact with the structure below the 
surface and the cable to shore, while birds interact with the surface 
structures and with the moving rotor of wind turbines.
    An important step that could be taken to vastly improve siting and 
reduce impacts would be to establish environmental baselines and 
standards now, before facilities are actually built. There is a need 
for hard scientific data to environmentally baseline the most likely 
regions where wind and wave energy facilities are to be built. This 
could include the development of regional programmatic environmental 
statements (PEIS under the National Environmental Policy Act--NEPA) 
that maps the many uses of a region, screening the areas with criteria 
to protect sensitive environmental areas, and mitigate potential 
competing uses of the ocean area. Developing such overlay maps and an 
environmental inventory of wildlife and commercial uses for a regions 
would provide guidance to both the environmental community and energy 
developers on the important issues to be addressed when siting energy 
production facilities.
    Starting such a process under NEPA would also initiate a formal 
public involvement process that identifies alternatives and potential 
environmental problems. This procedure may streamline the permitting 
process in the in the long run. Without such a strategic approach, the 
federal and state governments will need to require environmental 
assessments for each and every project. Developers will most likely be 
asked to fund before-and after, construction impacts (BACI) 
environmental studies to identify and verify the scope and intensity of 
impacts to the permitting agency and third party stakeholders. The PEIS 
process described above will help limit and focus the BACI type studies 
to those that are really needed.
    Another important and difficult issue that will need to be 
addressed is the impact of cumulative effects on the outer continental 
shelf This requires consideration of the impacts due to all activities, 
including oil and gas production, ocean renewable energy facilities, as 
well as all other activities. For this reason, it is essential to 
consolidate the leadership for this important environmental work and 
permitting at a single federal agency that can permit offshore wind 
energy and wave energy facilities in a timely fashion at a reasonable 
cost.

                        NECESSARY INFRASTRUCTURE

    Regional facilities will be needed to mass-produce hundreds, if not 
thousands, of wind, wave, tidal, and current machines. The devices will 
then most likely be transported by ship or towed to a specific sea 
station and installed. There will be a need for specialized 
installation equipment and vessels specifically designed for installing 
ocean renewable energy devices. The operation and maintenance will also 
be done from local shipyards harboring work boats of various types, and 
probably a jack-up, barge-mounted crane. Some maintenance activities 
may also be done by helicopter. For a large wind facility, several 
crews will do scheduled and unscheduled maintenance on a daily basis 
working from machine to machine as their work progresses.
    In the future, if ocean renewable energy facilities grow to cover a 
large portion of the electrical load in a region, then an offshore, 
high capacity transmission cable may be necessary to connect several 
offshore generating facilities to various substations on shore. This 
would alleviate transmission congestion onshore, and would provide 
multiple injection points for the offshore electrical energy over the 
region. In Europe, a high capacity offshore cable is being discussed to 
facilitate the interconnection of many wind farms in the Baltic Sea. 
This would provide multiple injection points for the wind generated 
electricity across several countries, without making major upgrades to 
the entire onshore transmission grid.
                               __________
                                 State of Virginia,
                                              7th District,
                                  Virginia Beach, VA, May 11, 2005.
Hon. Pete V. Domenici,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Senator Domenici: Thank you for inviting me to testify before 
the Senate Energy and Natural Resources Committee on April 19, 2005 
regarding natural gas exploration and drilling off the coast of 
Virginia Enclosed, you will find my answers to the list of questions I 
received to expand on some aspects of my testimony.
    I am sorry that the schedule did not permit me to testify before 
you on the subject. I will add that Senator Landrieu did a fine job of 
continuing the meeting in your absence. However, I regret that we did 
not have an opportunity to personally chat about the natural gas issue. 
I would be delighted to meet with you any time your schedule permits if 
you would find such a discussion valuable. I can be reached at my 
legislative by calling 757.671.2250 or my business office by calling 
757.247.0101.
    Again, I thank you for allowing me to share my views on this 
extremely important issue. I look forward to hearing from you.
    With kindest regards, I remain
            Very truly yours,
                                           Frank W. Wagner,
                                                     State Senator.
[Enclosure.]

    Question 1. Senator Wagner, your bill would have allowed the 
Virginia Liaison Office to lobby Congress on behalf of legislation that 
would lift the moratorium for development of natural gas reserves off 
the Atlantic Seaboard. What do you view as the most important 
principles to be incorporated into legislation that seeks to increase 
production and exploration on the OCS?
    Having witnessed the Energy and Natural Resources Committee 
members' testimony prior to the hearings, particularly the comments 
from Senator Martinez and Senator Burr, I believe that the most prudent 
course of action would be to allow states to opt out of the current 
moratorium on the OCS. The state and its people--who are closest to any 
exploration area--should be permitted to decide the issue of 
exploration. If Virginians believe that exploration off their coast is 
in their best interest, then it will be Virginians who decide to 
welcome or not to welcome exploration for natural gas.
    Also, I believe shared royalties with the states that choose to opt 
out of the moratorium is altogether appropriate and will act as a 
powerful incentive for states to seriously consider the risk/reward 
nature of drilling in the OCS and will also recognize that although 
production may occur in federal waters, the adjacent state will have a 
role to play in providing onshore infrastructure to support that 
activity. I believe once state governments study the safety and 
environmental records of the offshore industry, they will come to the 
same conclusion the Virginia General Assembly did in February 2005. The 
conclusion is that it is in the best interests of Virginia to pursue 
our offshore energy assets.
    Therefore the two major provisions for OCS energy recovery should 
be:

    1. Opt out of the moratorium by Executive Order from the Governor 
or by act of that state's legislative body.
    2. Shared royalty payments with only the states that choose to lift 
the moratorium.

    A third provision I consider extremely important to developing a 
plan to harness the full resources of the OCS, is an intensified 
Research and Development effort on methane hydrates with a goal of 
developing processes to economically harvest this important new 
potential resource. Alan Greenspan echoed these comments during his 
recent testimony in front of Congress.
    Initial USGS surveys suggest that two small areas, less than the 
size of Rhode Island, contained ten times more natural gas locked in 
these hydrates than was consumed in 1989. One report I read stated that 
there was twice the amount of carbon-based fuel reserves locked in 
methane hydrates than in all of the remaining carbon-based reserves 
(oil, natural gas and coal) combined. If we can put a man on the moon 
and an SUV on Mars, we can figure this one out, too.
    Question 2. You say that Canada is presently recovering over 500 
million cubic feet of natural gas per day off Nova Scotia. What do you 
think accounts for the differences in policy between U.S. and Canada?
    It is clear that Canada has a far more aggressive approach to 
fulfilling their energy needs than we do in the United States. Various 
reports and press accounts indicate that Canadian policy makers have 
looked at the outstanding safety and environmental record of the 
offshore energy industry and concluded that it is altogether 
appropriate to recover Canadian reserves off their coastline. The 
safety record speaks for itself: it is environmentally sound to pursue 
domestic reserves.
    I also believe Canadian policy makers have determined that it makes 
far more sense to employ Canadians to recover Canadian resources to be 
used by Canadian industries and homes (and exported to the U.S.) than 
it does to spend Canadian dollars to import their energy sources from 
countries that may or may not be friends of Canada
    Question 3. Please give me your thoughts on what you believe are 
the major distinctions, if any, that should be made between seeking 
additional access to resources for exploration and production of oil 
and seeking additional access for the exploration and production of 
natural gas?
    Reports I have read from the Department of the Interior indicate 
that the Atlantic OCS is gas prone, with little evidence of oil off the 
mid-Atlantic coast. However, there is always the possibility that where 
natural gas is discovered, there may also be oil. The fact that there 
has not been a major oil spill from over 4,000 oil and gas platforms in 
35 years would suggest that there is no scientific basis for making a 
distinction between oil and gas.
    Therefore, I believe that the moratorium should remain in place out 
to 20 miles off the shoreline for deposits made up of primarily natural 
gas and 40 miles offshore for deposits made up primarily of oil. Beyond 
20 and 40 miles, I believe the individual states should decide whether 
or not to lift the moratorium on the remaining OCS.
    Question 4. What impact would OCS access off of the Virginia coast 
have on jobs in the state and natural gas prices in Virginia?
    Answer.

                               JOB GROWTH

    It has always been my contention that OCS access off the coast of 
Virginia would have a very positive effect on Virginia's economy and 
job growth.
    Job growth would increase by three measurable standards:

    1. Direct employment in supporting OCS surveying, drilling and 
recovery of OCS energy reserves.
    2. Increased manufacturing employment due to a stable source of a 
domestic supply of natural gas at a reasonable cost.
    3. Indirect service sector job growth associated with the expanding 
economy in the OCS manufacturing sector.

    By way of explanation, actual economic data collected in Nova 
Scotia and in Norway proves the economic stimulus that occurs when 
supporting OCS exploration and development. A languishing Nova Scotia 
economy was actually turned around because of the investments that 
major energy companies made to support offshore exploration and 
recovery of natural gas.
    In terms of manufacturing jobs, the Honeywell plant in Hopewell, 
Virginia (largest user of natural gas east of the Mississippi) has laid 
off over 750 Virginians due to the threefold increase in natural gas 
prices in the past five years. This factory is one of the United 
States' major producers of fertilizer and nylon. Logic dictates that a 
reduction in natural gas prices will result in an increase in 
employment at this one factory.
    However, natural gas is a key component in a variety of 
manufacturing processes, including national security related chemical 
businesses, as well as the paper and pulp industry and those processes 
involving heat treating. As long as U.S. natural gas prices remain the 
highest in the world, we will continue to see our industrial and 
manufacturing base erode.

                           NATURAL GAS PRICES

    With regards to natural gas prices in Virginia, our offshore 
production would be piped into the existing natural gas distribution 
infrastructure. Since natural gas is traded as a commodity, market 
forces dictate the actual cost of gas.
    To the extent Virginia would benefit over any other state, our 
close proximity to the source may result in a lower distribution cost.
    However, the entire country would benefit form every effort we make 
to enhance the natural gas supply. Energy commodities have a direct 
relation to supply/demand market forces; hence, any increase in supply 
(OCS resources, Alaskan gas pipeline, additional LNG offload 
facilities) can only result in stabilizing and hopefully reducing 
natural gas costs.
    To do nothing would have a disastrous effect on our manufacturing 
base and household consumers and have serious implications for our 
national economy.
    Question 5. Please comment on the environmental impact of what you 
propose.
    The environmental risks associated with offshore drilling are 
minimal. As stated by the Secretary of the Interior, ``There has not 
been a major spill from an offshore oil platform in 35 years.''
    This track record is directly attributable to the safety features 
and technology enhancements incorporated into today's modern offshore 
drilling platform. When one compares the environmental safety record of 
the offshore drilling industry versus oil tankers and barges, it is 
obvious that the offshore industry is by far the preferred option if 
one is solely concerned with minimizing environmental risk. It also 
stands to reason that if we do not increase our domestic production, 
then we will be required to increase the tanker traffic and the 
inherent environmental risk associated with increased traffic.
    No one is proposing a moratorium on tanker traffic for obvious 
economic and national security reasons. However, environmental scare 
tactics ring hollow when one studies the actual data. Not only are the 
environmental risks minimal, I encourage everyone to visit this 
website: www.towersoflife.com. I have taken the liberty of including 
the following information from the website and I ask you to read it 
carefully.

          ``There are approximately 4,000 offshore oil and gas 
        platforms in the Gulf of Mexico. They produce one of the most 
        prolific ecosystems, by area, on the planet. Stanley and Wilson 
        (2000) reported that 10,000-30,000 adult fish reside around the 
        platform in an area about half the size of a football field. 
        Live rock organisms, coral, Endangered Species, and `protected' 
        fish and invertebrates colonize the platform's submerged 
        structure. Many blue-water platforms create complex coral reef 
        ecosystems, comprised of Caribbean flora and fauna that would 
        otherwise not exist on thousands of square miles of generally 
        featureless and silty continental shelf These platforms clearly 
        produce fish rather than merely attract fish. An abundance of 
        evidence suggest that they are Essential Fish Habitat (EFH), 
        Coral Habitat, and Endanger Species Habitat (ESH). Over 50 
        species of federally managed fish, crustaceans, and live rock 
        organisms settle and forage around the offshore structures. The 
        ecosystems they create are not designated as `protected 
        habitat' under any of our current Fisheries Management Plans. 
        Over 100 of them will be removed every year for the next 40 
        years.''
        www.towersoflife.com/ecorigs/index.html

    Like most citizens in our country, I want to enhance the quality of 
our environment. However, the environmental threats from offshore 
drilling espoused by some, do not jibe with the facts or the 
demonstrated 35-year record.
    As a former Navy diver and still active sport diver, I have seen 
with my own eyes literally thousands of fish congregating around the 
Chesapeake Bay light tower. Once erected, offshore towers become an 
ecosystem.
    Therefore, I have concluded that, based on an increase in tanker 
traffic or offshore development of our resources, offshore development 
is preferable. Based on a 35-year track record of no major spills, I 
believe that the environmental risks are minimal compared to the 
potential reward. Furthermore, we have talked about oil and gas 
platforms. The Department of the Interior has only stated a 
conservative estimate of 30 trillion cubic feet of natural gas and no 
mention of oil. Natural gas, since it is a gas, cannot spill.
    In closing, platforms established in the Atlantic basin will become 
ecosystems. Collected data from existing platforms proves that these 
platforms, and from 10-18 miles out from them, become new ecosystems. 
Rather than scaring off tourists, I believe the very real possibility 
exists that tourism will be enhanced because of new fishing areas that 
will be created. I visited a local bait store to gauge the sport 
fishermen's reaction after my legislation had become big news here in 
Hampton Roads. To a person, they responded positively. They supported 
my legislation because they understood the potential for new fishing 
opportunities.

                               __________
    Responses to the following questions were not received at 
the time the hearing went to press.

             Questions to Ms. Burton From Senator Domenici

    Question 1. If the strongest trend on the OCS today is the 
continuing development of the deep water in the Gulf of Mexico and the 
deepwater is primarily oil rich (or more oil-rich than shallow waters), 
how can we increase or even just sustain our level of natural gas 
production on the offshore?
    Question 2. Please comment on what steps MMS is taking to ensure 
that OCS operators are complying with applicable environmental laws?
    Question 3. What do you think of the principle that each individual 
coastal state should have the choice of whether or not oil and gas is 
produced off of its coast?
    Question 4. Can you give us your thoughts on how effective the 
offshore oil and gas industry is at preventing oil spills?
    Question 5. What facts lead you to conclude that MMS has the 
capability and is the most appropriate agency to administer offshore 
renewable energy projects?
                               __________
           Questions to Admiral Watkins From Senator Domenici

    Question 1. In your written testimony you state that, the nation's 
vast offshore ocean areas are, ``becoming an increasingly appealing 
place to pursue economic activities.'' Do you believe that it is time 
for us to re-examine whether increased access on the OCS for entities 
to pursue economic activity would be beneficial to the nation?
    Question 2. How can the federal government best facilitate 
renewable projects on the OCS and alter the current scheme which the 
Commission viewed as ineffective?
    Question 3. In your written testimony, you state that oil and gas 
development is a classic example of ``multiple-use resource management, 
including federal-state tensions.''
    What specific steps can be taken to fairly and equitably deal with 
this tension, particularly with regard to changes to the current 
revenue structure?
    Question 4. With respect to methane hydrates, it is the view of 
your Commission that much more information is needed to determine 
whether significant technical obstacles can be overcome to enable 
methane hydrates to become commercially viable and environmentally 
acceptable.
    Please comment on what some of these obstacles are and what is 
being done to overcome them.
                               __________
           Questions to Admiral Watkins From Senator Bingaman

    We are all well-aware of the controversy associated with the OCS 
oil and gas leasing program that has resulted in moratoria on large 
areas of the OCS. Now some are looking at the possibility of trying to 
tap the considerable non-oil and gas energy potential on the OCS.
    Question 1a. What do you think are the lessons learned from the oil 
and gas OCS experience that we can apply as we move forward with other 
energy production on the OCS?
    Question 1b. Can we avoid the ``not in my backyard'' syndrome as we 
move to develop renewable resources on the OCS? How?
    Question 1c. Do you have any other suggestions on how we can 
minimize the controversy associated with non-oil and gas energy 
development on the OCS?
    Question 2. Have you had an opportunity to review section 321 of 
the Conference Report on H.R. 6 (108th Congress) relating to alternate 
energy-related uses on the OCS? Do you have suggestions on any 
modifications to the provision to make it more consistent with the 
recommendations contained in the Ocean Commission Report? If so, please 
provide them.
    Question 3. The Ocean Commission Report calls for a comprehensive 
management regime for renewable energy on the OCS. Your testimony 
outlines several shortcomings of the current statutory authorities of 
the Corps of Engineers and the FERC in this area. Please elaborate. 
Given the current responsibilities of MMS for offshore energy 
development, do you think the Secretary of the Interior should take the 
lead in this area?
    Question 4. Your statement discusses the need for a ``comprehensive 
offshore management regime'' to coordinate the multiple uses of the 
Outer Continental Shelf. What do you envision? Please elaborate.
    Question 5. Your testimony recommends a funding increase in MMS's 
environmental studies program. Do you think this is necessary to 
address concerns where production is currently taking place? Do you 
think an increased commitment to addressing environmental concerns is a 
precursor to allowing energy production to go forward in other areas?
                               __________
             Questions to Ms. Burton From Senator Bingaman

    We are all well-aware of the controversy associated with the OCS 
oil and gas leasing program that has resulted in moratoria on large 
areas of the OCS. Now some are looking at the possibility of trying to 
tap the considerable non-oil and gas energy potential on the OCS.
    Question 1a. What do you think are the lessons learned from the oil 
and gas OCS experience that we can apply as we move forward with other 
energy production on the OCS?
    Question 1b. Can we avoid the ``not in my backyard'' syndrome as we 
move to develop renewable resources on the OCS? How?
    Question 1c. Do you have any suggestions on how we can minimize the 
controversy associated with non-oil and gas energy development on the 
OCS?
    Question 2. During the 107th Congress, the Administration 
transmitted legislation to provide a statutory regime for permitting 
the development of alternate energy related uses on the OCS. I agree 
that comprehensive legislation is needed in this area, and that it 
makes sense to give the Secretary of the Interior authority to permit 
this type of activity on the OCS.
    I believe some aspects of the Administration's proposal need fine-
tuning to clarify the scope of the provision and also to clarify that 
certain requirements of the OCS Lands Act apply. Will you work with us 
to refine these provisions?
    Question 3. Senator Alexander has introduced a bill (S. 726) that 
would require that portions of the original Lease Sale 181 area be 
offered for lease. Do you support this provision?
    Question 4. Has any decision been made yet on whether to include 
any portion of the original area of Lease Sale 181 in the next Five-
Year Plan?
    Question 5. What are MMS's current resource estimates for the OCS? 
Can you explain the methodology used in developing these estimates?

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