U.S. GOVERNMENT PRINTING OFFICE

70–888 DTP WASHINGTON : 2001

A NATIONAL ENERGY POLICY

OVERSIGHT HEARINGS

BEFORE THE

COMMITTEE ON RESOURCES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

March 7, 2001, The Role of Public Lands in the Development of a Self–

Reliant Energy Policy; and

June 6, 2001, The National Energy Policy

Serial No. 107-1

Printed for the use of the Committee on Resources

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

or

Committee address: http://resourcescommittee.house.gov

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: (202) 512–1800 Fax: (202) 512–2250

Mail: Stop SSOP, Washington, DC 20402–0001

(II)

COMMITTEE ON RESOURCES

JAMES V. HANSEN, Utah, Chairman

NICK J. RAHALL II, West Virginia, Ranking Democrat Member

Don Young, Alaska,

Vice Chairman

W.J. ′′Billy′′ Tauzin, Louisiana

Jim Saxton, New Jersey

Elton Gallegly, California

John J. Duncan, Jr., Tennessee

Joel Hefley, Colorado

Wayne T. Gilchrest, Maryland

Ken Calvert, California

Scott McInnis, Colorado

Richard W. Pombo, California

Barbara Cubin, Wyoming

George Radanovich, California

Walter B. Jones, Jr., North Carolina

Mac Thornberry, Texas

Chris Cannon, Utah

John E. Peterson, Pennsylvania

Bob Schaffer, Colorado

Jim Gibbons, Nevada

Mark E. Souder, Indiana

Greg Walden, Oregon

Michael K. Simpson, Idaho

Thomas G. Tancredo, Colorado

C.L. ′′Butch′′ Otter, Idaho

Tom Osborne, Nebraska

Jeff Flake, Arizona

Dennis R. Rehberg, Montana

VACANCY

George Miller, California

Edward J. Markey, Massachusetts

Dale E. Kildee, Michigan

Peter A. DeFazio, Oregon

Eni F.H. Faleomavaega, American Samoa

Neil Abercrombie, Hawaii

Solomon P. Ortiz, Texas

Frank Pallone, Jr., New Jersey

Calvin M. Dooley, California

Robert A. Underwood, Guam

Adam Smith, Washington

Donna M. Christensen, Virgin Islands

Ron Kind, Wisconsin

Jay Inslee, Washington

Grace F. Napolitano, California

Tom Udall, New Mexico

Mark Udall, Colorado

Rush D. Holt, New Jersey

James P. McGovern, Massachusetts

Anibal Acevedo-Vila, Puerto Rico

Hilda L. Solis, California

Brad Carson, Oklahoma

Betty McCollum, Minnesota

Allen D. Freemyer, Chief of Staff

Lisa Pittman, Chief Counsel

Michael S. Twinchek, Chief Clerk

James H. Zoia, Democrat Staff Director

Jeff Petrich, Democrat Chief Counsel

(III)

C O N T E N T S

Page

Hearing held on March 7, 2001 .............................................................................. 1

Statement of Members:

Calvert, Hon. Ken, a Representative in Congress from the State of

California, Prepared statement of ............................................................... 17

Cubin, Hon. Barbara, a Representative in Congress from the State of

Wyoming, Prepared statement of ................................................................ 18

Gallegly, Hon. Elton, a Representative in Congress from the State of

California, Prepared statement of ............................................................... 16

Hansen, Hon. James V., a Representative in Congress from the State

of Utah ........................................................................................................... 1

Prepared statement of ............................................................................... 3

McGovern, Hon. James P., a Representative in Congress from the State

of Massachusetts, Prepared statement of ................................................... 21

Pallone, Hon. Frank, Jr., a Representative in Congress from the State

of New Jersey, Prepared statement of ....................................................... 17

Radanovich, Hon. George, a Representative in Congress from the State

of California, Prepared statement of ........................................................... 19

Rahall, Hon. Nick J., II, a Representative in Congress from the State

of West Virginia ........................................................................................... 3

Prepared statement of ............................................................................... 4

Rehberg, Hon. Dennis R., a Representative in Congress from the State

of Montana, Prepared statement of ............................................................. 21

Udall, Hon. Mark, a Representative in Congress from the State of

Colorado, Prepared statement of ................................................................. 20

Statement of Witnesses:

Bowles, Jim L., President, Americas Division, Phillips Petroleum

Company, on behalf of the American Petroleum Institute ........................ 89

Prepared statement of ............................................................................... 90

Geringer, Hon. Jim, Governor, State of Wyoming ......................................... 11

Prepared statement of ............................................................................... 25

Hocker, Christopher, President, National Hydropower Association ............ 121

Prepared statement of ............................................................................... 122

Response to questions submitted for the record ..................................... 133

Hogan, Leland J., Rancher, Stockton, Utah ................................................... 114

Prepared statement of ............................................................................... 116

Response to questions submitted for the record ..................................... 118

James, Leslie, Executive Director, Colorado River Energy Distributors

Association ..................................................................................................... 143

Prepared statement of ............................................................................... 145

Judd, Robert L., Jr., Executive Director, USA Biomass Power Producers

Alliance .......................................................................................................... 138

Prepared statement of ............................................................................... 139

Knowles, Hon. Tony, Governor, State of Alaska ............................................ 5

Prepared statement of ............................................................................... 9

Martz, Hon. Judy, Governor, State of Montana ............................................. 43

Prepared statement of ............................................................................... 45

O’Connor, Terry Vice President, External Affairs, Arch Coal, Inc., on

behalf of the National Mining Association .................................................. 95

Prepared statement of ............................................................................... 97

Response to questions submitted for the record ..................................... 106

Stanley, Neal A., President, Independent Petroleum Association of

Mountain States ............................................................................................ 79

Prepared statement of ............................................................................... 80

Page

IV

Additional materials supplied:

Alberswerth, David, Director, The Wilderness Society, Letter submitted

for the record by Hon. Donna Christensen ................................................. 63

Mason, Tad, Vice President, TSS Consultants, Letter submitted for the

record by Hon. Scott McInnis ...................................................................... 154

(V)

CONTENTS

Page

Hearing held on June 6, 2001 ................................................................................. 159

Statement of Members:

Flake, Hon. Jeff, a Representative in Congress from the State of Arizona,

Prepared statement of .................................................................................. 210

Hansen, Hon. James V., a Representative in Congress from the State

of Utah ........................................................................................................... 159

Prepared statement of ............................................................................... 161

Kind, Hon. Ron, a Representative in Congress from the State of

Wisconsin, Prepared statement of ............................................................... 208

McInnis, Hon. Scott, a Representative in Congress from the State of

Colorado, Prepared statement of ................................................................. 207

Rahall, Hon. Nick J., II, a Representative in Congress from the State

of West Virginia, Prepared statement of .................................................... 163

Solis, Hon. Hilda L., a Representative in Congress from the State of

California, Prepared statement of ............................................................... 210

Udall, Hon. Mark, a Representative in Congress from the State of

Colorado, Prepared statement of ................................................................. 209

Udall, Hon. Tom, a Representative in Congress from the State of

New Mexico, Prepared statement of ........................................................... 192

Statement of Witnesses:

Norton, Hon. Gale A., Secretary, U.S. Department of the Interior .............. 164

Prepared statement of ............................................................................... 168

Response to questions submitted for the record ..................................... 210

(1)

OVERSIGHT HEARING ON THE ROLE OF

PUBLIC LANDS IN THE DEVELOPMENT OF A

SELF-RELIANT ENERGY POLICY

Wednesday, March 7, 2001

House of Representatives,

Committee on Resources,

Washington, DC

The Committee met, pursuant to notice, at 10:02 a.m., in Room

1324, Longworth House Office Building, Hon. James V. Hansen

(Chairman of the Committee) presiding.

STATEMENT OF THE HON. JAMES V. HANSEN, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF UTAH

The CHAIRMAN. The Committee will come to order. We appreciate

your presence. This very important meeting we are having today

will be regarding energy policy. Between this Committee and the

Commerce Committee, we hope to be coming up with a policy that

will determine the energy policy of America for the next few years.

Around the country this winter, Americans have opened their

utility bills with dismay to see their costs double and sometimes

triple from last year. Many Americans have written to ask, ‘‘Who

fell asleep at the switch? How can there be an energy shortage in

one of the most prosperous and technologically-advanced countries

in the world?’’ Our current situation is the direct result of the lack of a coherent

national energy policy and policies that have restricted the development of our domestic energy resources on public lands, thereby increasing reliance on foreign energy. To keep our economy prosperous and reinforce our national security, we must have reliable

energy supplies at a reasonable cost. We have called this congressional hearing to explore how we may structure natural resource

policy to help achieve a sustainable and self-reliant energy policy.

Over the last 150 years, the Federal Government retained land

to hold in trust for the people. The principle guiding public land

policy was multiple use and sustainable yield. Public land was a

resource to be used in maintaining our national health, environment, and wealth.

Some time ago, we lost that vision and today we are paying the

price. Currently, while national energy costs skyrocket, billions of

barrels of oil and natural gas are locked beneath public lands, including the Arctic National Wildlife Refuge. Using public lands responsibly includes environmentally sensitive resource extraction.

These two goals are not mutually exclusive. We have produced

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more than 13 billion barrels of oil since 1977 from Alaska’s North

Slope in a manner that has allowed wildlife to thrive and the caribou herds to increase five-fold.

Clean oil remains untouchable in many parts of the United

States and hydroelectric generation has been reduced. In one case,

generating capacity at a Federal hydropower facility was reduced

by one-third to comply with environmental regulations. That is

enough energy to power 400,000 homes.

I recall the debate in Utah several decades ago when we first set

out to develop resources on the upper Colorado River. After extensive study, the Bureau of Reclamation ultimately identified two

sites that were most feasible— Echo Park Canyon, in Dinosaur National Monument, and Glen Canyon.

Once that was done, we went through months and months of additional study and debate. Strong feelings were expressed on all

sides. Both sites proposed were beautiful, rugged, and largely unexplored, and yet both sites were unique in that they shared the geological characteristic that made it possible to build one of the largest man-made structures at the time, to harness one of the wildest

and untamed rivers in the hemisphere. After a long period of debate and negotiation, Congress ultimately decided that Glen Canyon was the best place to dam the upper Colorado River.

We used to hear former President Clinton say from time to time,

‘‘you can’t have mines everywhere,’’ and I agree with that. You can

only have mines where the minerals and resources are. Likewise

with a dam, you can’t have dams everywhere. You build dams on

sites which are capable of accomplishing the purpose for which

they are built.

In this instance, Glen Canyon was designed for three purposes:

water storage, flood control, and to generate electricity for the

growing population in the Southwest. You know, it has got another

one now; it is called recreation. In fact, more people go there for

more than one day than probably any other place in our whole

park system.

Once the site was proposed, opponents of the project cried out

and said, ‘‘This dam is too big. We will never be able to use all that

power. You will upset the laws of supply and demand,’’ et cetera,

et cetera. Besides, why do we need hydropower when we already

have all of that great coal in the Kaparowits plateau?

Thirty years later, when former President Clinton designated the

Grand Staircase-Escalante National Monument, we were told that

the Kaparowits coal would never be used, that markets would

never be able to use all that coal, and that there was a glut of

cheap power that would make the development of the coal resource

uneconomical.

My, how times have changed. Let’s not repeat the shortsightedness of the past. We have been given a sacred trust by the

people to develop our natural resources wisely and maintain a

healthy environment. It is time to return to the original concept of

multiple use of access to our public grounds.

I will look forward to hearing from our witnesses.

[The prepared statement of Chairman Hansen follows:]

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Statement of The Honorable James V. Hansen, Chairman,

Committee on Resources

Around the country this winter, Americans have opened their utility bills with

dismay to see their costs double and sometimes triple from last year. Many Americans have Written to ask, ‘‘Who fell asleep at the switch? How can there be an energy shortage in one of the most prosperous and technologically advanced countries

in the world?’’ Our current situation is the direct result of (1) lack of a coherent national energy

policy over the past eight years, and (2) policies that have restricted development

of our domestic energy resources on public lands, thereby increasing reliance on foreign energy. To keep our economy prosperous and reinforce our national security,

we must have reliable energy supplies at a reasonable cost. We have called this

Congressional hearing to explore how we may structure natural resource policy to

help achieve a sustainable and self-reliant energy policy.

Over the last 150 years, the Federal government retained land to hold in trust

for the public. The principle guiding public land policy was multiple use and sustainable yield. Public land was a resource to be used in maintaining our national

health, environment and wealth.

Some time ago, we lost that vision and today we are paying the price. Currently,

while national energy costs skyrocket, billions of barrels of oil and natural gas are

locked beneath public lands including the Arctic National Wildlife Refuge. Using

public lands responsibly includes environmentally sensitive resource extraction.

These two goals are not mutually exclusive. We have produced more than 13 billion

barrels of oil since 1977 from Alaska’s North Slope in a manner that has allowed

wildlife to thrive and the caribou herds to increase 5-fold.

Clean coal remains untouchable in many parts of the United States and hydroelectric generation has been reduced. In one case, generating capacity at a Federal

hydropower facility has been reduced by 1⁄3 to comply with environmental regulations. This is enough energy to power 400,000 homes.

We have been given a sacred trust by the people to develop our natural resources

wisely and maintain a healthy environment. It’s time to return to the original concept of multiple use on our public lands.

I look forward to hearing from our witnesses.

I now recognize the distinguished gentleman from West Virginia,

the ranking Democrat on the Committee.

STATEMENT OF THE HON. NICK J. RAHALL, II, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WEST VIRGINIA

Mr. RAHALL. Thank you very much, Mr. Chairman. I join with

you in welcoming our distinguished Governors of Alaska, Montana,

and Wyoming to the Resources Committee this morning for this

very important hearing on the role of public lands in the development of a national energy policy.

I approach this issue perhaps slightly differently, perhaps a lot

differently than Chairman Hansen and our distinguished panel

that is going to be testifying this morning. That is certainly no surprise to the Chairman. We have worked together on this Committee for a number of years, or decades perhaps.

Certainly, Federal lands have a role to play in producing energy

for our Nation. For instance, almost 23 million acres of these lands

are currently subject to Federal onshore oil and gas leases. Now,

this happens to be greater than the size of my home State of West

Virginia. It is the size of Indiana and just slightly less than the

size of States like Ohio, Kentucky, Tennessee, and Virginia. Now,

when you toss in the geothermal and coal leases, well, you start to

get to the size of these States.

Acreage aside, energy production from Federal lands, both onshore and offshore, is making a sizable contribution to our energy

needs. Oil production from Federal areas account for 27 percent of

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the U.S. total, natural gas 38 percent of the total, and coal 23 percent of the total, to the pleasure, I am sure, of the governors from

the Powder River Basin.

And here is something I am sure that certain people do not want

you to know, but it is worth stating today, and I am going to repeat

it. Natural gas and coal production from Federal leases was at an

all-time high during the Clinton administration, surpassing the

amount produced during the Reagan years, let alone Bush the

First. And let me repeat that. Natural gas and coal production from

Federal leases was at an all-time high during the Clinton administration, surpassing the amount produced during the Reagan years,

let alone Bush the First.

With this noted, I become somewhat puzzled when I hear talk

about opening more Federal lands to energy development. Now,

which areas are we talking about here? The big production comes

from offshore oil. Yet, exploration for new fields is constrained by

drilling moratorium bans supported by the President during the

campaign, as well as the governors of those coastal States. And

when it comes to onshore, certainly a viable energy policy should

not include opening Federal park and wilderness areas to new oil

and gas drilling.

So does it all boil down to little old Alaska, opening up a national

wildlife refuge so that 10 to 15 years in the future oil may begin

flowing to the lower 49 States, if it is not first exported to Japan,

an undetermined amount of oil at that? Does that represent the

hope and the salvation of our Nation’s energy security? That, in my

view, is quite a roll of the dice approach to addressing our energy

needs.

Certainly, Alaska has a role to play. An issue I intend to examine is whether we have fully explored the potential for the 23-million-acre National Petroleum Reserve in Alaska to not only contribute to our energy needs, but to Alaska’s thirst for shelling out

a $2,000-per-year check out of its $27 billion North Slope oil kitty

to every man, woman, child, and infant residing in the State, a

State, I might add, with no income tax and no statewide sales tax.

I notice there is a little rumbling in the audience. Everybody is trying to find out where to sign up for this check.

But rather than becoming bogged down in controversy over the

Arctic Refuge, I also think it would be constructive if we have more

dialogue over the potential of constructing the North Slope gas

pipeline already authorized by Federal law. We ought to examine

more fully the contribution that that can make in providing a more

immediate return in meeting America’s energy needs.

With that, I again welcome our Governors this morning and look

forward to your testimony.

[The prepared statement of Mr. Rahall follows:]

Statement of The Honorable Nick Rahall, a Representative in Congress

from the State of West Virginia

Thank you, Mr. Chairman. I would like to welcome the distinguished governors

of Alaska, Montana and Wyoming to the Resources Committee for today’s hearing

on the role of public lands in the development of a national energy policy.

I approach this topic from perhaps a different perspective than does Chairman

Hansen and the governors who are with us this morning.

5

Certainly, Federal lands have a role to play in producing energy for our Nation.

For instance, almost 23 million acres of these lands are currently subject to Federal

onshore oil and gas leases.

That is greater than the size of my home State of West Virginia. It is the size

of Indiana, and just slightly less than the size of States like Ohio, Kentucky, Tennessee and Virginia. Toss in Federal geothermal and coal leases, and you start to

get to the size of those States.

Acreage aside, energy production from Federal lands, both onshore and offshore,

is making a sizable contribution to our energy needs. Oil production from Federal

areas account for 27 percent of the U.S. total. Natural gas, 38 percent of the total.

And coal, 33 percent of the total...to the pleasure, I am sure, of the Governors from

the Power River Basin.

And here is something I am sure certain people do not want you to know: Natural

gas and coal production from Federal leases was at an all time high during the Clinton Administration, surpassing the amount produced during the Reagan years, let

alone Bush the First.

With this noted, I become somewhat puzzled when I hear talk about opening more

Federal lands to energy development.

Which areas are we talking about? The big production comes from offshore. Yet,

exploration for new fields is constrained by drilling moratoriums; bans which President Bush supported during his campaign, as well as by the governors of the coastal

States. And when it comes to onshore, certainly a viable energy policy should not

include opening Federal park and wilderness areas to new oil and gas drilling.

So does it all boil down to little ‘ole Alaska, to opening up a national wildlife refuge so that 10 to 15 years in the future oil may begin flowing to the lower 48 unless

it is first exported to Japan? An undetermined amount of oil at that. Does that represent the hope and salvation of the Nation’s energy security?

That, in my view, is a roll of the dice approach to addressing our energy needs.

Certainly, Alaska has a role to play. An issue I intend to examine is whether we

have fully explored the potential of the 23 million acre National Petroleum ReserveAlaska...to not only contribute to our energy needs...but to Alaska’s thirst for shelling out a $2,000 per-year check out of its $27 billion North Slope oil kitty to every

man, woman, child and infant residing in the State. A State, I might add, with no

income tax and no statewide sales tax.

I notice the audience is getting restless, governor, they want to know where to

sign up.

Rather than becoming bogged down in controversy over the Arctic Refuge, I also

think it would be constructive if we have more dialogue over the potential constructing the North Slope gas pipeline—already authorized by Federal law can

make in providing for a more immediate return in meeting America’s energy needs.

With that, I welcome our witnesses and look forward to hearing the testimony.

Thank you.

The CHAIRMAN. I thank the gentleman from West Virginia.

As you know, the policy of the Committee is if you are present

when the gavel falls, you will be recognized by seniority and after

that in the order in which you arrived. But in the interests of time,

we are going to go straight to our three distinguished Governors.

We are very honored to have you with us at this particular time.

We understand that Governor Knowles, of Alaska, has an airplane to catch, and so we will go to you first, Governor, if that is

all right.

Governor Knowles, we will turn to you, sir.

STATEMENT OF HON. TONY KNOWLES, GOVERNOR,

STATE OF ALASKA

Governor KNOWLES. For the record, I am Tony Knowles, the Governor of Alaska, and I welcome this opportunity to testify on the

vital issue of developing a self-reliant national energy policy and

the central role that America’s public lands play in that effort. I applaud you and the national administration for focusing on this

issue which is so important to America’s jobs and families.

6

I address you today in two capacities, first as Governor of a State

which serves as America’s energy storehouse. Since completion of

the trans-Alaska oil pipeline nearly 25 years ago, Alaska has been

supplying a significant portion of this nation’s domestic oil production. And now, with development of our natural gas, North America’s largest proven reserve, we will continue to help meet America’s energy needs.

Second, I represent my fellow governors of oil- and gas-producing

States as Chairman of the Interstate Oil and Gas Compact Commission (IOGCC). These 37 States produce more than 99 percent

of the oil and natural gas produced onshore in the United States,

and are committed to the conservation and maximum utilization of

America’s oil and gas reserves.

My message today is simple. To continue America’s prosperity

which I believe is threatened by a looming energy crisis, we must

meet our nation’s energy needs through a combination of conservation and increased supply. The key to increased energy supply is

the environmentally-responsible development of this nation’s enormous energy resources, most of which lie beneath our public lands.

Our access to those lands obligates us to accept the profound responsibility for enlightened stewardship. No longer can access to

public lands be an excuse for environmental destruction.

As this Committee knows well, this country is suffering from a

combination of high energy prices and energy shortages. We need

to look no further than the news video of senior citizens being pried

from stopped elevators during California’s rolling blackouts or subsequent plant closures and layoffs to know that.

New energy supplies will come from many sources, but our obligation for jobs and families of Americans is to look at home first.

America’s public lands hold the vast majority of those new energy

resources. In my own State of 375 million acres, one-fifth of the

land mass of the rest of America, we have no choice but to look to

public lands, as they constitute 88 percent of our land mass.

Mr. Chairman, I submit that we need to look no further than the

49th State for a national model on how to find and produce energy

resources on public lands, while protecting the wildlife and the environment. We in Alaska apply a simple standard to development

issues, whether producing oil from a newly discovered reserve or

harvesting America’s best tasting wild organic salmon, and that

standard is we do development right.

By that, I mean development must be based on three principles:

sound science and technology, enlightened stewardship, and a thorough, open public process. Using that standard, we have in Alaska

supplied up to a quarter of America’s domestic oil production from

the nation’s two largest oil fields. We have done so while protecting

the nation’s most pristine environment inhabited by more caribou,

grizzlies, bald eagles, and mosquitoes than the rest of the country

combined.

Nationally, the vast majority of our energy resources are on public lands. The U.S. Geological Survey estimated that 67 percent of

the nation’s undiscovered oil and 40 percent of its undiscovered

natural gas resources lie beneath onshore public lands. And along

our coastlines, only 2 percent of total Federal offshore acreage, including that in Alaska, has been leased for energy development. At

7

the same time, the amount of public lands available for oil drilling

has shrunk from 73 to 17 percent in the past 25 years.

The best promise for new natural gas development, which we

know is the clean-burning fuel of the 21st century, is on the public

lands in the Gulf of Mexico, the Rocky Mountains, and Alaska’s

Arctic Slope. As we seek to develop these energy resources on public lands, I believe those of us from Western public lands States

have a special obligation to adhere to the ‘‘doing it right’’ standard,

and we are doing exactly that in Alaska.

During my roughnecking days on the North Slope in the 1960’s,

a drill pad could be as big as 65 acres. Today, they are a tenth that

size. In using new technology, up to 50 wells can be drilled from

the same smaller pad and tap into oil identified by 3-D seismic

technology into oil 20,000 feet deep and 5 miles away, under sensitive areas such as ice-choked ocean or sensitive wildlife habitat.

That is like running a well through this Committee room floor to

Ronald Reagan National Airport and we could determine which

gate the drill bit would emerge from.

With this ‘‘doing it right’’ approach to development, we successfully convinced the Clinton administration to permit exploration

and development in a portion of the 23-million-acre National Petroleum Reserve (NPRA), a promising Indiana-sized area to the west

of Prudhoe Bay. We did so by imposing the strictest environmental

constraints of any oil and gas lease in America or the world.

These 79 conditions are specifically designed to protect caribou,

polar bears, and birds particularly during sensitive periods of

calving, migration, molting, denning, and hibernation. They were

the result of a collaboration of world-class experts in science and

engineering from all levels of government and industry. This is the

only acceptable way to combine the needs for jobs and energy development with the protection of the land and wildlife we love.

To continue meeting this nation’s energy needs, we urge the Congress to permit exploration in America’s best prospect for a major

oil and gas discovery in the Arctic National Wildlife Refuge

(ANWR). Just a small portion of this South Carolina-sized refuge

is believed to contain up to 16 billion barrels of oil, enough to

produce 2 million barrels a day for at least 25 years, about a third

of the current domestic production. In addition, it is believed to

hold substantial new discoveries of natural gas.

Environmentally-responsible development in the Arctic Refuge

would be good for America, producing thousands of jobs, lessening

our dependence on imported oil, reducing prices at the pump, providing environmentally-friendly natural gas to produce our nation’s

electric supply, improving our nation’s trade deficit, and a host of

other reasons.

As enlightened stewards, we must and can take special precautions to protect caribou, musk ox, geese, polar bear, and other

wildlife that inhabit the Arctic Refuge. As we did in the NPRA, we

will work with the industry to mitigate impacts such as limited activity during the 6 to 8 weeks when the Porcupine caribou herd

often uses the coastal plain for calving. We must be sensitive to the

subsistence needs of Native people on both sides of the border

whose culture, nutrition and economy are dependent on the area’s

healthy wildlife.

8

To bring oil from ANWR and other North Slope development to

American consumers, we are working with the Bush administration to reauthorize the right-of-way lease for the 800-mile transAlaska oil pipeline. The Federal right-of-way administered by the

Bureau of Land Management expires in 2004, but the environmental review and renewal process is projected to take at least 2

years. I welcome this Committee’s oversight and encouragement of

that process.

Alaskans are working to continue as the nation’s energy storehouse by delivering our enormous natural gas reserve to thirsty

American markets. Alaska’s North Slope has 35 trillion cubic feet

of discovered natural gas, most of which is being reinjected to increase Prudhoe Bay oil production. Yet, geologists estimate we are

sitting on perhaps triple what we have already discovered, more

than 100 trillion cubic feet.

The most viable way to get that gas to market is through a

1,800-mile pipeline from Alaska’s North Slope through Fairbanks

and along the Alaska Highway into the North American gas distribution system. This route has already been approved by Congress in 1977 and international agreement. This development

would be one of America’s largest privately-funded construction

projects, creating jobs and delivering environmentally-friendly energy for a generation or more. I am pleased that the nation’s governors unanimously endorsed the Alaska Highway natural gas

pipeline project at last month’s National Governors’ Association

conference.

In closing, Mr. Chairman, let me note that conservation must be

a cornerstone of America’s energy policy. It is not purpose here

today to describe this critical component in detail, but I note that

conservation alone cannot address the challenge before us. We

must increase our supply to stabilize prices and prevent shortages.

America’s energy security depends on access to public lands.

With new technology and strengthening our resolve to protect the

environment, we can go beyond the old approach of either development or the environment to the 21st century paradigm of recognizing the necessity and interdependence of both.

On behalf of the IOGCC, I recommend several steps to improve

responsible access to our public lands: complete the inventory of oil

and gas resources on public lands, as required in last year’s Energy

Policy Conservation Act; expedite processing of applications to drill

and offers to lease; conduct extensive research on the technologies

of extraction and alternative energy; repeal roadless plans and new

roadless initiatives that should already be a part of comprehensive

land use management plans; and streamline the National Environmental Protection Act process.

Mr. Chairman and Committee members, Alaska, my administration, and the IOGCC stand ready to assist you and our national administration in crafting a sensible national energy policy that provides greater access to public land for domestic oil production and

natural gas, that encourages conservation and recognizes the important partnership with our private oil and gas industry to get the

job done.

Thank you.

[The prepared statement of Governor Knowles follows:]

9

Statement of The Honorable Tony Knowles, Governor, State of Alaska

Good morning, Chairman Hansen and distinguished members of the Committee.

For the record, I am Tony Knowles, Governor of Alaska.

I welcome this opportunity to testify on the vital issue of developing a self-reliant

national energy policy and the central role America’s public lands play in that effort.

I applaud you and the national administration for focusing on this issue so important to American jobs and families.

I address you today in two capacities: First, as governor of a state which serves

as America’s energy storehouse. Since completion of the trans-Alaska oil pipeline

nearly 25 years ago, Alaska has been supplying a significant portion of this nation’s

domestic oil production. And now with development of our natural gas—North

America’s largest proven reserves—we’ll continue to help meet America’s energy

needs.

Second, I represent my fellow governors of oil and gas producing states as chairman of the Interstate Oil and Gas Compact Commission. These 37 states produce

more than 99 percent of the oil and natural gas produced on-shore in the United

States and are committed to the conservation and maximum utilization of American

oil and gas resources.

This time of year as the snow continues to fall across most of my state, I have

a personal policy to try to stay within about a 10-degree temperature variation from

the bulk of my constituents. I was looking forward to a real Alaska-style snowstorm,

but am honored nonetheless to join you here in our nation’s temperate capital.

My message today is simple: to continue America’s prosperity which I believe is

threatened by a looming energy crisis, we must meet our nation’s energy needs

through a combination of conservation and increased supply.

The key to increased energy supply is the environmentally responsible development of this nation’s enormous energy resources, most of which lie beneath our public lands. Our access to those lands carries with it the responsibility for sound stewardship. That access can never be considered a green light for the irresponsible destruction of those lands.

As this Committee knows well, this country is suffering from a combination of

high energy prices and energy shortages. We need look no further than news video

of senior citizens being pried from stopped elevators during California’s rolling

black-outs to know that.

New energy supplies will come from many sources, but our obligation for the jobs

and families of Americans is to look at home first. America’s public lands hold the

vast majority of those new energy resources.

In my own state of 375 million acres, public lands constitute 88 percent of our

land mass, with 40 percent of our state in Federal forests, wildlife refuges and national parks. Development of the resources on public lands in Alaska is a critical

part of our economic future.

Mr. Chairman, I submit we need look no further than the 49th state for a national model on how to find and produce energy resources on public lands, while

protecting the wildlife and environment.

We in Alaska apply a simple standard to development issues, whether producing

oil from a newly discovered reserve or harvesting America’s best-tasting, organic

wild salmon. That standard is—we do development right.

By that, I mean development must be based on three principles: sound science,

good stewardship and a thorough, open public process.

Using that standard, we in Alaska have supplied up to a quarter of America’s domestic oil production from the nation’s largest oil fields. We’ve done so while protecting the nation’s most pristine environment inhabited by more caribou, grizzly

bears, bald eagles and mosquitoes than the rest of the country combined.

Nationally, the vast majority of our energy resources are on public lands. The U.S.

Geological Survey estimates that 67 percent of the nation’s undiscovered oil and 40

percent of its undiscovered natural gas resources lie beneath on-shore public lands.

And along our coastlines, only 2 percent of total Federal offshore acreage, including

that in Alaska, has been leased for energy development.

At the same time, the amount of public lands available for oil drilling has shrunk

from 73 to 17 percent in the past 25 years. It’s worse for natural gas development,

which we know is the clean-burning fuel of the 21st century.

A recent report by the National Petroleum Council showed that the most promising regions for future gas production in the Rocky Mountains and Gulf of Mexico

are either closed to exploration or have significant access restrictions. And even if

we can obtain access to these resources, public lands must be crossed by pipelines

or other methods to deliver the energy to homes, power plants and factories.

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As we seek to develop these energy resources on public lands, I believe those of

us from western public lands states have a special obligation to adhere to the ‘‘doing

it right’’ standard.

We’re doing exactly that in Alaska. During my rough-necking days on the North

Slope in the 1960s, a drill pad could be as big as 65 acres. Today, they’re a tenth

that size.

And using new technology, up to 50 wells can be drilled from the same, smaller

pad and tap into oil identified by 3–D seismic technology into oil 20,000 feet deep

and five miles away, under sensitive areas, such as an ice-choked ocean or sensitive

wildlife habitat. That’s like running a well through this Committee room floor to

Ronald Reagan National Airport and we could determine which gate the drill bit

would emerge from.

With this ‘‘doing it right’’ approach to development, we successfully convinced the

Clinton administration to permit exploration and development in a portion of the

4-million-acre National Petroleum Reserve, a promising Indiana-sized area to the

west of Prudhoe Bay.

We did so by imposing the strictest environmental constraints of any oil and gas

lease in America. These 79 conditions are specifically designed to protect caribou,

polar bears and birds, particularly during sensitive periods of calving, migration,

molting, denning and hibernation.

They were the result of collaboration of world-class experts in science and engineering from all levels of government and industry. This is the only acceptable way

to combine the need for jobs and energy development with protection of the land

and wildlife we love.

To continue meeting this nation’s energy needs, we urge the Congress to permit

exploration in America’s best prospect for a major oil and gas discovery—in the Arctic National Wildlife Refuge. Just a small portion of this South Carolina-sized refuge

is believed to contain up to 16 billion barrels of oil, enough to produce 2 million barrels a day for at least 25 years, about a third of the current daily domestic production. In addition it is believed to hold substantial new discoveries of natural gas.

Environmentally responsible development in the Arctic Refuge would be good for

America—producing thousands of jobs, lessening our dependence on imported oil, reducing prices at the pump, providing environmental friendly natural gas to produce

our nation’s electrical supply, improving our nation’s trade deficit, and a host of

other reasons.

I believe we must, and can, take special precautions to protect the caribou, musk

ox, geese, polar bear and other wildlife that inhabit the Arctic Refuge. As we did

in the NPRA, we will work with the industry to mitigate impacts, such as limiting

activity during the six to eight weeks when the Porcupine caribou herd often uses

the coastal plain for calving.

We must be sensitive to the subsistence needs of Native people on both sides of

the border whose culture, nutrition, and economy are dependent on the area’s

healthy wildlife.

To bring oil from ANWR and other North Slope development to American consumers, we are working with the Bush administration to reauthorize the right of

way lease for the 800-mile trans-Alaska oil pipeline.

The Federal right of way administered by the Bureau of Land Management expires in 2004, but the environmental review and renewal process is projected to take

two years. I welcome this Committee’s oversight and encouragement of that process.

Alaskans are working to continue as the nation’s energy storehouse by delivering

our enormous natural gas reserves to thirsty American markets.

Alaska’s North Slope has 35 trillion cubic feet of discovered natural gas, most of

which today is being re-injected to increase Prudhoe Bay oil production. Yet geologists estimate we’re sitting on perhaps triple what we’re already discovered—more

than 100 trillion cubic feet.

The most viable way to get that gas to market is through an 1,800-mile pipeline

from Alaska’s North Slope, through Fairbanks and along the Alaska Highway into

the North American gas distribution system.

This development would be America’s largest privately funded construction

project, creating jobs and delivering environmentally friendly energy for a generation or more. I’m pleased the nation’s governors unanimously endorsed the Alaska

Highway natural gas pipeline project at last month’s National Governors’ Association conference.

In closing, Mr. Chairman, let me address two issues: conservation and access.

Conservation must be a cornerstone of America’s energy policy. Improved mileage

for vehicles, efficiencies in manufacturing and electricity use can substantially expand the efficiency in using our energy supply.

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Yet conservation alone cannot address the challenge before us. We must increase

our supply to stabilize prices and prevent shortages. America’s energy security depends on access to public lands.

With new technology and strengthening our resolve to protect the environment,

we can go beyond the old approach of either development or the environment, to

the 21st century paradigm of recognizing the necessity and interdependence of both.

On behalf of the IOGCC, I recommend three steps to improve access to our public

lands which hold the key to our future energy independence.

First, let’s complete the inventory of oil and natural gas resources on public lands

required in last year’s Energy Policy Conservation Act. The BLM must have adequate resources to complete this study in a timely manner.

Second, let’s expedite action in the agency processes that will lead directly to exploration for energy resources, such as applications to drill and offers to lease.

Third, let’s better share with independent energy producers and others the results

of state and Federal research so that resources developed on public lands are maximized. The Federal government could make a strong commitment to research by reinvesting a part of the revenue received from royalties on gas production.

Mr. Chairman and Committee members: Alaska, my administration and the

IOGCC stand ready to assist you and our national administration in crafting a sensible national energy policy that provides greater access to public land for domestic

production of oil and natural gas; that encourages conservation; and that recognizes

the important partnership with our private oil and gas industry to get the job done.

The CHAIRMAN. Thank you, Governor Knowles. We appreciate

your testimony.

I recognize the gentlelady from Wyoming to introduce Governor

Geringer.

Mrs. CUBIN. Thank you very much, Mr. Chairman. It is truly an

honor for me to represent Governor Geringer. Governor Geringer

has excelled nationwide in many, many areas since he has been

Governor. He has led the country in many areas, as well, as far as

taking his State forward is concerned—telecommunications, the deployment of the infrastructure required for connecting every single

school to computers. He has been in the forefront suggesting that

we had an energy crisis long before other people recognized that we

had an energy crisis.

Governor Geringer represents the least-populated State in the

country, but he also represents the only State in the country that

has three Senators—they are all men; the Governor is a man—and

one Congressman, a woman, but it really only takes one woman to

do the work of those three guys.

The Governor has always been on my side, so it is truly an honor

to represent a man that I think has been one of the best governors

that Wyoming has ever had, Governor Jim Geringer.

STATEMENT OF HON. JIM GERINGER, GOVERNOR,

STATE OF WYOMING

Governor GERINGER. Thank you, Congresswoman Cubin, and

thank you, Mr. Chairman, Ranking Member, and other members of

the Committee for your invitation to address you today.

Mr. Chairman, I ask that my written testimony that has been

presented and the attachments that are included be made a part

of the record.

The CHAIRMAN. Without objection.

Governor GERINGER. I thank you for that. I will not provide all

the testimony that is included there, but I ask that it be considered.

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As Congresswoman Cubin mentioned, Wyoming has the least

population of all States. We are here as Western governors, and we

particularly appreciate your invitation that the Western governors

join you because of the mineral resource that is in the West and

because so much of the public lands that will be debated and considered during this testimony are in the West. And you have heard

a very vivid example of that in Alaska.

In the Western Governors’ Association, we have the least populated State in Wyoming; the most populated State is California; the

largest States, Alaska and Texas. And as we consider the resources

there and the huge numbers that are involved with the oil, gas,

coal, hydroelectric power, wind energy, all the variety of renewable

and non-renewable resources, we are first to point out that Wyoming had the first National Park in Yellowstone; the first National

Monument, Devil’s Tower; the first National Forest, the Shoshone.

So we understand the environment and we understand the economy, and we are here to tell you that as we discuss the effect of

becoming self-reliant in energy for America, we also understand

the balance among environment, the economy, and community, because we as a community cannot ignore the impact that energy

may or may not have on our States.

Some of the discussion, I am sure, will center on whether or not

something is broken. If it ain’t broke, don’t fix it, is the common

term that is out there. But we ought to recognize that you ought

to avoid breaking it. If you do preventive maintenance, you can

avoid breaking it and you don’t have to recover from a disaster.

The model that we have developed in the West among our Western States is that we work together to prevent the crisis from happening rather than having to deal with recovering from a crisis. We

almost didn’t make it last year when the fires almost overwhelmed

the West, and could possibly again this summer. But we developed

a model among ourselves, Republican and Democrat. We don’t even

use the terms ‘‘bipartisan’’ or ‘‘nonpartisan.’’ We just get the job

done, as Governor Knowles said, because it is far better to have

avoided the problem than to have been engaged in the recovery of

a disastrous situation.

Chairman Greenspan has addressed various members of congressional Committees over the last couple of weeks, and even the governors, as to what is happening with our national economy. Our

national economy seems to have flattened out and the productivity

gains seem to be declining. They don’t have to.

One of the things that can dramatically impact that is the availability on time of energy, because energy drives the economy today.

The economy in America is referred to as the new economy, and

the new economy with its technology base needs the electricity in

a reliable, high-quality manner or it will not be able to sustain

itself, nor will the productivity gains be able to sustain themselves.

If there is one thing that we very vividly understand, whether

you are a Member across the table in your position or a governor

in our position, it is that our citizens want economic security. They

want jobs, they want opportunity for their children. Their views are

intergenerational, so as we debate energy, environment, and community, we deliberate that from an intergenerational perspective.

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And if we don’t have the jobs in the economy, there will be far less

that matters to our public.

We learned from the current crisis that energy solutions involve

diverse sources and technologies, varying from fossil fuels to solar,

from wind energy to biomass, and that we can work on the demand

side as well as the production side. But the new economy needs

more energy in order to make it.

On page 2 of my hand-out, there is a graphic that illustrates

what is happening today in terms of California and how, because

California has roughly 12 percent of the entire population pretty

much represented by that graphic, the electricity crisis that began

in California just recently has spread and has drained literally the

entire Western power grid in many ways because the demand created in California has rippled through the rest of our States.

We need to balance that out with supply, and ironically most of

the supply is there. While it is not lying dormant, much of it could

if we don’t take steps today. The underlying imbalance of supply

and demand has been exacerbated by the fact that California did

not have a long-term contract approach to their electricity supply.

But that is only on electric deregulation; natural gas, of course, has

gone through the ceiling.

As Congressman Tauzin said earlier today, with the high energy

prices that have come about in natural gas, we are starting to see

a rippling through our agricultural economy as well. The very people who put food on the table are going to pay extraordinarily high

prices for nitrogen fertilizers this year, or may just choose not to

even raise the crops at all, because in the Northwest, in States

such as Washington, Oregon and Idaho, it is actually cheaper and

more profitable for agriculture to take money to not use electricity

to irrigate, to pump their sprinklers and wells, than it is to raise

crops because of the high input costs. The same applies to the aluminum manufacturing industry, where selling already committed

long-term energy commitments is far more profitable to aluminum

manufacturers than it is to produce the aluminum.

But what about the lady in Buffalo, Wyoming, who called her

county commissioner who said, ‘‘I don’t know how to pay my gas

bill. It is $500 this month and I only have $600 a month income.’’

This isn’t just about the economy and the environment. This is

about people in our neighborhoods who don’t understand why this

developed as it did in the energy crisis.

The Western Governors have worked long and hard to raise citizen awareness to how serious this problem is. We had several

meetings, culminating in our Western Governors winter meeting

last December where we adopted a call for an energy policy for the

Americas. Much will be said about how much of America’s energy

is imported from other countries, but much of that is viewed as

being from the Middle East.

In fact, of the 4 primary countries who supply the United States

with energy, 3 of them are in the Western Hemisphere—Canada,

Mexico, and Venezuela. We ought to be working with our neighbors

rather than somebody so far away that we don’t even know who

they are or why they exist. With regard to oil from the Middle

East, instead of sending our military men and women to die, send

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them into the wide-open spaces of the West so that we all might

live.

The Western Governors’ Association hosted an energy policy

roundtable in Portland, Oregon. We had participants from the Department of Energy, from the Federal Energy Regulatory Commission (FERC), from a variety of Federal and State agencies to discuss what we could bring to Vice President Cheney and President

Bush to discuss what to do for Federal action. We have attached

some of our recommendations to my testimony for your review.

Mr. Chairman, just as you acknowledged in your opening remarks, our neighbors want to know who is in charge. Why didn’t

somebody wake up sooner so we wouldn’t have this uncertainty?

Who should be in charge, particularly as it relates to our Federal

public lands and how they dominate in the West?

In reality, no one person and no one agency should be in complete charge of production, of access, of distribution or consumption

of our nation’s energy supply. We are in this together. Partnerships

are vital and beneficial. Mr. Chairman, your letter of invitation to

me for my testimony asks for my perspective on the role that State

governments would have in interacting with Federal land managers. Well, the key word is ‘‘interaction.’’ In our view, interaction

must be a full, participating partner.

While partnerships in the legal sense may be limited partners or

they may be general partners, we are asking for full general partner status. We have common interests, but we also have shared jurisdictions and shared responsibilities. If State government has a

committed partnership with Federal agencies, we will produce the

domestic supplies of energy in an environmentally safe manner. It

is as simple as that.

The history of energy policy in America has been fragmented, at

best. The 25-year history of attempting to write an energy policy

has been confused. It has been fragmented. Six attempts have been

made formally in 25 years. None of them are comprehensive, particularly as it affects public land management, and not just the resource to be extracted but the other resources there as well for

recreation, for wildlife, for clean air and clean water, and the

amenities that the next generation ought to benefit from as well.

In the past, policy has been more by paranoia than by purpose.

We need to develop better management directives that foster cooperation instead of polarization. Much of the debate today will be

over who is in favor of the environment and who is in favor of development. That is not the issue, Mr. Chairman. The issue is how

will we assure the future not only of today’s generation but the

next generation.

Over the last decade, management by litigation and intimidation

has prevailed over management based on policy goals, and that has

had far more impact on our national energy policy than it should

have. The previous Chair of the Council on Environmental Quality,

Katie McGinty, put in her 25th anniversary report, ‘‘Our common

ground, the environment, has become a battle ground. Somehow,

nearly half of the Environmental Protection Agency’s (EPA) work

is not the product of our collective will on the environment, but

rather it is the product of a judicial decree. Somehow, we have beVerDate 11-MAY-2000 13:13 Aug 24, 2001 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6602 J:\DOCS\70888.TXT HRESOUR2 PsN: HRESOUR2
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come a country in receivership, with the courts managing our forests, our rivers, and our rangelands.’’ It goes back even further. The former Chief of the Forest Service,

Jack Ward Thomas, said in a speech in Wyoming 5 years ago that

he took his appointment as Chief of the Forest Service believing

that he was the chief resource manager of the nation’s forests. But

he said to us, ‘‘I have the least control of anyone over resource

management and allocation.’’ So who should manage the land and who does manage the land?

If I talk first about the public lands, nearly 75 percent of all Bureau of Land Management (BLM) and Forest Service lands in the

United States in total are located in the Western States. Our energy self-reliance through public lands will focus, then, on much of

those public lands.

But we, the States, have primary jurisdiction over many of the

activities that take place on all lands, Federal, State and private.

We have to work together because of those legal obligations, but we

should work together because it is for the good of our people. So

whether it be wildlife habitat, resource use, mineral extraction,

water supplies, flood protection, hunting, fishing, ascetic values,

tourism, or whatever, we should be partners. When you tinker with

Federal land issues in the West, you affect the economy of all of

America, but you particularly affect the livelihood of those people

in our communities.

I refer you now to the graphic on page 5 of my formal remarks

because it gives a graphic display of the Federal and non-Federal

land areas in the lower 48. For whatever reason, and with apologies to my fellow governor from Alaska, it didn’t print Alaska’s

overlay. In Alaska, though, as Governor Knowles has indicated,

375 million acres total; 242 million are Federal. So picture in your

mind much of the same pattern of integrated and interspersed and

intertwined activities that you see on the rest of that map, but particularly as it affects the West.

Let me illustrate even further the difficulty of management, and

what your Committee can most enable all of us to do is graphically

illustrated on page 6 of the hand-out, which is a map of the general

area of Wyoming. It shows the 15 ownership categories, each of

which has a unique set of management procedures when it comes

to developing the resources of energy in the West.

I use Wyoming as an example because Wyoming is not as Federally dominated as some other lands, but yet is dominated enough

by Federal agencies, many of whom don’t even work together, that

it will thwart any action that you might take as a Committee to

understand how we might appropriately develop the land in the

West. Even that band across southern Wyoming that shows rather

hazily in the yellow portion—that is because every other section of

land is private land originally developed when the Union Pacific

Railroad was extended right-of-way across the Western States and

offered alternating sections of land for 20 miles on either side of

the railroad right-of-way. The message in that map and the message in the previous map is we have to work together.

As far as the environment goes, in Wyoming we produce, process,

or transport all kinds of extracted minerals, but we also have renewable wind energy, hydroelectric power, and others as well. Our

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water is so clean that we are one of the few States without a fish

advisory. We have the toughest clean air laws in the nation. We

have proven that a clean environment and a robust energy sector

are not at odds with each other because we as governors live where

we govern.

As far as the potential, you have heard from Governor Knowles

and you will hear from Governor Martz and others about it is not

just a matter of the energy that is there; it is how we get from

there to where the energy is needed. The huge amounts of coal,

natural gas, oil, uranium, and other energy sources that are available in the West are challenged by some of these situations.

For instance, while Wyoming has enough coal reserves that if we

were a country we would be the number three country in the world

in coal reserves—not a State, a country —92 percent of all coal produced in Wyoming comes from Federal leases. Seventy-five percent

of all natural or methane gas produced in Wyoming is from Federal

ownership, and 60 percent of our oil. In other words, the Federal

resource is a very considerable resource, and as the Ranking Member mentioned, much of that is already being produced.

But today’s energy production is not and will not be sufficient.

America needs more energy. We are here to help that need be

filled, and to produce it not just from our States but to distribute

it where it is needed and consumed. Transmission lines, power

lines, gas pipelines will be needed to connect supply with demand.

Governor Hull of Arizona is frustrated with the most recent presidential declaration of yet another national monument in Arizona

that appears to have eliminated a long-approved power transmission line that was scheduled to connect energy generated in Arizona with consumers in California. Monumental decisions in Washington have created political misery in the West.

As far as the availability of products and energy in the West, we

don’t need Organization of Petroleum Exporting Countries (OPEC),

we need each other. Just the Wyoming resource alone could totally

supplant and replace the entire OPEC production for the next 41

years.

The CHAIRMAN. Governor, may I suspend briefly? You may notice

on the clock we have got two lights on. We have to run for a vote,

and I apologize. Could we quickly have a recess? I would ask all

Members to hurry back and then we will conclude with Governor

Geringer.

Would that be all right, Governor? I apologize for that.

Let me ask unanimous consent that all opening statements be included in the record.

Is there objection?

Hearing none, so ordered.

[The statements of Mr. Gallegly, Mr. Calvert, Mr. Pallone,

Mrs. Cubin, Mr. Radanovich, Mr. Udall of Colorado,

Mr. McGovern, and Mr. Rehberg, follow:]

Statement of The Honorable Elton Gallegly, a Representative in Congress

from the State of California

Mr. Chairman, I have concerns about the fairness of some of the studies that

small hydro power plants have been asked to do in the midst of the current energy

crisis.

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In my district, the operators of the Santa Felicia Dam and hydroplant near Piru

Creek, have been asked to do a number of studies by various Federal agencies, including the Forest Service, before they can relicensed. It is estimated that the costs

of the studies outweigh the costs of the hydro facility—the hydro facility cost is $1.2

million, the studies are estimated to cost $2 million. Mr. Chairman, the dam currently provides clean hydro-electric power to an estimated 1,500 homes in my district and operates at a profit of only $6,000 a year.

Although some of the studies are worthy, many are burdensome and unrelated

to the hydro facility—a study of noxious weeds, road and trail studies, and an impact study on the Arroyo Frog who’s habitat, according to University of California

at Santa Barbara Biology Professor Sam Sweet, is located more than three miles

upstream from the Dam.

Mr. Chairman, we ought to be aiding small hydro-electric power facilities, not putting them out of business with undue red tape. I urge the Committee to look into

the fairness of the relicensing process on these small hydro-electric power plants

that provide clean energy to communities throughout the United States.

Statement of The Honorable Ken Calvert, a Representative in Congress

from the State of California

The Western States are currently faced with the challenge of striking a balance

among the water needs of agriculture growers, urban and environmental communities, industry and hydroelectric power generation. As we have seen with the recent energy crisis in California, our energy and water systems, and therefore our

economies, are interdependent.

While hydroelectric generation comprises only 13 percent of the nation’s total

electricity supply, it is a vitally important component of the Western energy grid.

Hydroelectric power is clean, efficient and necessary for maintaining electric transmission reliability.

This important resource is currently being underutilized. For example, Bonneville

Power Administration has lost approximately 10 percent of its capacity due to environmental regulations. This is enough electricity to power 980,000 homes. Over the

past years, the ability of non-Federal dams to generate power has been reduced by

ambiguous mandatory conditions issued by Federal agencies for dam relicensing.

Weather related factors have also decreased the Pacific coast hydro-system capacity.

Reservoirs have been drawn down to dangerously low levels that may compromise

fish flows and water deliveries.

To prevent further erosion of potential Federal power generation, we must assure

that any further reductions be subject to good science and peer review. We need to

protect state water rights while improving hydroelectric generation capacity and efficiency. We cannot afford to accentuate one need to the detriment of the others. Instead we must strive for a balance that will guarantee a reliable energy and water

supply.

Statement of The Honorable Frank Pallone, Jr., a Representative in

Congress from the State of New Jersey

Thank you, Mr. Chairman. Let’s be responsive to America’s energy needs but let’s

make sure we are responsible when we discuss self-reliant energy policy in the same

sentence as public lands.

Our public lands are not our energy solution; our public lands are recreational opportunities for countless families, habitat protection areas for numerous endangered

species, and preservation areas for national historic sites, to note only a few. We

must not jeopardize the well being of our public lands from the many functions they

serve in the hope of solving our long-term energy needs.

As we reexamine our nation’s energy resources, we should begin by examining

public lands that have already been designated as lease areas. Federal public lands

now produce 26.6 percent of total U.S. oil production, and 37 percent of our nation’s

natural gas production. In the past eight years energy production on public lands

has exceeded production levels of both the Reagan and Bush years.

A realistic idea to explore—where we can work together for a common sense solution—is to expand production on Alaska’s North Slope. Alaska’s North Slope has

been open for oil and gas exploration and drilling for years—to the tune of 23 million acres or more. 35 trillion cubic feet of natural gas exist in Alaska’s North Slope

already available for exploration and development. We should find a viable pipeline

route for making these resources available.

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Mr. Chairman, if we open new public lands for resource extraction, we run the

risk of destroying our nation’s greatest natural resources forever. The effects of improperly managed public land resources can be disastrous. We run the risk of surface and subsurface water pollution from toxic metals including mercury, lead and

cadmium caused by drilling and mining operations. Contamination of this kind can

continue for years without being discovered. Industry’s improved drilling technology

does not preclude the need for roads, drilling pads, housing, oil processing facilities

and other infrastructure that inevitably impact the environment.

It’s time to fund common sense programs to conserve energy and develop alternative energy sources to reduce our reliance on polluting fossil fuels and oil imports

from foreign nations. Instead of discussing only methods of supplying more fossil

fuel energy, we have to develop ways to encourage renewable energy use and energy

conservation. In the past thirty years technology has helped us place a computer

in the palm of our hand, surely we can find ways for technology to provide us with

clean, renewable energy that does not place our open spaces, our environment, our

nation’s public lands in jeopardy.

Unfortunately, it seems the Republican Leadership is incapable of introducing

measures that would conserve energy, promote our long-term energy security, develop alternative energy resources, and protect our environment, without sacrificing

our economic growth. Instead, the Republican Leadership wants to drill the Arctic

Refuge. They have cut funding for energy efficiency, renewable energy, and alternative fuel programs during the past several years and now want to disrupt the

only true wilderness in America.

We should support funding to advance our technological capabilities in the fields

of energy efficiency and renewable energy and to advance our economic advantage

in exporting these technologies abroad. If we undertake these proactive types of efforts, then we can tell our residents and our children that we’re working to protect

our nation’s pristine resources for them their long-term enjoyment, not our shortterm solution.

It’s time to stop gutting our environment—time to stop destroying our forests,

land, water and air quality. Most Americans want to know why we’re not doing

more to protect the environment. Most Americans indicate a willingness to pay more

for energy efficient appliances and lighting. Most Americans don’t want us to drill

in ANWR.

I agree that we need to examine the prospect of a more self-reliant energy policy

but drilling in the Arctic Refuge will do nothing to increase our energy self-reliance.

Statement of The Honorable Barbara Cubin, a Representative in Congress

from the State of Wyoming

Thank you, Mr. Chairman, for holding this important hearing on the role of public

lands in the development of a more self-reliant domestic energy policy. Over the

past eight years we have seen what amounts to an ‘‘anti-energy’’ policy which has

discouraged the exploration for and development of oil, gas, coal, and uranium on

our public lands, and made coal-fired electricity generation anathema. At the same

time, the past Administration was seeking to dramatically reduce hydroelectricity’s

function as the ‘‘peaking power’’ of choice.

Collectively, it is a wonder the crisis we have seen in California, and to a lesser

extent in the northwest, has not occurred sooner. Perhaps it is the ubiquitous ‘‘online’’ computer presence everyone seems to need these days that is the straw that

broke the camel’s back, but there simply is no doubt that domestic demand for electricity has risen significantly, despite ‘‘energy star’’ ratings on computers and other

appliances. And, many experts suggest the real test will be when folks turn on the

air conditioners this summer. Rolling black-outs may be back with a vengeance.

Yes, conservation goals are laudable, but efficiency gains alone are insufficient.

Our nation must meet the rising demand for energy with new domestic exploration

and production. We must produce and conserve all forms of energy in America. And,

we can do so in and environmentally sensitive way. Fortunately, we now have an

Administration that recognizes our national security depends upon energy security.

The Bush Administration, with Vice President Cheney in a leadership role, is working to propose a comprehensive national energy policy for Congress to act upon, as

well as to formulate plans for taking administrative action where Congress isn’t

needed.

My Subcommittee on Energy and Mineral Resources will be examining areas

where public land reforms can make a difference in getting domestic energy supplies

to market. We kick off this effort next week with an in-depth review of natural gas

supplies and constraints. I look forward to working with the Administration and my

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colleagues here in Congress to begin the process of developing legislation which will

help to set this country on a focused course, both increasing energy supply and increasing incentives for conservation.

Again, Mr. Chairman, I truly thank you for convening this hearing today and look

forward to hearing from our distinguished group of witnesses, especially the Governor of my home state of Wyoming, the Honorable Jim Geringer. Wyoming coal,

oil, and natural gas (including coalbed methane) and uranium is a treasure trove

of energy for our nation. I welcome Governor Geringer’s remarks as to how to best

utilize these resources.

Statement of The Honorable George Radanovich, a Representative in

Congress from the State of California

Thank you Mr. Chairman for holding this hearing on the role of our natural resources in U.S. energy policy. Today, I will focus on two environmentally-friendly

energy resources: biomass and hydropower, and discuss how we can better use them

to provide more energy for consumers.

My district includes three national forests as well as three national parks, all of

which I am proud to represent. Over the past eight years, the previous Administration’s policy of closing-off land for roadless areas, designating nineteen new national

monuments—comprising five million acres—and adding numerous wilderness areas

has led to a decrease in the opportunities to utilize Federal lands to help meet our

nation’s energy needs.

The Clinton roadless policy to lock-up over 60 million acres of our national forests,

for instance, has led to a logging moratorium in many areas of the Sierra Nevada

Mountains in California. Such action, combined with the Forest Service’s ill-conceived Sierra Nevada Framework plan amendment, has forced the closure of biomass plants in the region. It is true that biomass comprises only about two percent

of all energy in California, but amidst our current crisis, every megawatt counts.

Biomass is a clean-burning method of producing energy, and it extends the life of

our landfills by burning forest waste. I encourage the new Administration to reexamine the roadless policy and the Sierra Nevada Framework plan to allow for extraction of underbrush from the forests to generate green-powered biomass energy.

On the issue of hydropower, I want to work with the new Administration to

streamline the cumbersome Federal regulatory process that is denying us of the full

use of existing hydro facilities. In the Pacific Northwest, 10 percent in hydro capacity on Federally-owned facilities is consistently lost due to Federal regulations. Also,

Glen Canyon dam has lost a 1/3 of its own capacity ‘‘enough to supply 400,000

homes—because of strict regulations to protect fish. The Federal government last

year released the Trinity River decision in California, which diverts 300,000 acre

feet of water annually for environmental uses. This action is a great cause for concern since that water will be lost for hydro generation purposes.

My own congressional district is home to about 2,000 megawatts of hydropower.

To give you an idea of what this means, 2,000 megawatts is enough to serve approximately 2.8 million people. Long-term licenses for these privately-owned facilities are so difficult and arduous to complete that some facilities have been operating

on yearly permits for over a decade. The tremendous red tape involved in relicensing the hydro facilities in the U.S. results in about an eight percent loss in

power each year. Such an amount could provide a safety-net during a Stage 3 emergency and be used to help prevent blackouts like those California experienced in

January. I will work with the Administration to facilitate a licensing process that

works to benefit both the environment and consumers.

As we all know, the U.S. is in dire need of a national energy policy, and our Federal resources must be managed in a manner to support a national energy policy.

The Federal government’s eight-year ‘‘hands-off’’ policy regarding Federal land management has led to an increase in the Federal land base and a decrease in opportunities to meet our nation’s energy needs. Our Federal lands must be managed in

a reasonable, environmentally-sensitive manner that operates in concert with a national energy strategy. Such consistency will prevent various Federal agencies from

implementing far-fetched policies that conflict with a national energy plan. I believe

we can achieve balanced, common-sense environmental goals as well as provide desperately needed energy for our nation’s citizens.

Mr. Chairman, thank you again for holding this important hearing. I look forward

to working with you to further develop a role for natural resources in our national

energy policy.

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Statement of The Honorable Mark Udall, a Representative in Congress

from the State of Colorado

Thank you, Mr. Chairman. I appreciate your scheduling this hearing on a most

important topic. Unfortunately, the Science Committee is holding its organizational

meeting this morning, so I will not be able to stay for the entire hearing.

However, I will review carefully the testimony of all the witnesses, and will be

particularly interested in Mr. Judd’s testimony regarding biomass, an energy source

that is of particular interest to me.

I am not sure just what is meant by a ‘‘self-reliant’’ energy policy, Mr. Chairman,

but I assume that it means a policy that would reduce our dependence on imported

energy sources—particularly imported petroleum.

I share the goal of reducing our dependence of imported petroleum—in fact, I

think we should reduce our dependence on petroleum, period.

That is why, along with nearly 170 other members of the Renewable Energy and

Energy Efficiency Caucus, I am working to promote development and use of alternative sources and to reduce inefficiencies and waste in the way we use energy.

So I hope that in the Committee’s discussions today there will be a recognition

of the importance of agreeing on a long-term energy policy—one that requires us

to think beyond today’s oil and gas prices.

I hope there will be discussion of the real crisis that will develop ten or twenty

years from now when oil prices will probably go up permanently as a result of increasing global demand and of passing the peak in global petroleum production.

We haven’t done enough to prepare for this eventuality. We very much need to

do more, beginning with the recognition that even opening all the public lands to

energy development would not provide a long-term solution—and, in areas that

should remain offlimits, like the coastal plain of the Arctic National Wildlife Refuge,

the costs would exceed the real benefits.

We cannot just drill our way to a sound energy policy. We need balance. And, in

particular, we need to recognize that increased efficiency and increased use of renewable energy are vital if we are to make progress in addressing environmental

challenges as well as in reducing our dependence on foreign energy sources.

In fact, by reducing air pollution and other environmental impacts from energy

production and use, renewable energy and increased energy-efficiency are the single

largest and most effective Federal pollution prevention programs.

And increased development of renewable energy has the potential for creating

hundreds of new domestic businesses, supporting thousands of American jobs, and

opening new international markets for American goods and services.

We have already come a long way. Solar, wind, geothermal, and biomass technologies have together more than tripled their contribution to the nation’s energy

mix over the past two decades. But we need to do more, to build on this progress.

All these technologies are very important for our country. But development of biomass-energy through the conversion of cellulosic biomass, which consists of any

plant or plant product, is particularly important to Colorado and other western

states.

That is because the threat of extreme wildfires in the areas where our national

forests are in close proximity to major population centers. To reduce and control this

risk, there is a need to thin the fuel build-up. After it is cut, a good part of this

underbrush and small-dimension material can and should be left to decompose on

the lands. But some will have to be removed from the forests and there is now no

effective use or market for much of it.

As you know, Mr. Chairman, last year’s Interior appropriations bill established

a program for such fuel-reduction projects, and provided funding for it to get underway. That was a substantial appropriation, but the funds could go further and much

more could be accomplished if there is a commercial market for this material. The

Colorado State Forest Service, the Forest Service Research Laboratory, and the National Renewable Energy Laboratory have all begun to study the possibilities of developing ethanol or other bioproducts economically from this wood fiber.

We need to support those efforts, as well as other efforts to increase the availability and viability of other renewable energy sources and to increase our energy

efficiency. That is the best way to go if our goal truly is a ‘‘self-reliant’’ energy policy

in the long run.

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Statement of The Honorable James P. McGovern, a Representative in

Congress from the State of Massachusetts

Thank you, Mr. Chairman. I appreciate the opportunity to offer a statement at

today’s hearing on the ‘‘Role of Public Lands in the Development of a Self Reliant

Energy Policy’’.

In the interest of time I would like to get right to the point and say that I think

that the issue of increasing oil and gas production on Federal public lands is a red

herring. I honestly do not think that we can have a serious discussion about increasing production without addressing the underlying issue of fossil fuel consumption.

According to the Department of Interior, the U.S. consumes over 19 million barrels of oil a day or 7 billion barrels of oil a year. The Natural Resources Defense

Council, using Energy Information Administration data, projects that this figure

will almost double over the next 50 years. And yet, the U.S. has less than 3 percent

of the world’s known oil reserves. It just does not seem likely that we could produce

our way to energy independence.

Like most Americans, I am concerned with our reliance on foreign oil. But at the

rate we are going, I am frankly more concerned about our reliance on fossil fuels

period. Consumption is the long-term issue that we need to address, and I am not

yet convinced that increased drilling on Federal lands is anything more than a temporary fix.

The topic of drilling on Federal public lands should not lead the discussion of a

long-term comprehensive energy policy. Eliminating the annual freeze on the Corporate Average Fuel Economy (CAFE) law should. If we are going to have tax cuts,

lets have tax cuts that will provide incentives for commuters to use mass transit

and tax credits to develop alternative energy sources.

The fact is that production levels on Federal government operated oil, gas and

coal leasing programs have increased over last eight years. Overall domestic production of oil on Federal lands increased from 13 percent in 1993 to 26.6 percent of

all U.S. production in 2000. And Federal lands account over 37 percent of domestic

natural gas production. And during that same period, total U.S. petroleum consumption increased by over 2 million barrels a day. Opening up our Federal lands to even

more drilling will not solve the long-term national security and environmental problems caused by our reliance on fossil fuels.

Statement of The Honorable Dennis R. Rehberg, a Representative in

Congress from the State of Montana

Thank you, Mr. Chairman. I also want to thank Montana Governor Judy Martz

for being here this morning. Governor Martz has really taken a pro-active stance

in dealing with the energy problems we are experiencing in Montana, and I thank

her for her leadership on this issue.

Mr. Chairman, it is no secret to most of us in this room that the United States

does not have a coherent energy policy, either long-term or short-term. Today we

are more dependent on foreign oil than ever before. In fact, 56 percent of our oil

supply comes from foreign sources, which is a 20 percent increase over the 1973

Arab oil embargo levels. And the Department of Energy predicts that in less than

20 years, America will rely on foreign countries for nearly 65 percent of our energy

needs. This is not only a threat to our economy, it is a threat to our national security.

Unfortunately, our energy problems are not confined to oil production. Despite

growing demand, our natural gas production has fallen 14 percent since 1973. Yet,

nearly 40 percent of our gas resources in the Rocky Mountains are off-limits to production and most of the submerged lands under our Federal waters are off-limits

to gas leasing until 2012.

The result: natural gas prices are 20 times higher in some parts of the country

than they were just one year ago. This dramatic increase, while hitting all consumers, is hitting those of us in ag country particularly hard because higher natural

gas prices mean increased fertilizer costs. So I think it’s important that we all understand that this energy problem we are experiencing affects virtually every aspect

of our nation’s economy. We have got to get a handle on this problem.

And, as if to add insult to injury, the water levels in the northwest are low—this

frustrates our ability to generate hydropower, which provides enough electricity for

98 million homes. But our hydroelectric operations are facing more problems than

just low water. Federal rules and regulations have made the process of relicensing

these operations expensive and time-consuming, which in turn contributes to the

rising cost of electricity in some areas.

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These energy problems have real life consequences. In January, the Bonneville

Power Administration announced that it is projecting an average 60 percent rate increase over the next five years. And high energy costs have caused a number of

Montana businesses to either shut down or cut back operations, which is costing

Montana much needed jobs.

And because of increased power costs, some Montana businesses have been forced

to produce their own power in-house by using generators, which costs about 5 times

the amount of what they used to pay for electricity, yet is still well below current

prices on the open market.

Mr. Chairman, the California situation—which we are all so familiar with and

which has sort of become the poster-child for our energy problems—combines a lack

of generation and transmission capacity with low water levels, and should serve as

a real wake-up call to all of us. Consider this, in California—over the last 10 years—

generation capability decreased 2 percent while retail sales increased 11 percent. So

the current problem California is experiencing should not come as any great surprise.

In short, Mr. Chairman, we must increase our power generation and transportation capabilities. And if we don’t start developing some of our natural resources

now, the California crisis of today will become the national crisis of tomorrow.

America has the tools to confront our energy problems, and we must use them.

While energy conservation is critical, the U.S. cannot conserve its way out of this

energy crunch. It is vitally important that we take steps to increase domestic energy

production through access to and exploration of oil and gas prospects such as

ANWR, and through new and expanded energy delivery infrastructure, advanced

coal technology, nuclear power, and solar and wind power. We also have to explore

alternative renewable fuels, such as ethanol, which bums clean and supplies an important market for our agriculture products.

America has huge deposits of natural gas, coal and oil. In Montana alone we have

several hundred years worth of natural gas and coal deposits—the eastern front of

the Rocky Mountains is rich in natural gas and clean burning coal.

Any national energy policy must include the development of our domestic supplies

of oil, such as our oil reserves in the Arctic National Wildlife Refuge, or ANWR. The

vast oil reserves in ANWR could replace our Saudi Arabian imports, for example,

for the next 30 years. That’s why I am a cosponsor of Rep. Don Young’s legislation

to develop some of this domestic supply in ANWR.

America also has large coal deposits—enough to last us nearly 300 years. And

Montana has more coal than any other state, holding approximately one-third of the

total strip-mineable coal in the nation. Current estimates place coal resources for

eastern Montana at about 50 billion short tons, 34.5 billion of which is low-sulfur,

clean-burning coal.

Coal is America’s largest and cheapest source of domestically produced energy accounting for nearly 60 percent of our nation’s electricity and costing consumers

about one-fifth the amount of oil and natural gas. And our abundance of coal includes coal bed methane, which is a source for natural gas. So clean burning coal

and the development of coal bed methane as a natural gas resource must play a

vital role in any national energy policy. This means we must invest in developing

coal technology.

It is also important to remember, Mr. Chairman, that while we need a national

energy policy, we must also seek to include input from our state government officials at every step of the way—just like we are doing here today. This is especially

important in Montana because of Montana’s vast acreage of checkerboard ownership

with the Federal government. So it is imperative the Federal government adopt a

good neighbor policy that allows Montana to help solve the nation’s energy shortage.

Montana Governor Judy Martz has taken the bull by the horns at the state level

by encouraging new energy production, streamlining regulations and building a better relationship with Federal land management agencies. Hopefully, today’s hearing

can allow us all to help improve this good neighbor policy so that we can work together with state governments to solve our current energy shortage.

I guess for me, Mr. Chairman, the bottom line is that we have the natural resources to head off this problem before it gets even worse. But that means we need

to develop a national energy policy that encourages the development of our resources in an energy efficient and environmentally friendly manner. And with the

technological advancements we’ve made, I believe we can do it. But it is up to us

as elected officials to come up with a plan and get the job done, and I thank you,

Chairman Hansen, for holding this hearing today, and for your leadership on this

issue, because this is an important step in the right direction.

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The CHAIRMAN. We will stand in recess.

[Recess.]

The CHAIRMAN. The Committee will come to order.

Governor Geringer, we apologize for cutting you off, but we had

no choice. Governor, we will turn to you again, sir.

Governor GERINGER. Let me just sum up with a few quick statements. First, to get our attention back to the issue at hand, much

of the discussion today as we deal with energy self-reliance from

public lands will depend a lot on the deadlock, the gridlock, if you

will, or headlock that pits environmental interests against those

who would have economic interests. We don’t view them as mutually exclusive; they are not and should not be. The interests are

compatible and complementary in every sense. Energy policy cuts

across so many different jurisdictions, as we illustrated in the

graphics that I pointed out to you in my testimony, and it is time

to stop litigating and start cooperating.

The Western States have energy that America needs. As we were

conversing during the break here, one of the members who is here

from Wyoming made the comment, it is like we have an I.V. container. We have the transfusion that is necessary, but not the line

to connect it when it comes to the transmission of the energy,

whether it be in raw form or in converted form to electricity.

Just let me illustrate a little bit of the challenge that you will

face that we already face in the Western States in trying to deal

with access to the energy that is in our public lands.

Back in 1969, the National Environmental Policy Act (NEPA)

was enacted with the purpose that we needed to recognize the profound impact that man’s activity has on the natural environment.

But in the purpose clause in the NEPA, as it is called, the National

Environmental Policy Act, it declares that the policy of the Federal

Government is to cooperate with State and local governments to

create and maintain conditions under which man and nature can

exist in productive harmony and still fulfill the social, economic,

and other requirements of present and future generations.

What has evolved from that Act, however, has been anything except that harmonious relationship. Implementation of what is a

fairly short and relatively simple Act has resulted in such a myriad

of regulations and processes that State and local authorities have

little or no idea which way the whipsaw of Federal agencies will

go next. There is tremendous inconsistency between and among

Federal agencies as to how they implement this Act.

What that opens the door to do is allow people to litigate or protest or appeal almost without end an infinite number of methods

to avoid or to thwart better planning and better opportunities for

energy development. We recommend as Western Governors that

streamlining start with the adoption of management principles

that we have developed as Western Governors over the years, and

that is included as part of the testimony called ‘‘Policy Resolution

from the Western Governors 99-13,’’ sponsored by Governor

Kitzhaber, of Oregon, a Democrat, Governor Leavitt, of Utah, a Republican, and endorsed in full not only by the Western Governors

but by the national governors as well.

It lists eight principles of environmental management that can

be very effective in resolving the conflict between and among the

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advocates of whatever side you might feel that you are on. They reflect a practical, common-sense approach to environmental decisions, much along the lines of our native son, Dr. W. Edwards

Deming’s principles that were established for quality management

that enabled a quality revolution for America on the industrial

side.

We have used these principles successfully on several difficult

environmental issues, and the call is even greater today because we

are in an age of litigation, with the courts not just directly managing our resources, but indirectly managing because of the fear of

litigation.

NEPA, in terms of the Act, is not the problem. It is the process.

It takes too long; it costs too much; it spawns litigation; it is inconsistently implemented. Every Federal agency requires extra layers

of management just for its own unique set of regulations. The difference just between the Bureau of Land Management (BLM) and

the Forest Service is dramatic, and yet they are all part of one Government. If you would simply require the Federal Government to

be consistent and speak with a unified voice, we would get a long

way, and input the States in as partners.

I want to leave you with the message that the current energy crisis is an opportunity to break through the often unproductive deadlock that pits energy needs against environmental protection. They

do not have to be mutually exclusive; they should not be.

The current electricity crisis in the West has awakened us as to

how much we don’t know about the energy resources of our nation

and how little we have explored the opportunity to meet the energy

needs of a growing economy and still yet protecting our environment. We can have both.

Mr. Chairman, I have included several recommendations. Rightsof-way and transmission lines ought to be looked at. We cannot get

the energy out of our States if we don’t have the rights-of-way to

deliver it, whether it be the pipeline from Alaska or whether it be

a transmission line that takes generation from Wyoming to California or to Chicago.

I recommend that this Committee urge the establishment of cooperating agency status for all States that are affected under any

environmental policy review as a routine and regular matter, not

just on the occasional basis that it has been doled out in the past.

We can even generate more through renewable resources. We have

tremendous wind generation capacity in Wyoming. Much of that is

on Federal lands.

One young lad from California dropped a note one day and said,

′′You know, you don’t have to have all those signs warning about

high winds the next 5 miles if you would turn off those giant propellers up on the hillside.′′

Wind generation, hydroelectric generation; the hydroelectric that

we currently have needs to have equipment replaced, replacing 40-

to 60-year-old generators with more efficient generation, increasing

generation, and certain minimizing the impact on endangered fish

when California needs more of Oregon’s power. The Bonneville

Power Administration, the Western Area Power Administration,

the Bureau of Reclamation, and the Corps of Engineers all need to

25

look at opportunities to enhance electrical production even with existing activities.

Ninety-two percent of all coal is taken from Wyoming lands. Wy- oming is so good at reclamation that you are holding $3 million of

our money. From energy it came, to energy it should return. We

would like to develop more effective ways to deliver energy from

the West.

Let me make one quick comment about the fires that occurred

last year in the West. Those too, because of the lack of coordinated

policy on forest health management, severely impacted, such as

fires in New Mexico that knocked out a 500-kilovolt transmission

line, to fires in Montana that shut down a similar line going from

Montana to Seattle. The implication of additional events this summer, with the drought that is already imminent, could lead to even

further shortages of electricity.

Thomas Jefferson maintained the solid belief that the success of

our democracy lies in the ordinary citizen being vested with a sense

of deep civic responsibility and citizens who would engage each

other directly in pursuit of the common good.

We in the American West believe that we should reject the last

two decades of bitter debate among environmentalists and resource

users that has so polarized us that we have gridlock rather than

any public benefit from our public lands. As former EPA Director

Bill Ruckelshaus said, ′′Business, governments and citizens are

frustrated by years of litigation and stalemate. It is time to turn

to the common good, and we are turning to that not just out of desperation but more frequently out of hope; hope that our decisions

will yield less controversial and more durable results. Jointly-designed decisions will be better and more informed, and the hope

that through this process we can actually regenerate public confidence in our institutions, especially government.′′

Mr. Chairman, thank you, and I would be happy to answer questions.

[The prepared statement of Governor Geringer follows:]

Statement of The Honorable Jim Geringer, Governor, State of Wyoming

Mr. Chairman and Committee Members, thank you for addressing the subject of

how America might and should become energy self-reliant, and in particular what

the role of Federal lands might be in that effort. Thank you also for asking for the

views of Western Governors. The energy future of this nation is dramatically linked

to the energy future of western states. More than that, we consider that the environment, the economy and community are a dynamic balance continually in the

making.

Self-reliance is more than energy

America’s long term sustained growth in the economy has been jump started by

increases in productivity fueled by innovation, risk and perseverance. We risk losing

our economic momentum if we cannot literally provide the fuel for the new economy.

Rising energy costs have been a major contributor to the recent slowdown in economic growth.

The future of our national economy depends upon our sustainable energy self-reliance. Public lands are at the forefront in providing the potential to provide much

in the form of raw energy or access to produce and deliver that energy. The development of the New Economy in America is heavily inter-dependent upon technology

and reliable, high quality electric power. Beyond the new economy, agricultural production and processing, manufacturing, renewable resources, protection of endangered species, recreational opportunities all affect our economy and our society and

each of them is affected in part by what happens on the resource of our public lands.

Our economic and social opportunities are directly linked to energy solutions. We

26

have learned from the current crisis that energy solutions involve diverse sources

and technologies ranging from fossil fuels to solar, from energy production to demand-side management and efficiency.

Energy is affecting everyone, not just California

The electricity crisis that began in California has spread throughout the western

power grid, known as the Western Interconnection. See map.

At its core, the crisis is a result of an imbalance of electricity demand and supply.

Electricity demand has grown with the growth in population and a growing economy

in the West. Few new powerplants have been built in the past decade in the West

and energy conservation efforts declined. This underlying imbalance of supply and

demand has been exacerbated by the structure of the electricity market in California that put extraordinary reliance on the spot market at the expense of more

stable, long-term contracts. High natural gas prices and a drought in the Northwest

are further exacerbating the crisis.

This crisis reaches well beyond California. The Bonneville Power Administration

is considering a 100 percent rate increase. Many utilities, such as the City of Tacoma, and industries, such as Phelps Dodge, are reeling from extraordinary wholesale electricity prices. From Montana to Arizona, plants and mines have shut down

because of the high cost of electricity. The crisis may deepen with summer peak demand and continuing drought in the Northwest.

The reality of the high energy prices was driven home last month when one of

our county commissioners in northeast Wyoming received a phone call from an elderly lady who wanted to know how she was going to pay her $500 heating bill

when her monthly income was just $600 per month.

Last December when the price of natural gas hit $10 per MMBTU, almost half

of the nation’s nitrogen industry shut down for several weeks, since natural gas is

the feedstock for nitrogen fertilizer. With significantly reduced supply, farmers this

spring will be paying unusually high prices for anhydrous ammonia and other nitrogen assuming not only that it is available but that in the event they can get it they

can actually afford it. Much of the manufacture of nitrogen has shifted off-shore and

America is paying other countries to produce as much as one third of all our nation’s

nitrogen. The security and affordability of our food supply will be affected.

I need not spend much time recounting the difficulties experienced by California

citizens with electricity. Our northwest states of Oregon, Idaho and Washington are

experiencing one of the driest winters on record which will manifest itself in lower

than usual runoff, less hydroelectric power and serious impacts to endangered fish.

This will be further exacerbated by the compounding economic effects caused by the

shortage of electricity. Farmers can make more money by being paid for not using

electricity than by raising crops and livestock. The same is true in manufacturing

aluminum.

Western Governors have worked long and hard to raise citizen awareness to the

serious nature of the energy situation. On December 1, Western Governors adopted

resolutions on energy policy, coal and natural gas. On December 20, Western Governors held an emergency meeting in Denver with and met with former DOE Secretary Bill Richardson and former FERC Chairman Jim Hoecker. By January 9,

nine Western Governors approved a Short-term Energy Conservation Strategy

aimed at coordinated action to dampen demand. On February 2, the Western Governors’ Association hosted an Energy Policy Roundtable in Portland, Oregon. Joining us were Energy Secretary Abraham, all three FERC commissioners, and leaders

from major utilities, natural gas and coal producers, environmental groups, academic experts, and small and large retail customers. We adopted several short- and

long-term energy policy recommendations. On February 27, Western Governors met

with Vice President Cheney to discuss the items requiring Federal action. We requested that an agreement be developed between Western States and the Cheney

energy policy team to provide for collaboration on our mutual energy challenges.

(See attached information given to the Vice President.)

Finally, energy policy has become a high priority nationally. I commend you and

the rest of the Resources Committee for recognizing that management of and access

to our Federal public lands will play a pivotal if not critical role in developing energy self-reliance.

Who’s in charge?

Today’s power shortages in California may only portend the aftershocks of even

greater shortages in other states this summer and compounded next winter. New

energy supplies are being developed at only one to two percent per year while energy consumption is forecast to grow at two to three times that rate. Who’s in

charge of our nation’s energy situation? Why didn’t someone wake up sooner so that

27

we wouldn’t have this uncertainty? We need to increase supply and an infrastructure to transport that supply. Part of the answer is that we have energy policy by

default, not by design, policy that is confused rather than coherent. Who should be

in charge? In reality, no one person or entity is or should be in complete charge of

managing the production, distribution or consumption of our nation’s energy supply.

We are in this together. Partnerships are vital and beneficial. Your letter of invitation to me for my testimony asked for my ‘‘perspective on the role of state government interacting with Federal land and mineral managers in developing a more

self-reliant energy policy for the nation through increased utilization of domestic

supplies in an environmentally sound manner.’’ The key phrase in your invitation

is ‘‘interaction with Federal land managers.’’ Interaction must be as full partners

progressing towards common goals. If state government has a committed partnership (or interaction) with Federal land managers we will produce domestic supplies

of energy in an environmentally safe manner. It is as simple as that.

History of energy policy

Until 1973, the Federal interest in energy policy and production was centered on

the primary principle that energy should be cheap and plentiful. The Arab oil embargo reinforced the notion that energy policy was synonymous with oil policy. Conservation of the resource to prevent waste and environmental protection was left to

the states, as it should be. The Federal policy by default today is that Americans

should be induced to reduce consumption, especially through higher prices brought

on by restricted access to production and distribution. This equates to an internal

embargo. The current discussion and research concerning global warming has fostered the policy tenet that we should get rid of any fuel that contains carbon. This

approach is certainly disjointed and confusing.

The Federal government in the mid-70’s began a series of efforts to write a national energy policy. Six attempts were made in 25 years with none being comprehensive, particularly as it would affect public land management. Any successful

new attempt must cut across all resource jurisdictions, public and private, state and

Federal. Likewise, any new policy must recognize the balance needed among the

economy, the environment and the community. Again, give the states full partnership or ‘‘interaction’’ and we will produce energy.

Policy by purpose, not by paranoia—Develop management directives that foster

cooperation, not polarization

Over the past decade, management by litigation and intimidation has prevailed

over management based on policy goals and has helped define our national energy

policy. As one previous chair of the Council on Environmental Quality put it, ‘‘our common ground, the environment, has become a battleground. Somehow, nearly half

of the EPA’s work is not the product of our collective will on the environment, but

rather the product of judicial decree. Somehow, we have become a country in receivership, with the courts managing our forests, our rivers and our rangelands.’’ CEQ

Chair McGinty, 1997.

Former Chief of the Forest Service, Jack Ward Thomas, lamented during a speech

in Wyoming five years ago, that he took his appointment believing that he was the

chief resource manager of the nations’ forests. But he said, ‘‘I have the least control

of anyone, over resource management and allocation. The Fish and Wildlife Service

has more say over forest management and health than I, through the Endangered

Species Act. Legal challenges consume the majority of my day.’’

Who should manage the land?—Shared responsibility, concurrent jurisdictions

Energy self-reliance through public lands will focus on the West, since nearly

75 percent of all BLM and Forest Service lands in the United States are located

in our Western states, particularly those that are rich in environmental as well as

energy values. These lands are managed for the general national public benefit, but

the laws, policies and management decisions and judicial direction for public lands

most directly impact, both socially and economically, the people who live in the

West. Our residents and communities depend upon the total resource for recreation,

wildlife habitat, resource use, mineral extraction, water supplies, flood protection,

hunting, fishing, aesthetic values, tourism and monuments. When you tinker with

Federal land issues in the West, you not only affect the economies of all Americans

but also the livelihoods of those people and communities living near and relying on

our public lands in the west.

As illustrated in the following figure, Federal land ownership in America is not

collected all in one place. Much of it is intermingled with state and private ownership. Regardless of specific ownership, public or private, we must recognize that

none of our natural resource decisions can be made exclusively and independently

of other managers or owners in the vicinity of our public lands. Again, we must

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1 1999 Resource Assessment of Selection Tertiary Coal Beds and Zones in the Northern Rocky

Mountains and Great Plains Region, October 1999. 2Federally Owned Coal and Federal Lands in the Colorado Plateau Region, USGS Fact Sheet

FS–145–99, September 1999. 3 1995 National Oil and Gas Assessment and Onshore Federal Lands, USGS Open File Report

95–5–N, January 1998.

interact as partners. States and the Federal government have shared or concurrent

jurisdictions over activities on our lands. We are both rooted as constitutional governments, the Federal with enumerated powers and the states with reserved and

delegated powers. As a result, activities on Federal lands require state as well as

Federal permits and permissions to be successful. Both must respect the rights of

private property adjacent to or co-mingled with governmental ownership.

States own and manage lands that are near, adjacent to, or intermingled with

Federal lands. To illustrate, I refer to the next figure in this presentation that

shows land ownership patterns just in the State of Wyoming. There are fifteen categories of land ownership, each with its own approach to resource management.

Where Federal land ownership dominates, partnerships are a necessity, not just

a nicety to be doled out by a patronizing Federal government.

Environment

In Wyoming we produce, process and/or transport coal, oil, natural gas, wind generation, and uranium. We have some of the cleanest air in the nation. Our water

is so clean that we are one of the few states without a fish advisory. We have proven

that a clean environment and a robust energy sector are not at odds with each

other.

Potential energy—It’s not just a matter of physics, it’s location, location, location

Energy in the West isn’t just electricity. Energy takes many forms, but is most

meaningful in generic terms of heat measurement, such as BTU’s, or as electrons.

Much of that energy is available in and under our Federal public lands. For example, there are 478 billion tons of Federal coal reserves in undeveloped portions of

the Powder River Basin in Wyoming and Montana.1 There are another 362 billion

tons of Federal coal reserves on the Colorado Plateau.2 Estimated oil in undiscovered conventional fields on Federal lands range from 4.4 to 12.8 billion barrels.

Similarly, estimates of technically recoverable gas in undiscovered conventional

fields on Federal lands range from 34.0 trillion cubic feet (TCF) to 96.8 TCF. Estimates of technically recoverable coalbed gas 3 on Federal lands range from 13.0

TCF to 19.6 TCF.3

Wyoming has enough coal reserves that, if we were a country, we would be number three in coal reserves in the world. Ninety-two percent of all coal produced in

Wyoming comes from Federal leases. Seventy five percent of methane gas produced

in Wyoming comes from Federal ownership. Sixty percent of our oil production is

from Federal lands. But we don’t even come close to Alaska in terms of natural gas

or petroleum. Highly effective wind generation in the West is situated on Federal

lands as is much of the hydroelectric generation. But today’s energy production is

not and will not be sufficient. America needs more energy. We have the energy but

we have a sharp imbalance between where energy can be produced and where it

is needed or consumed. Transmission pipelines and power lines are needed to connect supply with demand. Acquisition of rights-of-way is necessary. Governor Jane

Hull of Arizona is frustrated with the most recent presidential declaration of yet another national monument in Arizona that will likely eliminate a long-approved

power transmission line that was scheduled to connect energy generated in Arizona

with consumers in California. Monumental decisions in Washington have created

political misery in the West. If we cannot transmit energy it has no utility. If it has

no utility we have no incentive. If we have no incentive we have a continuing energy

policy based on default.

Over 70 percent of Wyoming’s mineral estate is Federally owned. As with many

western states, that amount of Federal domination could render us a third-world

colony rather than the sovereign states that we are. Wyoming ranks first of all

states in the production of coal and uranium. Our natural gas exploration and production has increased our known reserves significantly in recent years so that we

now rank fourth, but a distant fourth behind Alaska. Our extractable reserves are

equivalent to 374 billion barrels of oil. With OPEC currently producing approximately 25 million barrels of oil per day, Wyoming’s energy potential could completely replace the entire OPEC production for the next 41 years.

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We have it, America needs it

With this world-class base of raw resources at our very feet, how come America

is in such a critical situation of short supply? The answer is simple: access to the

resources has become more difficult and the ability to transport the products in any

form remains unpredictable and uncertain. In Wyoming almost any project to develop new production or to transport it to consumers involves a Federal action subject to the processes of the National Environmental Policy Act, or NEPA. The original intent of NEPA was admirable, but the immense body of activities developed

in its implementation in particular over the past eight years has elevated process

itself over results and has allowed opportunity for political control rather than public disclosure and real protection.

To illustrate, the Bureau of Land Management has been developing an Environmental Assessment for an additional 2500 permits for Coal Bed Methane wells in

Wyoming’s Powder River Basin. If the wells are not developed on the Federal lands,

production on adjacent state and privately owned lands will pull the methane gas

out of the Federal ownership. Following its approved procedures, the BLM had completed its work and had given assurances to leaseholders that the additional permits

would be available by March 1, 2001. At the last moment the U.S. Fish and Wildlife

Service reported that it had not completed its required assessment of impacts and

would delay the issuance of permits. The lack of coordination and cooperation between two divisions within the single Department of Interior will delay access to

a much-needed supply of gas in a very attractive market. Federal activity is primarily focused on process rather than results and there is no accountability for improper decisions. You have asked for my views on interaction between state government and Federal land managers. One of my views is that as a start ‘‘interaction’’ must begin with and between Federal agencies.

What’s a NEPA?—It’s not the act, it’s the actors

The National Environmental Policy Act was enacted in 1969 with the stated purpose of ‘‘recognizing the profound impact of man’s activity on the interrelations of

all components of the natural environment.’’ Further on in the Purpose Clause, the

act declares that ‘‘it is the policy of the Federal Government, in cooperation with

State and local governments and other concerned public and private

organizations . . . to create and maintain conditions under which man and nature

can exist in productive harmony and fulfill the social, economic and other requirements of present and future generations.’’ Implementation of this short and relatively simple act, NEPA, has resulted in

such a myriad of regulations and processes, that state and local authorities have

little or no idea which way the whip saw will go next. Inconsistency between and

among Federal agencies is rampant.

The Act is intended to require Federal, state and private actions that are comprehensive, elicit better planning, are inter-generational in their beneficial effect,

and strike a wholesome balance between the environment and the economy.

Federal regulations for the implementation of NEPA, must be streamlined and applied in a manner that reduces costs, eliminates interagency conflicts and inconsistencies, and is more efficient and timely. Western Governors recommend that

streamlining start with the adoption of management principles such as the eight

Enlibra principles we adopted in 1999. These principles, which are attached to my

testimony, reflect a practical, common sense way to approach environmental decisions, just as Wyoming’s native son, Dr. W. Edward Deming’s principles of quality

management enabled a quality revolution. We have employed these principles successfully on several difficult environmental issues.

Earlier I referenced that we are in an age of litigation with the courts directing

the management of our resources. But it’s not just that the courts are directly managing many of our resources, they are indirectly managing public resources in our

states because of the fear of litigation, not just because of actual litigation. Implementation of NEPA is not the problem. It’s the process. It takes too long, costs too

much, spawns unending litigation and is so inconsistently implemented that each

agency requires extra layers of management for its own unique set of regulations.

It’s not the Act, Mr. Chairman, it’s the Actors.

You don’t have to amend NEPA, Mr. Chairman, if you would simply require the

Federal government to be consistent and speak with a unified voice of management.

That should be among the first tasks that your Committee undertakes with VicePresident Cheney in his role as Energy Czar.

Other specific actions that could and should be taken include reallocating Federal

resources and personnel to activities that are focused on the near-term need for

more energy. For example, Wyoming’s Powder River Basin is the nation’s largest deposit of clean-burning coal. Over 90 percent of current coal production is developed

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under Federal leases. More clean-air-compliant coal could be produced by simply increasing the number of LBA’s (Leases By Application) from one per year to two per

year. The processes do not need to be changed. What’s lacking are the people resources needed for processing the applications. As today’s coal prices continue to

rise, increasing the pace of LBA’s with competitive bidding would enhance bonuses

paid as well as production bids. Federal agencies are waiting for direction and necessary resources to engage in strategic planning for the enhancement of energy supplies developed efficiently and in environmentally sound ways on public lands.

Similarly, State resources for participation in and implementation of such activities could be enhanced through the release of the state-share funds, which now total

more than $400 million for the western states and energy tribes, from the abandoned mine lands program.

In addition:

• The Clinton Roadless Policy threatens to strand over 55 million acres, some

of which include significant potential for energy development, both renewable

and non-renewable. Four Western Governors asked to ‘‘interact’’ by being

granted cooperating agency status. We were denied.

• The U.S. Forest Service has previously been directed to adopt and revise individual forest plans in an accelerated fashion that is hardly strategic and certainly exclusive of energy development. The fast track plan revision coupled

with the Clinton Roadless initiative for 55 million acres is hardly a sound

strategy for resource management.

• The projected growth in natural gas demand will necessitate a significant increase in pipeline and distribution systems over the next decade, many of

which will cross Federal lands. Best estimates are that 38,000 miles of new

gas pipelines are needed. The Federal government will have to facilitate this

construction by working with each affected state to coordinate rights of way

and production.

• Natural gas is the fuel of choice for the near term, since well over 90 percent

of new electric power generation will be gas fired, even though 60 percent of

current generation is from coal.

• Alternatives for construction and maintenance of electric transmission grid

must be encouraged. Today’s problems focus on California, but significant

shortages are imminent in the Midwest.

• A myriad of directives and solicitors’ opinions which flew out of Washington,

D.C. on January 19th regarding multiple use of our BLM lands needs to be

reassessed for purpose and benefit.

The recommendation from the West, Mr. Chairman, is that we pursue solutions

that focus on results, that symbolize balance and stewardship, that recognize states

as partners and, above all, that you resist preempting state laws and jurisdictions.

Energy is plentiful within the boundaries of public land jurisdictions.

The opportunities

I want to leave you with the message that the current energy crisis is an opportunity to break through the often unproductive deadlock that pits energy needs

against environmental protection. The western electricity crisis has awakened us to

how much we don’t know about the energy resources of the nation and how little

we have explored opportunities to meet the energy needs of a growing economy

while protecting our environment. We need to seek out opportunities to promote energy development AND environmental protection.

Below I have outlined several subjects under this Committee’s jurisdiction that

warrant careful and thoughtful examination. There are undoubtedly other areas

where progress can be made in promoting energy development and protecting the

environment.

Rights-of-way and permitting

Far fewer new power transmission lines and oil and gas pipelines have been built

in the West in the past decade than are needed today. The permitting processes of

Federal land management agencies and states are generally rusty and not capable

of the rapid action required to meet the energy demands of the West. While some

folks may call for the heavy hand of Federal preemption of existing state and Federal agency permitting processes, there is little reason for such draconian action, but

much to justify new approaches to integrate and accelerate existing permitting process. For example, in the West we are unaware of any interstate transmission lines

that have ever been blocked by lack of a state permit.

We need to revive the permitting process from the past decade of dormancy. This

needs to be done in a manner that reduces overall permitting time and improves

the quality of project reviews. Tomorrow, members of my staff will be meeting with

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Staff of the Western Governors’ Association and a major information technology firm

to begin exploring how high performance computing can be employed to expedite

project assessment and the NEPA review process. This kind of innovative activity

needs to become the rule, rather than the exception in the thinking of our agencies:

how can we do our jobs better, faster and cheaper without sacrificing the environment or the economy.

I recommend that this Committee:

• Urge Federal permitting agencies to include states as cooperating agencies

under NEPA reviews of energy projects whenever a state requests cooperating

agency status;

• Encourage the BLM and Forest Service to work with Western Governors to

develop a process that coordinates and synchronizes Federal and state reviews of proposed energy projects; and

• Encourage Federal agencies, including the Department of Energy, to work

with the states to develop the information necessary for the consideration of

alternatives to energy projects that are required under NEPA.

Enhancing electricity production from Federal dams

In the West, two Federal power marketing administrations, the Bonneville Power

Administration and the Western Area Power Administration, market electricity generated at dams operated by the Bureau of Reclamation and the Corps of Engineers.

We are all familiar with the arguments over the impact of such dams on the environment. The ongoing western electricity crisis is also reminding us how critical the

hydro-electric system is to meeting the electricity demand. Let’s develop opportunities to use the hydro-electric system to generate more electricity AND protect the

environment. For example, a re-regulating dam and reservoir downstream from

Glen Canyon Dam could enable greater peak electricity production, protect downstream environmental resources from the problems created by rapid fluctuations in

flows and mitigate environmental problems for native species. More effective use

could be made of Federal dams for stored generation capacity to even out the power

generated by intermittent wind power generation. The BPA in its recent announced

solicitation of 1,000 megawatts of wind generation, may use this wind power to balance hydro-electric generation. There are opportunities to replace 40–60 year old

generators with more efficient generators thereby increasing electricity generation

from the same amount of water (e.g., rewinds and replacements at Bonneville Dam,

The Dallas Dam, McNary Dam, Chief Joseph Dam) or build additional power plants

at existing dams (e.g., Folsom, Anderson Ranch, Black Canyon, Lewiston, Grand

Coulee. We could evaluate opportunities to modify irrigation practices to shift pumping loads off-peak, to use more efficient pumps and to improve the efficiency of

water use.

I urge you to direct BPA, WAPA, BuRec and the Corps to seek out opportunities

to use their assets to enhance electricity production while protecting the environment. I recommend that you ask them to report in 10 months on measures to

achieve this end and to consult with governors throughout their work.

Abandoned mine land funds

In enacting the Surface Mining Control and Reclamation Act of 1977, a bargain

was struck between coal producing states and Indian tribes and the Federal government under which the states and tribes would receive at least one-half of the abandoned mine land fee collections from coal mining within their borders. Over the

years, this fundamental agreement has been undercut by limits on appropriations

of the state/tribal share of AML collections, and diversion of the funds to the U.S.

Treasury and the health benefits of retired coal miners. The result is that nearly

every coal mining state and Indian tribe is owed significant amounts of money. For

example, the latest annual data (12/31/00) from OSM shows: West Virginia is owed

$95 million; Kentucky $101 million; Pennsylvania, $47 million; Montana $36 million; Utah $11 million; the Council of Energy Resource Tribes, $35 million; and for

Wyoming, the largest coal producing state, the most recent estimate is nearly $300

million.

As part of the bargain struck in 1977, states that completed their clean-up of

abandoned mines could use the funds for other public purposes. Wyoming is in this

position. So may be other states and tribes. At this point, our own money is being

withheld from Wyoming when these needed funds could be put to work expanding

our capability to develop our energy and related resources and enhance the environment of our beautiful state.

I urge this Committee to enact legislation that will enable states and Indian

Tribes to access and use the State-share monies they are due under the Surface

Mining Control and Reclamation Act of 1977.

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Energy and fires

Until last summer, few made the connection between our forest and range fires

and the reliability of the western electric power system. However, the fires of last

summer drove home the connection as fires in New Mexico knocked out a 500 Kv

transmission line from Four Comers to Albuquerque causing serious blackouts. In

Montana, the major fires resulted in the shut down of a major 500 Kv transmission

line that moves coal-generated power from eastern Montana to Seattle. You can

imagine the implications of these events if they should recur during this summer’s peak load.

Last fall, Western Governors negotiated an agreement with then-Interior Secretary Babbitt and then-Agriculture Secretary Glickman to correct the imbalance in

land management decisions. The agreement, which the Congress memorialized in

the Interior Appropriations Committee Report, makes the states full partners and

requires that local expertise and understanding be incorporated into forest management decisions during the extensive forest restoration activities over the next ten

years. While the issues addressed in this agreement extend beyond issues of energy,

I commend this agreement to the Committee and urge you to support its implementation as a model of the right way to manage our public lands and resources.

I understand that my colleague Montana Governor Judy Martz will be testifying

tomorrow to the Forest and Forest Health Subcommittee on these important issues.

Royalty management and well inspection

I want to thank you and the Congress for acting last year to remove a major irritant limiting state/Federal cooperation on royalty management and well inspection

which was the deduction of unsupported Federal agency costs from the states’ share

of Mineral Leasing Act revenues. With this obstacle removed, we have an opportunity for the thoughtful examination of ways in which the states and Federal government might further cooperate in enhancing the efficiency of how we collect royalties and manage mineral leases, such as by taking royalties in-kind rather than incash.

You should encourage new leadership at the BLM and MMS to seek greater efficiencies in the execution of their responsibilities through enhanced collaboration

with states. Both BLM and MMS execute responsibilities that parallel those of state

agencies. We ought to be able to take better advantage of the synergies between

these Federal and state agencies to improve well inspections and simplify royalty

management while reducing the burden on lessees.

National parks and gateway communities

Many of the most spectacular lands and waters in the nation are under the jurisdiction of the National Park Service and other Federal land management agencies.

The public’s interest in experiencing these national treasurers is growing with the

resulting increased pressure on the environment and gateway communities.

We need to find and capitalize on opportunities to show how parks and gateway

communities can work in harmony with the environment while meeting needs of

visitors. We need to use the parks and gateway communities as educational models

of our ability to meet our energy needs while protecting the environment.

I understand that there are examples of steps that can be taken in this direction.

For example, in the Chairman’s state of Utah, the state, the local utility

(PacifiCorp), and the National Park Service have collaborated to replace remote and

polluting diesel generation at Lake Powell with photo-voltaic. Zion National Park’s

pressing need to reduce traffic in the inner canyon has been integrated with the

transportation needs of the park’s gateway community of Springdale. These types

of innovations should be the norm, not the exception.

I urge you to direct the National Park Service, the BLM, the Forest Service and

the Fish and Wildlife Service to seek out opportunities with gateway communities

and states to meeting the needs of visitors and the gateway communities while providing a showcase of how the needs for energy and environmental protection can

be met. I recommend that you direct these agencies to come back with a plan in

10 months that identifies the opportunities for collaboration and necessary resources

to implement the plan. These plans must be developed in cooperation with gateway

communities and states.

Thomas Jefferson maintained a solid belief that the success of our democracy lies

in ordinary citizens vested with deep civic responsibility, citizens who engage each

other directly in the pursuit of the common good. The American West can and

should reject the last two decades of bitter debate among environmentalists and resource users that has become so polarized that we have gridlock rather than any

public benefit from our public lands. Former EPA Director Bill Ruckelshaus has

said ‘‘business, governments and citizens, frustrated by years of litigation and staleVerDate 11-MAY-2000 13:13 Aug 24, 2001 Jkt 000000 PO 00000 Frm 00038 Fmt 6633 Sfmt 6621 J:\DOCS\70888.TXT HRESOUR2 PsN: HRESOUR2
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mate, have begun to turn to the common good, sometimes out of desperation, but

more frequently out of hope. Hope that the decisions they yield will be less controversial and more durable. Hope that jointly designed decisions will be better and

more informed decisions. And hope that stakeholder processes could actually help

to regenerate public confidence in our institutions, including both government and

business.’’

Mr. Chairman, thank you. I would be happy to answer any questions.

Suggested Action Plan to Meet the Westerns Electricity Crisis and Help

Build the Foundation for a National Energy Policy

1. Permitting energy facilities.—Direct Federal agencies to partner with Western

states to expedite regulatory processes governing the operation of existing powerplants and the construction of necessary new energy infrastructure. This includes:

• EPA permits governing operation of existing powerplants and new powerplants;

• Federal interface with states on fish management and hydro operations;

• Interior Department and Forest Service on the processing rights-of-way;

• FERC processing of natural gas pipeline applications.

2. Reliability legislation.—Enact before summer Federal electric system reliability

legislation, such as last year’s Senate bill making reliability standards enforceable.

• Delegates to the West authority to devise standards and allows Federal deference.

• Governors create state bodies to advise industry and FERC on reliability

standards.

3. Low-income energy assistance.—Increase Federal funding for low-income energy assistance and low-income weatherization.

• Increased natural gas and electricity prices have caused major hardship.

• Expected high electricity prices this summer will exacerbate hardship in the

West.

4. Energy production and efficiency tax credits and Federal R&D.—Federal action

is needed to encourage the development of cleaner, more efficient powerplants and

more efficient use of energy.

• Adopt energy efficiency tax credits to complement the Western state efforts

to reduce demand this summer.

• Extend and expand wind production tax credit to geothermal, solar, and biomass.

• Adopt tax incentives for advanced coal use.

• Expand Federal fossil and renewable energy R&D.

5. Federal appliance standards.—Continue development of standards.

• Standards adopted by DOE in January (for clothes washers, water heaters,

residential air conditioning and heat pumps) are a step in the right direction.

• Grant waivers for stronger state standards, such as California’s air conditioner and commercial appliance standards.

6. Administration.—WGA cooperative agreement.—Implement a multi-year cooperative agreement with Western Governors.

• Agreement enhances Western states’ standing with Federal agencies and

serve as a vehicle for Federal funding on key energy issues.

• The cooperative agreement would include: expanding electrical generations,

building needed energy infrastructure, and improving the efficiency of energy

use.

• The cooperative agreement would extend to states cooperating agency status

for NEPA reviews on energy projects.

Western Governors’ Association Policy Resolution 99–013—Principles for

Environmental Management in the West

Sponsors: Governors Kitzhaber and Leavitt

A. BACKGROUND

Vision statement

1. The people of the West face a common challenge. The quality of life we cherish

is threatened—in part by our own success—as our rapid growth impacts much

of the environmental quality and many of the natural resource systems that

characterize our region. A number of factors illustrate the change that is occurring.

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• Throughout the 1990s, the population growth rate in the Western United

States has surpassed that of every other region of the country, in part because of the draw of the Western quality of life and magnificent landscapes.

Population mobility and growth and the resulting increased diversity in values are changing both the political dynamics and the region’s economy. • While its historic base of natural resource-related industries, such as farming,

fishing, mining, and wood products, remains important, the West has diversified dramatically and now counts telecommunications, tourism, recreation

services, transportation, information technologies, software and entertainment

companies among its larger employers.

• Globalization of markets, changing preferences, substitute materials, and

availability of natural resources have affected the competitiveness and resiliency of many Western communities. Communities must work to retool, adjust and diversify to remain competitive. • At the same time, the nature of environmental and natural resource problems

is changing. As large, easily identified sources of pollution are controlled, the

threat to the environment has shifted to diffuse, numerous, and smaller-scale

sources. Our sheer numbers and consumption habits make environmental

progress increasingly dependent on the daily behaviors and decisions made by

every individual.

• Agricultural consolidation and dispersed development have affected land-use

patterns resulting in a wide range of economic and environmental impacts.

Impacts range from impaired air quality from increasing numbers of commuters and miles traveled, to fragmented habitats and disrupted migration

routes for wildlife. Good stewardship born of locally controlled and economically sustainable agriculture may also suffer.

• New computer and communications technologies, as well as new environmental monitoring and characterization technologies, create opportunities for

innovative solutions to preserve and enhance the environment and communities of the West.

There is a lot at stake. Westerners enjoy majestic mountains, forests, streams and

lakes, as well as beautiful deserts, plains and coastlines. This landscape includes

the vast public lands—national parks and forests, wilderness areas and refuges,

military bases, tribal lands, state and local public lands—and highly productive private lands. This landscape harbors a wide array of plant and animal life and nurtures a diverse population of people both physically and spiritually. The West’s natural resource systems are a source of great wealth and beauty for the region, the

nation and the world.

Westerners desire to create a region that will provide our children an extraordinary quality of life. This future embraces a shared sense of stewardship responsibility for our region’s natural and cultural assets. It strives to ensure for present

and future generations clean water and air, open lands that are beautiful, life-sustaining and productive, and proximity to public recreational opportunities. Equally

important is an economy where people of any background or age have opportunities

for education and high quality jobs and the ability to contribute to the well-being

of their families and fellow citizens.

It must be clear that in implementing this vision, Westerners do not reject the

goals and objectives of Federal environmental laws, nor the appropriate role of Federal regulation and enforcement as a tool to achieve those objectives. Westerners respect treaty rights, sovereignty, property rights and other legal rights, and recognize

the responsibilities associated with those rights in addressing our common environmental challenges.

Our future includes a belief that we are better off if we can redirect energy away

from polarized battles and toward solving our common problems. It is a vision of

rebuilding trust, partnerships and community; of better understanding the cumulative effects of our actions; and of enhancing individual and collective environmental understanding and its associated stewardship. It includes individuals being

able to pursue their objectives in ways that build community rather than disrupt

it, and commitment to looking for win-win solutions sustainable over time.

2. During the 1990s, the Western Governors have experimented with a variety of

ways to improve management of the environment of the West through collaborative

processes. Valuable accomplishments have been achieved while lessons have been

learned from development of the Park City Principles for Water Management, the

High Plains Partnership, the Grand Canyon Visibility Transport Commission, The

Oregon Plan for Salmon and Watersheds, the Texas Regional Water Supply Planning Process, Trails and Recreational Access for Alaska and the Wyoming Open

Lands Initiative. These efforts have built on the collaborative process which has

shown repeated promise, and have demonstrated that the environmental strategies

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that work best have strong commitment from state and local government, vested

local support, and Federal collaboration.

3. In summary, mindful of our rich Western heritage, recognizing the need to sustain a vibrant Western economy, convinced of the importance of protecting and enhancing the environment for the well-being of present and future generations, and

acknowledging the benefits of existing and new approaches to environmental management, Governors and other Westerners with diverse experience have agreed to

the principles that follow.

B. GOVERNORS’ POLICY STATEMENT

1. The Western Governors commit to a new doctrine to guide natural resource and

environmental policy development and decision-making in the West. The doctrine is

based upon the principles below, each of which is dependent upon the others. The

integration of these principles is critical to their interpretation and the success of

the new doctrine.

National Standards, Neighborhood Solutions—Assign Responsibilities at the Right

Level

There is full acknowledgment that there are environmental issues of national interest ranging from management of public lands to air and water quality protection.

Public processes are used to identify and protect the collective values of the nation’s

public. No existing laws or identified legal rights and responsibilities are rejected.

The role of the Federal government is supported in passing laws that protect these

values as well as setting national standards and objectives that identify the appropriate uses and levels of protection to be achieved. As the Federal government sets

national standards, they should consult with the states, tribes and local governments as well as other concerned stakeholders in order to access data and other important information. When environmental standards have not been historically

within the Federal jurisdiction, non-Federal governments retain their standard setting and enforcing functions to ensure consideration of unique, local-level circumstances and to ensure community involvement.

With standards and objectives identified, there should be flexibility for non-Federal governments to develop their own plans to achieve them, and to provide accountability. Plans that consider more localized ecological, economic, social and political factors can have the advantage of having more public support and involvement and therefore can reach national standards more efficiently and effectively.

Governments should reward innovation and take responsibility for achieving environmental goals. They should support this type of empowerment for any level of

government that can demonstrate its ability to meet or exceed standards and goals

through locally or regionally tailored plans. The Federal government should support

non-Federal efforts in this regard with funds and technical assistance. In the event

that no government or community is progressing toward specific place-based plans,

the Federal government should become more actively involved in meeting the standards.

Collaboration, Not Polarization—Use Collaborative Processes to Break Down Barriers and Find Solutions

The regulatory tools we have been relying on over the last quarter of a century

are reaching the point of diminishing returns. In addition, environmental issues

tend to be highly polarizing, leading to destructive battles that do not necessarily

achieve environmental goals. Successful environmental policy implementation is

best accomplished through balanced, open and inclusive approaches at the ground

level, where interested stakeholders work together to formulate critical issue statements and develop locally based solutions to those issues. Collaborative approaches

often result in greater satisfaction with outcomes and broader public support, and

can increase the chances of involved parties staying committed over time to the solution and its implementation. Additionally, collaborative mechanisms may save

costs when compared with traditional means of policy development. Given the often

local nature of collaborative processes, it may be necessary for public and private

interests to provide resources to ensure these processes are transparent, have broad

participation and are supported with good technical information.

Reward Results, Not Programs—Move to a Performance-Based System

A clean and safe environment will best be achieved when government actions are

focused on outcomes, not programs, and when innovative approaches to achieving

desired outcomes are rewarded. Federal, state and local policies should encourage

‘‘outside the box’’ thinking in the development of strategies to achieve desired

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outcomes. Solving problems rather than just complying with programs should be rewarded.

Science for Facts, Process for Priorities—Separate Subjective Choices From Objective

Data Gathering

Environmental science is complex and uncertainties exist in most scientific findings. In addressing scientific uncertainties that underlie most environmental issues

and decisions, competing interests usually point to scientific conclusions supporting

their view and ignore or attack conflicting or insufficient information. This situation

allows interests to hold polarized positions, and interferes with reconciling the problems at hand. It may also leave stakeholders in denial over readily perceived environmental problems. This in turn reduces public confidence and raises the stridency

of debate. Critical, preventive steps may never be taken as a result, and this may

lead to more costly environmental protection than would otherwise be required.

A better approach is to reach agreement on the underlying facts as well as the

range of uncertainty surrounding the environmental question at hand before trying

to frame the choices to be made. This approach should use a public, balanced and

inclusive collaborative process and a range of respected scientists and peer-reviewed

science. Such a process promotes quality assurance and quality control mechanisms

to evaluate the credibility of scientific conclusions. It can also help stakeholders and

decision-makers understand the underlying science and its limitations before decisions are made. If a collaborative process among the stakeholders does not resolve

scientific disagreements, decision-makers must evaluate the differing scientific information and make the difficult policy choices. Decision-makers should use ongoing

scientific monitoring information to adapt their management decisions as necessary.

Markets Before Mandates—Pursue Economic Incentives Whenever Appropriate

While most individuals, businesses, and institutions want to protect the environment and achieve desired environmental outcomes at the lowest cost to society,

many environmental programs require the use of specific technologies and processes

to achieve these outcomes. Reliance on the threat of enforcement action to force

compliance with technology or process requirements may result in adequate environmental protection. However, market-based approaches and economic incentives often

result in more efficient and cost-effective results and may lead to more rapid compliance. These approaches also reward environmental performance, promote economic

health, encourage innovation and increase trust among government, industry and

the public.

Change A Heart, Change A Nation—Environmental Understanding is Crucial

Governments at all levels can develop policies, programs and procedures for protecting the environment. Yet the success of these policies ultimately depends on the

daily choices of our citizens. Beginning with the nation’s youth, people need to understand their relationship with the environment. They need to understand the importance of sustaining and enhancing their surroundings for themselves and future

generations. If we are able to achieve a healthy environment, it will be because citizens understand that a healthy environment is critical to the social and economic

health of the nation. Government has a role in educating people about stewardship

of natural resources. One important way for government to promote individual responsibility is by rewarding those who meet their stewardship responsibilities.

Recognition of Benefits and Costs—Make Sure All Decisions Affecting Infrastructure,

Development and Environment are Fully Informed

The implementation of environmental policies and programs should be guided by

an assessment of the costs and benefits of different options across the affected geographic range. To best understand opportunities for win-win solutions, cost and benefit assessments should look at life-cycle costs and economic externalities imposed

on those who do not participate in key transactions. These assessments can illustrate the relative advantages of various methods of achieving common public goals.

However, not all benefits and costs can be easily quantified or translated into dollars. There may be other non-economic factors such as equity within and across generations that should also be fully considered and integrated into every assessment

of options. The assessment of options should consider all of the social, legal, economic and political factors while ensuring that neither quantitative nor qualitative

factors dominate.

Solutions Transcend Political Boundaries—Use Appropriate Geographic Boundaries

for Environmental Problems

Many of the environmental challenges in the West cross political and agency

boundaries. For example, environmental management issues often fall within

37

natural basins. These are often transboundary water or air sheds. Focusing on the

natural boundaries of the problem helps identify the appropriate science, possible

markets, cross-border issues, and the full range of affected interests and governments that should participate and facilitate solutions. Voluntary interstate strategies as well as other partnerships are important tools as well.

2. The Western Governors invite state, local and Native American leaders, environmental organizations, the private sector, Congress and the Administration to embrace these principles in their environmental and natural resources policy work and

decision-making.

C. GOVERNORS’ MANAGEMENT DIRECTIVE

1. The Western Governors’ Association (WGA) shall transmit a copy of this resolution to the President; Vice President; the Council on Environmental Quality; the Administrator of the Environmental Protection Agency; the Secretaries of Interior, Energy, Transportation and Agriculture; the chairmen and ranking minority leaders of

the relevant Committees of Congress; the Western delegation to Congress; Western

tribal leaders; state, municipal and county government associations; leaders of business associations and environmental institutions; and interested CEOs.

WGA shall incorporate these principles into its projects and activities in environmental and natural resources policy development and shall work with the states to

identify specific areas where they have been demonstrated and adopted or may be

in the future.

3. WGA shall communicate the commitment of the Governors to these principles

to organizations, institutions and media concerned with environmental protection

and natural resources management.

4. WGA shall report to the Governors annually on input received on the content

of the Shared Doctrine for Environmental Management. In conjunction with its

Enlibra Steering and Advisory Committees, WGA shall use its limited resources to

promote the doctrine, and to engage and evaluate appropriate projects that seek to

advance its principles. To carry out these activities, WGA will prepare an implementation plan as part of the annual work plan submitted to the Governors.

Originally adopted as Policy Resolution 98–001 in 1998.

Western Governors’ Association Policy Resolution 00–033—Natural Gas

Sponsor: Governor Knowles

A. BACKGROUND

1. North America is dependent on reliable, reasonably priced energy supplies to

support its economy.

2. Demand for natural gas is growing faster than any other energy source. Higher

than expected recent growth in natural gas use will fully utilize current North

American gas production, creating the relatively high prices consumers are paying

for natural gas this winter. U.S. natural gas use is currently 21 trillion cubic feet

per year and is expected to grow to 30 trillion cubic feet by 2015. More than 90 percent of planned expansion of electric generation capacity in the U.S. is to be fueled

with natural gas.

3. Billions of dollars of investment in production, transmission, storage and distribution facilities will be required to ensure that North American natural gas consumers have access to an adequate supply of fuel.

4. The Interstate Oil and Gas Compact Commission’s recent Governor’s Summit

on Natural Gas concluded, with the support of natural gas experts from industry,

regulatory and other government officials, that a functional marketplace is capable

of delivering natural gas to North America at reasonable prices.

5. The largest single untapped supply of natural gas available to North American

is located in Alaska. 35 trillion cubic feet of gas are found in proven reserves. Additional exploration may discover total reserves of more than 100 trillion cubic feet.

6. In the 1970’s the United States and Canada agreed to transport Alaska natural

gas to the rest of the continent via a pipeline from Prudhoe Bay through Alaska’s

interior along the Alcan Highway to the existing North American distribution system. This agreement constitutes a treaty-like international arrangement which was

specifically authorized by Congress. Key rights-of-way and regulatory approvals are

still valid allowing a project to deliver billions of cubic feet per day by 2006 or 2007.

A pipeline along the Alcan Highway would parallel an existing highway corridor and

would not cross any U.S. national conservation system units. Such a project would

be the biggest private construction project in North American history.

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B. GOVERNORS’ POLICY STATEMENT

1. Consistent with Federal and state environmental laws and with local community values, Western Governors:

a. Believe Federal and state governments should endorse policies that increase the availability of North American natural gas at reasonable prices to

residential, commercial, industrial, and electric generation consumers,

b. Call on Federal and state governments to work together to allow for appropriate access to their public-owned lands for natural gas exploration, production

and transmission, while protecting environmentally sensitive areas, and

c. Endorse, pending completion of appropriate environmental review, a project

to bring Alaska gas to market via a pipeline from Prudhoe Bay along the Alcan

Highway through Canada to the North American distribution system. Any such

project must ensure full pipeline safety to protect the public and environment.

2. Western Governors also believe that the nation must continue to identify and

develop a full range of economic and efficient alternative energy sources, including

energy conservation.

C. GOVERNORS’ MANAGEMENT DIRECTIVE

1. The Western Governors’ Association (WGA) shall transmit this resolution to the

President, elect, Secretary of Energy, Secretary of Energy designee, and members

of the U.S. House and Senate Natural Resources Committees.

2. WGA staff shall monitor developments related to the purposes of this resolution

and report to the Governors as needed.

Western Governors’ Association Policy Resolution 00–036—Energy Policy

for the Americas

Sponsor: Governor Geringer

A. BACKGROUND

1. The United States enjoys the strongest economy in the world and an increasingly clean environment both of which are made possible by abundant and affordable energy and improvements in clean energy and renewable energy technologies.

To assure all Americans access to affordable energy, it is necessary to ensure that

diverse energy supplies, including coal, hydroelectric, natural gas, petroleum and renewable resources such as biomass, ethanol, wind, solar, and geothermal, remain

available, and that energy resources are used efficiently and in a manner that continues the trend to a cleaner environment

2. Since 1973, the Federal Government has attempted, through at least six plans,

to implement an effective national energy policy. Despite the Federal government

plans, today we: (a) are increasingly dependent on imported energy supplies, particularly transportation fuels, from unstable regions of the world; (b) do not have

in place adequate infrastructure necessary to provide our growing technology-driven

economy with reliable, high-quality and affordable supplies of energy; (c) have not

adequately improved the efficiency with which energy is used or enabled the demand side of the market to more effectively respond to energy price increases; and

(d) have flawed wholesale electricity markets in some areas. These shortcomings are

particularly apparent in a year when energy prices dramatically increased and western electricity markets are in the midst of fundamental reforms.

3. In order for the U.S. economy to be sustained and to grow, technologies and

policies need to be developed to enable all energy resources to be developed cleanly,

efficiently and cost-effectively and to efficiently use energy resources and enable demand responsiveness to energy prices.

4. The West is particularly critical to the implementation of national energy policy

because of the significant fossil energy and renewable energy resources of the region. The West already produces almost 65 percent of the nation’s natural gas, 64

percent of the nation’s oil, more than 50 percent of the nation’s coal, and a major

portion of the nation’s renewable resources.

5. The United States presently relies on fossil fuels (oil, gas, and coal) for approximately 85 percent of its total energy needs and almost 70 percent of its electrical

power.

6. Renewable energy should be developed and energy efficiency promoted to provide sufficient affordable and reliable energy as part of a diverse portfolio that includes fossil fuels as sources for electric power, transportation and heating. As efforts continue to develop technologies to enable a transition to renewable energy,

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it is important to ensure American consumers can reduce demand and utilize clean

burning natural gas, oil and coal.

7. In order for the U.S. economy to maintain sustained growth, all sources of energy should be developed cleanly, efficiently, and cost-effectively through the development of a comprehensive energy policy. To accomplish this, an initiative must be

developed and implemented to provide energy security, reliability, diversity, and affordability and to ensure environmental protection. Such an initiative must capitalize on current and future opportunities to improve the efficiency with which energy is used.

B. GOVERNORS’ POLICY STATEMENT

1. Western Governors’ support a national energy policy that is guided by the goals

of secure, reliable, diverse, affordable and environmentally-sound energy for all citizens. The Governors encourage cooperation among states to meet these goals.

2. A national energy policy should be guided by:

a. Effective and functional market-oriented approaches to energy supply and

use that enable the above goals to be met;

b. Appropriate government support of energy research in the development of

new technologies and commercial applications, with demonstrations by the private sector;

c. Performance-based Federal and state environmental standards implemented by the states;

d. Strategic alliances with our international partners in the Americas; and

e. Conservation by end-users in the transportation, industrial, residential,

and commercial sectors.

3. Western Governors believe that an Energy Policy Roundtable is needed to provide a forum for governors, members of Congress, the Federal administration, state

agencies, and experts to examine issues, policies and programs necessary to assure

secure, reliable, diverse, affordable and environmentally-sound energy into the future.

C. GOVERNORS’ MANAGEMENT DIRECTIVE

1. The Western Governors’ Association shall transmit this resolution to the President, elect, the Secretaries or Secretaries-elect of Energy, Agriculture, Interior and

Commerce, the Administrator or Administrator-designee of the Environmental Protection Agency, appropriate members and Committees of Congress, the National

Governors’ Association, and the Interstate Oil and Gas Compact Commission and

other concerned organizations.

2. WGA staff shall monitor developments related to the purposes of this resolution

and report to the governors as needed. WGA and affiliated organizations shall ensure that all WGA programs and initiatives that affect energy development and use

incorporate the principles and program of this policy.

3. WGA will work with other interested organizations to convene the first Energy

Policy Roundtable prior to the WGA Annual Meeting in order to prepare a detailed

approach to implement the policies in this resolution.

Western Governors’ Association Policy Resolution 00–037—Coal Policy

Sponsor: Governor Geringer

A. BACKGROUND

1. Coal mining has a long and proud heritage in the western United States with

today’s coal-fired power plants generating 56 percent of the electricity in the United

States and over 70 percent of the electricity generated in Arizona, Colorado, Montana, Nevada, New Mexico, Utah and Wyoming.

2. The West now mines over half of the coal produced in the United States from

less than 6 percent of the total coal mines in the United States. Western coal comprises approximately 55 percent of the nation’s reserves and over 80 percent of the

low sulfur coal reserves (defined as less than 1.67 lbs. SO2, per million Btu).

3. As the nation’s growth in energy demand continues, western coal development

is an important part of the fuel mix necessary to assure that U.S. citizens’ energy

needs are met in an affordable, reliable and increasingly clean manner.

4. Western and national coal-fired power generation is increasingly clean, with

significant reductions in SO2, NOX, and particulate matter during a period of dramatic increase in the demand for electricity. For example, western coal-fired power

40

plants currently produce 23 percent of the coal-fired electricity generated in the

country but emit only 13 percent of the SO2 emissions from such plants.

5. The western coal industry is among the safest in the entire world, and has consistently conducted successful reclamation of mined lands.

B. GOVERNORS’ POLICY STATEMENT

1. The Western Governors’ Association acknowledges the significant contribution

of the coal industry to many western states’ revenues and local communities’ economics. The Governors also strongly support public and private research to reduce

emissions from coal-fired generation.

2. Consistent with the Governors’ general energy policy resolution 00–036, Western Governors support the concepts for Federal legislation which:

a. Accelerate technology research and development programs for advanced

clean coal technology for new and existing coal based electric generating facilities.

b. Encourages appropriate incentives for emission reductions and efficiency

improvements in existing coal based electricity-generating facilities.

c. Encourages incentives for early commercial application of advanced clean

coal technologies for new generating capacity.

3. Western Governors support the concept of a more comprehensive and coordinated approach to environmental regulation.

4. Western Governors recognize that there are multiple sources of emissions that

cause regional haze and an effective emissions-reduction program must treat all

sources fairly.

C. GOVERNORS’ MANAGEMENT DIRECTIVE

1. WGA staff shall convey to the Administration, Congress and the U.S. Environmental Protection Agency that the Western Governors’ Association supports the concepts of Federal legislation as outlined in Policy Statement No. 2.

2. WGA staff shall convey to Congress and the U.S. Environmental Protection

Agency the need to address the multitude of emission concerns in a comprehensive

and coordinated approach.

3. WGA staff shall convey this resolution to Mining Associations within the membership states of the Western Governors’ Association.

[Maps referred to in Governor Geringer’s statement follow:]

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The CHAIRMAN. Thank you, Governor Geringer. We appreciate

your excellent remarks.

I recognize the gentleman from Montana to introduce the Governor of Montana.

Mr. REHBERG. Thank you, Mr. Chairman. It gives me a great

deal of pleasure to draw attention to the last of the three panel

members, a woman that I have worked with for many years.

Twelve years ago, we began working with Senator Conrad Burns

within the State operation.

If the gentlelady from Wyoming were here, I would make some

comment like ′′My governor can beat up her governor.′′ She is a

former Olympic speed skating champion. So, Jim, I wouldn’t leg

wrestle her if I were you; also a small businesswoman, very successful in that right as well. And in the true tradition of firsts in

Montana, we were the first State to have a woman Congresswoman, Jeanette Rankin, and we now have our first woman governor, and we so dearly appreciate the things she is going to try

and do to build energy independence for this nation.

Montana’s motto is ‘‘oro y plata,’’ ‘‘gold and silver,’’ and it is appropriate now at this time that we talk about coal, natural gas, and

oil being able to free us from the dependence on sources of oil oversees.

So without further ado, I want to introduce a very good friend

of mine, a new Governor, Judy Martz of the State of Montana.

The CHAIRMAN. Thank you. We appreciate the introduction.

Governor, we will turn to you.

STATEMENT OF THE HON. JUDY MARTZ, GOVERNOR,

STATE OF MONTANA

Governor MARTZ. Thank you. First of all, thank you, Congressman Rehberg. We are very proud to have you here representing

Montana.

Mr. Chairman, members of the Committee, for the record I am

Governor Judy Martz, representing the Big Sky State of Montana.

It is an honor to be here today to testify on the role of public lands

in developing a self-reliant energy policy. I appreciate the efforts

and interest this Committee has shown in our State and in this

issue.

As Governor Geringer mentioned, we also experienced last summer those horrific fires. We have closed down our only large aluminum plant, which is now selling back their power and closing

their doors for the next year. Mines that produce much-needed resources are at risk of closing because of energy prices, and one of

our major cements plants. As we lose jobs at 300 and 350 people

a crack, that is a huge impact to the State of Montana.

I ask for your consideration of my prior submission of my complete testimony for the record and for your review.

Now, let me begin by putting into context the size of Montana.

Overall, Montana has more than 93 million acres of land. That is

more than 145,000 square miles. Of the 93 million acres, more than

19 million acres are managed by the United States Forest Service,

8 million by the Bureau of Land Management, and another 1.1 million by the National Park Service. Thirty-three percent of our land

mass is managed by the Federal Government.

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We must start to utilize the resources that we have. We should

not act surprised that after a decade of stopping natural resource

development on public lands that we are suddenly faced with an

energy shortage. Natural gas prices will continue to rise if we don’t

focus on the energy that we can provide as a nation. Electricity

prices will continue to climb if we continue to say we can’t develop

clean coal to burn, we can’t develop natural gas, and we have to

blow up our hydropower dams. We can expand our natural resource

development well into the context of environmental stewardship.

This is not a zero-sum game.

Montana has a wealth of natural resources, from vast super-compliant coal fields in the east, to thousands of acres of timber land

in the west. Montana can contribute to the economic health of this

country through responsible and environmentally-sensible development of our resources.

Unfortunately, the Federal Government has systematically reduced the number of opportunities for reasonable development of

our natural resources in the past recent years. At the end of the

last administration’s term of office, doors were closed on many opportunities to responsible management and development of natural

resources. The past President’s Roadless Initiative will lock up over

6 million acres of U.S. Forest Service land. Additionally, the

Roadless Initiative will prohibit sensible and environmentally-sensitive exploration of natural gas and oil.

Also, just days before leaving office, President Clinton designated

nearly half a million acres of land along the upper Missouri River

breaks as a National Monument. The past administration permanently set aside one of our State’s greatest natural gas reserves

due to concerns over a great influx of tourists.

Last year, approximately 420,000 acres along the Rocky Mountain Front were withdrawn from mineral development for the next

20 years. The Rocky Mountain Front has untold reserves of natural

gas. In fact, our Canadian neighbors to the north have been responsibly developing natural gas along the Front for years.

But the news for us is not all bad. In fact, despite the previous

attempts to lock up the West, we believe Montana still has tremendous potential to meet the demands of a growing nation. Montana

anticipates the imminent transfer of Federal mineral rights in

super-compliant coal reserves in southeast Montana. This area of

land, known as the Otter Creek tracts, is the result of an exchange

for the mineral development rights outside Yellowstone National

Park.

While I served as Montana’s Lieutenant Governor with former

Governor Marc Racicot, Montana successfully negotiated a deal

with the Federal Government that resulted in a buy-out of mineral

rights and an exchange for the lost economic development. Under

the leadership of Senator Conrad Burns and former Congressman

Rick Hill, H.R. 2107 was signed into law in 1998 (P.L. 105-83),

mandating the transfer of Otter Creek Tracts 1, 2 and 3 to the

State of Montana.

The former Secretary of the Interior ignored the law, refusing to

make the transfer. I am pleased to say that, working with new Secretary of Interior Gail Norton, I am anticipating Montana will receive ownership of these tracts in the near future, a very important

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move for Montana. The development of over 533 million tons of

super-compliant coal is at stake here. I call it super-compliant because it far exceeds the Federal clean air requirements for high btu

values and low sulfur output.

This high-quality coal will be in demand in the Midwest as power

generating facilities struggle to improve air quality, as mandated

under the Clean Air Act. The development of these tracts is also

bringing increased interest from investors who recognize the need

for additional power sources in the Western half of our country. We

have already have several inquiries about potential coal development, but also coal-fired electric generating facilities that will fuel

the power needs of Montana and the West.

Along with the potential coal development, Montana has vast reserves of resources only recently acknowledged as a viable energy

source: coal bed methane, or natural gas. Currently, Montana’s Department of Environmental Quality and the BLM are working

jointly to assess environmental impacts from the proposed development. Wyoming Governor Geringer has had tremendous experience

in the development of coal bed methane, and we hope to learn from

his efforts in Wyoming.

Today, nearly 57 percent of our energy needs are supplied by foreign nations. Not only is that a national security risk, it takes

good-paying jobs away from hard-working Americans, hard-working

Montanans. I believe that is unacceptable.

We have the resources to meet a greater portion of our country’s

energy needs, and we can do it in an environmentally-sensitive

manner. As a nation, we need to reevaluate the role of our public

lands and how they can play a part in supplying this country with

the energy it so desperately needs.

We ask for every consideration to be allowed, with new technologies, to move forward in our State of Montana and the Western

States of this country and to assist in the energy needs of this

country. We want to be there. We want to see that environmentally-safe maneuvers or management practices will be used in

conservation, in transmission lines or pipelines, regulation changes

on the State and Federal level, increasing supply for generation

plants, and our immediate long-range needs and our short-range

needs would be met through those usages.

We want to be a partner with the Federal Government. We want

our opinions to be heard, as we have not had them heard, we believe, in the last 8 years. We appreciate the opportunity to be here

with you and we appreciate what is going to be happening in the

future.

Thank you.

[The prepared statement of Governor Martz follows:]

Statement of The Honorable Judy Martz, Governor, State of Montana

Mr. Chairman, Members of the Committee, for the record my name is Judy Martz

and I am the Governor of the great state of Montana. It is an honor to be here today

to speak on behalf of my state on the Role of Public Lands in Developing a SelfReliant Energy Policy. I appreciate the efforts and interest this Committee has

shown in this issue.

Let me begin by putting into context the size of Montana. Overall, Montana has

in excess of 93 million acres of land. That is over 145,000 square miles. Congressman Rehberg, our states sole voice in the House of Representatives has a big job.

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Of the 93 million acres, over 19 million acres are managed by the United States

Forest Service, 8 million by the Bureau of Land Management and another 1.1 million by the National Park Service.

Adding these public land figures together, and you see that 33 percent of our land

mass is managed by the Federal Government.

Montana has a wealth of natural resources. From vast super-compliant coal fields

in the east, to miles of timber land in the west, Montana has the natural resources

to help quest the thirst for energy across our nation. Montanans are anxious for the

opportunity to contribute to the economic health of this country through responsible

and environmentally sensible development of our resources.

Unfortunately, we have seen over the past decade, a continual move away from

the responsible development of our natural resources. We have continued to increase

our reliance on foreign nations to supply us with our energy needs. The result, foreign dependence on energy has reached all time highs, which in turn has led to rising energy costs and power shortages across the nation.

And while Montana has the potential to help supply this nation with clean, affordable energy, we have seen our ability to responsibly develop those resources grind

to a halt through Federal inaction and mismanagement. At the end of President

Clinton’s term in office, he forced many Federal land grabs through in an attempt

to recreate a lasting legacy. In Montana alone, we protested to no avail, President

Clinton’s Roadless Initiative, which locked up over 6 million acres of U.S. Forest

Service land. Never mind the fact that the smoke had barely cleared from devastating summer fires that reduced to ash over 900,000 acres of forest land.

Additionally, the Roadless Initiative will forever prohibit sensible and environmentally sensitive exploration of natural gas and oil.

Also, just days before leaving office, President Clinton designated nearly half a

million acres of land along the Upper Missouri River a National Monument. While

the state has been promoting tourist activity in Montana in an attempt to replace

revenues from resource industries, President Clinton and Secretary of Interior

Bruce Babbitt permanently set aside one of our states greatest natural gas reserves

due to ‘‘concerns over a great influx of tourists’’. Last year, approximately 420,000 acres along the Rocky Mountain Front were

withdrawn for mineral development for the next 20 years. The Rocky Mountain

Front has untold reserves of natural gas. In fact, our Canadian neighbors to the

north have been responsibly developing natural gas along the Front for years.

But the news is not all bad. In fact, despite the previous Administration’s attempt

to protect the west from itself, we believe Montana still has tremendous potential

to meet the demands of a growing nation.

Montana is in the process of receiving the Federal mineral rights in super-compliant coal reserves in Southeast Montana. This area of land known as the Otter Creek

tracts is the result of an exchange for the mineral development fights outside Yellowstone National Park. While serving as Montana’s Lieutenant Governor under

former Governor Marc Racicot, Montana successfully negotiated a deal with the

Federal government that resulted in the buyout of mineral rights, and an exchange

for the lost economic development. Under the leadership of Senator Conrad Burns

and former Congressman Rick Hill, H.R. 2107 was signed into law in 1998, mandating the transfer of Otter Creek Tracts 1, 2 and 3 to the State of Montana.

However, always mindful of what was best for the citizens of Montana, former

Secretary of Interior Bruce Babbitt refused to follow the Federal mandate and

reneged on the Federal government’s promise. I am pleased to say that working

with the new Secretary of Interior Gale Norton, I believe Montana will receive ownership of these tracts in the near future.

And at stake is the development of over 533 million tons of super-compliant coal.

And I call it super-compliant because it far exceeds Federal Clean Air requirements

with high BTU values and low sulphur output.

These tracts will most likely be included as part of our school trust land, thus

the revenue’s from development will add to our state’s ability to fund public education.

Additionally, this high quality coal will be in great demand in the Midwestern

part of our country as power generating facilities struggle to improve air quality as

mandated under the Clean Air Act.

The development of these tracts is also bringing increased interest from investors

who recognize the need for additional power sources in the western half of our country. We have already had several inquiries about the potential development of not

only the coal, but also coal fired electric generating facilities that will fuel the power

needs of Montana and the west.

Along with potential coal development, Montana has vast reserves of a resource

only recently acknowledged as a viable energy source. Coal bed methane. Currently,

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Montana’s Department of Environmental Quality and the BLM are working jointly

to assess environmental impacts from proposed development. Wyoming Governor

Geringer has had tremendous experience in the development of coal bed methane

and we hope to learn from efforts in Wyoming.

In Montana, we have seen increased interest in utilizing traditionally under-valued or no-valued timber byproducts to produce electricity. And this prospect grows

increasingly attractive as the United States Forest Service begins to implement The

National Fire Plan, a plan that addresses the health of our forests that in part focuses on mechanical treatment of small trees and shrubs that contribute to catastrophic fires. With the General Accounting Office identifying over 40 million acres

of interior west forestlands at risk for catastrophic fire, we have a tremendous potential energy resource at our disposal.

We have a tremendous amount of energy reserves on our public lands. From coal

to coal bed methane, from natural gas to timber byproduct co-generation, we have

the potential to be much more self reliant in terms of energy production.

Today, nearly 57 percent of our energy needs are supplied by foreign nations. Not

only is that a national security risk, it takes good paying jobs away from hard-working Americans. It is unacceptable. We have the resources to provide a much greater

role in meeting our country’s energy needs. And we can do it in an environmentally

sensitive manner. As a nation, we need to re-evaluate the role our public lands can

play in supplying this country with the energy it so desperately needs.

The CHAIRMAN. Thank you, Governor Martz. We appreciate your

excellent testimony.

We will now turn to members of the Committee for questions for

the governors. We will limit the members to 5 minutes each. We

will start with the ranking member. Mr. Rahall, of West Virginia,

is recognized.

Mr. RAHALL. Thank you, Mr. Chairman. I certainly don’t anticipate taking my full 5 minutes. I know of the time constraints on

the governors, but I want to ask a question of Governors Geringer

and Martz before yielding to my colleague from Massachusetts, Mr.

Markey, who just came in.

Since I’m from West Virginia, it should come as no surprise that

my first question involves coal, and I do direct it to the two governors I mentioned. I take it that you both support private property

rights?

Governor GERINGER. Absolutely.

Governor MARTZ. The same, absolutely.

Mr. RAHALL. Okay. That being the case, you may be interested

to know that Federal coal leasing activities in the West are beginning to intrude on the private property rights of my constituents.

I believe that Federal coal in the West should not be developed for

the sole purpose of competing against coal production produced

from private lands in the Midwest and the Appalachian region.

Western coal serving Western markets is fine, certainly. But for

publicly-owned resources to be produced simply to displace privately-owned resources—well, you can see I have a problem with

that. Let me give you an example of what I am talking about.

Recently, Morgan Stanley Dean Witter upgraded the two major

Western railroads, Burlington Northern-Sante Fe and the Union

Pacific, from neutral to out-perform, based on their potential to expand into new Eastern coal markets this year with Powder River

Basin coal.

My question is this: How do you reconcile this Federal intrusion

into the marketplace through coal leasing activities that you apparently favor, with the fact that this Federal coal is displacing coal

48

produced from private lands in electricity markets they have traditionally held?

Governor GERINGER. Mr. Chairman, I am not exactly familiar

with the situation that Congressman Rahall is describing, but I

would comment in this way. It is not one versus the other; it is

both working together. There is enough demand currently today

that both ought to be producing coal in an environmentally sound

way.

We are not about in Wyoming to dictate to West Virginia how

you ought to manage for environmental considerations, or economic, and we would ask the same in return. I indicated that Federal lands are producing most of the coal from Wyoming. I believe

you are correct in the statistics that you have used. In fact, Wyoming and the West, in fact, now out-produce the East in terms of

total quantity of coal.

Mr. RAHALL. Displacing our traditional markets in the East.

Governor GERINGER. Well, with all respect, I don’t believe it is

displacing. I believe that the problem is not what Wyoming is

doing. It is what is not happening in West Virginia, and I certainly

invite your questions to someone who has coal production in both

States; that is, Arch Coal. Terry O’Connor is here and will be on

the next panel to discuss that. So perhaps he, because he has economic interests in both States, might be able to give you the very

practical, common-sense approach to it.

Let me illustrate it in another way. Nearly 60 percent of all generation today is from coal-fired generation. Yet, probably close to

90 or 95 percent of all new power generation going online is natural gas. Coal ought to be in the mix somewhere. We have a national energy policy by default that favors natural gas over coal.

Yet, coal can be as energy-compliant, as well as environmentallycompliant.

Congressman Rahall, I would suggest that we ought to evaluate

why coal is being displaced by national energy policy, not by Wyoming production on Federal lands. It is that lack of policy. And to

give you a cost comparison, you can generate electricity from coal

at about 20 percent the cost of generation from natural gas at today’s prices. That ought to affect and benefit the members in your

district, as well as those who produce the coal.

So the issue is over the lack of a policy that would encourage the

use of high-quality, clean-burning coal from whatever State it

comes from, and we ought to work together.

Governor MARTZ. Congressman, I am not so sure that I have a

lot more to add. Coming from the Western States, we have a need

out there and the coal is sitting there to be used. I think it is advantageous for us to do that, and I don’t see it as a threat to any

other State. This country needs the energy right now.

Sometimes, it is not so popular to talk about the jobs involved,

but in Montana it is very popular. We need those jobs. We also

need to have the energy coming from the coal beds that are there.

Coal beds are one of the least expensive ways to produce energy,

in comparison to gas. So for that reason, we will continue to pursue

this avenue.

Mr. RAHALL. Thank you. I am aware of the figures you all cited.

It is just that overall philosophy that I have a problem with, being

49

for property rights on the one hand, and yet, allowing Federal help

and Federal policy to displace private property rights in the East

and the production therefrom.

Governor MARTZ. Could I just address that one time, too? In the

particular area that I am talking about, the Otter Creek tracts that

we are asking to be transferred as the law says they should be,

former Governor Marc Racicot has visited most of the people in

those areas and most all of them are amiable to having this kind

of enterprise go on in that area. I am sure that a lot of the lands

that you are talking about in your State are sitting—I shouldn’t

say I am sure of that, but I would guess some of that is on private

property.

Mr. RAHALL. All of our land in West Virginia is private property.

Governor MARTZ. Sure, and is developed, and that is what we

want to do, also.

The CHAIRMAN. The time of the gentleman has expired.

On the Republican side, Mr. Duncan.

Mr. DUNCAN. Thank you, Mr. Chairman, and thank you for holding this hearing and for your great leadership of this Committee.

About 3 weeks ago, in the small town of Englewood, Tennessee,

in my district, the mayor there told me that he had senior citizens

who were having to choose between paying their utility bills or eating. And I noticed Governor Geringer mentioned something like

that in his State.

I can tell you that, first of all, this is not just a Western problem.

All over this country, you have groups, usually of very wealthy environmental extremists, who protest anytime anybody wants to dig

for any coal, drill for any oil, cut a single tree, produce any natural

gas. What I think they are ignoring or they don’t care about is that

who they are hurting in that process are the poor and the lowerincome people because they are destroying jobs and they are driving up prices, and I think it is very, sad.

I read a few years ago that the average member of the Sierra

Club had an income over four times that of the average American.

And perhaps they are not hurt by some of these policies, but I can

tell you a lot of people in my district are. So I certainly appreciate

the testimony that each of you has given here today, and I hope

that as you pursue these policies—I think people look at a map of

the United States on one little page in a book and they forget how

big this country is.

I serve on the Forests Subcommittee and I was told that in the

mid-1980’s the Congress passed a law that was hailed by the environmentalists at the time that we wouldn’t cut more than 80 percent of the new growth in the national forests. Today, we are cutting less than one-seventh of the new growth. We are not even cutting half of the dead and dying trees. So what does that do? It destroys jobs and it drives up prices, and people wonder why houses

and a lot of other things are costing so much.

Governor Martz mentioned the dependence on foreign oil. That

increases with each passing year, and I think money is behind it

because I can tell you that the OPEC countries and many shipping

companies—there are a lot of people with big money or companies

with big money that benefit if we depend more and more on foreign

energy.

50

So I appreciate your coming here today, and with that I will yield

back the balance of my time.

The CHAIRMAN. I appreciate the gentleman.

The gentleman from Massachusetts, Mr. Markey.

Mr. MARKEY. Thank you, Mr. Chairman, very much.

President Bush has made the Arctic Refuge the center of this debate. You can talk about all the environmentally-benign drilling

rigs you want. We are supposed to conjure up in our minds Carl

Sandburg and little cats’ feet on the tundra. But as my mother

used to say, the most important question in every situation in life

is ‘‘compared to what.’’ So when you compare today’s rigs to yesterday’s rigs, you are missing the point.

Here is the point: today, the Refuge is God-made, unique,

roadless, untracked, and undisturbed by man. Nearby is one of the

most environmentally-benign oil fields in the world, in Prudhoe

Bay. They go as far as to put diapers on the trucks so the amount

of oil that leaks from the pans is minimized. Now, that is impressive, but don’t tell me it changes the fact that a huge industrial

complex has grown up on the tundra on the North Slope that has

changed the character of the wilderness forever.

While the diaper catches drippings, the routine operation of the

fields results in gallons of toxic fluids being spilled everyday. Exploring, drilling, producing, connecting, hauling, pumping—it is a

very dirty business even when you are trying to be clean. Now, let

me show you what I mean.

Poster number 1. President Bush says ‘‘. . . leaving only footprints.’’ That is what he is talking about. That is Prudhoe Bay. You

can just get an aerial view and just keep going in terms of the impact that the drilling has had on that area.

Poster number 2. Here is the existing footprint. It sprawls over

1,000 square miles, permanently scaring the landscape and oozing

ever outward. And, again, this is all permissible, all within the law

right now. We are not debating this today.

Poster number 3. This is what my mother was talking about.

Right now, the black side is Prudhoe Bay. The Canning River is

all that separates the protected area of the Refuge from the blight.

On the black side, you have 1,000 square miles of development, 500

miles of roads, 3,893 wells drilled, 170 drill pads, 55 contaminated

waste sites, 1 toxic spill everyday, 2 refineries, twice the nitrogen

oxide pollution as Washington, D.C., 114,000 metric tons of methane and 11 million metric tons of carbon emissions each year, $22

million in civil and criminal penalties, 25 production and treatment

facilities, 60 million cubic yards of gravel mined.

On the other side, you have no industrial development, just as

Congress declared in 1980, this Committee declared, Mo Udall and

all the Republicans, unanimously in 1980, nothing.

Now, there is no such thing as a wilderness oil field. It is an

oxymoron. Jumbo shrimp, Chevy Chase night life, wilderness oil

field—there is no such thing. The sooner that we declare the Refuge a fully protected unit of the Wilderness Act, the sooner we will

turn our attention to producing energy such as natural gas, renewables, clean coal.

Looking automobiles and SUVs, after all, we consume 20 million

barrels of oil each day, and 13.5 million of those barrels go into

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gasoline tanks. So is it really a great moment when Chrysler announced its Unimog last week that gets 10 miles a gallon, going

further backwards in terms of energy efficiency, or do we really

want an SUV to get 25 or 30 miles a gallon so that we don’t have

to drill in that wilderness? Where would we go first, to the Godmade, beautiful Refuge or to the man-made problems of automobiles and SUVs and air conditioners and refrigerators, et cetera,

that are increasingly fuel-inefficient?

Why doesn’t it make sense, Governor, for us first to try to tap

the natural gas in Prudhoe Bay and bring that down through a

pipeline, to tap the National Petroleum Reserve in a way that it

hasn’t been yet? Why don’t we first tap all the resources that are

legally allowed to be tapped by Democrats and Republicans, and

partner that with a deal on fuel economy standards and appliance

efficiency standards before we take that pristine area and destroy

it forever?

The CHAIRMAN. The time of the gentleman has expired, and I assume the gentleman is going to ask unanimous consent that the

Governor of Alaska can respond to your question. Is that correct?

Mr. MARKEY. I actually need your permission alone, Mr. Chairman. I would ask that.

The CHAIRMAN. The Governor of Alaska.

Governor KNOWLES. Thank you, Mr. Chairman.

Mr. Markey, in response to your question about why don’t we

look at other areas first, indeed we are looking at all of those possibilities. The infrastructure of the North Slope in developing oil and

gas for America’s needs will be utilizing all of the opportunities of

where the oil is.

Congress, in 1980, determined that in creating the wilderness,

the Arctic National Wildlife Refuge, in creating that area, that

there was a certain part of it that was going to be set aside for

study because even at that time, with limited technology, they

knew that it was probably one of the most promising areas for oil

and gas development, and that remains today.

So we do utilize the overhead of infrastructure that is in place

as we reach out to the west to the National Petroleum Reserve. I

would note that in today’s technology, it is estimated there may be

5 billion barrels of oil and maybe 5 to 10 trillion cubic feet of gas

in an area that 20 years ago they quit holding leases on because

no one was interested because they didn’t think there was any

more there.

So we know today, just as we have reduced the size of the footprint by one-tenth of what it used to be 20 years ago, that we can

go to these areas. We can do so in a way that does protect the environment. Nobody pretends that it would be a wilderness where

there is development, but we can protect the environment. We can

ensure the health of the wildlife and the fish and we can assure

in those areas where we do have development that it is done right.

Mr. MARKEY. But, Governor, it hasn’t been economical to drill for

the natural gas in Prudhoe Bay for 20 years even though there are

30 to 50 trillion cubic feet of natural gas there. What does that say

about the economics of ANWR if the industry can’t even figure out

after 20 years, with Democrats and Republicans giving you apVerDate 11-MAY-2000 13:13 Aug 24, 2001 Jkt 000000 PO 00000 Frm 00057 Fmt 6633 Sfmt 6602 J:\DOCS\70888.TXT HRESOUR2 PsN: HRESOUR2
52

proval—not giving you, but the industry—to bring down the natural gas from Prudhoe Bay? It has been uneconomical.

Governor KNOWLES. Mr. Chairman and Mr. Markey, if I might

respond, that has been a very interesting story because Congress

again approved a gas pipeline in 1977 under the belief that at that

time it was economical to bring it to the lower 48. The market really wasn’t there.

At the same time, the gas was being used to repressurize the

field to increase the recovery of oil in Prudhoe Bay, and so it has

been hard at work. We reinject 8 billion cubic feet a day, recycle

it into Prudhoe Bay to increase our recovery of oil. As that is winding down and as Prudhoe Bay is winding down, it truly is time to

come and serve the energy market. The price has increased to

where an investment in a $10 billion pipeline is economical and

can meet and help stabilize the increased price of gas in America

today. So it really works out in a win-win situation.

Mr. MARKEY. I think it would be better for the industry to finish

that project first, or at least begin it, and I want to help on that

and prove that that is economical before we destroy the Refuge. I

think that is something we could probably all agree to work upon,

but right now no progress has really been made.

Thank you, Mr. Chairman.

The CHAIRMAN. Governor, if I may, I have got a little question

here I am not sure of. According to this map, this area that they

would like to drill in is not a designated wilderness area. Is that

correct?

Governor KNOWLES. Mr. Chairman, no, sir, that is not. That was

designated as a study area which was set aside from the Wildlife

Refuge in 1980. It was done as a study area to be determined later

by Congress as to whether it would be open for development, and

that is the question that we are coming forward with today.

The CHAIRMAN. I appreciate that clarification.

The gentleman from Maryland, Mr. Gilchrest, is recognized for

five minutes.

Mr. GILCHREST. I thank the Chairman. I ask unanimous consent

for 15. Is there objection?

The CHAIRMAN. Yes, there probably is.

Mr. GILCHREST. Just kidding, Mr. Chairman.

Governor Knowles, I crawled down in a grizzly bear’s den one

time in Alaska. The Governor from Wyoming, I once got a set of

chains for my pickup in Buffalo, Wyoming, in November, in a pretty severe snowstorm. And the Governor from Montana, I used to

live in the wilderness in northern Idaho and would come to Missoula once a month for supplies. So it is a beautiful State, it is a

beautiful region.

I would like to boil this down, at least in my terms, to something

very simplistic, and that is lung tissue and mortgage payments. We

all try to make sure we do both, that we have clean air to breathe

and we don’t exacerbate lung problems, and we provide safe and

secure jobs for people to raise their families and live their lives.

The issue of drilling for oil or mining in the West always arouses

a division in the country between East and West. I, from Maryland,

can recognize the need for employment and for jobs, and when I

ride around the Washington Beltway or the Baltimore Beltway, or

53

I look at places like Tysons Corner, I yearn for the open spaces. It

is a necessity for me that I know still exists in the West.

In Maryland, we used to have elk, we used to have wolves, we

used to have salmon, we used to have bison, we used to have grizzly bears. We used to have an abundance of otters, of mink, of

shore birds. Most of those are either diminished or gone. In Alaska,

none of those are diminished or gone or threatened or endangered.

They are still there.

So I recognize that people in the West, when someone from the

East Coast who drives everyday to work in an SUV on the Beltway

and is looking for more jobs, and yet they are opposed to drilling

for oil at ANWR—I find it a paradox, almost, if I may, an

oxymoron. Even Democratic local elected officials in my district

that will change the zoning or land use for an area that is treelined or wetlands or open space so they can add an addition to WalMart or another shopping plaza—those people will vote against

drilling for oil at ANWR. The governor from my State, the Senators

from my State, pursue dredging at all costs, and the reason is for

job security, for economic development.

Governor Knowles, you made a comment about we need a combination of conservation and increase in supplies. Now, I would add

one other thing to that list, besides conservation —we need to aggressively pursue that—and increased supply. I understand that. I

also understand the idea that jobs in a remote area are important

for people, but we need to aggressively pursue alternative sources.

It is my judgment that we cannot ever be energy-independent if

we continue to rely on fossil fuels in the manner in which we have

done under the present conditions. The cost of fossil fuel will probably never go down because the increased worldwide demand for

fossil fuel is not at a level point. It is not going to decrease; it is

going to dramatically increase. So our dependence on fossil fuel is

to a large extent never going to enable us to be energy-independent.

So what are the alternatives? I think we can pursue aggressively

alternatives, and many of them were mentioned here today, whether it is nuclear power; solar power; wind power, which we can

produce more efficient lines so the resistance is less and you get

more of the electricity through; and fuel cells, what we have been

powering our Space Shuttle on for decades now.

I have talked to engineers. In less than 20 years, they say most

of our automobiles can be running and operating on fuel cells,

where the emission is pure water. Our power plants in about 20

years, a majority of them, if we aggressively pursue this, can operate under this technology.

The last comment, Mr. Chairman, lung tissue and mortgage payments, the longing and the necessity for open spaces. And so after

all that, Mr. Chairman, and my understanding for the West and

the need for jobs, I would still oppose drilling for oil at ANWR.

The CHAIRMAN. Let me ask this. Members of the Majority and

Minority side, will you raise your hands if you have questions for

the governors? If you do, then we will take you by seniority.

We will go to Mr. DeFazio; on the Majority side, Mrs. Cubin and

the gentleman from Indiana, Mr. Souder.

Mr. DeFazio, you are recognized for 5 minutes.

54

Mr. DEFAZIO. Thank you, Mr. Chairman.

To Governor Martz, I have followed with concern the closing of

the aluminum plants in Montana, the threat to the mining industry and forest, lumber and wood products industry because of skyhigh electric prices. I would note that those sky-high prices come

at a time when your State is generating as much electricity as it

ever has. It is just under a different structure where you have deregulated electricity and you have deregulated the price that goes

to large industrial consumers.

Do you support a cap or temporary cap on wholesale energy

prices in the West? The cause of your plants closing is not a shortage of energy, it is an artificial run-up in wholesale prices caused

by the deregulation in California. Do you support the cap?

Governor MARTZ. Congressman, no, I do not support capping

them. We need to produce more generation.

Mr. DEFAZIO. Thank you, Governor. Well, if you hadn’t allowed

Montana Power to sell all its generation to an out-of-state company

who is now shipping all the power out of State and marking up the

price, you might have enough energy to run your own plants. I am

getting tired of people using the energy crisis as an excuse to drill.

There is a real energy crisis in the West. There is an electric energy crisis today. Governor Knowles referred to it, people trapped

in elevators. But guess what? It has nothing to do with oil, it has

nothing to do with drilling in ANWR. That is being used as a pretty limp excuse to deal with real problems while we ignore the real

problem, which is speculative activity going on in California.

California had a price spike and a crisis in their low season.

They are a net exporter in the winter, and guess what? This year,

they weren’t. Guess what? 15,500 megawatts of generation was

shut down, not because of clean air, not because of lack of gas, certainly not because of lack of oil, since 1 percent of their energy is

generated by burning oil, but because of a market gone nuts, with

huge increases in profits for out-of-state energy companies, the

same thing that has happened in Montana.

Governor Martz, your own energy commission —you have an Advisory Council on Electricity Prices and they voted on Monday to

keep alive a number of options for further study. Your Republican

house majority leader has proposed a 3,300-percent—he says here

he wants to have an energy transaction tax paid by power companies, and increase the tax phenomenally to raise $116 million a

year to help lower the rates for consumers.

Isn’t this kind of nuts? We have got a market where you allow

speculators to gouge your consumers and then we are going to try

and maybe tax them back to get the windfall. We have another proposal for a windfall profits tax of 45 to 50 percent. Yet, you are

coming in here and saying we need to produce more energy.

Yes, there is a long-term energy problem in this country and in

the Western United States, but today the crisis is artificially created. Natural gas prices followed electricity. I have met with the

largest distributors of natural gas in the West and they have the

graphs to prove it. The wholesale prices at the Canadian border

didn’t go up until the electricity prices went through the ceiling. If

we don’t deal with the underlying cause today—yes, 10 years from

now you can have more energy production from fluid methane, or

55

if Governor Knowles is successful at opening ANWR to add to the

production from the National Petroleum Reserve and the natural

gas that we can all agree on.

But the point is people are going to go broke in the meantime.

Businesses are going to close in the meantime. We need some leadership from Western Governors and other people to deal with this.

Now, I know Alaska is not on our grid, so this doesn’t directly impact you. But I would ask you to please don’t use this and don’t

use the image of senior citizens trapped in elevators to justify drilling in ANWR. There is no relationship.

Governor Knowles, do you support the continued export of oil

from Alaska to China and Japan?

Governor KNOWLES. Madam Chairman and Mr. DeFazio, there is

no oil that is currently being exported from Alaska to Asia. At one

time, there was a small amount, a relatively small amount, no

more than 5 percent, that was exported, just like there is currently

crude and crude oil products that are being exported from every

other State in the Union.

As this Congress and the administration and I also personally

support many of the free trade aspects that have helped our economy, the fact of the matter is— Mr. DEFAZIO. Governor, if I could, we have documents showing

that the major oil companies on the West Coast of the United

States have internal documents showing that they only wanted to

export oil from Alaska to drive up wholesale prices in the Western

United States.

Would you support reimposing a ban on the export of oil in the

future from Alaska? If we are going to develop more oil resources

in Alaska, would you agree that every drop of that oil should stay

home?

Governor KNOWLES. Madam Chairman, Mr. DeFazio, I believe

that Alaska should be treated no different than every other State

in the Union. There is no ban on oil exports from any State in the

Union except for Alaska, and that was done away with, with bipartisan support, signed by President Clinton, sponsored by him several years ago.

The fact of the matter is that there is no oil being exported today

because the market clearly is in need of all of the oil that is had.

It has never been a significant amount, as I say, never more than

5 percent when it was passed several years ago, as I say, with the

support of President Clinton and bipartisan in Congress.

Mr. DEFAZIO. Well, the oil company execs seem to feel that it got

them two to three cents per gallon on the wholesale market in the

West, which created a few hundred million dollars of illicit profits.

So I would urge you to reconsider your position and perhaps we

could support a ban on any oil exports from the United States. If

we are in an energy crisis, let’s put in place a ban before we find

new resources and start exporting them.

Thank you, Madam Chairman.

Mrs. CUBIN. [Presiding.] Are there any other Members on the Republican side that have questions?

If not, I just wanted to—excuse me.

Mr. Souder?

Mr. SOUDER. You can go ahead, Madam Chairman.

56

Mrs. CUBIN. No. I would like you to.

Mr. SOUDER. I thank you. I just have a simple question, but I

wanted to make a comment that illustrates some of the frustration

of the Western Governors and Western members.

In my hometown, you can go 600 miles east without hitting Federal-owned land. You can go 1,000 miles west without hitting Federal land. You can go 250 miles north or 250 miles south. We don’t

have much public-owned land. We have lots of opinions on what we

should do with your land.

I have some sympathy with the argument that we messed up in

the Midwest and the East and we need to figure out how to do a

better job of environmentally managing. But sometimes the extremist rhetoric that we hear turns people who are looking for reasonable solutions into armed conflict again.

One of the statements that I heard here—and I just wanted to

sort this out for the record—I heard 1,000 square miles at Prudhoe

Bay. Governor Knowles, I wondered how many square miles are in

ANWR as a whole. Do you have any idea? When we hear a different figure like square miles, square miles is an algebraic number; it is a little misleading.

Governor KNOWLES. Madam Chairman, in response to the question, I am not sure of the square miles. There are about 19 million

acres there. I will have to refer to my— Mr. SOUDER. Of the 19 million, how much is the area that was

open for discussion as to whether it could be explored?

Governor KNOWLES. It is approximately 1.5 million acres is the

total acres that is left for study.

Mr. SOUDER. So it is approximately—what is that, less than 5

percent, 3 percent?

Governor KNOWLES. Eight percent.

Mr. SOUDER. Eight percent. Is there an argument that in that 8

percent, there isn’t enough of a buffer between that and the rest

of the 92 percent? In order words, would the development go right

up to the edge of the 8 percent?

Governor KNOWLES. Madam Chairman, no, sir. That is the area

in the coastal plain that was believed in a broad-brush sense as to

what might be the most probable for oil and gas development. Of

that, there would be a relatively small part that was developed.

But as I say, it would not encompass all of it.

Mr. SOUDER. Is there an argument that the 8 percent, if it were

all used—is that 8 percent more—and I apologize for my relative

lack of knowledge in some of these questions, but it is hard to tell

when people are going back and forth how to get the actual answers to some of these questions.

Is this area more environmentally significant, and if so how did

it not get designated in the beginning as wilderness?

Governor KNOWLES. There is no question it is a unique part of

the Wildlife Refuge. As the coastal plain, its primary environmental consideration for wildlife is that much of it is considered to

be the core calving area of the Porcupine caribou herd. So there

would have to be some very careful mitigations made to ensure the

continued health of that herd. It goes there for approximately 3 to

4 weeks for calving, insect relief, and prior to their resuming their

normal migration habits in the fall and winter.

57

Mr. SOUDER. And, in general, are there other things in addition

to the calving?

Governor KNOWLES. There is polar bear denning which is of interest. There is also the snow geese, migratory water foul, which

are also a point of concern. So those are the three primary concerns. There are also some musk ox, but they are not as environmentally sensitive as the polar bear and the snow geese.

Mr. SOUDER. I appreciate that. Those of us who are trying to balance the needs for our energy consumption and environmental concerns are going to be interested in how we can address those types

of unique questions, not big numbers that try to scare people, but

how we can actually address the real substantive questions underneath that and not potential high-risk variables.

Governor KNOWLES. Madam Chairman, if I might just in response, painting a slightly different picture—and I do appreciate

Mr. Markey’s attempt to paint a picture of industrial development,

but I think, in perspective and in line with the questions that were

being asked of proportionality, I would note that in Alaska there

are 53 million acres of national parks that will not be developed

for oil and gas, and that is roughly the complete size of New York

and Ohio combined.

There are some 72 million acres of wildlife refuges, three-quarters the size of the entire State of California, put aside that nobody

is asking to be part of any oil and gas development. There are wilderness areas of some 58 million acres. So we are speaking of areas

that are truly set aside to encompass the wilderness values that

people yearn for to be part of our permanent national assets.

The area that is being looked at in ANWR, the 1.5 million acres,

is part of a geological structure that is the same called the Barrow

Arch that goes across the entire North Slope from NPRA across

there to the Canadian border, and is part of a responsible development of a significant part of our Nation’s future. I would note it

is not just oil, but there is considerable gas, just as there was in

the Prudhoe Bay geological formation.

I would say that the oil and gas development on the North Slope,

with the figures that Mr. Markey has put forth, is the most environmentally responsible development anywhere in the world. It is

the strictest, and it should be that way and it ought to be that way.

Thank you.

Mrs. CUBIN. Because Mr. Rahall has to leave in just a few moments, I just wanted to make a comment on his behalf, as well as

yours. He asked a question of Governor Geringer about Federal

coal displacing private coal production. And Geringer, I understand, answered that very well, but there was a point that I wanted to add, also, and that is that that displacement occurred more

because of the Clean Air Act Amendments and because of the

court’s ruling on mountaintop mining and valley fill than it did because of anything that was done Federally.

Then I also know Mr. DeFazio has to go, and then Mr. Markey

is moving right over here. President Bush already has the authority to reimpose the export ban.

The Chair now recognizes Mr. Inslee.

Mr. INSLEE. Thank you, Madam Chair.

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I want to thank Governor Knowles for coming here. You have, as

always, been an articulate, reasonable spokesperson for your State

and we appreciate it. But in the spirit of candor, I want to tell you

why so many thousands of my constituents are vigorously opposed

to drilling in the Arctic Refuge.

They respect and believe that there would be efforts to make

small bulldozers that doze the roads and small injection facilities

that inject product below ground and small buildings that emit nitrous oxide and the like. But I will tell you the way my constituents feel about it. They feel the same way about putting a small

mustache on the Mona Lisa. Even though it was well-trimmed and

well-dyed and well cared for, they think it is a major mistake. It

is a major mistake because that is an international asset, as is the

Arctic Refuge.

Even though those same thousands of people I represent will

never come to the Arctic Refuge, never even get close to the Arctic

Refuge, may never go to the State of Alaska, they carry a piece in

their hearts today, even though they have never been there. They

feel so strongly about this that I predict this is not going to go

through the U.S. Congress this year, not just in my State, but in

all 50 States.

I want to tell you the other reason they feel that way is not just

based on emotion. It is based on practicality. I am going to ask you

in a minute about the numbers, but as best as I understand it,

under the optimistic projections there would be about 300,000 barrels a day, and that is likely not to really become economically productive for about 10 years. My constituents think that is too little

and too late.

They believe we need a solution today, tomorrow, and they recognize that if the U.S. Congress will get off the dime and pass some

higher mileage standards to improve the efficiency of our vehicles,

we can have equivalent savings next year. We don’t have to wait

10 years. I am told that even a minimal increase of those mileage

standards, of increasing it, say, 2.2 miles per gallon for light trucks

and SUVs, will save more this year and next year than what we

get in 10 years out of the Arctic Refuge. So they believe that it is

not just a value system in question here, but a practical system

that we have a better solution today.

So I want to ask all three of you, have you lobbied your Senators

and Members of Congress to support higher mileage standards, and

if so what has been their response?

Governor KNOWLES. Madam Chair, Mr. Inslee, thank you for

your comments. In direct answer to your question, I believe that

conservation is an important part of the national energy policy, and

certainly the reduction in the fuel use of automobiles is an important part of being able to stretch the efficiency and the use of our

fuels. But it doesn’t make the use of fuels obsolete; we still need

those fuels.

In regard to the question about ANWR, just like there may be controversy over the projection that we are going to have a $5.6

trillion surplus in America, it all depends on who is forecasting it.

It is estimated that in the Arctic National Wildlife Refuge coastal

plain study area that there may well be up to 16 billion barrels,

which would mean approximately 2 million barrels a day for 25

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years, which would provide a third of our domestic oil production.

That is not an insignificant part and I think is part of what could

be carefully weighed in a judgment as to whether we can responsibly develop it.

In reference to the portrait, if I might just note that we have, as

I have explained, a vast number of areas as part of our national

treasury of lands that are not being questioned for development,

open for development. And that certainly can satisfy, just as when

you make decisions in your States about what needs to be protected

and what not, that balance of development and protected areas

that we need to look for.

Mrs. CUBIN. The gentleman’s time has expired.

I understand that Governor Knowles—

Mr. INSLEE. The other two governors were not allowed to—

Mrs. CUBIN. I am sorry, Mr. Inslee. Governor Knowles has a one

o’clock plane to catch.

Mr. INSLEE. I understand. Could you allow the two other governors to answer that question?

Mrs. CUBIN. That is what I was going to say.

Mr. INSLEE. Thank you.

Mrs. CUBIN. I would like to interrupt at this point and if anyone

has a specific question for Governor Knowles, then fine.

Mr. Calvert, do you have one?

Mr. CALVERT. I apologize that I wasn’t here earlier. I was at another commitment.

Governor Knowles, regarding the proposed drilling at ANWR, in

relationship to the pipeline that already leaves Prudhoe and goes

to Valdez, I understand right now there are about a million barrels

a day being shipped down to Valdez in that pipeline.

I also understand that at peak production during the Gulf War,

they were transporting about 2 million barrels a day oil down to

Valdez. Is that a correct number?

Governor KNOWLES. Yes, sir.

Mr. CALVERT. I also understand that because of declining production within existing oil fields in Prudhoe, we may get to the point

of marginal costs. In other words, it costs more to keep the pipeline

open than it would to continue to move oil out of Prudhoe, and I

understand that number is somewhere between 500,000 to 700,000

barrels a day. Is that the right number?

Governor KNOWLES. I couldn’t verify that number, but there is

a point, yes, sir, that it would not be economical.

Mr. CALVERT. It is true, then, that oil coming out of Alaska has

declined by 50 percent because we are unable to find additional

supply to get into the pipeline? So at some point in the foreseeable

future if additional supply is not put into that line, is it credible

that that pipeline would be shut down?

Governor KNOWLES. Yes, sir, it would be shut down and then it

would be dismantled.

Mr. CALVERT. And then we would have no resources at all coming out of Alaska in any significant amount, to add to the oil supply of the United States?

Governor KNOWLES. Yes, sir, unless there was a gas pipeline

built that would bring that. But in terms of oil, after it would be

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dismantled, it would not be practical to ship any oil from the North

Slope.

Mr. CALVERT. And at 2 million barrels a day, if we could get that

back up, that would be a significant—you mentioned a third of the

total U.S. production?

Governor KNOWLES. Yes, sir.

Mr. CALVERT. Thank you.

Mrs. CUBIN. Thank you, Governor, and if the other governors

have time, we would appreciate it if they would stay and answer

the questions. But if you need to go, Governor Knowles, the Committee certainly understands that. We don’t want you to miss your

plane.

Governor KNOWLES. Thank you very much, Madam Chairman

and members of the Committee. Thank you.

Mrs. CUBIN. Thank you for being here.

Mr. Inslee, would you like to restate your question?

Mr. INSLEE. Yes, just very quickly if the other two governors

could let us know—nice to see you, Governor Martz—has your congressional delegation supported increasing our mileage standards

for vehicles in America as part of our energy strategy, and if not

do you know why not and have you lobbied them to do so?

Governor GERINGER. Let me answer first by explaining what the

Western Governors did on February 2nd when we met in Portland

at the invitation of Governor Kitzhaber and Governor Kempthorne.

We adopted several suggested actions that we asked everyone to

consider within our States, as well as the Federal Government, including those activities that would enhance efficiency and conservation; in addition to automobile usage, efficiency tax credits to reduce demand in any form; to shift to any other kind of distributed

generation where it could be done on an individual basis; Federal

appliance standards such as adopted by the Department of Energy

for all kinds of appliances.

In other words, we are pursuing every form of energy conservation, whether it be specifically automotive or otherwise. Our goal

is not to increase consumption. Our goal is, given the trends that

there are in demand and consumption and the demands that will

be placed on our States, that we not be treated like colonies, that

we be evaluated as equal sovereign States, as each of your States

are.

Mindful of Mr. Markey’s comments about Boston, whether it be

the Boston Tea Party or the Boston Big Dig, each State does things

a little bit differently. So when it comes to consumption, our goal

in being here at this panel is to elicit partnerships with the Federal

Government as we develop ways to better manage the resources

and not waste them. So efficiency was at the top of our list on what

actions could be taken by the States, by governors, by the Congress, or whoever it might be, automotive or otherwise. We have

strongly advocated those and presented those to the energy task

force chaired by Vice President Cheney.

Mr. INSLEE. Has your congressional delegation voted for increased Corporate Average Fuel Economy (CAFE) mileage standards in this country recently? Do you know?

Governor GERINGER. I am not familiar with their voting record

on that.

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Mrs. CUBIN. What am I, a potted plant?

Governor MARTZ. Congressman, I am not familiar whether ours

have voted in that manner, but I am visiting with all of our delegation in the morning and it is something we can talk about. I was

at the meeting that we agreed on the same things that Governor

Geringer talked about.

I do want to say it doesn’t matter whether you believe this is an

artificial problem or not. It is real, and to the people that are dealing with it everyday it is very real. So with that, conservation with

our entire State right now, we are asking people to conserve. We

are coming up with a plan, taking it off of other States’ plans who

are already in the full mode of conservation to present a plan to

entire State of Montana on how we can conserve. That is our first

best thing we can do right now. Thank you for the question.

Mr. INSLEE. Do you know if your congressional delegation has

voted— Mrs. CUBIN. The gentleman’s time has expired. You can ask the

congressional delegation when you see them.

Are there any other questions on the other side?

If not, the Chair recognizes Mrs. Christensen.

Mrs. CHRISTENSEN. Thank you, Madam Chair. I want to say

thank you to the governors for spending so much time with us this

morning and answering the questions. I know you are very busy.

I have one brief question and it was particularly directed to you,

Governor Geringer and Governor Martz.

Your testimonies are in support of opening up more Federal

lands for leasing and drilling. Yet, the Department of the Interior

reports that 95 percent of lands managed by BLM in several

States—Colorado, Montana, New Mexico, Utah, and Wyoming—are

currently available for leasing and drilling.

You may or may not know, but if you do I am interested in

knowing how much of the lands that are already available are

leased and being drilled and have they been exhausted. If you don’t

know specifically, how do you reconcile asking for more Federal

lands to be opened up when already 95 percent of the lands are

available for leasing and drilling?

Thank you. That is my only question.

Governor GERINGER. Madam Chairman, if I might respond in

part, there seems to be confusion over whether we are asking for

opening up more access or asking for greater cooperation on how

we develop what is already open. The answer is both.

I will illustrate by saying that in the Powder River Basin of Wyoming, which is one area that has been opened up for coal bed methane development, as I indicated, the Federal agencies cannot seem

to understand how each other works. So whatever goals we might

have for production, because America wants it, we are willing to

help enable that. But in the process of doing that, we quite often

run into—even though BLM and other Federal agencies might describe how the lands are open for energy production, in fact, they

are not by the way the process seems to work out, by the appeals

that are made, by the inconsistent regulations that are applied.

The economic interest that we have in our States is that jobs depend on it locally, but so does the environmental appeal. We want

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mand is starting to draw on our resources. Our question is what

is the best way we can enable that development so that we don’t

destroy jobs; we don’t destroy the environment; we enable that on

all sides.

But the statistic that all these lands are open is very deceiving

when you look at the practicality of how it is applied. In fact, most

of those are thwarted in some fashion by those who, I think, simply

for the sake of wanting to discourage any development or consumption, manipulate the system rather than engage in constructive and

cooperative approaches. That is what we are asking for.

Governor MARTZ. Congresswoman, I don’t know if that 95 percent pertains to Montana that you talked about. I don’t know if it

is 95 percent that is used in Montana, Federal lands, but I will

know next time I see you. We do know we have opportunities there,

and we are a State that needs those opportunities, and I think the

country needs the opportunities we are looking for.

We do know that we are asking for a say in how those lands are

used in the State of Montana, other than just sitting there. With

pure coal, very good, compliant coal, it seems unreasonable to not

want to bring that out to do generation with that in an environmentally-sound way. So we are here to ask for those considerations

and allow our voices to be heard in those considerations, as it has

not been in the past.

Mrs. CUBIN. I would like to also ask the gentlelady if she would

be willing to meet with me and we could discuss that 95-percent

issue of BLM lands because that seems extraordinarily unlikely to

me based on the knowledge that I have of access to public lands,

whether it is from the Endangered Species Act or the roadless

areas in the forests, or whatever.

So I just think that is a very unlikely figure, but we can talk

about that.

Mrs. CHRISTENSEN. And perhaps we can ask for more specific information as it relates to the States. Is that 95 percent of all the

lands and is it all of it in Wyoming or is it distributed across the

States?

Mrs. CUBIN. Right, and I am sure the gentlelady remembers last

year the amendment to the Energy Policy Act that asked the USGS

to do an inventory of the fossil fuels under the public lands in the

lower 48 States, and then do an overlay of all the laws, rules, and

regulations that impede production of that energy source. Until we

actually know what we are dealing with, I think it will be very difficult to set a figure like that.

I know you governors have been very patient with us and we appreciate it very much. Thank you for your time and for your input.

It is truly a pleasure for me to work with Governor Geringer, and

I know that with Governor Martz in the future we will have a good

working relationship. We really, really appreciate your being here.

Mrs. NAPOLITANO. Madam Chair?

Mrs. CUBIN. Yes.

Mrs. NAPOLITANO. May I have a comment or two?

Mrs. CUBIN. Certainly, Mrs. Napolitano.

Mrs. NAPOLITANO. Thank you. I apologize, like other Members,

because we have conflicting Committee meetings.

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In listening to the testimony when I walked in of all three governors, but essentially yours—I haven’t had a chance to look at

your written testimony, but as a former elected official myself, I

feel that we have a very grave responsibility that we do not abuse

our land, and leave some of whatever treasure we have for the next

few decades, for our children and our grandchildren and our great

grandchildren.

I am looking forward to that report Mrs. Cubin was alluding to

because I think we need to take a good long look at how we can

best ensure that we have the ability to have this planet continue

on its course and not deplete ourselves of those beautiful natural

resources we have within our reach.

Thank you.

Mrs. CUBIN. Mrs. Christensen?

Mrs. CHRISTENSEN. Madam Chair, thank you. I see that the acreage is—there is a table in a wilderness report that was sent to

Congressman Hansen. I would like to have it entered for the record

because it states specifically how many millions of acres BLM is

managing in each State and the areas that are open to leasing and

the areas that are closed to leasing. Really, the areas closed to leasing are minuscule compared to the total acreage.

Mrs. CUBIN. Without objection.

Mrs. CHRISTENSEN. Thank you.

[The information referred to follows:]

THE WILDERNESS SOCIETY,

Washington, DC, March 7, 2001.

Hon. JAMES V. HANSEN, Chairman,

Hon. NICK JOE RAHALL II, Ranking Member,

House Resources Committee, Longworth House Office Building, House of Representatives, Washington, DC.

DEAR CHAIRMAN HANSEN AND REPRESENTATIVE RAHALL: The House Resources Committee is to be commended for initiating a review of the ‘‘Role of Public Lands in the Development of a Self-Reliant Energy Policy.’’ It is our

hope that in exercising its oversight role regarding this important matter, the Committee will seek to be as objective as possible in reviewing the nature and extent

of fossil fuel resources on our public lands, and the environmental values that also

reside on those lands that can be placed at risk by oil and gas exploration and development activities. For although the oil and gas extracted from our public lands

are an important component of our nation’s well-being, the environmental, wildlife,

watershed, and wilderness values of those lands are equally important to Americans. We ask that this letter with attachments be placed in today’s hearing record.

One fact of central importance that we wish to draw to the Committee’s attention

is that the vast majority of public lands managed by the Bureau of Land Management (BLM) in the Overthrust Belt states of Colorado, Montana, New Mexico, Utah

and Wyoming are presently open to leasing, exploration and development by the oil

and gas industry. In fact, information presented to the Assistant Secretary for Land

and Minerals Management by the BLM in 1995 indicated that over ninety-five percent of BLM lands in those states (including ‘‘split estate’’ lands) were available for

oil and gas leasing. I have appended to this letter the BLM’s synopsis of the availability of BLM lands in those states for oil and gas leasing, exploration and development.

Other recent data made available by the BLM indicates that the agency has been

carrying out a robust onshore oil and leasing program for the past decade. For example, the Clinton Administration issued oil and gas leases on more than 26.4 million acres of public lands during the last eight years (see attachment). According to

the BLM publication, Public Rewards from Public Lands, there are nearly 50,000

producing oil and gas wells on the public lands (see attachment). Thousands of new

drilling permits have been issued during the past eight years—3,400 by the BLM

in FY 2000 alone.

Criticism by some that in recent years too much public land has been made unavailable for oil and gas activities is simply not supported by the facts. Upon close

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examination, industry criticism of ‘‘lack of access’’ really falls into two categories:

lands that are off-limits entirely to oil and gas development; and lands available for

development if the industry takes special care of the environment. The former areas

include wilderness areas, wilderness study areas, and/or areas such as steep slopes,

karst areas, and areas where other mineral activities are taking place, in other

words, places where oil and gas activities could pose extreme environmental hazards

or be incompatible with other values. Currently, such areas comprise roughly 5 percent of BLM-managed lands in the five states.

The latter category often encompasses areas where evidence indicates the presence of sensitive wildlife habitats, such as elk calving areas, or sage grouse leks,

where operations at certain times of the year could pose severe threats to wildlife.

In such cases, the BLM may require that operations only occur at certain times of

the year, when such areas or not in use by wildlife. In some cases, the BLM imposes

‘‘No Surface Occupancy’’ leases, whereby the lessee is required to access the oil and

gas resource from off-site. Such ‘‘NSO’’ stipulations are also designed to protect wildlife habitats, while making the resource available for extraction. (A fuller explanation of typical special stipulations BLM includes on oil and gas leases is found

in the first appended document to this letter.)

The imposition of special, seasonal, or NSO stipulations are an attempt by the

BLM to balance the industry’s desire for access to oil and gas deposits, while balancing the BLM’s responsibility to manage other resources on the public lands. And

although industry public relations campaigns frequently emphasize the benignity of

contemporary exploration and development technologies, it is apparent that when

required by the BLM to utilize these technologies to minimize environmental impacts, the industry is reluctant to do so.

One of the most challenging environmental problems with oil and gas development relates to protection of water quality. Unfortunately there is very little baseline data on water quality in Wyoming, for example, that would allow the responsible agencies to understand the negative impact on water quality for downstream

communities from oil and gas development. And since water flows across state lines,

ranchers in Montana, for example, are concerned that the water flowing from Wyoming coal bed methane projects does not deteriorate in quality. Given the dramatic

increase in drilling permits, the cumulative impacts on water quality have not been,

but need to be, examined carefully through long term monitoring. If there is one

resource more valuable in the west than oil and gas, it is water.

The national forests currently supply 0.4 percent of total U.S. oil and gas production, half of which occurs on the Little Missouri Grasslands (Forest Service Roadless

Area Conservation FEIS, 2000, pages 3–312 and 3–316). The remaining national

forest land account for less than 0.2 percent of total production in 1999 (Ibid.). The

vast majority of roadless areas on the national forests subject to the new Forest

Service roadless protection policy have been open to leasing for decades, and there

has been little interest in exploiting potential resources, even though the real price

of oil in the past was much higher than it is today.

In conclusion, it is our hope that the Committee’s enthusiasm for a ‘‘self-reliant’’

energy policy will be tempered by the realization that a country that consumes 40

percent of the world’s oil production, but harbors only two percent of the world’s oil

reserves, cannot be ‘‘self-reliant’’ in energy—even if we make 100 percent of our public lands available to the oil industry and eliminate all environmental protection requirements on them. Instead, policy-makers would serve our nation’s interest best

by seeking ways to reduce our dependence, not on foreign oil, but on oil itself We

cannot drill our way to ‘‘energy independence,’’ and we should not ruin the few remaining pristine wild places on our public lands in a vain attempt to do so.

Sincerely,

DAVID ALBERSWERTH,

Director, Bureau of Land Management Program.

Attachments.

AVAILABILITY OF PUBLIC LANDS

The vast majority of public lands are available for leasing. In the states with considerable production of 116.6 million acres only 2.9 million acres are not open for

leasing. In Colorado 16.2 million acres are open and 600,000 closed to leasing; in

Montana out of 19 million acres 400,000 are closed; in New Mexico of 29.9 million

acres of lands only 1.3 million is not open to leasing; in Utah 900,000 acres are

closed to leasing leaving 21.2 million acres open; in Wyoming 700,000 acres are

closed out of 28.6 million.

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LEGEND

Acreage data are estimates based on best available data.

Categories of stipulations

1. Standard.—Lands available for leasing generally have no special stipulations,

except any that may be included in standard lease terms regarding conduct of operations or conditions of approval given at the permitting stage such as: prohibitions

against surface occupancy with 500 feet of surface water and/or riparian area; on

slopes exceeding 25 percent; construction when soil is saturated; within 1/4 mile of

occupied dwellings.

2. Seasonal and Other.—Prohibits fluid mineral exploration and development activities for specific time periods, i.e., sage grouse strutting areas, hawk nesting areas

or calving periods. These restrictions are generally for specific months during the

year.

3. No Surface Occupancy.—Prohibits operations because it has been determined

that other resource values present on the lease cannot be managed to coexist with

oil and gas operations. Operations may be conducted through directional drilling.

4. Off Limits.—Lands that are statutorily unavailable for leasing, i.e., Wilderness

Study Areas and Designated Wilderness Study Areas; lands within incorporated cities, towns, villages, and National Parks and Monuments; and areas prohibited temporarily by policy considerations pending analysis of various factors such as social,

economic, environmental (Areas of Critical Environmental Concern—ACECs, Wildlife Refuges) and safety concerns, i.e., special project areas, unstable soils. Some restrictions are discretionary and may be excepted by the authorized officer upon application by the operator.

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Mrs. CUBIN. Governors, please feel free to go. Thank you very

much for being here.

We do have a vote on the Floor. It is the ergonomics rule. We

have 10 minutes left.

The next panel will be Neal Stanley, testifying on behalf of the

Independent Petroleum Association of the Mountain States; Jim

Bowles, Vice President of Phillips Petroleum Company, who is testifying on behalf of the American Petroleum Institute; and Terry

O’Connor, with Arch Coal Company, testifying on behalf of the National Mining Association.

So if those gentlemen would please take their places at the table,

we will run over and vote and be back here immediately. Thank

you.

[Recess.]

Mrs. CUBIN. I would like to welcome the panel, and I know other

members of the Subcommittee will be coming in as they are available.

So, first, I would like to call on Mr. Stanley, as I said earlier, on

behalf of the Independent Petroleum Association of the Mountain

States.

STATEMENT OF NEAL A. STANLEY, PRESIDENT, INDEPENDENT

PETROLEUM ASSOCIATION OF THE MOUNTAIN STATES

Mr. STANLEY. Thank you, Madam Chair, members of the Committee. I am Neal Stanley, Senior Vice President of Forest Oil Corporation, and President of the Independent Petroleum Association

of the Mountain States, both based in Denver, Colorado.

I would like to thank this Committee for focusing its attention

on the significance of Government lands in developing a sustainable national energy policy. Policies that limit or encourage energy

development on Government lands have very real consequences.

The oil and gas industry can supply the nation’s growing natural

gas needs, but the costs of natural gas will be dependent upon a

number of factors, most notably having adequate access to the land

in a timely manner. Policies that promote reasonable access to the

nation’s abundant supplies of natural gas will bring more gas to

market quicker, which will lower the price.

Please turn to Exhibit #1 in my written testimony. This is a map

showing Government lands. The various represent the agencies

with surface management responsibility. Fifty-two percent of the

land in the West is Government land.

Exhibit #2 shows the total estimated natural gas resources in the

lower 48 with the corresponding percentage of those resources that

are subject to prohibitions on access. In the Rocky Mountains,

where abundant supplies of natural gas exist, Federal policies limit

access to an estimated 137 trillion cubic feet of natural gas. This

is 6 years’ supply at current rates of use. Also, in the eastern Gulf

of Mexico, 24 trillion cubic feet of natural gas is restricted. Lease

Sale 181 is scheduled for December 2001 and should stay on schedule.

Impediments to gaining access for natural gas development come

in many forms. Recent mining designations, road-building policies,

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source management plans and overly restrictive surface use requirements are also preventing access.

A natural starting point for looking at access is with the restrictions that effectively reduce access where oil and gas leasing has

already occurred. In order to facilitate the growth of deer and elk

herds, land managers prohibit drilling during winter months. My

personal experience in over 20 years of sitting on many drilling rigs

throughout the Rockies has been that these animals are not in the

least bit bothered by our activity. Hundreds of wells could have

been drilled this winter alone to help supply natural gas.

For what purpose or benefit do land managers restrict drilling?

So that the herd can increase in size, only to be hunted in the fall.

So we must decide, should American consumers be paying a higher

price for energy to subsidize the elk hunters?

Examples like this point up an important shortfall in land management policy. There has been no clear direction with respect to

energy development on Government land. Throughout the gas-rich

basins of the Rocky Mountain region, backlogs continue to grow for

permits to drill and rights-of-way for pipelines and roads.

Exhibit #3 shows the surface use restrictions on a southwestern

Wyoming Federal lease. Please notice the length of time associated

with each restriction, and also note the amount of time required to

drill an 8,000-foot well. As energy companies explore for natural

gas, we have a very short window each year to drill our wells.

My final point is that the employment of advanced technology

must occur if we are to reach our goals. Research and development

spending by the oil and gas industry has decreased from $10 billion

to $2 billion per year over the past 20 years as the large, integrated companies have shrunk in size. We know that past innovations from this R&D such as horizontal drilling and 3-D seismic

have provided significant increases in the recovery of oil and gas.

Federal efforts to aid the R&D effort by devoting a portion of Federal oil and gas royalties to a research fund would be a win-win

program.

In conclusion, it is important to remember that natural gas resources are not uniformly distributed in the landscape. We must be

allowed to drill where the resources exist if we are to supply the

maximum available energy. I view the balance between energy supply and its price and access to public land like a teeter-totter. If

the industry is shut out from public land, then the price of energy

will be much higher. If we have access to public land where the resource exists, then the price for energy will be much lower. The

American people and this Congress must decide the balance between access to Government land and the supply and price of natural gas to meet the nation’s energy needs.

Madam Chair and members of the Committee, thank you for the

opportunity to appear before you today.

[The prepared statement of Mr. Stanley follows:]

Statement of Neal A. Stanley, on Behalf of the Independent Petroleum

Association of Mountain States and Independent Petroleum Association

of America

Mr. Chairman, members of the Committee, I am Neal Stanley, Senior Vice President of Forest Oil Corporation, and President of the Independent Petroleum Association of Mountain States (IPAMS). Both Forest Oil and IPAMS are based in Denver,

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Colorado. Today, I am testifying on the behalf of the Independent Petroleum Association of America (IPAA), and IPAMS. IPAA and IPAMS represent thousands of

independent oil and natural gas producers across the nation. Independents drill 85

percent of the wells in the U.S., and produce 40 percent of the oil and two-thirds

of the natural gas.

I would like to thank this Committee for focusing its attention on the significance

of government lands in developing a sustainable national energy policy. Energy policy cannot be developed in a vacuum. Policies that either limit or encourage energy

development on government land have very real consequences. As such, I imagine

that we all desire land policies that will provide for human needs, contribute to the

sustainability of communities, and concurrently help secure the health of the land

for the benefit of current and future generations.

Despite our best conservation efforts, electricity demand in the United States will

continue to increase as a function of our growing population and the role of computers in our new economy. The role of natural gas in meeting this new demand

cannot be understated. Ninety-five percent of all the new power plants now scheduled to be built will run on natural gas. Electricity produced from natural gas fired

generation will increase from 15 percent to 40 percent by the year 2020. Reports

from the Department of Energy, Gas Research Institute, National Petroleum Council and American Gas Association show natural gas consumption increasing from 22

trillion cubic feet (TCF) this year to 35 trillion cubic feet (TCF) in 2020.

The oil and gas industry can meet the nation’s growing demand for natural gas,

but the price of natural gas will be dependent upon a number of factors, most notably, having adequate access to the resource in a timely manner. Policies that promote reasonable access to the nation’s abundant supplies of natural gas will bring

gas to market more quickly and also lower the price of this energy.

Exhibit #1 is a map showing government lands. The various colors represent the

different agencies with surface management responsibility. A map showing the Federal government’s mineral interest in the western United States would encompass

an even larger portion of the West than is depicted on this map. Fifty-two percent

of the land in the western United States is managed by Federal and state governments.

Exhibit #2 shows the total estimated natural gas resources in the lower 48 states,

with the corresponding percentage of those resources that are subject to severe, if

not outright, prohibitions on access.

Developing the substantial domestic natural gas reserves in offshore areas of the

Eastern Gulf of Mexico, Atlantic Ocean, and California is prohibited by moratoria.

President Clinton extended these moratoria for another ten years in 1998 saying,

‘‘First, it is clear we must save these shores from oil drilling.’’ This is a flawed argument ignoring the state of current technology. It results in these moratoria preventing natural gas development as well as oil. In fact, both the Eastern Gulf and

the Atlantic reserves are viewed as gas reserve areas, not oil. Those coasts are not

at risk. Too often, these policies seem to be predicated on the events that occurred

30 years ago. Federal moratoria policy needs to be reviewed. New policies need to

be based on a sound understanding, of today’s technology.

Offshore Lease Sale 181 is scheduled for December 2001 and is outside the areas

covered by moratoria. The resources contained in this sale area, approximately 7.8

TCF of gas and 1.9 billion barrels of oil, are important to the nation and surrounding coastal states. We strongly recommend the sale stay on schedule. This sale

includes much needed gas resources for the Gulf of Mexico to even partially meet

this country’s natural gas needs.

In the Rocky Mountains, where abundant supplies of natural gas exist, Federal

policies prohibit access to an estimated 137 trillion cubic feet of natural gas. Longterm sustainable gas production will be achievable only through the development of

frontier areas such as the Rockies. Without access to such areas, industry will not

be able to keep pace with steeper decline rates in the mature basins.

Impediments to gaining access for natural gas development come in many forms.

Recent monument designations, new policies prohibiting road construction, and continuous wilderness reviews prohibit access to some areas. Administrative withdrawals, inaction, and extensive delays work similarly to restrict access. Outdated

resource management plans and overly restrictive surface-use requirements also

prevent access. The constraints differ in severity, but in each case, these impediments work individually and cumulatively to prevent the development of natural

gas.

A natural starting point for looking at limits on access is with the restrictions

that effectively reduce access where oil and gas leasing has already occurred. Take

for example a common restriction on drilling during winter months to protect Big

Game Winter Range. In order to facilitate the growth of deer and elk herds, land

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managers prohibit drilling during winter months. My personal experience of sitting

on many drilling rigs throughout the Rockies has been that these animals are not

the least bit bothered by our activity. Nevertheless, the impacts of this restriction

are significant. Hundreds of wells could have been drilled this winter alone to help

offset the expected shortages of natural gas that we will encounter this summer.

And for what purpose, or benefit, do land managers restrict drilling? So that the

herd can increase in size only to be hunted the next fall. If there is any real tradeoff between closing an area or opening it to development, the tradeoff seems to be

between energy development and hunting. And so we must decide, should American

consumers be paying a higher price for energy to subsidize elk hunters?

Examples like this point out an important shortfall in land management policy.

There has been no clear direction for land managers with respect to energy development on government land. Accordingly, each land manager assigns a relative value

to the development of energy with no sense of how his or her actions contribute to

or detract from the nation’s energy sustainability. Mixed messages and a lack of accountability have led to a situation where land managers focus entirely on process

with no apparent regard for the outcome. If left unattended, this lack of direction

will become even more disastrous.

Another example that illustrates the BLM’s failure to recognize the urgency to develop natural gas can be seen in a recent wildcat well Forest Oil drilled in southwest Wyoming. In this case, the BLM’s interpretation of field rules ended up costing

Forest Oil $120,000, and even more when you consider the opportunity costs associated with delays. The well site was six miles from an improved road with an existing two-track road that led to the location. The BLM required Forest Oil to design

and construct an improved road to the location at a cost of $90,000, even though

the well was only going to take 20 days to drill. If drilling proved it to be a dry

hole, we would not need to continue to go to that location. Indeed, the well was a

dry hole that cost the company $800,000 to drill. After we plugged the well, the

BLM required Forest to either maintain the road forever, or reclaim the road to its

previous two-track status. It will cost Forest another $30,000 to reclaim the road.

The money wasted, $120,000, could have been spent drilling more wells.

Natural gas companies rely on Federal land managers to process their permit requests in a timely manner. Without the necessary environmental studies, permits,

and authorizations, access to drill on Federal lands is prohibited. Throughout the

gas-rich basins of the Rocky Mountain Region, backlogs for issuing permits to drill

and rights-of-way for roads and pipelines continue to grow. Many resource management plans are outdated and revisions are being required before any leasing and

development can occur. Staffing is short in many offices and the problem seems to

get worse with time. The use of sophisticated mapping tools and other technologies

could ameliorate some of these problems but, as with many other issues, addressing

agency priorities and goals is a necessary first step.

Exhibit #3 shows the surface use restrictions and seasonal restrictions on a southwestern Wyoming Federal lease. Please notice the length of time associated with

each restriction and also note the amount of time required to drill a typical 8,000-

foot well and a horizontal well. Companies exploring for natural gas have a very

short window to drill wells. If the BLM has not processed the permits in time to

meet that window of opportunity, the company will have to release the drilling rig

they have contracted and wait another year before drilling. Which brings me to my

next point, which is the importance of agency readiness, staffing, and technological

sophistication.

Exhibit #4 demonstrates the time requirements associated with operating on private land and Federal land. The right side of the table shows the timeframe, to get

a well permitted and drilled. The difference between drilling on private land and

Federal lands is 3 months versus 1–3 years.

To further illustrate the pervasiveness of land access problems throughout the

Rocky Mountain Region, the following three examples are provided.

Exhibit #5 is a map of the newly designated Canyons of the Ancients National

Monument in southwestern Colorado. Canyons of the Ancients encompasses

McElmo Dome, one of the Rocky Mountain region’s most significant sources of natural gas used for advanced oil and gas recovery in Colorado, New Mexico and Texas.

On the map, of the 183,000 acres within the Monument’s boundary, there are nearly

155,000 acres of active Federal leases, 141,000 of which are held by production or

are included in four Federal production units.

When the monument was designated, the BLM proposed stringent surface use restrictions on 79,000 acres, including a No Surface Occupancy stipulation. Given the

BLM’s predilection for restricting access, the Resource Management Plan that will

be developed for the monument creates even more uncertainty for producers.

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Exhibit #6 is a map of Jack Morrow Hills Resource Area in southwestern Wyoming. The Environmental Impact Statement for the Green River Resource Management Plan, which includes the Jack Morrow Hills area, was started in 1989, with

the Record of Decision finally issued eight years later, in October 1997. The decision

of whether to lease for oil and gas exploration and development in Jack Morrow

Hills area was deferred in the ROD until a Coordinated Activity Plan for the area

could be completed, which took another four years. When the Draft EIS for the CAP

was issued, the preferred alternative was for ‘‘staged leasing,’’ effectively postponing

leasing decisions indefinitely. On the map, areas designated as potential Wilderness

Study Areas (WSA) are shown in light blue stippling. Note that there are active

leases and leases held by production within the new WSAs.

The attached map of the Jack Morrow Hills area shows the BLM-managed mineral estate with active oil and gas leases in yellow. Of the 623,000 acres within the

red boundary of the Jack Morrow Hills area, there are 239,000 acres of active Federal leases, 36,000 of which are productive. Also note that within the CAP area,

there are 137,890 acres recommended as Wilderness Study Areas.

Exhibit #7 is a map showing the entire state of Utah. Current leases are shown

in yellow, a total of 3,567 active Federal leases. Also shown on the map are the

BLM’s 1990 recommendations for three million acres of new Wilderness Study

Areas, as well as former Interior Secretary Babbitt’s reinventory of an additional

three million acres, described in the map’s legend as ‘‘HR1500 Boundaries’’. Note

that the proposed Wilderness Study Areas include lands that are already leased,

making development as difficult as the examples of Jack Morrow Hills and Canyons

of the Ancients. Not shown on the Utah map are the nearly 29,000 leases that were

previously leased in the past but were not renewed as a direct result of administrative direction from Washington.

These examples are only a few of many examples of the overzealous application

of singular surface uses that preclude other resource development. Other examples,

some even more egregious, would include the backlog of drilling permits and rights

of way applications in northeastern Wyoming; de facto wilderness management of

Wyoming’s Bridger/Teton National Forest and Montana’s Rocky Mountain Front;

and excessively stringent application of NEPA planning documents and subsequent

delays in Utah, Colorado, Montana, and the Dakotas.

My final point is that the employment of advanced technology for both land managers and industry must occur if we are to reach our goals. Research and development spending by the oil and gas industry has decreased from $10 billion to $2 billion per year over the past twenty years as the large integrated companies have

shrunk in size. Yet we know that past innovations from this R&D, such as horizontal drilling and 3–D and 4–D seismic, have provided significant increases in the

recovery of oil and gas. Frontier areas like the Rocky Mountain region will require

new and sophisticated technologies to develop a large portion of the unconventional

gas resources found in the region. Federal efforts to aid the R&D effort by directing

a portion of Federal oil and gas royalties to a research fund would be a significant

win-win program. Increased R&D spending will increase oil and gas production, resulting in a commensurate increase in Federal royalties.

In conclusion, I would remind the Committee that natural gas resources are not

uniformly distributed across the landscape. Even so, natural gas development can

coexist with other values. We do not need to choose between ‘‘this or that’’ use of

public land. Responsible management can allow for ‘‘this and that’’ use. Responsible

management can provide for human needs, contribute to the sustainability of communities, and concurrently help secure the health of the land for the benefit of current and future generations.

I view the balance between energy supply, and hence, price and access to government land as a teeter-totter. If the energy industry is shut out from government

lands, then the price of energy will obviously be much higher. If we have access to

more land where the resource exists, then the price of energy will be much lower.

The American people and this Congress must balance the perceived trade-offs of allowing reasonable access to government land with the tangible benefits of securing

an adequate supply of natural gas to meet the nation’s near-term energy needs.

Mr. Chairman and members of the Committee, thank you for the opportunity to

appear before you today.

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Mrs. CUBIN. Thank you, Mr. Stanley.

The Chair now recognizes Jim Bowles, the Vice President of Phillips Petroleum Company, testifying on behalf of the American Petroleum Institute.

STATEMENT OF JIM L. BOWLES, PRESIDENT, AMERICAS DIVISION, PHILLIPS PETROLEUM COMPANY, ON BEHALF OF THE

AMERICAN PETROLEUM INSTITUTE

Mr. BOWLES. Thank you. My name is Jim Bowles. I am President

of the Americas Division of Phillips Petroleum Company. I represent Phillips and the American Petroleum Institute, which has

over 400 members engaged in every aspect of the oil and gas industry in the United States. I appreciate this opportunity to speak regarding access to Government lands underneath which much of the

country’s known reserves of oil and gas naturally lie. I ask that my

full remarks be submitted for the record.

Today, we import some 57 percent of our crude oil. While we cannot eliminate our dependence on imported oil, there are a number

of things we can do to encourage greater domestic production. They

all have to do with allowing our companies greater access to nonpark Government lands to produce the great energy resources we

have in an environmentally compatible manner.

Today, I plan to focus on three regions where the access question

is of the utmost importance—the Western United States, Alaska,

and the Gulf of Mexico. Demand for natural gas in this country has

never been stronger, and it will continue to grow along with the demand for electricity. We have a tremendous natural gas resource

base in North America. However, since 1983, access to Federal

lands in the Western U.S., where an estimated 40 percent of the

natural gas reserves are located, has declined by 60 percent.

Despite the industry’s record of sound environmental stewardship, the previous administration barred exploration on vast regions of Government lands, including nearly 60 million acres in the

forest system. In the lower 48, some 205 million acres of Federal

lands in the Western U.S. are under the control of two Federal

agencies with broad discretionary powers—the Bureau of Land

Management, the BLM, and the U.S. Forest Service. They administer Federal non-park lands. Both are required to manage these

lands under the congressionally-mandated concept of multiple use.

Yet, both have used discretionary actions to withdraw lands from

leasing, and long delayed other leasing decisions and project permitting.

There are vast reserves of natural gas in the form of coal bed

methane beneath Western Federal lands. However, BLM’s inability

to grant timely permits because of understaffing has greatly hindered development of this gas.

In Alaska, a new discovery of oil at Prudhoe Bay on the North

Slope in the early 1970’s offered a significant new source of competitive domestic supply. However, North Slope production has fallen by nearly 50 percent by the year 2000. Alaska still holds much

promise for new energy development, not only in the much discussed Arctic National Wildlife Refuge, but also in NPRA, the National Petroleum Reserve-Alaska, that is west of Prudhoe Bay.

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Our industry has made great strides in developing fields in these

Arctic areas, with less adverse harm to the environment. One of

these areas, the Alpine field, is a great example of how technology

has minimized any impacts of Arctic oil and gas development. Only

97 acres, an area smaller than the U.S. Capitol grounds, are needed on the surface to produce from 40,000 acres, an area roughly the

size of the District of Columbia.

North Slope exploration takes place during the winter using ice

pads and ice roads that melt in the spring, leaving no trace of exploration activity. New technologies developed from our experience

in the Arctic have tremendously reduced the so-called footprint of

our activities and our operations. Despite these examples of the industry’s environmentally-sound operations, Congress has refused to

authorize exploration on the small section of ANWR that was specifically set aside by law for exploration in 1980.

In the offshore Gulf of Mexico, production is expected to rise to

nearly a third of our domestic oil and gas supply within a decade.

There, too, new technologies have driven down the cost of finding

oil and gas, with much less disturbance to the environment, and

allowed us to drill and produce in deep waters off the Gulf.

However, because reserves are being depleted at an ever-increasing rate, this cannot continue to be offset by future development

unless new areas are opened for exploration. We have the technology and the will to explore and produce in these sensitive areas,

as is being done in Canada, where oil and gas activities in the Atlantic have been conducted successfully with environmentallysound development.

America will soon have a great opportunity to augment reserves.

Federal Outer Continental Shelf (OCS) Lease Sale 181 in the eastern Gulf of Mexico is slated for December 2001. It was proposed

only after comprehensive environmental reviews and consultations

with Gulf State governors. The Sale 181 area is estimated to contain 7.8 trillion cubic feet of natural gas and 1.9 billion barrels of

oil. Again, these reserves can be produced cleanly with advanced

technology.

One potential obstacle to the success of 181 is the Coastal Zone

Management Act which has been used by States, contrary to Congress’ intent, to cause serious and costly delays to Federal OCS

leasing and production that would have no adverse environmental

impact on coastal zones. We strongly support Sale 181 to proceed

as planned.

To summarize, our industry can explore for and produce our

country’s reserves of oil and natural gas for national security purposes and family and personal security. We are willing to make

enormous investments to meet these ends, but we must have access

to our natural resources for exploration and production.

Thank you.

[The prepared statement of Mr. Bowles follows:]

Statement of Jim L. Bowles, President, Americas Division, Phillips

Petroleum, on Behalf of the American Petroleum Institute

My name is Jim Bowles. I am President, Americas Division, of Phillips Petroleum.

I represent Phillips Petroleum and the American Petroleum Institute, which has

over 400 members, engaged in every aspect of the oil and gas industry in the United

States.

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While the U.S. oil and natural gas industry has long provided a reliable and affordable supply of energy, the Federal government has always played a pivotal role

in determining how well our energy needs are met. And the increasing energy demands of our new economy make it imperative that government and industry work

to put forth a new national energy policy.

A national energy policy

A successful national energy policy must be comprehensive in order to be effective.

It must seek to ensure enough energy to support economic growth by promoting responsible development of both domestic and foreign resources. It should recognize

that sophisticated new technology developed by the oil and natural gas industry

greatly reduces adverse impacts on the environment by exploration and production,

both onshore and offshore.

A successful national energy policy will recognize that there is no quick fix to our

energy problems. It must reflect the reality that we need to increase supplies of all

forms of energy to fully support our growing economy. It is important to encourage

responsible use of energy and increase supplies of all fuels, including fossil fuels as

well as alternative fuels.

A successful national energy policy must be flexible to allow companies to adapt

to new energy and environmental challenges. It should recognize that our refinery

and delivery infrastructure continues to be stretched to its limit, restraining the industry’s capability to meet new energy demands. It should remove unreasonable and

complex regulations on cleaner energy production and transportation to accommodate growth and the continued high demand for energy—and to meet seasonal or

unexpected requirements.

A successful national energy policy must rely primarily on the private sector

working through free markets, and it must recognize the value of diversified energy

sources. To that end, it should encourage competitive trade practices and international investment.

Finally, a successful national energy policy must create a predictable operating

and investment environment for energy suppliers. The Department of Energy

projects that producers will have to invest some $650 billion through 2015 to meet

the growth in natural gas demand alone. That should tell us that government must

work to create a more stable regulatory environment so that producers can invest

with confidence that they will be able to get a fair return on their investment.

Access to government lands

I am here today to speak to the Committee about access to the government lands

that contain much of the country’s known reserves of natural gas and oil.

Today, the U.S. imports 57 percent of its crude oil. Last year’s gasoline price volatility was due in part to a cutback in production by foreign oil producing countries.

While we cannot eliminate our dependence on imported oil, there are many things

that can be done to encourage greater production in this country.

America has vast reserves to help it meet its future requirements. But we must

have greater access to government lands to produce this energy in an environmentally responsible manner.

Demand for natural gas in this country has never been stronger. The National

Petroleum Council (NPC), a Federal advisory Committee of the Department of Energy, predicts demand, which is now at about 21 trillion cubic feet (Tcf) per year,

at about 29 Tcf by 2010. The Energy Information Administration (EIA) now estimates that, due to Clean Air Act requirements, and increased demand for electricity, we will need 35 Tcf annually by 2015.

We have a tremendous resource base of natural gas in North America. Estimates

put it between 1,200 and 1,600 Tcf (including resources in coal seams and tight

sands formations). But we have a significant problem due to two key factors.

First, volatile energy prices inhibited drilling during the 1998–99 time period. Second, significantly reduced access to some of the most promising areas has suppressed our ability to increase our proven reserves. This has resulted in today’s high

prices, as demand has continued to grow.

With higher prices this year, oil and gas producers are making good returns on

their investments, and plowing additional capital into new exploration. While some

increase in supply has taken place, achieving the reserve growth needed to meet expected demand growth over the long term will require sustained growth in drilling

activity.

We recognize that this has been a costly and painful year for consumers. It is,

therefore, critical to help consumers understand what the United States must do

from an energy policy standpoint to ensure that the U.S. maintains and enhances

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its long-term supplies. Put simply, increased drilling and stable long-term prices are

crucial to future supplies.

Yet, many of the government’s multiple use lands have been placed off-limits by

the Federal government. Since 1983, access to Federal lands in the western United

States-where an estimated 67 percent of conventional onshore oil reserves and 40

percent of our natural gas reserves are located—has declined by 60 percent. Equally

important is the fact that discretionary land management policies often unnecessarily restrict or impede efforts to develop resources on public lands. Our ability to

search for new domestic offshore oil and natural gas is limited to portions of the

Gulf of Mexico and offshore Alaska waters because congressional moratoria have

withdrawn most of the rest of our Federal Outer Continental Shelf from consideration.

What is access to government lands? We do not request to drill on parklands or

in wilderness areas set aside by Acts of Congress. Rather, we seek access to areas

in the American West that have been designated as ‘‘multiple use’’ so that numerous

activities can take place there.

Most of these areas are simply vast expanses of non-descript Federal lands. However, because they lack the beauty and grandeur of the Grand Canyon or the Grand

Tetons does not mean that we treat them with less respect than we do any other

lands entrusted to us by the government, or by private landowners. Most people

driving near or hiking in one of these multiple-use government land areas would

be hard-pressed to locate one of our facilities once the drilling rig is removed. It has

become fashionable for editorialists and others to refer to our industry as a ‘‘dirty’’

or ‘‘messy’’ business. Safety and environmental protection are critical concerns, regardless of their location, and where our contractual lease obligations with the government require us to return the land to its original condition once drilling and production cease.

Yet, despite our record of sound stewardship, President Clinton used his executive

powers under the Antiquities Act to bar oil and gas exploration and other activities

on vast regions of government lands.

For example, the designation of the Grand Staircase-Escalante Monument in

Utah in 1996 summarily withdrew promising valid oil and gas leases on state lands

without even notice or consultation with state and local authorities, or affected communities. Likewise, the U.S. Forest Service recently banned our companies from exploring for natural gas and oil on promising government lands when it published

rules to bar road building on nearly 60 million acres in the Forest System.

Offshore, the ‘‘consistency’’ provisions of the Coastal Zone Management Act

(CZMA), under the guise of due process and consultation, have caused serious duplicative and incredibly costly delays to Federal OCS leasing and production activities

that would have no adverse environmental impacts on states’ coastal zones. And

regulations issued by the National Oceanic and Atmospheric Administration

(NOAA) in the last days of the Clinton Administration appear to add impediments

to environmentally compatible energy development in the OCS, contrary to the balancing of competing interests directed by Congress when it enacted the CZMA. Both

the summary withdrawal of multiple use government lands without stakeholder

consultation under the Antiquities Act, and the endless due process used by opponents to block Federal offshore production that does not affect a state’s coastal zone

are extreme, and must be moderated.

Further, Congress has refused to authorize exploration on the small section of the

Arctic National Wildlife Refuge (ANWR) that was specifically set aside by law for

exploration in 1980, after a 1987 final environmental impact statement concluded

that it could be safely developed.

We respect, and strictly adhere, to all of the nation’s environmental laws. However, many government lands offshore and onshore that should reasonably be open

for leasing are, in fact, off limits, or severely restricted from responsible development.

Offshore lands

Offshore, the OCS has assumed increasing importance in U.S. energy supply over

the past half century. The Federal portion of the OCS now supplies 19 percent of

the oil and 27 percent of the gas produced in the United States. Offshore production

promises to play an even more significant role in the future. The Department of Energy forecasts that offshore production will rise to nearly a third of our domestic

oil and gas supply within a decade.

In recent years, exploration and development of the offshore has been a major factor contributing to domestic energy supplies. From 1993 to 1997, new proven reserves replaced over 147 percent of offshore oil produced, and over 106 percent of

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gas produced. In 1997 alone, the Gulf of Mexico accounted for over 79 percent of

the new field discoveries of oil in the United States.

The relatively shallow shelf of the Central and Western Gulf was the focus of past

development, and is the location of the majority of current oil production and the

vast bulk of current gas production. It has been a source of growth in gas production

in the United States for nearly three decades.

Technological revolutions, such as 3–D seismic profiling of promising structures,

coupled with astounding computer power and directional drilling techniques which

allow numerous reservoirs to be accessed from one drill site have driven down the

costs of finding oil and gas. And at the same time these technologies allow development with much less disturbance to the environment. Tremendous advances in our

ability to drill and produce in the deep waters of the Gulf have also resulted in vast

new reserves being added to our resource base. The Deepwater Royalty Relief Act

developed by this Committee, and passed by Congress in 1995, has significantly

aided that endeavor. Those in the Federal government who are most familiar with

our industry have lauded our technological advances.

A 1999 DOE report, Environmental Benefits of Advanced Oil and Gas Exploration

and Production Technology, stated that, ‘‘innovative E&P approaches are making a

difference to the environment. With advanced technologies, the oil and gas industry

can pinpoint resources more accurately, extract them more efficiently and with less

surface disturbance, minimize associated wastes, and, ultimately, restore sites to

original or better condition. . . . [The industry] has integrated an environmental

ethic into its business and culture and operations . . . [and] has come to recognize

that high environmental standards and responsible development are good business.’’

However, there is now accumulating evidence that resource depletion is overtaking the effects of technical advances on the cost structure of OCS development.

The volume of reserves added per dollar of capital spent in the OCS has been falling

steadily since the early 1990s. Due to increased demand, reserves are being depleted

at an ever-increasing rate. Due to more efficient extraction technologies, the decline

from new gas wells is now estimated to be as high as 40 percent per year.

This does not suggest the imminent collapse of OCS production, but it does suggest that the drilling and capital expenditures required to replace and augment reserves will become increasingly important. We must increase deepwater development, and access to areas presently restricted. Currently, presidential moratoria,

and annual Interior Appropriations bill riders preclude leasing in most of the Eastern Gulf of Mexico, the entire Atlantic and Pacific Federal OCS, and portions of offshore Alaska.

As a result, only 200 million acres out of a possible 1.5 billion Federal OCS acreage is available for environmentally compatible exploration and production.

The National Petroleum Council estimates that more than 76 trillion cubic feet

of gas are off-limits in the Federal OCS as a result of the current moratoria. Twenty

one Tcf are estimated to lie in the Federal waters beneath the Pacific, 31 Tcf beneath the Atlantic OCS, and about 24 Tcf are projected to lie beneath the Department of the Interior’s Eastern Gulf of Mexico Planning Area.

Again, our companies have the technology, and the will to explore and produce

in these areas in an environmentally compatible manner. It is already being done

in Canada’s OCS, where oil and natural gas activities off the Atlantic coast have

been conducted successfully in recent years with environmentally sound developments. Those supplies are now becoming available for the energy needs of New England.

America will soon have a great opportunity to augment its reserves. Federal OCS

Lease Sale 181 represents a plan for leasing by the Department of the Interior in

the Eastern Gulf of Mexico Planning Area. Scheduled since the mid-1990s based on

comprehensive environmental reviews, and consultations between former DOI Secretary Bruce Babbitt and then Governors Chiles of Florida and James of Alabama,

Sale 181 is slated to be conducted in December 2001. The area available in Sale

181 is estimated by the NPC to contain 7.8 trillion cubic feet of natural gas and

1.9 billion barrels of oil. This means that natural gas from the Sale 181 area could

satisfy the current natural gas needs of Florida’s 5.9 million households for the next

16 years. Lastly, the crude oil from the Sale 181 area (which is expected to come

from the deepwater areas, far removed from the coastline) could fuel 74,000 cars for

20 years.

These potential reserves can be produced cleanly, for advances in technology have

made offshore oil and natural gas exploration and production safer than ever. For

the 1980–1999 period, 7.4 billion barrels of oil have been produced in the OCS with

less than 0.001 percent spilled—a 99.999 percent near perfect record.

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Alaska’s North Slope

In the early 1970s, as petroleum production from the Lower 48 states entered a

decline, a new discovery of oil at Prudhoe Bay on the North Slope of Alaska offered

the U.S. the promise of a significant new source of competitive domestic supply on

a world-class scale. The discovery was initially estimated to be 9.6 billion barrels

of oil, nearly double the size of the largest field ever previously found in North

America. Despite high costs, a hostile climate and major environmental challenges,

supply from Prudhoe Bay came online in 1977, offsetting much of the decline in

Lower 48 production through the mid-1980s.

By the mid 1980s, Alaska’s North Slope was supplying about a quarter of U.S.

oil production. Meanwhile, as Prudhoe production grew, the estimated resource potential of the North Slope began to grow as well, as other finds occurred. However,

North Slope production has been falling. North Slope production peaked in 1988,

and by 1998 had fallen by nearly 40 percent.

Phillips and other companies operating on Alaska’s North Slope are actively exploring for new sources of oil in the areas that have become available for leasing.

This includes the National Petroleum Reserve-Alaska (NPRA) and the Alpine field,

located in state lands west of Prudhoe Bay in an incredibly rich and diverse wildlife

habitat. The new Alpine field is a great example of how technology has minimized

any impacts of arctic oil and gas development. Only 97 acres, an area smaller than

the area covered by the U.S. Capitol grounds, are needed on the surface to produce

from an area of 40,000 acres, an area roughly the size of the District of Columbia.

This winter Phillips will drill 12–15 exploratory wells. Today’s North Slope exploration takes place during the winter using ice pads and ice roads that melt in the

Spring, leaving almost no trace of the previous Winter’s exploration activities. When

oil and gas is discovered, new technologies developed from our experience in the

Arctic have tremendously reduced the so-called ‘‘footprint’’ of our activities in our

operations to extract these resources.

The U.S. Geological Service estimates there to be more than 10 billion barrels of

oil recoverable from the coastal plain of ANWR, and, perhaps as much as 16 billion

barrels. That is equivalent to the volumes we would import, at current levels, from

Saudi Arabia for the next 20–25 years. If those volumes are found it would be the

largest oil discovery in the world in the last 30 years.

And due to technological advances, the ‘‘footprint’’ to develop ANWR, if exploration confirmed the vast reserves predicted there, would be only an estimated 2,000

total acres out of a total area of 19.8 million acres, a tract roughly the size of South

Carolina.

The Lower 48

In the Lower 48 states, a 1997 study by the Cooperating Associations Forum

found that Federal lease acreage available for oil and gas exploration and production in eight Western states (California, Colorado, Montana, Nevada, New Mexico,

North Dakota, Utah and Wyoming) has decreased by more than 60 percent since

1983.

Approximately 205 million acres of Federal lands in these states are under the

control of two Federal agencies with broad discretionary powers. The Bureau of

Land Management (BLM), whose land management planning authority is derived

from the FLPMA of 1976, and the USFS, whose jurisdiction is derived from the National Forest Management Act, administer these Federal, non-park lands.

Both agencies are required to manage lands they administer under the congressionally mandated concept of multiple use. Yet, BLM and USFS discretionary actions have withdrawn Federal lands from leasing, and long delayed other leasing

decisions and project permitting.

Congress has directed the BLM and the Forest Service to allocate non-wilderness

lands for resource use, identify areas that are available for oil and gas leasing, and

identify important wildlife habitat areas, and inventory wilderness candidate lands

among other uses. Each agency has completed land use plans for the lands they administer, including lands that are candidates for wilderness designation. Yet, some

lands found unsuitable for wilderness designation are, however, managed as ‘‘wilderness study areas,’’ effectively removing these lands inappropriately from consideration for resource development. Further, these agencies often dictate lease stipulations as conditions of approval for exploration and production. Stipulations are intended to protect resource values in conjunction with proposed projects, such as exploratory wells, yet many conditions required, such as ‘‘no surface occupancy,’’ essentially preclude exploration and production from occurring.

The NPC study on natural gas referred to earlier also points out that vast reserves of natural gas in the form of coal bed methane (CBM) lie beneath Federal

lands, especially in Wyoming and Montana. However, BLM’s inability to grant perVerDate 11-MAY-2000 13:13 Aug 24, 2001 Jkt 000000 PO 00000 Frm 00100 Fmt 6633 Sfmt 6621 J:\DOCS\70888.TXT HRESOUR2 PsN: HRESOUR2
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mits in a timely manner has greatly hindered CBM development, and may contribute to further shortfalls in necessary future gas production. In some instances

we recognize that individual BLM offices may be understaffed and therefore are

simply unable to efficiently process permitting requests. We therefore support increased funding for BLM to adequately address these critical permitting backlogs.

We applaud this Committee’s involvement in legislation enacted in the last Congress directing the Departments of the Interior and Energy and the Forest Service

to conduct an inventory of oil and gas resources on Federal lands and the restrictions that prevent access to these critical resources. We urge Congress to fully fund

this inventory in the FY 2002 appropriations process so that adequate information

will be available on resource availability.

In conclusion, we must recognize that this industry in the 21st Century has the

technologies, and sensibilities to explore for, and produce our nation’s vast reserves

of secure oil and gas—resources that keep factories and offices running, and our

homes comfortable regardless of the weather. Oil and natural gas are the key ingredients in thousands of products that we use, from life-saving medical devices to fertilizers that help feed the world.

I am grateful to the Committee for the opportunity to present our views on a national energy policy for the long-term health and continued prosperity of our nation.

Mrs. CUBIN. Thank you, Mr. Bowles.

Mr. O’Connor?

STATEMENT OF TERRY O’CONNOR, VICE PRESIDENT, EXTERNAL AFFAIRS, ARCH COAL, INC., ON BEHALF OF THE

NATIONAL MINING ASSOCIATION

Mr. O’CONNOR. Good afternoon, Madam Chairman. It is good to

see you again. For the record, my name is Terry O’Connor. I am

Vice President of External Affairs for Arch Coal, the second largest

coal producer in the United States. We will produce about 115 million tons of coal this year, we estimate, and about 70 percent of

those tons will come from Federal lands in the Western States of

Wyoming, Colorado, and Utah.

I am here also on behalf of the National Mining Association, and

before commencing my testimony I just want to thank you and ask

you to relay to Chairman Hansen our appreciation for both of you

scheduling this all-important hearing.

Most of us here in the room today are aware that coal is America’s most abundant and reliable domestic energy resource. The

coal produced in the United States is used to generate over 50 percent of the electricity generated in this country. We are also probably all aware that coal represents somewhere between 85 percent

and 95 percent of the discovered and economically recoverable fossil fuel resources in the United States.

Finally, it is generally known that the Western United States

coal fields on Federal lands are blessed with an abundance with

some of the lowest-sulfur coal in the United States, if not the

world. Western coal, in particular, is quite low in inherent NOx

when burned in U.S. power plants.

What may not be quite as generally known is that today a majority of coal production comes from the Western United States. The

bulk of that production is actually coming from Congresswoman

Cubin’s district or a portion of her district, the prolific coal-producing region of northeastern Wyoming and to some extent Montana, called the Powder River Basin, and referred to by many as

the Saudi Arabia of coal. If Campbell County, Wyoming, in northeastern Wyoming, were a separate country, it would be one of the

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five largest coal-producing nations on Earth, with the United

States being number two.

Forecasts show that over 90 percent of expected new coal production in the United States likely will come in the next 20 years from

mines on Western Federal lands. However, a group of ominous

clouds are on the horizon, in that numerous Federal policies now

in effect discourage or in some cases prevent the exploration, development, and investment that will be required to bring additional

Federal coal production online. This Congress has a unique opportunity to deal with some of these issues and help us contribute toward the goal of making our country less energy-reliant on unstable foreign sources.

Madam Chairwoman, in the interests of time I will dispense with

a discussion of most of the issues that are raised in our written testimony, but I would quickly like to address three of the most serious issues that we hope Congress will take an early look at.

The first issue I would like to address today and take a moment

or two on is the U.S. Forest Service Roadless Initiative. In addition

to the much publicized restrictions on timbering, as a consequence

of this initiative the coal mining industry will also be significantly

and adversely impacted.

I refer you to a statement in the Forest Service’s own EIS which

says that the initiative, quote, ‘‘’will preclude further development

of leasable mineral resources within inventoried roadless areas,

which will result in decreases in jobs, income, and payments to

States.’’ My company, our employees, and the consumers of our coal

will be ultimately adversely impacted by this Roadless Initiative

unless it is somehow amended.

For example, in Colorado we operate the West Elk underground

mine, the second largest coal-producing mine in the State, where

we employ 360 people with an annual payroll of over $26 million.

An estimated 200 million tons of very low-sulfur, high-Btu coal is

adjacent to our West Elk mine. If this Roadless Initiative is not

somehow changed, this will result in the premature abandonment

of the mine and the loss of an over $100 million capital investment

that we have made.

Similarly, in Utah, we operate three large underground mines,

and actually are the largest coal producer in the State. Our coal

represents about 40 percent of the State’s coal production. Our coal

underlies a large forest service tract. I refer you to a map that is

either in the back of the room or back in the Resources Committee

room that identifies the enormity of the Roadless Initiative and

what it will do.

Ironically, as California attempts to dig out from its energy crisis, one of California’s most viable, low-cost, lowest-hanging fruit is

the construction of power plants to supply California much-needed

electricity. This Roadless Initiative will put in harm’s way their capacity to do so. We recommend that Congress, at a minimum,

amend this Roadless Initiative somehow to exclude sub-surface

leasable minerals, and that includes oil, gas, and coal.

Secondly, and very quickly, an area I would like to address for

just a second is an issue you are very familiar with, and I certainly

thank you for your past efforts on this—the issue of conflict involving the simultaneous development of coal and coal bed methane in

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the Powder River Basin. This issue sits as a potential cloud that

can impact far more than the very, very small, isolated areas of

conflict, and we urge that Congress move quickly in order to free

up the much needed coal bed methane, as well as low-cost, low-sulfur coal.

Third, an issue that I would like to second Mr. Bowles, to my

right, is the administrative backlog which is occurring in the Powder River Basin, in his case with regard to coal bed methane. In

our case, it is the lease by application process for coal.

Because of the dramatic increase in requirements for low-sulfur

coal in the West, BLM is simply not keeping up with the processing

of lease by applications. If an application were submitted today, because they are only processing one a year, it would be probably

2009 before a lease sale was held, then another 3 years to permit

it, another year after that to move the infrastructure. And we

would be looking at 2012 before we could be in production on a new

LBA. This cries out for congressional oversight.

Finally, and in conclusion, as important as all of these issues are,

the other side of the potentially even more leveraging portion of the

energy coin is that as a nation we must authorize the construction

of additional coal-fired generation facilities, as well as the equally

essential transmission lines to be able to move electricity to places

where it is needed.

The United States and the Western United States must escape

the banana syndrome, which many of you are familiar with as the

next step beyond NIMBY; it is build absolutely nothing anywhere

near anything. If the next generation of lower-emitting, highercombustion-efficiency coal-fired plants are not allowed to be built,

constructed and operated, any additional Federal coal which is produced in the West will not be able to help reduce our nation’s reliance on unstable foreign sources of energy or to prevent the spread

of the California syndrome nationally.

Thank you very much for your time.

[The prepared statement of Mr. O’Connor follows:]

Statement of Terry O’Connor, Vice President, External Affairs, Arch Coal,

Inc., on Behalf of the National Mining Association

Mr. Chairman, my name is Terry O’Connor. I am Vice President of External Affairs for Arch Coal, Inc. I am appearing here on behalf of the National Mining Association (NMA) to testify on the important role that energy resources on Federal

lands, specifically coal resources, have in the development of strategies and policies

to take the United States closer to the goal of being self-reliant for energy supply.

Thank you for the opportunity to present the mining industries views on this subject.

Summary

Affordable, reliable energy is a necessity for economic growth. Domestic, affordable and increasingly clean coal provides over 20 percent of all the energy that is

used in the United States and is the fuel of choice for over 50 percent of the electricity generated in our nation today. Nearly 40 percent of our coal production is

from mines located on Federal lands. Over one-third of the nation’s coal reserve is

found on lands owned or controlled by the Federal government. Forecasts show that

over 90 percent of new production expected to come on line over the next 20 years

will be from mines on Federal lands. However, policies now in effect discourage, or

prevent the exploration, development and investments that will be required to bring

this new production on line. This Congress has an opportunity to change current

policy direction to ensure that the vast resources on Federal lands can contribute

towards the goal of energy self-sufficiency while at the same time ensuring that

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both the environment and the economies of the regions in which these resources are

located are protected and advanced.

General introduction

Arch Coal, Inc., headquartered in St. Louis, is the second largest coal producer

in the United States. In 2000, our operating subsidiaries mined more than 107 million tons of coal—nearly 10 percent of the nation’s production—from surface and underground mines in Wyoming, Colorado, Utah, Illinois, West Virginia, Kentucky and

Virginia. Arch shipped coal to approximately 140 power plants in 30 states providing the fuel for 6 percent of the electricity used by Americans last year. Arch

owns or controls approximately 3.2 billion tons of coal reserves including reserves

on Federal lands.

In 2000 our company mined nearly 65 million tons of low-sulfur, sub-bituminous

coal from our two large surface mines in the Powder River Basin (‘‘PRB’’) of Wyoming, Black Thunder and Coal Creek mines. We also produced 3.4 million tons in

our West Elk Mine in Colorado and 9.4 million tons in three mines in Utah. This

coal is almost exclusively mined on Federal lands. One of Arch Coal’s highest priorities is to operate safe and environmentally responsible mines. Our production and

reclamation experience on our mines on Federal lands are prime examples of the

way that our priorities are met.

The National Mining Association represents producers of coal, metals and nonmetal minerals, as well as manufacturers of processing equipment, machinery and

supplies, transporters, and engineering, consulting and financial institutions serving

the mining industry. The members of National Mining Association produce over

80 percent of America’s coal, a reliable, affordable, domestic fuel choice used to generate over 50 percent of the electricity used in the nation.

A balanced national energy strategy is a basic element of our nation’s economic

future

Mr. Chairman, we would like to commend you for holding these oversight hearings on the need for a balanced national energy strategy. Energy, whether it is from

coal, oil, natural gas, uranium or renewable sources, is the common denominator

that is imperative to sustain economic growth, improve standards of living and simultaneously support an expanding population. Affordable and reliable energy— much of it from coal produced on Federal lands—has made the last decade of expansion possible. The recent sharp increase in the overall cost of energy along with concerns over current and future supplies together remind us of the importance of affordable energy as these factors are, in part, behind the downturn in the economy

that is now occurring.

The policies of the past eight years have actively discouraged and even prevented

investments in domestic energy supplies and in the energy delivery infrastructure

on both public and private lands. As a result no energy source be it petroleum, natural gas, coal or uranium is in a position to quickly increase output, to even to meet

the new demands that are forecast. Our energy supply industry has not been able

to make the investments or develop and maintain the infrastructure that is necessary for the future. The policies that have discouraged or outright prevented development must be identified and reversed. The United States is fortunate to have

a large domestic energy resource within our borders but, to even approach energy

self-sufficiency our policy direction must be returned to one that encourages environmentally sound development and use of our nation’s vast energy resource base.

Forecasts of future energy demand all consider technological advances, conservation and increased efficiency. But all forecasts also point to an increase in energy

demand. For example, the Energy Information Administration (EIA) is predicting

that energy use will increase by over 32 percent by 2020. Meeting this demand with

reliable affordable energy while maintaining our high environmental standards will

be a challenge, but a challenge that can be met with the correct policies that consider and enhance the role of all energy sources, including those sources found on

Federal lands.

The role of coal in U.S. energy

Coal reserves, which are geographically distributed throughout the US, comprise

the greater share of the nation’s energy resource base. The demonstrated coal reserve is over 500 billion tons, a reserve large enough to support a growing coal demand for over 200 years. In 2000, 1.1 billion tons of coal were produced in mines

located in 26 states. Coal, or electricity generated from coal is used in all 50 states.

The coal industry contributes some $161 billion annually to the economy and directly and indirectly employs nearly 1 million people.

Last year 1.026 billion tons of coal were used to generate over 50 percent of all

electricity used in the US. Although this is more than triple the amount of coal used

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for electrical generation in 1970, emissions have declined by over one-third. The Energy Information Administration forecasts show that electricity use will increase by

another 35 percent by 2020 and that coal use for electricity will total at least 1.25

billion tons in 2020, some 250 million tons or 20 percent more than is currently

burned. Meeting electricity demands will require construction of new power plants

including coal fired power plants. Although beyond the scope of this hearing, a national energy strategy must include provision for incentives that allow companies

building these new plants to assume the risks of commercializing new advanced

clean coal technologies. The mining industry supports legislation designed to provides a measure of burden-sharing to cushion the cost of improving the environmental performance of existing coal-based generating facilities and to stimulate deployment of advanced technologies to further reduce emissions and improve efficiency in new generating facilities.

Coal fired electricity is and will remain the most affordable electricity available.

Electric rates in regions dependent upon coal for electricity average at least onethird lower than rates in regions dependent upon other fuels for electricity. Forecasts show that these differentials will remain in place over at least the next twenty

years.

Because coal is a domestic energy resource that is reliable, affordable and, with

new advanced clean coal technologies, increasingly clean, coal can and should continue to play a major role in meeting the energy needs of our nation in the future.

Coal production will increase and nearly all this new coal will be from reserves located on Federal lands.

Coal on Federal lands

Coal mined on Federal lands provides a vital portion of the nation’s domestic energy supply. In 2000 approximately 405 million tons of coal, 37 percent of national

production, were mined on Federal lands. Considering western production only, a

full 80 percent came from mines on Federal lands and, considering that the majority

of privately held western reserves are on lands that are effectively controlled by

Federal land policies one can assume that 85 percent or more of the growing western coal industry depends upon Federal land management policies. Coal mines on

Federal lands are found in Colorado (89 percent of production within the state),

Montana (46 percent), New Mexico (24 percent), North Dakota (7 percent), Oklahoma (35 percent), Utah (88 percent), Washington (33 percent) and Wyoming

(92 percent). Less than 0.1 percent of coal production on Federal lands—365,000

tons—were from lands located in the Appalachian states (Alabama and Kentucky).

Coal produced on Federal lands contributes directly to local economies in a positive way. In 2000, this coal was worth an estimated $3 billion. Production activities

provided high paying jobs for over 15,000 workers in 2000, paying wages in excess

of $600 million. Considering both direct and indirect economic benefits, coal produced on Federal lands provided employment for nearly 150,000 workers with wages

of over $3.5 billion dollars.

Coal produced on Federal lands contributed nearly $400 million to state and local

tax revenue. Royalties paid to the Federal Government were an estimated $330 million in 2000.

The benefits of coal mined on Federal Lands do not remain within the region as

this coal is shipped to electric generators in 30 states. Major destinations outside

the western region include generators in Michigan, Minnesota, Illinois, Indiana,

Iowa, Wisconsin, Texas, Kansas, and Arkansas with some being shipped as far as

Alabama, Mississippi and Georgia. Taken as a whole, coal mined on Federal lands

is used to generate nearly 40 percent of all electricity generated from coal, or approximately 20 percent of all electricity produced in the US. This is not an insignificant amount being enough to supply electricity to the entire South Atlantic census

region or to all the customers in the East North Central and West North Central

states combined or to 3.2 Californias.

The Federal Government owns about one-third of the nation’s coal resources,

which are located on approximately 76 million acres of land principally in the Western United States. Western Federal lands contain approximately 60 percent of the

total western coal reserve base. An additional 20 percent of the coal resources in

the West are managed or impacted by the Federal Government by virtue of (1) the

commingling of State and private coal reserves with Federal leases and (2) trust responsibilities for Indian lands.

It is important to note that the enormous coal reserves on Federal lands include

some of the best coal from an environmental standpoint. Many of the reserves, especially those located in Wyoming and Montana, are low in sulfur and also low in inherent NOX when burned in power plants. These coals are ideally suited to meet

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1W.D. Watson, Opportunity Costs of Federal Land-Use Restrictions for U.S. Coal Markets

(1992).

2Department of Energy Report to the Forest Service, William Hochheiser (November 2000).

the increasingly stringent emission requirements of the Clean Air Act Amendments

of 1990 and the regulations that EPA has promulgated.

Whether viewed as an environmental, an economic or as a domestic energy security and reliability issue, continued coal production from reserves on Federal lands

is critically important to the economy and the well being of the United States. Energy, especially electricity would not be as readily available or as affordable if it

were not for coal from Federal lands.

Coal from Federal lands is projected to increase over the next two decades. The

EIA Annual Outlook 2001 forecasts shows that over 90 percent of the expected 250

million tons increase in U.S. coal production will come from coal reserves located

on Federal lands. If this forecast is to be realized policy changes must occur.

Policies should encourage, not discourage or prevent responsible development of coal

resources on Federal lands

Interpretations of legislation over a long period of time added to the policies of

the previous Administration over the last eight years have acted to discourage or

actually prevent responsible development of coal resources on Federal Lands. There

are several issues that need to be considered the first of which is access to the resources located on Federal lands for responsible exploration and development activities. Large reserve blocks have already been effectively removed from development

by actions by the Federal Government. To cite just two examples:

• According to the U.S. Geological Survey, the unsuitability provisions under

SMCRA (the Surface Mine Control and Reclamation Act of 1977) and land use

planning policies under FLPMA (the Federal Land Policy Management Act)

have removed some 53 billion tons of Federal coal from future leasing which

in effect reduces the National surface mineable reserve base by almost 25 percent.1

• The previous Administrations use of the Antiquities Act to create National

Monument designations removed additional blocks of reserves from development. In 1996, this Act was used to create the Grand Staircase-Escalante National Monument removing 23 billion tons of mineable coal reserves in Utah’s

Kaparowits coalfield.

Pending actions, such as the Forest Service Roadless Area Conservation Rule will

remove even larger portions of the coal reserves located on Federal lands from responsible development.

Forest service roadless conservation areas

This Committee, and its members who serve on the Forest and Lands Subcommittee in particular, know well the history and the effects of the last administration’s Roadless Area Conservation rule that was published on January 12, 2001.

The lack of available information regarding affected areas of Forest Service administered lands made it extremely difficult for mineral developers to determine the impacts of the rule. Since the Forest Service did not identify or consider mineral resources in its draft environmental impact statement, industry had to create its own

maps by identifying proposed roadless areas and areas containing known mineral

resources on a forest-by-forest basis. The results of this exercise were particularly

staggering, especially for leasable Federal minerals such a coal. In fact, the implementation of this rule could sterilize over 40 percent of the coal production in Colorado and Utah.

According to the Department of Energy:

• The roadless initiative will have an impact on coal reserves in Colorado

and Utah, including both the expansion of existing mines and tracts of

coal of near-term commercial interest. While these resources are recovered using underground mines, roads are needed to build ventilation

shafts and for safety, e.g., to fight underground fires. The mines would

not be built or expanded if roads cannot be constructed.

• Existing leases may also be affected . . .2

In Colorado, one of the mines in the Grand Mesa-Uncompahgre Forest is my company’s, Arch Coal, West Elk Mine where 200 million tons of coal could become unrecoverable because of the rule. This loss of reserves will result in the premature

abandonment of the mine and its $100 million infrastructure. The DOE report predicts that over $10 billion economic activity would be lost as a consequence.

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The Bowie Mine in the Grand Mesa-Uncompahgre Forest will be blocked from developing 50 million tons of high quality coal reflecting over 2.5 billion in economic

activity. The Oxbow Mine, adjacent to the Bowie leases is surrounded on the east

and north by roadless areas. These roadless prohibitions will thwart future development at this operation.

The Forest Services Final Environmental Impact statement for the roadless rule

declares that in Utah’s Manti-La sal Forest three tracts alone account for 185 million tons of high Btu coal that are prejudiced by the rule. Further investigations

of coal resources in the area indicate the impact could be much greater.

The Forest Service chose to accept these severe prescriptions even though mine

roads are temporary and the Surface Mining Control and Reclamation Act (SMCRA)

mandates that these roaded areas be reclaimed to a condition as good or better than

they were before mining. It should be noted that surface coal mines cannot be permitted on Forest Service administered lands unless the Secretary of Interior ‘‘finds

that there are no significant recreational, timber, economic, or other values which

may be incompatible with such surface mining operations . . .’’ In other words, the

values the rule is supposed to safeguard have already been considered and protected

by an existing statute. Yet, millions of tons of low sulfur coal have been sterilized

by this needless and unlawful regulation.

Federal leasing

In August 1976, the Federal Coal Leasing Amendments Act (‘‘FCLAA’’) was enacted. FCLAA’s imposed for the first time a series of radically more stringent requirements upon Federal coal lessees, the compliance with which forced such lessees

to make a host of major financial and operational commitments, many of which

made good policy sense but others were counterproductive. Over the past 25 years,

those Federal coal lessees who have managed to stay in business have fully complied with both the rational and the questionable requirements.

Federal coal lessees are not today calling for major reform of the FCLAA program,

although over time certain of FCLAA’s provisions ultimately may need to be revisited and modified. Even where modifications ultimately may be needed, in most instances, the debate on such modifications can be deferred to a later time when adverse impacts become more focused and imminent. There are two areas that need

attention however.

1. Advanced royalty provisions

The first issue that must be addressed is a segment of FCLAA’s current ‘‘advanced royalty’’ provisions, which call for early legislative reform by Congress. The

current advance royalty provisions provide, among other items, that:

Advance royalties may not be paid for more than an aggregate of 10 years,

Advance royalties paid during the initial 20 year term of a lease may not be

carried over past the 20th year, and

The Secretary of Interior may unilaterally cease to accept advance royalties.

With the progressive deterioration of U.S. coal market prices, several Federal coal

lessees have been forced temporarily to curtail production or to idle uneconomic

mines.

We recommend that narrowly drafted, surgical changes be made to FCLAA’s advance royalty provisions which would:

Extend the aggregate entitlement to pay advance royalty in lieu of continued

operations from 10 years to 20 years;

Delete the current prohibition on the carry-over of advance royalty payments

made during the initial 20–year period of the lease;

Delete the current authorization for the Secretary unilaterally to cease to accept advance royalties in lieu of continued operations; and

Delete the last sentence of Section 39 of the MLLA of 1920 (Section 14 of

FCLAA) prohibiting the waiver, suspension, or reduction of advance royalties.

2. Address the need to move expeditiously on lease-buy applications

The Federal Coal Leasing Amendments Act of 1976 (‘‘FCLAA’’) requires that all

leases for Federal coal be conducted by a competitive leasing process. One of the

mechanisms for initiating competitive leasing is through a lease-buy application

(‘‘LBA’’) procedure, which allows an existing coal mining operation to nominate a

tract for the expressed purpose of prolonging the life of the existing mine. The LBA

process has been effectively used in Utah, Colorado and Wyoming for over a decade

now. In the Powder River Basin (‘‘PRB’’) of Wyoming, which is called by many the

‘‘Saudi Arabia of coal’’, since that area is producing in excess of 1/3 of all U.S. coal,

the LBA process has been critical to the orderly development of Federal coal reserves.

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As pointed out, coal production in the PRB has jumped dramatically since the

Clean Air Act Amendments of 1990 primarily because western coals are typically

very low in sulfur and also very low in inherent NOx when burned in power plants.

With this dramatic increase in demand for low sulfur western coal has come the

need for continued access to Federal coal reserves. Western coal producers clearly

recognize this need and make their leasing plans accordingly. Unfortunately, the

Bureau of Land Management now is only processing and holding one Federal coal

lease sale per year in the Wyoming PRB. Thus, the most recent coal lease applications filed may not be offered for sale for eight years. Permitting requirements will

then add another approximately three years. As a consequence, it is readily apparent that there is an excessive backlog of Federal coal lease applications on file and

that the timeframe for processing LBAs and issuing leases has become unacceptable

to orderly development of this most important domestic energy resource.

There are several administrative opportunities to address this backlog. The first

opportunity is to consolidate the NEPA process instead of conducting separate EIS’s for each lease application. Several LBAs should be combined into one document.

Second, and even more importantly, the Department of Interior expeditiously should

evaluate the workload of other BLM offices to determine if there are any personnel

available to help work through this backlog. Finally, and of relevance to this hearing, Congress should give favorable consideration to supporting additional Federal

funding for the processing of these lease applications in order to short the intolerable backlog.

Coal/coal bed methane conflict in the Powder River Basin

The Powder River Basin of Wyoming and Montana is one of the world’ richest energy resource regions and includes the largest reserves of low sulfur coal in the

United States. Virtually all of the coal and about 50 percent of the oil and gas reserves in the Basin are owned by the Federal government and managed by the Bureau of Land Management (BLM) under the Mineral Leasing Act of 1920. Problems

have arisen, because BLM has issued Federal coal leases and Federal oil and gas

leases for the same locations in the Basin. In many cases when these oil and gas

leases were issues coal bed methane resource development was not contemplated.

In those areas leased both for coal and oil and gas, disputes over timing of mineral development have arisen. The sequence of development frequently becomes a

critical issue, because the production of any one of the minerals can result in the

loss of another. For safety and operational reasons, concurrent development typically is impossible. No clear statutory direction exist to resolve disputes over the sequence of mineral development in these areas where the Federal government has

‘‘double leased’ its minerals. BLM has not provided effective guidance or included

conditions in its leases that would provide a resolution to these disputes.

In order to achieve optimum recovery of the Basin’s energy assets, legislation that

would provide the missing statutory direction to resolve these mineral development

contests should be enacted. Legislation should be used only in the conflict areas of

the Powder River Basin and only as a last resort if private negotiations and BLM

administrative policies fail.

Mineral management service administrative appeals process

Under Department of Interior (DOI) rules promulgated in 1973, the Minerals

Management Service (MMS) is the only DOI agency with an intermediate appeal

to the director of the agency. All other DOI agency appeals go directly to the Interior Board of Land appeals (IBLA). The principal purpose of the MMS administrative appeals process should be the expeditious and independent review of cases involving disputed facts, legal issues, or policy upon request of the adversely affected

party. This two-stage process can extend 5 to 7 years, even before the controversy

can enter the courts.

In spite recommendations from a Federal Advisory Committee urging Secretary

of Interior Babbitt to direct MMS develop a one-stage process for all MMS appeals,

the Secretary decided to retain the current two-tier process. He made this decision

even though he stated in the decision document that he agreed with the Advisory

Committee’s report in support of its recommendation.

The current unwieldy appeals process needlessly ties up what may be considerable industry resources with no competing benefit. The Department should revisit

Secretary Babbitt’s ill-advised decision and implement a streamlined appeal process

like that used by all other DOI agencies. This action would save the agency and

the industry time and resources.

Revitalizing the abandoned mined lands program

The 1977 Surface Mining Control and Reclamation Act, SMCRA, mandates that

lands disturbed by coal mining be restored to their pre-mining conditions. Inactive

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mines are addressed through the Abandoned Mine land, AML, provisions which require coal operators to pay at fee to the Office of Surface Mining’s AML fund of 35

cents per ton for surface mined coal and 15 cents per ton for underground mined

coal. The funds are used to clean up pre-SMCRA abandoned sites. The fee has been

extended twice and is currently set to expire at the end of FY–2004.

To date $5 billion in contributions have been paid by the coal industry into the fund but only $1.3 billion in Priority 1 and 2 reclamation work has been completed.

Approximately $2.5 billion in work remains to be completed and the AML fund currently has an unappropriated balance of $1.5 billion. This has occurred because annual appropriations have been significantly less than the fees paid by industry and

the distribution formula is out-of-date and does not reflect significant increases in

western production. Further, the fund is paying for excessive Federal and state administrative costs of approximately $45 million annually.

The coal industry believes that 2001 provides a unique opportunity to reform the

AML program. The coal industry would support an extension of the AML program

if additional funds are dedicated to clean up of the remaining Priority 1 and 2 areas

and IF the current fee structure is reduced beginning in FY–2002. Suggested program reform should include a major reduction in administrative costs and a freeze

on the inventory of eligible reclamation projects. These actions would give long-term

financial stability to the various state AML programs and would ensure that the

Surface Mining Acts original environmental goals are achieved and that reclamation

is completed more quickly and effectively.

The Thunder Basin National Grasslands

There is a goal that is stated in the Thunder Basin National Grasslands (TBNG)

Draft Management Plan that purports to: ‘‘conserve air quality-related values over

Class I and Class II airsheds.’’

The U.S. Forest Service claims additional responsibility and authority with respect to air quality-related values on all Federal lands (Class I and Class II) via

broad interpretation of the Organic Administration Act of 1897, Wilderness Act of

1964, the Forest and Range Renewable Resources Planning Act as amended by the

National Forest Management Act of 1976. Additionally, The Federal Land Managers’ Air Quality-Related Values (AQRV) Work Group (FLAG) published a ‘‘guidance document’’ on December 29, 2000. This guidance seeks to identify AQRV’s and

define adverse impacts in Class I areas. This document also purports authority for

Class II areas under management by USFS, U.S. Fish and Wildlife Service and the

National Park Service via broad interpretations of various Acts delegating authorities to the aforementioned Federal Land Managers.

Currently, the Wyoming Air Quality Division does not evaluate the effect of new

or expanding surface coalmines on Class I (or II) areas with respect to Air QualityRelated Values. This is mainly because these particular facilities do not meet the

criteria of major facilities under the Prevention of Significant Deterioration sections

of the state or Federal air quality rules and regulations.

However, the Federal land managers have recently begun to require an evaluation

of cumulative impacts to air quality-related values (specifically visibility) in Class

I and selected Class II areas as part of the NEPA process for Federal actions such

as leasing Federal coal. This action is out of the State of Wyoming’s direct jurisdiction, as opposed to the permitting program where the Wyoming Air Quality Division

is the lead agency.

This practice is especially concerning in light of the fact that six (6) new ‘‘Special

Interest Areas’’ are being proposed as part of the Thunder Basin Grasslands Draft

Management Plan. These areas were originally proposed for ‘‘Wilderness’’ designation in the draft plan and are also considered ‘‘roadless’’. These areas are located

from six to thirty (6) to (30) miles from five (5) existing surface coalmines. Each of

these mines has a history of continued leasing interest for Federal coal reserves located adjacent to the existing operations. The additional leases serve to allow the

continuation of these operations. Each of these five (5) mining operations submitted

applications for additional leases in the year 2000. Representatives of the USFS

Douglas Ranger District have noted in past discussions that these Class II ‘‘Special

Interest Areas’’ would likely be reference points in computer modeling evaluations

of Air Quality-Related Value impacts during the leasing process. There is very little

doubt that significant impacts will be predicted considering the vicinity of the proposed special areas to the mining operations and the highly conservative nature of

the modeling tools used for these purposes.

Risks: The possibility exists that predictions of significant impacts from existing

and expanding coal mine operations within the general area of these proposed ‘‘special’’ areas could negatively affect the ability to continue leasing Federal coal reserves.

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Five (5) large surface coalmines are located either wholly or partially on the

Thunder Basin National Grassland, which is located in the southern Powder River

Basin and is managed by the U.S. Forest Service. These five (5) mines produce Federally owned coal with the lowest sulfur content of any coal mined within the Powder River Basin and the United States. Of the 316 million tons of coal produced in

the Powder River Basin of Wyoming in 1999, 178 million tons or fifty-six percent

(56 percent) were shipped from these five (5) mines. In 1999, these five (5) mines

provided over sixteen percent (16 percent) of all U.S. produced coal.

In 1999, the average production rate of the five (5) mines on and adjacent to the

Thunder Basin National Grassland was approximately 36 million annual tons each.

At these production rates, the mines must periodically replenish reserves by applying for and purchasing new Federal coal leases through the Bureau of Land Management’s (BLM) Lease-by-Application, (LBA) process. Historically, the mines on

and adjacent to the Thunder Basin National Grassland have applied for new Federal coal leases through the LBA process every five (5) years beginning in 1989 to

present.

Impacts: Currently, applications for coal leases in the Powder River Basin filed

with BLM and pending sales total nearly 2.3 billion tons of mineable reserves. The

pending lease reserves represent one-hundred forty percent (140 percent) of the coal

lease sales that occurred for the five (5) years of very active coal leasing from April

1995 through the end of 2000. This indicates the strongest interest in coal leasing

in the region since initial establishment of extensive mining operations in the late

1970’s and early 1980’s.

The pending lease reserves represent an amount equal to 86 percent of the total

Federal reserves of coal leased in the Powder River Basin from 1991 through 2000.

The coal volumes in the pending lease applications represent approximately $560

million in bonus bids alone, to be shared equally by the Federal treasury and the

state where the lease is located.

The $560 million in potential bonus bids does not take into consideration

12.5 percent production royalty payments. Another $1.1 billion will be generated

(assuming an average prices of coal over time of $4.00 per ton). These royalty payments are fifty-fifty (50:50) between the Federal treasury and the appropriate state.

Five (5) of the pending eight (8) Federal leases will be located on or immediately

adjacent to the Thunder Basin National Grassland. Future coal lease applications

can and will involve USFS managed surface.

Regional haze

EPA’s Regional Haze rule has the potential to impact energy production and generation on Federal lands in several different ways:

Siting—modeling of new state-of-the-art sources can show an impact on Class

I Areas (national parks, wilderness areas, etc.). This modeling effort can have

the result of denial of a permit and force the abandonment of the project.

The Federal Land Managers will have two bites at the apple under the Regional Haze Rule: the first is regional haze Best Available Retrofit Technology

(BART) in which targeted emission reductions are met based upon overall technology assumptions in a region. This approach allows for the regulated community to have flexibility in meeting the reductions by over complying in one area

to meet the reduction goals. The second bite is reasonably attributable BART,

in which an impact in a Class I area is tied to a specific source (based upon

modeling). The dual regulatory program virtually eliminates any flexibility and

cost effectiveness achieved through a market based program.

As an example, the western United States is far ahead of the rest of the country in addressing Regional Haze. The modeling analysis showed that throughout

the range of potential emission reductions (moderate to extreme), there is no

perceptible improvement in visibility.

A review of assumptions made in the western plans needs to be initiated. The

plan was developed at a time of low natural gas and oil prices, and at a time

when it was believed that virtually all new electric generation plants would be

fired by natural gas. Assumptions regarding fuel price and the demand for electricity (growth) need to be reevaluated to ensure that the proposed caps on SO2

do not inadvertently impact the development of new sources.

Electric power plants built near western coal fields can help solve electricity shortfalls, but changes need to be made in permitting transmission lines

An electric transmission system providing operational and investment certainty is

a key element in a coherent and effective energy policy. For companies to invest in

new power plants providing affordable energy, there must be significant reform of

permitting and siting regulations not only for the plants, but for the transmission

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lines and facilities that follow. The lengthy and uncertain permitting process is the

problem, not the environmental protection required. We would recommend Federal

action reducing the permitting and review timeframes required. We would further

recommend a Congressional or Executive directive fashioned along the lines of the

Executive Order addressing California’s energy needs. That order gave DOE lead responsibility in ensuring priority focus on siting and permitting action by the various

Federal agencies involved, and facilitating those actions with the appropriate state

authorities. We also encourage the Congress to put in place an expedited and simple

permitting and siting processes for the vast areas of Federal Lands in the West,

which need to be crossed by transmission lines.

In addition to permitting and siting reform, uniform and enforceable rules governing the operation of the transmission system are needed. Our current and arguably antiquated power grid was designed for localized demand and reliability. Electricity today must be wheeled between states and regions. Given the interconnected

nature of the nation’s transmission system, it is critical to optimize system reliability and consumer benefit by ensuring that the state and Federal governments

enter into an effective regulatory partnership. However at present, it is still uncertain who will own or operate the lines, what rate of investment return will be allowed, and what will be the transmission charge. The absence of uniform and enforceable rules has delayed investment in improvements to the grid. The grid must

be operated as an integrated entity, not a balkanized confederation.

Mr. Chairman, this concludes my comments. I would be happy to respond to your

questions.

[The response to questions submitted for the record by Mr.

O’Connor follows:]

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Mrs. CUBIN. I thank the panel for their testimony. I have a few

questions.

Mr. Bowles, in your oral testimony you said that understaffing

of BLM was the problem for permitting coal bed methane drilling,

and I think you were talking about in the Powder River Basin

area. The Congress got special appropriations for funds on permitting coal bed methane production, for wells and for drilling.

It is my understanding, and it could be wrong—we tried to verify

this and didn’t follow through on it—that a lot of that money that

we got to hire personnel to do permits was spent on 12 pickup

trucks. Another problem that has occurred, at least in that area,

as you know, was the cumulative effects of all of the wells having

been built.

So I guess what I want to know is are you saying—I know Mr.

O’Connor said that Congress needs oversight of this, and I absolutely agree that we do. Are you saying that the Congress needs

to appropriate more money to hire more people to permit this, or

are you saying that the administration needs to get involved and

make sure that the money is spent the way it is intended to be?

After all, the Interior Department really is one of the only, if not

the only agency of Government that produces revenue for the Government, and you have to have the permitting done in order to do

that.

Mr. BOWLES. For one, BLM does not have a very responsive way

of permitting. Whether or not the money has been made available

or they have aggressively tackled the problem head-on, we have not

seen permits issued in a timely manner.

I might say that in one State that is outside of Wyoming, in

Utah, where we do business, we see a State application going

through in 30 to 45 days to drill a new well. That same State in

BLM applications is taking upwards of 240 days to drill a well. So

there is not only a possible manpower issue that is out there, there

is also what might be considered a mandate to the BLM as far as

their role in handling oil and gas activities for multiple use.

Mrs. CUBIN. So then your answer would be both?

Mr. BOWLES. Yes, ma’am.

Mrs. CUBIN. Mr. O’Connor, you heard Governor Geringer’s testimony, and a lot of your written statement and your oral statement

focuses on the problem with the Forest Service’s roadless policy

and the management of the Thunder Basin National Grasslands.

What do you think of the governor’s approach to State and Federal partnerships in that regard? Do you think his ideas will work

to undo a lot of the permitting complications that we have now?

Mr. O’CONNOR. Madam Chairwoman, I philosophically and

strongly believe that the people closest to the issues are the people

who should be empowered and sought out in a collaborative manner to work closely with the State as well as the Federal Government in seeking solutions to these problems.

I think it is inappropriate for the Federal Government to take a

one-size-fits-all approach to problems that are regional or local in

scope, and I think it is appropriate and necessary and just flat the

right thing to do to empower States and to empower communities

and the citizens of those communities to be able to work with all

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levels of State and Federal Government in order to seek out these

solutions.

Mrs. CUBIN. You also referred to the problem that you are having

with the Forest Service roadless rule at the West Elk mine in Colorado. I wondered, was there any attempt by your company to work

with the previous administration, interact with them, or the National Mining Association about the concerns before the rule was

promulgated?

Mr. O’CONNOR. One of the major difficulties we had was when

the roadless environmental impact statement and the rules came

out last fall, they were so vague and so difficult to comprehend that

we had a hard time really identifying with any specificity what

areas in the Western United States would be impacted and which

areas would not be.

On a number of occasions, we formally as well as informally requested maps of areas in order to make a determination of potential areas of impact, and we were told by the Forest Service that

no maps existed. It was not really until the very end of the process,

really when the comment periods were over and the initiative was

about to be implemented, that we were able to go back and on our

own initiative put together maps based upon indirect data that we

had gotten through the EIS that would be able to identify specifically what lands would be covered.

We have asked the Forest Service to advise us if they believe

that these maps that we have done have been incorrect, and so far

all indications are that in almost all cases what we have done appears to be correct. But we had to put it together ourselves. There

were no maps by the Forest Service done, and we think that this

really did a disservice to the potentially impacted citizens around

the area who were not able to really identify during the comment

period what might or might not be happening in their areas.

Mrs. CUBIN. So it sounds to me like the rules and regulations—

that input didn’t really happen or they just rushed it through without considering fully input from the public and from you and from

other folks as well.

Mr. O’CONNOR. I agree.

Mrs. CUBIN. My time is up, but I do have one other question that

I wanted to ask Mr. Bowles.

What is the Cooperating Associations Forum? I wonder, is it possible to make a copy of their study available to the Committee?

Mr. BOWLES. We would be pleased to do that.

Mrs. CUBIN. Would you tell me what it is?

Mr. BOWLES. Well, that was a group that—I think you see that

in written testimony that listed 7 States that actually did a study

to look at what has happened in land access over the course of

years. That is one of the unfortunate things that we have in many

of our Western State resources, is really getting our hands around

what kind of available resource is there. This group did take a stab

at that and I would be pleased to make it available to the Committee.

Mrs. CUBIN. Thank you. I would like that for the record.

Mrs. CUBIN. I have quite a few other questions that I wanted to

ask the panel, but time is wearing on and I do need to go to anVerDate 11-MAY-2000 13:13 Aug 24, 2001 Jkt 000000 PO 00000 Frm 00116 Fmt 6633 Sfmt 6602 J:\DOCS\70888.TXT HRESOUR2 PsN: HRESOUR2
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other meeting. So I will submit the questions in writing, if you

would be so kind as to answer them.

Mrs. CUBIN. At this time, I recognize Mrs. Napolitano for questions.

Mrs. NAPOLITANO. Thank you, Madam Chair.

This question is for Mr. Stanley, and one of the things you referred to in your hand-out, in the map, was the Rocky Mountain

area, that it is closed to industry. I wonder if you can provide a

more detailed explanation of what you mean by the restricted

areas.

The Department of the Interior has given us information that

shows 95 percent of the those lands have been open, and you indicated on this map only 40 percent, because it is restricted. Could

you explain or even give us in writing what your industry is referring to so that we can better understand specifically what you are

referring to, and also to see how we can understand your claim

from the industry that this is happening?

Mr. STANLEY. Yes. The 40 percent is the total restriction from

many different sources of restrictions. There are roadless policies,

there are the restrictions during the year, there are— Mrs. NAPOLITANO. Of what kind, sir?

Mr. STANLEY. We are not really talking about national parks and

wilderness areas. We are talking about other general restrictions

within this. I will be happy to submit in writing the documentation

for this. I don’t have that with me.

Mrs. NAPOLITANO. Would you, please, sir? I would really like to

have it entered into the record so that we have that clarification.

Mr. STANLEY. Yes, ma’am.

Mr. CALVERT. [Presiding.] The Chair will keep the record open

for any additional information to satisfy the gentlelady from Southern California.

Mrs. NAPOLITANO. Thank you.

[The information referred to follows:]

Mr. CALVERT. Any additional questions?

Mrs. NAPOLITANO. No, thank you.

Mr. CALVERT. I just have one quick question for Mr. Bowles, representing API. I understand you are also with Phillips Petroleum.

Mr. BOWLES. Yes, sir.

Mr. CALVERT. For the interest of the Committee, at what capacity are the West Coast refineries operating right at present? I know

that is not your— Mr. BOWLES. It really is not my area.

Mr. CALVERT. Do you have any information that leads you to believe that are operating pretty close to 100-percent capacity? That

is what I understand.

Mr. BOWLES. Generally, in the U.S., refinery capacity is running

at or close to maximum capacity.

Mr. CALVERT. At maximum capacity?

Mr. BOWLES. Yes, sir.

Mr. CALVERT. This is really outside the jurisdiction of this Committee, but it does have an interrelationship to supply because as

we increase the supply of domestic production in the United States,

obviously we want to move that domestic production to refiners. If

we increased our domestic production by a particular amount, say

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10 percent—and oil is a fungible commodity—what we don’t

produce domestically we will import, and vice versa.

Do you foresee additional refining capability coming online in the

foreseeable future to take care of that increased supply?

Mr. BOWLES. Well, I would say in the near term more likely what

you would see is the displacement of the import of foreign crude

into the West Coast markets.

Mr. CALVERT. Now, are more and more of the imports coming

into the United States refined elsewhere prior to entry into the

United States?

Mr. BOWLES. I don’t have any good statistics on that, Congressman.

Mr. CALVERT. I bring that up because obviously the energy issue

is beyond just the supply issue. I know in our State of California

a significant amount of the refining capability went away when we

put in a clean air standard to lower sulfur content in oil, which is

a good thing. And now we are doing it nationally. In my previous

Committee Chairmanship we wanted to make sure we maintained

refining capability in order to make sure we don’t have an increase

in gasoline prices nationally as we have seen in California. So that

is the reason I brought that subject up for the Committee’s edification.

Mrs. Napolitano?

Mrs. NAPOLITANO. Mr. Chairman, thank you for recognizing me.

There was one question that I neglected to ask.

Mr. CALVERT. The gentlelady is recognized.

Mrs. NAPOLITANO. Thank you.

I believe it was Mr. O’Connor who made the statement that

somehow California would be hurt in its ability to recover. I wonder if you would elaborate on that statement. I think you mentioned something to the effect that if production is curtailed, it

would hurt California’s recovery.

Mr. O’CONNOR. I am sorry that I am unfamiliar with what your

reference is. Could you restate it?

Mrs. NAPOLITANO. There was a statement earlier, I believe, when

I walked in that you were speaking to it. I unfortunately didn’t

continue to make notes on it because I was trying to catch up.

Mr. O’CONNOR. Perhaps it was reference to a large underground

coal mine that we have in Colorado that could be adversely impacted by the Roadless Initiative. It is called the West Elk mine.

It is the second largest coal mine in Colorado. It is a very high-Btu,

very, very low-sulfur coal that is supplying energy into the Midwest.

The Roadless Initiative stands the prospects of preventing us

from moving our existing operations into an adjacent 200-millionton reserve that is adjacent to our existing reserves. And if we are

not able to do so, the 360-some employees, the $100 million investment, and the annual payroll of $26 million, as well as the major

impacts that would occur in west central Colorado, would be drastically impacted as a result of our premature closure of this mine

because of our inability to move into an adjacent reserve.

Mrs. NAPOLITANO. How would that affect or impact California?

Mr. O’CONNOR. Now, I understand the question.

Mrs. NAPOLITANO. That is what your statement included.

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Mr. O’CONNOR. I am sorry for the redundancy.

With all of the controversy and publicity that has occurred in

California in the last 6 months involving high energy and high

electricity prices, ironically there is a small island within the

southern part of the State that is enjoying inexpensive electricity

and very reliable electricity, and it is 6 million people in the Los

Angeles area.

The reason they are is because the Los Angeles Division of Water

Power many years ago went to Utah and built a large coal generation plant and they are bringing in their electricity from Utah to

California. That electricity is very inexpensive. It is reliably priced

and reliable long term. Mayor Riordan has called for the construction of an additional power plant in Utah in order to meet Los Angeles’ long-term needs.

The point of my testimony was that because of this Roadless Initiative, as much as 40 percent of the unleased Federal coal in this

area will not be able to be developed, and that puts into harm’s

way the city of Los Angeles’ ability, and in a broader sense California’s ability to be able to pluck out this very low-hanging energy

fruit and take advantage of it because of its growing electrical

needs.

Mrs. NAPOLITANO. Okay, I get your point. The thing that puzzles

me, though, is that the city of Los Angeles is fueled by the California Department of Water and Power, which so far has not been

impacted because they stayed out of the deregulation. They have

apparently been able to supply enough to its over 11 million customers so that they are staying afloat very well.

I just did not correlate what you were talking about because Los

Angeles is being taken care of. It is the northern part of California,

and to some lesser degree the rollouts are starting to affect midCalifornia and Southern California. So it just does not correlate. I

think it is kind of stretching it a little bit to say that our ability

to be able to produce in that area is going to have a tremendous

impact or will be a significant change for us in California.

Mr. O’CONNOR. Certainly, the impacts are not going to be immediate. But in the longer-term scheme of things, not just for the city

of Los Angeles but for California itself, these Utah coal reserves

stand available to be a major low-cost, reliable and affordable energy supplier, and this Roadless Initiative is a major impediment

to that potential.

Mrs. NAPOLITANO. Well, hopefully, California will be found in a

situation where it will not have to rely on outside help. The fact

that the governor has promoted 6 new generation plants and has—

actually, 3 being built, 3 on the books, and 6 more or 7 more,

should be able to take care of the futuristic needs of California

without having to rely on outside interests of any kind, and I am

looking forward to that.

Mr. O’CONNOR. I honestly hope you are right.

Mrs. NAPOLITANO. Well, add to that the use of other kinds of

power producers that are beginning to become more viable. At one

time they were dormant and now they are becoming more interested in providing energy for those of us in California. So while I

understand and I thank the State for its interest and for being

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there when we need them, I don’t think that our reliance is going

to be something they can count on.

Mr. CALVERT. I am going to wrap it up.

I am just curious. The coal that was mentioned in Utah is the

cleanest coal that is available in the continental United States, as

I understand it, or amongst the cleanest coal in the United States?

Mr. O’CONNOR. It is among the cleanest coals.

Mr. CALVERT. Right. How many megawatts is that power plant

that you mentioned producing in Utah?

Mr. O’CONNOR. I don’t recall exactly, but I think it is about 3,500

megawatts.

Mr. CALVERT. 3,500 megawatts.

Mr. O’CONNOR. There are three units there and Mayor Riordan

has called for a fourth unit.

Mr. CALVERT. And the expansion is for an additional 1,000-megawatt plant?

Mr. O’CONNOR. Yes.

Mr. CALVERT. So bringing that up to 5,000, which is about 10

percent of the total load in the State of California. Is that a correct

statement?

Mr. O’CONNOR. Yes.

Mr. CALVERT. Thank you, and this panel is excused. Thank you

for coming out and attending today.

We are going to bring up our last panel as the gentlemen are

leaving. I would like to recognize the people we have on our panel:

Mr. Leland Hogan, a rancher from Utah; Mr. Chris Hocker, President of the National Hydropower Association; Mr. Robert Judd, Director of the USA Biomass Power Producers Alliance; and Ms. Leslie James, Executive Director of the Colorado River Energy Distributors Association.

With that, I would recognize Mr. Hogan for 5 minutes. Please

limit your testimony to 5 minutes so we will have some time for

questions.

Thank you.

STATEMENT OF LELAND J. HOGAN, STOCKTON, UTAH

Mr. HOGAN. Thank you very much. It is a pleasure to be here,

Mr. Chairman and Committee members. I am a rancher and a

farmer from Stockton, Utah, which is about 50 miles west of Salt

Lake City.

My other credentials are in my written statement. I won’t take

the time to go through that and I will try and talk about things

that are pertinent to our specific operation rather than to reiterate

those things that are in the written comments.

My brother and I run a diversified farm operation, as I said,

about 50 miles west of Salt Lake City. We have to pump our water

in order to gain the water that we need in order to irrigate our

crops. We are about fourth generation in this country. We came

from the Scandinavian countries to this country, and we have been

in agriculture back as long as our history records.

We are in agriculture for the long term, and our contracts that

we sign or the indebtedness that we take on indicates that we are

there for the long term. In order to accomplish that, we need power

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that is affordable and also available in order to continue farming

as we have in the past.

The data that has been collected by a magazine that is circulated

through the industry called Irrigation magazine that gathers data

from land grant colleges across the country indicates that a continued rise in irrigated crop land is happening across the country. In

order for us to continue to be as productive as we have in the past

and increase our production, irrigation seems to be the way that

it is headed. With irrigation comes more consumption of power.

Where we live, it seems as though coal-fired power plants have

produced power the most economically; it produces the most economic power that is available. If there is a better economic way to

do it—and some of those things have been discussed today—I hope

that those things are explored and that we insert them into our national energy policy.

I have seen and participated in this cycle as it has gone on over

the past 30 years—an abundance of power, a shortage of power, a

decrease in prices, an increase in prices. That really hurts us as individuals being on the farm. Our net income is affected directly. We

are a taker of prices and not a setter of prices. Because our markets are national and international, we take prices that are set a

long way away from where we produce. We have to fit within those

categories or we go out of business. As prices escalate and we see

these things happening, it is very disturbing to us.

With the stroke of a pen, the Grand Staircase-Escalante National

Monument was created, engulfing approximately 2 million acres of

land. Under that land lies a great coal reserve; no one knows exactly, but perhaps enough coal to last the area that it is producing

for for maybe hundreds of years.

As I said before, an affordable and available, consistent, readily

usable amount of electricity is so important. Our production cycle

is very short. We produce what we produce in approximately 6

months of the year. If we miss any portion of that time, our production decreases. Our ability to stay financially viable also decreases.

So we are locked into a situation where we can’t change things too

much. We have to use the power.

It was alluded to this morning in some of the discussion that

large users of power in the agricultural industry will not produce

this next year. Well, that break-off is about at 4 megawatts. I don’t

think there is a producer in the State of Utah that uses 4

megawatts. There are those in Idaho, and there probably will be

some who won’t produce this year, but they will take a payment

instead of production. That will cause a ripple effect throughout the

whole agricultural industry because the feed or the commodities

that would have been produced by those people will be minus from

the equation this next year. Therefore, we are going to see ripple

effects through the whole agricultural economy because of this isolated situation that is taking place this year. It will be very interesting to watch.

As a farmer, as a former elected official, a parent and as a grandfather, I plead with the members of the Committee to move toward

a national energy policy that puts us in a position that we do not

find ourselves today, a position where we have what we need in

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order to continue the standard of life that we have set for ourselves.

I thank you very much for the opportunity to be here today.

[The prepared statement of Mr. Hogan follows:]

Statement of Leland J. Hogan, Stockton, Utah

My name is Leland J. Hogan. I am a fourth generation farmer. My brother and

I operate a diversified ranch and farming operation, which includes 600 acres of alfalfa hay and grain crops in Stockton, Tooele County, Utah. In my area, as is true

with much of the farmland in the West, crops must be artificially irrigated by pumping underground water or pressurizing surface water for sprinkler systems. I have

served as a member and chairman of the Utah Committee of Consumer Services,

an agency of Utah state government responsible for analyzing economic impacts of

utility pricing on consumers. I have also served as chairman of the Tooele County

Commission, a member of the Utah Quality Growth Commission, vice president of

the Utah Farm Bureau Federation, and chairman of that organization’s irrigation

pumpers’ committee. I am particularly pleased to appear before this Committee, because Chairman Hansen is my congressman.

Energy costs comprise a major, and rapidly growing segment of the cost of producing food and fiber for America’s consumers. From the fuel for our farm implements, to the irrigation pumping costs, to the processing and transportation of this

food and fiber, the impact of these skyrocketing energy costs is placing farmers in

a serious economic squeeze.

The agriculture industry’s ability to directly pass on these increases in energy

costs is limited or non-existent. Due to the highly competitive national and international market for agricultural products, the price for our products is set by market forces and not by producers. As ‘‘price takers,’’ producers and processors must

absorb increased costs resulting in the higher threat of widespread business failure.

Moreover, in the long-run, increased energy costs to agriculture producers will ultimately be passed on to American consumers through higher retail pricing of goods.

There are roughly 3,500 agriculture producers in Utah who rely on electricity to

irrigate crops. Approximately 1,300 of these irrigators are customers of Utah Power,

Utah’s only investor-owned electric utility company. Last June, these regulated customers used 54 megawatts of power on the company’s peak load, which, to put in

perspective, is enough power to provide electricity for 30,000 homes for one month.

The collective annual cost for electricity to these 1,300 irrigators was $7.2 million.

However, these irrigators, along with all customer classes of the company, will be

facing a 9.5 percent increase in their utility rates due to a recent interim rate adjustment ordered by our Public Service Commission. A rate case recently filed by

Utah Power to adjust rates even higher is also pending.

To top it off natural gas pricing to Utah retail customers is up 50 percent from

a year ago. While natural gas generally does not play as big a role in the cost of

production for agriculture in Utah as electricity, it still takes a significant toll on

residential cost of living.

So what can be done about these rapidly rising costs? While conservation and

more prudent use of the energy we have is always a good idea, the current situation

cries out loudly for the Bush Administration, working with congress, to develop a

sensible energy policy. May I assure the Committee that this comment is not a call

for nationalization of our energy production in any form. Rather it is a call for a

new commitment to development of existing known reserves of crude oil, natural gas

and other fuels in the carbon-based family. It is also a plea for the United States

government to devote far more funding and other incentives to foster development

of alternative energy sources, including plant-based sources.

As a Utahn I cannot fail to again point out that in our state there is a vast supply

of high grade, low sulphur coal. And perhaps hundreds of years’ supply of it was

locked up with the sweep of a presidential pen when the 1.7 million acre Grand

Staircase-Escalante National Monument was declared in Southern Utah four years

ago. Indeed, there are within that monument some important and apparently rare

plant species and some rare, even spectacular scenery. As a farmer I am vitally interested in identification and preservation of endangered plants species. Future

commercial agriculture plant genetics may depend on it. But there are vast acreages

of that monument underlain by this high quality coal that could be harvested with

very little surface disturbance. Isn’t it time that we start to make the connection

between the light switch on the walls of our houses and the coal mines of America?

In Utah most of the natural gas wells are on land managed by the Bureau of

Land Management. The permitting process to gain access to these lands for energy

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development is daunting. Although I will defer to those who are experts in this area,

surely this process can be streamlined and our government can encourage energy

production rather than impede it. These are public lands. The resources they hold

should benefit the public—all the public! We have learned much about more environment-friendly energy exploration and restoration of disturbed areas. I urge this

Committee to move our government back towards multiple use of these lands.

Some of my farm and ranch colleagues have visited Alaska’s Prudhoe Bay oil

fields. Then, after flying directly over the Arctic National Wildlife Refuge while in

that area, they came back convinced that with modern technology and the existing

commitment to environmental protection while harvesting energy, there is no real

reason to deny ourselves the vast quantities of recoverable high quality crude oil

available within that refuge.

As a citizen, farmer, former elected public official, a parent and a grandfather, I

plead with the members of this Committee to move this nation away from an evergrowing dependence upon foreign sources of energy supplies. I believe we can do it,

and I believe we must do it. If the recent escalations in energy costs, including the

manipulated oil prices by the cartels don’t make us understand this, I am at a loss

as to what will.

[Mr. Hogan’s response to questions submitted for the record

follows:]

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Mr. CALVERT. I thank the gentleman for his testimony.

Next, Mr. Chris Hocker, President of the National Hydropower

Association.

STATEMENT OF CHRIS HOCKER, PRESIDENT,

NATIONAL HYDROPOWER ASSOCIATION

Mr. HOCKER. Thank you, Mr. Chairman. My name is Chris Hocker. I am President of the National Hydropower Association, and I

appreciate this opportunity to talk about hydropower, which is the

number one renewable resource in the U.S.

Hydropower is the leading renewable. It represents about 10 percent of the nation’s electricity overall and about 80 percent of its

renewable energy overall. 98,000 megawatts of clean hydropower is

produced, which is enough for about 98 million homes. But as was

alluded to earlier today, hydro’s contributions are beyond energy.

They include irrigation, water supply, and recreation. They also

contribute to clean air and a safe, reliable transmission system.

Despite all that, I would like to call your attention to two troubling facts. First, hydropower is on the decline. Second, there is

quite a large amount of untapped hydropower that is being ignored. At a time when hydro should be most valuable, it is waning,

and this is due to a regulatory scheme and actions by resource

agencies who hold the upper hand in the licensing process. These

are the same problems, frankly, that play a large part in why the

development of new hydro capacity is being neglected. These problems can be fixed, but the time to do so is running short.

Hydropower is losing capacity due to FERC’s hydro licensing

process. We strongly believe the process is broken and badly in

need of repair. In fact, the Energy Information Administration

(EIA) said for the first time last year that hydro capacity will decline due to regulatory constraints. This demands urgent attention,

as half of the licensed capacity in the U.S. must be relicensed in

the next 15 years, and over half of that is located in the West,

where the energy crisis is paramount.

The licensing process is exceedingly complex, needlessly fragmented, excessively costly, and frustratingly inefficient. It fails to

fully weigh the benefits of hydropower and often results in extended litigation, which costs both the project and the environment.

What can be done to fix this? Enact legislation this Congress

which requires a more balanced review by resource agencies such

as the Departments of Interior, Commerce, and Agriculture in their

mandatory conditioning authority. We support legislation action because we honestly believe that our largest concern, which is balancing energy and non-energy values, can be achieved only through

legislation. Administrative reform efforts that have already taken

place have been helpful. We encourage them to continue, but we

don’t believe that administrative reform alone is enough. The problem must be addressed legislatively.

We must develop a process that permits agencies to consider

non-resource issues in their review and conditioning authority.

They should also be required to consider the economic effects of resource protection and bring balance and certainty to the process.

Otherwise, we will continue to lose hydropower.

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We must also act to encourage undeveloped hydropower. We

have an impressive amount of potential. A Department of Energy

(DOE) study shows that there are 21,000 megawatts of potential at

existing dams. There are over 4,000 megawatts available at existing hydro facilities, and again much of this potential capacity that

is being undeveloped is in the West.

Again, this is undeveloped because of the complex regulatory

scheme, and also because there are no incentives for producers to

bring new generation online. Therefore, we strongly support production incentives that would encourage new hydro capacity at existing sites; that is, without the need to build new dams.

As I conclude, I want to leave you with a few final thoughts.

First of all, the hydro industry takes very seriously its role as stewards of the rivers that we are privileged to use. We strongly believe

that healthy rivers and hydropower can coexist. Resource agencies

need to develop a better understanding that we can do both. We

can achieve both environmental and energy goals, and we should

all be in the direction of pursuing policies that recognize this.

Second, as we look for solutions to our energy problems, it is

without question in our greatest interest to expand the use of our

domestic renewable resources such as hydro. It is important for

fuel diversity, energy security, reliability, and clean air.

Finally, I want to emphasize that the time is running short, with

20,000-plus megawatts being relicensed in the next 15 years. As we

look to self-sustaining energy strategies, now is the time for policymakers to better incorporate hydro into the nation’s energy mix.

We can no longer afford to encourage energy policies that ignore

this extremely valuable resource. We should no longer contribute to

its decline.

Thank you, and I look forward to your questions.

[The prepared statement of Mr. Hocker follows:]

Testimony of Chris Hocker, President, National Hydropower Association

Good morning Mr. Chairman, members of the Committee. My name is Chris

Hocker. I am the President of the National Hydropower Association (NHA). I appreciate the opportunity to appear today to talk about hydropower—the nation’s most

valuable domestic renewable resource—and its relationship with Federal resource

agencies.

As you may know, hydropower is the nation’s leading renewable. It represents

about 10 percent of the nation’s electricity and about 80 percent of its renewable

energy. Overall, 98,200 Megawatts (MW) of clean and efficient power is produced

from hydro facilities—enough electricity for 98 million homes.

While these are impressive facts, hydro’s contributions go well beyond energy.

These benefits include irrigation, transportation, water supply, recreation, and invaluable contributions to cleaner air and a safe, reliable transmission system. De

spite these benefits, today I bring to your attention two troubling facts I believe deserve policy consideration.

First, hydropower is on the decline. And second, there is a large amount of untapped hydropower that has been ignored for too long. I find it somewhat ironic that

at a time when hydro should be most valuable, it is waning due to an arcane regulatory scheme and actions by resource agencies who hold the upper hand in the licensing process. These problems also play a large part in why development of potential new capacity is neglected. These problems can be fixed, however, but we need

your help, and that of the Administration, to resolve them. And quite frankly, time

is running short.

Hydropower is losing capacity and operational flexibility due to the Federal Energy Regulatory Commission’s (FERC) hydropower licensing process. We strongly

believe the process is broken and badly in need of repair. In fact, the Energy InforVerDate 11-MAY-2000 13:13 Aug 24, 2001 Jkt 000000 PO 00000 Frm 00128 Fmt 6633 Sfmt 6621 J:\DOCS\70888.TXT HRESOUR2 PsN: HRESOUR2
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mation Administration (EIA) said for the first time last year that hydro capacity

will decline due to ‘‘regulatory constraints.’’ This problem demands urgent attention as half of licensed capacity—28,784

MWs—must to be relicensed by 2016, and over 52 percent of it is located in Western states where energy supply and reliability issues have already reached a critical

stage, and water resource issues are paramount.

The licensing process is exceedingly complex, needlessly fragmented, excessively

costly and frustratingly inefficient. Further, it fails to fully weigh the benefits of hydropower and often results in extended and contentious litigation, costing both the

project and the environment.

Attached to my written statement, you will find a document that shows case after

case where the process has failed, strongly highlighting the need for reform. I encourage you to carefully review it.

What can be done to fix a process all stakeholders agree needs improving? Enact

legislation this Congress which requires a more balanced review by resource agencies such as the Departments of Interior (DOI) and Commerce (DOC) in their mandatory conditioning authority under Section 18 of the Federal Power Act, as well

as the Department of Agriculture (USDA), under Section 4(e). We support legislative

action because we honestly believe our largest concern, balancing energy and nonenergy values, can only be achieved through legislation.

This is not to say that administrative reform efforts over the last 18 months have

been useless. They have been very helpful, in fact, and we encourage these efforts

to continue. We hope Congress will provide support and encourage agencies to continue efforts devoted to administrative solutions in the areas that are most appropriate. We also commend the resource agencies for their efforts as progress has been

made. The fundamental problems with licensing, however, must be addressed legislatively.

We must develop a process that permits agencies to consider non-resource issues

in their review and conditioning authority. By requiring agencies to consider the economics effects of resource protection on other project values, we will bring balance

and certainty to the process that is desperately needed. In addition, we ask that the

process allow licensees to review and comment on mandatory conditions during the

process, limit conditions to project-induced impacts, enforce process deadlines, and

improve the collaboration amongst agencies and stakeholders. Otherwise, we will

continue to lose clean, reliable hydropower.

While we must act to stop the bleeding of lost hydro capacity due to licensing,

we can also act to encourage undeveloped, environmentally-sound hydropower. The

U.S. has an impressive amount of new hydropower potential. A Department of Energy (DOE) study shows there are approximately 21,000 MWs of potential capacity

at existing dams. Over 4,300 MWs are available at existing hydro facilities alone.

More importantly, much of this potential—over 10,000 MWs—is located in the capacity-hungry west.

This hydro capacity sits unused largely because of the complex regulatory scheme

I already mentioned. But, it is also undeveloped because there are no incentives for

producers to bring new generation on-line, a process that is more expensive and

complicated than ever.

Providing production tax credits for new hydropower capacity at existing sites will

help resolve this problem. Production credits already exist for wind and biomass,

why not hydro? Several proposals have been circulated this Congress to extend the

credit to other renewables. NHA strongly supports the tax credit expansion to include hydro at existing facilities and non-hydro dams. Without it, development will

not occur and we will fail to gain the benefits of additional hydro. Further, we will

fail to replace capacity already lost.

Before I conclude my remarks, I want to leave you with a few final thoughts I

hope you will remember as you examine policies regarding our natural resources

and energy strategies.

One, the hydropower industry takes very seriously its role as stewards of the rivers we are privileged to use. We strongly believe that healthy rivers and hydropower

can coexist. Resource agencies need to develop a better understanding that we can

achieve both and they should be directed to pursue policies that recognize this.

Our attempts to reform the licensing process will not remove the conditioning authority of the agencies or undermine existing environmental laws designed to protect our resources. NHA believes in both resource protection and the pursuit of effective and meaningful energy strategies that include hydropower.

Two, as we look for solutions to our energy problems, it is without question in

our greatest interest to expand the use of our domestic renewable resources such

as hydropower. It is important for fuel diversity, energy security, reliability and

clean air.

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Finally, time is running short. As we look to self-sustaining energy strategies,

now is clearly the time for policymakers to better incorporate hydropower into the

nation’s energy mix. It behooves us all to craft energy policies that embrace this extremely valuable resource, not further contribute to its decline.

Thank you. I look forward to your questions.

What’s Wrong With the Hydropower Licensing Process?

Real-Life Examples

Roughly half of all Federally-regulated hydroelectric capacity—240 projects in 38

states, representing 28,784 megawatts of electricity generation—is due to be relicensed by FERC in the next fifteen years. An inefficient licensing process that is

time-consuming, arbitrary, and costly places all of these projects, and the future of

hydropower as a clean, renewable energy source, at risk. The following examples,

taken from hydro projects around the nation, illustrate some of the many problems

associated with the current hydropower licensing process.

ARBITRARY AND UNILATERAL EXERCISE OF MANDATORY CONDITIONING AUTHORITY

On February 23, 2000 FERC rescinded a license previously issued for the 4.1 MW

Enloe Dam Project in, Okanogan County, Washington. Although FERC was in the

process of engaging all parties in addressing fish passage issues at the dam, the National Marine Fisheries Service (NMFS) challenged that process as encroaching its

unilateral conditioning authority under Section 18 of the Federal Power Act. NMFS

insisted on imposing a fish passage requirement in the project license despite (i) opposition to such passage by the Washington Department of Fish and Wildlife, the

Okanagan Indian Nation, and the Canadian government; and (ii) the desire of the

Congressionally authorized Northwest Power Planning Council to assign financial

responsibility for fish passage at Enloe Dam to regional entities.

NMFS had stated that its preferred position in the proceeding was license denial

and dam removal. By insisting on fish passage as a condition of the license and at

the licensee’s expense, NMFS not only acted, in the words of FERC Commissioner

Massey, ‘‘out of sync with regional planning,’’ but ultimately prevailed in gaining

denial of the license application. As FERC Commissioner He ́bert explained in his

concurring opinion:

Unfortunately, the Commission’s hope that this protracted dispute could

result in a mutually-acceptable agreement has been undermined by the recalcitrance of a single agency. . . In today’s order, the Commission states

that it no longer has the discretion to continue to resist NMFS’ over- tures. . .

One party, carrying mandatory conditioning authority, and focusing myopically on its own particular interest, can upset the collaborative process

if so inclined. To a party opposing licensing, stalemate may mean victory

for one party and defeat to the rest of America. . .

I view this process, where some participants, bearing veto power, have

more negotiating authority than others, if indeed inclined to negotiate at

all, as absurd. As a result, I am encouraged by pending legislative efforts

to rationalize this process, by requiring a greater level of cooperation among

Federal and state resource agencies. Such reform would benefit consumers

by forcing all parties to the table in an effort to resolve such disputes in

a fashion that is best suited for the benefit of all Americans.

ARBITRARY NATURE OF PROCESS/INAPPROPRIATE APPLICATION OF AGENCY AUTHORITIES

PacifiCorp is currently seeking a new FERC license for its eight-dam, 185 MW

North Umpqua project in Douglas County, Oregon. PacifiCorp initiated the process

in 1992 and went far beyond the normal requirements for public involvement and

science collection in the hope that the North Umpqua licensing process would become a model of how a utility could work collaboratively with all stakeholders.

After submitting its relicense application in 1995, PacifiCorp initiated the North

Umpqua cooperative Watershed Analysis to identify and address specific resource

concerns that emerged during the relicensing process. The watershed analysis was

the first-of-its-kind for a hydro project and involved PacifiCorp, Federal and state

resource agencies, academic institutions and interested members of the public.

PacifiCorp and other interested parties then entered detailed settlement discussions

in 1997.

After two years of discussions, yielding little consensus, the U.S. Forest Service

(USFS) insisted—without providing an adequate scientific explanation—that Soda

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Springs Dam (one of the eight dams on the project) be removed as a condition of

settlement to meet objectives contained in the President’s Forest Plan. This, despite

the fact that removal of Soda Springs Dam would put the viability of the entire

project at serious risk, from both an operational and economic standpoint, and despite there being other mitigation alternatives available. This also represents the

first time that the Forest Service has indicated it intends to use its 4(e) conditioning

authorities under the Federal Power Act to require a dam removal. This would create a broad, adverse precedent for other hydroelectric projects in the West located

wholly or in part on Forest Service lands.

PacifiCorp had recently agreed to remove its Condit Dam in south central Washington because compelling reasons existed. By contrast, no compelling reason exists

for removal of Soda Springs. Citing an unreasonable bargaining position by USFS,

and concerns over the precedential nature of the removal requirement, PacifiCorp

walked away from settlement negotiations in November, 1999.

PacifiCorp remained interested in achieving a settlement that balances the need

to mitigate for project impacts with the need for cost-effective renewable resources.

The company and other stakeholders have been able to restart settlement negotiations and those discussions continue. But the North Umpqua experience points to

significant flaws in the current law. If the Federal Power Act required conditioning

agencies to take a balanced approach in setting their demands and included some

accountability over them, the settlement negotiations might have been conducted

more smoothly and efficiently in this case.

EXCESSIVE LENGTH OF PROCESS/JUDICIAL CALL FOR LEGISLATIVE IMPROVEMENTS

In March, 1997, the Eugene Water & Electric Board (EWEB) received a new

FERC license for two projects (23.2 MW combined) on the McKenzie River in Oregon. In the license, FERC incorporated certain fishery conditions prescribed by

Federal resource agencies under Section 18 of the Federal Power Act (FPA)—at a

cost to EWEB of $14,000,000—but rejected several conditions because they did not

meet the requirements of the FPA for ‘‘fishway prescriptions.’’

Despite the $14,000,000 of project improvements, several interest groups and

agencies requested an administrative rehearing of the license before FERC; upon denial of the requests, the parties challenged the license before the U.S. Court of Appeals for the Ninth Circuit. Among other claims, the parties contended the FPA does

not authorize FERC to refuse to accept any condition prescribed under Section 18.

In other words, the parties asked the court to rule that the resource agencies had

absolute power to dictate license conditions under the FPA whether they met the

intent of the FPA for a fishway prescription or not.

In its August, 1999 decision, the court did just that—concluding the FPA denied

FERC the authority to modify, reject, or reclassify prescriptions submitted by resource agencies under Section 18, even while noting FERC’s observation that the

resource agencies ‘‘do not concern themselves with the delicate economic versus environmental balancing required in every license.’’ The court went on to acknowledge

Congressional ‘‘failure’’ to require agencies to develop improved ‘‘regulations, procedures or standards for implementing Section 18.’’ The court noted that, absent Congressional action, the court was powerless to rewrite the statute. ‘‘Our task,’’ the

opinion stated, ‘‘is to apply the statute’s text, not to improve upon it.’’ The court’s

decision means that currently only a Federal court of appeals has the authority to

determine whether a fishery condition offered by a Federal resource agency and required to be included in a license meets the requirements for a ‘‘fishway prescription’’ under the FPA.

With its hands thus tied, the court’s decision will mean a remand of the license

back to FERC to be re-written once the appeal is completed—8 years after EWEB

first submitted its license application; with only the Ninth Circuit then having the

authority to decide whether any condition prescribed by a resource agency meets the

FPA requirements for ‘‘fishway prescriptions.’’

CONDITIONS MAKING PROJECT UNECONOMIC/ARBITRARY NATURE OF PROCESS/

INSUFFICIENT IMPACT ANALYSIS

In 1996, during the relicensing of the Edwards Dam near Augusta, Maine, the

U.S. Fish and Wildlife Service (USFWS) and the National Marine Fisheries Service

(NMFS) prescribed a fishway system on the dam to safeguard a few species of fish.

The fishery agencies estimated this fishway system would cost approximately $9

million while the licensee estimated the cost at $12 million—both of these estimates

effectively rendered the project uneconomic. Lacking the authority to amend the

prescription or otherwise balance it against the energy or other resource values of

the project, FERC instead ordered the removal of the dam in November 1997.

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During the relicensing process, the USFWS and NMFS also recommended that

flows of 4,500 cubic feet per second be released annually in July into a deep hole

below the dam they determined was a spawning and nursery habitat for the Atlantic sturgeon. This flow recommendation had severe economic implications on the

project since it would force the project to forgo power generation completely in July

most years. This deep hole was located just below the area where the dam was

eventually breached and this once-important spawning and nursery habitat is now

assumed to be filled with rubble.

The U.S. Department of Interior and segments of the environmental community

have hailed FERC’s decision as a means of restoring a 17-mile stretch of the Kennebec River to its ‘‘natural condition’’. Moreover, certain environmental groups are

now claiming that the simple act of removing the dam has successfully restored this

section of the river yet no comprehensive studies are being planned to actually

measure the success of this dam removal on the restoration of the river ecosystem.

ARBITRARY NATURE/EXCESSIVE LENGTH OF PROCESS

In an ongoing relicensing of a 35.5 MW facility in New York State, arbitrary fishway prescriptions have been proposed by the USFWS, at a cost of over $2 million. Why arbitrary?

The blueback herring, the primary species on which the prescriptions were

premised, is not native to the river where the project is situated.

With an 80-foot waterfall, blocking upstream fish passage, there would be no

migration without the man-made lock system adjacent to the project.

The project (and other hydro facilities on the river) have operated without

fishways for several decades and during that time the fish population has grown

to over 100 million annually.

Pre-filing consultation started on this project in 1986, and a final license order

still has not been issued. If the fishway prescription is included in the license along

with other resource protection measures, the project would become economically

unviable.

ARBITRARY NATURE OF PROCESS/FERC APPROVAL OF INAPPROPRIATE CONDITIONS

In a recent relicensing of a Western project, the U.S. Forest Service imposed numerous conditions, including one that required the project owner to annually send

the Forest Service a set payment, expected to cover all operation and maintenance

costs associated with existing campgrounds in the project vicinity. The owner pursued an administrative appeal of this condition at the Forest Service, arguing that

the Forest Service failed to demonstrate that most of the campgrounds’ use was re- lated to the project. Furthermore, the Forest Service did not attempt to justify the

amount of the annual payment for the operation and maintenance costs it sought

from the licensee.

Nonetheless, FERC included the condition in the project license, concluding that

it lacked the authority to even consider if a relationship between the condition and

the project justified the Forest Service condition. Similarly, FERC was unable to reject an instream flow release imposed upon the project by the Bureau of Land Management, even though FERC summarily dismissed as inappropriate and unsupported the same exact amount of instream flow release recommended by the California Department of Fish and Game.

After FERC issued the new license for the project, containing the contested condition, the owner challenged the condition at FERC and took the case before the U.S.

Court of Appeals. Just prior to the case being heard and five years after the first

of the two administrative appeals were filed with the Forest Service, the Forest

Service decided that the operation and maintenance costs were indeed inappropriate

and accepted an owner-proposed method for reimbursement of only those campground operation and maintenance costs related to the project—approximately

1.25 percent of the amount originally demanded by the Forest Service.

FERC APPROVAL OF CONDITIONS THAT RESULT IN ‘‘NO QUANTIFIABLE BENEFIT’’/

EXCESSIVE LENGTH OF PROCESS

After FERC asserted jurisdiction over a 70 year old, 1.2 MW project in New England, the project owner reached agreement with one state agency on the level of

minimum flows to be released from the project. However, a resource agency from

an adjacent state and the USFWS prescribed a minimum flow that was nearly twice

the agreed upon level. In its final environmental assessment for the project, FERC

concluded that the owner’s minimum flow could be provided with existing project

equipment and that there was no ‘‘quantifiable benefit’’ from requiring the USFWS

flow level rather than the level proposed by the owner.

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However, because the recommendation was made under section 10(j) of the FPA,

and because the recommendation appeared ‘‘consistent with the FPA,’’ FERC incorporated the higher minimum flow requirement in the license. FERC’s rubber stamp

approval of the USFWS 10(j) recommendation, along with other conditions imposed

on the project, had the effect of reducing net revenue from the project by

60 percent, making the project economically marginal at best. (Note: Issuance of the

license for this small project took more than 8 years.)

DUPLICATIVE NATURE OF PROCESS

The Energy Policy Act of 1992 specifically prohibits Federal land managing agencies from requiring an existing hydropower project to obtain a Special Use Permit.

However, in a number of licenses, the Forest Service has taken the standard Special

Use Permit terms and included them in the conditions submitted to FERC under

section 4(e) of the Federal Power Act. In turn, FERC has had no choice but to impose these conditions on the project license. These Special Use Permit conditions are

designed to allow the Forest Service to regulate the project in the same manner that

FERC administers the licensed project. Thus, despite the Energy Policy Act prohibition, the Forest Service is duplicating FERC’s legislative mandate to administer

Federally licensed hydropower projects.

CONDITIONS MAKING PROJECT UNECONOMIC

In 1997, six years after the licensee filed its initial plan, FERC issued an order

approving a mitigation and management plan for the 170 MW Kerr Project in Montana. The FERC plan incorporated conditions submitted by the Department of the

Interior requiring a variety of non-operational measures, including: a fish and wildlife implementation strategy to be funded through a one-time payment of $12.5 million and annual payments of $1.27 million, a fish stocking plan, the acquisition of

6,800 acres to serve as replacement wildlife habitat, the construction of five islands

to serve as waterfowl habitat and construction of erosion control structures.

The FERC environmental impact statement (EIS) on the mitigation and management plan concluded that the conditions imposed by Interior would ‘‘eliminate the

project’s positive economic benefits.’’ The EIS found that the project’s current annual

net benefits were approximately $9 million, but that with Interior’s conditions, the

annual net benefits would be a negative $2.7 million. Not even Interior disputed

that the conditions would reduce the project’s net annual benefits by many millions

of dollars. However, the Commission noted that ‘‘any economic analysis of the impact of Interior’s conditions is of at best tangential relevance to our decision,’’ since

FERC was obligated to impose the Interior conditions.

CONDITIONS MAKING PROJECT UNECONOMIC/INSUFFICIENT IMPACT ANALYSIS/

ARBITRARY NATURE OF PROCESS/LITIGATION AS ONLY RECOURSE

The 700kW Yaleville project in upstate New York is one of the smallest hydro facilities operated by Niagara Mohawk Power Corporation. In pre-filing consultation

in connection with the 1988 licensing of the project, the USFWS raised the issue

of fish passage. The agency recommendation was to provide for downstream passage

of freshwater non-migratory resident species, namely bass and walleye. This, despite:

Spillage over the dam provided natural passage of fish at least 85 percent of

the time;

Despite decades of hydro project operation, an abundance of bass and walleye

was evident on the river both above and below the project; and The $400,000 price tag for the agency-recommended fishway was prohibitive

for such a small project.

Niagara Mohawk disputed the agency recommendation in its license application

and FERC, in its 1991 draft Environmental Assessment (EA) for the project, agreed

with the owner and recommended a lower cost fish protection alternative. USFWS,

after failing to sway FERC away from its position in dispute resolution proceedings,

responded by prescribing the downstream passage fishway under its Section 18

mandatory conditioning authority.

FERC denied the fishway prescription in its 1992 license order because it did not

meet the day’s definition of ‘‘fishway’’ [at the time, a fishway had to serve the purpose of passing fish whose life cycle depended entirely on migration past the hydro

facility—which was not the case with the Yaleville bass and walleye]. A broader

‘‘fishway’’ definition was established with the passage of the Energy Policy Act of

1992; accordingly, FERC had to rescind its prior denial and require Niagara Mohawk to install the fishway—despite the lack of biological basis and the fact that

its cost would negate the economic operation of the project.

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1 NHA is the only national trade association committed exclusively to representing the interests of the hydroelectric power industry. Our members represent approximately 60 percent of

domestic, non-Federal hydroelectric capacity and nearly 80,000 megawatts overall. Its membership consists of more than 140 companies including public utilities, investor owned utilities,

independent power producers, equipment manufacturers, engineers, consultants and law firms.

Niagara Mohawk promptly appealed the FERC order. Negotiations with USFWS

ultimately led to an agreement to install a less expensive fishway design (at a cost

one tenth of that originally prescribed). If the owner had not pursued an aggressive

litigation action, USFWS would likely never had agreed to negotiate. Litigation, in

this case, spawned reason; but only after more than 8 years of licensing process and

a cost to the owner of nearly $300,000.

CONDITIONS MAKING PROJECT UNECONOMIC

In 1997, FERC issued a license for a 70 MW project in Washington state. In the

text of the license itself, FERC noted that the prescribed resource agency conditions

would result in a yearly operating loss of over $6.5 million for the project owner.

Indicating that the project as licensed would not be ‘‘economically beneficial’’, FERC

issued the license with the conditions, leaving it to the owner to ‘‘make the business

decision whether [to operate the facility] in view of what appear to be the net economic costs.’’

National Hydropower Association—Sustaining Hydropower: How Policymakers Can Reverse the Decline of America’s Leading Emissions-Free,

Renewable Resource

Hydropower is our largest renewable resource—accounting for about ten percent

of the nation’s electricity and over 80 percent of its renewable energy. It is an emissions-free, clean, reliable source of domestic energy which possesses many valuable

benefits beyond power supply. Among its benefits are transmission system reliability, water supply, irrigation, flood control, recreation and transportation. More

importantly, as an emissions-free power source, hydropower helps our nation meet

its clean energy goals and reduces the number of health problems associated with

air pollution.

Supply of hydropower is waning, however, and America is in danger of losing significant hydropower capacity at a time when it is most needed. As we face rising

energy prices, increased levels of pollution, energy shortages and reliability concerns, now is clearly the time for policymakers at the Federal level to better incorporate hydropower into the nation’s long-term energy strategy.

As we devise a clear long-term energy strategy, there are steps policymakers can

take now to address the decline of hydropower. What’s more, steps can also be taken

to encourage development of additional hydropower capacity at existing sites, allowing the country to increase its use of renewable, emissions-free generation and

strengthen the reliability of the transmission system.

What can be done to reverse the decline of hydropower and bring new growth to

an industry that is crucial to the nation’s energy strategy? The National Hydropower Association (NHA)1 suggests the following:

Hydropower relicensing reform

First and foremost, the hydropower relicensing process needs to be reformed. Over

the next 15 years, two-thirds of all non-Federal hydroelectric capacity—nearly

29,000 MW of power (enough to serve six million retail customers)—must undergo

the Federal Energy Regulatory Commission’s (FERC) relicensing process. This includes 284 projects in 39 states, much of it in western states where power supply

is a major concern.

While there are many perspectives, all stakeholders agree that the relicensing

process is in need of improvement. A multitude of statutes, regulations, agency policies and court decisions has made the process time-consuming, costly, contentious,

duplicative and generally frustrating for all. Federal agencies are allowed to set conditions on licenses without regard to their effects on project economics, energy benefits and values protected by other statutes or regulations. Many times, agencies

fight agencies and conflicting demands are issued. Worse, conditions are placed on

a license that have little to do with project impacts.

Hydropower licensees have no recourse to appeal, or even question, the basis of

mandatory conditions set by the agencies, except through litigation. Further, a typical hydropower project can take eight to 10 years to weave its way through the

process—some have taken more than 20 years—and cost up to a million dollars a

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year. The end result of this broken process is the loss of operational flexibility and

generation capacity—on average 8 percent per project—possibly putting at risk system reliability and clearly resulting in the loss of clean, renewable power.

Enacting legislation, such as bills offered in the 106th and 107th Congresses— Congressman Joe Barton’s substitute amendment to Congressman Ed Towns’ H.R.

2335, or Senator Larry Craig’s S. 71—would give Federal resource agencies the responsibility to consider and document the power, economic, and other impacts of

their mandatory conditions before imposing them on a hydro license. The bills would

also impose deadlines on Federal resource agencies for submission of final conditions. Reform legislation will not change or modify any existing environmental laws,

nor will it eliminate mandatory conditioning authority of Federal resource agencies.

What legislative reform will do is bring a much needed balance and certainty to the

relicensing process and help stop the decline of hydropower, all while protecting the

river resource.

Properly developed and implemented administrative remedies can certainly help

on a number of fronts and should be encouraged as well. Taken alone, however, administrative reforms can not fully address the substantive problems with the process. In some instances, administrative reform can actually complicate matters. For

example:

In January of 2001, the U.S. Departments of Interior (DOI) and Commerce (DOC)

proposed a new policy regarding Section 18 fishway prescriptions. The proposed policy serves to define ‘‘fishways’’ broadly to include virtually any project structure or

operational measure related to fish and would redefine the term ‘‘fish’’ to include

virtually every form of water-related animal life other than mammals and birds.

Further, it would give the agencies virtually unbounded authority to prescribe new

or modified fishways, throughout the term of a license. This will result in further

overlapping and conflicting Federal roles in the relicensing process and will exacerbate the uncertainties for licensees and other stakeholders that currently plague the

relicensing process.

Also in January, DOI and DOC implemented a new policy for administrative review of mandatory conditions and prescriptions developed by the departments under

the authorities in sections 4(e) and 18 of the Federal Power Act. Despite agency intention to ‘‘improve’’ the hydro licensing process, the new policy fails to define substantive standards for review of mandatory conditions and to detail procedures for

the development of an administrative record. While the proposal does represent a

good faith effort to improve the process within the confines of current law, it does

not resolve industry’s concerns and it fails to address the fundamental problems

with the process.

Again, NHA believes that legislative fixes are necessary to reform the relicensing

process in a manner satisfactory to most stakeholders.

Market incentives for hydropower development

Although maintaining a strong and viable hydropower industry is a critical component of the nation’s long-term energy strategy, hydropower development has been

stagnant—almost nonexistent—for a long period of time. Yet, most legislative proposals that address renewable energy ignore hydropower and its increasingly marginal economic state due to regulatory costs and capacity restrictions. This misguided omission threatens to jeopardize our country’s most successful renewable energy resource as competition, and serious concerns over reliability and power supply,

comes to the electric power industry.

NHA forecasts that 21.3 GW of additional power from hydroelectric resources

could be developed by 2020—none of which would require the construction of a new

dam or impoundment. In terms of greenhouse gas reductions, this would equal displacing 24 million metric tons of carbon emissions. Of the 21.3 Gigawatts (GW), over

4,000 Megawatts (MW) can be developed at existing hydroelectric facilities alone.

Bringing new hydro generation on-line, however, is increasingly difficult and expensive. While not the same disadvantages as those encountered by other renewable

industries, hydro’s disadvantages hold equal merit and demand similar countermeasures in policies designed to encourage the development of renewable sources

of power. Providing financial incentives for hydro producers—such as those proposed

in the 106th Congress by Congressmen John Shadegg and Albert Wynn, or proposals in the 107th Congress that expand the Section 45 production tax credit to

include all renewables, including hydropower—will encourage hydropower development at existing sites, allowing the United States to rely more on a clean, domestic

resource.

In the west, for example, 45 percent of hydro capacity in California, and 73 percent of Northwest capacity, faces the gauntlet of relicensing in the next 15 years.

Given the current trend in relicensing, California and the Pacific Northwest might

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retire 1,200 or more megawatts of generation capacity. On the other hand, with

changes to the process, and the proper financial incentives described above, another

8,800 MW of new capacity could be developed without building a single new dam.

Given the current state of affairs in this region of the country, it is hard to imagine

why we would not pursue policies to encourage additional clean, renewable hydropower capacity.

Dam decommissioning and removal

Hydropower dams have been a rich and vital part of our American history and

continue to be an important part of our American landscape. Many of their benefits

play a crucial role in regional economies and in national energy policy. Dams are

not simply a remnant of our past, they continue to play an important role for our

future.

Despite this importance, there are some dams that have outlived their usefulness

when considered within the context of rigorous new environmental standards. NHA

recognizes the fact that maintaining some hydro dams, once their full public benefit

is weighed against environmental and other social needs, may no longer be prudent.

In these cases, decommissioning and removal may be the most appropriate course.

However, we believe that when all benefits are considered, dam removal will occur

only in rare instances. The real issue in dam removal is whether all of the benefits

of a dam are appropriately weighed against the real, not subjective or hopeful gains.

There is a movement, mostly an ideologically driven one, to remove many of the

dams in the country. As we consider all the aspects of dam removal, we must remember that this infrastructure is not easily replaced. Smart policy dictates that

dam removal should be considered as a last resort when there is no other means

to address the environmental consequences of the impoundment and all of the

project benefits have been appropriately considered. Obviously, the growing interest

in dam removal stems from our common concern over the health of our nation’s rivers. The fact remains, however, that dams and healthy rivers can coexist. As a nation, our goal should be the preservation of both.

In those cases where prudence dictates removal, the hydropower industry believes

that all stakeholders must be in common agreement. Removal should be a collaborative effort. FERC does not have the authority to unilaterally order removal of a

facility, and the owner of the facility must be made whole in the process.

Hydropower owners and operators are good stewards of our waterways. Dam removal is a major issue of concern, not only to the industry, but also to the nation.

Working with all stakeholders, policymakers can develop a rational national policy

that can both protect and preserve our waterways and the infrastructure within

them.

Actions needed in the 107th Congress

1. Enact hydro relicensing reform legislation as soon as possible and continue to

pursue administrative reform efforts where helpful.

2. Enact incentives legislation such as tax credits or incentives payments for capacity upgrades and efficiency improvements at existing hydroelectric facilities, and

for new development at existing dams.

3. De-politicize the debate over dam decommissioning and dam removal and pursue national policy based on sound science with full consideration of all project benefits.

By focusing on the three areas NHA has discussed, Federal policymakers have an

opportunity to not only protect our hydropower resource, but to also promote modest

growth of a clean, renewable, domestic energy resource that is crucial to meeting

long-term energy strategies.

National Hydropower Association—Hydropower Licensing Improvement: A

Balanced Approach to Preserving Our Nation’s Leading Renewable

Overview

In the wake of ongoing energy supply shortages and reliability concerns in California, the Pacific Northwest and throughout the nation, it is crucial that existing

sources of energy—especially those that are clean, low-cost, reliable and efficient—

remain in abundant supply. Yet, domestic generation of hydropower, our nation’s

leading emissions-free, renewable energy resource, is waning as a result of a Federal Energy Regulatory Commission (FERC) licensing process that all parties agree

is in need of repair. It is indeed ironic that our nation’s hydro supply is in decline

when our nation needs it most.

Hydro licensing improvement legislation introduced in the 106th Congress (H.R.

2335/S. 740) gained strong bipartisan support in both Chambers and was approved

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by the House Commerce Subcommittee on Energy and Power. With energy policy

concerns taking center stage in the 107th Congress, Congress has an opportunity

to build on this momentum and enact meaningful hydro licensing process improvements this year to ensure that crucial megawatts (MW) of hydropower are preserved

for current and future generations.

Background

Since 1986, FERC has been required, under the Federal Power Act, to give ‘‘equal

consideration’’ to a variety of factors when issuing hydro project licenses and relicenses. This balancing authority requires FERC not only to consider the power, economic, and development benefits of a particular hydro project, but also to consider

energy conservation and the protection, mitigation of damage to, and enhancement

of fish and wildlife. In other words, under Federal law, FERC has the responsibility

and authority to strike a balance between power and environmental values.

The courts, however, have interpreted the Federal Power Act so as to prevent any

balancing from taking place. The courts, in effect, have given Federal resource agencies the authority to set ‘‘mandatory’’ conditions on FERC licenses—conditions that

are automatically attached to a final license. This means that FERC has no opportunity to question the basis of mandatory conditions set by the agencies.

This would not be a problem if Federal resource agencies, when imposing a mandatory condition, considered the various factors that FERC is required to examine

pursuant to the Federal Power Act. However, this is simply not done. The net result

is that no one is balancing. No one has the authority to look at the big picture of

how hydro fits into our national energy policy.

The implications are significant. Hydro project owners are facing higher costs, loss

of operational flexibility, and lost generation due to new constraints imposed on operations. A typical hydro project can take from eight to 10 years to weave its way

through the licensing process, at an average cost of $1 million per year. In its Energy Outlook 2000 Report, the Department of Energy’s Energy Information Administration (EIA) for the first time forecasted decreased hydroelectric capacity as ‘‘regulatory actions limit capacity at existing projects.’’

The urgency

Over the next 15 years, more than half of all non-Federal hydroelectric capacity

(nearly 29,000 MWs of power—enough to serve six million retail customers) must

go through the FERC licensing process. This includes 284 projects in 39 states.

What’s more, 45 percent of hydro capacity in California, and 73 percent of Northwest capacity faces relicensing in the next 15 years. Given the current trend in relicensing, California and the Pacific Northwest might retire 1,200 or more MWs of

generation capacity—enough power for 1.2 million homes. Given the current state

of affairs in this region of the country, it is hard to imagine why we would not pursue policies to improve the licensing process.

Congress must do its part to ensure that this important renewable resource continues to operate in a cost-effective and environmentally compatible manner. If current trends continue, the nation could lose a number of hydropower projects and,

with them, enormous clean energy, reliability, drinking water, flood control, irrigation, transportation and recreation benefits. Moreover, consumers could face increased energy replacement costs with polluting sources.

Summary

Hydropower has been a rich and vital part of our American history and continues

to be an important part of our American landscape. Many of its benefits play a crucial role in regional economies and in national energy policy. Hydropower is not simply a remnant of our past, it continues to play an important role for our future.

Working with all stakeholders, policymakers can develop a rational national policy

that can both protect and preserve our waterways and environment, as well as the

infrastructure within them.

The hydro relicensing debate has, for years, been a search for balance: can the

nation balance the benefits of hydropower with environmental protection and mitigation? A growing number of members of Congress from both parties believes it can.

Given the enormous role that hydro plays and must continue to play in our national

electricity grid, the time for balancing—and the time for Federal policymakers to

better incorporate hydropower into the nation’s long-term energy strategy—is clearly now.

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National Hydropower Association—Forecast for Hydropower Development

Through 2020

Two Federal agencies have estimated large potential capacity from hydroelectric

facilities in the U.S. But the National Hydropower Association (NHA) expects that

the existing licensing process will prohibit realizing any new capacity in the future.

In fact, NHA is currently predicting a loss of renewable hydroelectric power in the

U.S. without legislative changes to hydropower regulations.

The Federal Energy Regulatory Commission’s (FERC) river basin studies show a

potential of 73,200 MW of additional U.S. hydroelectric capacity.1 Emphasizing engineering feasibility and some economic analysis, but no environmental considerations, the FERC estimate is the likely ‘‘upper limit of conventional water power potential in the United States’’.2

The U.S. Department of Energy (DOE) has undertaken an assessment of hydropower resources using FERC’s river basin analysis while also screening for environmental, legal and institutional constraints at potential sites including threatened or

endangered species, national designations, cultural values and other non-power

issues.3

DOE’s results show there are 5,677 undeveloped hydropower sites with a potential

capacity of about 30,000 megawatts.4 Of that amount, 57 percent (17,052 MW) are

at sites with some type of existing dam or impoundment, but no power generation.

Another 14 percent (4,326 MW) exists at projects that already have hydropower generation, but are not developed to their full potential. Only 8,500 megawatts or 28

percent of the potential would require new dams.5

NHA anticipates that, given the regulatory burden associated with the Federal licensing process—the cost, delay and duplication—none of this new capacity will.be

developed by 2020. And worse, with no changes in the current licensing process,

studies show an average eight percent 6 loss of hydroelectric generation in relicensing.6 Furthermore, considering the uncertain future of some Federal projects,

the potential loss of generation from our nation’s hydroelectric system could be very

significant.

However, there are factors that could change NHA’s bleak forecast:

The need for greenhouse gas reductions that would drive domestic policy to

again encourage hydropower development;

The hydro licensing process is improved so that it increases investor certainty

and recognizes the unique energy characteristics and environmental benefit of

hydropower; and

The resulting licensing rules fairly balances environmental and energy needs.

Under these circumstances, NHA forecasts that 20,915 MW of additional power

from hydroelectric resources could be developed by 2020—none of which would require the construction of a new dam or impoundment. In terms of greenhouse gas

reductions, this would mean displacing 24 million metric tons of carbon emissions

from coal.7

Hydroelectric generating capacity would rise to 99,478 MW—a 27 percent increase

from current levels—and this nation’s use of hydropower resources would rise to 4.9

quads.8

Other factors that could further stimulate the development of hydropower capacity are:

The development of commercially viable advanced turbines that further improve biological conditions for fish (fish friendly turbines);

Greater efficiency from these advanced turbines;

The trend in the growing deregulated market to value hydropower’s ancillary

benefits—its unique ability to stabilize the electric grid.

Increased acceptance of green power programs that charge a premium for the

delivery of clean and renewable electricity in a deregulated market.

FOOTNOTES

1 Hydroelectric Power Resources of the United States; Developed and Undeveloped, FERC,

Washington, DC, January 1, 1992, p. xi. 2 Id. p. xxxv.

3 ‘‘Identification of Undeveloped Hydropower Resources in the United States, Based on Environmental, Legal, and Institutional Attributes’’, Table 2, J.E. Francfort and A.M. Conner from

Waterpower ’97 Proceedings of the International Conference on Hydropower, Volume 2, ASCE,

New York, NY, p. 1307. 4 Hydropower Resource Assessment program draft report U.S. DOE Hydropower Program,

Idaho National Engineering and Environmental Laboratory, <www.inel.gov/national/hydropower/index.html>, November 1998. 5 Interview with Jim Francfort, Hydropower Resource Assessment program, September, 1998.

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6 ‘‘Scenarios of U.S. Carbon Reductions: Potential Impacts of Energy Technologies by 2010 and

Beyond’’, Office of Energy Efficiency and Renewable Energy, U.S. DOE, September 15, 1997, p.

7.21. 7 According to ‘‘Impacts of the Kyoto Protocol on U.S. Energy Markets and Economic Activity,’’

prepared by the Energy Information Administration, October, 1998, Table 17, p. 75, coal fired

technologies emit 571 pounds of carbon per MegaWatthour. 8 In 1996, total hydropower consumption was 3.911 quads. Hydropower capacity in 1996 was

73,129 MW. The ratio of quads consumed to capacity is .0000491.

[Responses by Mr. Hocker to questions submitted for the record follow:]

Question 1 submitted by Representative James Hansen, Chairman of the Committee

In the early 1990’s, the Advanced Hydropower Turbine Systems (AHTS) program

was initiated by industry with a request to DOE for matching funds. The goal was

to develop advanced turbines and other systems to improve safe fish passage while

maintaining the operational efficiency. DOE responded positively, focusing its attention—and its hydro R&D funding—on the program. In some cases, interested parties

in the hydropower industry also supported specific research items important to the

AHTS program when funds were not available from DOE. Completion of the program would: minimize environmental impact to aquatic life; increase facility efficiency—savings that can be passed along to the consumer; improve relicensing negotiations; lower government’s regulatory enforcement costs; increase government revenue from idled Federal projects that will benefit from this new technology; and encourage cooperation over conflict between industry, government and environmental

advocates.

The Advanced Hydropower Turbine System program is important to industry and

should be fully funded to its completion, including field verification. The focus of the

research should be broadly conceived to include the transfer of technology to smaller

applications at a variety of sites, as well as potentially contributing to salmon restoration in the Northwest.

Currently, the majority of the DOE’s AHTS funds are being directed to Alden/

NREC turbine laboratory pilot testing. To minimize the elapsed time between laboratory and field tests of the new Alden/NREC turbine, it is important to establish

criteria for site selection, to select a site(s) for field testing, and to design features

needed for the turbine installation, all while the turbine is being evaluated in the

laboratory. The selection process should be defined and one or more field sites

should be selected. Due consideration would be given to the need for owner participation, site characteristics and changes, construction methods, design of the turbine

for the site head and flow, means and scope of the fish testing, and cost and schedule.

The other focus of the AHTS program is devoted to the Voith Siemens Hydro

AHTS design which is based on enhancing current turbine designs. A modified

Kaplan turbine has been developed based on improved flow conditions and supported by field testing of existing turbines. Some of the advanced design features

were included in the Bonneville Dam Minimum Gap Runner (MGR). Fish injury/survival tests were conducted at Bonneville Dam on the new MGR and on an existing

turbine through a collaboratively funded project of DOE, U.S. Army Corps of Engineers, Bonneville Power Administration and Grant County PUD. To demonstrate

that improvements have been made, it is essential to install and test a full size machine to prove these concepts.

An improved AHTS concept Kaplan design has been developed to replace existing

turbines for a site on the Columbia River and is ready for testing. Additionally, industry-developed technology for advanced control systems to optimize fish-passage

survival is also available for field verification in conjunction with the advanced

Kaplan design. Further opportunities exist for collaboration with industry in the

field verification phase.

The hydropower industry has demonstrated its commitment to a competitive and

environmentally sound future for hydroelectric generation. The industry’s partnership with DOE and its willingness to contribute funds and resources to the AHTS

program should be seen as the foundation for a new cooperative era between industry, government, and the public in addressing our nation’s energy and environmental needs.

Industry urges that Federal water development agencies, principally the U.S.

Army Corps of Engineers, the Bureau of Reclamation, and the Tennessee Valley Authority better coordinate their hydropower R&D efforts among themselves, with the

DOE and with the private sector. In addition, Federal executive branch offices with

science, technology and natural resource portfolios must pay closer attention to hyVerDate 11-MAY-2000 13:13 Aug 24, 2001 Jkt 000000 PO 00000 Frm 00139 Fmt 6633 Sfmt 6621 J:\DOCS\70888.TXT HRESOUR2 PsN: HRESOUR2
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dropower R&D as they examine their respective disciplines and coordinate R&D

across Federal agencies.

Most importantly, industry stands ready to collaborate with the DOE in the expansion and coordination of R&D related to hydropower. Basic research of waterrelated environmental issues must receive greater attention across multiple DOE offices and its laboratories where it is mission-appropriate (e.g., Office of Basic Energy

Sciences, Office of Biology and Environment, and the Office of Policy).

While much progress has been made already in devising new approaches to generating hydroelectricity while supporting healthy fisheries, much more work remains

to be done. Now, DOE must expand its focus and devote attention and resources

to other areas of hydropower R&D, while continuing to fund the AHTS program.

Research and development efforts in the private sector tend to focus on meeting

short-term objectives and, increasingly in the restructured electricity sector, must

be justified by a short-term return on the investment. Only the Federal Government

can take a longer-term, higher-risk approach to research that addresses strategic

national interests.

The hydropower industry proposes that the DOE should take a ‘‘three track’’ approach to hydropower R&D. One track should continue the efforts to improve hydropower systems that support safe fish passage. The second track should be focused

on laboratory and field verification projects that optimize hydro operations, increase

efficiencies, and enhance environmental performance. The third track should focus

on policy issues affecting hydropower. This final track would include, but not be limited to, stimulating hydro upgrades and new development, valuing hydro’s role in

electric reliability, assessing hydropower’s environmental performance, and expanding hydro’s contribution to avoiding greenhouse gas emissions (please see attachment on specifics of NHA’s recommendations to DOE).

Funding for hydropower research has never reached the 1997 President’s Committee of Advisors on Science and Technology (PCAST) Report recommended levels.

Because of the lack of support for hydropower, and the Advanced Hydropower Turbine specifically, the program is behind schedule and possibly in jeopardy. The millions of dollars that have been spent, and the progress that has been made, may

all be for naught if the program if the program is not fully funding in 2002 and

beyond.

NHA strongly encourages Congress to appropriate finances for the turbine program that are much closer to the recommendations of the PCAST report. The program is at a critical stage and needs the appropriate financing to move to the next

stage.

For 2002, NHA recommends $16,000,000. The amount provided is for cost-shared

research and development of the AHTS. The amount is also for research to examine

hydropower mitigation efforts; develop biological criteria for mitigation efforts; research and testing on the effectiveness of hydrokinetic energy systems; the development of consistent methodology for lifecycle analysis and total valuation of hydropower, including contributions to clean air; and to study the ancillary electric benefits of hydropower.

Question 1 Submitted by Representative Ken Calvert

During the last 18 months, industry has been primarily involved in two non-legislative processes to address and resolve hydro relicensing issues—the Federal Advisory Committee (FACA) to the Interagency Task Force to Improve Hydroelectric Licensing Processes (ITF) and the National Review Group (NRG) headed by the Electric Power Research Institute (EPRI). Both of these administrative reform working

groups produced a very helpful and positive dialogue concerning many of the relicensing issues and brought some helpful process-related improvements. The ITF and

FACA completed their work for the most part (an implementation plan of the

groups’ recommendations is occurring but there is some concern regarding the level

of implementation) while the NRG will continue into 2001 and focus on a few key

issues. Industry will continue to play a very active role in those discussions and

looks forward to working with the broad range of hydro stakeholders.

Properly developed and implemented administrative remedies can certainly help

on a number of fronts and should be encouraged. Taken alone, however, administrative reforms cannot fully address the substantive problems with the process. In

some instances, administrative reforms (in these cases, led by the Clinton Administration) can actually complicate and worsen matters. For example:

In January of 2001, the U.S. Departments of Interior (DOI) and Commerce (DOC)

proposed a new policy regarding Section 18 fishway prescriptions. The proposed policy serves to define ‘‘fishways’’ broadly to include virtually any project structure or

operational measure related to fish and would redefine the term ‘‘fish’’ to include

virtually every form of water-related animal life other than mammals and birds.

135

Further, it would give the agencies virtually unbounded authority to prescribe new

or modified fishways throughout the term of a license. This will result in further

overlapping and conflicting Federal roles in the relicensing process and will exacerbate the uncertainties for licensees and other stakeholders that currently plague the

relicensing process.

NHA strenuously objects to the Proposed Interagency Policy on the Prescription

of Fishways and has asked that it be immediately rescinded and all processes related to this proposed policy be halted. Section 1701 (b) of the National Energy Policy Act of 1992 rescinded the Federal Energy Regulatory Commission’s (FERC) definition of fishways. The Act clearly defers to FERC to redefine fishways by rulemaking with the concurrence by the Secretaries of Commerce and Interior. Quite

simply, the Departments’ proposed policy attempts to evade the express intent of

Congress.

In addition to the serious concerns over the process of the Departments’ proposed

policy, we also stress that the proposed policy is premature, flawed and unbalanced.

Moreover, contrary to the Departments’ assumptions, the proposal could have serious economic impacts and should undergo review required by the Regulatory Flexibility Act.

As we face rising energy prices, increased levels of pollution and greenhouse

gases, energy shortages and serious reliability concerns, this is the least opportune

time, when viewed from the public interest perspective, for the Departments to

mount a campaign for unbounded advocacy for their prescriptive powers. Now is

clearly the time for policymakers at the Federal level to better incorporate hydropower into the nation’s long-term energy strategies, not to devise policies that further diminish a waning resource that is so vital to energy adequacy, diversity and

security.

Also in January, DOI and DOC implemented a new policy for administrative review of mandatory conditions and prescriptions developed by the departments under

the authorities in sections 4(e) and 18 of the Federal Power Act. Despite agency intention to ‘‘improve’’ the hydro licensing process, the new policy fails to define substantive standards for review of mandatory conditions and to detail procedures for

the development of an administrative record. While the proposal does represent a

good faith effort to improve the process within the confines of current law, it does

not resolve industry’s concerns and it fails to address the fundamental problems

with the process. Again, NHA believes that legislative fixes are necessary to reform

the relicensing process in a manner satisfactory to most stakeholders.

Question 2 Submitted by Representative Ken Calvert

The industry is committed to exploring options and keeping the dialogue open as

we move forward on a reform bill. As a matter of fact, we are currently involved

in such discussions in both the House and the Senate. Progress has been made in

certain areas and that is largely due to the fact that a productive discussion with

all stakeholders occurred. It is not in the interest of industry (nor is it likely) to

jam a bill through Congress while ignore other stakeholders’ concerns.

We understand that a bi-partisan approach is best and achievable. In fact, we feel

ultimately that relicensing reform is a bi-partisan issue and we look forward to

working in a bi-partisan environment. A few years ago, industry decided that taking

a moderate approach to relicensing reform was best and we continue to believe that.

We made tremendous progress last Congress and hopefully that will pay off in

the 107th Congress with a bill that is signed into law. We want to work with the

resource agencies and other stakeholders so long as a bill that brings balance and

certainty to the licensing process is achieved.

Question 3 Submitted by Representative Ken Calvert

The primary reason for lost hydro capacity is due to a relicensing process that

is badly in need of repair. This problem demands urgent attention as half of licensed

capacity—28,784 MWs—must to be relicensed by 2016, and over 52 percent of it is

located in Western states where energy supply and reliability issues have already

reached a critical stage, and water resource issues are paramount (please see attachment for specific state-by-state numbers).

The relicensing process is exceedingly complex, needlessly fragmented, excessively

costly and frustratingly inefficient. Further, it fails to fully weigh the benefits of hydropower and often results in extended and contentious litigation, costing both the

project and the environment.

While there are many perspectives, all stakeholders agree that the relicensing

process is in need of improvement. A multitude of statutes, regulations, agency policies and court decisions has made the process time-consuming, contentious, duplicative and generally frustrating for all. Federal agencies are allowed to set conditions

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on licenses without regard to their effects on project economics, energy benefits and

values protected by other statutes or regulations. Many times, agencies fight agencies and conflicting demands are issued. Worse, conditions are placed on a license

that have little to do with project impacts.

Hydropower licensees have no recourse to appeal, or even question, the basis of

mandatory conditions set by the agencies, except through litigation. Further, a typical hydropower project can take eight to 10 years to weave its way through the

process—some have taken more than 20 years—and cost up to a million dollars a

year. The end result of this broken process is the loss of operational flexibility and

generation capacity—on average 8 percent per project—possibly putting at risk system reliability and clearly resulting in the loss of clean, renewable power.

Enacting legislation, such as bills offered in the 106’ ’’ and 107’ ’’ Congresses—Congressman Joe Barton’s substitute amendment to Congressman Ed Towns’ H.R. 2335,

or Senator Larry Craig’s S. 71—would give Federal resource agencies the responsibility to consider and document the power, economic, and other impacts of their

mandatory conditions before imposing them on a hydro license. The bills would also

impose deadlines on Federal resource agencies for submission of final conditions. Reform legislation will not change or modify any existing environmental laws, nor will

it eliminate mandatory conditioning authority of Federal resource agencies. What

legislative reform will do is bring a much needed balance and certainty to the relicensing process and help stop the decline of hydropower, while protecting the river

resource.

Question 4 Submitted by Representative Ken Calvert

Although maintaining a strong and viable hydropower industry is a critical component of the nation’s long-term energy strategy, hydropower development has been

stagnant—almost non-existent—for along period of time. Yet, most legislative proposals that address renewable energy ignore hydropower and its increasingly marginal economic state due to regulatory costs and capacity restrictions. This misguided omission threatens to jeopardize our country’s most successful renewable energy resource as competition, and serious concerns over reliability and power supply,

comes to the electric power industry.

NHA forecasts that 21.3 GW of additional power from hydroelectric resources

could be developed by 2020—none of which would require the construction of a new

dam or impoundment. In terms of greenhouse gas reductions, this would equal displacing 24 million metric tons of carbon emissions. Of the 21.3 Gigawatts (GW), over

4,000 Megawatts (MW) can be developed at existing hydroelectric facilities alone.

Bringing new hydro generation on-line, however, is increasingly difficult and expensive. While not the same disadvantages as those encountered by other renewable

industries, hydro’s disadvantages hold equal merit and demand similar countermeasures in policies designed to encourage the development of renewable sources

of power. Providing financial incentives for hydro producers—such as those proposed

in the 106th Congress by Congressmen John Shadegg and Albert Wynn, or proposals in the 1071’’ Congress that expand the Section 45 production tax credit to

include all renewables, including hydropower—will encourage hydropower development at existing sites, allowing the United States to rely more on a clean, domestic

resource.

In the west, for example, 45 percent of hydro capacity in California, and 73 percent of Northwest capacity, faces the gauntlet of relicensing in the next 15 years.

Given the current trend in relicensing, California and the Pacific Northwest might

retire 1,200 or more megawatts of generation capacity. On the other hand, with

changes to the process, and the proper financial incentives described above, another

8,800 MW of new capacity could be developed without building a single new dam.

Given the current state of affairs in this region of the country, it is hard to imagine

why we would not pursue policies to encourage additional clean, renewable hydropower capacity.

Question 1 Submitted by Representative Ed Markey

The National Hydropower Association does not advocate any particular formula

or structure for fees charged for the use of Federal lands. As recognized for decades

in the Federal Power Act, the production of electric energy from our nation’s waterways is considered to be in the public interest, and licenses are granted based on

the determination of a hydro project being in the ‘‘public interest, convenience, and

necessity.’’ So long as hydropower is determined to be in the public interest, we believe that fees should not be so high as to threaten the viability of a hydro project.

To suggest, as the question does, that hydropower owners may ‘‘abandon their

projects or leave a mess behind’’ is purely speculative and has no basis in historical

fact. NHA advocates the responsible use of the nation’s waterways and takes very

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seriously its role as stewards of the rivers we are privileged to use. We strongly believe that healthy rivers and hydropower can coexist.

Question 2 Submitted by Representative Ed Markey

See answer to Question 1.

Question 3 Submitted by Representative Ed Markey

Again, the NHA does not advocate a particular fee structure or formula, nor do

we take a position on the allocation of funds for water projects. Such allocation is

currently been made in accordance with certain public policy decisions made by Congress, and it is Congress who properly should decide whether a change is necessary

and if so, what the change should be. If such changes are considered by Congress,

NHA will respond to the issue at that time.

Question 4 Submitted by Representative Ed Markey

We do not have specific information at this time comparing oil and gas leasing

with hydropower fees. Even if such information were available, such a comparison

would likely be inaccurate and incomplete, since hydropower is an emission-free renewable resource that is not subject to depletion. As far as mitigation efforts to reduce hydropower’s impacts, industry has spent hundreds of millions of dollars to

lessen its impacts.

Question 5 Submitted by Representative Ed Markey

The principle of scarcity applies universally, not just to hydropower. Again, a

hydro project is recognized as being in the public interest by virtue of its holding

a Federal license. NHA would be prepared to respond to specific proposals that modify the existing structure or formula for fees, and would be pleased to work with

Congress to arrive at a fee structure that is reasonable and fair. In addition, NHA

is pursuing polices that would maximize the power and non-power benefits of existing projects. While there are a substantial number of undeveloped sites where hydropower dams could be placed, NHA is more concerned with increasing the efficiencies and capacity at existing sites.

Question 6 Submitted by Representative Ed Markey

NHA believes there is merit in shifting money collected from the FERC fees to

the agencies participating in the relicensing process instead of allowing the money

to be deposited into the general treasury. NHA has been discussing this issue with

agencies and other stakeholders as the reform debated has moved forward. It is

often pointed out by agencies and NGO’s that resources for agency involvement in

relicensing efforts are insufficient. We believe it is important for agencies to have

appropriate resources available so a constructive and efficient relicensing process

can occur with their full participation.

Question 7 Submitted by Representative Ed Markey

The question could just as aptly be reversed: How can FERC, which is charged

with balancing the broad spectrum of power and non-power interests in the licensing of a hydro project, be expected to do so when other agencies have unrestrained

authority over aspects of a project that represent only narrow interests? What NHA

supports is balance—the recognition that power and non-power considerations

should be treated equally.

We are not advocating a removal of mandatory conditioning authority or attempting to weaken the authorities of resource agencies. We are advocating a process that

permits agencies to consider non-resource issues in their review and conditioning

authority. By requiring agencies to consider the economics effects of resource protection on other project values, we will bring balance and certainty to the process that

is desperately needed.

Again, our attempts to reform the licensing process will not remove the conditioning authority of the agencies or undermine existing environmental laws designed to protect our resources. NHA believes in both resource protection and the

pursuit of effective and meaningful energy strategies that include hydropower.

Question 8 Submitted by Representative Ed Markey

The Forest Service does have a review process but it is rarely used and is mostly

ineffective. Hydropower licensees have no recourse to appeal, or even question, the

basis of mandatory conditions set by the other agencies, except through litigation.

A review process established by reform legislation can hopefully avoid the costly and

lengthy litigation that is often the result of the current process, costing both the

project and the environment. In addition, a review process within the licensing process would establish an administrative record, allow licensees to offer alternative

suggestions for resource protection and greaten stakeholder involvement. Please see

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the attached comments NHA filed in response to DOI and DOC’s Notice for Comments on a Proposed Policy For Review of Mandatory Conditions.

Question 9 Submitted by Representative Ed Markey

Again, what NHA seeks is balance, not a guarantee of profitability. We believe

that a fair balancing of power and non-power interests will result, in an overwhelming majority of cases, in hydro projects that are both economically viable and

protective of environmental resources. Under the current licensing system, however,

the balance has been upset by the unrestrained mandatory conditioning authority

of certain agencies who presently are not required to take economic viability into

account. It’s a stretch to suggest that the Federal Government is guaranteeing the

hydropower industry’s profitability. Industry’s goals and the government’s goals

should not be mutually exclusive.

Question 10 Submitted by Representative Ed Markey

I believe your question is attempting to ask how many projects have failed to acquire a new license because of actions by resource agencies. While there are projects

that have not been relicensed, it’s more important to focus on the overall effects of

a broken relicensing process—the significant loss of clean, renewable generation capacity, and more importantly, the loss of operational flexibility which is extremely

important from a transmission system reliability standpoint. Please see the attached

paper that was included with my statement at the hearing for specific cases of agency involvement that has caused significant problems.

Mr. MCINNIS. [Presiding.] Thank you, Mr. Hocker.

Mr. Judd, Director of the USA Biomass Power Producers Alliance.

STATEMENT OF ROBERT L. JUDD, JR., EXECUTIVE DIRECTOR,

USA BIOMASS POWER PRODUCERS ALLIANCE

Mr. JUDD. Thank you, Mr. Chairman, and Mrs. Napolitano. I

come to you this morning fresh from the heartland of America’s energy crisis, from Sacramento, California, where issues of energy

supply and pricing and imports are front and center on the daily

agenda there.

I serve as Executive Director of the USA Biomass Power Producers Alliance. This is an association of the owners and operators

of the nation’s biomass power facilities. You need to know that the

biomass power industry, as one of the alternative energy producers

referenced earlier, converts environmental liabilities into clean

electricity. Under carefully controlled conditions, our industry combusts more than 20 million tons of cellulosic residues per year, primarily wood waste from forest-related activities, into clean electricity.

To give you an example, in all of California and in an entire

year, only 40 million tons of material go to the all of the landfills

in the State. So, in effect, the biomass power industry is also a

massive waste management system. There are currently 85 operating biomass power facilities in America, and there are 15 that

are operable but idle because of market conditions at present.

Decisions concerning the locating, the siting of these power facilities were primarily determined by the proximity of a sustainable

fuel supply. The reason is simple. The biomass power facilities purchase the waste materials they use as fuel in the form of wood

chips. The principal component of our fuel cost is transportation of

materials from the point of origin, the forest, to the point of use,

the facility. To minimize fuel costs, many of our facilities were located near their source. Now, they travel up to 100 miles to gather

their materials.

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The materials used as fuel by the biomass industry are residual

wastes that remain after all other economic value has been extracted from a product. We recycle materials that would otherwise

be discarded into a product that has societal value. The materials

we use from forests include slash and brush, tops, branches, bark,

excess sawdust, et cetera. We buy this. It is delivered to us. We,

in effect, are the garbage man for the forestry industry. We give

a productive use to those materials that are worthless to someone

else.

There is a recent DOE study which we will submit for the record

that monetizes the value of the benefits of U.S. biomass policy, in

addition to the electricity that they produce. It turns out that the

value of the environmental and economic benefits are more valuable than the electricity we produce itself.

Our facilities in the past, in those instances where they are proximate to public lands, have taken substantial materials from public

lands and converted them into electricity. In the future, that capability exists and should be expanded. However, in recent years we

have obtained less and less material from public lands because

there has been less and less commercial activity on public lands.

We consequently now get material from the urban waste stream

which has a much lower societal value than materials that might

be thinned from the forests to reduce forest fire risk and severity.

Facilities in our industry are dropping like flies. Our production

is down 20 percent in 5 years, and in the past 3 months alone 5

facilities, including 3 in Montana, 1 in Idaho and 1 in California,

have gone down because of the unavailability of fuel from adjacent

public lands.

Looking ahead, in my final moments here, biomass facilities can

and should be integrated into the implementation of the National

Fire Plan. They can also help fulfill the promise of the HergerFeinstein Quincy Library Group legislation, which will test largescale progressive strategies for land management and fire risk reduction. Additionally, there is need and justification for the construction of new biomass power facilities in many regions.

We have further recommendations in our comments here. The

primary recommendation we have is that at a time of need for domestic electricity, we have to stop the bleeding first and foremost

in the existing power facilities to allow them to serve the public

need and then develop a plan to construct more facilities to provide

a greater level of electricity output from this resource.

Thank you, sir.

[The prepared statement of Mr. Judd follows:]

Statement of Robert L. Judd, Jr., Executive Director, USA Biomass Power

Producers Alliance

Mr. Chairman and Members: Thank you for the opportunity to address the Committee today. My name is Robert Judd. I serve as Executive Director of the USA

Biomass Power Producers Alliance. Based in Sacramento, California, we are a nation-wide association of owners and operators of biomass power facilities.

The existing biomass power industry

The nation’s existing biomass power industry is in the business of converting environmental liabilities into clean electricity. Under carefully controlled conditions, our

industry combusts more than 20 million tons of cellulosic residues per year—primarily wood waste from forest-related activities—to produce steam which drives a

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turbine that generates electricity for transmission and distribution to homes and

businesses.

Prompted by Federal policy and incentives put in place in the late 1970’s, what

we now recognize as the biomass power industry emerged into its current form between 1985 and 1995. No new facilities have been placed into operation since that

time, and electricity output from existing facilities has declined by nearly

20 percent since 1995, due primarily to declining availability and increasing prices

in our fuel supply.

The industry is currently comprised of approximately 85 power plants located in

14 states across the nation. In total, they have the capacity to generate 1,600

megawatts of electricity—or, looked at in another way, enough power to serve the

needs of 1.5 million households. These facilities represent a capital investment in

excess of $7 billion and they provide significant levels of rural employment and

property tax revenues in the jurisdictions in which they are located.

In addition to the 85 operating facilities, there are approximately 15 facilities that

are operable but currently sit idle due to local market conditions.

For clarification, I would note that the facilities described in my testimony were

constructed for the sole purpose of generating clean electricity from the combustion

of certain organic residues. They are distinct from other facilities that generate electricity from the combustion of municipal solid waste or from residues within the

pulp and paper manufacturing sector.

Decisions concerning the siting of the existing biomass power facilities were primarily determined by the proximity of a sustainable fuel supply. The reason for this

is a simple one. The biomass power facilities purchase the waste materials they use

as fuel, and the principal component of fuel cost is transportation of materials from

point of origin to point of use. In order to minimize fuel costs, the facilities were

located as close to their fuel sources as possible. Some facilities are actually located

directly at the source of their fuel—at a lumber mill, for example—while others are

stand-alone facilities that obtain fuel from a variety of sources within a radius that

usually does not exceed 100 miles. Given the decline in mill operations in recent

years, few if any of the operating facilities are self-sufficient. All have the need and

capacity to derive fuel from external sources.

The fuel supply

Materials used as fuel by the biomass power industry are the residual wastes that

remain after all other economic value has been extracted. In effect, the industry recycles material—that would otherwise be discarded—into a product (electricity) that

has societal value.

One can view the biomass power industry as a massive waste management system that generates electricity as one of a number of valuable by-products.

Our fuel supply is derived from three major sources. The first and principal source

is forest-related activities, which account for roughly 75 percent of our total supply.

Within this category, materials include slash and brush from commercial timber

harvest operations (we use the branches and tops after the tree has been sent to

the mill), bark and excess sawdust from timber processing, and materials derived

from thinning of overly-dense vegetation in order to reduce the risk and severity of

forest fires. The biomass power industry is, in reality, the ‘‘garbage man’’ for the

forestry sector. We gather and use only those materials that are worthless to someone else. If a certain material has more value as a pulp chip or as an input to another commercial product, the market will drive it in that direction rather than to

us.

Our second source of fuel is agricultural residues, which comprise approximately

15 percent of our total supply. These materials include orchard tree prunings and

removals, as well as residuals from sugar manufacturing and rice milling.

Our third and final source of fuel is urban wood waste diverted from landfill disposal. Included here are broken pallets and shipping containers, leftovers from construction and manufacturing activities, and selected other materials. Fuel specifications provided to our fuel brokers require the exclusion of paper that is commonly

recycled and materials that are toxic or hazardous. Our industry simply cannot afford to find hazardous chemicals in our air emissions or our ash, so we take all necessary precautions to exclude them at the front end of the process.

Public benefits of biomass power generation

The biomass power industry has a number of unique characteristics that are germane to the subject of this hearing and are particularly relevant as our new President develops and introduces a national energy policy within the next few weeks.

In late 1999, the U.S. Department of Energy published an independent research

report entitled The Value of the Benefits of U.S. Biomass Power, which compared

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the impacts of biomass energy production with that of the most probable alternative

fate of the residues we use as fuel. The report also attempted to quantify (monetize)

the value of the nonelectric benefits of biomass power production in terms of criteria

air pollutants, greenhouse gas emissions, landfill capacity use, forest and watershed

improvement, rural employment and economic development, and energy diversity

and security.

The findings of this report are notable and important. In an industry where the

average cost to deliver a kilowatt-hour of electricity is 61⁄2 cents to 7 cents, the report concludes that ‘‘Based on a base-case, conservative analysis, the value of the

environmental services (described above) associated with biomass energy production

in the United States is 11.4 cents per kilowatt hour.’’ In other words, the environmental benefits are 63 percent more valuable than the electricity itself or, alternatively, each unit of electricity produced delivers a substantial environmental

bonus that is not reflected in the price of the electricity itself. This bonus reflects

the public ‘‘externality’’ value of biomass power and forms the basis for its inclusion

in a sensible national energy policy.

Further, the report cites recent research which estimates the savings in ultimate

cost, on a net-present value (NPV) basis, of using mechanical thinning for forest

treatment versus a regime of prescribed burns that must be carried out over a number of years to achieve the same degree of forest improvement. The mechanical

thinning, followed five years later by a prescribed burn, has a cost (NPV) of $432

per acre. The alternative of three prescribed fire treatments during a 20-year period

has a cost (NPV) of $560 per acre for a net savings of $128 per acre using the mechanical thinning and fuel production alternative. These savings do not include the

reduction in air emissions during the various burns, the reduction in residual stand

damage, or the diminished risk of prescribed burns flaring out of control. Moreover,

there is an immediate value of benefits realized from the mechanical thinning/fuel

production option versus the delayed benefits from multiple prescribed burn testaments.

The public benefits of the biomass power industry are derived from the gathering,

processing, and delivery of its fuel supply rather than from its generation of electricity. This characteristic distinguishes the biomass sector from all other energy

technologies. As mentioned earlier, the biomass power industry pays to acquire its

fuel. Consequently, an entire infrastructure has been established to provide the

services needed to obtain and deliver the fuel to us, and this infrastructure is funded and sustained by the substantial per-ton payments we make to acquire our fuel.

Our purchases support contractors who undertake pre-fire thinning in the public

and private forests, with appropriate permits, to reduce forest fire risk and to remove excess biomass that depresses forest health and productivity and degrades the

functioning of watersheds. Our purchases also support similar services in the agricultural sector to chip and deliver orchard prunings and other materials that would

otherwise be a major source of air pollution when they are burned in the open field.

It is widely recognized that the level of direct and indirect rural employment is

higher in the biomass power industry than in any other renewable energy technology.

Biomass power and public lands

In those instances in which biomass power facilities are located in relative proximity to public lands, they have the capability to play an important role in generating electricity from wood waste derived from those lands. The biomass facilities

provide a destination and a productive use for removed materials that otherwise

would be an environmental liability. The facilities have the capacity to utilize a high

volume of materials on a continuous basis, and the availability of fuel beyond current levels would optimize electricity output at a time when many states, particularly in the West, are faced with distressing shortages.

It is fair to note, however, that the correlation between the location of biomass

power facilities and the location of public lands is less than perfect. In some parts

of the country—from northern California up through Oregon and Washington and

into Idaho—there is excellent correlation. Elsewhere, in Maine, for example, there

is none. In northern Michigan, there is a good match.

Due to constraints on commercial timber harvesting and modest efforts so far to

implement mechanical thinning of overly dense woodlands, our facilities—even

when they are proximate to public lands—have obtained a diminishing percentage

of their fuel from these lands in recent years. When possible, our operators have

replaced public-lands fuel with materials from private lands and, increasingly, with

fuel derived from the urban waste stream. This is an unfortunate economic necessity if we are to maintain our electricity generation levels.

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Perhaps a few examples can illuminate the difficulties our facilities have faced in

obtaining fuels from public lands. You may be aware that the U.S. Forest Service

imposed a moratorium on all commercial activities in California’s Sierra Nevada, effective December 11, 2000. Its intent was not focused on the biomass industry, but

an inadvertent consequence of its action was to abort fuel supply contracts that

were already in place. This action unexpectedly disrupted power production at our

facilities and forced our managers to scramble for replacement fuel on the spot market where they had no choice but to pay top dollar. Sixteen of California’s 28 operating biomass power facilities depend, to a greater or lesser degree, on fuels derived

from public lands. These facilities generate over 250 megawatts of electricity, a critical supply in an energy emergency. One of the California facilities—Honey Lake

Power—terminated its operations due to a lack of fuel and will not reopen until this

May at the earliest.

Numerous other examples exist. The Boise-Cascade biomass power facility at

Emmet, Idaho just announced permanent closure due to inadequate fuel supplies

from Federal lands. Two of the other three biomass facilities in Idaho are also out

of service at present. Additionally, the absence of activity on public lands in northern Michigan has limited fuel availability and constrained normal output.

In sum, there is an unmet potential to use biomass from public lands for electricity production purposes. While some facilities proximate to public lands can

maintain high output by using alternative fuels, others do not have that option. The

point to be made is that Federal policy should encourage the biomass power facilities to use as fuel those materials that would otherwise present the highest level

of environmental risk. Certainly the overly dense vegetation that increases forest

fire risk on public lands meets this criterion. The opportunity to convert these undesirable materials into a productive use, however, is quite limited under current conditions.

Pricing and economic considerations

Briefly, it is worth noting that biomass power facilities are increasingly sensitive

to fuel costs. In order to compete in deregulated electricity markets, which reward

the lowest-cost provider and give no value to external benefits such as those described earlier, the biomass power facilities must reduce their fuel costs to the lowest possible level.

For example, many biomass power facilities pay in the range of $40 per ton for

wood chips delivered to their facilities as fuel. Each $10 they pay for fuel equates

to 1 cent per kilowatt hour on the cost of their electricity. At $40 per ton (an average price for a ton of forest-derived fuel) the facilities are paying out approximately

2⁄3 of their income (4 cents out of 61⁄2 cents) for fuel alone. Going forward, the remaining income of 21⁄2 cents may be inadequate to cover the costs of operations and

maintenance, labor, debt service, and administration. Many facilities now need to

reduce fuel costs if they are to maintain full productivity and continue to provide

the environmental and economic benefits that serve the public good.

This issue is pertinent here because the cost of biomass fuels removed from public

lands will have to be measured against the cost of all other available fuels. Just

because public land fuels may be available, there is no certainty that they will be

utilized unless they are competitively priced. An opportunity exists here to shape

Federal policy, perhaps in the form of priority fuel use incentives, to ensure that

biomass power facilities turn first to residuals from public lands.

Looking ahead

There is a solid case that can be made for optimizing the electricity output of the

nation’s existing biomass power facilities, including those that are operating at

present and those that are currently idle. They generate clean renewable electricity

and, as an inherent bonus, remedy a range of environmental and economic problems. This industry could provide a worthwhile service—and a higher level of service—to Federal land managers if certain policies were enacted. Biomass power facilities can and should be integrated into the implementation of the National Fire Plan

whenever possible. They can also help fulfill the promise of the Herger-Feinstein

Quincy Library Group legislation which will test large-scale, progressive strategies

for land management and fire risk reduction.

Additionally, there is a demonstrable need for the construction of new biomass

power facilities in many regions of the country that are currently unserved or

under-served. In light of the millions of acres of public lands in states like Alaska,

New Mexico, and Montana, it is surprising that no biomass power facilities exist

there at all. Other states like Oregon, Washington, and New York have only a handful of facilities.

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In order to move ahead with new projects, developers need certainty about longterm fuel availability at affordable contract prices and they need to know that they

will receive a reasonable price for their electricity over an extended period of time.

The rest is mostly engineering. The Federal government could accelerate the construction of the next generation of biomass power facilities in those locations where

they are most appropriate and needed by reaching out with encouragement and assistance to the private sector.

Biomass materials from public lands can also be co-fired in existing power plants

that use coal as a primary fuel. By substituting a certain percentage (5 percent–

10 percent) of biomass materials for coal, certain criteria air pollutants can be reduced without diminishing electrical output. There may in some instances be a locational match between public lands and coal-fired power plants that make this an

attractive option.

Finally, there is an emerging opportunity to use biomass materials from Federal

lands as a feedstock for ethanol production. While ethanol and its tax credit are not

without controversy, evaluation of its merits in a scenario in which an ethanol distillation facility is co-located with an existing biomass power facility is underway at

a number of sites. Attractive engineering and fuel efficiencies appear to be within

reach.

Recommendations

To ensure the availability of the nation’s existing biomass power facilities as a

productive-use destination for materials removed from public lands for fire risk reduction or other commercial purposes, our primary recommendation is to provide

the industry with a much-needed production tax credit similar to the one that has

been provided to the wind energy industry since 1992. Our industry is in turmoil

now as fuel supplies contract and electricity markets are radically reshaped. The

production tax credit would increase the electricity generated by the industry and

would stabilize its operations at a time when many fear reductions or closure in the

near future. Legislation which includes this production tax credit is known as the

Energy Security Act of 2001 and has recently been introduced in the Senate.

From a broader perspective, the nation also needs an articulated biomass management policy as a context for future decision-making. None exists now, even though

we have an abundance of biomass waste materials that are a latent source of products, wealth, and environmental benefits. Intelligent utilization of our biomass resources is the cornerstone of self-reliance for electricity production and other desirable purposes.

Mr. CALVERT. [Presiding.] I thank the gentleman.

Mr. McInnis, you are outnumbered. We have three Southern

Californians here, and we like it, too.

Our last panelist is Ms. Leslie James, Executive Director of the

Colorado River Energy Distributors Association.

You may begin.

STATEMENT OF LESLIE JAMES, EXECUTIVE DIRECTOR,

COLORADO RIVER ENERGY DISTRIBUTORS ASSOCIATION

Ms. JAMES. Mr. Chairman, members of the Committee, I am Leslie James. I am honored to have been asked to speak with you

today regarding environmental and market impacts on the Federal

Colorado River Storage Project and its customers.

CREDA is a non-profit organization representing consumerowned utilities in the six Western States of Arizona, New Mexico,

Nevada, Utah, Colorado, and Wyoming. For Mr. McInnis, our members include Tri-State GNT, Platte River Power Authority, and Colorado Springs Utilities.

Formed in 1978, our organization members serve nearly 3 million electric consumers in these States. They have all entered into

long-term, cost-based contracts with the Western Area Power Administration, or WAPA, for purchase of Federal hydropower produced by the Colorado River Storage Project, or CRSP.

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CRSP contractors have been ensuring repayment of the Federal

investment in that project for 30 years. The rates charged under

these contracts are subject to frequent adjustment in order to repay

all of the Federal investment, with interest, in the CRSP, including

generation, transmission, operation and maintenance, and environmental costs. In addition, the contractors are paying over 95 percent of the cost of the irrigation features of the CRSP.

CRSP generating resource capability has been severely restricted. Let’s start with Glen Canyon Dam. Glen Canyon is the

largest feature of the CRSP, located near Page, Arizona. In 1996,

after many years of study and a $104 million EIS, which was also

paid for by CRSP power revenues, Glen Canyon operations were

changed. Approximately one-third of the generating capability has

been lost.

The EIS identified the annual financial cost to CRSP customers

at about $89.1 million per year, but that was in 1991 dollars.

Today, it is probably 3 to 4 times that cost. To date, over $134 million has been spent on Glen Canyon studies and paid for by CRSP

power revenues. This figure does not include the nearly $8 million

a year spent for the adaptive management program.

Just last summer, due to the requirements of a 1994 Fish and

Wildlife Service biological opinion, a low-flow experiment was undertaken. The experiment includes low flat flows all summer,

which meant reduced generation and no ability to follow load. The

low flat flows and dry hydrology, along with the increase in energy

market prices in the West, had a severe impact on costs. It required WAPA to purchase $55 million worth of replacement power

during that period last summer. The cost of the experiment alone

for research and manpower was over $3.5 million, also paid by

CRSP power revenues.

Let’s move up to the upper basin, Flaming Gorge Dam. Flaming

Gorge is on the Green River, located near Vernal, Utah. A 1992

Fish and Wildlife Service opinion has reduced Flaming Gorge generation by about 17 percent. Two years ago, the estimated impact

of that reduction was about $2.87 million per year. There is also

a current new potential for impacts to Flaming Gorge due to an ongoing EIS on Flaming Gorge flows. The cost of this EIS is estimated to be about $3 million, and it should be completed within

the next 18 months.

Let’s move to the Aspinall Unit. The Aspinall Unit includes three

dams and generating plants along the Gunnison River near Gunnison, Colorado. Since 1988, the Upper Colorado Endangered Fish

Recovery Program has been performing studies and installing capital features to benefit four endangered species of fish, but no studies have been completed to address the impacts on power generation.

The Fish and Wildlife Service has drafted a flow recommendations report which has yet to be finalized. Our concern is, once

again, there will be efforts to re-operate these dams in favor of endangered fish and to the detriment of power generation. These facilities are basically the last remaining peaking units in the CRSP.

Another impact to these facilities comes with the filing on January 17th of this year by the National Park Service of a proposal

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to quantify reserved water rights for the Black Canyon of the Gunnison National Monument.

Now, I will talk briefly about the Western energy market and the

effects on the CRSP and our members. This energy market crisis

you have heard a lot about today is affecting all CRSP contractors

and WAPA. Reduced generation at CRSP facilities has required our

members and WAPA to be out in the market buying power to replace lost generation. This is the same energy market from which

California entities are buying.

Our members are potentially facing a rate increase from WAPA.

As originally proposed, it could have increased the CRSP rate 67

to 187 percent. WAPA is considering alternatives to this rate adjustment, however. But just to give you an idea of the market impact, in a normal operating year WAPA would spend $6 million

during the whole year on purchased power. Just this last winter,

they spent $71 million.

Additionally, the CRSP resources marketed by WAPA are pursuant to law and marketing plans. They are within a legally defined

marketing area and on a long-term contractual basis. However, on

September 18th and February 15th this year, WAPA was directed

to ramp up Glen Canyon to help California avoid blackouts. Although sympathetic to the energy issues in California, CREDA has

serious operational, legal, and financial concerns with the requirement that CRSP resources be made available to California.

In summary, our view is that in any self-reliant, comprehensive

energy policy the unique roles, obligations, and contracts of the

Federal power marketing agencies must be recognized and maintained.

Secondly, Federal generating facility agencies should be encouraged to maximum production from those facilities, recognizing existing legal constraints.

Third, Fish and Wildlife flow recommendations for Federal hydropower facilities must be based on peer-reviewed, sound science,

in consultation with all relevant stakeholders, and should take into

account elements of Federal energy policy and economic impact.

There must be a balance between costs and impacts.

Lastly, CRSP contractors must not be held responsible for operational, legal, or financial impacts associated with the Federal Government’s assistance to California during this time of crisis.

Thank you for the opportunity of appearing before you today.

[The prepared statement of Ms. James follows:]

Statement of Leslie James, Executive Director, Colorado River Energy

Distributors Association (CREDA)

Mr. Chairman, members of the Committee, I am Leslie James, Executive Director

of the Colorado River Energy Distributors Association (CREDA). I am pleased to

have been asked to talk with you today regarding the Colorado River Storage

Project, its role in the development of a self-reliant U.S. energy policy, and recent

impacts on this Federal project.

CREDA members (contractors) have entered into long-term, cost-based contracts

with the Western Area Power Administration (WAPA), a power marketing administration of the Department of Energy, for purchase of Federal hydropower resources

of the Colorado River Storage Project (CRSP). These contracts provide for frequent

rate adjustments in order to ensure repayment of the Federal investment in the

CRSP. Our purpose today is to provide some background on the facilities of the

CRSP, to discuss the costs included in the CRSP rate, and to describe environVerDate 11-MAY-2000 13:13 Aug 24, 2001 Jkt 000000 PO 00000 Frm 00151 Fmt 6633 Sfmt 6621 J:\DOCS\70888.TXT HRESOUR2 PsN: HRESOUR2
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mental and energy market impacts on both the Federal government and CRSP contractors. First, a description of CREDA and its membership.

CREDA is a non-profit organization representing consumer-owned electric systems that purchase Federal hydropower and resources of the CRSP. CREDA was

established in 1978, and serves as the ‘‘voice’’ of CRSP contractor members in dealing with resource availability and affordability issues. CREDA represents its members in dealing with the Bureau of Reclamation (as the generating agency of the

CRSP) and WAPA (as the marketing agency of the CRSP). CREDA members are

all non-profit organizations, serving nearly 3 million electric consumers in the six

western states of Arizona, Colorado, Nevada, New Mexico, Utah and Wyoming.

CREDA members purchase over 85 percent of the CRSP power resource. Attached

is a listing of current CREDA members. At the time CREDA was formed, the key

issue for its members was the continuing increase in CRSP rates. CREDA members

felt it would be more effective and efficient to have a single organizational ‘‘voice’’ for them in regard to rate, Federal legislative and environmental issues impacting

the CRSP.

CRSP contractors have been ensuring repayment of the Federal investment for 30

years, by entering into long-term contracts to purchase the CRSP resource and by

paying all of the Federal investment in generation and transmission facilities (with

interest), all power-related operation and maintenance costs, and environmental

costs. In addition, the CRSP contractors are paying over 95 percent of the cost of

the irrigation features of the CRSP (beyond the ability of the irrigators to pay). In

fact in the current CRSP rate, 35 percent of the total annual revenue requirement

is due to irrigation assistance! It is important to note that the cost-based nature of

the CRSP rate includes costs beyond simply those associated with generation of the

hydropower resource. A further example is the cost of the Glen Canyon Adaptive

Management Program (AMP) and the Upper Basin Endangered Fish Recovery Implementation Program (RIP). More, detail on these costs will be provided below.

Next, a description of the CRSP.

The Colorado River Storage Project (CRSP) was authorized in the Colorado River

Storage Project Act of 1956 (P.L. 485, 84th Cong., 70 Stat. 50), as a multi-purpose

Federal project that provides flood control; water storage for irrigation, municipal

and industrial purposes; recreation and environmental mitigation and protection, in

addition to the generation of electricity. This testimony will focus on the major generation features of the CRSP, although there are several irrigation projects included

in the Project. The CRSP power features include five dams and associated generators, substations, and transmission lines.

Glen Canyon Dam

Glen Canyon Dam is located near Page, Arizona and is by far the largest of the

CRSP projects. Glen Canyon Dam began operation in 1964. The water stored behind

the dam is the key to full development by the Upper Colorado River Basin states

of their Colorado River Compact share of Colorado River water. The Glen Canyon

power plant consists of eight generators for a total of about 1,300 MW, which is

more than 70 percent of total CRSP generation. The ability of the Bureau to generate, and WAPA to market, the total generating capability of Glen Canyon Dam

has been impacted over a period of many years, by various processes and laws. In

1978 the Bureau began evaluating the possibility of upgrading the eight generating

units at Glen Canyon. This was possible primarily due to design characteristics of

the generators and improved insulating materials. This upgrade was completed, and

the generation was increased from about 1,000 MW to 1,300 MW. To fully utilize

the unit upgrades would require the maximum release of water from Glen Canyon

to be increased from 31,500 cubic feet per second (cfs) to about 33,200 cfs. The Bureau also studied the possibility of adding new units on the outlet works to provide

additional peaking capacity. The possibility of increasing maximum releases from

Glen Canyon raised concerns with downstream users. After discussion with stakeholders, the Secretary of the Interior initiated the first phase of the Glen Canyon

Environmental Studies.

In 1982, the Bureau began Phase I of the Glen Canyon Environmental Studies.

These studies were primarily to analyze the impacts of raising the maximum release

from 31,500 cfs to 33,200 cfs on the transport of sediment downstream from the

dam, recreation (including fishing and rafting), endangered species (including the

humpback chub in the Lower Colorado River), and the riparian habitat along the

river banks. The studies proceeded during the early 1980’s and were concluded in

1987. The general conclusion of the Glen Canyon Environmental Studies Phase I

was that the dam had blocked much of the sediment coming down the Colorado

River and therefore beaches were not being replenished with sand. Many questioned

the results of the Glen Canyon Environmental Studies Phase I because the process

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did not in all cases follow good scientific practice. For instance, the impact on power

and water economics was not fully explored.

After reviewing the Glen Canyon Environmental Studies Phase I and a review by

the National Academy of Science, the Secretary of the Interior determined that the

Glen Canyon Environmental Studies should be continued to address the economic

impacts, particularly as they relate to power, and also to collect additional data to

substantiate some of the conclusions in the Phase I report. Flooding during 1983– 85 exposed Native American cultural sites in the canyon, so an inventory was necessary to identify these sites and recommend appropriate protection.

The Glen Canyon Environmental Studies Phase 2 was initiated in 1989. The Bureau of Reclamation decided to hire a Senior Scientist to assist with the development of the Phase 2 studies to assure an appropriate scientific process. The Bureau

and the Senior Scientist developed Phase 2 studies, which included a series of test

flows to evaluate the impact of different operating conditions and to develop response curves for various conditions. Many interested parties, including water,

power, recreation, environment, and Native American interests participated in the

process.

In July 1989, the Secretary of the Interior announced the start of an environmental impact statement (EIS) on the operation of the Glen Canyon Dam. No specific Federal action was identified for study. Meetings were held during 1990 to seek

input into alternatives that should be considered, and the Bureau determined the

nine alternatives (including a ‘‘no action’’ alternative) to be studied. Meanwhile, in

1992, the Grand Canyon Protection Act (106 Stat. 4672) was signed into law. Section 1804 of the Act required completion of the EIS within two years. The EIS was

completed and the Record of Decision (ROD) signed in October 1996. The result was

that Glen Canyon operations were changed to reflect a revised flow regime; approximately one-third of the generating capacity was lost (456 MW). The EIS identifies

the annual financial cost to CRSP power contractors at $89.1 million per year. But

this figure is in 1991 dollars and is probably 3–4 times greater today, given energy

market conditions. The cost of the Glen Canyon EIS was approximately $104 million, and was funded by power revenues collected from the CRSP contractors. To

date, over $134 million has been spent on Glen studies, and paid by CRSP power

revenues. This figure does NOT include the nearly $8 million per year spent for the

Adaptive Management Program.

The Act also recognized that with the changes in operation that resulted from the

EIS, there ought to be a new look at how the costs of the Dam are assigned for

repayment. Section 204(e) of the Act requires the Secretary of the Interior to implement a new allocation of costs, which would relieve power from some of those obligations commensurate with the loss of generating capacity. The new operating criteria

were implemented in 1996, but the Secretary has yet to produce a cost study or to

reallocate the costs as required by law.

In April of 2000, it was determined that, due to hydrologic conditions and requirements of a 1994 Fish & Wildlife Service biological opinion, a low flow summer experiment would be undertaken. The experiment included high spike flows in May

and September, with low flat flows (8,000 cfs) all summer. The purpose was to gain

information regarding endangered humpback chub conditions. The low, flat flows

and hydrology, along with western energy market prices, had a severe impact on

power generation, requiring CRSP customers, and WAPA, to purchase replacement

power to meet their resource needs. The cost incurred by WAPA (and to be recovered from CRSP contractors) for this replacement power was $55 million, just for

the summer. Twenty-four million dollars of this total is attributed to the low steady

flow environmental experiment; the remainder is attributed to wholesale energy

market prices. The cost of the experiment alone was over $3.5 million, funded by

CRSP power revenues. These figures do not include additional costs to CRSP contractors who had to purchase or supplement their CRSP resource with purchases

from the energy market.

Adaptive Management Program

CREDA participates on the Federal Advisory Committee charged with making

recommendations to the Secretary of the Interior as to operations of Glen Canyon

Dam pursuant to the Record of Decision and underlying laws. Funding for the program (Adaptive Management Program) is through CRSP power revenues. Proposed

funding for next year’s program will exceed $10 million. On October 27, 2000, President Clinton signed the FY 2001 Energy and Water Development Appropriations

Act which includes language (section 204) capping the amount of CRSP power revenues that can be used for the Adaptive Management Program at $7,850,000, subject

to inflation. Without this cap, the annual program costs would have continued to

increase, with power revenues being the sole funding source. Now, the program will

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need to seek appropriated dollars in order to maintain increased funding levels.

CREDA supports seeking other sources of funding for this program. CREDA also

participates on the Technical Work Group through our consultants, to ensure that

good science and efforts to increase power production are considered.

CRSP contractors have paid, and continue to pay, the majority of costs at Glen

Canyon, even while the Glen capacity has been depleted by about one-third, and

there are significant operating constraints on the remaining available capability, as

required by the 1996 ROD. CREDA is optimistic, however, that additional capability

may become available to the CRSP contractors while still in compliance with the

operating restrictions.

Flaming Gorge Dam

Flaming Gorge Dam is on the Green River, a major tributary of the Colorado

River, and is located near Vernal, Utah. Flaming Gorge has three units producing

about 152 MW of generation. In 1992, the Fish & Wildlife Service issued a Biological Opinion on the operation of Flaming Gorge Dam. Two years ago, the estimated

impacts to power generation since implementation of the Biological Opinion was

$2.87 million per year. Approximately 26 MW have been lost to date due to changed

operations to benefit endangered fish. During summer of 2000, the Bureau began

the process of completing an EIS on proposed flow recommendations for endangered

fish. The Bureau is attempting to keep a narrow scope on the recommendations, but

some environmental groups are advocating the inclusion of an alternative to tear

down the dam Two CREDA members from Utah are ‘‘cooperating agencies’’ and,

thus, are able to participate in the meetings with the Federal agencies. The cost of

the Flaming Gorge Dam EIS is expected to be $3 million, and could be completed

within the next 18 months.

Aspinall Unit

The Aspinall Unit includes three dams and generating plants along the Gunnison

River near Gunnison, Colorado. Blue Mesa is the first darn on the river and has

two units producing about 97 MW. Morrow Point is the second dam in the series

and consists of two generators producing a total of 146 MW. Crystal is the final dam

and has one 32 MW generator. Morrow Point and Crystal Reservoirs allow some

regulation of the river flow so that releases from Crystal can be used to regulate

downstream flows as necessary. Since the early 1990’s as part of the Upper Colorado River Endangered Fish Recovery Implementation Program, or RIP, studies

have been undertaken to determine fish needs in this region. But NO studies have

been completed to determine impacts on power generation! CREDA’s interpretation

of the Fish & Wildlife Service’s flow recommendations is that they advocate a return

to ‘‘natural’’, or almost pre-dam flow patterns. In our view, this goal is unattainable

and unrealistic. The dams are there, the environment has changed, and efforts to

recover fish should recognize those facts. The Fish & Wildlife Service’s draft flow

recommendations report has yet to be finalized.

Another looming impact on power generation on the Gunnison River comes with

the filing by the National Park Service of a proposal to quantify reserved water

rights for the Black Canyon of the Gunnison National Monument This filing was

made in Colorado Water Court on January 17, 2001. (Case No. W–437, District

Court, Water Division No. 4, Colorado.) CREDA has not yet completed its analysis

of the impacts to power generation, but our preliminary indications are that the proposed flows associated with the water right quantification are unachievable and will

have a severe impact on power generation and existing water rights within the

State of Colorado. Statements of opposition in this matter must be filed by

March 30, 2001 in Colorado Water Court.

Upper Colorado River Endangered Fish Recovery Implementation Program (RIP)

The RIP was established through cooperative agreements among States and Federal agencies in 1988 for a 15-year period to help recover four endangered fish in

the Upper Colorado Basin. Power revenues currently fund about 60 percent of the

base research/study program, which until recently required about $2. 1 million per

year. Authorizing legislation was passed in October 2000, which authorized a $100

million capital improvements program. CREDA testified in support of this legislation in both House and Senate hearings. The legislation provides matching funds

for the capital program so that, in the event State funding for the program ceases,

so too does power revenue funding. The legislation had the support of the Upper

Basin States, CREDA, Federal agencies and some environmental groups. Why did

CREDA support it? (1) It caps CRSP cost exposure; (2) unlike in the Grand Canyon,

the States are contributing funding; and (3) also unlike in the Grand Canyon, the

authorization expires in 2011 and the program will have to be reauthorized by Congress.

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The legislation requires CRSP power revenue funding for monitoring and research

of up to $6 million per year, with credits toward repayment. In addition, the Upper

Basin States and CRSP power revenues will each contribute $17 million toward capital features. The legislation recognized that changes in operation of Flaming Gorge

and Aspinall generation as a result of Biological Opinions cost CRSP contractors $2

to $5 million per year. Notwithstanding the passage of authorizing legislation for

the RIP, CREDA still has concerns regarding ongoing impacts to operation of the

Federal facilities. In addition, CREDA is concerned that there should be specific recovery goals established as soon as possible. Recovery should be achieved through

the capital features of the RIP, not rely solely on dam operation adjustments.

The western wholesale market

The power systems throughout the western United States are all interconnected

and thus operate as one large integrated system. Electricity is the ultimate in ‘‘just

in time delivery, but this delivery creates a problem because large quantities of electricity cannot be stored for later use. Any time the load increases or decreases, a

regulating generator must sense that change and immediately respond appropriately. The system has been designed to allow certain units to be ‘‘base’’ loaded,

while a few of the units are allowed to ‘‘follow load’’ or regulate. This system has

provided a very stable and reliable electric system. To enable reliable moment-bymoment system control, it is necessary to have contractual arrangements to address

how the various entities will interrelate and account for the power and energy.

These contractual arrangements can be very complex, but they provide a means of

reconciling the system after the fact. Therefore, contractual arrangements may not

necessarily follow the actual operation on a moment-by-moment basis, but the contracts allow the entities to operate within agreed upon guidelines so business can

continue.

Hydro projects are ideal for ‘‘load following’’ and meeting peak demand because

they can be easily and quickly adjusted to meet changing load. The Federal hydro

system historically has been used to follow the load within the region, while the

larger, less flexible nuclear and coal-fired plants provide the base load requirements.

It has also been possible for the output of the hydro projects to be reduced to a minimum at night to ‘‘save’’ the water in the reservoir for use the following day when

peak loads require it. This integration of hydro and thermal resources provides the

most efficient operation of the electric power system. Historically, WAPA has been

able to reduce its hydro resources to the minimum level in the middle of the night

(when most users are asleep and industrial loads are low) and use thermal resources, and then increase the hydro generation in the daytime to provide the peaking requirement and defer the addition by the customer of additional peaking or less

efficient coal-burning resources. If the hydro resource is constrained by maximum

and minimum flow and ramp rate releases, this flexibility and diversity is reduced.

This also reduces the value of the hydropower, necessitates additional coal burning,

possibly requires additional resources to be built, and raises the cost to consumers

due to the need to replace unavailable resources.

CRSP rates and marketing program

When the Federal reclamation projects were begun, they were designed, constructed, operated, and maintained by the Bureau. The Bureau also owned the

transmission system and marketed the power from the projects. When WAPA was

formed under the Department of Energy Organization Act in 1977, the design, construction, operation, and maintenance functions remained with the Bureau, and the

transmission system and marketing responsibilities were moved to WAPA. Construction and capital projects are funded through the Federal Treasury at the interest rate determined by Congress or at the time construction starts. These projects

go through a budgeting process associated with the Federal budget, and money is

appropriated for these projects with congressional approval. As revenues are collected for the sale of Federal power, there is a priority assigned to payment of obligations. The priority of repayment of the projects is that O&M expenses for WAPA

and the Bureau are paid first and then repayment of the highest interest loans is

made to the Federal Treasury. The components associated with the power features

are paid first, including the appropriate interest, and then the power revenues are

used to pay the irrigation projects at no interest.

Each year WAPA compiles a ‘‘power repayment study’’ which estimates expenses

of both the Bureau and WAPA, and is the basis for the CRSP rate. After WAPA

has completed the power repayment study and if a rate adjustment is necessary,

a public process is begun. This process includes a notice in the Federal Register that

a rate adjustment is necessary, public information and comment meetings, and then

the proposed rate is filed with the Federal Energy Regulatory Commission (FERC)

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for review. The rate can be put into effect on an interim basis while FERC reviews

the rate, and if FERC concurs, the rate becomes final. FERC may also choose to

remand (or send back) the rate.

In July 2000, CREDA was pleased to learn that through our 1992 Work Program

Review process (a contractual arrangement among CREDA, the Bureau and WAPA),

WAPA would defer a rate increase until 2001. However, as indicated in a

November 8, 2000 Federal Register notice (65 FR 66995) due to low hydrology, high

purchased power costs and the impacts of the Glen Canyon low flow experiment,

WAPA announced it is in a severe cash flow situation and would have to consider

a rate ‘‘adder’’. CRSP financial obligations are paid from the CRSP Basin Fund, a

revolving fund in the United States Treasury, which is greatly impacted by high

purchased power prices. The replacement and firming power purchased by WAPA

on behalf of the CRSP contractors is paid for from this Fund. Clearly, the significant

increase in energy prices over the past 9 months has had a severe impact on the

Basin Fund cash flow. The proposed ‘‘adder’’ would have amounted to a 62 percent

increase in the CRSP rate. Under other, ‘‘worst case’’ hydrologic scenarios, this increase could have been as high as a 187 percent increase in the first year. As proposed, the increase would have translated to an approximately $57 million impact

to CREDA members in the first year alone. WAPA is currently exploring alternatives to the ‘‘adder’’. The effects on the CRSP rate from the western energy market are staggering. For instance, in a ‘‘normal’’ operating year, WAPA purchases approximately $6 million worth of purchased power to firm up the CRSP resource commitments. This winter season, however, WAPA’s purchased power requirements for

CRSP are $71 million!

The original CRSP contracts expired on September 1, 1989. WAPA completed an

Environmental Impact Statement (EIS) on the Post-89 Marketing Criteria. Contract

amendments were executed which reflected changes in the operation of the CRSP

facilities, and provided options for the CRSP contractors in terms of whether they

desire to make up the ‘‘shortfall’’ themselves, or whether they desire to have WAPA

purchase on their behalf and pass through the associated costs.

Changes to the amount of CRSP resources available to CRSP contractors began

again in April 1998. The changes were made in the contracts to reflect the changed

operating conditions at Glen Canyon Dam. In addition, in late 1998, the Department

of Energy (DOE) was asked to begin the process to extend the CRSP and Central

Valley contracts beyond 2004. Following this process, at the direction of newly appointed DOE Secretary Bill Richardson, a public process began to determine how

much of the existing CRSP resource should be ‘‘set aside’’, primarily for Native

American allocations. In June, 1999, WAPA published a Federal Register notice (64

FR 34414, June 25, 1999) indicating that in the post-2004 CRSP contract extensions, CRSP allocations would be reduced up to 7 percent to create a pool of power

to be allocated to Native American and new customers. Preceding this decision, departing DOE Secretary Elizabeth Moler posed a series of questions for public comment regarding allocation of and use of Federal hydropower resources by preference

entities in a deregulated environment (63 FR 66166, December 1, 1998). Ultimately,

DOE found no change was required of WAPA’s marketing criteria, which to CREDA

reaffirmed the concept that the cost-based rates and marketing criteria associated

with the CRSP are still relevant, possibly even more so, in a deregulated environment. WAPA is currently negotiating the ‘‘post-2004’’ contracts with new applicants

for the CRSP resource. In essence, CRSP contractors have experienced a reduction

in the amount of CRSP resource available to them through both operational and administrative processes. They are now facing significant rate impacts due to the effects of hydrology and energy market conditions in the west.

The ‘‘California’’ crisis and CRSP

The western energy market ‘‘price crisis’’ is affecting all CRSP contractors and

WAPA. Reduced operational levels at CRSP facilities, due to environmental constraints, have caused WAPA and the contractors to be out ‘‘in the market’’ having

to purchase resources to meet contractual obligations and to serve load. This is the

same energy market from which California entities are buying.

The CRSP resources are marketed by WAPA pursuant to law and marketing

plans within a legally defined marketing area, on a firm basis to preference entities.

And yet, by Presidential and DOE directives issued during 2000, WAPA was called

upon on September 18, 2000 and again on February 15, 2001, to ‘‘ramp up’’ Glen

Canyon to assist the California Independent System Operator avoid blackouts. Although sympathetic to the energy situation in California, CREDA has some serious

concerns with a requirement that CRSP resources be made available to California.

CREDA’s concerns are operational, legal and financial. Current hydrologic conditions in the Colorado Basin indicate the potential for another dry summer. Water

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released this spring may not be recoverable when so desperately needed to meet

summer peak demands. CRSP resources are committed under long-term, cost-based

contracts with a legally defined group of contractors, who are located within a legally established geographic marketing area. From a financial standpoint, the CRSP

contractors are the ‘‘guarantors’’ of Federal repayment investment in the CRSP.

Given the current financial situation of California power purchasers, CREDA believes the CRSP contractors must be provided protection from financial impacts

which may result from Presidential or Administration directives which require

WAPA to sell into the California market.

Conclusions and recommendations

1. In any self-reliant, comprehensive Energy Policy, the unique roles and responsibilities of the Federal power marketing administrations must be recognized and

maintained. CRSP resources are marketed under long-term, cost based contracts

and guarantee repayment of the Federal investment in power facilities as well as

its very sizable investment in irrigation projects.

2. CRSP contractors must not be responsible for operational, legal or financial impacts associated with the Federal government’s assistance to California.

3. The Fish & Wildlife Service recommendations for flows to Federal hydropower

operations in order to benefit endangered fishes must be based on peer-reviewed,

sound science, in consultation with all relevant stakeholders, and should take into

account elements of Federal energy policy and economic impacts. There must be a

balance between costs and impacts.

4. Federal hydropower facility operating agencies should be encouraged to maximize production from those facilities, recognizing existing legal constraints.

CREDA thanks the Committee for the opportunity of providing this information

and appearing today.

Colorado River Energy Distributors Association (CREDA) Membership

Arizona:

Arizona Municipal Power Users Association

Arizona Power Authority

Arizona Power Pooling Association

Irrigation and Electrical Districts Association

Navajo Tribal Utility Authority (also New Mexico, Utah)

Salt River Project

Colorado:

City of Colorado Springs

Intermountain Rural Electric Association

Platte River Power Authority

Tri-State Generation & Transmission Cooperative (also Nebraska, Wyoming and

New Mexico)

Yampa Valley Electric Association, Inc.

Nevada:

Colorado River Commission of Nevada

Silver State Power Association

New Mexico:

Farmington Electric Utility System

Tri-State Generation & Transmission Cooperative

City of Truth or Consequences

Utah:

City of Provo

Strawberry Electric Service District

Utah Associated Municipal Power System

Utah Municipal Power Agency

Wyoming:

Wyoming Municipal Power Agency

Affiliate Member:

Navopache Electric Cooperative (Arizona)

Mr. CALVERT. I thank the gentlelady.

I have a few questions. Certainly, we do have an energy crisis.

I don’t want to just refer to it as a California energy crisis. I believe that we have an energy crisis that may be systemic throughVerDate 11-MAY-2000 13:13 Aug 24, 2001 Jkt 000000 PO 00000 Frm 00157 Fmt 6633 Sfmt 6602 J:\DOCS\70888.TXT HRESOUR2 PsN: HRESOUR2
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out the United States, especially in the West, and California is just

the first evidence of what may occur in other areas. Certainly, it

already is occurring in other areas.

Glen Canyon Dam. There are probably two people who could answer this question, Mr. Hocker and Ms. James. How many

megawatts have been lost to production because of the new requirements that have been set forth in operations of that dam?

Ms. JAMES. Approximately 456 megawatts, of a total potential capability of 1,300 megawatts.

Mr. CALVERT. Close to 500 megawatts. California, can only use

power out of Glen Canyon, as a last resort. I guess we have used

it a couple of times here in the last few months. Is that correct?

Ms. JAMES. Mr. Chairman, yes, that is correct. On September

18th of 2000 and on February 15th of 2001.

Mr. CALVERT. For spike energy needs.

Ms. JAMES. And you are right. Basically, it was the understanding of WAPA that it was a resource of last resort.

Mr. CALVERT. A resource of last resort.

Since the new order came in effect limiting the amount of power

out of Glen Canyon, has there been any effect on the species that

they were trying to protect downstream? Was that the chub fish?

Ms. JAMES. Mr. Chairman and members, yes, the EIS addressed

multiple downstream resources. But you are correct; it is the

humpback chub. The habitat of the humpback chub is basically the

lower Colorado River, which feeds into the main stem of the Colorado.

The summer flow experiment that was undertaken this year— the test results are not entirely in. The primary purpose for that

experiment was The biological opinion that required them to do

these type of flows for the humpback. So in terms of what was the

impact, the jury is still out.

Mr. CALVERT. We don’t know?

Ms. JAMES. That is correct.

Mr. CALVERT. And how long has this been going on?

Ms. JAMES. The record of decision was signed in October 1996,

and the experimentation in Glen Canyon through the adaptive

management program has been going on since then. The low flow

experiment this summer for the chub started in May and concluded

in September.

Mr. CALVERT. Has there been any more discussion out of this administration about piercing dams in the West? Have you heard

anything from the Department of the Interior recently about that?

Ms. JAMES. Mr. Chairman, no, I have not.

Mr. CALVERT. That has kind of stopped?

Ms. JAMES. We hope so.

Mr. CALVERT Mr. Hocker, in your statement you briefly discussed

administrative reform efforts with resource agencies and other

stakeholders. What were these processes and how have these processes helped?

Mr. HOCKER. Well, it has been helpful to have dialogue with the

various agencies. There was an interagency task force. There has

been a national review group put together by EPRI. We encourage

this sort of effort between dam owners, hydro project owners, and

the resource agencies.

153

But there have also been disappointments, most recently when

the Department of the Interior just before the change of administrations put forth a proposed fishway policy that essentially would

have defined virtually anything as a fishway and virtually anything as a fish. It was discouraging to us because we felt it went

against the National Energy Policy Act of 1992, and again shows

why we think ultimately our search for balance and fairness in the

licensing process is going to have to be legislative rather than administrative.

Mr. CALVERT. Mr. Hogan, you mentioned that there are folks

selling power. I assume they have long-term power contracts.

Mr. HOGAN. No, they weren’t long-term power contracts. They

take an average over the past 5 years on usage and they calculate

the payment to the producer on that usage.

Mr. CALVERT. So they pay you not to produce, in effect?

Mr. HOGAN. That is correct.

Mr. CALVERT. So by doing that, that obviously has a domino effect on the local economy, the people driving the trucks, the people

in the stores. The only people who benefit from that obviously are

the people who own the land.

Mr. HOGAN. Absolutely.

Mr. CALVERT. So that could be an ongoing effect if we don’t get

a hold of this problem pretty quickly.

Mrs. Napolitano is recognized.

Mrs. NAPOLITANO. Thank you, Mr. Chair.

I hate to bring California up again, but this still bothers me. Ms.

James, I noticed in your testimony, and actually you referred to it,

that the members of your distributors association include everybody except California. Can you explain why?

Ms. JAMES. Yes. The resources of the Colorado River Storage

Project, or CRSP, are marketed pursuant to a Federal marketing

plan. The marketing plan is restricted geographically to exclude

California. It was a marketing plan that was developed at the time

the CRSP resource was developed and has been renewed every

time the long-term contracts are up for renewal. California is not

part of the geographic scope of that Federal project, unlike Hoover.

Hoover is marketed into California, but Hoover is an entirely different law and marketing plan.

Mrs. NAPOLITANO. What is the reason for the exclusion?

Ms. JAMES. Well, I guess you would have to ask the Congress at

the time the CRSP Act was passed and the marketing plans were

developed.

Mrs. NAPOLITANO. I just had to clarify that.

One of the questions that I have is will it be possible to upgrade

the existing generation or otherwise increase generation capacity in

your projects and still comply with the environmental and Endangered Species Act requirement?

Ms. JAMES. Yes. We believe that to a certain extent there is the

ability to increase generation within the confines of the record of

decision at Glen Canyon. The Glen Canyon adaptive management

program is a program of experimentation. What we continue to try

to stress in that program is that power production is a downstream

resource as important as sediment, vegetation, fish, et cetera.

154

So we believe within the confines of the operational constraints,

there is the ability, working with the Bureau of Reclamation as the

operating agency, to make some adjustments to generation patterns to increase some of the output of Glen Canyon.

Mrs. NAPOLITANO. And is the Bureau also evaluating the improvements to project the generating capacity?

Ms. JAMES. That is a good question. I understand Section 105 of

Mr. Murkowski’s bill has a provision that would require those

agencies to look into that. I think at this point the Bureau is considering how are they going to respond, but that is something we

would also encourage, that they look at the ability to increase and

enhance flexibility within existing legal constraints for all the

CRSP facilities.

I might also add as to the Flaming Gorge and Aspinall Unit facilities, later this month we believe some recovery goals will be

published in the Federal Register. Those recovery goals will also

cover the humpback chub. There may be some ability through the

recovery goals to ease restrictions at Glen in terms of experimentation for humpback chub.

Mrs. NAPOLITANO. Thank you. I will pass on further questions.

Mr. CALVERT. Mr. McInnis?

Mr. MCINNIS. Thank you, Mr. Chairman. As you know, we are

down to our vote, the final few minutes. Otherwise, I would like

to spend some time.

Ms. James, I found your testimony fascinating. One reminder

that Black Canyon is no longer a monument. My bill in the House,

with the support of my colleagues, made it a park.

But that aside, I think you are pointing out very clearly what our

difficulty is with this energy problem in this country. We have got

the capability; we have got capacity in place ready to produce this.

But because of these other considerations, we can’t flip the switch,

and literally in some cases that is all that is necessary.

I wanted to, Mr. Chairman, submit for the record a statement

from Tad Mason. He is Vice President of TSS Consulting.

Mr. CALVERT. Without objection.

[The prepared statement of Mr. Mason follows:]

TSS CONSULTANTS,

Rancho Cordova, CA, March 5, 2001.

Hon. JAMES V. HANSEN,

Chair, House Committee on Resources,

1324 Longworth House Office Building, Washington, DC.

DEAR CHAIRMAN HANSEN: As the Resources Committee deliberates on issues related to development of a

comprehensive national energy policy consideration should be made for the support

of renewable energy sources.

The advantages of utilizing renewable sources of energy—especially biomass energy are numerous, and include:

—Restoration of healthy forests

—Alternatives to open burning

—Reduction of greenhouse gas emissions

—Landfill diversions

—Beneficial economic impacts to rural counties

—Community protection

—Energy diversification

Attached is a short paper describing the positive experiences that we have experienced in the West as a result of supporting biomass energy projects.

155

Please contact me if you have any questions.

Sincerely,

TAD MASON, Vice President.

Statement by Tad Mason, Vice President, TSS Consultants

THE OPPORTUNITY TO DEVELOP BIOMASS ENERGY IN THE WEST

Introduction

This paper addresses the opportunity to develop biomass energy as a renewable

energy source in the 11 Western states. As this paper is being composed the West

is experiencing a very serious energy shortage, one that will impact this region for

years to come. Significant opportunities exist to both improve the health of our

Western forests and create more electricity to help solve an energy crisis.

Advantages of biomass energy

In the early 1980’s California enacted statewide initiatives targeting the development of alternate energy projects. These, coupled with Federal legislation provided

motivation for the almost overnight development of numerous biomass fired power

generation facilities. By the early 1990’s over 60 plants with an output of 800+

megawatts of power were on line and operating. These plants consumed over 10 million tons of waste wood annually. Not only did these plants generate electricity for

an energy hungry region—they also provided significant societal benefits including

the disposal of unwanted and underutilized wood waste.

Today, California has 29 biomass to electricity plants operating with an output

of just over 550 megawatts. A number of factors contributed to the downsizing of

this industry, but the primary reason was concern over the long-term viability of

these facilities in a deregulated electricity market. Today, as the state attempts to

address the deregulated power generation market, there are ongoing discussions on

how to best bring more power generation on line—including more biomass power.

Currently the California legislature is considering a number of bills that provide incentives for the development of additional biomass plants.

The California legislature is highly motivated to support the biomass energy sector due to the wide array of societal benefits that this state has experienced since

the first plants were built and began operating in the early 1980’s. These benefits

include:

Restoring Healthy Forests.—Almost a century of successful fire suppression has allowed unnatural accumulations of small trees and brush to grow into very dense

thickets. These unnatural and very dense thickets fuel more intense and catastrophic forest replacing wild fires. Last season, over 7 million acres of Western forests were damaged by wild fire. By removing the overcrowded trees and brush, the

forests are restored to a more natural condition—one that allows for the re-introduction of fire. Once thinned these forests support critical habitat for a wide variety

of sensitive animal species and help assure the long-term health of entire watersheds.

Alternative to Open Burning.—Until the advent of the biomass energy sector,

large amounts of woody biomass were disposed of by open field burning. From agricultural byproducts such as orchard pruning material to forest derived byproducts—

prescribed burning of small trees, brush, etc., large amounts of wood waste were

open burned as a means of disposal. Now that a market exists for this material millions of tons of this waste is consumed in power generation boilers equipped with

sophisticated emissions control devices rather than burned in the open with uncontrolled air emissions. The net impact is cleaner air and a move towards meeting new

EPA air standards addressing particulate matter of 2.5 microns (down from 10 microns) in size.

Greenhouse Gas Emissions.—Healthy forests have the ability to actively store a

major greenhouse gas—carbon dioxide (known as carbon sequestration). As forests

are thinned and become more efficient at growing and at carbon sequestration there

is a relative reduction of this greenhouse gas. The biomass retrieved from forest

thinning operations not only improves forest health (and therefore carbon sequestration) but also represents a power generation alternative to the burning of fossil fuels

for power. Fossil fuels combustion releases CO2 that was stored away in long-term

geological storage, while biomass combustion actively promotes improved carbon sequestration as in the case of newly thinned, healthy forest. Wild fires are also large

producers of CO2 emissions. As more forests receive forest fuels reduction treatments, there should be a net decrease in wild fires, resulting in a net reduction of

CO2 emissions.

156

Landfill Diversions.—It has been estimated that wood waste in the form of crates,

pallets, yard trimmings, demolition wood, etc. comprises over 25 percent of the

waste stream going into landfills. Diversion of this wood waste to power generation

extends the useful life of landfills, reduces waste handling costs and saves municipalities the cost of new landfill development. Less space devoted to landfills means

more space for other uses such as parks, habitat conservation easements, etc.

Economic Impacts.—Employment associated with biomass energy plants is significant—especially in the rural areas where these plants are typically sited. Activities

such as harvesting, collecting, processing and transporting wood waste to the power

plants requires skilled workers that earn relatively high wages. Highly skilled technicians are required to operate and maintain the power plant. The plants also contribute to the local economy through payment of property taxes. In many rural counties the biomass energy plants are among the largest taxpayers.

Community Protection.—Communities located in forested regions of the United

States are at significant risk due to the unnatural accumulation of forest fuels over

the past century. In fact, this is such a high priority issue that currently, the U.S.

Departments of Agriculture and Interior are maintaining a list of Urban Wildland

Interface communities that are at high risk from wildfire. The establishment of this

document, which now lists hundreds of communities, was in direct response to last

seasons’ catastrophic wild fire season. The proactive treatment of forest fuels around

communities at risk will reduce the chance of catastrophic wild fire. Unfortunately

many communities that experienced wild fire last year know only too well how fire

can impact the long term economic well being of the areas primary employment sectors—forestry, recreation, agriculture, etc.

Energy Diversification.—Biomass energy provides a renewable energy alternative

to the use of non-renewable energy sources such as oil, gas and coal. Use of renewables represents a move towards energy independence, in support of national and

international security. Currently, we as a nation import significant amounts of oil

from highly unstable regions of the world. This dependence on finite energy resources from insecure regions places the United States at significant risk. Biomass

energy, as with other renewable energy sources, represent opportunities to diversify

our energy portfolio.

Recommendations

As the House Resources Committee reviews alternatives to address energy policy,

consideration should be made to address some hard targets:

Set a renewables portfolio standard goal that mandates that the nation’s energy be sourced from at least 25 percent renewables: wind, solar, geothermal

and biomass by 2005.

Provide energy tax credits for development of renewable energy projects.

Provide tax incentives to forest landowners that proactively treat forest fuels

through removal of biomass that is then used for power generation.

Encourage utilities to enter into long-term power purchase agreements with

renewable energy plants at rates that take into account the societal benefits (for

example, biomass: improved forest health, clean sustainable energy, reduced

open burning, reduced waste to landfills, etc.) which these plants have to offer,

at rates that allow the plants to operate at a profit over the long term.

Support the long term funding of the National Fire Plan. Implementation of

the NFP will address the long term health of our forests, long term employment

in rural communities and provide incentives for the development of biomass energy projects.

Support pilot project funding for biomass to ethanol facilities. As the demand

for ethanol in the West increases there is a growing need to produce more ethanol from a wider variety of feed stocks including biomass.

Conclusions

The clear opportunity to address the long term health of this nation’s Western forests and, at the same time generate power with a clean renewable energy source

exists right now. The technology is proven, and the benefits from existing biomass

plants demonstrates the potential for a West wide program.

Mr. MCINNIS. Mr. Judd, I wanted to ask you a couple of quick

questions. Mr. Mason in his remarks that we have just submitted

for the record recommends we establish hard targets for renewable

energy sources—he suggests about 25 percent by 2005—and proVerDate 11-MAY-2000 13:13 Aug 24, 2001 Jkt 000000 PO 00000 Frm 00162 Fmt 6633 Sfmt 6602 J:\DOCS\70888.TXT HRESOUR2 PsN: HRESOUR2
157

vide tax incentives to forest land owners who treat fossil fuels

through the removal of biomass for power generation.

Do you agree with those recommendations, and how do they tie

into the National Fire Plan?

Mr. JUDD. Mr. Mason’s first recommendation in terms of incentives is a good one. We have an industry of power producers and

an industry of fuel suppliers on the forestry side that are standing

still when they should be moving forward. Incentives for the private sector landowners to supply fuel would be useful for the facilities themselves. To keep them operating at full capacity, there

needs to be a production tax credit for the existing facilities, and

that will be proposed again in legislation this year.

Mr. MCINNIS. Mr. Chairman, in consideration of the time, I will

conclude my questioning.

Mr. CALVERT. I thank the gentleman, and I would again like to

thank the witnesses for their valuable testimony and the Members

for their questions. We may have some additional questions for

you. We have several votes. We will be gone for half an hour, so

I am going to adjourn this hearing, but please expect some additional questions that we will send to you. Hopefully, we can have

some written replies. Again, we thank you.

This Committee is adjourned.

[Whereupon, at 1:50 p.m., the Committee was adjourned.]

(159)

OVERSIGHT HEARING ON THE NATIONAL

ENERGY POLICY

Wednesday, June 6, 2001

U.S. House of Representatives

Committee on Resources

Washington, DC

The Committee met, pursuant to call, at 10:00 a.m., in Room

1324, Longworth House Office Building, The Honorable James V.

Hansen [Chairman of the Committee] presiding.

STATEMENT OF THE HONORABLE JAMES V. HANSEN, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF UTAH

The CHAIRMAN. The Committee will come to order.

Good morning. As usual members come dribbling in through this,

so we will start on time as we normally do. We are pleased to welcome the Honorable Gale Norton, Secretary of Interior to this full

Committee hearing on energy policy.

On May 17th, the administration released a National Energy

Policy Report designed to identify and implement an energy policy

that addresses the needs of the United States over the next three

decades. It couldn’t have come at a better time. The California

problem has spread to other Western States. Consumers are putting a greater percentage of their hard earned paychecks toward

electric and gas bills. Agriculture is being hit particularly hard, as

is the manufacturing sector and transportation sectors. Clearly

after 8 years of neglect, we need to develop a comprehensive longterm energy policy.

The Committee on Resources has jurisdiction over energy policy

as it relates to Federal lands. As you know, a significant portion

of the U.S. energy reserves are located on Federal lands and in the

Outer Continental Shelf. Roughly 15 percent of all hydropower generated and transmitted in the United States is owned and operated

by the Department of Interior. This Committee also has responsibility to ensure that all Federal statutes are followed closely so we

might protect our public lands while allowing development of these

valuable energy resources to go forward in a responsible and environmentally sensitive way.

There are a number of regulatory and legislative tools at our disposal to allow us to address the pressing energy needs of our country. As the Committee begins the legislative process, we should

look to ways to improve the implementation of NEPA, streamline

160

the permitting process and improve coordination among Federal

agencies.

Numerous hearings have been held in the Energy and Minerals

and Water and Power Subcommittees on the energy resources and

issues on Federal lands and facilities. Those hearings have been

very informative and I believe have provided a strong foundation

from which we can begin the legislative process. The administration has also provided the Committee a good blueprint to begin as

well.

Unfortunately, the administration’s report has been broadly criticized for placing too much emphasis on development of existing resources and not relying enough on conservation or emerging technologies. In that criticism, some extremist environmentalists have

even gone so far as to deny that there is an energy crisis at all.

I differ with that view. All evidence points to the fact that there

is an energy crisis in the United States, from continued lagging

economic reports to rolling blackouts to record high gasoline prices.

Despite our best efforts at times, Congress will never be able to

repeal the laws of supply and demand. The current energy crisis

is a result of too much demand and not enough supply. Demand

for energy has grown by 30 percent in the last decade. This is the

cost we must pay for powering the engine of the United States

economy. That same economic engine has also powered the rest of

the world toward tremendous economic growth the past decade.

Unfortunately, it is politically easier to stand on the sidelines

and criticize those who have rolled up their sleeves and gone to

work, rather than join them in working toward a solution. It is

easier to hide behind the cloak of promises of future payoffs in alternative energy sources and conservation rather than to admit

that difficult decisions must be made.

We are told that all we have to do is conserve and apply energy

efficient technologies and the problem will go away. That philosophy ignores the need to address the very immediate demands for

increased supply today, not just 10 years from now.

In the last decade our economy has grown by more than 30 percent without a correlating increase in energy supplies or generation. This is most evident in California, which has benefited more

than any other State from the high tech boom of the nineties. I

know that my colleagues from California are proud that their State

has the most intensive and rigorous conservation programs in the

country. Californians also have the lowest per capita energy consumption in the Nation, and I congratulate them for that accomplishment. And yet as they sit in the dark un-airconditioned offices

each afternoon, many Californians are learning that conservation

alone does not constitute a sound energy policy. Try as we might,

we simply cannot conserve our way out of our current problems.

I recently read where the President of the Sierra Club, one of the

most vociferous critics of the Administration, referred to the energy

blueprint as a cesspool of polluter giveaways. That makes for a

good sound bite but provides no insight as to how we end blackouts

or bring down high gas prices.

There are no solutions offered by the critics of the President’s energy policy. All we hear from the critics are vague promises of

quicker, cleaner, cheaper, safer solutions like energy efficient techVerDate 11-MAY-2000 13:13 Aug 24, 2001 Jkt 000000 PO 00000 Frm 00166 Fmt 6601 Sfmt 6601 J:\DOCS\70888.TXT HRESOUR2 PsN: HRESOUR2
161

nologies, renewable power like solar and wind. Rarely is it mentioned that these technologies are years away from implementation. They would have us believe that simply waving a magic wand,

all of these technologies can be put into place immediately.

Rarely is it mentioned, for example, that it will take 15 to 20

years to turn over the existing fleet of gas guzzling SUVs to more

efficient vehicles. Fifteen years is a long time to wait when we need

more production now. Even if a dramatic transformation was to

take place within 5 to 10 years, we do not have the generation capacity to accommodate millions of new electric vehicles. To do so

we have to rely on existing fuel supplies.

More coal-fired plants? People say way too dirty. Think of all the

terrible greenhouse gases. How about natural gas? Oh, no, that

would allow for exploration on sensitive Federal lands and offshore,

and think of all the pipelines that would have to cross forest

roadless areas. How about increased nuclear power? I don’t want

a Chernobyl or Three Mile Island in my backyard. Solar and wind,

but wait 20 years until the technology can be applied on a large

scale. In the meantime how about mass transit? But don’t count on

light rail because that takes electricity.

Isn’t it time that someone said the emperor has no clothes. We

cannot wish away our energy problems. There are no easy and

painless solutions to this. There are no short-term fixes and I don’t

know who has got the magic wand. If someone has it, please come

forward.

It is time that we all begin to take this problem seriously. We

have to first admit that ours is a fossil fuel based economy and will

be for a long, long time to come. While there are indeed promising

new technologies on the horizon, they are still on the horizon. We

cannot conserve our way out of this current situation nor can we

afford to do nothing until energy efficient technologies become fully

implemented 15 to 20 years from now. Given that, we must make

the most of the technologies we have.

I am sure today’s hearing will be very lively. I look forward to

hearing what suggestions the Secretary has for the Committee and

what actions we should take, and I look forward to the testimony.

No one is taking away from the idea we should conserve. Of

course we should. Everyone should conserve energy. Still, let’s be

realistic on what the President has offered.

I understand the Secretary is under some time constraints this

morning. So I request the opening statements be restricted to Mr.

Rahall and myself. I would encourage members of the Committee

to use their allotted 5 minutes for statements and questions. I also

want to remind Members that this hearing is about national energy policy and encourage them to keep their remarks and questions focused on that issue. If time allows, we will try to have a

second round.

Mr. Ranking Member, Mr. Rahall.

[The prepared statement of the Chairman follows:]

Statement of The Honorable James V. Hansen, Chairman, Committee on

Resources

Good morning. We are pleased to welcome the Honorable Gale Norton, Secretary

of Interior to this Full Committee hearing on Energy Policy. We look forward to

hearing your testimony this morning.

162

On May 17th, the Administration released the National Energy Policy report designed to identify and implement an energy policy that addresses the needs of the

United States over the next three decades. It couldn’t have come at a better time.

The California contagion has spread to other western states. Consumers are putting

a greater percentage of their hard earned paychecks toward electric and gas bills.

Agriculture is being hit particularly hard as is the manufacturing sector and transportation sectors. Clearly after eight years of neglect, we need to develop comprehensive long-term energy policy.

The Committee on Resources has jurisdiction over a portion of this energy policy.

A significant portion of the U.S. energy reserves are located on federal lands and

in the Outer Continental Shelf. Roughly 15 percent of all hydropower generated and

transmitted in the United States is owned and operated by the Department of Interior. This Committee also has responsibility to ensure that all federal statutes are

followed closely so we might protect our public lands while allowing development

of these valuable energy resources to go forward in a responsible and environmentally sensitive way.

The Administration’s report has been broadly criticized for placing too much emphasis on development of existing resources and not relying enough on conservation

or emerging technologies. In that criticism, some extremists have even gone so far

as to deny that there is an energy crisis at all. I beg to differ with that view. All

evidence points to the fact that there is an energy crisis in the United States, from

our lagging economic indicators to rolling blackouts to record high gasoline prices.

Despite our best efforts at times, Congress will never be able to repeal the Laws

of Supply and Demand. The current energy crisis is a result of too much demand

and not enough supply. Demand for energy has grown by 30 percent in the last decade. That is the cost we must pay for powering the engine of the United States economy. That same economic engine has also powered the rest of the world toward tremendous economic growth the past decade.

Unfortunately, it is politically easier to stand on the sidelines and criticize those

who have rolled up their sleeves and gone to work, rather than to join them in

working toward a solution. It is easier to hide behind a cloak of promises of future

payoffs in alternative energy sources and conservation, rather than to admit that

difficult decisions must be made.

We are told that all we have to do is to conserve and apply energy efficient technologies and the problem goes away. That philosophy ignores the need to address

the very immediate demands for increased supply today, not just ten years from

now. In the last decade, our economy has grown by more than 30 percent without a

correlating increase in energy supplies or generation. This is most evident in California which has benefited more than any other state from the high-tech boom of

the nineties.

I know that my colleagues from California are proud that their state has the most

intensive and rigorous conservation programs in the country. Californians also have

the lowest per capita energy consumption in the nation. I congratulate them for that

accomplishment. And yet, as they sit in dark, un-airconditioned offices each afternoon, many Californians are learning that conservation alone does not constitute a

sound energy policy. Try as we might, we simply cannot conserve our way out of

the current situation we are in.

I recently read where the President of the Sierra Club, one the most vociferous

critics of the Administration referred to the Energy Blueprint as ‘‘a cesspool of polluter giveaways.’’ That makes for a good sound bite but provides no insight as to

how we resolve the current problem.

What solutions are offered by the critics of the President’s energy policy? None.

After soundly denouncing the Administration’s plan, all they have to offer are vague

promises of ‘‘quicker, cleaner, cheaper, safer solutions like energy-efficient technologies renewable power like solar and wind.’’ They also admit that we are in a

crisis but it can be resolved by ‘‘responsible additions to supply.’’

They would have us believe that simply waving a magic wand, all of these technologies will be put into place tomorrow and our problem goes away.

Rarely is it mentioned for example that it will take 15 to 20 years to turn over

the existing fleet of gas guzzling SUV’s to more energy efficient vehicles. Fifteen

years is a long time to wait without a short-term solution and even if a dramatic

transformation was to take place within five to ten years, we do not have the generation capacity to accommodate millions of new electric vehicles. To do so, we have

to rely on existing fuel supplies.

More coal-fired plants? ‘‘Too dirty. Think of all the terrible greenhouse gases.’’

How about natural gas? ‘‘Oh no, that would allow for exploration on sensitive federal lands and offshore. And think of all the pipelines that would cross Forest

163

roadless areas.’’ Increased nuclear power? ‘‘I don’t want a Chernobyl and Three Mile

Island in my backyard.’’ Solar and wind? Yes, but wait twenty five years until the

technology can be applied on a large scale. In the meantime, just rely on mass transit. But don’t count on light rail systems because they run on electricity.

Maybe we should go back to wood-fired steam trains but since so many are opposed to logging that is not an option. Maybe we should light a candle and just

curse the darkness.

I don’t intend to be flippant but isn’t it time that someone says ‘‘The Emperor has

no clothes.’’ We cannot wish away our energy problems. There are no easy and painless solutions. There are no short term fixes and no magic wands to wave.

It is time that we all begin to take this problem seriously. We have to first admit

that ours is a fossil-fueled-based economy and will be for a long, long time to come.

While there are indeed promising new technologies on the horizon, they are still on

the horizon. We cannot conserve our way out of the current situation, nor can we

afford to do nothing until energy efficient technologies become fully implemented 15

to 20 years from now. Given that, we must make the most of the technologies and

the energy supplies we currently have in place.

I am sure that today’s hearing will be a lively one. I look forward to hearing what

suggestions the Secretary has for the Committee as to what actions we should take.

I look forward to your testimony.

I understand the Secretary is under some time constrains this morning so I request that opening statements be restricted to Mr. Rahall and myself. I would encourage Members of the Committee to use their allotted five minutes for statements

and questions. I want to also remind Members that this hearing is about national

energy policy and encourage them to keep their remarks and questions focused on

that broader issue. If time allows, we will try to have a second round of questions.

STATEMENT OF THE HONORABLE NICK J. RAHALL, II, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WEST

VIRGINIA

Mr. RAHALL. Thank you, Mr. Chairman. Secretary Norton, on behalf of the Committee Democrats we welcome you to the Committee this morning to discuss the administration’s National Energy Policy Report and specifically proposals it contains which are

in this Committee’s jurisdiction. The administration’s energy policy

report contains several proposals that would require legislation

from this Committee. The one of course receiving the most attention involves the opening of a portion of the Arctic National Wildlife Refuge to oil and gas drilling.

The question of whether or not Congress opens that area to development is a direct one. It can be debated and it can be dealt

with one way or another. But frankly, what concerns me more are

certain proposals which are either hinted at by the report or which

have been alluded to by the President, yourself, Secretary Norton,

as well as others within the administration and certain Members

of this body as well. What I am referring to is this mantra we have

been hearing that one way to salvation is to open more public lands

to energy development. Let’s open more public lands to energy development.

The administration and others are actually suggesting we drill in

our national monuments, to mine in pristine wilderness areas and

lift bipartisan bans on oil and gas leasing in environmentally sensitive offshore areas. News flash, folks: Hey, big oil is just licking

its chops. They are so happy. Sky rocketing gas prices, record profits, a beleaguered American public, and a chance to just rip, rip

into areas they have been hankering and licking at their chops to

rip into after many, many years.

Yet apparently monuments and wilderness areas are not enough.

The last few months when it comes to the issue of Federal lands

164

I have posed the question within this Committee and in other forums what Federal lands are you talking about? What more do you

want?

Just recently we have been given the answer. There is a place

in Montana that native Americans call the Valley of the Chiefs. It

contains rare rock art. It has cultural and religious significance, so

much so that the Bureau of Land Management designated it an

area of critical environmental concern. Exploring for oil in this

place has been described as being akin to placing a drilling rig in

the Sistine Chapel, but not to this administration, and this dismays me, Secretary Norton. Just 12 days after the inauguration of

President Bush, the BLM gave the green light to a company owned

by one of the wealthiest persons in America, Philip Anschutz, to explore for oil in this sacred place, and in the process running roughshod over NEPA, the National Historic Preservation Act, and our

trust responsibilities to Native Americans, let alone our responsibilities of good stewardship to the Nation.

Are we really that desperate? Are we really that greedy that we

as Americans are willing to squander the remaining vestiges of our

national heritage to quench our thirst for energy, leaving nothing

for our children and our future generations to come? I do not think

so, nor am I certain do the vast majority of Americans.

Secretary Norton, I am this morning imploring you to stop the

drilling in the Valley of the Chiefs. This is within your power. If

the President wants another photo op to show his concern for the

environment, this would be the perfect, perfect place. There will be

no alligators hungrily eyeing him as they were in the Everglades

the other day, but there would be many people, many of whom are

in this room, that would express their profound thanks.

Thank you, Mr. Chairman.

The CHAIRMAN. I thank the gentleman from West Virginia.

Madam Secretary, it is indeed a pleasure to have you with us today

as your first time in front of this Committee. Many of us here have

sat through a lot of Secretaries, I was just checking off Watt,

Clark, Hodel, Lujan and Babbitt that we have gone through. And

all of it was interesting. And we appreciate you being here with us

today and we will now turn the time over to you.

STATEMENT OF THE HONORABLE GALE A. NORTON,

SECRETARY, U.S. DEPARTMENT OF THE INTERIOR

Secretary NORTON. Thank you very much. Mr. Chairman and

members of the Committee—.

The CHAIRMAN. Is the power on? Could you check that out? We

are not in California. We still have power here.

Secretary NORTON. Mr. Chairman and members of the Committee, it is a pleasure to be here today to discuss the National Energy Policy Report and the Department of the Interior’s role in carrying out the President’s policy.

In my short tenure as Secretary, I have spent a substantial

amount of time studying the issues surrounding our Nation’s energy policy. I have been concerned by the seriousness of the longterm energy problems facing our country and also amazed by the

ingenuity of U.S. citizens and companies that allow us to produce

energy with minimal impact on our environment and wildlife.

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What has become clear is that each of us is striving to attain the

same goal, a secure energy supply, while protecting the environment. I believe the President’s energy plan will increase energy

production while we also improve our environment. Both goals can

be achieved and sustained.

More than half of the domestic recommendations in the National

Energy Policy Report are targeted to conservation, environmental

protection, renewable and alternative energy, and to measures

aimed at helping consumers deal with rising energy prices. The national energy policy promotes the use of new 21st century technologies to increase energy efficiency and conservation.

The executive branch is beginning its conservation efforts close

to home. Although the Department of the Interior has had programs in place to reduce its energy consumption since 1985, we

must do better. Last month I issued a directive to all Interior bureaus asking them to take steps to promote energy conservation. I

am going to continue to push the Department to become a more efficient energy consumer. This commitment extends to all of our facilities.

In addition to standard conservation practices, we are also exploring some innovative approaches. For example, the Green Energy Parks Program, a successful partnership between the National

Park Service and the Department of Energy, has fostered over 200

energy and water conservation projects, saving the American taxpayers millions of dollars.

Last week I saw one of those projects. It was in Yellowstone. We

have a number of vehicles there that operate on alternative fuels.

We have buses and maintenance trucks that operate with biodiesel,

which is a combination of diesel energy, traditional diesel energy

plus alternative energy sources. We also have one truck there that

operates entirely on biomass fuel, and that is a truck that is essentially powered by potato scraps. I was even told that the exhaust

from that smells something like french fries. Now, I don’t anticipate that the Department of the Interior fleet is going to be running on vegetable scraps, but these are the kinds of innovative approaches that I think are worth pursuing, and I think it is worthwhile to make the Federal government a model for the types of

practices that might some day become commonplace.

In addition to reducing demand, we must also consider strategies

to augment the Nation’s energy supplies. Renewable and alternative energy supplies not only help diversify our energy portfolio,

but they are sources of clean energy for current and future generations. The current contribution of sources such as wind, biomass,

solar and geothermal to America’s total electricity supply is small,

less than 10 percent. Nevertheless, the renewable and alternative

energy sectors are part of our comprehensive energy plan.

The President has directed the Departments of the Interior and

Energy to reevaluate access limitations to Federal lands in order

to increase renewable energy production. The identification of potential locations for wind, geothermal and solar energy production

on Federal lands will assist in the planning and development of alternative energy resources. Interior’s lands already produce 48 percent of our Nation’s geothermal energy. The Department will look

for ways to reduce delays in lease processing to encourage more

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geothermal energy production. Most geothermal plants are located

in California, Nevada, Utah and Oregon. An expeditious leasing

process can play a small but helpful role in meeting the energy

needs of California and the West.

Now I would like to turn to more traditional energy sources. The

Department of the Interior manages oil, natural gas and coal that

underlie all of our Federal lands, including Department of Agriculture and Department of Defense lands. We also oversee all

Outer Continental Shelf oil and gas production. We work closely

with Indian tribes regarding energy resources on their lands.

The Cabinet Energy Policy Development Group recognized the

growing gap between production and consumption. And I would

like to first point you to the chart that on the right is headed U.S.

oil consumption.

The CHAIRMAN. Can I get you to move that out so the members

can see it, please?

Secretary NORTON. What this chart indicates are two things.

First is that the projections are that our oil consumption in the

United States will continue to rise, and that is indicated of course

by the red line. The green line indicates oil field production in the

United States. And this is a part of the equation that I think is

often missed, and that is that under our current situation our oil

production in the United States is continuing to decline. The

United States has the most mature oil production areas within the

world; that is, we have been tapping our oil reservoirs for longer

essentially than anyone else has, and as a result those initially rich

reservoirs are beginning to be tapped dry. And so our production

continues to decline unless we find new sources.

The gray area is the projected shortfall. That is how far we come

from meeting our oil needs. The gap has largely today been filled

by imported oil. And that percentage has risen from 35 percent in

1973, which at the time certainly seemed alarming to us, to 52 percent today. So over half of our oil is imported today.

One of the choices that the Energy Policy Development Group

felt needed to be presented to the American public is whether we

want to continue on that pathway toward increasing imports or

whether we want to analyze our own sources and return ourselves

to more energy independence.

The Interior Department is responsible for approximately a third

of all oil, natural gas and coal produced in the United States. This

percentage is increasing. And that is what is shown on the other

chart. Perhaps you want to move that one around a little bit.

That chart, the lowest area there, the pink area, is oil production, the cream colored area is natural gas production, the brown

area above that is coal, and then the blue line is hydroelectric. And

these are essentially indications of our domestic production. But

what this chart shows is the increasing public land portion of that.

As our private land resources are being depleted, those areas

where we began production decades ago, we are seeing more and

more reliance on public lands. The current estimates are that 68

percent of all undiscovered U.S. oil resources and three-fourths of

our natural gas resources are on public lands. And that is why our

discussion has tended to focus on utilization of our public lands.

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Also included, as I noted on that chart, is hydropower capacity.

The Department of the Interior also owns and operates about 16

percent of all hydropower capacity in the United States. All of

those facilities are located in the western United States.

The National Energy Plan asked Interior to continue the study

begun under last year’s Energy Policy and Conservation Act, which

asks us to study impediments to Federal onshore oil and gas exploration and development. Essentially we will be identifying the location of the most promising energy resources, then examining surface land use restrictions. We can then determine whether surface

restrictions should be altered to allow access to the resources.

Some areas such as parks or wilderness areas would stay undisturbed. However, in other areas the surface use may be reexamined

so that energy resources become available. Such changes would ordinarily occur through administrative land management planning

processes or rulemaking, and public involvement in the decisionmaking process would be expected.

In some cases congressional action might be necessary to allow

access. This is the case in the most well-known potential energy

area, the Arctic National Wildlife Refuge. The 1002 area of ANWR

is expected to be one of the Nation’s largest sources of oil, enough

to equal or exceed our current imports from Iraq.

I am sure we will discuss this proposal further. For now let me

point out that the National Energy Policy Development Plan calls

for creation of a Royalties Conservation Fund. This fund would earmark potentially billions of dollars in royalties from new energy

production in ANWR to fund land conservation efforts. This fund

would also be used to help eliminate the maintenance and improvements backlog on Federal lands.

We have recently done an analysis to try to compare production

in ANWR in comparison to the lower 48. So many people ask why

have you targeted the ANWR area, and that is in large measure

because of the size of the potential reserves that are there. We

compared production in the North Slope of Alaska, the existing production, with the statewide production totals from Wyoming, which

is the largest oil producing State with substantial Federal lands.

Wyoming has something over 9,000 producing wells while the

North Slope has about 2200 producing wells. The existing Alaskan

wells produce about 24 times as much oil per well as those in Wyoming. At this rate it would take about 219,000 wells to produce as

much oil in Wyoming as is produced from the North Slope if there

were that much oil available. The point is that in order to produce

oil domestically that would equal what we have potentially available from ANWR, we would have to produce perhaps 20 times as

many wells here, 24 times as many wells from this example in

order to have a similar amount of production from other areas of

this country.

Interior’s other significant energy-related issue deals with infrastructure for energy transport. Rights-of-way for electric transmission lines and new gas pipelines will often require siting across

some of the one out of every four acres of this country owned by

the Department of the Interior. Such infrastructure is one of the

fastest ways of mitigating California type energy shortages. PursuVerDate 11-MAY-2000 13:13 Aug 24, 2001 Jkt 000000 PO 00000 Frm 00173 Fmt 6601 Sfmt 6602 J:\DOCS\70888.TXT HRESOUR2 PsN: HRESOUR2
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ant to the energy plan we will be streamlining our processes for

handling these types of proposals.

Mr. Chairman, while the challenges facing us are significant,

they are not insurmountable. By building on new 21st century

technologies, this country can produce ample domestic resources

while enhancing and protecting the environment. I look forward to

working with this Committee and others in Congress to implement

Interior’s portions of the President’s national energy policy, and

that concludes my statement.

[The prepared statement of Secretary Norton follows:]

Statement of The Honorable Gale Norton, Secretary of the Interior,

U.S. Department of the Interior

Mr. Chairman, members of the Committee, it is a pleasure to be here to discuss

the ‘‘National Energy Policy’’ report and the Department of the Interior’s role in carrying out the President’s policy.

In my short tenure as Secretary, I have spent a substantial amount of time studying the issues surrounding our Nation’s energy policy. I have been concerned by the

seriousness of the long-term energy problems facing our country, and also amazed

by the ingenuity of U.S. citizens and companies that allows us to produce energy

with minimal impact on our environment and wildlife. What has become clear is

that each of us is striving to attain the same goal—a secure energy supply while

protecting the environment.

I believe the President’s energy plan will increase energy production while we also

improve our environment. Both goals can be achieved and sustained.

Background

The need for a national energy policy becomes clear when you look at the numbers. Over the next 20 years, U.S. oil consumption is projected to grow by over 6

million barrels per day. If U.S. oil production follows the same historical pattern of

the last 10 years, it will decline by 1.5 million barrels per day. U.S. natural gas consumption has been projected to grow by over 50 percent in the same time period

while production will grow by only 14 percent if it grows at the rate of the last 10

years. Our U.S. energy production is not keeping up with our growing consumption,

creating an ever-increasing gap between domestic supply and demand.

A large portion of the United States’ energy reserves are contained in the lands

and offshore areas managed by Federal agencies. The Department of the Interior

manages energy production on all Federal lands, both onshore and the Outer Continental Shelf (OCS). These Federal lands provide nearly 30 percent of annual national energy production. In the year 2000, 32 percent of oil and 35 percent of natural gas were produced from Federal lands. In addition, Federal lands produced 37

percent of coal and 48 percent of geothermal energy in 2000. Federal lands are also

estimated to contain significant undiscovered domestic energy resources. Estimates

suggest that these lands contain approximately 68 percent of all undiscovered U.S.

oil resources1 and 74 percent of undiscovered natural gas resources.

The Department also owns and operates about 16 percent of all the hydropower

capacity in the United States, all of which is located in 17 western states. Since a

vital portion of our energy development occurs on Federal lands, I am going to tailor

my remarks today to Interior’s energy policy implementation plans on Federal

lands.

Improving and Accelerating Environmental Protection

More than half of the domestic recommendations in the National Energy Policy

report are targeted to conservation, environmental protection, renewable and alternative energy, and measures aimed at helping consumers deal with rising energy

costs. The National Energy Policy promotes the use of new, 21st century technologies to increase energy efficiency and conservation.

In the implementation of this energy plan, our Department will strive to focus efforts among the Interior agencies on priority setting, resource allocation, and jointly

focusing on the recovery and restoration of particular species or habitat types to improve the environmental baseline.

There are also a number of existing Federal programs that can assist in restoring

habitat on private lands, such as the FWS Partners for Fish and Wildlife and Coastal Programs and various Department of Agriculture programs. These and other private landowner incentive programs could be used to contribute to the conservation

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of important environmental resource values. Actions on Federal lands could also be

coordinated with activities undertaken on non-Federal lands to increase their effectiveness. Another possibility is a Federal/state coordinated effort using grants to stabilize the status of a listed species through the conservation of important habitat

by acquisition or regulatory control.

Our Department has worked to develop new and innovative ways to manage our

national treasures in our parks and on other Federal lands. To bolster funding for

land conservation efforts, the National Energy Policy Development Group has recommended that the President direct Interior to work with Congress to create a

‘‘Royalties Conservation Fund.’’ This fund would earmark potentially billions of dollars in royalties from new oil and gas production in ANWR to fund land conservation efforts. This fund would also be used to help eliminate the maintenance and

improvements backlog on Federal lands.

The Department of the Interior has reduced its energy consumption in buildings

and facilities by about 10% since 1985. However, we need to do better. I am going

to continue to push the Department to strive to become a more efficient energy consumer. This commitment extends to all of our facilities. For example, the Green Energy Parks Program, a successful partnership between the National Park Service

and the Department of Energy, has fostered over 200 energy and water conservation

projects saving the American taxpayers millions of dollars. We hope to use this effort as a model for establishing additional partnership efforts within Interior.

REGULATORY AND LEGISLATIVE TOOLS

Improving the Implementation of the National Environmental Policy Act

The NEPA process is often perceived as lengthy and arduous. The fundamental

premise of ensuring that public decision makers have good information that is scrutinized by the public before decisions are made must always be maintained. However, we can seek to improve the process in a variety of ways. For example, the

process could be streamlined through better use of joint agency documents for environmental reviews for proposed energy developments. This may be especially applicable when projects, such as transmission lines and pipelines, cross jurisdictional

boundaries and require approvals from more than one Federal agency, State, or

Tribe.

Expedited Permitting

Permitting for energy-related projects is often a lengthy multi-agency process. The

President has issued an Executive Order directing Federal agencies to expedite the

review of permits and other Federal actions necessary to accelerate the completion

of energy-related project approvals on a national basis. The Administration will

work to establish a task force to ensure that Federal agencies set up appropriate

mechanisms to coordinate Federal, State, tribal, and local permitting activity in particular regions where increased activity is expected.

Improving the Endangered Species Act Consultation Process

The Endangered Species Act (ESA) Section 7 consultation process is also an important component of reviewing projects for their potential adverse effects. The FWS

has recently implemented several initiatives to increase the efficiency and effectiveness of the Section 7 consultation process. Interior is also considering a number of

other actions to improve the Section 7 consultation process.

Ensuring Diverse Domestic Energy Supplies

At the core of any long-term national energy policy are strategies to increase the

Nation’s energy supplies. The President’s plan lays out a road map for meeting our

future energy demands from diverse fuel sources through the use of 21st century

technologies. The United States has significant domestic energy resources, and remains a major energy producer. Between 1986 and 2000, production of coal, natural

gas, nuclear energy, and renewable energy increased. However, these increases have

been largely offset by declines in oil production. If we wish to maintain a large

measure of energy independence, our Nation must rise to meet this challenge.

Federal Onshore Lands

The Congress, in the Energy Policy and Conservation Act, directed the Department to study the impediments to Federal onshore oil and gas exploration and development and then review the results with full public consultation. The Department will expedite completion of this study. As appropriate, Interior will consider

making changes to land use plans based on the findings of the study.

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The Outer Continental Shelf

The Outer Continental Shelf (OCS) encompasses 1.76 billion acres. As you know,

Congress has designated about 610 million acres off-limits to leasing on the OCS,

which has been extended by Presidential action through 2012. For available OCS

areas, it is imperative that the variety of Federal and State statutes, regulations,

and executive orders are clear to ensure effective and efficient environmentally

sound development. For this reason, the President has directed the Departments of

the Interior and Commerce to re-examine the current Federal, legal and policy regime surrounding energy-related activities in the coastal zone and on the OCS to

determine if any changes are needed.

Although significant technological breakthroughs have allowed for more deepwater production, substantial economic risks remain. The Deep Water Royalty Relief

Act of 1995, which granted variable royalty reductions for new leases in deep water,

contributed to much of the increase in deepwater leasing in the central and western

Gulf of Mexico over the last five years. Similar incentives could help spur development in other technological frontiers, such as deep natural gas, or make possible

continued production from both offshore and onshore fields near the end of their economic life. The President has directed us to continue to explore opportunities for

royalty reductions, consistent with a fair return to the public, in areas where production might not otherwise occur.

The Alaskan North Slope

I had the opportunity to go to Alaska in March to visit the North Slope, talk to

the local citizens and learn about current and potential future energy and environmental issues in the region. I would like to take a few minutes to discuss four Department of the Interior initiatives specific to the Alaskan North Slope.

NPR–A

Let me turn first to the National Petroleum Reserve–Alaska, or NPR–A. Leasing

was reinitiated in NPR–A a few years ago. The President’s National Energy Policy

calls for the Department of the Interior to consider additional oil and gas development, based on the best available environmentally protective technology, through

further lease sales in the NPR–A, including areas not currently leased in the Northeast sector of the Reserve. In support of the President’s policy, Interior will take a

number of steps, including: conducting additional leasing in the northeast sector of

NPR–A on a biennial basis; preparing to hold lease sales in other NPR–A sectors;

initiating environmental analysis for a full field development; completing and publishing updated estimates of the undiscovered oil and gas resources of the NPR–A;

completing unitization, suspension, and extension regulations for NPR–A;and, if

necessary, promulgating regulations to issue rights-of-way in NPR–A to cover potential NPR–A and OCS oil and gas development.

ANWR

Next, let me discuss the Administration’s position on energy activities in the Arctic National Wildlife Refuge (ANWR). The President is proposing to open a small

fraction of the 19 million acres in ANWR for oil exploration using the most hightech, environmentally responsible methods. The President and I both believe that

oil and gas development can successfully coexist with wildlife in Alaska’s arctic region.

ANWR is located in the northeast corner of Alaska. The Refuge is about the size

of South Carolina; however, the portion of the Refuge known as the 1002 Area is

only about 6 percent of the total Refuge. We expect that no more than 2000 acres

will be disturbed if the 1002 Area is developed. The 1002 Area was excluded from

wilderness designation and Congress specified that it be studied further through a

comprehensive inventory of its fish and wildlife resources, and the potential for oil

and gas production. Estimates of substantial resources in the 1002 Area based on

nearby drilling results and seismic data have made it one of the most promising

prospects for oil and natural gas in the United States.

In 1998, a USGS assessment of petroleum resources of the 1002 Area estimated

the expected volume of technically recoverable oil beneath the 1002 area to be 7.7

billion barrels, with a 95 percent chance of 4.2 billion barrels and a 5 percent chance

of 11.8 billion barrels. For comparison, the U.S. currently consumes about 7 billion

barrels per year. Of this, the U.S. imports about 4 billion barrels and produces

about 3 billion barrels. Congressional action would also open up Native-owned

lands. The overall mean estimate of technically recoverable oil for the 1002 region,

including Native and state offshore areas is 10.4 billion barrels.

The Refuge provides a variety of arctic habitats supporting fish and wildlife species. The wildlife most associated with the 1002 Area is the Porcupine caribou herd,

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named after its wintering grounds along the Porcupine River of northwest Canada.

Currently numbering nearly 130,000 caribou, the herd migrates each year across

the Brooks Range to arrive in early summer on the North Slope’s coastal plain in

the 1002 Area and eastward into Canada.

Contrasting with the migratory nature of the Porcupine caribou herd, muskoxen

are year-round residents on the 1002 Area. According to the Fish and Wildlife Service, to survive the long winter, approximately 250 animals in scattered groups carefully conserve their energy reserves by minimizing their activities until summer.

In the fall, polar bears from the Beaufort Sea region visit the area along the coast

and barrier islands to forage, rest, and wait for the sea ice to form. Later toward

winter, pregnant females enter dens either on the sea ice or on land and give birth

to their young.

One hundred forty-six bird species are known to visit the 1002 Area. Approximately one-third of these nest and raise broods during the brief summer while the

remainder use the refuge as a resting stopover during spring and fall migrations.

The 1002 Area, including its lagoons, support 8 species of marine mammals, 62 species of coastal fish, and 7 species of freshwater fish of which the Arctic grayling and

Arctic char are common. Several of these species are important as subsistence food

resources.

The Inupiat Eskimo Village of Kaktovik is located on the northern border of the

Arctic Refuge coastal plain. Their subsistence resources include marine mammals,

fish, caribou and muskoxen. The Kaktovik Inupiat Corporation (KIC) owns 92,000

acres of private land within the Refuge boundary. This land cannot be developed

for oil and gas unless Congress authorizes leasing of the 1002 Area. On the whole,

Kaktovik residents support oil and gas development in the 1002 Area.

South of the 1002 Area and on the other side of the Brooks Range, the Gwich’in

Athabascan people live in villages in Alaska and Canada. Gwich’in rely heavily on

the Porcupine caribou herd for subsistence, and caribou figure prominently in their

cultural heritage. Because of their concern over the potential impacts to the herd,

the Gwich’in villages of this region oppose oil development in the 1002 Area.

Our support for enactment of authority to lease oil and gas resources in ANWR

is a prime example of the Department’s dual commitment to energy development

and environmental conservation. We recognize that the ecological resources of the

Refuge are unique and precious. We must respect and conserve this wealth for future generations of Americans. However, because of advances in technology and in

our enhanced understanding of the ecology, we are now able to proceed with exploratory work with very little long-term effect.

If this exploration discovers as much oil and gas as we hope, we will proceed cautiously with development and production. To achieve this goal under our proposal,

lessees will be required to use directional drilling and ice road technologies to reduce the extent of surface alteration. We will require lessees to operate in a no discharge, no litter mode. All materials and fluids brought into the Refuge will be

taken out or injected into deep wells. We will require monitoring of wildlife populations and habitat conditions so that unexpected degradation is identified early and

actions are taken to prevent and restore. We will require restoration, both as activities proceed and when production is shut down at the end. Our goal must be to have

no significant alterations in wildlife populations or the environment after oil and

gas production are finished.

The President and I know that there is a long history of debate surrounding opening ANWR to energy development. However, we believe that new technologies enable us to conduct environmentally safe oil and gas exploration and production. Any

legislation must contain adequate safeguards to protect wildlife and other environmental values.

Arctic Outer Continental Shelf

The third part of a comprehensive North Slope package involves the Arctic Outer

Continental Shelf. The Beaufort Sea Planning Area encompasses approximately 65

million acres. Active leases in this area represent only 0.4 percent of the total acreage, and only 5 percent of the leased acreage is being actively pursued for development and production. The Northstar project, scheduled to come on-line later this

year, will yield the first Federal OCS production from offshore Alaska. The Chukchi

Sea Planning Area encompasses approximately 63.7 million acres, none of which is

currently leased. Both of these areas are under active consideration for the next 5–

Year Plan for 2002–2007.

Infrastructure

The fourth component of the North Slope strategy concerns infrastructure. The

right-of-way permit for the Trans–Alaska Pipeline System (TAPS) must be renewed

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by January of 2004. The President has directed our Department to work with Alaska to ensure an expeditious process for the renewal of the lease and right-of-way

for TAPS.

One of the largest known reserves of natural gas in the United States has been

found in the Arctic. The existing production areas of the North Slope contain large

amounts of gas that have been reinjected rather than marketed. The President has

asked Departments of Energy and State, along with the Department of the Interior,

to work with Canada, the State of Alaska, and other interested parties to expedite

the permitting process for construction of a pipeline to deliver natural gas to the

lower 48 states once an application is filed. In addition, the Department will continue participating in interagency efforts to improve pipeline safety and expedite

permitting in an environmentally sound manner.

Enhanced Oil and Gas Recovery from Existing Wells

From 30 to 70 percent of oil and 10 to 20 percent of natural gas, is not recovered

in normal field development. It is estimated that enhanced oil recovery techniques,

through new technologies, could add about 60 billion barrels of oil nationwide

through increased use of existing, not new, oil fields. This translates into more energy supply with fewer environmental effects because enhanced recovery does not

require drilling in new areas. For this reason, the President has directed both the

Departments of Energy and the Interior to promote enhanced oil and gas recovery

from existing wells through new technology.

Coal

Coal is one of our country’s most abundant resources. The United States possesses

one-fourth of the world’s coal resources. Part of the National Energy Policy is to

maintain and improve the Department’s coal leasing activities to assure that coal

supplies are adequate for electricity generation.

Renewable and Alternative Energy Supply

At the heart of any national energy policy are strategies to augment the Nation’s

energy supplies. Renewable and alternative energy sources such as wind, hydropower, biomass, solar, and geothermal are critical components of this plan. Renewable and alternative energy supplies not only help diversify our energy portfolio, but

they are sources of clean energy for current and future generations. While the current contribution of renewable and alternative energy resources to America’s total

electricity supply is small—less than 10 percent—the renewables and alternative

energy sectors are integral to U.S. energy security.

The President has directed the Departments of the Interior and Energy to reevaluate access limitations to Federal lands in order to increase renewable energy

production, such as biomass, wind, geothermal, and solar. The identification of potential locations for renewable energy production on Federal lands will assist in the

planning and development of alternative energy resources. A review of administrative impediments and access limitations will aid in the development of these resources.

The Department will look for ways to reduce delays in geothermal lease processing to encourage more geothermal energy production. Most geothermal plants are

located in the West, in California, Nevada, Utah, and Oregon. An expeditious leasing process could be an important source to help meet the energy needs of California

and the West.

Finally, per the President’s request, Interior will seek to work with Congress on

legislation to use an estimated $1.2 billion of ANWR bonuses for funding research

into alternative and renewable energy resources, including wind, solar, geothermal,

and biomass.

Hydropower

Although the majority of the Nation’s electricity is generated using fossil fuels,

hydropower also plays an important role. Western states, such as Idaho, Washington, Oregon, Montana and California, rely on hydropower for a significant portion of their electricity supply. Other states, such as South Dakota and New York,

also depend to some substantial extent on hydropower for their electricity. Hydropower is a clean, domestic, and renewable source of electricity. The Administration

seeks to increase electricity generation from hydropower plants. The Department is

committed to accomplishing these gains in an environmentally sound manner.

Bureau of Reclamation Efficiency Improvements

The Bureau of Reclamation has undertaken an aggressive uprating and efficiency

improvement program, which has significantly expanded the capacity of our hydropower system. For example, Bureau of Reclamation has ongoing turbine runner

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work at Grand Coulee Dam in eastern Washington, which is ultimately expected to

result in 45 - 50 MW of additional capacity. Replacements are also underway at

Yellowtail Dam in Montana, and turbine runner replacements at the Shasta Powerplant in California are planned. These three programs will result in an equivalent

of 250 new megawatts of capacity over the next nine years.

With an average age of 43 years, Interior’s generation capacity is old. While twothirds of the facilities have been uprated and/or rewound, one-third have not been

modified. The efficiency of the existing generators could be increased by replacing

aging windings inside the generator. In fact, there often can be substantial increases

in capacity by installing windings using modern insulation technology. Reclamation

presently has rewinding projects ongoing on units at Alcova and Davis Powerplants

which could result in the equivalent of an additional 10 megawatts.

Using Market–Oriented Incentives

Another potential source of additional power is leasing water that could then be

used to generate power. Such leasing arrangements would be between willing nonFederal buyers and sellers. Reclamation will work to facilitate such arrangements

and will shortly initiate an internal effort to identify potential opportunities in this

area.

Reclamation continues to work on flexible power generation schedules to support

the needs of the western power grid. In many cases, Reclamation has asked its

project pumping customers to shift the timing of their deliveries to off-peak times

to make more peaking power available to the market. At Grand Coulee Dam in eastern Washington, we have been able to shift more than 300 megawatts of pumping

load to off-peak times - making it available to the Bonneville Power Administration

for peaking purposes. There are likely to be additional opportunities in this area,

especially if power marketers are willing to provide financial incentives to project

water users to shift the timing of their use.

Infrastructure

Our energy infrastructure includes many components, such as the physical network of pipelines for oil and natural gas, electricity transmission lines and other

means for transporting energy to consumers. Unfortunately, the Nation’s energy infrastructure has not kept up with the changing requirements of our energy system.

The demand for additional energy and electricity is expected to increase the need

for rights-of-way across Federal lands. To help with this process, we have identified

a number of opportunities to expedite the processing of energy rights-of-way applications by streamlining the application process.

Conclusion

Mr. Chairman, while the challenge facing us is significant, it is not insurmountable. By building on new 21st century technologies, this country can produce ample

domestic resources while enhancing and protecting the environment. I look forward

to working with this Committee and others in Congress to implement Interior’s

pieces of the President’s National Energy Policy.

Mr. Chairman, this concludes my statement. I would be pleased to answer any

questions that you or members of your Committee might have.

[Charts included in Secretary Norton’s testimony follow:]

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175

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The CHAIRMAN. Thank you, Madam Secretary. We appreciate

your statement. We will now turn to members of the Committee for

questions. We limit the members to 5 minutes. We appreciate them

doing their best to stay within that time. Mr. Rahall, we will start

with you, sir.

Mr. RAHALL. Thank you, Mr. Chairman. Thank you Secretary

Norton, for your testimony. The Department at times, as we have

been reading, has resorted and responded to extraordinary situations involving mineral leases with innovative approaches, including buybacks, working at the local level, at the State level, trying

to arrange exchanges, et cetera, in order to prevent Federal involvement or a Federal solution to the particular issue.

I am wondering if you are prepared to invoke such a similar program, invoke measures of this nature in regard to the situation I

referred to in my opening testimony at Weatherman Draw; that is,

to stop the drilling in the Valley of the Chiefs, this area of critical

environmental concern and very sacred religious rights to many of

our tribal leaders in this country. If you are willing to go in and

invoke these type of measures at the local level in consultation

with the tribal leaders in trying to arrange an acceptable solution

here.

Secretary NORTON. Thank you, Congressman, for the opportunity

to comment on that. That is an area that I became aware of

through seeing newspaper accounts of that. The decision-making on

that so far has taken place at the State level within the Bureau

of Land Management. It is my understanding that there was a 4-

year long process of consultation and study on that, that they are

going forward with essentially one exploratory well, is the current

proposal, and that there would be measures taken to try to protect

the resources in that area. That decision, however, is subject to appeal to the Interior Board of Land Appeals, and that process would

presumably take place before any activity would occur on the

grounds.

We will continue to monitor that and to see what information

arises out of that process.

At this point I don’t have the level of detailed information on

that to really interject my opinion.

Mr. RAHALL. There has been such a long process to which you

referred because it has been described as an area of critical environmental concern. It is an area ripe in resource values as well as

its sacred implications that I have alluded to. Some of the opponents to the drilling in the Valley of the Chiefs have advised me

that there was a decided shift in the Bureau of Land Management

after, last year’s Presidential election, toward the Anschutz Exploration’s drilling permit application.

So I would ask you if you can assure this Committee that the

politics did not influence the Montana BLM State office after the

election to approve this application.

Secretary NORTON. To the best of my knowledge and after some

checking with the Montana people, we found no evidence that there

was any communication from or to Washington in that decisionmaking process. And so as far as I know, there was no consultation

that the Montana officials from BLM had with regard to that.

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Mr. RAHALL. As I said in my opening comments, you do have the

administrative ability to stop this exploration and drilling and I

would just like to in a more general way ask your views how this

activity might comport with what I view as your responsibilities to

our Native Americans, a very important responsibility in your job

as Secretary of the Interior.

Secretary NORTON. We certainly work with the tribes on energy

issues both in situations like this where they may be concerned

about energy development as well as in those situations where they

want to pursue energy development on their own lands. And so we

hope to have a working relationship with them. My direction to the

bureaus throughout, and the point that I have made, is that they

need to consult with the people who are affected by the decisions,

and that would include consultation with tribes in situations like

this as well as with other affected local residents, with environmental groups in various situations. And so I would like to see a

consultation process take place. So I will continue to monitor this

one and we will continue to see how this evolves and to obtain

more information about it.

Mr. RAHALL. I hope that would take place along with Mr.

Anschutz as well and involvement of the tribal leaders.

The CHAIRMAN. The gentleman from Louisiana, Mr. Tauzin.

Mr. TAUZIN. Thank you, Mr. Chairman. Madam Secretary welcome. Let me ask you, have you ever visited the Mandalay National Wildlife Refuge in Louisiana?

Secretary NORTON. No, sir, I have not.

Mr. TAUZIN. I want to welcome you. I hope you will come one

day. We have quite a number of wildlife refuges and incredible wetland areas in my State. The reason I would particularly like you

to come visit Mandalay National Wildlife Refuge is that we have

drilled over a hundred wells in the Mandalay National Wildlife

Refuge in Louisiana. Some were drilled before the refuge was created, but many were drilled after it. And it is a prime example of

how we can produce and have produced energy for this country

without disturbing or environmentally damaging whatsoever a very

beautiful part of our country.

The reason I ask you about the National Wildlife Refuge in Louisiana is because I have a very profound question to give you and

maybe visiting the refuge will allow you to answer that question.

Is the Mandalay Wildlife Refuge in Louisiana less important than

the National Wildlife Refuge in Alaska or National Wildlife Refuge

in Montana, Wyoming, or any other part of this country?

Secretary NORTON. I have learned I should not prioritize our

lands by showing favoritism.

Mr. TAUZIN. I should hope not. But you see, we develop oil and

gas resources for America on the wildlife refuges in Louisiana. We

develop on Federal lands in Louisiana. In fact, here are some numbers for the Committee. Louisiana, onshore and offshore Federal jurisdiction, production of oil for America is 27 percent of our national consumption. Louisiana, on and offshore Federal and State

jurisdictional lands produce 27 percent of the natural gas. A lot of

it goes to the Northeast. My friends here on the Committee enjoy

that natural gas. In fact, they tax it more than we do. We don’t

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even tax the Federal offshore. They get revenue from it, they get

the benefit from the gas from it.

I want to ask you a simple question. What would happen if we

made a decision in Louisiana today that we didn’t want any more

production on the Federal lands in Louisiana, the Louisiana jurisdiction lands, they are too sacred. They are too precious. We

shouldn’t take any chance of any damage to them. We ought to

shut down all drilling and all production in Louisiana. What would

happen to this Nation if all of a sudden 27 percent of the supplies

were suddenly shut down because Louisiana decided to do what

many parts of the country apparently decide to do and we decided

not to be a contributor to this Nation’s energy security? What

would happen to this country if we went from a 52—I understand

it is closer to 58 percent—dependence on foreign sources and we

added another 27 percent dependence on foreign sources? What

would happen to this country if Louisiana decided to act like many

other places in this country and protect our wildlife refuges from

any drilling, any exploration, any development at all; what would

happen to this country?

Secretary NORTON. Obviously that would have a severe impact

on our— Mr. TAUZIN. Severe? It would be catastrophic, Madam Secretary.

Catastrophic. The Secretary of Energy is visiting Louisiana, I

think, this week, today maybe, he is over in Garyville, where the

last new refinery was built in America, Marathon Oil Refinery. We

produce 17 percent of the gasoline that this country uses in Louisiana. What would happen if we shut down those refineries today

because we don’t want any environmental impacts from refineries

in our State? We want to protect our air and land. We had an explosion at one of those refineries. Almost blew up the whole town

in my district. It shattered a lot of lives temporarily. But you know,

that town gathered around itself and rebuilt that refinery, rebuilt

the cat cracker so that we could in fact continue the operation of

that refinery and supply this Nation with gasoline. What if we decided that we don’t want to take any chances with explosions and

natural gas pipelines and we don’t want to have any more production and refining in Louisiana? What would happen to prices of

gasoline and natural gas in this country if we decided we wanted

to act like other people in this country and not produce? Would it

be serious or catastrophic?

You know the answer. It would be catastrophic. Bottom line.

Secretary NORTON. I will let you answer that.

Mr. TAUZIN. Bottom line is we produce in the sensitive wetlands

in Louisiana, even in the National Wildlife Refuges in Louisiana.

We dedicate a lot of the monies from our State lands back to preserve those refuges. We have I think 5 million acres in preservation

of wetlands in Louisiana that are producing oil and gas for the rest

of you here and produced in environmentally sensitive ways and

yet the money is going back to preserve and enhance those wetland

areas.

Now, I am just going to make that little simple point. We in Louisiana have made a decision to be contributors to this Nation’s energy security and we take some risk in doing it. But we think we

do it wisely. But if we ever shut down like some of you want to

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shut down some other areas of this country, if Texas ever decided

to do the same thing, Oklahoma and few other States, Wyoming,

where on earth would this country be?

Thank you very much.

The CHAIRMAN. Thank the gentleman. The gentleman from California, Mr. Miller.

Mr. MILLER. Thank you, Mr. Chairman. And Madam Secretary,

welcome to the Committee. I guess I will pick up where Mr. Tauzin

left off, but on a different vein. That is that we have had—since

1982 under the Reagan administration, we have had a moratoria

on offshore oil and gas drilling in California and since that time

Congress has renewed that moratoria every year and that moratoria in fact has been expanded to the coast lines of other States,

Florida, of course being the other big State, but up the coast in

part or in whole North and South Carolina and almost up the entire East Coast, if not the entire East Coast at this point.

And that was—that moratoria was extended to the year 2000 by

former President Bush and it was extended by executive order to

2012 under former President Clinton. I guess the opening question

I have for you is will you or will you not continue to support that

moratorium?

Secretary NORTON. We will continue to support the moratorium.

President Bush has been steadfast in saying that he will observe

the moratoria and that the role of States in making those decisions

is something that should be recognized.

Mr. MILLER. Well, I appreciate that answer. I am quite hopeful

with that answer. Let me ask you a couple of particular problems

that are drifting around in this discussion. And that is that the

Mineral Management’s advisory board has recommended that Mineral Management should identify five areas of potential exploration, quote, to identify the top five geological places in the moratoria area and if possible the most prospective areas for natural gas

in a place the industry would likely explore if allowed. Do you view

that as consistent or inconsistent with the moratoria that these

States have asked for and have been granted by this Congress?

Secretary NORTON. That advisory board represents the State governments. It includes representatives of the governors of coastal

States as well as a number of other groups that are represented

on that; local government interests, for example. It is advisory to

us and therefore they made a recommendation to us. Their proposal was to look at natural gas areas and to determine whether

there were natural gas areas that might be acceptable to any of the

coastal States. And so that continues as a recognition that the

States might be receptive to making changes in the moratoria, but

I believe also recognizes that the States are the ones— Mr. MILLER. Do you view that Federal activity, to the extent that

that engages Federal activity, that that is consistent with the moratoria?

Secretary NORTON. At this point that is purely a recommendation

coming from an advisory committee. It has not even reached my

desk in the form of a formal recommendation, much less us deciding to go forward with that recommendation.

Mr. MILLER. Well, let me ask you this: With respect to your operation in the—apparently in a set of draft options, I realize those

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are options like recommendations from the Department of Interior,

the suggestion has been—I think there were three or four suggestions. One specifically recommends going forward with lease sale

181 of the Florida—in the 36 tracts, the preexisting tracts in California. Is it your plan to go forward with drilling activity in those

areas?

Secretary NORTON. The lease sale 181 area is excluded from the

moratoria. That was action taken by Congress a few years ago as

well as signed by President Clinton that removed that area from

any moratoria. That is a preexisting proposal. Existing leases are

and always have been excluded from any of the moratoria.

Mr. MILLER. So your proposal—would you accept that—you are

going to plan to accept that recommendation to go forward with

drilling development in those areas?

Secretary NORTON. We are in the process of reviewing lease sale

181. That process has not yet concluded, and so there has not been

a final decision on lease sale 181. As to any existing lease activities, I am not aware of the particular status of those.

Mr. MILLER. And that is true with respect to the preexisting

tracts in California?

Secretary NORTON. That is correct.

Mrs. CUBIN. Will the gentleman yield? I think that the OCS Policy Committee’s recommendation isn’t for drilling, they recommend

not to drill. It is to gather seismic data and also data about the

ocean floor itself, animals, plants and so on.

Mr. MILLER. I understand that. Those are all what we call

preleasing activities or in this case, where leases are already existing, those are predrilling activities and that is why the concern in

the States— Mrs. CUBIN. Those are not preleasing activities.

Mr. MILLER. In this case they are preexisting leasing, but they

are obviously designed to consider whether or not to go forward. As

you know, those leases certainly off of California have been the

subject of long negotiations about whether or not to purchase those

leases to pay back, to give people credits to lease in other areas.

This is the suggestion, recommendations of activities to suggest

that you want to go forward with those leases because the next recommendation is that you assess Federal consistency on the CZMA,

EPA discharge standards, all of which suggest that the provisions

that are in place either in a Federal or State statute that may be

prohibiting those leases from going forward now in some form or

another are going to be weakened so that those leases in fact can

go forward.

That is the reason for concern. We appreciate the leases exist

and that the stakeholders that have those leases want to drill

them. But we are also terribly concerned that there is also a body

of law about the thresholds that have to be met before that would

be going forward and the recommendation appears to suggest that

those thresholds are in fact going to be weakened.

The CHAIRMAN. The time of the gentleman has expired. Would

you like to quickly respond, and we will move on?

Secretary NORTON. Essentially what the Committee has recommended is initiating a process of discussion with the State governments, and it is my understanding that that discussion with

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State governments is the core of that proposal. It is not moving forward with any sort of actual drilling program.

The CHAIRMAN. The gentleman from Tennessee.

Mr. DUNCAN. Madam Secretary, I read in Consumers Research

Magazine in April that President Clinton just before he left office

locked up 213 trillion cubic feet of natural gas and then I had the

mayor of Englewood, Tennessee come to me and tell me that he

had senior citizens who were having to choose between eating or

paying their utility bills. What I have noticed is that most of these

environmental extremists seem to come from very wealthy families

and perhaps they are not hurt by some of these policies, but when

you have groups that when you won’t allow drilling for any oil you

drive the price up, when you won’t allow people to dig for coal you

drive the price of coal up, when you won’t let anybody cut any trees

you drive the price of lumber up, when you won’t let anybody

produce any natural gas you drive up the price of natural gas. And

what I am asking is this: Will you try to keep in mind in all the

policies that you advocate, that if we don’t allow the production of

any energy or any natural resources in this country, that we are

not hurting the wealthy people but we are hurting the poor and

lower income and working people in this country by driving up

prices and destroying jobs?

Secretary NORTON. Congressman, that is a very important point.

It certainly is the least fortunate among us who are the ones who

suffer the impacts from energy shortages and high prices of fuel,

and so that is one of the concerns that our policy group had in

mind as we discussed our energy proposals.

Mr. DUNCAN. Also I have been up to Prudhoe Bay twice and in

both of those visits I have seen that 1.5 million-acre coastal plain

and I don’t believe there is a trigger bush on it hardly. It is this

frozen tundra. I have never seen anything like it. Yet this Arctic

National Wildlife Refuge I am told is 19.8 million acres. I was

pleased in your statement to see that you pointed out that you

would like to drill on only 2000 acres out of 19.8 million acres. I

don’t know what percentage that is, but it is almost minuscule. Yet

some of these groups show pictures of the Brooks Range and the

mountains and where the trees are. And it seems to me it is as

false as Nazi propaganda used to be.

I read in Time magazine a couple of months ago that the entire

Arctic Wildlife Refuge had 1,000 visitors last year. Now, I represent about half of the Great Smoky Mountains National Park

and we have about 10 million visitors a year for an area that is

only 1/35th the size of the Arctic National Wildlife Refuge. I assume that we don’t have the votes to allow that drilling for that

oil in Alaska. But it is really endangering our national security to

become more and more and more dependent on foreign and imported oil, and I would hope that you would try to get that message

out as much as you possibly can.

Secretary NORTON. Thank you, Congressman. I believe that we

need to put in perspective both the potential impacts in the Arctic

National Wildlife Refuge as well as the measures that can be taken

to ensure that environmental protection is done at the highest levels if we were to go forward there.

Mr. DUNCAN. Thank you very much.

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The CHAIRMAN. Thank the gentleman. The gentleman from Massachusetts, Mr. Markey, is recognized for 5 minutes.

Mr. MARKEY. Thank you, Mr. Chairman. Welcome, Madam Secretary. We from New England would just like to nail down with

some specificity the intention of the administration to drill off of

George’s Bank. Can you give us today the unequivocal promise that

you are not going to back away from the moratoria which exists

and that no amount of study by any of the panels that may be looking at it will change the mind of this administration with regard

to the drilling which the industry would like to commence off of

George’s Bank?

Secretary NORTON. Congressman, I am not familiar with exactly

where the George’s Bank area is, but I presume that is covered by

existing moratoria. Obviously— Mr. MARKEY. If you never find out where it is, I don’t think New

England would mind. I think that is probably, you know, a big plus

right now in your testimony. But what our concern is this, that in

the actual national energy policy plan, which is why we are greatly

concerned, the administration says that the group recommends

that the President direct the Secretaries of Commerce and Interior

to reexamine the current Federal legal and policy regime statutes

and regulations and executive orders to determine if changes are

needed regarding energy related activities in siting of energy facilities in the coastal zone and on the Outer Continental Shelf.

So obviously, you know, you say, well, we are going to keep the

moratorium in place, but at the same time, the President’s own— Vice President Cheney’s own panel that you served on basically is

calling for a study of these very areas that are the subject of the

moratoria.

Secretary NORTON. If I could make two points. First of all, I

think it is wise for us to have a wide array of information as we

are making decisions. And I think understanding where resources

are located is something that leads to wise decision-making, whether we decide to go forward with trying to access those resources or

not.

Secondly, I think what the policy is primarily aimed toward is

looking at the processes that are used on Outer Continental Shelf

development in existing areas. I think there is some potential room

for improvement in those. We are analyzing that to determine

whether we need administrative changes or whether we need to

come back to you all.

I think the process that we have today of environmental planning in the Outer Continental Shelf is one that lacks some clarity

as to the point at which it makes the most sense to go forward with

the decision-making on leasing. At this point we have decisionmaking that has environmental analysis at a number of—

Mr. MARKEY. There is a prohibition. The moratoria includes a

prohibition on leasing activities. You understand that?

Secretary NORTON. And I am talking about—if we talk about the

areas that are offshore Texas in the existing Outer Continental

Shelf, I think there are still some issues that we can look at in

terms of the appropriate process for our analysis. And so— Mr. MARKEY. What weight are you going to give to the States?

I have a letter that I am going to send over to you today from the

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entire Massachusetts delegation asking this administration not to

reopen any consideration of drilling off of George’s Bank. Is that

something that you are going to give complete deference to?

Secretary NORTON. It seems to me that what you are asking

about is something that is within your control in terms of the congressionally imposed moratoria. And to the extent that this area is

controlled by moratoria, then obviously we cannot go forward with

any sort of action there. The President—

Mr. MARKEY. Do you have any intention whatsoever of drilling

off of George’s Bank?

Secretary NORTON. Obviously we are going to comply with the

law and not to drill in areas that are currently covered by moratoria. I mean obviously we would not be considering doing things

that are covered by existing moratoria.

Mr. MARKEY. Would you oppose an extension of the moratoria?

Secretary NORTON. That is a completely abstract question and I

am not sure what you have in mind.

Mr. MARKEY. Let me make one quick point to you.

Secretary NORTON. If I can say, I don’t think there is any problem with discussions that consider where our resources are located,

that present to the American public what the choices are. The eastern seaboard is an area that is a natural gas production area as

opposed to an oil area. And so oil spills are not a significant concern on the Atlantic seaboard. And so natural gas is something

that would be considered.

The CHAIRMAN. The time of the gentleman has expired. The gentleman from Colorado, Mr. Hefley.

Mr. HEFLEY. Thank you, Mr. Chairman. Madam Secretary, it is

wonderful to see you here in this role. We have worked so long in

Colorado on various issues together and it is good to see you here.

Thank you for being part of an administration at least trying to develop an energy plan, because so many administrations, both Democrat and Republican, refuse to struggle with this very knotty

issue. At least you are struggling with it and the debate is going

on, and I think that is very, very healthy.

I would like to just point out Mr. Rahall took a swipe at President Bush about his photo opportunity down in the Everglades.

You are on a little bit of shaky ground, Nick, when you think of

your President Mr. Clinton, who I recall, Mr. Chairman, just before

the election went down on the banks of the Grand Canyon and announced a gigantic national monument in Utah, but the photo op

was better in Arizona than it was in Utah. So a little bit of shaky

ground there, you might be careful about that.

Mr. RAHALL. I love photo ops myself.

Mr. HEFLEY. Sure, sure.

There is no question that we need to pursue additional energy

resources. You got to go where the energy is. Now there is some

ground that is truly sacred ground. Yellowstone, you are not going

to drill in Yellowstone National Park. But I grew up in Oklahoma.

And when I was growing up fishing the streams and ponds and so

forth as a boy, a lot of the streams had oil slicks on them. And I

thought that is the way streams came. I didn’t realize that the oil

industry was being very, very casual about their environmental

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awareness there and letting oil get into the streams and into the

water table. They don’t do that any more. That has changed.

You look in Colorado, you look at the mining, the way the mining

industry defiled Colorado, or the timber industry, anywhere you

want to look in the old days, but they don’t do those things any

more. So, Gale, we don’t have to have either/or. And you might

want to speak to that, because there are so many people in this debate that say either you have energy production or you have environmental protection. It doesn’t have to be either/or with the way

we do it today.

Speaking of Oklahoma and sacred ground, it is interesting that

the way Indian tribes oftentimes and others come up with something that all of a sudden is sacred ground. I would be very interested to know—I don’t have any idea how long this has been the

Valley of the Chiefs. Is this a modern thing or is this a long time

thing? Maybe it is a long time thing.

Mr. HEFLEY. I know that oil made an awful lot of Indian tribes

in Oklahoma very, very rich.

Mr. RAHALL. Would the gentleman yield on that question? I have

got the answer.

Mr. HEFLEY. I will in just a minute, but I do want to know the

answer.

Mr. RAHALL. Try 1,000 years.

Mr. HEFLEY. You are sure of that.

Mr. RAHALL. Or more. Thousand or more.

Mr. HEFLEY. All right. Maybe that is true or maybe that is a

number that you just threw out. I don’t know, but I will accept

your word for it. On the ground, the sacred grounds of the Oklahoma capital are oil wells producing energy; doesn’t seem to bother

anyone. They are producing energy for the Nation. Do you have a

process—I know that there is a process but do you have a process

that you have confidence that will determine what truly is a sacred

area where the values are more important as to what it is today,

like a Yellowstone, than for it to be an area of oil production? Is

there a process so that when you go through that process you have

confidence that you have made not an emotional decision but a realistic decision about what truly is sacred and what isn’t.

Secretary NORTON. We have several different layers in that. First

of all, there are areas that Congress has set aside as not being appropriate for new development where we would not consider leasing activities, and that would include our parks obviously and wilderness areas. So there are some areas that are, as you pointed

out, off limits.

As to other areas we would engage in a process of planning that

would include input from local people, from State governments,

from environmental groups. It is an open and public process of concentration to determine what the various values are and to try and

weigh which of those are going to be the most significant and taking into account the way in which any sort of activity might occur

in order to be most environmentally sensitive. We live in the 21st

century and, as you point out, technology has increased dramatically and we can do things today to protect our resources that were

not possible 20 years ago, and so we do have the potential to ensure that we can both have the energy that we need for our way

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of life and also to go forward with our protection of our environment.

The CHAIRMAN. Time.

Mr. HEFLEY. Thank you very much.

The CHAIRMAN. I thank the gentleman. Gentleman from Michigan, Mr. Kildee.

Mr. KILDEE. Thank you, Mr. Chairman. Thank you, Madam Secretary. Madam Secretary, in January of 2000, then Governor Bush

said that the President, quote, ought to get on the phone with the

OPEC cartel and say we expect you to open your spigots. What has

President Bush’s policy been towards OPEC?

Secretary NORTON. Congressman, I hesitate to speak on international issues since that is not my area. That is a delicate area,

and so I would be happy to provide that information for you for the

record.

Mr. KILDEE. Do you know of any President getting on the phone

with anyone in OPEC and coming close to saying turn on your

spigots? Are you aware of that just from reading the Washington

Post and listening to the electronic media; are you aware of any of

that?

Secretary NORTON. Again, I hesitate to comment on international

issues. That would be the subject of international negotiations.

Mr. KILDEE. So you are not aware of the President intervening

with the OPEC?

Secretary NORTON. I have stated my position.

Mr. KILDEE. Maybe we should probably bring Spencer Abraham

over here, too. Most of the newscasts indicate there is a decidedly

different policy under President Bush with regard to OPEC than

there was under President Clinton when he sent Richardson over

there to really try to get them to open the spigots more, but if you

could get some clearance on that very delicate international situation of getting on the phone and provide that to the Committee we

would appreciate it very, very much.

Madam Secretary, in Michigan, in one area of Michigan overnight gasoline went up 30 cents a gallon and going up a nickel, a

dime, 15 cents, but 30 cents a gallon overnight. Has your Department or anyone in your Department looked into that or asked the

Department of Justice to look into how that 30 cent increase could

occur overnight and how that is related to the market forces?

Secretary NORTON. My understanding is that most of those price

spikes are due to refinery capacity problems and transportation

problems that deal with essential boutique fuels, the fuel formulations that are unique to particular geographic areas, and that is

something that is being examined as part of the overall energy

plan.

Mr. KILDEE. Is the Department of Justice involved in looking at

spikes of 30? That is really a very, very sharp spike, isn’t it, 30

cents overnight? Is the Department of Justice working on that?

Have you requested that they look into such Draconian spikes?

Secretary NORTON. Attorney General Ashcroft would have to be

the one to answer that. I obviously am not privy to Department of

Justice review of things. I know when I was Attorney General of

Colorado we had jurisdiction over antitrust enforcement and we

were frequently called every time there was an increase in the

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price of gasoline to look for price fixing conspiracies and we had a

complete investigation. We had a panel that we brought of outside

people to analyze pricing structure within Colorado and they found

no evidence of any of that, and so it is something I think people

want to look to but there very often are other explanations and I

think those who have looked at this have for the most part found

the explanation to be within the refinery formulations.

Mr. KILDEE. But when you were Attorney General, you had other

departments of State government making requests of you for investigations?

Secretary NORTON. No, never actually, not on that sort of thing.

Those antitrust investigation requests are based on evidence and

people coming forward with information about potential activities

and most often on consumer complaints. That is the way in which

that often arises.

Mr. KILDEE. Both in Michigan and in the Federal Government

very often departments do call upon the Department of Justice to

investigate since they are the arm of investigation and have the

wherewithal to do that and the ability.

Thank you very much for your testimony, Madam Secretary.

The CHAIRMAN. Gentleman from California, Mr. Calvert.

Mr. CALVERT. I thank the Chairman. Welcome, Madam Secretary. I wanted to say something positive about California. I know

nowadays that is not the most popular thing to do, but California

is a great State and we have done some great things in California.

We are a large solar user, I think the largest in the union. We use

a significant amount of wind. As a mater of fact, in my own County

of Riverside, California, you can drive down on the 10 freeway—

I am sure many of you have done that on your way to Palm

Springs, and you will see all those windmills down there. They are

ugly as hell, but they sure generate a lot of power for folks down

there in Riverside County.

And geothermal, I don’t know if there is an area anywhere in the

country that produces more geothermal power than the State of

California, especially just down the road from Riverside County out

in Imperial County, down toward the Mexican border.

And I have got to congratulate the City of Los Angeles. I know

the Chairman would appreciate this, and certainly Mr. Rahall, is

that the City of L.A. In their wisdom is down there negotiating a

deal in Utah right now to put together 3,500 megawatts of coal

power to ship down to the City of Los Angeles to help the Department of Water and Power meet future demands for the City of L.A.

So you know we are doing a lot of things in California to meet the

problems that we are having, but we do need some help.

And the question I have, a lot of the energy problems we have

isn’t necessarily just supply, though that is the biggest problem. It

is also distribution. We have certainly a problem that has been

well-publicized of natural gas distribution in California, not able to

get enough natural gas within the State to meet the increasing demand for natural gas; also, for electricity, and the most famous one

of course is Path 15, which I am certain you have heard about.

What role, if any, does the Department of Interior have in helping

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solved where we can get better electric distribution within the

State of California from north to south?

Secretary NORTON. The Path 15 area between north and south

areas of California would be something Interior would be involved

in to the extent that any public land right-of-ways would be necessary, and so we would be happy and have said that we would

work to expedite any right-of-way activities involving that.

Nationwide, the opportunity to look at transmission both for electricity and gas pipelines is something that would often involve Interior lands and we hope to expedite those processes.

Mr. CALVERT. And that was the next question because when I

was reading through the energy policy, there certainly is a lot of

impetus about creating right-of-way for not just natural gas but for

electric distribution. Is it the administration’s position to prioritize

using Federal land first prior to using condemnation on private

property?

Secretary NORTON. To my knowledge there is not a particular

proposal on that. I think that would be a case-by-case type of determination, depending on what particular properties is involved.

Mr. CALVERT. I would hope you would look into that because certainly condemnation is difficult and I think it would expedite the

process somewhat if that could be prioritized over private property.

One other issue of course, water resource and its ability to create

electricity, essentially hydro and peaking power, which is very important in the West right now because California is not the only

State suffering or will suffer this summer, and what role would you

have this summer in potentially increasing the amount of peaking

power that we could be able to count on in the West?

Secretary NORTON. Unfortunately, in terms of this summer, I

have bad news and that is that in most of our areas of hydro production in the Pacific Northwest, this is the second driest year in

the 100-year history of the Bureau of Reclamation and so additional water is simply not available for significant amounts of hydropower being available. We have less supply than we ordinarily

would. We have taken steps to try to provide peaking power where

we can and we have a number of situations where we have assisted

California, and we have every time we have been asked by California to assist in Stage 3 kinds of blackouts situations. So we have

done that. But it is more a long-term issue in terms of being able

to look at our facilities across the board and see what we can do

at existing facilities to enhance the turbines and otherwise provide

more electricity from those areas. So we are doing what we can

with very little water.

The CHAIRMAN. The gentleman’s time has expired. Gentleman

from Oregon, Mr. DeFazio.

Mr. DEFAZIO. Thank you, Mr. Chairman. Madam Secretary, excuse me if we go quickly here. Five minutes isn’t very long and I

have a number of questions.

I will go first to the issue of eminent domain. I am a bit concerned about the extraordinary proposals and the broad brush proposals I see to give the Federal Energy Regulatory Commission,

which is of course a fairly obscure agency of Federal bureaucrats

out behind Union Station in some nice lush headquarters, the right

to preempt any and all private property rights in the United States

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of America. I would assume with your background with the Rocky

Mountain Foundation and others that you would not support such

a proposal and perhaps this is contrary to suggestions you made

during the discussions.

Secretary NORTON. The proposal to give the Federal Energy Regulatory Commission condemnation rights is essentially something

that they have already had with regard to electricity—

Mr. DEFAZIO. No, with pipeline.

Secretary NORTON. With regard to pipelines. It is a new proposal

as regards to electricity. Essentially having studied something of

the constitutional issues in property rights, when you have a public

purpose that requires that—

Mr. DEFAZIO. I am familiar with it. This is a point where I am

going to interrupt you. I understand. So you are going to defend

the policy. But I just find it a bit ironic that many of the same people who adamantly oppose the CARA legislation last year, which

is for conservation purposes, which provided extraordinary new

protections against preemption of private property, more than we

ever had in terms of congressional authority to review and stop

those sorts of things, would now propose a huge new broad brush

preemption on private lands. I mean you are saying you are taking

for public purpose. How about this public purpose?

In Minnesota the citizen advocates want a new line that goes

West to bring in cheaper power from Montana and elsewhere. The

incumbent utilities want a new line that goes east so they can sell

the less expensive power of Minnesota into the more expensive

markets of Chicago. So what is the public purpose there? Is it

cheaper prices for the constituents of the State which would be a

line to the West which the utilities don’t want or is it the line to

the East which the utilities do want so they can make more

money? In whose interest is FERC going to be acting?

Secretary NORTON. Well, from an overall perspective we have an

energy grid that is essentially 1950s era—

Mr. DEFAZIO. Well, it was not designed for deregulation, which

I opposed—

Secretary NORTON. We really need to enhance our grids and to

have more—

Mr. DEFAZIO. So you fully support this. Do you expect to be also

suggesting that it would preempt Federal statutes and protections,

wilderness, scenic areas, Columbia Gorge Scenic Area for instance

and other areas, would you suggest that the preemption authority

of FERC would go also to public lands?

Secretary NORTON. This would be a legislative proposal and I am

not sure what the outlines are on the—

Mr. DEFAZIO. Will you recommend that they could preempt those

protected lands?

Secretary NORTON. I am not sure what the existing status of that

would be.

Mr. DEFAZIO. Well, I mean would you recommend it?

Secretary NORTON. It would concern us to have that kind of a

proposal—

Mr. DEFAZIO. So you will oppose it then? You oppose it?

Secretary NORTON. We will take a look at that.

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Mr. DEFAZIO. I see. Okay. All right. If we could go just quickly

to the offshore. You gave both definitive and qualified answers. Do

all those definitive and qualified answers apply to Oregon and

Washington, the same ones that California got answers to and

Massachusetts?

Secretary NORTON. We continue to observe the existing moratoria.

Mr. DEFAZIO. That is good. Now, do you think if the wildest

dreams of this policy are realized that we can double our oil reserves, U.S. Oil reserves, I mean, known reserves? Do you think

there is that possibility?

Secretary NORTON. I am sorry, I— Mr. DEFAZIO. Do you think we could possibly with all the exploration that is being advocated could we double or even triple our

known oil reserves, U.S.?

Secretary NORTON. I don’t believe that anybody knows the answer to that.

Mr. DEFAZIO. What would you say—how about 10 times, do you

think it is possible we could get to 10 times our existing reserves

with all the exploration you want or is that kind of out there?

Secretary NORTON. It is quite unlikely that you would see anything like that.

Mr. DEFAZIO. Well, I would refer you to an article, the Mirage

of a Growing Fuel Supply, by Edgar J. Nearing, who just happens

to be a mathematician, I am not, but he says that if we have 5 percent growth, that a 1,000-year supply—that is, if we could have 10

times as much as we do now, would last 79 years, and he suggests

rather that if we just got half of that in conservation, reduce a 5

percent growth to 2.5 percent growth, we could quadruple the lifetime of our expected reserves. So I would suggest strongly that if

we apply the laws of mathematics here that we could do a lot better by having a little more emphasis on conservation in this plan,

and I appreciate the potato fueled buses in Yosemite or wherever

that was going to be, that is great, and I will eat more French fries

to help with that, but that is the French fries—I am sorry, I was

thinking, you know, we do grow some potatoes in Oregon.

I think my time has expired. Thank you, Madam Secretary.

The CHAIRMAN. I thank the gentleman. The gentleman, the vice

Chairman of the Committee, Mr. Young, is recognized for 5 minutes.

Mr. YOUNG. Thank you, Mr. Chairman. Thank you, Madam Secretary. It always amazes me to hear people question this policy because there was a President for 8 years who had no policy at all

but to burn, burn, burn, baby, burn, and now to hear the Congress

on the other side talk about we have got to have—this policy is not

good, it has got holes and we are going to conserve our way into

prosperity is absolutely ludicrous.

Besides that, Madam Chairman, I am here for one reason. You

just went to Alaska, I understand, and went to Prudhoe Bay and

ANWR and Kaktovik. Just give me a little rundown on your trip.

Secretary NORTON. We toured the North Slope area as well as

some other areas of Alaska. Had the opportunity to go to Kaktovik

and to talk with the natives who live within the 1002 area of

ANWR and to examine the high technology approaches that are

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used in other parts of the North Slope. The Alpine facility is one

that we visited and I was quite impressed with the technology that

is used there with ice roads, with drill pads that use horizontal

drilling going out several miles in order to minimize the impact on

the surface.

Mr. YOUNG. What were the native people in the North Slope— what did they tell you?

Secretary NORTON. They are concerned because their native

lands are tied up in the 1002 area and they have 92,000 acres of

native owned lands where they would like to see oil and gas or oil

development take place and they are prevented from doing that

until Congress acts.

Mr. YOUNG. I happen to believe they have a right to drill their

own wells, by the way. I am one of the people to advocate that and

deliver to the market. And what we have done to them is absolutely wrong because the Act itself says specifically the Congress

has to act on 1002 but we also granted them lands and I have

asked them to explore through the legal branches where they could

possibly do so. To their credit they have not said that they want

to do that yet because they would look to do it with the consortium

rather than do it on their own. With the horizontal drilling, Madam

Secretary, they probably could drain all our oil, which I think

would be quite interesting for them to do so, and I say that sincerely because it is their land, it is their oil. We gave it to them

and now we are saying you can’t do it because of a special interest

group.

There was a little bit of a difference of opinion in your statement

about the amount of oil, estimated 10.4. The so-called environmentalists say they are over-optimistic, that it is 3.5. I have heard

as high as 16 and I predict as high as 39. What is the Geological

Survey’s estimate of the oil? What is their true numbers, most recent numbers?

Secretary NORTON. The number that we use primarily is the median estimate of recoverable oil, and that is 7.7 billion barrels. For

the broader area that includes the native lands and State-owned

lands, that is 10.4 billion barrels so that you often hear 7.7 and

10.4. The difference between those is just what lands are included.

Mr. YOUNG. And these are estimates because I have to remind

the Committee that when we had this—and this Committee

passed—the Trans-Alaskan Pipeline’s estimated amount of oil was

the maximum of 10 billion barrels. We have now pumped the 16th

billion barrel of oil and we are still pumping 1 million barrels a

day. So I don’t believe estimates can be really clarified until actual

drilling takes place and the production takes place.

I am a little bit concerned because I don’t know how many on

the Committee recognize that Saddam Hussein has stopped producing 2 million barrels of his oil that he uses for military purposes

and has raised the price of oil and I am happy to say for Alaska

is up to $32 a barrel today. It will probably go to $35 a barrel and

yet we have those that oppose drilling in ANWR because you don’t

want to disturb supposedly the environment. Yet you are willing to

take and go on your knee pads and go over there and negotiate

with the OPEC countries to get them to try to produce more oil,

and I think that is a very, very shortsighted point of view.

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I am going to continue to push this issue and I do believe eventually the wisdom of America will wake up and say this is for the

good of the Nation. By the way, Madam Secretary, this is the same

area in 1973 when we fought the pipeline bill that the environmental community said let’s go west to east with the least hospitable, with the least wildlife quality lands. That is where they

want to build the pipeline, and now we have found a little oil and

it becomes the Serengeti of Alaska. I wish they would stay and be

consistent.

I will suggest respectfully that this is an issue that is going to

go a long ways over a long period of time, a lot of debate, but don’t

be blindly led by the misadvertisement of the environmental community and the propaganda they put forth. Go up there and look

at it. And those that haven’t gone up there and are willing to vote

against me, shame on you. Go up and look at it, come back and

tell me I am wrong, and that is fine, but don’t do it blindly.

Thank you, Mr. Chairman.

The CHAIRMAN. I thank the gentleman. Gentleman from New

Mexico, Mr. Tom Udall.

Mr. TOM UDALL. Mr. Chairman, I believe that Congressmen Kind

and Inslee were in front of me so I would defer to them if they are

going to ask questions.

The CHAIRMAN. Congressman Kind.

Mr. KIND. I thank you, Mr. Chairman. I thank the gentleman

from New Mexico for yielding me his time or however that worked

out. Mr. Chairman, I do have a written statement I would like to

submit for the record without objection.

The CHAIRMAN. Without objection.

[The prepared statement of Mr. Tom Udall follows:]

Statement of The Honorable Tom Udall, a Representative in Congress from

the State of New Mexico

Mr. Chairman, Ranking Member, I commend you for holding this hearing so that

we may address one of the most pressing issues presently facing our Nation—energy.

The National Energy Policy Group, chaired by Vice President Cheney, released its

report, the National Energy Policy, on May 17. The plan promotes an increase in

domestic oil and gas production from Federal public lands, specifically endorsing a

change in law to allow oil and gas leasing in 1.5 million acres of the Arctic National

Wildlife Refuge (ANWR).

The U.S. Energy Information Administration projects that U.S. demand for refined petroleum products will grow over 35 percent by year 2020, and natural gas

is expected to rise by 45 percent. Instead of reducing this escalating rate of consumption, the Bush Administration suggests, among other things, to increase our

energy supplies, remove regulatory hurdles, and expedite permits for new projects.

A key component of the Bush Administration’s energy plan is to promote domestic

energy security and reduce our reliance on foreign oil by opening the coastal plain

of ANWR to oil and gas drilling. Reducing our reliance on foreign oil is important.

However, meeting this goal by focusing on drilling of in ANWR is an unrealistic and

misplaced priority because it does not exercise proper stewardship responsibility of

our Federally managed lands. Moreover, with small changes in vehicle fuel efficiency, we could save many times over the amount of energy at stake. After all, the

oil and gas under the coastal plain isn’t going anywhere and we may develop future

technologies which are much less damaging to this magnificent resource

The coastal plain of ANWR is the most biologically productive part of the refuge

and the heart of its wildlife activity. In the mid–1980’s, I rafted the Hula Hula

River traveling over 100 miles from the mountains of the Brooks Range and through

the coastal plain to the Beaufort Sea. I viewed first-hand the critical habitat for caribou, muskox, swans, snow geese as well as the Porcupine Caribou Herd which supports the subsistence lifestyle of over 7,000 Gwich’in (gwe–CHEEN’) American and

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Canadian Indians who oppose the drilling in ANWR because of the potential disruption of the caribou herd. As such, I question whether the administration intends to

manage the protected Federal lands appropriately and take into consideration the

input of the general population and our nation’s native and traditional communities

who will be most affected by such an initiative.

This Administration has not given consideration to developing those areas Congress has specifically recognized as being appropriate for oil and gas exploration on

Alaska’s North Slope. Ninety five percent of Alaska’s North Slope is open to oil and

gas exploration. Why aren’t we doing the necessary work in those areas, rather than

focusing on ANWR? The 23 million acre National Petroleum Reserve - Alaska

(NPR–A) was set aside by Congress in 1923 for preservation as a future supply of

oil, and was specifically opened for leasing in 1980. It makes much more sense to

explore for more production in NPR–A instead of squandering the time, energy, and

resources on ANWR.

(Gas Pipelines)

The National Energy Policy plan directs the Secretary of the Interior to coordinate

with Federal and state agencies and interested parties to expedite the construction

of a pipeline to deliver natural gas from Alaska to the lower 48 states. This recommendation lacks adequate safety and environmental protections that are a must

to proceeding.

Reflecting on the horrible pipeline explosion near Carlsbad, New Mexico last August that killed 12 people and the Bellingham, Washington gas pipeline tragedy, I

want to further ensure that our existing and future gas pipelines across the U.S.

are safe. With that in mind, the Administration and Congress must strengthen our

current oversight program for pipelines in order to enhance safety and reliability.

As the Secretary of the Interior, I would hope that you would take the lead in the

administration and work with Secretary Abrahams and Mineta to provide to Congress ideas on how to provide maximum safety.

The energy plan calls for more power plants, more refineries and 38,000 mile of

new pipelines. Since many of gas pipelines cross Bureau of Land Management

lands, the Department of the Interior is responsible for regulatory law compliance,

specifically in regards to environmental analyses and the permitting process. The

projected growth in energy has called into question whether regulatory actions and

permitting processes can keep pace with the necessary construction of new delivery

facilities. The current staffing and budget levels at the BLM field offices for these

efforts are inadequate. I look forward to hearing from you how the Department of

the Interior intends to address this issue. Without focusing on this aspect, I do not

see how the BLM can effectively implement its resource management program in

the lower 48 states with the proposed President’s budget. The President’s BLM

budget for Fiscal Year 2002 identifies an overall decrease of $2.1 billion from Fiscal

Year 2001 to $1.8 billion for Fiscal Year 2002. Although the administration intends

to increase the BLM’s energy and mineral program by $15 million, a large portion

of that will be going toward exploration on Alaska’s North Slope and completion of

the BLM’s land management planning process. That doesn’t leave much money for

the BLM to manage its other programs, and the programs will suffer tremendously

because of the budget cuts.

In conclusion, let me say that the key elements for a balanced, long-term comprehensive energy strategy must be the reduction of our consumption levels and diversification of our energy base in an environmentally sound manner. And let me

stress that last element—environmentally sound. These basic goals can be accomplished through a variety of measures including improving energy efficiency, promoting the use of renewable energy sources, and enhancing the productive capacity

of the domestic oil industry. Thus, a comprehensive strategy should ensure that energy and environmental policies are complementary, and work together to support

long term energy goals as opposed to implementing a policy at either extreme.

America has placed its trust in this Administration and in Congress to implement

an energy policy that is balanced and that serves not only our present environmental and energy interest, but also those of future generations.

Mr. KIND. Thank you. And as ranking member of the Energy

Subcommittee on Resources along with Chairwoman Cubin, we

have had quite a few hearings, Madam Secretary, in regard to the

energy policy and the effect on public lands. They have been very

enlightening hearings. In fact, one of the prominent facts that kind

of came out in the course of these hearings is that roughly 95 perVerDate 11-MAY-2000 13:13 Aug 24, 2001 Jkt 000000 PO 00000 Frm 00199 Fmt 6601 Sfmt 6602 J:\DOCS\70888.TXT HRESOUR2 PsN: HRESOUR2
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cent of the public lands already are available for access for exploration and drilling under current policy, and there are a lot of new

discoveries being conducted on these lands that are already available for exploration.

In fact, I am wondering if when you were up in the North Slope

of Alaska recently you had a chance to get together with the officials at Phillips Alaska to discuss with them the recently discovered oilfield that was made there on May 22nd. In fact, it is the

largest oil reserve finding in the last decade in land that was already obviously accessible to these companies, land that is part of

a national petroleum reserve, and so there is I think a lot of great

potential that is untapped. In fact, discoveries that are being made,

I think they are estimating it to be about a half a billion barrel oilfield that was just recently discovered.

But I think we also need to be honest with the American people.

I know there is lot of optimism here in this Congress and with various members of the administration that we can do this on public

lands, do it with the latest technology and in an environmentally

friendly way, but there are, to be honest, inherent risks that come

with exploration and drilling on our public lands.

And in fact, I don’t know if you had an opportunity during your

tour of the North Slope to go to Kuparuk Oilfield because on April

17th, the Anchorage Daily News just announced one of the largest

oil spills to have occurred on the North Slope, oil and salt water

spills, that affected a few acres of tundra because the salt water

that came out, the oil that came out were over a hundred degrees

in temperature and which just burned right through the snow and

the ice and, now we have got saturated acres of tundra up there

that was just reported in the Anchorage Daily News.

Mr. YOUNG. And if you believe the Anchorage Daily News, I can

tell you a great many whales, too. That is a propaganda paper, always has been and will continue to be so. It is the left wing coming

out of— Mr. KIND. Reclaiming my time, Mr. Chairman, but this wasn’t an

isolated incident that was reported. Apparently there have been

four other comparable oil spills that have occurred in the North

Slope in the last 6 months that are being reported, and I would be

more than happy to go up there and trudge around.

Mr. YOUNG. I hope that you do.

Mr. KIND. And the point I am trying to make, Mr. Chairman, reclaiming my time—

The CHAIRMAN. Gentleman from Wisconsin yielded to the gentleman from Alaska; is that correct?

Mr. KIND. The point I am trying to make is that there are going

to be risks inherent in drilling on the public lands. If there aren’t,

then why is Governor Bush in Florida adamantly opposed to offshore drilling for natural gas in the Gulf? And why is every Republican candidate for Joe Scarborough’s seat down in Pensacola opposed to offshore drilling if there aren’t some inherent risks?

But we need to balance those risks with the short-term energy

needs we have as a country, and I don’t think anyone is proposing

that we don’t have a short-term need that needs to be addressed.

We are a fossil fuel dependent nation. We are not going to change

that overnight, and it is going to call for some increased producVerDate 11-MAY-2000 13:13 Aug 24, 2001 Jkt 000000 PO 00000 Frm 00200 Fmt 6601 Sfmt 6602 J:\DOCS\70888.TXT HRESOUR2 PsN: HRESOUR2
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tion. We want to be able to work with you and the administration

on how we can do that in an environmentally friendly way but with

a balanced approach, an approach that recognizes the fossil fuel

needs that we have as a Nation but one that also is honest in recognizing the potential that does exist with renewable and alternative energy sources.

We are not 15 years away, Mr. Chairman, in being able to develop some of this latest technology. In fact, GM just announced

plans of coming out with trucks in the next couple of years that are

four-cylinder—eight-cylinder trucks that are going to increase fuel

efficiency by up to 25 percent because of the fourth generation cylinder machines that they are going to be producing. So a lot of this

is starting to happen right now, and I am hoping the administration will take a balanced approach to our long-term energy needs,

one that recognizes the need for some fossil fuel development and

production domestically, but one that also taps into the potential

of alternative and renewable energy sources.

The budget that the administration submitted I don’t feel reflected those values or those priorities. When you take a look at a

48 percent reduction in funding for the photovoltaic program, 48

percent less in the wind power program, 48 percent less in geothermal, 48 percent less in hydrogen program, for many of us it

means that you are not treating the alternative and renewable aspect of this seriously. Otherwise why would we just have 48 percent across the board cuts in these programs. And perhaps the

height of cynicism in the energy plan was that they will restore

funding for these programs but only after we collect the oil reserves, after we go into the Arctic National Wildlife Refuge and

drill and extract that oil.

And so I think the hope here is that we do approach this in a

balanced way, realistically understanding that we are going to

have to increase our short-term production needs in the country

but tap into the developing technology— The CHAIRMAN. The time of the gentleman—

Mr. KIND. There have been tremendous progress in the last couple of decades, and we would like to be able to work with you in

more detail as we start to develop the energy plan in this Congress.

Thank you again for coming.

The CHAIRMAN. The time of the gentleman has expired. The gentleman from Colorado, Mr. McInnis.

Mr. MCINNIS. Thank you, Mr. Chairman. I would hope that the

other side of the aisle takes some interest in the issue now ongoing

in the State of California. It is unfortunate that Mr. Markey has

left, but I am concerned. There is about 83,000 acres in California

near the Big Sur. It is mostly wild undeveloped coast that forms

the southern gateway to the Big Sur, and it is now being proposed

for development, and from my colleagues on the other side of the

aisle, the expert that they hired this week was Bruce Babbitt, who

helped developed that.

Second of all, I would like to say to the Secretary of Interior that

the politics on this Weatherman Draw—the lease—the Weatherman Draw, the politics on this is being played by the opponents to

this. It is not being played by the lessee or Mr. Anschutz’s corporation.

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Furthermore, Mr. Rahall, I noticed that some of the comments

based on your press conference or some of the comments based on

reports by the press of your comments, Mr. Rahall, strayed into a

personal attack on Mr. Anschutz himself.

Mr. Udall from Colorado, the Secretary herself, myself, I consider

myself a good friend of Mr. Anschutz’s. Mr. Anschutz has been covered extensively in the media by Colorado for 30 years that I have

kept up. I have known him for 30 years. Never once during that

period of time have I seen an attack on his personal integrity. He

is well respected in Colorado, and I would hope they would keep

it to the facts.

Mr. RAHALL. Would the gentleman yield since he has mentioned

my name?

Mr. MCINNIS. Madam Secretary, I would hope that the Department of Interior, kind of like the old detective show, just the facts,

ma’am, just the facts, that is what we need to look at here and not

some kind of political play. I would be happy to yield to the gentleman as I get towards the end if I have some time.

Mr. RAHALL. You mentioned my name in a false statement.

Mr. MCINNIS. Then I will yield right now. Go ahead, Mr. Rahall.

Mr. RAHALL. Would you please quote to me the personal assault

I made on Mr. Anschutz?

Mr. MCINNIS. No, no. I said comments as a result of your press

conference yesterday by the Sierra Club that comes out, made a

comment about Western art and so on, and they apparently have

teamed up with you on this approach to oppose this. In fact, I

would like—reclaiming my time, I would ask the Secretary, would

you reiterate for me your response to Mr. Rahall’s comment. Mr.

Rahall asked you if you had—I guess he didn’t use the word inappropriate, but if you had contact in regards to this particular permit, undue influence. Remember that question earlier? Would you

repeat your answer to that?

Secretary NORTON. The question was with regard to the decision

making in Montana on that.

Mr. MCINNIS. Yes.

Secretary NORTON. And the decision making so far in this Department, and in that regard, as far as I know there was no contact

between those who have made decisions on this and anyone in

Washington. I do have to say I did see Phil Anschutz at his opening of his exhibits at the Corcoran Gallery that took place a while

back. I don’t believe that I had heard of this issue at the time. And

so I know I have had no discussion with him on that type of issue.

Mr. MCINNIS. And this particular decision went to the State director of the BLM over in Montana. It went to the appeal process.

As I understand from the date of the permits, the permits were

first issued in 1987 and 1985. That is the numbers on them. In

February of 1994 they got—I mean there is a lot of history to this.

There is a lot of facts to this, and all of the sudden in the last couple of weeks I think there is a political play that is being motivated

by facts that apparently I am not aware of or emotions that I am

not aware of and I think it is unfair. I think you are the person

to stand up to these kind of challenges. I think you are doing an

excellent job, and I just wanted to clarify that.

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Now, as courtesy to Mr. Rahall, Mr. Rahall, I would be happy to

yield in my 30 or 40 seconds for further discussion.

Mr. RAHALL. I was asking the gentleman to quote me the statement he accused me of making a personal attack on Mr. Anschutz.

I was looking for that statement so that if that is true I could

apologize. If it is not true then I have nothing to apologize for.

Mr. MCINNIS. Mr. Rahall, I am not saying that you personally

made this. I am saying as a result of the press on this, the Sierra

Club, and I can certainly quote the Sierra Club, who is apparently

working with you on their opposition to this, have begun a personal

attack on this gentleman, a gentleman who is well respected in

Colorado and undeserving of this type of an attack. So I would

hope that you constrain or help restrain the Sierra Club and some

of these others from straying off into that personal attack mode

versus a professional disagreement or objection filed on the permit

process.

Thank you, Mr. Chairman.

The CHAIRMAN. The gentleman’s time has expired. We are going

to recognize folks by the order in which they arrived on the minority side, Mr. Inslee, Mrs. Christensen, Tom Udall, Mark Udall. In

the column on the GOP side it would be Mrs. Cubin, Mr. Gibbons,

Mr. Osborne, Mr. Rehberg, Mr. Cannon and Mr. Gilchrest. With

that in mind Mr. Inslee is recognized for 5 minutes.

Mr. INSLEE. Madam Secretary, my name is Jay Inslee. I represent the First District. That is the area north of Seattle and

Redmond in the State of Washington. And I want to tell you my

constituents are very concerned about one of the lines on a graph

you showed us this morning. That is this graph showing proposed

or projected oil consumption by America in the next, I guess it is

the next 20 years that you have brought this graph with you today.

Their concerns are that the projection of the increase that you

and the administration have projected are as if they are fixed in

stone and we can’t do anything about wringing efficiencies from our

vehicles and other machinery to try to reduce the slope of that

curve as it goes up. And my constituents are very, very concerned

that while we are in this energy shortage and while we have

known technology to increase the fuel efficiency of our vehicles, this

administration has not supported increasing our CAFE standards,

our average mileage standards to our vehicles.

And the reason that is very concerning to them is that nationwide I see numbers, 89 percent of Americans believe we ought to

improve the fuel efficiency standards of our vehicles and yet the

administration has not supported moving forward to increase those

CAFE standards. Perhaps they are listening to other folks, I don’t

know, but they certainly are not taking action to reduce the slope

of that oil consumption curve.

The question I have to ask you is, I want to ask about your role

in this discussion. You are the steward of our public lands. You

have an incredible responsibility of the most beautiful land in the

known solar system to date in any event. Now, I would hope during

the administration’s energy policy you went to these meetings and

said, hey, folks, we shouldn’t be drilling in the Arctic Refuge or we

shouldn’t be drilling in the Hanford Reach New National Monument until and unless we first improve our CAFE standards and

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improve the mileage of our vehicles. I guess I would like to know,

did you make that argument during the development of this policy?

Secretary NORTON. We have looked at a comprehensive approach

that looks across the board, and I would like to correct something

on the CAFE standards. There is currently a study underway by

the National Academy of Sciences and the administration is planning to look at the results of that study and act upon those results

of that study, and so we have not in any way ruled out looking for

a whole variety of different ways of trying to reduce the slope of

that oil consumption increase. That is really the most likely scenario. It is obviously not the only scenario and that is why we have

taken an across the board look that looks at reducing demand as

well as increasing supply.

Mr. INSLEE. Well, perhaps you can answer my question. As a

steward of all public lands, did you argue within the administration that our CAFE standards should be improved before we look

at drilling in the ANWR and other national monuments?

Secretary NORTON. I think we need to look at things simultaneously and that is the position that I take across the board every

place.

Mr. INSLEE. Today are you advocating?

Secretary NORTON. That we need to take a long-term look. We

are in a situation today because we have not built a new refinery

in a generation, we haven’t seen new power plants in California in

10 years, we have not planned ahead and I think we need to plan

ahead, take a long-term look. That means we don’t stop at any

place and wait for just one proposal. We need to look across the

board at a comprehensive approach.

Mr. INSLEE. Are you today here arguing that we should improve

our CAFE standards; is that your testimony?

Secretary NORTON. That is not something that my Department

deals with. We are not the ones who have the scientific expertise

in dealing with that. I have a strong position that we need to base

our decision making on a thorough understanding of science and

based on public input, and that would be an element of any decision that is made on that.

Mr. INSLEE. Let me encourage you to consider your portfolio larger. As a steward of the public lands, I can tell you that the people

I represent want to go to this administration and say I as steward

of these public lands want to improve our CAFE standards before

we endanger the environment that I am sworn to protect.

Second issue, pipeline safety, if we are going to drill in these national monuments you have got to have pipelines that don’t explode. Three people were incinerated in Bellingham, Washington

over a year and a half ago, several in New Mexico. To date the U.S.

House has not moved a meaningful bill. The U.S. Senate has approved a bill. Are you urging our noble Chairman to move at least

a bill as strong as the Senate’s bill that has passed this year on

pipeline safety?

Secretary NORTON. I am not aware of that particular legislation.

I am sure we would be happy to take a look at that.

Mr. INSLEE. We would encourage you to do so, and I hope you

can join us in urging the House to act. It has been over a year and

half since three children were incinerated in Bellingham and this

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House has not acted in a meaningful way in pipeline safety, and

if we are going to drill on these lands I think we ought to do it in

a way that doesn’t expose the people to incineration.

Secretary NORTON. Safety obviously is very important.

The CHAIRMAN. The time of the gentleman has expired. The

gentlelady from Wyoming, Mrs. Cubin.

Mrs. CUBIN. Thank you, Mr. Chairman. Welcome, Madam Secretary.

I did want to make a point that on May 2th—Mr. Inslee will be

interested in this, as Mr. Kind would be—that the President put

in the budget amendment to drastically increase the research and

development on renewable energies. So I think that should make

them very happy. I am also going to want to talk about the budget.

No matter how much people might want us to be able to conserve

ourselves out of this energy crunch or crisis, it is not possible. We

finally have to face the consequences of inaction, of restrictive land

policies and extremist environmental policies. We finally have to

deal with the consequences of the actions that have been taken

over the past so many years.

Now when I hear members on the other side say that 95 percent

of the public lands are available for exploration, I wonder what in

the heck that even means. I just really question that in the first

place, and then I wonder if they understand that available for exploration, maybe some of the land is leased but so they think because the land is leased somebody can go poke a hole in the ground

because the land is leased. They don’t realize the permitting process that has to be gone through and all of those laws that are in

place have to be applied by members, personnel in the agencies to

protect the environment, and that is where they give us a hard

time because they really don’t understand what happens out there

on the ground, and that is what I want to talk about. I was concerned that, I am concerned that the agencies have enough personnel to process applications to permit drilling or all of those kind

of things, with taking into account that the President recommended

a $200 million cut, was it, how much, I can’t remember how much

the cut was to Interior.

Secretary NORTON. $200 million from last year’s.

Mrs. CUBIN. I have spoken with Chairman Young and it is my

opinion, it is my very strong opinion, that the only agency or basically the only agency of our government that generates new money

is the Interior Department and it seems very short-sighted to me

to not have that agency funded to the level that they can actually

do the work that is given them to do. We have a gas area in Wyoming of cold bed methane. There are 2,300 APDs pending because

they can’t get to them. I would like to get a larger appropriation

for the agency to help with that. Would you give me your views on

that?

Secretary NORTON. We are looking across the board at what we

can do to expedite permits. To some extent that may require simply

decreasing the time that it spends in somebody’s desk drawer before it is sent on to the next agency for action. In other cases, it

may be a manpower type situation. We are in the process and will

be taking a look at those kinds of issues so that we can tell you

exactly where the problems are. I would like to point out to you a

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Department of Energy study that is being released today was done

in cooperation with my Department that deals with the Powder

River area in Wyoming and the stipulations and the restrictions on

land use in that area and it found that 68 percent of the resource

is not available because of surface restrictions, and that is the type

of study and the type of information that will be coming out of our

long-term study.

Mrs. CUBIN. That is excellent. I also find it curious that some

members on the other side seem to be afraid of gathering information on drilling, or not on drilling but on gathering information off

the coast of New England and California when they in fact voted

for the bill that required the study to find out all of that information in the lower 48 States. So it is sort of like not in my backyard.

Another thing I wanted to bring up, and again you can do this

internally, but I want to be as helpful as possible, there are areas

as we know like the Powder River Basin where there is a lot of activity and we have in the Parks Department, as you know, a fee

program where the park who collects the fees gets to keep a certain

percentage of the fees to use in that park rather than returning it

to the general Treasury and we have been thinking about possibly

having a setup like that for BLM offices or Park Service offices

where a lot of permitting has to be done and where it seems to me

that that would be a good way to address activity where the activity is.

Secretary NORTON. I would be happy to talk with you further

about that.

Mrs. CUBIN. Thank you for being here. I look forward to a productive year and please know we are here to help you out.

The CHAIRMAN. I thank the gentlelady. Madam Secretary, we

have two votes on. I understand we have got about 40 minutes

more that we can infringe on your time. If the Committee could

stand in recess, myself and the ranking member feel we probably

have room for one quick one, and if it is all right with the Committee I would kind of yield to myself for that and then we will

quickly go over and vote. We have two votes, and then come right

back and see if we can indulge you for the remainder of the time.

Let me just say, if I may, very respectfully, I notice that past

Chairman Mr. Young talked to you about going to Alaska and you

have been there. I don’t want to in any way pin you down on anything but we have something that we call the Grand Staircase

Escalante and I have noticed that some of the members have alluded to the idea of drilling in our monuments. I still feel the same

way about that.

How many have been there? People talk about monuments and

parks and Federal land. A lot of that has to be done on a retail

basis. What are we looking at? You know in the 1.7 million acres

of that monument—and I have to say I am very familiar with it.

My father had uranium mines on it. I have put Piper supercubs

down in places that only a person that is not using their head

would put them down on. I have been on horses on it. I have driven

jeeps across it and the whole nine yards. I am very, very familiar

with the property down there. If anyone seems to think that that

is a grand and glorious scenery, they are kidding themselves. I

would say maybe 10 percent of it would qualify under my criteria

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of the 1906 antiquity law under what is an archaeological, scientific

or historic site.

It is basically sagebrush, but on there is probably the largest

supply that we have of low sulfur coal, fossil fuels and natural gas.

And I think we have to do this on a retail basis and look at it and

see what we can drill on so an idea of saying just because someone

declares it as sacrosanct and it can’t be looked at is nonsense. It

can be.

I also would like to talk to you for a moment about the idea, this

idea of the big bad oil companies. I am given to understand in my

briefings on this that oil companies basically could do better going

overseas. But as the Chairman of the Commerce Committee always

likes to refer to it, we are dealing with those we can’t depend on

and I understand they could make, from my briefings, probably

more money going overseas than they can here. But it is not a big

issue of who is making money, it is more of an issue who do you

want to depend on, and I think that is something that should be

taken into consideration.

So with that said, I just wanted to get that in, if I may, and point

out that these things can be done in an environmentally sound way

and I think they should be. I really appreciate you coming and we

are going to just recess for a few moments here and we will run

over and vote and come right back and then wind this up. Is that

all right with you?

Secretary NORTON. Yes, thank you, sir.

The CHAIRMAN. Okay. With that said, we will stand in recess and

be right back, and I urge the Committee members of the Committee to hurry back.

[Recess.]

The CHAIRMAN. The Committee will come to order. Thank you,

Madam Secretary. I really appreciate the members keeping in

mind that we have got 15 minutes and the Secretary has to leave,

so let’s be very brief. We are trying to get to everybody that we can.

The gentleman from New Mexico, Mr. Udall, is recognized.

Mr. TOM UDALL. Thank you very much, Mr. Chairman. Welcome

now, Madam Secretary. It is great to have you here today and as

a beginning I just wanted to compliment you on what you are

doing, at least what I am reading about that you are doing, with

the Corps of Engineers. I noticed they put out a new set of regulations on wetlands. It looks like those are going to weaken protection for the riparian areas and I hope that you keep it—it reported

in the press that you and several other agencies were keeping the

pressure on them and keeping up the fight, so I hope that you continue to do that.

Mr. TOM UDALL. The question that I wanted to ask, and I am

going to preface it with a little bit of a statement to give you a little

bit of background, but it goes along a line that Congressman Inslee

was approaching, and this is—and the Chairman talked about, and

other Members here have talked about, a national energy policy.

And we are getting into a national energy policy. The thing that

I fear is we are really not telling the truth to the American people

about what our energy situation is.

And there has been a lot of criticism of the administration’s policies being too supply-oriented and trying to increase supplies of oil

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and gas. And I wanted to specifically focus on natural gas, because

it seems to me that we have put all our eggs at the national level

here in the United States in the natural gas basket. Seventy percent of the new homes coming online use natural gas. All of the

new power plants that we have been talking about, and many of

them are in the report, and there are numbers from 1,000 to 1,600

going to be run by natural gas. And I am worried about that because as you note in your testimony, and I think you do it pretty

persuasively here, you talk about how natural gas production is

just barely keeping up, and we are talking about a 50 percent increase in demand.

And I just wanted to read a brief little statement to you. This

is a fellow—and I don’t consider myself the absolute expert on this,

but here is a guy named Matt Simmons, he is in President Bush’s

kitchen cabinet. He is an investment banker and deals with the energy services industry, and here is what he writes about this natural gas situation: An energy crisis is descending over the world.

The situation is grave. The world has not run out of oil, and North

America has not run out of natural gas, but what we are short of

is any way to grow our energy supply.

North America has no excess natural gas capacity. What we do

have is extremely aggressive decline rates making it harder each

year to keep current production from falling. A massive number of

gas-fired power plans have been ordered, but the gas to run them

is simply not there.

And so my question to you, Madam Secretary, is aren’t we better

off, knowing that we have this massive increase and knowing that

we have this serious problem confronting the Nation, aren’t we better off focusing on conservation, on efficiency, even use a new term,

let’s call it energy productivity, that is where we make productivity

gains, and focus on that side of the equation where we know we

can make enormous gains? For example, the rules put in under the

Clinton administration for air conditioners would allow us to not

build 146 power plants, and so those kinds of savings are out there.

The industry people have endorsed some of them. And I am just

wondering if we are not better off focusing in a bold way and in

a big way on conservation or what we call energy productivity?

Secretary NORTON. Congressman Udall, I think you raise a good

point in terms of trying to focus on conservation. That is something

that we would like to look at. Natural gas demand far exceeds any

expectation that is currently there in terms of what conservation

can accomplish. The Energy Department proposals that estimate

the 50 percent increase in natural gas, I believe, do factor in that

we continue with conservation efforts and that we continue with

these at the current rate that we are going forward and finding

new ways of conserving. It is largely for air quality reasons that

natural gas has become so much in demand, and so to a large extent that natural gas increase is a shift from other fuels in order

to take advantage of the air quality benefits.

Mr. TOM UDALL. And I understand that. And what I would like

you to focus on is aren’t we better off being very aggressive on energy productivity rather than putting all our eggs in the natural

gas basket so to speak?

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Secretary NORTON. We are trying to pursue both avenues so that

we have both conservation and additional supplies.

Mr. TOM UDALL. Thank you very much.

The CHAIRMAN. The time of the gentleman has expired. The gentleman from Nevada Mr. Gibbons is recognized for 5 minutes.

Mr. GIBBONS. Thank you, Mr. Chairman, and, Madam Secretary,

I want to welcome you to our Committee and certainly appreciate

your testimony and presence here today. I have only been in this

Committee for now 5 years, or beginning my 5th year, but during

that time your predecessor Secretary Babbitt never once came in

here and testified and argued and demanded CAFE standards be

increased. Perhaps that is because he also realized that CAFE

standards are not in his jurisdiction. But in the 96 months of the

previous jurisdiction, they never came up with an energy plan as

comprehensive or detailed as yours, so I want to give you great

credit for that.

I also want to thank you. Thank you for your willingness to look

at the 3809 regulations. As you know, in Nevada, a State which

has approximately 111,000 square miles, is 90 percent Federal public land, whether that is Forest Service or BLM, and mining is an

important industry for our State. It is an important industry for

the United States. So your willingness to take a look at the 3809

regulations and review those changes that were made are greatly

appreciated and deeply important to a lot of Nevadans, as I am

sure to a lot of Americans.

My issue, of course, is one as we look at all of the renewable energy issues, geothermal. Recently in the last Congress in the late

night, passed as a rider to one of the appropriation bills, was a

change to some of the status of Nevada lands, that Black Rock National Conservation Area in which approximately 1.3 million acres

was removed from geothermal potential and taken off the books.

We would appreciate your willingness and your understanding to

take a look at the Black Rock conservation issue, geothermal potential, not that we want to change any of the provisions which are

going to protect those pristine areas that need protecting, but we

do also recognize that Nevada, unlike what my friend from California says, is probably the heart of geothermal energy in this Nation. And we have a great potential for it, one, which I think is a

very clean energy source that could provide a great deal of energy

for the answer to California’s problem.

In addition to that, let me say that California has approached

Nevada in the last year, and I know I was talking with your director, State director, with approximately 11 applications for new

power plants to be built in Nevada for California. This is probably

part of the problem with California, its unwillingness to look internally at its own energy needs and demands.

But that being put aside, I want to thank you for your interest

here, but also I want to talk about the geothermal as I indicated

earlier and hopefully get the Department of Interior’s willingness

to take a look at the boundaries of that 1.3 million-acre Black Rock

NCA to see whether or not we can efficiently and effectively and

environmentally soundly, may I say, look at the geothermal energy

potential there and make some accommodations for that very vital,

very needed energy resource from that standard.

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Secretary NORTON. Congressman, we would be happy to work

with you and to examine that issue further.

Mr. GIBBONS. Thank you. And I know that you are on a very

short time leash, and with that I would again applaud you for

being in office for 4 our 5 months and having come up with an energy plan for this Nation. And again, you know, we have to address

these issues. It is important for you to be here to address these

issues. You are doing a fine job, and we look forward to having you

back. Thank you.

I yield back the balance of my time.

The CHAIRMAN. Appreciate the gentleman’s comments.

Looks like we have time for one more. The gentlelady from the

Virgin Islands is recognized.

Mrs. CHRISTENSEN. Thank you. I will be very brief. Thank you,

Mr. Chairman.

Good morning, Madam Secretary. It is a pleasure to join my colleagues in welcoming you to the Committee for the first time.

Secretary NORTON. Thank you.

Mrs. CHRISTENSEN. Before I ask the one question that I have, I

want to take the opportunity to thank you for the way in which you

have addressed with us the issue of the monument which is still

ongoing, the two monuments that have been designated in my district. Mr. Chairman, from that experience and the other opportunities that we have had to work with the Secretary, despite what we

are going through now, I am sure that we are going to end up at

the end of the process with a very fair and balanced approach to

dealing with our energy crisis.

My question is that based on your testimony, the U.S. consumes

about 7 billion gallons of oil—barrels of oil per year, and of that

we import 4 billion and produce about 3-. How much does your office estimate we could increase production, for example, from increased drilling in the 95 percent of the BLM lands in those five

States in the West from the lease that is already existing and

available to us, and the outer continental shelf from enhanced recovery from the existing wells? Because your testimony says that

maybe somewhere from 30 to 70 percent is not recovered of what

is drilled, how much more can we increase our production from just

those areas and not putting any of our environmentally sensitive

areas at risk?

Secretary NORTON. We are in the process of looking at some of

those things and would be happy to provide you with some followup information about that. I obviously don’t have those figures

right at the top of my head. Certainly looking at enhancing production from existing areas is one of the things that we would like to

pursue, and I think there are some good opportunities for doing

that. That doesn’t solve all of our problems, but I think that is one

of the many steps that we have to pursue.

Mrs. CHRISTENSEN. Thank you. And you know, I agree with my

colleague Mr. Udall here. I think that if we use the existing areas

and increase our production, then the yield, and use the conservation—and what is it—energy productivity measures, I think that

we can address this crisis.

The CHAIRMAN. I thank the gentlelady.

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We have four Members who haven’t had an opportunity. We have

got about 3 minutes. Raise your hand if you want to ask a question. We will take you by the order you came then.

Mr. Osborne.

Mr. OSBORNE. Thank you, Mr. Chairman. Thank you, Madam

Secretary, for being here. I realize it may not be directly in your

province, but we are very interested in biodiesel and ethanol as

part of renewable fuels and wondered if you had a quick comment

on how you see this fitting into the energy plan?

Secretary NORTON. The alternative fuels such as ethanol are a

part of the comprehensive energy plan, and that is something that

the administration does plan to pursue with additional research, as

well as looking at other incentives for going forward with that.

Mr. OSBORNE. Thank you. Yield back my time.

The CHAIRMAN. Thank you.

Mr. Rehberg.

Mr. REHBERG. Thank you, Mr. Chairman.

Having been in public service since 1984 as a State legislator,

and Lieutenant Governor from 1991 and 1997, and now as Congressman, I have spent my entire time traveling in the State of

Montana to all 56 counties. I can honestly tell you I have never

even heard of Mr. Anschutz, nor was this a controversy until it was

created, this controversy, by the media and by the various interest

groups to create the controversy. I hope you will stay above it,

allow the process to go forward. I commend you for what you have

done so far.

I also want to thank you for sending Mike Koslowski out to Montana most recently. We had a Missouri Breaks hearing, and as you

know there is a controversy surrounding that breaks designation

by President Clinton and Mr. Babbitt.

My question is—and certainly the monument that was created

for the purposes of protecting the Missouri Breaks, but as you

know, there are 80,000 acres of private property that were included

within that designation, and there was quite a bit of oil and gas

leasing property and, in fact, active Federal gas wells in that area.

Are you open to suggestions for boundary adjustments?

Secretary NORTON. That is one of our more controversial monument designations and one that has, I think, one of the largest

amounts of concern from local citizens.

We are going through a process. We would be happy to work

with you further. We are just beginning our process in looking at

what should be the future of that monument, and perhaps adjustment of boundaries is something that you all might want to consider for congressional action.

Mr. REHBERG. Thank you. I hope that Mike will give you a full

briefing. We sat there for 8 hours and had 300 people. Mike gave

everybody an opportunity to testify. It took us about 8 hours to get

through that process.

My second quick question is Otter Creek. Are we any closer on

Otter Creek? As you know, the State of Montana negotiated in good

faith with the Federal Government for the transference of the

Otter Creek tracts because they wanted to keep us from actually

mining the New World Project north of Yellowstone Park. That was

a good faith negotiation. It broke down in the end because Mr. BabVerDate 11-MAY-2000 13:13 Aug 24, 2001 Jkt 000000 PO 00000 Frm 00211 Fmt 6601 Sfmt 6602 J:\DOCS\70888.TXT HRESOUR2 PsN: HRESOUR2
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bitt chose to turn his back on the State of Montana. How are we

on that process?

Secretary NORTON. My understanding is that we are still working with the State of Montana in trying to move forward on that.

Mr. REHBERG. Thank you, Mr. Chairman.

The CHAIRMAN. The gentlelady from Minnesota.

Ms. MCCOLLUM. Thank you, Mr. Chair.

Secretary Norton, I am from the State of Minnesota, and the

Great Lakes does have some drilling going on in Michigan. The

Great Lakes provides drinking water for 10 million people, 35 percent of the fresh water, and we are very alarmed and very concerned that there is going to be increased pressure both on the

States, with the Canadian Government also, with more drilling

going on in the Great Lakes as well as the proposed pipeline,

which, it is my understanding, may have some input in whether or

not it is approved or not, running a pipeline through the Great

Lakes to transport what eventually could be oil, which covers 35

percent, as I said, of America’s drinking water, the world’s fresh

water. So can you tell me what your position is, the Department’s

position is, on protecting fresh drinking water in the Great Lakes?

And if you have taken any position, I hope have you taken a position in slowing down and not drilling in the Great Lakes.

Secretary NORTON. My understanding is that the drilling in the

Great Lakes is entirely a State issue as opposed to any Federal

land being involved in that. And I am not familiar with the pipeline proposal. I would be happy to get back with you with additional information on that. I don’t have an understanding of or a

position on the pipeline proposal at this time.

Ms. MCCOLLUM. Mr. Chair—Ms. Norton, yes, it is a State issue.

The Federal Government, I would think, would have a health and

safety concern with the fresh water sources that are out there. So

I am asking the Federal Government, you know, you are representing the Department of Interior, if you are going to ask States

to slow down on this, or if you are going to be working to identify

oil and other resources potentially that could be drilled out of the

Great Lakes, or are you going to take a position where there is the

place of last resort we should go because it is drinking water, as

I said, for 10 million people?

Secretary NORTON. I would be happy to take a look and see what

jurisdiction the Department of the Interior has on those issues. I

am not aware of a particular jurisdiction we have at this point. I

think it would be primarily an Environmental Protection Agency

issue in terms of water quality.

Ms. MCCOLLUM. Well, Secretary Norton, even if you don’t have

direct jurisdiction, you are a leader in this area. I am asking for

your strong consideration of doing what we have to do to protect

drinking water. We are focused on oil right now, but any of the futurists will tell you the next battles that future generations will

fight over will not be over oil, it will be over water. Thank you.

The CHAIRMAN. I thank the gentlelady.

The gentlemen from Colorado.

Mr. TANCREDO. Thank you, Mr. Chairman.

Although some may be surprised at the great accomplishments

you have already been able to achieve, Madam Secretary, none of

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us from Colorado are surprised, because we know you, and we

know exactly what you are made of. And I have to say that you

make us all very proud. Personally certainly I can attest to that.

Madam Secretary, just a point about ANWR and the bonus bids.

If you could clarify for us exactly how the administration is—as I

understand it, some revenue from the bonus bids would be directed

toward land conservation and some toward research and development of alternative energy sources. Am I accurate in that? Do you

know how that split will occur? Do you have any idea about how

much money we may be talking about?

Secretary NORTON. My recollection is that we would be looking

at alternative energy types of research from the money coming

from the bonus bids, where land conservation measures would be

coming from the royalties from actual production. I don’t have dollar figures for that, but would be happy to see if we do have any

of those available.

Mr. TANCREDO. Thank you. I have no other questions except to

say it is great to see you.

The CHAIRMAN. Thank the gentleman from Colorado.

We thank the Secretary. We appreciate your patience and your

time with us. I think as I have listened to all the testimony, the

most revealing testimony I heard today was from Mr. Markey from

Massachusetts, his comments when he said this, ′′The State should

be given complete deference when deciding how to use the natural

resources.′′ Now, I hope that applies to Alaska, Utah and Colorado

and those other States, because so far those of us that live in the

West, my 21 years as a Member of this organization, I haven’t seen

that. I say amen. I agree wholeheartedly with Mr. Markey on that

with the exception of one thing in Nevada, Mr. Gibbons. And sometimes the good of the country has to come first.

Mr. GIBBONS. A little nuclear waste, that is all we have got a

problem with.

The CHAIRMAN. I don’t know how you came up with that.

Thank you, Madam Secretary. We surely appreciate it and appreciate your kindness, and we now stand adjourned

[Whereupon, at 12:36 p.m., the Committee was adjourned.]

Additional statements submitted for the record follow:

[The prepared statement of Mr. McInnis follows:]

Statement of The Honorable Scott McInnis, a Representative in Congress

from the State of Colorado

Recently, my Subcommittee on Forests and Forest Health conducted an oversight

hearing exploring the role of community-based partnerships in the management of

our nation’s forests, and another on forest biomass as an economic use for forest

fuels. During the course of these hearings, two critical themes surfaced. First,

healthy forests and healthy local communities are inalterably intertwined. Second,

the emerging field of biomass production provides a great opportunity to promote

both healthy forests and healthy local economies while contributing to our nation’s

energy needs.

Biomass production seeks to utilize wood fiber generated by the mechanical

thinning of forests for energy production. This practice complements other efforts to

turn small logs into innovative value-added products, such as furniture or hardwood

floors, or composite signs made from chip wood and plastics.

As Secretary Norton and members of this Committee know, last year Congress

established the National Fire Plan to combat the rampant threat of catastrophic fire

on our forest lands. At present, 73 million acres of National Forest lands run the

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substantial risk of experiencing run-a-way wildfires during the coming fire season.

Additional acres are at risk on Interior Department lands. The cause of this imminent threat is clear: after 100 years of aggressive fire suppression, many of our forests are crowded with excess fuels—live small-diameter trees, dead trees of all sizes,

branches, brush, and heavy accumulations of needles and leaves. The National Fire

Plan creates a comprehensive and coordinated framework through which land managers can address this fundamental cause of our current forest fire crisis.

As resource managers begin to systematically reduce hazardous forest fuels under

the National Fire Plan, vast quantities of biomass could be made available. If this

excess wood and brush must be removed to improve forest health, it only stands to

reason that these resources should be put to efficient use in the local market place.

It’s a matter of common sense. In my view, Congress and Federal land management

agencies should take all practical steps to promote the long-term availability of biomass and the viability of the businesses that utilize it.

There will no doubt be some who cynically, and wrongly, view biomass production

as some sort of threat to our public forests. It is not. Let me be clear: forest fuel

reduction and biomass production is not an excuse to increase timber harvesting.

Instead, it is a one-two combination that simultaneously promotes the sustainability

of our forests and the health of our local economies.

I look forward to hearing how the Department of the Interior will participate in

exploring the benefits, opportunities and obstacles to utilizing biomass from our

Federal lands. Such a renewable resource can boost domestic energy production

while providing a viable and safe alternative to letting our public land treasures

burn up in catastrophic fire.

[The report entitled ′′National Energy Policy′′ was too lengthy to

be included in the printed hearing. It has been retained in the

Committee’s official files.]

[The prepared statement of Mr. Kind follows:]

Statement of The Honorable Ron Kind, Ranking Democrat,

Subcommittee on Energy and Mineral Resources

Thank you Mr. Chairman. Ms. Norton, I would like to thank you for appearing

before the Resources Committee today to discuss aspects of the President’s National

Energy Policy. I have reviewed the policy and found aspects that I can support. In

particular, I was impressed with those sections of the plan that address the need

for increased emphasis on renewable energy, conservation, and energy efficiency.

I believe these are exactly the areas that we as a country should focus on in order

to achieve greater energy self sufficiency. However, while there were good words in

the President’s energy policy regarding energy efficiency and renewable energy

sources, the President’s Fiscal Year 2002 budget request does not support his commitment in these areas. For example, the President proposes to cut Department of

Energy funding for solar and renewable energy sources by $136 million - a reduction

of 36 percent.

Further, the Administration’s request would eliminate the International Renewable Energy Program and the Renewable Energy Program for American Indians. It

would include $36.1 million less for Photovoltaics, $19.1 million less for Wind, $17.8

million less for Superconductivity, $13.0 million less for Geothermal, $13.0 million

less for Hydrogen, and $11.8 million less for Concentrating Solar Power.

I find it very difficult to understand these proposed cuts in light of the glowing

words for renewable energy contained in the National Energy Policy and the President’s claim that the nation faces an energy crisis. Indeed, common sense would dictate that we be increasing funding for these programs, not cutting them as the

President proposes.

The National Energy Policy also calls for increased domestic production of oil, natural gas, and coal. While I recognize the possible need for increased domestic production of these traditional energy resources, I am concerned that the Administration is too willing scale back environmental protections in the name of increased

supply. Environmental restrictions designed to protect our wildlife must not be sacrificed. For example, I am concerned that the environmental impacts of pumping billions of gallons of contaminated water to the surface as a result of coalbed methane

gas production have not been adequately assessed. In addition, the energy industry

must be required to use the most advanced technology designed to minimize environmental impacts.

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Over the short term, we may need to increase domestic production of our traditional energy to meet our needs. However, this must be done in a manner that is

truly protective of the environment. We should not allow the current situation to

be used as an excuse to rollback environmental protection. Over the long term, our

economic and environmental future lies with using our advanced technology to develop clean, renewable energy sources and becoming more energy efficient.

[The prepared statement of Mr. Mark Udall follows:]

Statement of The Honorable Mark Udall, a Representative in Congress

from the State of Colorado

I am looking forward to hearing from Secretary Norton, because this is a most

important topic.

I have some very serious concerns about the Administration’s energy policies. I

think they lack balance, with too much emphasis on increased production of fossil

fuels and not enough on alternative sources, energy conservation, and increased efficiency.

I also am very apprehensive about how these policies would affect the management of the Federal lands, which are the property of all the American people.

Certainly those lands—in Colorado as in other states—can and should provide our

country with energy and minerals.

But the lands also have many other resources, both natural and cultural, as well

as less-tangible values.

Like energy and minerals, those other resources and values are important for the

entire country. But they are especially important for the people of the Western

states—they shape our region and our lives.

In Colorado, rapid population growth is putting increased pressure not only on

our national parks and monuments but also on the national forests, the wildlife refuges, and the public lands managed by the Bureau of Land Management.

We are becoming increasingly aware of the need to respond to that pressure by

better management of recreational and other uses of all the Federal lands in our

state, and by increased protection for the most sensitive areas.

Just in the last two years, legislation has been enacted to enlarge the Black Canyon of the Gunnison and the Great Sand Dunes National Monuments and to designate them as National Parks; to create the Colorado Canyons National Conservation Area; and to add the Spanish Peaks and the Black Ridge areas to the National

Wilderness Preservation System.

And pending before this Committee are bills to protect more wilderness areas in

our national parks, national forests, and public lands and to designate Rocky Flats

as a National Wildlife Refuge once that former weapons site is fully cleaned up and

closed.

I strongly support these initiatives and also support protecting the roadless parts

of the national forests. I think that is the way we should be going.

But the Administration’s energy policies seem to go in the other direction.

In fact, I am tempted to borrow some rhetoric from the other side of the aisle and

say that we are on the verge of a ‘‘war on the West.—

That is not a new phrase. Some people used it about some actions of the previous

Administration. But now there is a difference—this time, it may prove to be accurate.

Unless we restore some balance, the energy policy will be a war on wilderness,

a war on wildlife, a war on open spaces—and ultimately, a war on the economy of

the West.

The administration wants the people of the West to open up protected areas, forsake protecting more wilderness, and sacrifice much of what makes our part of the

country special—all to avoid a commitment to a balanced policy of increased efficiency and conservation and an energy supply featuring not only oil and gas but

also greater use of wind, solar, biomass, and other renewable sources.

The West has heard that before—but the West has changed significantly since the

Reagan–Bush administration came to Washington. Our region’s economy is more diverse and many of the jobs in the new economy are based on people’s desire to live

where open space and the natural environment are vigorously protected.

So, I urge the President to draw back from the brink, rethink his priorities, and

listen to all the voices of the west and the rest of the country.

If that happens, I think we in the Congress can work with the Administration

to develop a sound, balanced policy that will address our energy problems without

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sacrificing the other resources and values of the Federal lands. Certainly I am ready

to help in that effort.

[The prepared statement of Ms. Solis follows:]

Statement of The Honorable Hilda L. Solis, a Representative in Congress

from the State of California

Chairman Hansen, Ranking Member Rahall, and colleagues, I am disappointed

with this so-called National Energy Policy.

As a Representative from the great state of California, my constituents and I have

experienced first hand what it is like to sit in the dark. We have grumbled as we

sat in traffic because the traffic lights were not working due to a blackout and we

have cried out for relief as prices have jumped from $30 per Megawatt Hour (MWh)

to $1900 per Megawatt Hour (MWh).

My constituents are on the front line of the energy crisis. And yet, they have been

ignored by the Bush Administration and its National Energy Policy Development

Group. How can our country take seriously an Administration who has promised so

much in the future but is unwilling to deal with the present?

The Administration promises more drilling, less environmental protection standards, and more coal burning. They want the focus of our national energy policy to

be on the destruction of the environment instead of the future of this country.

Sure, President Bush’s plan has some portions which are environmentally conscious - but this limited good does not make up for the overall destruction of our

precious resources. We are drilling away at our children’s future.

[The prepared statement of Mr. Flake follows:]

Statement by The Honorable Jeff Flake, a Representative in Congress from

the State of Arizona

President Bush’s energy policy is intended to increase energy supply through a

variety of measures while paving the way for more self-reliant energy production.

The economics of the plan move toward allowing the market to correct current imbalances between current supply and demands. Today we look into how this plan

will affect legislation to be heard before the Resource Committee this Congress.

Currently, we are experiencing the results of policies that inhibited production,

raised costs and imposed price controls on energy. Our situation is felt in rolling

blackouts, higher utility bills, higher gasoline prices and concern over our country’s future energy supply. And, we find ourselves 56% dependent upon foreign produced

oil. The President’s Energy Policy is intended to address these very issues.

In a report containing over 100 recommendations, the National Energy Policy emphasizes basic economics, and production of energy on our own soil to a much greater extent than we have seen over the past several years. In order to accomplish this,

we need to directly address issues of expedited permitting processes, infrastructure

development, and exploration of regions known to contain energy resources.

It is my hope that together we can approach this situation with a strong effort

for reform that will bring us closer to a self-sufficient energy supply. I look forward

to hearing more about how the Committee can work towards accomplishing the

President’s goals during this Congress.

[The response from Secretary Norton to questions submitted for

the record follow:]

FOLLOW-UP QUESTIONS AND ANSWERS FOR SECRETARY NORTON FROM THE JUNE 6, 2001

HEARING BEFORE THE HOUSE RESOURCES COMMITTEE ON THE NATIONAL ENERGY

POLICY

(HANSEN) Energy and Minerals

Question 1a: Does the Interior Department have an estimate as to how much oil

and gas production is presently not accessible due to restricted land management

uses or designation such as wilderness study areas, national monuments?

Answer: General information is available for National Monuments and Wilderness

Study Areas regarding oil and gas potential. The probability of oil and gas developVerDate 11-MAY-2000 13:13 Aug 24, 2001 Jkt 000000 PO 00000 Frm 00216 Fmt 6601 Sfmt 6621 J:\DOCS\70888.TXT HRESOUR2 PsN: HRESOUR2
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ment within these sites is generally low based upon preliminary geologic data, Bureau of Land Management (BLM) planning and known industry records (including

proprietary data). One notable exception to this is Canyons of the Ancients National

Monument in Colorado which is currently 85% leased for oil and gas and is subject

to valid existing rights and further leasing in particular circumstances, as provided

by Proclamation. In other areas, there is limited overlap of industry identified oil

and gas reserves with National Monuments and Wilderness Study Areas. The Department of Energy report in June of this year that analysts studying Federal lands

in the Greater Green River Basin of Wyoming and Colorado found that nearly 68%

of the area’s technically recoverable gas is either closed to development or under significant access restrictions. However, the total volume of the reserves is not proven

at this time and BLM is working closely with the USGS to obtain more detailed

information about the potential for undiscovered oil and gas reserves within these

areas. Question 1b: How have permitting delays for drilling and construction of transportation facilities, such as pipelines and transmission lines across public land impacted our ability to develop energy resources on public lands?

Answer: Permitting delays result in slowing the efforts to bring on-line energy development in a timely manner.

The BLM is responding to this concern regarding our national need for increased

energy and mineral production from our Federal lands in an environmentally responsible manner through several initiatives. One key element is the study required

in Section 604 of the Energy and Policy Conservation Act (EPCA) of 2000. The

EPCA study will identify and inventory impediments and restrictions to oil and gas

resources. We will also study ways to ensure that the permitting of drilling and construction of transportation facilities and other right-of-ways for oil and gas are made

available in a timely and expedited manner as allowed by budgetary resources.

Question 2: Do you believe that you as Secretary of Interior have the authority

to acquire seismic data in areas which are designated off-limits to oil development

through annual appropriations riders or an executive order?

Answer: In moratoria language appearing in the Fiscal Year 1992 House Report,

accompanying the Fiscal Year 1992 Interior Appropriations, restrictions on

preleasing activities did not preclude environmental, geologic, geophysical, economic,

engineering, or other scientific analyses, studies, or evaluations. These studies are

not considered a part of the EIS or the formal sale process. While the current moratoria language is silent on these interpretations, this language has not been revised

or reinterpreted in subsequent appropriation bills.

Question 3: In light of highly publicized natural gas shortages and high market

prices, what specific actions does Interior plan to take to speed up the permitting

process, particularly in areas where excess pipeline capacity is available to carry

natural gas into gas-short areas like California or the Midwest?

Answer: Permitting for energy-related projects is often a lengthy multi-agency

process. The President has issued an executive order directing Federal agencies to

expedite the review of permits and other Federal actions necessary to accelerate the

completion of energy-related project approvals on a national basis. The Department

of the Interior is well on its way to developing our energy implementation plan. Specific actions to expedite permitting will be contained in that plan. The BLM is addressing permitting through several initiatives, including revising key land use

plans for current development scenarios; streamlining the processes for timely approvals for oil and gas development such as ESA Section 7 consultation with Fish

and Wildlife Service, National Marine Fisheries Service, and cultural resources

clearances; and improving coordination among affected parties by the use of information meetings and forums such as the National Petroleum Forum and Federal

Leadership Forum. In addition to permitting, the Bureau must also address the

monitoring and compliance of existing and new operations. Finally, pipeline carrying

capacity is not a responsibility of the Department of the Interior, but we will work

with FERC to expedite Right–Of–Way approval to facilitate this process.

Question 4: Does BLM have any national guidelines on how regional managers

should handle prospective energy resource lands in the area planning process or is

that left to the individual’s discretion? Is it time to re-examine these guidelines in

light of energy shortages?

Answer: The BLM does have existing national Supplemental Program Guidance

for oil and gas leasing and planning. This guidance is in the process of being reviewed in light of the National Energy Policy.

Question 5: What is the current status of the implementation of the Energy Policy

and Conservation Act, Sec. 604 study on impediments to oil and gas exploration and

development? How will the Department use the study in increasing access to oil and

gas resources?

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Answer: Since the reauthorization of the Energy Policy and Conservation Act

(EPCA) (P.L.106–469) on November 9, 2000, the Department of the Interior is proceeding expeditiously in its efforts to complete the assessment of restrictions and

impediments to oil and natural gas development underlying Federal land. To expedite the process, the Secretary designated the BLM as the lead agency to coordinate

the assessment. Working cooperatively as an inter-agency team, the BLM, USGS,

USFS, and DOE completed identifying current studies and ongoing efforts, establishing agency’s responsibilities and identifying the overall approach to the analysis.

Currently, the study is focusing on five priority areas within the Rocky Mountain

Region based on industry interest, resource potential, reserve ranking and an oil

and gas needs analysis. The analysis for these basins is expected to be provided to

the House and Senate energy and resource Committees within the required twoyear time frame.

As the information from the assessment is received, the BLM and USFS will review the findings, assess the restrictions and impediments effects on the availability

of oil and gas resources for future development, and consider modifications, as necessary, to increase access to oil and natural gas resources.

Question 6: Can you give us an idea regarding the budget requirements for the

Department to conduct this work? What level of detail will this assessment take if

new funds are not sought in the current fiscal year? Will a reprogramming request

be sent to the appropriators to get this job funded?

Answer: Implementation of Section 604 of the Energy Policy and Conservation Act

Amendments of 2000 affects Interior’s Bureau of Land Management and the U.S.

Geological Survey, as well as the U.S. Forest Service and the Department of Energy.

Section 604 requires these agencies to identify and evaluate the extent of oil and

gas resources and reserves on public lands, and evaluate impediments and restrictions to access and development of these resources. These evaluations are to be completed by the end of 2002.

In the 2002 President’s Budget, $3.0 million is requested in the BLM budget for

the work of all four agencies. Since oil and gas assessments are performed by geological basin, and since it would not be possible to perform these analyses on all

basins in the U.S. within the time provided, the agencies are in the process of discussing the basins of greatest interest with the authorizing Committees. Currently,

the four agencies will be able to fulfill the requirements of EPCA by the end of 2002

for five study areas in the Rocky Mountains with the largest estimates of oil and

gas resources and significant Federal land ownership. These study areas include

Montana Thrust Belt in Montana, the San Juan and Paradox Basins in Colorado

and New Mexico, the Unita/Piceance Basin in Colorado and Utah, the Greater

Green River Basin in Wyoming and Colorado, and the Powder River Basin in Wyoming and Montana.

Because the requested funding is sufficient to complete work in these five basins,

the Department does not anticipate that a reprogramming request will be necessary

to meet the requirements of the provision by the end of 2002.

Question 7: BLM is implementing a major planning effort that concentrates on

updating and completing land use management and activity plans. Has BLM set energy resource areas as their highest priority?

Answer: The BLM fully supports the goals and measures outlined in the President’s Energy Policy and is taking the necessary measures to achieve them. This

includes adjusting the priority and schedules of land use planning activities. Management of energy resources was a key factor used to identify planning projects included in the Fiscal Year 2001 and 2002 President’s budget requests. The BLM has

recently undertaken efforts to expeditiously identify and complete high-priority energy related plans. The BLM currently is in the process of identifying 5 - 10 timesensitive plans where we will take appropriate measures to ensure their timely completion. These measures will include, as needed, the use of policy and technical support teams, additional training, enhanced contracting procedures, and the re-allocation of funding.

Question 8: Will BLM be exploring new approaches to the planning process to assure that management plans not only remain current but also address the energy

potential of each resource area?

Answer: In November 2000, the BLM issued a revised land use planning manual

and handbook to more clearly outline planning and decision making requirements,

including those for mineral and energy development. This manual and handbook includes specific guidance on updating land use plans to ensure they address energy

and mineral development. This guidance also includes direction for addressing new

information and circumstances to ensure that land use plans remain current. This

guidance identifies factors to consider when making a determination of whether

plan revisions or amendments are necessary, such as the identification of new inforVerDate 11-MAY-2000 13:13 Aug 24, 2001 Jkt 000000 PO 00000 Frm 00218 Fmt 6601 Sfmt 6621 J:\DOCS\70888.TXT HRESOUR2 PsN: HRESOUR2
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mation or changes in anticipated impacts. We are currently revising our Planning

for Fluid Mineral Leasing Handbook to ensure it provides up-to-date guidance for

energy development, including procedures to address energy potential for each resource area. We plan on expanding this handbook to address other energy sources

as well. This handbook will also provide guidance for addressing information generated through the assessment of oil and gas resources which is being conducted

under provisions of the Energy Policy and Conservation Act of 2000.

The BLM is currently exploring opportunities to modify the land use planning

regulations so that they more closely align with the Council for Environmental

Quality’s regulations for implementing the National Environmental Policy Act.

These modifications will reduce some of the confusion that exists between the procedural requirements for land use planning and the procedural requirements for completing environmental analyses. The anticipated changes will also allow land use

plans to be completed in less time.

Question 9: Are any bottlenecks in the oil and gas leasing and permitting process

caused by conflicting requirements in different laws? If so, what legislation is required to resolve these conflicts?

Answer: As part of the President’’ National Energy Policy, we will be examining

whether there are any such bottlenecks and how best to resolve them.

Question 10: In many offices the BLM has significant Application for a Permit to

Drill backlogs, even though states are also involved in issuing drilling permits on

state and private land in the same areas. Would it be feasible for BLM to contract

some of the APD backlog to the appropriate state agency or rely on outside parties

to conduct much of the work?

Answer: Most Application for a Permit to Drill (APD) backlogs are due to NEPA

and planning requirements and the consultations and reviews, required by several

statutes, that are conducted in conjunction with the environmental analysis required by NEPA. Most of the large-scale EISs are already contracted out to private

contractors. Decision making on individual APD approvals is a Federal function

which is not susceptible to contracting out. However, BLM is considering possible

additional uses of contractors for the analytical processes involved prior to decision

making.

Question 11: The National Resources Defense Council said in a report to this

Committee that it is not necessary to drill in offshore Alaska, the eastern Gulf of

Mexico, and other OCS areas where drilling moratoria are in place because 70 percent of the country’s estimated undiscovered, economically recoverable oil and gas

is located outside of these areas. Can you respond to this statement?

Answer: It is true that the estimated undiscovered economic resources of the moratoria areas represent less than a third of the estimate for the total OCS. The current reserves and resource estimates are concentrated in the Central and Western

Gulf. Large portions of these areas are mature and natural gas production on the

shelf has been in decline since 1997. Resources in moratoria areas could have a significant effect on the Nations energy future. Since these areas are comparatively

under-explored, less certainty exists about the resource estimates. There is also relatively greater up-side potential since the comparative lack of exploration in these

areas also means that the larger fields in the field size distributions remain undiscovered. It is these larger fields that normally produce resources more efficiently

with less environmental impact since less infrastructure is required to produce a

given resource level than from more numerous but smaller fields.

Question 12: In the Powder River Basin there has been a de facto moratorium

on Federal gas drilling because of the threat of a lawsuit over the inadequacy of

the current land use plan to contemplate CBM development of this magnitude.

What is being done to resolve this impasse in a timely fashion?

Answer: An environmental assessment for approving up to 2,500 CBM drainage

protection wells was completed in March of this year and Wyoming BLM is actively

approving CBM wells in its portion of the Powder River Basin (PRB). In addition,

a new EIS for permitting CBM wells in the Wyoming PRB is scheduled for completion in mid–2002. This document will allow for the permitting of up to 50,000 CBM

wells. In Montana, BLM is doing a joint EIS with the State of Montana for CBM

wells in its portion of the Basin. The Montana EIS is scheduled for completion in

late 2002.

Question 13: The Wyoming Oil and Gas Conservation Commission continues to

approve coal bed methane drilling permits in the Powder River Basin. During the

last 12 months they have approved about 6400 permits, which included about 1500

on Federal lands. This seems to be a duplication of efforts. Is it necessary for BLM

to also approve drilling permits?

Answer: Under current law, BLM has the responsibility to coordinate and manage

all resources on Federal lands and to comply with a number of other environmental

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laws (such as the National Historic Preservation Act, Endangered Species Act,

FLPMA, NEPA, etc.). These are not requirements in the State of Wyoming. Consequently, the State permitting process is vastly different.

Question 14: The imbalance in drilling permit approvals indicates that Federal

gas resources are being drained by non Federal wells. BLM has received about $3.5

million in supplemental appropriations during the last three years for coal bed

methane in the Powder River Basin. What is the current backlog in the approval

of CBM drilling permits and when will the backlog be eliminated?

Answer: The current backlog for CBM drainage permits is 1,400 wells. Since the

drainage Environmental Assessment was completed in March 2001. Wyoming BLM

has approved approximately 550 CBM drainage wells. The remaining backlog

should be processed by end of year. Additionally, there are approximately 1,600 nondrainage CBM permits pending. These will not be processed until the 50,000 well

EIS is completed in 2002 at which time thousands of additional drilling permit submissions are anticipated. Ultimately, the Wyoming Office plans to permit more than

2,500 CBM wells a year once the environmental documents are completed and additional staff are hired.

Question 15: This Committee has heard complaints about EIS delays in Wyoming’s Jack Morrow Hills Resource Area and at the Vernal District Office in northeastern Utah? What is the cause of these delays and when may we expect this process to be completed?

Answer: The Jack Morrow Hills Coordinated Activity Plan is in the process of

being revised by the BLM in Wyoming. The BLM has received approximately 12,000

public comments on the plan. Since we must still analyze all the comments, we cannot provide a completion date at this time. In northeastern Utah, the Vernal Field

Office is preparing an EIS for conventional gas well drilling. The project was first

analyzed in an Environmental Assessment (EA) but due to public input, an EIS was

initiated. The BLM plans to complete the EIS in the summer of 2001.

ANWR

Question 16: In your testimony, you say the mean estimate of recoverable oil

under the coastal plain of ANWR is 10.4 billion barrels. Environmentalists say the

Geological Survey’s most ‘‘optimistic’’ estimate is only 3.5 billion barrels or less.

There seems to be a difference of opinion. Can you clarify the Geological Survey’s

estimate of oil? What is estimate of ‘‘in-place’’ oil resources under the coastal plain,

including Native and State lands?

Answer: The USGS Petroleum Assessment of the 1002 Area of the Arctic National

Wildlife Refuge is reported in three categories: in-place, technically recoverable, and

economically recoverable resources. For each category, they report a range of values

from lowest and most conservative (at the 95% confidence level) to highest, but unlikely (at the 5% confidence level). Also, they report the mean, or the expected value.

Also, the USGS estimates are reported geographically for the 1002 Area alone

(both deformed and undeformed areas), and the entire assessment area, which includes the 1002 Area, the State waters, and the Native lands. This assessment did

not assess state lands. Given the many categories and ranges of values, it is not

surprising that quotes of assessment results might appear to be in conflict.

The best way to clarify the Geological Survey’s estimate of oil resources is to

present the results in the table below, with categories labeled. The results of the

economic analysis are given for oil at $24 a barrel, which is just an example. If the

price of oil were to increase, the resource estimate would increase as well. Tables

within the Assessment report include volume estimates for economically recoverable

oil for a range of prices for oil.

The USGS mean estimate for ‘‘in-place’’ oil under the coastal plain, including Native lands and State waters (not lands) is 27.78 billion barrels. The full range reported is from 15.58 bbo (at the 95% confidence level) to 42.32 bbo (at the 5% confidence level).

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Question 17: The industry on Alaska’s North Slope has increased its success rate

in recovering oil the last 20 years. Is it possible that the estimated amount of recoverable oil in ANWR could increase, too, if further technological advances are made?

Answer: The technically recoverable resource volumes reported in the USGS Petroleum assessment of the 1002 Area of ANWR were estimated by applying recovery

rates, that are typical for current North Slope fields, to in-place resource estimates.

Therefore, it would be reasonable to say that technically recoverable resource estimates might increase if recovery rates increased, if all other information remained

the same.

Question 18: Have the caribou arrived in the coastal plain of ANWR this year?

What time did they arrive last year?

Answer: Not as of June 15. This year an unusually late spring, coupled with exceptionally deep snow persisting along the spring migration route in Canada, has

delayed the Porcupine herd from reaching the coastal plain of the Arctic National

Wildlife Refuge. Since the herd calves in early June, we assume they calved on the

north slope of the Yukon Territory and upland migration routes east of Old Crow

Flats. This is very similar to the pattern observed in 2000, also a late- spring deepsnow year.

Under a similar pattern in 2000, initial birth rate was lower than average (71%

v 80%), and survival of calves to 1 July was also lower than average (63% vs 88%).

Data for 2001 are not yet available. Given the late spring, this summer’s census will

be particularly important. An inter-agency team will attempt to conduct a herd census beginning around 25 June.

Last summer, caribou of the Porcupine herd began arriving on the refuge coastal

plain around 15 June 2000 after calving primarily in Canada. Major movements

from the calving grounds in Canada arrived during the period of 20–25 June 2000.

Question 19: What has been the effect of oil development on wildlife in and near

Prudhoe Bay? Has the oil development caused any wildlife to become endangered

or caused species to be listed due to development?

Answer: The potential impacts of oil field development on wildlife near Prudhoe

Bay and across the Arctic Coastal Plain of Alaska can be broadly classified to include: loss of habitat due to gravel fill; avoidance or displacement from preferred

habitats; disturbance; changes in hydrology and vegetation near infrastructure; distribution and abundance of predators and scavengers; contaminants; and the chance

of a significant onshore or offshore oil spill. Knowledge of the potential effects of oil

development on wildlife in the Prudhoe Bay area is constrained by the lack of quantitative pre-development data, particularly for migratory waterbirds (e.g., waterfowl,

shorebirds), predators (e.g., foxes, brown bears), and scavengers (e.g., gulls). In 1999,

oil production facilities extended approximately 80 miles across the Arctic Coastal

Plain (Alpine to Badami) with more than 362 miles of roads, 11 square miles of land

developed for drill pads and processing facilities, 1,130 miles of pipelines and 15

gravel mines totaling approximately 2.5 square mile. The direct loss of wetland

habitats as the result of gravel fill and indirect impacts (e.g., disturbance, avoidance,

potential changes in hydrology and vegetation) of oil development on the distribution, breeding density and productivity of migratory birds are unknown. Although

many species of migratory birds occur, nest and raise broods in or near oil field infrastructure, some species have been shown to avoid infield facilities.

Although adequate data have not been collected, arctic foxes near Prudhoe Bay

may produce more young and live longer due to the availability of a supplemental

food source (garbage) and den sites (buildings, equipment). The potential impacts of

increased numbers and survival of arctic foxes on ground nesting birds, including

threatened species, are unknown. Similarly, the occurrence, density and productivity

of brown bears and gulls have likely increased as the result of the Prudhoe Bay

landfill. Ravens did not occur in the Prudhoe Bay area until the development of infrastructure which provided nesting structures and anthropogenic food sources.

Relative to caribou, the Central Arctic herd has two distinct calving areas. From

1980–87, the western-most portion of the herd that calved near Prudhoe Bay shifted

its location of concentrated calving away from oil field infrastructure. Since 1987,

the concentrated calving has remained south and outside of the oil field in an area

of poorer quality forage. Yet despite this shift, from 1978 to 2000, the Central Arctic

herd increased from 5,000 to its current population of about 27,000 individuals.

The two threatened migratory birds which occur in the Prudhoe Bay area during

summer are spectacled eiders and the Alaska breeding population of Steller’s eiders.

Causes of the declines of both species are not well understood but factors include

lead shot poisoning; increased predation by ravens, large gulls and foxes on breeding

grounds in areas where predators may be enhanced by year-round food and shelter

due to human activities; and degradation of winter habitat. The development of the

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Prudhoe Bay area, in itself, has not resulted in any species becoming endangered

or being listed under the Endangered Species Act.

Question 20: You’ve been to the North Slope of Alaska. How would you compare

the environmental track record of oil development there with that of similar industrial development in other areas you’ve toured?

Answer: Yes, I have visited the North Slope of Alaska. I find the environmental

record of the industry in Alaska, under state and Federal regulation and supervision, to be good. In addition, I believe all efforts are being made to improve the

oil industry’s environmental record. My experience in other states is similar to what

I saw in the North Slope in that the industry continues to refine environmentally

sound ways to produce.

Question 21: How much Federal land in Alaska has Congress set aside in Wildlife

Refuges, Parks, Monuments, Wilderness Areas, and Wild and Scenic Rivers? Was

the coastal plain of ANWR ever designated a wilderness area?

Answer: 77.0 million acres in Alaska are set aside in Wildlife Refuges of which

18.7 million acres are Wilderness. There are approximately 5.2 million acres of National Park Service Land in Alaska of which approximately 33 million acres are Wilderness and .72 million acres are Monuments. The Bureau of Land Management

has .6 million acres (952 miles on 6 rivers) of Wild and Scenic River Land and .78

million acres of Wilderness Study Areas in Alaska. The coastal plain of the Alaska

National Wildlife Refuge has never been designated as a wilderness area.

Water and Power

Question 22: In 1996, Former Secretary Babbitt signed a Record of Decision regarding the operations of Glen Canyon Dam that reduced the peaking power capacity of the dam by one third. Obviously this has had significant impact on municipalities across the west. What are the Administration’s plans to evaluate and improve

this situation? What suggestions do you have as to what action could be taken to

increase the power capacity of Glen Canyon Dam?

Answer: The 1996 Record of Decision(ROD) on the Operation of Glen Canyon Dam

EIS placed restrictions on the power plant releases from the dam, but also put in

place an Adaptive Management Program to monitor the effects of these restrictions.

Annual monitoring and research activities are currently being conducted to evaluate

the effectiveness of the ROD in meeting the intent of the EIS preferred alternative

and the Grand Canyon Protection Act of 1992. Results from this long term effort

will address whether the constraints are achieving the desired effect. Recommendations to the Secretary from this Adaptive Management Program could lead to

changes.

Increasing the power capacity of the dam depends not only on these constraints,

but also on the availability of water for release for generating electricity. Release

volumes are bound by treaty, compact and statute, and we have no authority to release water in excess of these requirements. Drought conditions in the Southwest

thus constrains our ability to meet municipalities’ electrical demand from hydropower facilities.

The ROD contains a provision for deviation from EIS constraints under emergency conditions, and this provision has been used 7 times in the last year to temporarily increase on-peak releases to assist power users. However, there are no provisions for deviation from the ROD constraints for financial reasons. Since there can

be no increase in annual water deliveries from the dam, any additional releases for

emergency purposes must be offset by lower releases later in the water year. Therefore, permanent increases in generating capacity could only occur by relaxing the

daily fluctuation constraints of the EIS, a proposal which would be expected to have

adverse impacts to most of the downstream resources in the Grand Canyon.

Question 23: What role will Departmental agencies take in regards to mandatory

conditions for FERC relicensing?

Answer: Interior bureaus are responsible for establishing hydropower license conditions as they relate to the protection and adequate utilization of Indian and public

lands, and as they relate to fishways. Interior has committed to developing preliminary conditions within 60 days after FERC determines that the license application

is ready for analysis, and final conditions within 60 days of the close of the draft

NEPA comment period. We are looking for other ways to streamline the process and

will be examining whether or not an appeals process would be appropriate. We will

also be re-examining our definition of ‘‘fish’’ and ‘‘fishway.—

Question 24: As you know, hydropower is one of the cleanest sources of energy

available, yet like all other forms of energy production, dams require a source of

fuel—water. With much of the west in drought conditions, what is the Department

doing to assure maximum power production, within the limits of water availability

and water service contracts, throughout the 17 western Reclamation states?

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Answer: Through the 1980’s and 1990’s, Reclamation has had an aggressive program to update and uprate existing units. Reclamation presently has programs underway to increase capacity and energy at many facilities including new runners at

Grand Coulee (400 MW) and Shasta (51 MW) and uprating Davis (11 MW). In addition, Reclamation continues to implement life extension programs to revitalize performance and to reduce/eliminate expensive failures.

Reclamation has been changing pumping operations to provide additional power

during peak hours. As an example, Grand Coulee pumping for irrigation of the Columbia Basin Project has been shifted as much as possible to non-peak hours. This

can remove up to 300 megawatts from the peak hours and add up to 600 megawatts

of load to non-peak. The off-peak pumping also reduces spill on other Columbia

River hydro plants by increasing off-peak loads during high water release periods

when water might otherwise bypass the generating units.

In operations, Reclamation is working with BPA on powerplant optimization and

other operational improvements which would improve powerplant operations. As an

example, at Hungry Horse, Reclamation is reviewing different unit configurations

for power generation to maintain the minimum water releases this year and increase power generation.

Region powerplants have coordinated closely with the PMAs on a daily basis and

regular scheduled weekly conference calls to ensure that units are scheduled out at

the most opportune time. This has resulted in frequent changes to outage schedules

and occasionally expedited return to service should system emergencies arise. Many

units such as those at Grand Coulee units are also used for reserves (both standby

and spinning) in addition to generation requirements.

Conservation efforts Reclamation is making include signed agreements with BPA

for energy conservation audits at Reclamation Power facilities. Presently, the Hungry Horse audits have been completed. The recommend retrofits in lighting, HVAC,

and other systems will save energy that will be available for BPA to market.

In the Upper Colorado Region, the project operators for pumping plants are the

water districts. The water districts have entered into power contracts with the

Western Area Power Administration (Western) and Reclamation. A requirement in

the power contract is to have an energy conservation plan. This plan includes such

items as using energy efficient equipment and operating at times to best use the

water and power.

Question 25: What is the Administration’s position regarding the Path 15 transmission issue in Northern California?

Answer: The Department and the BLM support designation of the Western Area

Power Administration (WAPA, a Department of Energy agency) as the lead Federal

agency for this issue. It is not known at this time whether public lands will be involved in the proposed upgrade/expansion of the Path 15 transmission line. In

March 2001, WAPA hosted a meeting in Sacramento, California of Federal and

State agencies and other organizations that would be involved in the permitting of

the upgrading of Path 15. Various discussions of how to streamline and coordinate

the Federal National Environmental Protection Act and the State California Environmental Quality Act reviews that would be required were raised at that meeting,

and the goal of producing a joint Environmental Impact Statement/Environment Impact Report. This coordination should continue under WAPA’s lead and BLM will

provide whatever support is needed.

Question 26: What steps is the Department taking in determining new Federal

water resource projects that could potentially provide power generation? Is the Department of the Interior undertaking any studies that will increase the amount of

water storage, while at the same time providing potential power generation?

Answer: At present the Department has no completely new water resource

projects under consideration that would provide new power generation. The Department has however been studying modifications to existing projects that would substantially increase power output of existing facilities or increase the power that

could be provided during peak load periods. One of the most promising opportunities

is our program to evaluate the replacement of aging water turbine runners of existing units to substantially increase energy output with no additional water through

the units. We are beginning to develop criteria to evaluate the best opportunities.

Once identified, further evaluation of these opportunities will be conducted as funding permits.

Studies that are presently underway include the following:

1) Hungry Horse units have already been uprated with the intention of installing

a small re-regulating reservoir 3 miles below Hungry Horse Dam. The downstream

flows could be improved (fluctuations decreased) for fishery and environmental quality purposes. As a result of the new Biological Opinion for Bull Trout Reclamation

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has been requested to reexamine the addition of a re-regulation reservoir below

Hungry Horse Dam.

2) Looking at increasing capacity at Folsom Powerplant.

3) Reclamation is working with BPA to rebuild the 2.5 MW Boise Diversion Dam

Powerplant, which is presently mothballed.

4) Increasing the water storage at Keswick reservoir by the addition of

flashboards to the existing gates and looking at doing environmental cleanup upstream of the reservoir to allow greater reservoir operating flexibility. This will substantially increase peaking from Shasta powerplant.

5) Looking at an additional 10MW generation at Black Canyon.

6) Looking at increasing capacity at Keswick Powerplant.

7) Looking at increasing output at Shasta with the proposed raising of the dam.

8) Negotiating the replacement of the aging 0.3 MW Lewiston Powerplant with

a 1.5 MW facility.

Other programs are underway to evaluate the economic viability of rewinding and

upgrading of older generating units to increase the energy and power output of existing units.

Forest and Forest Health

Question 27: Significant energy resources may be ‘‘locked up’’ by the Forest Service’s Roadless Rule and transportation policy. Since, the subsurface resources in

these areas are actually managed by the BLM, will Interior work with the Forest

Service to identify these resources and modify the rule so that they remain open

for development? Can you suggest any actions that Congress should take to resolve

this problem?

Answer: a) The BLM, in cooperation with the USGS, the Department of Energy,

and the Forest Service is conducting the EPCA study to more clearly identify these

resources and the impediments to accessing them. On July 10, 2001, the Forest

Service published an Advanced Notice of proposed Rulemaking (66 Fed. Reg. 35918)

that gives the public the opportunity to comment on key issues that have been

raised regarding the protection of roadless areas. These comments will help the

USDA determine the next steps in addressing the long-term protection and management of roadless values within the National Forest System. For a discussion of the

relative responsibilities of the Forest Service and BLM regarding subsurface mineral management, see pages 3–250 to 3–261 of the roadless rule FEIS.

b) We do not have any suggestions for Congressional action at this time.

Question 28: The Federal lands currently contain millions of acres of forest lands

at high risk of catastrophic fire, due largely to many decades of successful fire suppression. The National Fire Plan has set objectives for both the National Forests

and the Department of the Interior to reduce the fire risk where it is greatest. With

millions of acres needing treatment each year, would you support a policy encouraging the use of woody material, such as a small tree thinnings and brush, for biomass energy production?

Answer: Yes. Utilization of biomass for energy production is consistent with a National Energy Policy objective to increase America’s use of renewable and alternative

energy sources. Biomass utilization is also consistent with the goals and objectives

of the National Fire Plan to reduce accumulations of woody material that create a

fire hazard, threatening communities and forests and rangelands. Markets for small

woody material are currently limited but there are opportunities to utilize these byproducts of resource restoration treatments for heat, steam, electric energy generation, and transportation fuels. Firewood, wood-stove pellets and hog fuel; cofiring

and biogasification; and small modular power systems and transportation fuels are

examples of existing or emerging technologies.

Question 29: How many acres of such lands are estimated to need treatment on

Interior lands, by agency, under the National Fire Plan? Could you describe your

plans for accomplishing the fire plan goals?

Answer: For Fiscal Year 2001, it is estimated that 1.383 million acres managed

by the Department of the Interior are at high risk from catastrophic fire and need

to be treated. Plans for accomplishing this goal include treating an estimated

123,000 acres by mechanical means such as thinning, 1,040,000 acres by prescribed

burning, 87,000 acres by combination of mechanical and prescribed treatments and

roughly 233,000 acres by a combination of multiple treatments. We plan to treat an

estimated 296,000 acres of land administered by the National Park Service, 495,000

acres of land administered by the Fish and Wildlife Service, 172,000 acres administered by the Bureau of Indian Affairs, and 420,000 acres administered by the Bureau of Land Management.

The Department of the Interior may not achieve the estimated treatment acreage

with prescribed fire due to regional drought conditions resulting in restrictions on

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use of prescribed fire in the Southeast, Pacific Northwest, and Northern Rockies. A

severe fire season may also hamper fuels treatment efforts as many of the personnel

involved in fire suppression are also responsible for project planning and implementation.

Tribal Energy Issues

Question 30: How does the Presidents Energy Policy ensure that Tribal lands will

be included in any new interstate or national grid plans?

Answer: This is a matter that would need to be dealt with by the Federal Energy

Regulatory Commission.

Question 31: Will the Administration provide tax incentives for development and

production of Tribal oil, coal, natural gas to enable tribes to be competitive with

other domestic and foreign product?

Answer: There are no current proposals to do so.

Question 32: Will the Administration support double tax credit for the development of renewable resources on Tribal lands?

Answer: The Department will work with the Administration in formulating a policy following consultation with Tribes and other Federal Agencies involved.

Question 33: Will the Administration support granting FERC regulating authority

to establish national interconnection requirements?

Answer: The Department recognizes that interconnection is a problem, particularly for small utilities, including those on Tribal lands. The Department welcomes

proposals offering an appropriate set of national standards.

Question 34: Does the Administration have provisions to affirmatively clarify the

authority of Tribal governments to control the siting and regulation of generation,

transmission facilities and rate-making authority on Tribal lands?

Answer: The decision to develop energy resources on Indian lands is entirely at

the discretion of the Indian mineral owner(s) and, as noted, any actions by the Federal Government that could affect those resources must be accomplished through

consultation.

CZMA

Question 35: Section 307(b)(3)(B) of the Coastal Zone Management Act gives the

Secretary of Commerce the authority to determine what data states may request to

review in addition to the information provided under the plans required by the

OCSLA. Since the Secretary of Interior has the expertise to determine if any additional data is needed, or if states are merely engaging in dilatory tactics, would the

Administration support giving the Section 307(b)(3)(B) authority to the Secretary of

the Interior?

Answer: The correct citation is 307(c)(3)(B). Under the Administration’s National

Energy Policy Report, the Departments of the Interior and Commerce are tasked

with re-examining the current Federal legal and policy regime to determine whether

changes associated with OCS activities are needed. The procedures for determining

what additional information states may request for their consistency reviews should

be part of that review. The Administration will support a process that ensures

States have adequate relevant information for their consistency reviews while providing operators with a predictable and reasonable decision making process for their

proposed activities. Through the joint review, we will be able to identify any legal/

policy areas requiring modification and will develop possible solutions to implement

any identified changes.

(DEMOCRATIC QUESTIONS)

Question 36: According to the Denver Post, on March 15, President Bush was

quoted as saying that there was room in some national monuments for drilling rigs.

He said, according to the Post, that the Bush Administration will look at ‘‘all public

lands’’ for new sources of energy. Do you support oil and gas drilling in National

Monuments?

Answer: For the most part, potential for O&G development in National Monuments is low. However, if the required EPCA study should identify an area in a National Monument that restricts O&G development with a higher potential, we would

carefully assess these findings. It should be noted that some monuments are already

accessible, under valid existing rights, for oil and gas development.

Question 37: In that same Denver Post article, President Bush is also quoted as

saying that concerning whether or not to allow energy development in national

monuments, ‘‘It all depends upon the cost-benefit ratio.’’ Is that the criteria you will

use to determine energy development in national monuments?

Answer: Careful evaluation of the relationship between the oil and gas potential

and resources being protected would occur on a site specific, case-by-case basis. It

221

should be noted that some monuments are already accessible for oil and gas development.

Question 38: You have stated your intention to open some of the new National

Monuments (those created by President Clinton) to energy exploration and development—apparently by adjusting the boundaries. Will you attempt to make such

changes administratively or will you seek legislation to accomplish this?

Answer: I have not indicated an intention to open Monuments to energy exploration and development. On March 28, 2001, letters were sent to elected officials

requesting their (and their constituents) ideas about Monuments. Responses to

those letters will be collected and analyzed and determinations will be made as to

changes that should be made.

Question 39: According to press reports, you have sent invitations to certain elected officials seeking their ideas on National Monument boundary adjustments, existing uses that should be accommodated, vehicle use, rights-of-way, grazing, water

rights, and ‘‘other traditional multiple uses . . .’’ What process do you intend to use

in making decisions regarding oil and gas development and these other ‘‘uses in our

national monuments?

Answer: On March 28, 2001, letters were sent to elected officials requesting their

(and their constituents) ideas into how they would like to see their National Monuments managed and for what uses. Responses to those letters will be collected and

analyzed and determinations will be made as to changes that are recommended. In

general, changes to the National Monument proclamations would require legislation.

All other land use issues will be addressed in the Land Use Plans being prepared

for each area.

Question 40: Is it your intention that the BLM land use planning process be used

to consider changes in National Monument boundaries, proposals for energy development, mining proposals, and other uses, such as off-road vehicles? Will you commit to consider proposed changes to monument boundaries or proposed uses within

the new Monuments only after BLM has considered such changes during the development of a land use plan for each Monument? (i.e., assuring public review and

comment).

Answer: I have demonstrated my commitment to the public involvement process

by the letters sent March 28th asking for input into the land uses in National

Monuments and by placing a priority for funding the Land Use Plans currently underway.

Question 41: Which Monuments do you believe should be altered?

Answer: Once the responses from the March 28th letters are in and completely

analyzed, decisions and recommendations will be made on whether changes will be

made.

Question 42: Have you or your staff had discussions with Members of Congress

regarding proposed alterations to the new Monuments? If so, which Monuments are

under consideration for changes?

Answer: On March 28, 2001, letters were sent to elected officials including affected Members of Congress requesting their (and their constituents) ideas into how

they would like to see their National Monuments managed and for what uses. Responses to those letters will be collected and analyzed and determinations will be

made as to changes that are recommended.

Question 43: For example, the Associated Press reported on June 5 on a possible

threat to the new Ironwood Forest National Monument from mining. According to

the report, ASARCO, a giant producer of copper and other metals is lobbying you

and other officials to change the boundaries so that mining can take place on what

is now protected monument lands. The article stated that a Congressman Kolbe’s

request, officials from BLM and Pima County, Arizona, toured the ASARCO Silver

Bell mine last week. Representative Kolbe was quoted as saying that he had sent

an aide to the meeting at Chairman Hansen’s and your request. Is this an accurate

report? What are your intentions for this monument?

Answer: We would be willing to consider changes to monuments which resolve difficult and conflicting land use issues while working to protect the resources as intended by the proclamation.

Question 44: Secretary Babbitt made a habit of meeting with members of the public prior to making recommendations on the designation of new national monuments. He held open public forums in communities that would be affected by these

proposals and articulated his intention to recommend national monument designation before doing so. Will you commit to engage the public in an open dialogue before proceeding with any changes-or proposals to change-the new National Monuments?

Answer: Yes, I have already made that commitment through the March 28th letters and am taking the feedback seriously.

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Question 45: In June 2000, then-candidate Bush stated that he did not support

extension of the deepwater royalty relief program in the Gulf of Mexico OCS leasing

program. As you know, that 5-year program expired after allowing oil and gas companies a free ride on paying royalties due on billions of barrels of oil and gas produced from the deepwaters of the Gulf of Mexico. Interestingly, the President’s en- ergy plan takes a different approach, suggesting that the program be reintroduced

to encourage oil and gas development. Given the boom that continues in the Gulf,

why would a royalty holiday be warranted?

Answer: My understanding is that when President Bush stated that he did not

support extending the Deep Water Royalty Relief Act, he was referring to the specific amounts and form of relief embodied in that legislation, which passed in 1995

and expired in 2000. By the year 2000, economic conditions and geologic findings

in the Gulf of Mexico had changed considerably in the five years since passage of

the Act. So, clearly, the provisions in the Act needed to be adjusted or eliminated.

The President’s energy plan provides that the Secretary of the Interior consider

economic incentives for environmentally sound offshore oil and gas development

where warranted by specific circumstances: explore opportunities for royalty reductions, consistent with ensuring a fair return to the public where warranted for enhanced oil and gas recovery; for reduction of risk associated with production in frontier areas or deep gas formations; and for development of small fields that would

otherwise be uneconomic. (NEP p. 5–7) (emphasis added).

Accordingly, royalty relief will provide some insurance that the net proceeds from

production in the future will justify today’s required substantial deepwater investments. In addition, if oil and gas prices are higher than expected and exceed the

price thresholds specified as part of the conditions of royalty relief, producers are

required to pay royalties on production during those time periods even if it otherwise would be royalty-free. Thus, the public’s interest is protected during times

when prices are higher than expected.

Question 46: A May 30th article in a Montana newspaper, The Great Falls Tribune, on oil and gas development Montana and Wyoming, reported that Department

of Interior officials have suggested streamlining decision-making about oil and gas

leases, by removing any say-so of the Forest Service. Under the current system, the

Forest Service decides where oil and gas activities will occur. Do you believe the

BLM should decide where in National Forests energy development should occur?

Answer: We do not recommend changing the current responsibilities of the Forest

Service and the BLM for energy development in National Forests. We will continue

to strive to improve our coordination with the Forest Service and other agencies to

expedite environmentally-sound energy development.

Question 47: The OCS Policy Committee recently recommended to you that the

Department lift the OCS moratoria in at least five places. Specifically, the advisory

group recommended that the Interior Department examine ‘‘the most prospective

areas for natural gas in [places] the industry would like to explore if allowed.’’ The

President’s plan also recommended that the Interior and Commerce departments reexamine laws and regulations restricting offshore exploration.

Answer: The recommendations forwarded to the Secretary of the Interior were

those of the OCS Policy Committee. Neither the Natural Gas Subcommittee report,

nor the OCS Policy Committee recommendations, specified revisiting any particular

moratoria area. The Natural Gas Subcommittee charter stated ‘‘The purpose of this

subcommittee is to independently review and evaluate information on natural gas,

and then to provide an assessment of the contribution the OCS can make to meeting

the short-term and long-term natural gas needs of the U.S. within the framework

of a national energy policy.’’ The report provided resource estimates and potential

for the entire OCS.

On May 24, 2001, the OCS Policy Committee amended the Natural Gas Subcommittee recommendations and adopted a resolution to forward its amended recommendations to the Secretary of the Interior. I received a letter from the Policy

Committee forwarding a resolution to transmit 12 recommendations ‘‘to encourage

increasing natural gas production from the OCS.’’ I plan to take all 12 recommendations under advisement.

Copies of the Policy Committee’s Resolution and Recommendations are attached.

Question 48: On pages 3–8 through 3–9 of the National Energy Policy, there is

a discussion about hydro power and the importance of communities working together to reduce the impacts dams have on fisheries. The report touts the work of

Grant County Public Utility District 2 which installed spillway deflectors on

Wanapum Dam and says Grant County’s work is ‘‘an example of successful collaboration’’ between the National Marine Fisheries Service and the utility. Can you tell

me more about the history of Grant County’s participation in this project? I am advised that the so-called collaboration stems from litigation that the States of WashVerDate 11-MAY-2000 13:13 Aug 24, 2001 Jkt 000000 PO 00000 Frm 00228 Fmt 6601 Sfmt 6621 J:\DOCS\70888.TXT HRESOUR2 PsN: HRESOUR2
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ington and Oregon, National Marine Fisheries Service and Fish and Wildlife Service

brought against Grant County in a suit before the Federal Energy Regulatory Commission.

Answer: The spillway deflectors developed by the Grant County Public Utility District and referred to in the National Energy Report are needed to reduce dissolved

gases in the Columbia River. (Dissolved gases can adversely affect migrating

salmon.) They are being installed by Grant County to improve water quality and

reduce salmon mortality. The U.S. Fish and Wildlife Service is not involved in litigation with Grant County and we are not aware of any litigation regarding the spillway deflectors. However, while the Grant County PUD has not been involved in any

litigation, they still do face exposure to litigation.

The Mid-Columbia River has several Federal Energy Regulatory Commission

(Commission) licensed projects including Priest Rapids, Wanapum, Rock Island,

Rocky Reach, and Wells. Grant County owns and operates the Priest Rapids and

Wanapum Projects. Since the mid–1970s, the State and Federal agencies and the

licensees have been trying to reduce project-related mortality on migrating salmon

and steelhead. These efforts have included installing fish screens, improving upstream passage of adults, spilling water to help juvenile salmon avoid the turbines,

installing spillway deflectors to reduce dissolved gases, and several other measures.

Many of these devices have been installed or are in the approval process.

To approve these devices, the licensee must petition the Commission to amend

their license. In this case, Grant County asked the Commission to change the license for the Wanapum Project because the spillway deflectors are not an authorized part of the project. Under the Commission’s procedures for requesting an

amendment of a license, the licensee must petition the Commission to reopen the

license; must provide substantial evidence to support their position; must outline

the legal and technical basis for their petition; and must provide evidence of consultation with the Federal and State agencies. This process appears, for all practical

purposes, to be litigation. However, it is not litigation, instead it is the normal

quasi- judicial process the Commission uses to make decisions. The same process

is used regardless of whether it is a contested proceeding or all parties agree with

the proposal.

The U.S. Fish and Wildlife Service, NOAA–Fisheries, and the States of Oregon

and Washington are involved in the efforts to improve fish passage on the Mid–Columbia. They are consulting with Grant County and Chelan County, and are aware

of the counties efforts to improve their hydropower projects for the benefit of salmon

and steelhead

(YOUNG)

Question 49: Your testimony describing the productivity of the average oil well on

the North Slope of Alaska in comparison to the average well in the Lower 48 States

was an interesting point that has not been often made. Can you elaborate on the

significance of this issue?

Answer: The point of my remark was that there are significant differences in the

size of the prospects for oil and gas between the North Slope of Alaska and the

lower 48 that should be considered when we think about the expected results of exploration and development in those areas. The North Slope holds the potential to

yield substantial additions to our oil and gas supplies with much less drilling and

much less surface area devoted to petroleum production than in the lower 48.

This situation results from the fact that the geological features that remain to be

explored on the North Slope are much larger than those remaining in the lower 48.

In addition, only large discoveries are economical to develop and produce on the

North Slope. In the lower 48, as illustrated by the data from Wyoming, the targets

for exploration are a larger number of small geological features, each one needing

exploratory wells. Each of the few prospects on which oil or gas are found requires

production wells and equipment and an access road.

In comparison, on the North Slope, the exploration targets are much larger so

that much more oil will be discovered by successful wells. Moreover, the large reservoirs of the North Slope can be produced using numerous wells drilled directionally from the same surface facility. This substantially reduces the extent of the

area occupied by such facilities in relation to the amount of oil produced. Disturbance for roads is also reduced on the North slope by using ice roads.

Comparing the data for Wyoming to a recent discovery in the National Petroleum

Reserve - Alaska (NPR–A) that is typical of the North Slope shows that the area

of surface disturbance per barrel discovered is about 300 times less for the NPR–

A discovery than the average in Wyoming.

The North Slope has about 2200 producing oil wells with an average production

of about 455 barrels of oil per day. On a state-wide basis, Wyoming, the largest oil

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producing state with substantial Federal lands, has 9,121 producing oil wells with

an average production of 19 barrels per day. Existing Alaskan wells produce about

24 times as much oil per well as those in Wyoming. At this rate, it would take about

219,000 wells to produce as much oil in Wyoming as is produced on the North

Slope—if there was that much oil available.

These statistics illustrate the high potential for discovery of oil on the North Slope

and they support my point that we should consider the fact that those will be less

drilling and less surface disturbance per barrel than the lower 48.

Question 50: What are the USGS estimates of the in-place oil resources on the

coastal plain of ANWR, including the Federal 1002 area, and State and Native

lands? If oil recovery methods improve on oil fields that are comparable to those believed to underlie the coastal plain, would the estimate of technically recoverable

oil resources under the coastal plain increase?

Answer: The USGS mean estimate for ‘‘in-place’’ oil under the coastal plain, including Native lands and State waters (not lands) is 27.78 billion barrels. The full

range reported is from 15.58 billion barrels (at the 95% confidence level) to 42.32

billion barrels at the 5% confidence level).

The volume of technically recoverable oil is that volume that is recoverable from

the in-place estimate. Therefore, it is reasonable to expect that larger volumes of

oil could be recovered as recovery methods improve. However it is very difficult to

forecast what that volume might be.

Question 51: Some believe the 1002 area is a Wilderness area. Is the 1002 Area

now, or has it ever been, a unit of the Wilderness Preservation System?

Answer: The 1002 area is not designated as Wilderness, nor has it been.

(GALLEGLY)

Question 52: I have concerns about the fairness of some of the studies that small

hydro-power plants have been asked to do in the midst of the current energy crisis.

In my district, the operators of the Santa Felicia Dam and hydro-plant near Piru

Creek, have been asked to do a number of studies by various Federal agencies. It

is estimated that the costs of the studies outweigh the costs of the hydro facility

- the hydro facility costs $2 million. The dam currently provides clean hydro-electric

power to an estimated 1,500 homes in my district.

Will you work with your fellow agencies to ensure that the FERC relicensing process is not overly burdensome for small hydro-electric plants?

Answer: I am committed to working with other resource agencies to guarantee

that the FERC-licensing process is not overly burdensome for applicants.

Upon initial review of this case I believe that this was an instance where the applicant initially did not do enough to provide necessary information to the resource

agencies. Unfortunately the resource agencies responded with expensive study requirements to fill the information gap. I am happy to report that the resource agencies and the applicant will be meeting this summer to decide on a course of study

that is appropriate to the physical scale of the project and its environmental impacts.

Studies provide key scientific information to all involved in the licensing process:

1) Licensees use study information to develop mitigation that addresses impacts related to their project operations; 2) Resource agencies rely on studies to develop license conditions to protect resources for which they have statutory responsibilities;

3) FERC uses the information to perform NEPA analysis, to meet other regulatory

responsibilities, and to make decisions regarding the appropriate level and type of

mitigation to require in licenses.

Recent forums for improving hydropower licensing identified a number of issues

and solutions with respect to selecting and implementing studies. The Interagency

Task Force to Improve Hydroelectric Licensing Process (ITF) called for the resource

agencies to more clearly identify their resource management goals and objectives,

and establish a clear nexus between project operations and impacts on the resources

being studied. Importantly, the Department made a commitment to choosing the

least cost alternative to achieve management goals. The resource agencies are committed to implementing these and other changes.

(MARKEY)

OCS Drilling

Question 53(a): One of the recommendations made in the Bush Administration’s

proposed national energy policy was to revisit OCS drilling policy. What specific

changes in ‘‘current Federal legal and policy regimes’’ is your Department currently

considering to implement this recommendation?

Answer: We are at a very early stage in implementation of the Administration’s

energy policy. We plan to work with other agencies, to see if we can improve the

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efficiency of our regulatory process while ensuring involvement of essential stakeholders.

Question 53(b): What aspects of this issue [do] you expect will be evaluated by

the Commerce Department?

Answer Under the Administration’s National Energy Policy Report, the Departments of Commerce and Interior have been tasked to review policies, procedures,

and regulations associated with energy-related activities and facilities in the coastal

zone and on the OCS to determine whether they lend themselves to an efficient,

predictable, and environmentally-sound oil and gas leasing, exploration, and development program.

Question 53(c): In your oral testimony, you said in response to a question about

the Administration’s plans to revisit OCS drilling policies that ‘‘I think it is wise

for us to have a wide array of information as we are making decisions. And I think

understanding where resources are located is something that leads to wise decisionmaking, whether or not we decide to go forward with trying to access those resources or not.’’ With respect to the OCS moratoria areas, what additional information do you believe it is necessary to obtain at this time that we do not already have,

and how are you proposing to obtain this information?

Answer: As we look to and plan for the future, we need to have a sound information base for discussions and consultations with all stakeholders. We need to understand the environment and the geology. We have conducted environmental studies

of moratoria areas in the past, but clearly some would need to be updated. Acquiring environmental information in moratoria areas has been supported by past review of the National Academy of Science and the Department of the Interior Advisory Committees.

We would also benefit if there were more geological and geophysical information

collected using state of the art techniques. This is an activity normally done by the

private sector and it is unlikely companies will pursue such activity while areas are

under moratoria.

Question 53(d): Would the Department be considering allowing exploratory drilling or related activities in order to obtain the type of information you are seeking?

Answer: Consistent with longstanding Departmental interpretation, the current

congressional restrictions on OCS activities, as well as the restrictions under the

President’s 1998 OCS directive, do not preclude the collection of environmental, geologic, geophysical, economic, engineering or other scientific analyses, studies or evaluations. These are the types of information needed to better understand the environment and resources potential of an area. Also, current congressional moratoria,

as well as the restrictions under the President’s 1998 OCS directive, do not preclude

exploratory drilling on existing leases located in areas under a leasing moratorium.

Therefore, a lease owner of an existing lease within a moratoria area can file an

exploration plan, which could include exploration drilling. If that were to occur, an

exploration plan would require review and approval by MMS and affected states

under NEPA and CZMA.

Question 53(e): During the hearing, you seemed to suggest that the Department’s

‘‘re-examination’’ might also focus on policies affecting off-shore drilling in those existing regions where such drilling is currently permitted. Here, you indicated in

your oral testimony that you believed there was ‘‘some potential room for improvement’’ and that ‘‘we are analyzing that to determine whether we need administrative changes or whether we need to come back to you all?’’ What specific administrative or legislative changes are you considering and why?

Answer: We would like to reexamine several laws. Much of this work involves

other Federal agencies. Under the Administration’s National Energy Policy Report,

the Departments of Interior and Commerce have been tasked to examine the current Federal legal and policy regime (statutes, regulations and Executive Orders) to

determine if changes are needed regarding energy-related activities and the sitting

of energy facilities in the coastal zone and on the OCS.

Question 53(f): Your testimony also seemed to indicate a desire to review existing

environmental planning requirements relating to off-shore drilling because you felt

current requirements lacked some ‘‘clarity.’’ What specific concerns do you have

about these environmental requirements?

Answer: Our interest is that the regulatory framework provides clear instruction

as to what regulatory requirements will be met, what environmental information is

required to be submitted, how that information will be used, and when decisions

must be made. We also believe that timeframes should be clear.

Question 53(g): When do you expect the Department’s ‘‘reexamination’’ of OCS

drilling policies and the relevant legal and regulatory framework to be completed?

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Answer: It is my understanding that staff from the Department of the Interior

and the Department of Commerce will meet soon, and I do not know when a review

would be completed.

Question 53(h): Recent press reports indicate that the Natural Gas Subcommittee,

a division of the Federal advisory Committee that provides recommendations to the

Interior Department, has recommended that the Department examine ‘‘the five top

geological plays in the moratoria areas, and if possible, the most prospective areas

for natural gas in the plays that the industry would like to explore if allowed.’’ In

your response to a question raised at the Committee’s hearing, you indicated that

you have not been formally presented with the recommendations of this Subcommittee. When do you expect that this will occur, and what action will the Department take in response to these recommendations?

Answer: The OCS Policy Committee provides advice to the Secretary of the Interior on implementing the OCS Lands Act. Representing the collective viewpoint of

coastal states, environmental interests, industry and other parties. The Policy Committee advises the Department, through the Minerals Management Service, on a

number of important issues involving our Nation’s energy policy. The Committee establishes subcommittees to study issues in-depth and to develop recommendations

for consideration by the full Committee. Committee recommendations are forwarded

to the Secretary.

On May 24, 2001, the OCS Policy Committee amended the Natural Gas Subcommittee recommendations and adopted a resolution to forward its amended recommendations to the Secretary of the Interior. On June 7, 2001, I received a letter

from the Policy Committee forwarding a resolution to transmit 12 recommendations

‘‘to encourage increasing natural gas production from the OCS.’’ I plan to take all

12 recommendations under advisement.

Copies of the Policy Committee’s Resolution and Recommendations are attached.

Question 53(i): Who are the current Members respectively of the Natural Gas

Subcommittee, the Outer Continental Shelf Advisory Committee, and the Minerals

Management Advisory Board? For each of these panels, how many Members are employed by, affiliated with or have financial ties to the oil and natural gas industries,

including consultants to those industries? How many Members are from environmental, consumer, or public interest organizations?

Answer: The members of the Natural Gas Subcommittee were:

Jerome M. Selby (Chair), Consultant for the Mayor of Anchorage, Anchorage,

Alaska; Patrick S. Galvin, Division of Governmental Coordination, Juneau, Alaska;

Robert R. Jordan, Delaware Geological Survey, Newark, Delaware; Jack C.

Caldwell, Louisiana Department of Natural Resources, Baton Rouge, Louisiana;

Lawrence C. Schmidt, Department of Environmental Protection, Trenton, New Jersey; Daniel F. McLawhorn, North Carolina Department of Environment and Natural

Resources, Raleigh, North Carolina; Bruce F. Vild, Statewide Planning Program,

Providence, Rhode Island; Andrew L. Hardiman, Chevron Gulf of Mexico Deepwater

Business Unit, New Orleans, Louisiana; Paul L. Kelly, Rowan Companies, Inc.,

Houston, Texas; George N. Ahmaogak, Sr., Mayor, North Slope Borough, Barrow,

Alaska Environmental Community advisor.

The Minerals Management Advisory Board is comprised of four committees, the

OCS Policy Committee, the Royalty Policy Committee, the Alaska OCS Region Offshore Advisory Committee (inactive), and the OCS Scientific Committee. The advice

and information that the Board, through its committees, provides to the Department

and MMS are unique. The members serve as MMS’s primary contact to the Governor’s offices and Native American Indian tribes. These members bring into focus

a broad range of knowledge and invaluable perspective and provide for distillation

of data affecting offshore oil and gas exploration and development and royalty management. The committee meetings also provide opportunities for parties with an interest in OCS oil and gas development and royalty management issues to discuss

their differences in an open forum and examine alternatives to resolve conflicts.

The OCS Policy Committee follows:

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Question 53(j): Do you intend to revisit the moratorium on oil and gas exploration

in the Georges Bank, as the Natural Gas Subcommittee has recommended? Do you

intend to authorize any further studies, reports, or other evaluations of drilling in

the Georges Bank? If so, what would be the purpose of such studies, reports or other

examinations be?

Answer: The Administration supports the current moratoria and there are no

plans under consideration for exploration and development in the Georges Bank

area.

The OCS Policy Committee amended the Natural Gas Subcommittee recommendations and adopted a resolution to forward its amended recommendations

to the Secretary of the Interior. On June 7, 2001, I received a letter from the Policy

Committee forwarding a resolution to transmit 12 recommendations ‘‘to encourage

increasing natural gas production from the OCS.’’ I plan to take all 12 recommendations under advisement.

Question 53(k): According to press reports, in a May 9, 2001 interview, Energy

Secretary Spencer Abraham stated that he was ‘‘not aware of any changes to any

of the moratoria’’ and that ‘‘I don’t think that’s been at all under consideration, to

my knowledge.’’ Your testimony, on the other hand, seems to indicate that the Administration is trying to obtain information that would form the basis for making

such changes.

Answer: My testimony was not intended to indicate any lack of support of current

OCS moratoria. The Administration supports current presidential withdrawals and

congressional moratoria.

Question 53(l): During the Committee’s hearing, you indicated that the Administration would comply with the existing Congressionally imposed moratoria on drilling in the OCS. However, President Clinton also issued an executive order extending the current moratoria until 2012. Does the Bush Administration intend to keep

this executive order in place?

Answer: We appreciate the longstanding history, context, and concerns associated

with OCS moratoria and presidential withdrawals. The Administration has no plans

to undo this framework.

Question 53(m): Is the Administration also ‘‘re-examining’’ whether or not to retain the existing executive OCS order or repealing, shortening, or narrowing its

scope? If so, what options are you considering?

Answer: We intend to comply with existing moratoria/executive withdrawals.

COOGER Leases

Question 54: Secretary Norton, the Administration’s Energy Task Force Report

recommended a reexamination of the currently suspended offshore leases near California. If you include these leases in your review and your Department decides not

to allow drilling in offshore California, then will you allow these stakeholders to recover their offshore California investments for use in future lease sales in the Gulf

of Mexico or elsewhere?

Since your Administration seems to be fixated on giving on the production side

of the equation, what guarantee would you give these leaseholders that they have

not wasted their money in vain and can use their money for other sales? What

mechanism would you propose to allow them to recover their costs?

Answer: The Administration’s Energy Policy Development Group does not recommend a review of the currently suspended California offshore leases. The operators of these leases are submitting plans for the exploration and development of

their leases this year, with a number pursuing delineation of reservoirs in order to

craft development plans to maximize recovery with a minimum of environmental

disruption. Thorough analyses of the environmental effects of exploration and development are being performed on the proposals under the National Environmental

Policy Act and the Coastal Zone Management Act.

Ultra–Deepwater Drilling

Question 55(a): It is my understanding that there is a great deal of natural gas

beneath the ultra-deepwater portion of the Gulf of Mexico. The problem seems to

be that it is very expensive and technically challenging to develop natural gas from

great water depth. Has the Interior Department conducted an analysis of the oil and

gas deposit values in the ultra-deepwater region of the Gulf of Mexico?

Answer: Sediments beneath the ultra-deepwater of the Gulf of Mexico are believed

to contain significant quantities of natural gas, as well as oil resources. To date, the

deep water has been more of an oil province with primarily associated natural gas.

Although there are numerous high profile discoveries in this region; e.g. Crazy

Horse, North Crazy Horse, Mensa and Mad Dog, actual production has occurred in

only a single field, Mensa. Reserve estimates are very speculative for fields at this

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early stage of exploration and delineation, but current estimates total 3.7 billion

barrels of oil (Bbo) and 6.8 trillion cubic feet of gas (Tcfg). In its most recent assessment of undiscovered hydrocarbon resources in the Gulf of Mexico, MMS estimated

that, at the mean level, 16.1 Bbo and 62.6 Tcfg may exist in the portion of the region available for exploration and development.

No attempt was made to develop an estimate of the value of the hydrocarbon in

either the individual or aggregate field discoveries. MMS, however, did develop estimates of the quantities of undiscovered resources in ultra-deepwater with water

depth greater than 1800 meters that would be economically recoverable under two

different price scenarios. In the base case scenario ($18/bbl and $2.11/mcf) 4.7 Bbo

and 14.5 Tcfg are estimated to be economically recoverable. In the high case scenario ($30/bbl and $3.52/mcf) 10.9 Bbo and 34.8 Tcfg are economic. These estimates

respectively represent 27 and 63 percent of the assessed volumes of undiscovered

hydrocarbon resources in the area.

Question 55(b): What has the Department done to expedite development of this

region when there are so many pipe dreams of drilling in ANWR. Does the Department have a contingency plan if Congress doesn’t open up ANWR to drilling?

Answer: As for expediting ultra-deepwater development, we have increased resources (mainly through additional staff) to review and act on deepwater plans and

permits. We have also changed our plans and permitting process, including use of

conceptual Deep Water Operations Plans, for all deepwater applications. These

changes give us access to information at as early a stage as possible to hopefully

improve cycle time in the application review process.

Question 55(c): Could the ultra-deepwater region of the Gulf help meet domestic

oil and gas demand in light of the inevitable failure to open up ANWR?

Answer: Even though only a single field (Mensa) is currently producing, the recent announcements of numerous significant field development projects in this region (e.g., Crazy Horse, North Crazy Horse, Mad Dog, and Nakika) assure that the

area will be a significant source of domestic hydrocarbon production for years to

come. With respect to natural gas, there is still a concern that the OCS will not

be able to meet the increases required to meet the expected increased in natural

gas consumption by 2012.

Question 55(d): Should we be accelerating the development of the ultra- deepwater no matter what the fate of ANWR?

Answer: The U.S. currently imports nearly 60 percent of its crude oil consumption

and is projected to face significant challenges in the next two decades in meeting

forecasts of natural gas demand. It, therefore, makes sense to encourage production

in those areas where it can occur in an environmentally safe manner. The ultradeepwater region of the Gulf of Mexico is one such area. Virtually all of the unleased deepwater area of the central and western Gulf of Mexico is offered. Additional deepwater tracts are proposed to be offered later this year in the eastern Gulf

of Mexico area as well.

Question 55(e): When exploring the ultra-deepwater region, has the Department

made a determination of the necessary technological capabilities to enhance production capabilities in this area while protecting the environment?

Answer: The MMS has assessed and continues to track the evolution of technological capabilities that will enable and enhance the development of hydrocarbon

fields in water depths exceeding 5000 feet (i.e., the ultra-deepwater). A concentrated

effort was initiated in the mid–1990’s to investigate the development of deepwater

hydrocarbon reserves. A multi-task strategy was formulated with the goal of ensuring deepwater development activities were consistent with the Agency’s environmental, safety, conservation mandates. The Deepwater Strategy is a proactive approach to managing operations, ensuring appropriate environmental and technical

reviews, and focusing studies and research efforts related to deepwater activities.

Part of this effort was the identification of over 100 new technologies, techniques,

and systems that are in use or necessary for deepwater development. MMS continues to gather information about these technologies. A database is used to track

the status of the individual deepwater technologies.

The MMS evaluation of new technologies and alternative compliance measures

(procedures and equipment) can be complex, involving risk assessment, comparative

analyses, and a review of hazard analyses conducted by the operator in support of

the departure (or alternative compliance). MMS reviews have resulted in some denials of requests to use new technology as untested and unproven. MMS has launched

a series of initiatives, including an aggressive technical research effort, joint funding

with industry projects, linkages to major universities, and joint research with foreign governments to address mutual questions. Some of the issues being addressed

include well control, oil spills, production flow assurance, and risk assessment of

new production systems. MMS has also conducted and cosponsored workshops to adVerDate 11-MAY-2000 13:13 Aug 24, 2001 Jkt 000000 PO 00000 Frm 00240 Fmt 6601 Sfmt 6621 J:\DOCS\70888.TXT HRESOUR2 PsN: HRESOUR2
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dress issues of immediate concern. MMS uses these workshops to identify issues

and to gather information for evaluations and decisions.

The near-term implications of MMS’ efforts are being realized. Development intentions for 3 fields in water depths greater than 7000 feet are currently being reviewed; there are 20 hydrocarbon fields in the development stage in water depths

exceeding 5000 feet that will be in production before 2004. The baseline work to address new, enabling technologies are directly beneficial to the MMS review of these

projects.

Pipeline and Electricity Transmission

Question 56: In your opening statement, you said that the Department was going

to streamline the process through which it considers and approves requests to allow

the construction of electric transmission lines and natural gas pipelines. What specific options is the Department going to consider?

Answer: The BLM, in collaboration with the Forest Service and interested stakeholders, has been streamlining the processes used to receive, review and analyze applications for electrical and natural gas transmission lines. For example, the BLM

has developed procedures to allow oil and gas developers to apply for Right-of–Ways

concurrently with the applications for permit to drill. The BLM has also developed

procedures that allow for payment of Right-of–Way processing fees (which must be

paid in advance before application processing can proceed) with ‘‘call in’’ credit card

information. In the future, the BLM will be expanding its use of electronic commerce by exploring ways to accomplish pre-application ‘‘meetings,’’ application data

review, and data submission using the internet. The BLM is also exploring ways to

have all the required application processing fees paid electronically

Question 57: Can you assure the Committee that the measures you are considering will not result in any diminution in the Department’s critical responsibilities

to protect and management sensitive public lands, and will not curtail a full and

thorough assessment of the environmental impact of any proposed new powerlines

or natural gas pipelines?

Answer: Yes, BLM strongly encourages the use of private sector environmental

contracting companies to prepare applications and the required environmental reports. This allows BLM to concentrate its workforce on application review, analysis,

and decision making. The BLM and the FS are leading the way in refining procedures related to establishing ‘‘Lead Agency’’ and ‘‘Lead Office’’ responsibilities when

processing applications that cross lands administered by both agencies. When a lead

agency and office are designated, single points of contact are established and the

application review and decision processes are coordinated out of one office. This

saves time and resources for both the applicant and the Federal agencies. The BLM

is also working to finalize regulations that will modernize its cost recovery procedures. When implemented these regulations will allow the BLM to direct more resources to the offices processing applications. The regulation will also allow the

BLM in certain situations to enter into agreement with companies to meld its administrative practices with the companies business practices.

Question 58: How will the Department’s plans to streamline this process affect the

opportunities for public comment and public participation in the decision-making

process regarding siting of new pipelines and electrical transmission lines?

Answer: The Department is fully committed to involving the public in its decisionmaking process for pipelines, electrical transmission lines, and other transportation

support needs. The BLM will complete all necessary land use plan amendments or

revisions, and their associated environmental analysis in accordance with procedures for public involvement. This includes notifying the public of the upcoming

planning and environmental process and providing notification of opportunities for

the public to review and comment. BLM’s planning process also includes provisions

for affected parties to raise objections to the BLM Director. The planning and rightof-way granting processes will be completed with one document, rather than sequentially, to decrease the amount of time required. None of the measures being considered will diminish the Interior’s critical responsibility to protect and manage the

public lands. The measures will increase our ability to protect and manage our public lands because they are designed to reduce the routine administrative procedures

associated with application review and to focus the Interior’s activity on critical

analysis and decision making elements of application review. One example is contracting private sector environmental firms to prepare applications and environmental reports. This frees BLM personnel to concentrate on the analysis of the data

and on making the required decisions.

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Oil and Gas Production on Public Lands

Question 59: The American public will judge how ‘‘environmentally-sensitive’’ new production on public lands might be according to how ‘‘environmentally-sensitive’’ we have already been. In this regard, I would like to know what steps you are taking to impose enforceable obligations on developers when they are granted oil and

gas leases on public lands. Certainly mitigating the damage done by the routine operation of oil and gas exploration and production on the scale of Prudhoe Bay, for

example, would be a vast, expensive undertaking. The industry plans to expand into

pristine, environmentally sensitive areas on lands belonging to the public. Will the

mess ever be cleaned up?

Requirements for Cleanup: What conditions regarding clean-up and environmental restoration of a drilling or production site are currently contained in Federal

leases on Federal lands such as the NPR–A? Please provide the actual language

from such leases. Please provide a discussion of the method used, if any, to set the

standards of cleanup and to hold the leaseholder accountable if it fails to meet the

requirements of the lease.

Answer: Many of the following requirements are created and implemented to prevent or minimize damages which might otherwise require cleanup upon completion

of specific activities.

The standard lease stipulations were created by the BLM’s Washington Office

staff with considerable input from the BLM field staff and review by the Solicitor’s Office to assure that any standard conditions which might be encountered in the

field are covered. Special stipulations are created based on environmental research

and public input which occurs during the environmental review process as required

by the National Environmental Protection Act (NEPA). Additional site-specific

NEPA reviews are made, and if any additional needs are identified, additional

NEPA protective requirements are added by the BLM’s authorized officer (AO) when

reviewing the lessee’s or operator’s plan of development and site-specific Applications for Permit to Drill (APDs). A copy of the NPR–A requirements is attached.

BONDING: Bonding doesn’t relieve a lessee or operator from it’s cleanup and resource protection requirements and responsibilities, but is nevertheless an integral

part of the ‘‘cleanup’’ package. It is required by the BLM in every case ($10,000.00 minimum per lease; $25,000.00 minimum statewide; $150,000.00 minimum nationwide) before any on-the-ground activity is allowed to take place, and also for geophysical exploration ($5,000.00 minimum per exploration; $25,000.00 minimum

statewide; $50,000.00 minimum nationwide). For the NPR–A, the BLM also requires bonding, but at these different amounts: individual lease ($100,000.00 minimum);

NPR–A-wide bonding ($300,000.00 minimum). NPR–A bonds must be filed and approved before we will issue a lease or leases to a lessee. Further, individual states

have differing bonding requirements in addition to the BLM-required bonding. For

example, the State of Alaska’s Oil and Gas Conservation Commission requires a $100,000.00 bond for each well drilled on Federal, state or private lands, or—. . . not less than $200,000 for a blanket bond covering all of the operator’s wells in the

state, except that the commission will allow an amount less than $100,000 to cover

a single well if the operator demonstrates to the commission’s satisfaction in the application for a Permit to Drill (Form 10–401) that the cost of well abandonment and

location clearance will be less than $100,000.— SPECIAL SITE–SPECIFIC RESTRICTIONS: The unique particulars of site-specific cleanup and environmental restoration are established by the BLM’s AO, as

noted above, and set out as specific terms and conditions in the NEPA-review / approval process for each individual Application for Permit to Drill (APD) or drilling

and development plan. This allows them to be tailored to the most currently available environmental data, technological advances, and other changing issues which

arise over a period of time.

Standardized resource protection and reclamation requirements are contained in

the lease forms and, as developed during the course of NEPA analysis, in the Record

of Decision for the pre-sale NEPA study. In the case of the NPR–A, these general

stipulations, as well as five special stipulations applicable to only certain leases,

were also contained in the Detailed Statement of Sale.

See attached Appendix A for the standard protections in lease language.

Question 60: Ensuring the Availability of Cleanup and Restoration Funds: The

huge cost of dismantling, removal and restoration occurs once the wells have

stopped producing. Therefore, the oil and gas industry cannot expect to have the resources necessary to do the job unless it sets the funds aside while the wells are

still producing. What guarantees exists to ensure that sufficient financial resources

will be available to complete the required activities at the appropriate time? Are

funds being held in escrow? If not, why not? Please provide the actual language

from leases regarding such requirements.

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Answer: All oil and gas lessees are responsible for cleanup and restoration of damaged lands resulting from their operations. It is a requirement on all Federal oil and

gas leases as well as current operating regulations contained in 43 CFR 3160. In

addition, there are an number of other Federal laws that also require clean up and

restoration of contaminated lands. The BLM assures enforcement of these requirements through the use of lease bonds as well as enforcement provisions of the oil

and gas operating regulations (Re: 43 CFR 3104 Bonding and 43 CFR 3163 Noncompliance). Lease bonds are a form of escrow held by the surety company and payable to the BLM. Actual lease language is as follows: ‘‘4.(a) The Undersigned certifies that...(6)offeror is in compliance with reclamation requirements for all Federal oil and gas lease holdings as required

by sec. 17(g) of the Mineral Leasing Act.′′ Question 61: Examples: Please provide three good examples of successful implementation of cleanup requirements implemented by the holder of an oil or gas lease

on public lands following major production, pursuant to the requirements of the

lease.

Answer: The BLM routinely approves hundreds of well abandonments each year.

On all of these sites the well is plugged according to approved BLM specifications,

the well location is re-contoured and the entire disturbed area is re-vegetated. The

BLM does not release the final lease bond obligation until field inspectors have

verified the location is fully reclaimed. These are the standards for all Federal onshore oil and gas wells. The following are three examples of successful implementation of cleanup requirements following oil or gas production:

1. EOG Resources Incorporated, formerly Enron Oil and Gas Company’s Big

Piney/Labarge operations (in Sublette County, Wyoming), received the BLM’s Director’s Excellence Award for EOG’s efforts and contribution in performing outstanding

reclamation activities on Federal lands administered by the BLM in 2000. EOG Resources reclamation endeavors within the Big Piney/Labarge operations include the

following accomplishments: successful final abandonment of three entire oil and gas

fields, including extensive road and pad removal, recontouring and reclamation, resulting in the prior disturbed land being reclaimed back to that of a natural landscape; substantial reduction in soil erosion through extensive road upgrading and

graveling which included numerous culvert installations for a road network covering

over 70-square miles; establishment of stable producing well locations through surface re-contouring which alleviated erosion and weed infestations; and re-establishment of specific plant subspecies that resulted in considerable improvement to winter range areas of wildlife;

2. Over the last two years, Merit Energy has conducted extensive environmental

clean-up and production facility consolidation of the Hamilton Dome Oil Field in Hot

Spring County, Wyoming. Hamilton Dome is considered one of Wyoming’s major oil

fields. Pursuant to the requirements of the lease, Merit Energy upon acquiring the

Hamilton field operation, expended considerable resources to improve the oil field

infrastructure to minimize and in a number of cases alleviate environmental problems. As an example, Merit has been proactive at plugging and reclaiming a significant number of idle or inactive wells which are no longer capable of production.

3. The Hogback Dakota Field, located to the northwest of Farmington, New Mexico, in the San Juan Basin, is an oil field which was discovered in the late 1920’s,

but developed beginning in the 1950’s. Several dozen wells were drilled to completely develop the field. The northern part of the field was depleted by the early

1990’s. The operator at the time, Duncan Oil Company, plugged 24 wells on three

of the oil and gas leases in 1995. Reclamation consisted of grading and reseeding

the locations. The three leases were then terminated. The southern part of the Hogback Field continues to produce under a successor operator to Duncan Oil Company.

(GILCHREST)

Question 62: Does the Secretary support continuation of the offshore oil and gas

moratorium for the Atlantic Coast?

Answer: The Administration supports the existing moratoria/executive withdrawals.

Question 63: How many national wildlife refuges currently host extractive activities (oil, gas, coal, other minerals)?

Answer: 42 refuges host oil and gas extractive activities;

0 refuges host coal extractive activities;

1 refuge hosts hardrock extraction;

29 refuges host sand and gravel extractive activities; and

2 refuges host extractive activities of other minerals

Question 64: How many extractive use leases have yet to be acted upon in national wildlife refuges, and how many refuges does this effect?

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Answer: From the regions that were able to respond, only 634 potential extractive

use leases were identified coming from 3 regions and affecting 19 refuge units. 632

of these leases were from 7 refuges in Alaska.

Question 65: How many refuges have potential oil, gas, coal, and other energy resources, that have yet to be capitalized upon?

Answer: 45 refuges reported potential oil, gas, coal, and other energy resources

that have yet to be capitalized on. One region was unable to obtain the information

in the time allotted. Several of the others only provided best guesses.

Question 66: The Secretary described in her testimony, actions that the Department has taken to improve energy efficiency and to diversify energy sources it

draws upon. What are some of the best examples of energy efficiency and diversification within the Department of the Interior? How much biofuel does the Department use annually? How many fuel cells are in operation? Solar panels? Other nonfossil fuel sources?

Answer: General: Over the past two decades, Interior has done much to reduce

energy use and embrace energy efficient technologies. This legacy of accomplishment

has resulted in numerous successful energy and water conservation and renewable

energy projects around the country. In response to the National Energy Policy and

Secretary Norton’s energy mandates, Interior bureaus have renewed their emphasis

on energy efficiency, energy conservation and the use of energy-saving technologies.

By partnering with the Department of Energy (DOE) and its national energy laboratories, other Federal agencies, state and local governments, and non-governmental

organizations, Interior will continue to implement energy conservation practices and

techniques, and introduce new technologies to increase energy efficiency and reduce

energy consumption.

Best Examples of Energy Efficiency and Diversification Within the Department of the

Interior:

The following fourteen energy and water conservation showcase facilities have

been recognized by the DOE and offer some of Interior’s best examples of energy

efficiency and diversification:

• National Park Service (NPS)

* Golden Gate National Recreation Area,

* Joshua Tree NP,

* Sleeping Bear Dunes National Lakeshore,

* Whitman Mission National Historic Site, and

* Zion National Park (NP)

• Bureau of Reclamation

* Centennial Job Corps Center,

* Denver Federal Center–Building 67,

* Davis Dam, and

* Glen Canyon Dam

• Fish and Wildlife Service (FWS)

* John Heinz NWR,

* National Conservation Training Center,

* Neal Smith National Wildlife Refuge (NWR), and

* Wichita Mountains Wildlife Refuge

• U.S. Geological Survey

* Central Region - EROS Data Center

These and other Interior facilities, have incorporated energy-saving concepts into

building design including automated energy management control systems; energyefficient heating, ventilation, and air conditioning systems; energy-efficient lighting;

insulation, passive solar energy design; ground-source geothermal heat pumps; use

of recycled materials in building construction; and power generation from renewable

energy sources.

Biofuel use annually: During Fiscal Year 2000, Interior’s motor vehicle and marine fleets used over 70,000 gasoline-equivalent gallons of biofuels produced from renewable domestic feedstocks such as forage grasses and oil seeds. With greater production and improved distribution, Interior will be able to significantly increase

biofuel usage. Many Interior facilities are partnering with public and private sector

organizations to improve the availability of biofuels. With the assistance of the Defense Energy Support Center, DOE and industry, Interior plans to greatly expand

its use of biofuels through bulk purchasing for facilities in the Mid–Atlantic, Northwest and Southwest beginning in Fiscal Year 2001. A few facilities plan to begin

use of biofuels in their diesel generators.

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Fuel Cells in Operation: The high cost of fuel cells has been the obstacle to greater use of this technology. Currently, Interior has a fuel cell operating at Golden

Gate National Recreation Area with another one planned to be installed at Yellowstone NP during the summer. Both of these systems were financed through costsharing partnerships. Other Interior facilities are actively seeking to acquire fuel

cells to replace diesel generators and supplement energy currently supplied through

the electric grid. They are looking to partnerships to help finance the acquisition

of these systems.

Solar panels in Operation: Interior is a government leader in the use of solar-powered energy generating systems with nearly 600 solar photovoltaic (PV) facilities

and an estimated 40 solar hot water systems primarily located at NPS, Bureau of

Land Management and FWS facilities. The Bureau of Indian Affairs (BIA) is also

working with Native Americans to deploy solar powered generating systems on Indian lands. Our installations are notable for the fact that they are not just demonstrations—they are cost-effective power sources that were the best choice for the

application. These systems conservatively represent about 600 kiloWatts (kW) of capacity, and generate over 1 million kW hours of electricity annually. Each system

is made up of multiple panels, which vary from roughly 50 to 100 Watts each. With

total capacity at 600 kW, that would represent between 6,000 and 12,000 panels.

Other Non–Fossil Fuel Sources: As resources allow, Interior facilities are using

other non-fossil fuel sources such as from off-grid wind turbine, geothermal, and hybrid systems (combining two energy sources) and green power from renewable

sources available on the grid to meet energy needs. Highlights include:

• FWS and NPS are using ground source geothermal systems to both heat and

cool the buildings at seven facilities.

• BIA is incorporating the use of geothermal systems in the design for some of

its Native American school replacement and renovation projects.

• FWS is using wind energy at five refuges.

• Several bureaus facilities in Denver, Colorado will purchase a portion of their

monthly electric power from wind-generated electricity.

• Channel Islands NP is in the process of installing an innovative hybrid wind/

PV system on Santa Rosa Island, reducing the island’s annual diesel fuel consumption for power generation by 94 per cent.

• The Office of Surface Mining and the Minerals Management Service are working

with the General Services Administration to incorporate the use of non-fossil renewable fuel sources where possible, into their building lease agreements.

• With DOE’s design assistance, the National Business Center is planning to create an energy efficient ‘‘green’’ roof for the Main Interior Building consisting of

liner, insulation, gravel and topsoil, and moss, plants or grasses as well as a

small PV system.

(ORTIZ)

Question 67: Madam Secretary, it is my understanding the Department is moving

forward with development of a new 5–Year program for Outer Continental Shelf

leasing for 2002–2007. What is the current status of this plan?

Answer: In December 2000, in accordance with section 18 of the OCS Lands Act,

the MMS published a request for information with a 45-day comment period in

order to begin preparing a new 5–Year OCS Program for 2002–2007. The current

5–Year Program expires in June 2002. The 5–Year Program indicates the size, timing and location of leasing activity determined to best meet national energy needs.

In preparing a new 5–Year Program, we seek comments from constituents including

States, local government, industry, interest groups, and individual citizens. Based

on an analysis of these comments, the 5–Year Program must balance the potential

for environmental damage, the discovery of oil and gas, and the adverse impact on

the coastal zone.

We have now completed the initial information gathering phase, and we are currently evaluating a number of options in light of the information we have received,

our own analysis, and the Administration’s developing energy policy. Our objective

is to develop a 5–Year OCS leasing program, which meets the mandates of the OCS

Lands Act and advances the nation toward its energy goals.

We plan to publish an initial Draft Proposed Program for 2002–2007 and draft

EIS, this summer. Subsequent steps in developing a new 5–Year Program after receiving comments on the Draft Proposed Program and accompanying draft EIS, will

include an appropriate comment period and publication of a Proposed Program and

draft EIS with an appropriate comment period; and publishing a Proposed Final

Program with a final EIS. We hope to have the next 5–Year Program in place before

June 2002.

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Question 68: Considering the status quo of limiting offshore exploration and production to the Central and Western Gulf of Mexico and Alaska, what consideration

is being given to the ‘‘equitable sharing’’ of the production and distribution of offshore energy resources?

Answer: Section 18 of the OCS Lands Act requires that every new 5-year program

for OCS oil and gas leasing be prepared in a manner consistent with four main principles: (1) consideration of economic, social, and environmental values and the potential impact on marine, coastal, and human environments; (2) a proper balance

among potential for environmental damage, discovery of oil and gas, and adverse

impact on the coastal zone; (3) assurance of receiving fair market value; and (4) consideration of eight factors. The equitable sharing of developmental benefits and environmental risks is one of these eight factors. Among the others are existing information on geographical, geological, and ecological characteristics of regions; location

of regions with respect to needs of energy markets; location of regions with respect

to other uses of the sea and seabed; interest of potential oil and gas producers; and

laws, goals, and policies of affected States.

The current program, you have noted, includes proposed lease sales only in the

Gulf of Mexico and the Alaska OCS, the result of a greater weight given to the laws,

goals, and policies of affected States and the location of regions with respect to other

uses of the sea and seabed. As we develop a new program to succeed the current

one, I will give full consideration to the geographic distribution of proposed OCS

lease sales and the benefits and risks that would result from those sales. However,

I will have to temper this consideration with the understanding that both the Atlantic and the Pacific OCS and all but a small portion of the Eastern Gulf of Mexico,

under presidential authority, have been withdrawn from disposition by leasing until

after June 30, 2012.

As the President pledged during the campaign, the Department will work with

the various affected parties to try to craft agreement as to what kind of program

would best serve the Nation by providing energy—especially natural gas—and employment while protecting other valued resources.

Question 69: In developing your plan, will your Department consider the costs of

eliminating large areas from consideration under the 5-year plan? While I support

reserving areas of important resource and cultural benefit, I am concerned that we

do not understand the costs of removing large areas from consideration, not only

in terms of economics and jobs, but equally, in terms of national security.

Answer: As directed by the OCS Lands Act, MMS has begun its analysis for the

new 5-year program by examining all planning areas eligible for leasing consideration. This initial analysis includes a ranking of these planning areas by the potential net economic value and by the potential net social benefits of leasing all of each

area. Areas under Presidential and congressional moratoria are not considered for

leasing and are not included in the economic analysis. The information provided by

MMS allows me to gauge the effect on total value to the Nation of any options eliminating areas from consideration or reducing the eligible portion of a planning area.

The environmentally sound development of the Nation’s OCS resources, through

a reliable lease sale schedule that is consistent with other uses of the OCS sea and

seabed and with State and local government priorities, can help further the achievement of each of the goals set out in the OCS Lands Act. Investments in and production of OCS oil and gas generate billions of dollars annually in bonuses, royalties,

and taxes and create thousands of well-paying jobs throughout the American economy. Production of offshore resources under proper environmental safeguards poses

less risk of major oil spills than does importing foreign oil in tankers. Expanded use

of natural gas, including that produced on the OCS, has substantial environmental

benefits over other fossil fuels.

Most production resulting from lease sales held under the new 5-year program is

likely to begin over the next decade and continue well into the first half of this century. Just as important, the program decisions and the way they are made will have

a lasting effect on the relationship between the Federal Government and other interested parties and the ability to develop and implement future programs in a way

that best meets the Nation’s energy needs while protecting the values reflected in

competing Federal, State, and local priorities.

(FLAKE)

Question 70: Natural gas appears to be a cleaner alternative to energy production

because it does not release soot, chemical toxins, or mercury. It emits half as much

smog producing nitrogen oxide and 30 percent less carbon dioxide, a green house

gas believed to worsen global warming. How can the Committee address this and

encourage sources of natural gas to be tapped and used?

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Answer: The NEPD Group recognized the critical importance of boosting production to meet anticipated demand, and ensuring that the natural gas pipeline network is expanded to the extent necessary. To that end, the NEPD recommended

that my agency should examine land status and lease stipulation impediments to

Federal gas leasing, economic incentives for environmentally sound off-shore development, and opportunities for royalty reductions in specific instances and where

warranted. It is also recommended that we expedite discussion on a right-of-way for

a gas pipeline for North Slope natural gas if and when an application is received.

Question 71: It was assumed in the 70’s that many of the nation’s older, higher

emitting power plants would soon go off line and thus were exempted by the Clean

Air Act. The Act specified that improvement beyond routine maintenance- including

measures to prolong the life of these plants - would make the entire plant subject

to the newer, more stringent, rules. Some say these plants continue to run, evading

compliance by calling major expansions ‘‘routine maintenance.’’ What will be the Department’s approach to enforcement of these situations.

Answer: While I am sensitive to the importance and complexity of this question,

I believe that it would not be appropriate for me to comment on this issue which

is under the regulatory jurisdiction of EPA.

Question 72: President Bush has called for reducing and expediting Federal regulations, such as those protecting public lands and air quality, in order to stimulate

oil drilling and power generation. How can we encourage this to occur and get the

market rolling?

Answer: At Interior, we will be reviewing our regulations to identify opportunities

for streamlining. We are also focusing attention on expediting decisions within existing regulations.

Question 73: When encouraging development of power resource production and

generation, the issue of eminent domain arises and the fact that rather than use

or harm public lands, privately held property is sometimes ‘‘taken.’’ There appears

to be a conflict when the Federal government has the ability to name National

Monuments and private property becomes the remaining vehicle by which energy

can be developed. Can you comment on how we might ensure that this does not create a conflict of interest for the Federal government? (Article 1, Section 8, Clause

17).

Answer: There is a potential for such conflict, and we will want to weigh that in

the balance as Federal land use decisions are made. In any given case, there may

be important public land values that need protection from a utility corridor such as

an electric transmission line, but we also need to take into account that forcing a

right-of-way off public lands may have major economic impacts due to extensive and

longer rerouting, but also land use impacts on the lands to which the right-of-way

is rerouted. It is not clear that this was always taken into account in developing

the boundaries for new National Monuments.

Question 74: Only 17% of Arizona is privately owned land. Given the recommendation that legislation be developed to grant authority to obtain rights of way

for electricity transmission lines and our Committee’s interest in Federal lands, how

do you see privately owned lands being addressed versus those that are publicly

owned?

Answer: The Bureau of Land Management (BLM) currently has authority to grant

rights-of-way across public lands for oil and gas pipelines under the Mineral Leasing

Act of 1920 (MLA) and for other rights-of-way, including electric transmission lines

and facilities, under the Federal Land Policy and Management Act of 1976

(FLPMA). In practice, BLM processes over 1,200 pipeline and electric system rightsof-way authorizations annually and, based on increasing demand for energy, BLM

expects this number to increase by 15 - 20 percent over the next five years. At

present, BLM estimates that some 90 percent of all oil and gas pipeline and electric

transmission rights-of-way in the western U.S. are dependent to some extent on

rights-of-way authorizations on Federal lands. Given the increased demand for

rights-of-way, their obvious importance, and the growing complexity of some applications, the BLM issued a proposed rule in June of 1999 to update its cost recovery

program in order to better meet the increasing demands of the rights-of-way program.

With regard to acquisition of rights-of-way on private lands for electrical transmission lines or facilities, industry must acquire such lands independent of any

right-of-way application related to public lands. The Department of the Interior does

not play a role in the acquisition of rights-of-way on such lands.

Question 75: It was originally thought that with our country’s shift to the service

sector that energy consumption would decrease, however, with the onset of computerized business, we now have less conservation and more use of peak hour energy

consumption. How has this factored into the National Energy Policy?

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Answer: Changes in our society have led to changes in our projections about future supply and demand of crucial energy resources. President Bush recognized the

need to incorporate an analysis of these trends into a comprehensive National Energy Strategy. Energy intensity, or the energy required to produce a dollar’s worth

of gross domestic product will continue to decline, due to improved energy efficiency,

as well as to structural changes in the economy. The NEPD Group offered a number

of suggestions that address energy conservation and energy efficiency.

Question 76: The President has stated that there are no short term fixes, but is

he considering, or will he consider short term bailouts in case there are extreme

shortages this summer, such as tapping into the Strategic Petroleum Reserve?

I am certain that the President is concerned about the potential impacts of energy

shortages this summer. He has directed us to expedite permits for new power production and to work as good partners to reduce our electricity at Federal facilities,

especially during the peak periods this summer. We have not had discussions about

tapping into the Strategic Petroleum Reserve.

(PALLONE)

Question 77: According to chart 6–2 that you provided to the Committee, between

1978 and 1983 consumption of oil in the United States dropped from nearly 19 million barrels per day to just over 15 million barrels per day. Then between 1983 and

1998, oil consumption increased to once again meet the 1978 level of approximately

19 billion barrels per day. Clearly in the late 1970’s through conservation efforts

and innovative solutions, this country reduced the need to use billions of barrels of

oil. Twenty years later, in 1998 consumption levels were equal to those in 1978.

Additionally, the USGS has calculated that at today’s high oil prices, only 2.6 billion barrels of oil - equal to 140 days of current U.S. consumption - in the Refuge

are ‘‘economically recoverable.—

As the proprietor of our country’s natural resources, to what extent will you promote conservation efforts, supported by historical figures, prior to supporting development of oil and gas production in our country’s most sensitive areas?

Answer: We are committed to promoting conservation efforts and alternative

fuels. Interior bureaus have renewed their emphasis on energy efficiency, energy

conservation and the use of energy-saving technologies. Interior facilities have incorporated energy-saving concepts into building design including automated energy

management control systems; energy-efficient heating, ventilation, and air conditioning systems; energy-efficient lighting; insulation, passive solar energy design;

ground-source geothermal heat pumps; use of recycled materials in building construction; and power generation from renewable energy sources. In addition, the Bureau of Land Management (BLM) is reviewing the opportunities for expanded siting

of solar and wind electrical generating facilities on public lands. The BLM is also

working with the Forest Service to identify sites for biomass development.

Question 78: In regard to the Alaska National Wildlife Refuge, in your testimony

you state, ‘‘...because of advances in technology...we are now able to proceed with

exploratory work with very little long-term effect’’. Further you identify regulations

that Department of Interior intends to put in place on production in the Arctic Refuge and conclude with ‘‘we believe that new technologies enable us to conduct environmentally safe oil and gas exploration and production.—

Just days before you visited Prudhoe Bay, state inspectors found that almost a

third of the safety shutoff valves tested at one drilling platform failed to close. Additionally, on the North Slope, 92,400 gallons of saltwater and crude oil leaked from

a pipeline at the Kuparuk oil field on April 15; this was the fourth major spill on

the North Slope in the winter of 2000. Given these recent environmentally disastrous incidences, I am deeply concerned about your use and the Administration’s

frequent use of the term environmentally friendly technology.

Question 79a: First, please explain to me what you believe is ‘‘environmentally

safe oil and gas exploration and production—?

Answer: Environmentally safe oil and gas exploration and production in the context of the North Slope is activity where ‘‘state of the art’’ environmentally friendly

technology and procedures are employed such as low impact exploratory approaches

that include ice roads and extended reach directional drilling. It includes developing

contingency plans and procedures to deal with incidents and potential environmental impacts. Planning, training, equipment, Federal and state regulation and

supervision all play a part. Finally, it includes operating under a strong environmental standard that overlays all activities conducted in the area.

Question 79b: Second, please explain how you determine what are long-term effects and the scientific insight you have to determine these effects?

Answer: We are monitoring the ongoing development in the Naval Petroleum Reserve–Alaska (NPRA) under the stipulations we developed prior to leasing. Funding

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for additional studies covering issues such as ice road location is included in the

President’s 2002 Budget

Question 79c: Third, how will the cost of the regulations you intend to put in place

in the Arctic National Wildlife Refuge affect oil and gas production rates and the

overall cost benefit analysis of economically recoverable resources?

Answer: The National Energy Policy states that Congress should require the use

of the best available technology and should require that activities will result in no

significant adverse impact to the surrounding environment. This standard will be

our position despite any additional costs that could arise.

Question 80 : Will the Administration seek to overturn the Presidential moratorium in place until 2012 to develop oil and gas production in the OCS?

Answer: We appreciate the longstanding history, context, and concerns associated

with OCS moratoria and presidential withdrawals. The Administration has no plans

for undoing this framework.

Question 81a: Earlier this morning I met with tribal leaders from the Crow, Comanche, Blackfeet, and Standing Rock Sioux about a sacred area known as Weatherman’s Draw. Aside from the fact that I find it outrageous we would be drilling

in an environmentally sensitive area, I find it unacceptable that the tribal nations

were not adequately consulted about the proposed drilling in the area. This Canyon

has religious and spiritual significance and is found to contain some of the most impressive rock drawings and petroglyphs in the West. How do you explain the fact

that local American Indians were essentially left out of consultation process?

Answer: There is a long history of tribal consultation associated with this area.

Geographically, the nearest tribes to BLM’s Billings Field Office are the Crow and

Northern Cheyenne in Montana, and the Eastern Shoshone and Northern Arapaho

in Wyoming. Initial contacts were made with all four of these local tribal governments within several days after the applications for permits (APDS) to drill came

in to our Billings office late in 1993. An initial visit to the Weatherman Draw sites

was conducted by BLM in March 1994, with representatives of all four tribes in attendance. Other tribes in Montana more distant from the Billings area were contacted by phone, including the Blackfeet and Assiniboine Sioux, however these additional tribes deferred to the Crow and the other local tribes.

Since the initial site tour for the tribes in 1994, the Bureau has met with tribal

government representatives from each of the four local tribes on numerous occasions

in the BLM office and in tribal administration offices. Tours of the Weatherman

sites were conducted twice with government representatives of the Crow and the

Northern Cheyenne Tribes. BLM sought comments repeatedly from all four groups

and have kept them informed of the project status. BLM had numerous letters and

faxes that were sent to the tribes informing them of the project and asking for comments and involvement. We have written comments on file from the tribal governments of the Northern Cheyenne and the Crow. We have verbal comments from the

Eastern Shoshone government and the Northern Arapaho government.

The comment period on the final EA for the Weatherman Draw APD closed December 1, 2000. After the comment period closed several environmental groups requested a meeting on Weatherman Draw. The meeting was held January 17, 2001,

in Billings and Dr. Lawrence Loendorf presented evidence indicating possible links

with prehistoric Apachean peoples, all of whom reside now in New Mexico, Arizona,

Oklahoma, and Alberta. We also had a number of comments on the EA suggesting

that more distant tribes should be involved in consultation. We looked at the range

of tribes with possible prehistoric ties to the Billings area and contacted those

groups. In addition, we were contacted by other groups who wish to consult, but who

are not well documented as ancient residents of the area. In total, we have spoken

with, written to, and provided materials to 26 tribes, including almost all the tribal

governments on the North American Plains.

Question 81b: Given your authority and ability to stop this proposal and knowing

now of its disturbing history, do you have any plans to stop the exploratory drilling

from proceeding?

Answer: On February 5, 2001, the Bureau of Land Management concluded an environmental study that began in 1993 and issued a decision to allow drilling of a

single exploratory well. Several groups requested a review of that decision. The review was signed on May 21, 2001, and upheld the decision to allow the exploratory

well. However, the review can be appealed to the Interior Board of Land Appeals,

and the BLM will not allow any drilling activity to take place until the 30-day appeal period has expired June 23. The Board has the discretion to issue a stay of

drilling activity until it renders a decision. I will, of course, continue to monitor this

issue.

Question 82: Question 6. Under the 1992 Energy Policy Act, the Secretary of the

Interior is authorized to request funding for American Indian Renewable Energy

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Projects. Given the potential for renewable, clean energy production by tribes, will

you seek funding for the American Indian Renewable Energy Project? What is the

Department of Interior’s plan to help tribes develop their renewable resources?

Answer: Funding for American Indian Renewable Energy Projects will be considered within the overall evaluation of economic viability using present and developing technology. Where feasible, these energy sources can contribute in environmentally attractive ways. In addition, for Indian tribes, renewable energy might

provide energy locally more cost effective than by conventional grid service.

As a Department, we are considering how to best develop a plan to help tribes

with all energy resources on Indian lands including renewable resources.

(KIND)

Question 83: Drilling and producing methane gas from coal beds results in vast

quantities of water being pumped to the surface. For instance, there are proposals

to drill up to 70,000 such gas wells in the state of Wyoming alone. These wells

would result in more than one billion gallons of water being pumped to the surface

everyday. Pumping such quantities of water to the surface can impact the water

table, contaminate drinking water supplies, cause flooding, etc. In addition, the

water sometimes has a high salt content that has an adverse impact on plants and

animals. Has a comprehensive analysis of the impacts of pumping such vast quantities of water to the surface been performed. If not, is one planned? Does the Department have a strategy for mitigating possible impacts?

Answer: All of these issues are part of the EISs and EAs being conducted in Wyoming and Montana. Specifically, the impact of water production, disposal, and use

has been analyzed in substantial detail. An EIS is in preparation on this area and

these issues. The final EIS is expected to be completed mid-year 2002. In addition,

all Coal Bed Methane (CBM) wells on Federal leases must have an approved water

management plan prior to approval of the drilling permits. The BLM also requires

State Department of Environmental Quality approvals under the Clean Water Act

for any disposal of produced water.

Question 84: Directional drilling is one of the technologies being touted as a

means of reducing the infrastructure footprint associated with oil and gas drilling,

particularly in regard to drilling in Alaska. However, in some cases industry has

resisted using this technology for drilling on Federal lands in the lower 48 states.

Rather than using directional drilling, the industry is lobbying to increase the density of oil and gas wells allowed on Federal lands. Do you believe the allowable density of oil and gas wells on Federal lands should be increased, or do you think the

industry should be encouraged or required to pursue technologies such as directional

drilling that minimize the industrial footprint and associated environmental impacts?

Answer: The technology for a ‘‘small footprint’’ is applicable in many situations,

both in Alaska and the lower 48 states. I support this technology where needed to

minimize environmental impact and where it can be done technically and with reasonable economics.

Question 85: There are a number of lease stipulations regarding drilling and production on Federal lands that are designed to minimize the impacts on animal wildlife. For instance, in some cases there are prohibitions on production activities during sensitive animal breeding or migration periods. There are industry proposals

that call for relaxing or eliminating such protective measures in the name of increasing production. Do you support relaxing or eliminating these protective measures that are designed to protect animal wildlife?

Answer: Most of the prohibitions to reduce impacts to wildlife populations are applied only to drilling operations when most of the human influence is present. Production restrictions are uncommon. I support continued use of all necessary prohibitions, whether on drilling or production if they are supported by sound science and

provide for the continued existence of viable wildlife populations while allowing for

development of our energy resources.

Question 86: Approximately 95% of the land managed by the Bureau of Land

Management within the Rocky Mountain States of Colorado, Montana, Wyoming,

Utah, and New Mexico are already open to oil and gas leasing and there are extensive ongoing exploration and development activities on these lands already. Can you

provide an estimate of the size of oil and gas reserves on the remaining five percent

of Federal lands not currently available for leasing? How does the size of these projected reserves compare to U.S. total reserves of oil and gas?

Answer: The USGS does not have information about energy resources under Federal lands that are not currently available for leasing. The Energy Act of 2000 requires the Secretary of the Interior to conduct an inventory of energy resources

under Federal lands and the restrictions and impediments to their development.

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The first five priority regions will be completed by November 2002, and estimate

of resources under land available for leasing will be available at that time.

(T. UDALL)

Question 87: Reflecting on the horrible pipeline explosion near Carlsbad, New

Mexico last August that killed 12 people and the Bellingham, Washington gas pipeline tragedy, I want to further ensure that our existing and future gas pipelines

across the U.S. are safe. With that in mind, the Administration and Congress must

strengthen our current oversight program for pipelines in order to enhance safety

and reliability.

As the Secretary of the Interior, please explain how you will take the lead in the

administration and work with Secretaries Abraham and Mineta to provide ideas to

Congress ideas on how to provide maximum safety?

Answer: The Department of Transportation (DOT) has the lead responsibility for

pipeline safety issues. However, the Department of the Interior is strongly committed to working with the DOT on environmental and right-of-way impacts of pipelines on public and Federal lands. In order to better explain the role of pipeline safety to both government and private industry pipeline managers, the DOT’s Office of

Pipeline Safety (OPS) actively participated in the inter-agency/International Right

of Way Association, Pipeline Committee, Pipeline Systems Course. It is becoming increasingly common where pipeline safety is a concern in the application review process to have OPS personnel conduct ‘‘on site’’ public land reviews.

Question 88: I do not see how the BLM can effectively implement its resource

management program in the lower 48 states with the proposed President’s budget.

ThePresident’s BLM budget for Fiscal Year 2001 was $2.1 billion and dropped to

$1.8 billion for Fiscal Year 2002. Although the administration intends to increase

that BLM’s energy and mineral program by $15 million, a large portion of that will

be going toward exploration on Alaska’s North Slope and completion of the BLM’s

land management planning process. That doesn’t leave much money for the BLM

to manage its other programs, and the programs willsuffer tremendously because

of the budget cuts.

Can you provide a breakdown of all the BLM’s programs funding levels between

Fiscal Year 2001 and the President’s budget for Fiscal Year 2002, nationally and

in New Mexico?

Answer: The attached table (appendix B) provides funding changes by account. It

is accurate that the BLM President’s budget shows an overall decrease from Fiscal

Year 2001. However, BLM’s two main operating accounts include an increase from

Fiscal Year 2001. Also, a major portion of the proposed decreases in the budget are

one-time or emergency costs that were provided in Fiscal Year 2001 and not continued in Fiscal Year 2002. For example, $226 million in reductions reflect the elimination of a fire emergency contingency fund [$199.6 million] as well as one-time fire

equipment purchases and a targeted research project [$26.8 million]. Other similar

reductions include $17 million in one-time emergency funding for Great Basin restoration and Grasshopper and Mormon cricket control.

We do not yet have a detailed breakdown of Fiscal Year 2002 funding for New

Mexico or other BLM states. It is expected that New Mexico would share in the requested energy increases as specified in BLM’s Fiscal Year 2002 budget justifications. For example, of the requested increase for land use planning, $217,000 would

be directed to New Mexico for five high priority land use plans. A portion of the

$11.7 million requested increase for oil and gas activities would be directed to high

priority areas in New Mexico such as the San Juan Basin to process additional Applications for Permit to Drill and for implementation of the Energy Policy and Conservation Act. $670,000 of the $1.5 million increase requested for processing additional right-of-ways would be directed to New Mexico. Approximately $7.6 million

would also be used in New Mexico for land acquisition in four critical, specially-designated areas, as well as sufficient resources to prepare for and address wildland

fires.

Question 89: Even at the Fiscal Year 2001 budget levels, staffing levels if BLM

field offices such a Farmington, New Mexico appear severely deficient to manage

and implement its resources objectives as well as its public relations program.

How do you intend to maintain or ramp-up the appropriate staffing levels for

these program areas, especially with fire management and suppression given the

proposed budget cuts?

Answer: The BLM Full Time Equivalency [FTE] request for Fiscal Year 2002 is

10,771 FTE, the same as Fiscal Year 2001. This level represents an increase of 833

FTE [8%] over the FTE actually used in Fiscal Year 2000. The Fiscal Year 2002

budget request also presents several internal adjustments in FTE levels to address

the highest priorities. For example, an additional 40 FTE will be directed to priority

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energy activities, 17 FTE will be used to make more progress in land use planning

and 11 FTE will help process additional right-of -ways.

A significant number of these positions will also help BLM to ensure a full readiness capability for wildland fire management. The BLM is moving toward increasing

staffing in the wildland fire program in Fiscal Year 2001 by 656 FTE to continue

progress in implementing the National Fire Plan prepared after the Fiscal Year

2000 fire season.

The Fiscal Year 2002 budget request for wildland fire management is more than

double historical funding levels. At the proposed level, emphasis will continue on

full implementation of the National Fire Plan, including building capacity in preparedness, ensuring a responsive operations program, and sustaining support for

rural fire districts.

(INSLEE)

Question 90: Will the Administration withhold funding of the Hanford Reach National Monument in order to attempt to drill for natural gas on the monument, or

change the boundaries of the monument?

Answer: I have not indicated an intention to open Monuments to energy exploration or drilling, nor have I recommended withholding funds to do so. On March

28th, letters were sent to elected officials in Washington State requesting their (and

their constituents) ideas about how they would like to see their National Monuments managed and for what uses. Responses to those letters will be collected and

analyzed and determinations will be made as to recommended changes.

(M. UDALL) Withdrawn Areas

Question 91: The Cheney task force recommended that the President direct you,

as Secretary of the Interior, to review public lands that are now withdrawn from

oil and gas leasing, and to ‘‘consider modifications where appropriate.’’ Will you be

doing that?

Answer: Yes. This will be done, primarily through the Energy and Policy Conservation Act section 604 studies and the land use planning process.

Question 92: As I understand it, right now about 16 million acres of BLM lands

in Colorado are open to oil and gas leasing, while about 600,000 acres - that is,

about 3.5% of the total - are withdrawn from leasing. Are those numbers about

right?

Answer: The BLM Colorado administers 12.6 million subsurface acres that are

open to oil and gas leasing. About one million acres are withdrawn from leasing,

including 145,000 acres of wilderness and 615,000 acres of wilderness study areas.

Question 93: Will you be reviewing lands in Colorado that BLM is now managing

as wilderness study areas? If so, which ones?

Answer: We will be reviewing all lands BLM manages in priority oil and gas basins under the EPCA section 604 process. However, until Congress determines otherwise, wilderness study areas will be managed according to the Wilderness Act of

1964, which states in part A...so as not to impair the suitability of such areas for

preservation as wilderness, subject, however, to the continuation of existing mining

and grazing uses and mineral leasing...@

Question 94: In addition to the formal wilderness study areas, there are a number

of areas in Colorado that BLM has been re-inventorying to see if they might have

wilderness potential. How will the energy plan affect those areas?

Answer: In 1997 and 1998 the BLM Colorado conducted in-depth roadless reviews

in six western slope areas. After consultation with filed offices, on-the-ground tours,

and review of hundreds of public comments, 167,000 acres in the Vermillion, South

Shale Ridge, and Bangs Canyon areas were identified as containing wilderness values; land use plan amendments were prepared. When funding is available, BLM will

proceed with a land use classifications. In addition we expect the result of the EPCA

review to be factored into the land use planning process. To the extent that land

use planning recommendation could result in additional restrictions on land use development, they will be evaluated pursuant to Executive Order 13211- ‘‘Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution or Use.—

Question 95: What other Colorado withdrawals will you be reviewing?

Answer: The only withdrawn land that is closed to oil and gas leasing is the U.S.

Air Force Academy. The BLM is currently reviewing about 200,000 acres of Bureau

of Reclamation withdrawn lands and opening those lands no longer needed for water

project purposes. However, these lands have always been open to oil and gas leasing.

Question 96: How will you decide what modifications to these withdrawals would

be ‘‘appropriate—?

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Answer: As noted in question 95 above, the only withdrawn lands in Colorado

closed to oil and gas leasing are withdrawn to benefit the U.S. Air Force Academy.

When withdrawn lands are returned to management by the BLM, land use plans

are amended to address resource issues, concerns and future management direction.

Question 97: How will you go about consulting with people in Colorado about this?

Answer: Land use planning and compliance with NEPA are public processes. The

BLM routinely notifies and solicits participation by our public through the NEPA

scoping process, which includes Federal Register notices, press releases, letters to

interested citizens, and open houses or meetings.

Question 98: What modifications can you make administratively, and which would

require legislation?

Answer: In general, withdrawn by legislation and proclamation (e.g., National

Conservation Area’s, National Monuments, Military and power site withdrawals,

Wilderness, Wilderness Study Areas and Wild Rivers) from oil and gas leasing

would require legislation to allow leasing. Any withdrawals executed through land

use planning can be modified through a new or amended land use plan.

Question 99: Am I right in understanding that relaxing restrictions on leasing in

wilderness study areas can only be done through legislation?

Answer: Yes. Mineral leasing on the overwhelming majority (98%) of BLM wilderness study areas is restricted by Act of Congress. To change that restriction requires

legislation.

These are a small number of WSA’s (2%) that were identified by BLM through

the land use planning process. The Secretary has the discretion to reconsider these

section 202 WSA’s. Release of these WSA’s would require a land use plan amendment and associated NEPA analysis.

Question 100: Wilderness Study Areas - Just before he left office, the first President Bush sent Congress a final report on possible BLM wilderness. It named 54

Colorado wilderness study areas and recommended that more than 346,000 acres in

Colorado be designated as wilderness. Congress dealt with some areas in the 1993

Colorado wilderness bill and later legislation. But the others are still wilderness

study areas, and other areas have been proposed as well. I understand the task

force considered urging the Administration to encourage Congress to decide which

BLM and Forest Service wilderness study areas should be protected as wilderness.

That evidently is not in the final report. But don’t you think that it would be good

to get this resolved, at least in Colorado, by passing a BLM wilderness bill?

Answer: The final decision as to whether or not a wilderness study area becomes

a designated ‘‘Wilderness Area’’ under the authority of the Wilderness Act of 1964

is made by Congress. I support Congress resolving these issues in Colorado and

throughout the West.

Leasing Stipulations

Question 101: The task force also recommended that the President direct you, as

Secretary, to review the stipulations on existing oil and gas leases, and to modify

them as appropriate. Will you be doing that?

Answer: Yes. The review is proceeding. The EPCA study and the related Green

River Basin study include a component where existing lease stipulations are analyzed.

Question 102: Will you be doing this in a generic way, or on a case-by-case basis?

Answer: BLM may make some generic changes, but case specific stipulations will

still be applied were warranted.

Question 103: What kinds of modifications might be considered?

Answer: Duration of seasonal stipulations might be amended; size of others might

be reduced; and terms of prohibited activities might be modified. BLM anticipates

the EPCA study to provide valuable information on both the effectiveness of new

and existing stipulations as well as a review of the impact of the stipulations on

energy and mineral development. It will provide a baseline for monitoring effectiveness of the stipulations.

Question 104: Do you know if any Colorado leases are likely to be modified?

Answer: It is unknown at this time whether any Colorado leases are likely to be

modified.

Question 105: How will you go about consulting with people in Colorado about

this?

Answer: We have pledged to include public notification and consultation in the

modification of lease stipulations. The National Energy Policy recommends that the

President direct the Secretary of the Interior to ‘‘review public land withdrawals and

lease stipulations, with full public consultation, especially with the people in the region, to consider modifications where appropriate.—

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Canyons of the Ancients Monument

Question 106: Will you be considering any changes to the boundaries or the management of the new Canyon of the Ancients National Monument?

Answer: On March 28th, letters were sent to elected officials in Washington State

requesting their (and their constituents) ideas about how they would like to see

their National Monuments managed and for what uses. Responses to those letters

will be collected and analyzed and we will consider recommended changes.

(HOLT)

Question 107: It appears the R&D funding for renewable energy and funding for

land conservation proposed in the Administration’s energy plan all rely on revenues

generated from the oil and gas leases in the Arctic Refuge. In the event that Congress does not allow drilling in the 1002 Area, what contingencies does the Administration propose for making up for these lost funds?

Answer: The research and development funding from ANWR leasing was projected to occur in 2004, and our understanding is that discretionary funds are also

proposed in the President’s Budget for renewable research and development, independent of ANWR royalties. However, the research and development of renewable

energy is a Department of Energy program, so the Department of Energy may be

able to provide a more complete answer about funding these programs.

The proposal to fund land conservation from royalties collected on ANWR production is part of a recommendation in the National Energy Policy, but is not part of

the budget request for 2002. We are proceeding with planning efforts for implementing the National Energy Policy recommendations and hope to be able to provide more detail in the future.

The Department and the Administration remain optimistic about the potential of

ANWR to provide for our nation’s future energy needs. The proposal in the 2002

budget, and any proposals in future budgets, will take several years to come to fruition.

Question 108: The President recently renewed his commitment to maintaining a

moratorium on offshore oil drilling off the coast of California. In the recent hearing

before the Resources Committee, the Secretary stated she would abide by the existing moratoria. Is the Secretary willing to abide with the moratorium on offshore

drilling off of the coast of New Jersey?

Answer: We appreciate the longstanding history, context, and concerns associated

with OCS moratoria and presidential withdrawals. The Administration has no plans

to undo this framework.

Question 109: The plan proposes providing additional economic incentives for companies to develop reserves in frontier areas and using deep gas production. First,

does this imply that these reserves would not be developed without these incentives?

Second, every industry assumes much of their own risk, especially when reporting

record profits. Why are we proposing that the taxpayers reduce or eliminate the risk

of this exploration?

Answer: The President’s National Energy Policy calls for the Secretary to consider

economic incentives for environmentally sound offshore oil and gas development

where warranted by specific circumstances which includes exploring opportunities

for royalty reduction consistent with ensuring a fair return to the public where warranted. We estimate that about one billion additional barrels of oil equivalent could

be developed from the unleased resource base due to royalty relief. Absent this relief, these resources would not be developed at prices expected to prevail over the

next 10 years. In addition, some fields that would be developed, but at a later time

without royalty relief, will be developed sooner in the presence of relief from royalties.

Taxpayers stand to gain considerably by the increased production, in the form of

less vulnerability to oil supply disruptions, greater domestic natural gas reserves,

and lower domestic oil and gas prices. In short, for commodities such as oil and gas,

the value to the Nation of each unit produced domestically is worth more than its

market price. Few products generated in other industries can make this same claim.

So, reducing the risk of exploration to oil and gas companies benefits all the citizens

of the Nation, especially when the result is additional domestic oil production that

replaces insecure supplies of foreign oil, and additional domestic gas production that

lowers domestic gas prices. Further, our royalty relief program is not open-ended.

Royalty relief is granted only when prices are below the thresholds specified in the

leases. If prices exceed the threshold values, producers pay royalties and the production applies against their royalty suspension volume.

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(SOLIS)

Question 110: What private organizations and businesses did the Administration

consult when creating the National Energy Policy report? Will you submit a list to

the Committee for our information?

Answer: The Department of the Interior did not request information or views from

private organizations and businesses in developing options for consideration in the

National Energy Policy effort.

Question 111: The Federal Energy Regulatory Commission (FERC) has clearly acknowledged that energy prices in California are not ‘‘just and reasonable.’’ Yet according to FERC Commissioner William Massey, FERC is not willing to ensure that

consumers are protected from these outrageous rates. In light of these facts, why

didn’t the National Energy Policy Development (NEPD) Group direct FERC to exercise their responsibility and regulate skyrocketing wholesale prices in the West?

Answer: Competition, if implemented effectively, will benefit consumers. The California deregulation plan, unfortunately, was severely flawed and counter-productive

in that it did not allow the market to work. In order for electricity markets to function, there must be adequate supplies to meet demand, and there must be efficient

means to deliver the goods to the electric power consumers. The major part of the

problem of providing adequate supplies in California was locking in enough longterm contract power to provide a strong incentive to increase generating capacity

and supply; this was exacerbated by the lack of new local generating facilities and

the unusually low amount of hydropower generation due to the extensive regional

drought. The problem with regulatory action—establishing price caps to lower the

price of electricity in this market is that such caps will do nothing to increase, and

may lower, the amount of electricity produced. At the same time the lower prices

will increase the amount of electricity consumers use which is immediately and directly counterproductive.

The Administration’s view of this unfortunate situation is that it is important for

the market to continue to send price signals to consumers that more conservation

is needed—especially in the immediate term, and to potential suppliers that more

power needs to be produced in both the short and longer terms. This approach appears to be working since conservation is way up in California, and substantial new

investment in new and expanded generating facilities is extensive. From FERC actions to date, it appears that there has been inappropriate overpricing of power in

some specific cases; FERC appears to be dealing with this, and has ordered refunds

where it has determined that overcharging took place.

Question 112: Most of the NEPD Group proposals are long term in scope and will

not impact the consumer for many years to come. My constituents are dealing with

an energy crisis today. How does the NEPD group propose to relieve this burden

in the near future?

Answer: President Bush has directed us to expedite permits for new power production and to work as good partners to reduce our electricity use at Federal facilities, especially during the peak periods this summer. The President has also instructed us to work with Congress in increasing funding for the Low Income Home

Energy Assistance Program (LIHEAP) and allow use of oil and gas royalties for that

program when oil or gas reaches certain prices.

Question 113: Extensive drilling will take place if this proposed National Energy

Policy becomes a reality. How will the Administration ensure local voices are heard

and taken into consideration when making decisions about drilling? How will you

ensure that these activities are not taking place disproportionately in minority communities?

Answer: Leasing decisions are made only after extensive planning with ample opportunity for public participation. If applicable, we will proceed in light of Executive

Order 12898 February 11, 1994 on Environmental Justice. Agencies must analyze

the environmental effects (ie, human health and economic and social effects) of their

actions—including their effects on minority communities and low-income communities—when such analysis is required by NEPA. Also, agencies must provide opportunity for community input in the NEPA process, including identifying potential effects and mitigation measures in consultation with affected communities and improving the accessibility of meetings, crucial documents and notices.

Question 114: The Bush Administration froze funds for the Low Income Heating

and Energy Assistance Program (LIHEAP). The NEPD Group has proposed making

the future of the program contingent on oil/gas royalties. In fact, the Groups recommendations go as far as to direct the Secretary of Energy to raid weatherization

programs to fund LIHEAP. This program directly affects my constituents - people

in dire need. Why would your group recommend risking funds for this program

when it is so worthwhile.

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Answer: The NEPD Group recommended that the President take steps to mitigate

the impacts of high energy costs on low-income consumers. The President understands the real impacts of high energy prices on families. As part of its support for

LIHEAP, the National Energy Policy recommends that Congress enact legislation

that would allow the use of oil and gas royalty payments to bolster LIHEAP funding

whenever oil and natural gas prices exceed certain prices. The Administration wants

to work with the Congress to determine the appropriate trigger prices or the formula for determining them.

Question 115: The NEPD Group recommends what looks to be national electricity

deregulation to increase competition. In light of the FERC’s inability to live up to

its responsibilities to ensure ‘‘just and reasonable’’ prices, how can we ensure that

the price gouging of the West doesn’t spread nationwide?

Answer: It is difficult to draw a general conclusion about deregulation from the

California example. The risk that the California experience will repeat itself is low,

since other states have not modeled their retail competition plan on the California

model.

Question 116: The Federal budget proposed by President Bush cut research for

renewables, which would increase electricity generation and protect our environment. At the same time, the NEPD group recommends an increase in the Administration’s requested funding for renewable research. How can you explain this discrepancy?

Answer: One NEPD recommendation was that the President should direct the

Secretary of Energy to conduct a comprehensive review of current funding and historic performance of renewable and alternative energy research. The President is

committed to increasing America’s use of renewable and alternative energy. Additionally, the Administration has found that congressional action to add significant

energy efficiency and renewables funding above the President’s Fiscal Year 2002

Budget request on both the Fiscal Year 2002 Energy and Water and Interior and

Related Agencies Appropriations bills, is consistent with and largely supportive of

the NEPD recommendations. The Administration looks forward to working with

Congress to ensure allocation of resources to those programs that most effectively

meet performance-based criteria, and to fund the most efficient program alternatives by reducing lower priority program resources.

Question 117: According to scientists throughout the world, your recommendations are sure to cause an increase in global warming. Yet, you make no mention

about the climate in your policy discussion. Was this issue addressed during the

NEPD Group’s meetings? How will you ensure that the policy’s actions don’t increase greenhouse gas emissions?

Answer: The primary focus of the Administration on global warming is being addressed through the cabinet-level Global Climate Change Task Force which is currently assessing the science and potential actions to address the issue. While global

warming was discussed in the processes of developing the National Energy Policy,

the NEPD consciously deferred dealing with this issue because of the more comprehensive analysis on global climate change being conducted. There are a number

of major elements in the National Energy Policy, however, that will help address

global climate change including the major emphases on energy conservation, natural

gas, clean coal technology, nuclear energy, and alternative energy sources such as

wind, geothermal and solar power.

Question 118: One of the proposals that the NEPD Group put forth requires the

Secretary of Transportation to provide Corporate Average Fuel Economy (CAFE)

standards that will not negatively affect the auto industry. The Report says nothing

about how the CAFE standards affect the environment, or about the Environmental

Protection Agency’s participation in the determination of those standards. How will

you ensure that the Secretary of Transportation takes into consideration the environmental impacts of the CAFE standards?

Answer: This question relates directly to a recommendation made by the NEPD

that the President has tasked to the Secretary of Transportation. The Secretary of

Transportation must craft CAFE standards that increase efficiency without adversely affecting the automotive industry. The President believes that environmental protection and economic growth are not mutually exclusive.

Question 119: The NEPD Group’s recommendations strongly support the expedited use of nuclear energy. How can the Administration endorse such a plan when

we have not yet found a safe way of disposing of spent nuclear rods?

Answer: I will have to defer to the Department of Energy on this issue.

(WILSON) Bureau of Reclamation and the Middle Rio Grande Conservancy District

Question 120: As you know, the New Mexico office of the Bureau of Reclamation

loaned the Middle Rio Grande Conservancy District money for work on the Middle

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1Section 213, Reclamation Reform Act of 1982 (96 Stat. 1269; 43 U.S.C. sec. 390mm), paragraph (c), states: (c) Nothing in this title shall be construed as authorizing or permitting

lump sum or accelerated repayment of construction costs, except in the case of a repayment contract which is in effect upon the date of enactment of this Act and which provides for such lump

sum or accelerated repayment by an individual or district.

Rio Grande Project in 1951 and the San Juan–Chama Project; both projects involved

District irrigation improvements and water. The Middle Rio Grande Conservancy

District paid off the first loan last year. It recently tried to pay off the San Juan– Chama loan, but the Bureau refused to accept the payment and claimed indefinite

control over these projects. This in effect Federalizes the control of local water

rights, whether intended or not. Will you direct the local office of the Bureau to accept complete repayment for the loan?

Answer: The Reclamation decisions carried out by the local office were discussed

and supported by the highest levels of Reclamation and the Department. The Reclamation Act does not authorize Reclamation to issue loans. Rather, in the Reclamation Act, Congress authorized the funding and construction of Federal Reclamation

projects and provided that the dams and reservoirs that make up those Federal

projects would remain in Federal ownership until Congress provided otherwise.

Thus, when Congress authorized the Federal Middle Rio Grande Project in 1948, it

did not provide a situation where lands and facilities would be held as collateral

for a loan, but rather was creating a Federal Reclamation project which would remain in Federal ownership until Congress made other provision. Consequently, the

repayment of construction costs is not the equivalent of a mortgage payment but

instead is the price paid for water delivery from Federal facilities.

Additionally, the Reclamation laws impose conditions upon those who enter into

contracts for Reclamation water. Those conditions include price and acreage limitations in order to control the benefits provided by Reclamation projects and ensure

they are provided to the largest number of people possible. Therefore, Congress also

placed stringent conditions upon the repayment of construction obligations and the

termination of price and acreage limitations.

In 1951, the Middle Rio Grande Conservancy District (MRGCD) contracted to

repay, without interest, the reimbursable costs of the Middle Rio Grande Project.

In 1963, that contract was amended to include repayment, without interest, of costs

related to a supplemental water supply from the San Juan–Chama (SJ–C) Project.

Acting pursuant to authority provided to the Secretary by Congress in 1962, Reclamation constructed the SJ–C Project to furnish irrigation water to Native Americans, Pueblo lands, and other lands within MRGCD. Additionally, the SJ–C Project

provides water for municipal and industrial purposes and recreation and fish and

wildlife benefits in New Mexico. The SJ–C Project is a transbasin diversion which

helps to satisfy New Mexico’s entitlement to water from the Colorado River and

helps meet the increasing demands in the Rio Grande basin.

In 2000, MRGCD completed repayment for the Middle Rio Grande Project portion

of its contract but has until 2022 to repay the approximately $2.4 million balance

on the San Juan–Chama Project portion.

On May 14, 2001, MRGCD attempted to present Reclamation with a check for the

remainder of San Juan–Chama Project costs. After consultation with the Department’s Solicitors, Reclamation declined to accept payment because Section 213 1 of

the Reclamation Reform Act of 1982 (RRA) precludes lump sum or accelerated repayment by water users unless specifically provided for in a contract existing prior

to enactment of the RRA. MRGCD’s contract requires repayment in 50 consecutive

annual installments ending in 2022 and makes no provision for lump sum or accelerated repayment. Legislative action is therefore necessary before Reclamation can

accept complete repayment.

MRGCD has stated publicly that its objective is to terminate Contract No. I78r–

243 and obtain title to Project lands and facilities in order to remove the Federal

presence from the Middle Rio Grande Project. An exemption from Section 213 authorizing early payout would not accomplish this objective because Reclamation law

requires that title to project lands and facilities must remain in the name of the

United States until Congress provides otherwise.

Question 121: The local Bureau of Reclamation office has refused to accept repayment of a Federal loan from the Middle Rio Grande Conservancy District. This defies common sense. This position is unacceptable and may be contrary to law. Is this

the official position of the Bush Administration or reflection of the local Bureau of

Reclamation office policy? Do you support this policy or will you reverse the position

of the local Bureau of Reclamation?

Answer: Reclamation and I share your view that interest-free loans should be recovered quickly whenever possible.

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Section 203 [Middle Rio Grande Project], Flood Control Act of 1948 (62 Stat. 1179)

In carrying out the provisions of this Act, the Secretary of the Interior shall

be governed by and have the powers conferred upon him by the Federal reclamation laws (Act of June 17, 1902, 32 Stat. 388), and Acts amendatory

thereof or supplementary thereto, except as is otherwise provided in this

Act or in the reports referred to above. This Act shall be deemed a supplement to said Federal reclamation laws.

Section 213 of the Reclamation Reform Act of 1982 (RRA) appears to leave Reclamation no administrative remedy to solve this problem without Congressional assistance. We believe that legislation exempting the District from Section 213 is necessary before Reclamation can accept their lump sum payment.

Even though a statutory exception from Section 213 and other provisions of the

RRA could facilitate prepayment, such an exception alone will not achieve the District’s publicly stated desires to terminate its contract and obtain title to project facilities.

Title to project facilities does not automatically transfer to the District when their

contract is paid in full. Section 6, Reclamation Act of 1902 (32. Stat. 389, 43 U.S.C.

sec. 491, 498), states:

Provided, that when the payment required by this act are made for the

major portion of the lands irrigated from the waters of any of the works

herein provided for, then the management and operation of such irrigation

works shall pass to the owners of the lands irrigated thereby, to be maintained at their expense under such form of organization and under such

rules and regulations as may be acceptable to the Secretary of the Interior:

Provided, that the title to and the management and operation of the reservoirs and works necessary for their protection and operation shall remain

in the Government until otherwise provided by Congress.

This is also reiterated in Article 29 of the District’s contract, which specifically

states: ‘‘Title to all works constructed by the United States under this contract and

to all such works as are conveyed to the United States by the provision hereof, shall,

as provided in Article 26, be and continue to be vested in the name of the United

States until otherwise provided for by Congress, notwithstanding the transfer hereafter of any such works to the District for operation and maintenance.’’ I do not believe that current law allows this prepayment. Our management actions must continue to comply with the law.

Question 122: If the reason for the Bureau’s policy is based on statute, it clearly

has unintended consequences. Will you provide Congress with specific language that

will allow us to correct this situation for the Middle Rio Grande Conservancy District?

Answer: We appreciate your willingness to seek a legislative remedy and are willing to work with your staff and the District to find a solution for this situation. Reclamation believes that legislation would be required in order to terminate MRGCD’s

contract without terminating water delivery. Reclamation also believes that legislation would be required before title to project lands and facilities could be transferred

from the United States to MRGCD.

Termination of the contract and transfer of title to project facilities would reduce

the Federal presence in the Middle Rio Grande Project. Termination of the contract

would terminate MRGCD’s right to receive water from both the Middle Rio Grande

and the San–Juan Chama projects unless Congress deauthorized the projects and

removed them from Reclamation law. Legislation which would fully accomplish this

objective would be complex.

An exemption from Section 213 of the Reclamation Reform Act of 1982 (RRA)

alone would not relieve MRGCD of all of the acreage limitation and reporting requirements of the RRA. Despite early payout, MRGCD would remain subject to

acreage limitation and reporting requirements unless the legislation also exempted

MRGCD from other portions of the RRA. A comprehensive exemption from RRA requirements might be viewed as precedent-setting.

The United States holds water rights for the six Native American Pueblos (Acts

of February 14, 1927, March 13, 1928, August 27, 1935, and June 30, 1938). These

rights are satisfied first through natural flow of the Rio Grande, but any deficiencies

are made up through Rio Grande water stored in El Vado Reservoir under a 1981

agreement. Water is delivered to the Pueblos through facilities of the Middle Rio

Grande Project. The Secretary of the Interior has a trust responsibility to the Pueblos associated with the Pueblos entitlement to receive water through project facilities to irrigate lands which were reclaimed under the Middle Rio Grande Project.

A portion of the Pueblo right has first priority over any water right lands within

MRGCD, and the water right for reclaimed Pueblo lands has priority equal to water

delivered to other water right lands within MRGCD. Additionally, because the MidVerDate 11-MAY-2000 13:13 Aug 24, 2001 Jkt 000000 PO 00000 Frm 00258 Fmt 6601 Sfmt 6621 J:\DOCS\70888.TXT HRESOUR2 PsN: HRESOUR2
253

dle Rio Grande Project facilities must continue to deliver Pueblo water, a portion

of the Federal interest in the Middle Rio Grande facilities would survive title transfer.

The reach of the Middle Rio Grande from which MRGCD obtains its water supply

is considered critical habitat for the endangered Rio Grande silvery minnow. In

1999 a coalition of environmental groups filed suit against the United States and

MRGCD alleging violations of the Endangered Species Act (ESA) in the operation

of the Middle Rio Grande Project. Authorization of early payout could impact the

outcome of ongoing litigation in the Federal District Court for the District of New

Mexico (CIV 99–1320–JP/RLP–ACE, Rio Grande Silvery Minnow vs. J. William

McDonald, et al., and Middle Rio Grande Conservancy District)

Many municipal providers, such as the City of Albuquerque, receive a municipal

and industrial water supply from the SJ–C Project and have repayment contracts

with Reclamation similar to MRGCD’s contract. Additionally, it would be inconsistent if MRGCD were the only entity to receive title transfer to any SJ–C Project

facilities by repaying its portion of the construction obligation.

ATTACHMENT A

OCS Policy Committee Meeting (May 24, 2001)

The OCS Policy Committee is an independent advisory committee chartered under

the Federal Advisory Committee Act to give the Secretary of the Interior advice on

discretionary issues related to implementation of the OCS Lands Act. The members

represent Governors of coastal States, local government, environmental interests,

and the offshore oil and gas, minerals and fishing industries.

In October 2000, the OCS Policy Committee established a Natural Gas Subcommittee to independently review and evaluate information on natural gas, and

then provide an assessment of the contribution the OCS can make to meeting the

short term and long term natural gas needs of the United States within the framework of a national energy policy. The subcommittee forwarded its report with accompanying recommendations for consideration of the OCS Policy Committee on

April 20, 2001.

Action Taken: The OCS Policy Committee on May 24, 2001 amended the Subcommittee recommendations and adopted the resolution to forward its amended recommendations to the Secretary of the Interior.

OCS POLICY COMMITTEE

Resolution of the OCS Policy Committee on Recommendations based on the Report

from the Subcommittee on Natural Gas

In consideration of the duty of the Outer Continental Shelf (OCS) Policy Committee to provide policy guidance to the Secretary of the Interior on issues related

to the management, protection, and development of mineral resources on the OCS,

the following resolution is hereby adopted in Alexandria, Virginia on this 24th day

of May, 2001;

WHEREAS, growth of U.S. consumptive demand for natural gas is currently of

national interest, with projections as high as 30 trillion cubic feet (Tcf) of natural

gas annually by the year 2015, representing a 50 percent increase over current national consumption;

NOTING that if the offshore is expected to maintain the same percentage contribution towards future U.S. gas consumption, the annual gas production from Federal waters will have to be increased to reach about 7 to 8 Tcf from its current level

of 5 Tcf;

WHEREAS, the OCS Policy Committee established a Subcommittee to independently review and evaluate information on natural gas, and then provide an assessment of the contribution the OCS can make to meeting the short term and long

term natural gas needs of the United States within the framework of a national energy policy; and

WHEREAS, the Subcommittee on Natural Gas, after careful review and due consideration of significant factors including resource, production, and demand projections; infrastructure; alternatives; the environmental safety record of, and current

technologies and procedures used by, the offshore industry; leasing moratoria; safety

and operational considerations unique to natural gas; and social impacts; has prepared a report that documents its review and offers recommendations; but does not

evaluate energy, fuel, or building efficiencies and the roles these may play in the

nation’s energy needs over the next several decades; and

WHEREAS, the report of the Subcommittee will help guide the Secretary of the

Interior and the Minerals Management Service (MMS) in identifying the role of the

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OCS in addressing the natural gas needs of the nation by identifying potential

issues and policy options;

NOW, THEREFORE BE IT RESOLVED by the OCS Policy Committee that the

attached recommendations based on the Report of the Subcommittee on Natural Gas

are approved and adopted by the OCS Policy Committee; and

Further, Be It Resolved, that the Secretary of the Interior is urged by the OCS

Policy Committee to take timely action to implement the recommendations of this

Committee.

Outer Continental Shelf Policy Committee

Chairman DONALD F. Oltz, Jr.

OCS POLICY COMMITTEE RECOMMENDATIONS BASED ON THE REPORT FROM THE

SUBCOMMITTEE ON NATURAL GAS

MAY 24, 2001

After consideration of the available information concerning the supply and demand for energy in the U.S., the Policy Committee finds that natural gas should

be considered as a significant part of an energy base, which includes alternatives

and conservation programs. Recognizing that natural gas is only a portion of a national energy policy, the Policy Committee makes the following recommendations:

• The Outer Continental Shelf (OCS) should be viewed as a significant source for

increased supply of natural gas to meet the national demand for the long term.

• Congressional funding to MMS and other critical agencies such as Fish and

Wildlife Service, National Marine Fisheries Service, DOE, and EPA, should be

assured to allow staff to accomplish the work necessary to increase production

of natural gas in an environmentally sound manner from the OCS.

• Future production will have technical and economic challenges; therefore, following on the success of the deep water royalty relief program, MMS should develop economic incentives to encourage new drilling for natural gas in an environmentally sound manner in deep formations, subsalt formations, and in deep

water. Such incentives should be considered for both new leases and existing

leases to maximize the use of the existing natural gas infrastructure on the

OCS.

• The MMS, in cooperation with industry, should encourage increased natural gas

production in an environmentally sound manner from existing OCS leases.

• The Policy Committee supports the existing 5-year leasing program. However,

the leasing process can be improved with increased congressional funding for

mitigation, including impact assistance funds, revenue sharing, and local participation in the decisionmaking process.

• Encourage congressional funding for additional education and outreach regarding the leasing program.

• With regard to improving the leasing process, the Policy Committee also recommends that MMS:

* Include the mitigation of local social, cultural, and economic impacts within

its policy determinations and recommendations.

* Consider how the Bureau can restructure its decisionmaking process to provide for greater input from local communities, including the opportunity for

MMS, the industry, and local residents to attempt to reach agreement on controversial matters and how they should be adjusted, remedied, or mitigated—

at specific times and places that various activities occur.

* Conduct a comparative assessment of environmental risk between offshore

and onshore production, where onshore reserves exist in the same area as offshore reserves.

* Encourage operators to provide natural gas to the local communities in all

areas.

• Specifically in Alaska,

* Give special consideration to local, social, cultural, and economic impacts in

northern Alaskan communities, in light of the unique subsistence culture in,

and the remoteness of, these communities.

* Adopt as a resource tool the 1994 NRC Committee report entitled ‘‘Environmental Information for Outer Continental Shelf Oil and Gas Decisions in

Alaska’’ (National Academy Press, 1994).

• The MMS, partnering with DOE, should expand cooperative research with other

agencies and industry seeking technical solutions to leading edge issues such as

seismic imaging of subsalt areas and drilling in deep formations.

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• The MMS, in cooperation with DOE, should encourage international cooperation

in development of gas hydrates in an environmentally sound manner, with a

goal of a pilot program in place within 10 years.

• A gas pipeline from Alaska to the lower 48 States would favorably encourage

an increase in natural gas production by creating favorable economics for Federal OCS production in Alaska. The Policy Committee recommends that DOI

work with other agencies to expedite all appropriate permit reviews for such a

pipeline.

• To help develop information and enhance an informed public debate on whether

or not there are grounds and support for a limited lifting of moratoria in existing moratoria areas, the MMS in consultation with industry and affected states,

should identify the 5 top geologic plays in the moratoria areas, and if possible,

the most prospective areas for natural gas in the plays that industry would likely explore if allowed. The following process would be used:

* Encourage congressional funding to MMS for the acquisition of seismic data

to assist in narrowing down prospective areas. It is important that these data

be non-proprietary, which would be the case if acquired exclusively by MMS.

* Encourage congressional funding for environment and social/human impacts

studies for broad based or specific to 5 prospective geological plays.

* Establish a site-specific stakeholder consultation process that would permit

a sharing of information and discussion of concerns regarding the pilot areas.

• Although the following are not under the purview of the MMS and the Policy

Committee, it is recommended that a national energy policy consider:

* Continuing to expand and develop the national pipeline infrastructure, looking at corridor access, environmental, safety and regulatory issues, and capacity.

* Encouraging dual fuel capacity for new electricity generating plants.

* Encouraging the review by the Administration of cost-effective tax incentives

to increase the production of natural gas.

* Encouraging conservation and increasing efficiency in the use of natural gas,

as a part of a national energy policy portfolio.

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