```

[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

 
     H.R. 1229, ``PUTTING THE GULF BACK TO WORK ACT''; H.R. 1230, 
  ``AMERICAN OFFSHORE LEASING NOW ACT''; AND H.R. 1231, ``REVERSING 
              PRESIDENT OBAMA'S OFFSHORE MORATORIUM ACT''

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

                          LEGISLATIVE HEARING

                               before the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                                 of the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                        Wednesday, April 6, 2011

                               __________

                           Serial No. 112-20

                               __________

       Printed for the use of the Committee on Natural Resources

         Available via the World Wide Web: http://www.fdsys.gov
                                   or
          Committee address: http://naturalresources.house.gov

                  U.S. GOVERNMENT PRINTING OFFICE
65-600                    WASHINGTON : 2011
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20402-0001

                     COMMITTEE ON NATURAL RESOURCES

                       DOC HASTINGS, WA, Chairman
             EDWARD J. MARKEY, MA, Ranking Democrat Member

Don Young, AK                        Dale E. Kildee, MI
John J. Duncan, Jr., TN              Peter A. DeFazio, OR
Louie Gohmert, TX                    Eni F.H. Faleomavaega, AS
Rob Bishop, UT                       Frank Pallone, Jr., NJ
Doug Lamborn, CO                     Grace F. Napolitano, CA
Robert J. Wittman, VA                Rush D. Holt, NJ
Paul C. Broun, GA                    Raul M. Grijalva, AZ
John Fleming, LA                     Madeleine Z. Bordallo, GU
Mike Coffman, CO                     Jim Costa, CA
Tom McClintock, CA                   Dan Boren, OK
Glenn Thompson, PA                   Gregorio Kilili Camacho Sablan, 
Jeff Denham, CA                          CNMI
Dan Benishek, MI                     Martin Heinrich, NM
David Rivera, FL                     Ben Ray Lujan, NM
Jeff Duncan, SC                      John P. Sarbanes, MD
Scott R. Tipton, CO                  Betty Sutton, OH
Paul A. Gosar, AZ                    Niki Tsongas, MA
Raul R. Labrador, ID                 Pedro R. Pierluisi, PR
Kristi L. Noem, SD                   John Garamendi, CA
Steve Southerland II, FL             Colleen W. Hanabusa, HI
Bill Flores, TX                      Vacancy
Andy Harris, MD
Jeffrey M. Landry, LA
Charles J. ``Chuck'' Fleischmann, 
    TN
Jon Runyan, NJ
Bill Johnson, OH

                       Todd Young, Chief of Staff
                      Lisa Pittman, Chief Counsel
                Jeffrey Duncan, Democrat Staff Director
                 David Watkins, Democrat Chief Counsel
                                 ------                                

              SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

                       DOUG LAMBORN, CO, Chairman
               RUSH D. HOLT, NJ, Ranking Democrat Member

Louie Gohmert, TX                    Peter A. DeFazio, OR
Paul C. Broun, GA                    Madeleine Z. Bordallo, GU
John Fleming, LA                     Jim Costa, CA
Mike Coffman, CO                     Dan Boren, OK
Glenn Thompson, PA                   Gregorio Kilili Camacho Sablan, 
Dan Benishek, MI                         CNMI
David Rivera, FL                     Martin Heinrich, NM
Jeff Duncan, SC                      John P. Sarbanes, MD
Paul A. Gosar, AZ                    Betty Sutton, OH
Bill Flores, TX                      Niki Tsongas, MA
Jeffrey M. Landry, LA                Vacancy
Charles J. ``Chuck'' Fleischmann,    Edward J. Markey, MA, ex officio
    TN
Bill Johnson, OH
Doc Hastings, WA, ex officio
                                 ------                                
                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Wednesday, April 6, 2011.........................     1

Statement of Members:
    Hastings, Hon. Doc, a Representative in Congress from the 
      State of Washington........................................     6
        Prepared statement of....................................     8
    Holt, Hon. Rush D., a Representative in Congress from the 
      State of New Jersey........................................     4
        Prepared statement of....................................     5
    Lamborn, Hon. Doug, a Representative in Congress from the 
      State of Colorado..........................................     1
        Prepared statement of....................................     3
    Markey, Hon. Edward J., a Representative in Congress from the 
      State of Massachusetts.....................................    41

Statement of Witnesses:
    Danos, Hank, President, Danos and Curole Marine Contractors, 
      Inc........................................................    13
        Prepared statement of....................................    14
    Domenech, Douglas W., Secretary of Natural Resources, 
      Commonwealth of Virginia...................................     9
        Prepared statement of....................................    11
    Mason, Joseph R., Ph.D., Hermann Moyse/LBA Professor of 
      Finance, Louisiana State University, and Senior Fellow, The 
      Wharton School.............................................    17
        Prepared statement of....................................    18
    Woglom, Emily, Director of Government Relations, Ocean 
      Conservancy................................................    24
        Prepared statement of....................................    26

   LEGISLATIVE HEARING ON H.R. 1229, ``PUTTING THE GULF BACK TO WORK 
ACT''; H.R. 1230, ``AMERICAN OFFSHORE LEASING NOW ACT''; AND H.R. 1231, 
        ``REVERSING PRESIDENT OBAMA'S OFFSHORE MORATORIUM ACT''.

                              ----------                              

                        Wednesday, April 6, 2011

                     U.S. House of Representatives

              Subcommittee on Energy and Mineral Resources

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

    The Subcommittee met, pursuant to call, at 10:02 a.m. in 
Room 1324, Longworth House Office Building, Hon. Douglas 
Lamborn, [Chairman of the Subcommittee] presiding.
    Present: Representatives Lamborn, Fleming, Duncan, Gosar, 
Landry, Fleischmann, Johnson, Hastings, Wittman, Holt, Tsongas 
and Markey.

STATEMENT OF HON. DOUGLAS LAMBORN, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF COLORADO

    Mr. Lamborn. The Subcommittee will come to order. The 
Chairman notes the presence of a quorum, which under Committee 
Rule 3[e] is two Members.
    The Subcommittee on Energy and Mineral Resources is meeting 
today to hear testimony on H.R. 1229, ``Putting the Gulf Back 
to Work Act,'' H.R. 1230, ``Restarting American Offshore 
Leasing Now Act,'' and H.R. 1231, ``Reversing President Obama's 
Offshore Moratorium.''
    Under Committee Rule 4[f], opening statements are limited 
to the Chairman and Ranking Member of the Subcommittee. 
However, in the case of today's hearing, we will be 
accommodating the Chairman and Ranking Member of the full 
Committee.
    However, I ask unanimous consent to include any other 
Member's opening statement in the hearing record if submitted 
to the clerk by close of business today. Hearing no objection, 
so ordered. And I will yield to myself first for an opening 
statement.
    Today we will examine the first bills before this Committee 
under the American Energy Initiative. These bills introduced by 
Natural Resources Committee Chairman Doc Hastings are the first 
steps in reforming our domestic energy policies to set us 
forward on a new path of expanding production of nation's 
resources.
    The purpose of the American Energy Initiative is to stop 
Washington's policies that are driving up gasoline prices and 
to expand American energy production to help lower costs, 
create jobs, and generate revenue. These specific proposals 
meet the goal of the Speaker to avoid the complicated and 
comprehensive 300- or 1,000-page bills that have been done in 
the past.
    Specifically, these three bills we are considering today 
are H.R. 1229, ``Putting the Gulf Back to Work Act,'' which 
will establish a requirement for a permit to drill in statute 
and require safety review; H.R. 1230, ``The Restarting American 
Offshore Leasing Now Act'' that will resume Outer Continental 
Shelf lease sales delayed or canceled by the Obama 
Administration; and H.R. 1231, ``Reversing President Obama's 
Offshore Moratorium Act.'' When the Administration took office 
in 2009, there was a proposed 2010 to 2015 OCS plan on the 
table. This Administration immediately scraped that plan and 
delayed the development of a new plan by two years. This delay 
period is where we are now with rising gasoline prices and 
declining production in the Outer Continental Shelf.
    While these bills deal directly with our oil and natural 
gas policies, these bills will not be the last words from this 
Subcommittee. In the months ahead, the Subcommittee will 
continue to focus on expanding renewable energy, onshore oil, 
natural gas and mineral production onshore, coal, and other 
critical minerals that are vital to renewable energy and new 
technology.
    The Subcommittee will consider future specific proposals 
that generate more energy, create jobs, and more revenue for 
the Federal Government that are offered by Members on either 
side of the aisle.
    When Congress talks about creating jobs, you will hear 
various proposals from different sides, often trying to pick 
and choose those industries that should be favored. But we 
should work to ensure that as many industries and sectors of 
our economy as possible are creating jobs. Many seem to think 
that renewable oil and gas are an either/or equation, but the 
truth is we can and should do both.
    Off the coast of Virginia, there is no reason we cannot 
proceed forward with a progressive program of wind development 
and promoting responsible oil and natural gas development, 
while at the same time ensuring that the defense, fishing, and 
tourism jobs that exist today are protected. There is no one 
right choice in this recipe; we must choose to do all these 
things.
    Doing so can have a tremendous benefit for the American 
people. Just the offshore oil and gas development is projected 
to create more than a million new jobs all across America if 
implemented. But resource development is not just about 
drilling everywhere. We must develop our resources where the 
resources are. This simple concept seems to elude many people, 
but I believe it is one the American people understand.
    Last year during the height of the BP disaster, the 
American people were wondering why we are drilling in deeper 
and deeper water which is more risky. The reason is simple. 
That is where the oil is located. But that isn't the only place 
our oil resources are. It is just the only place we are 
allowing drilling to take place.
    America has vast oil resources in the Outer Continental 
Shelf off Alaska and off the coast of California in shallow 
water. And at a shallower depth under the earth, these 
resources are significantly easier to develop and produce and 
present less risk to the people and the environment.
    Finally, these bills are about raising revenue for the 
Federal Government. In 2008, bonus bids and rentals from the 
OCS totaled nearly $10 billion. In Fiscal Year 2011, the budget 
estimate is $150 million, a decline of $9.85 billion. This 
tremendous decline is because of the decisions made by this 
Administration not to hold any lease sales in the OCS in 2011, 
the first time that this has happened since passage of the 
Outer Continental Shelf Lands Act in 1957.
    In closing, the bills before us today are the first steps 
in an aggressive energy agenda this Committee will address to 
help make America more energy secure, create jobs, and generate 
revenue to help us balance our budget.
    At this point, I would like to yield to the Ranking Member.
    [The prepared statement of Chairman Lamborn follows:]

          Statement of The Honorable Doug Lamborn, Chairman, 
              Subcommittee on Energy and Mineral Resources

    Today, we will examine the first bills before this Committee under 
the American Energy Initiative. These bills introduced by Natural 
Resources Committee Chairman Doc Hastings are the first steps in 
reforming our domestic energy policies to set us forward on a new path 
of expanding production of our nation's resources. The purpose of the 
American Energy Initiative is to stop Washington policies that are 
driving up gasoline prices and expand American energy production to 
help lower costs, create jobs and generate revenue. These ``bite size'' 
proposals meet the goal of the Speaker to avoid the complicated and 
comprehensive 300- or 1000-page bills that have been done in the past.
    Specifically, the three bills we are considering today are H.R. 
1229, ``Putting the Gulf Back to Work Act'' that will establish a 
requirement for a permit to drill in statute and require safety review; 
H.R. 1230, the ``Restarting American Offshore Leasing Now Act'' that 
will resume Outer Continental Shelf lease sales delayed or canceled by 
the Obama Administration; And H.R. 1231, the ``Reversing President 
Obama's Offshore Moratorium Act.''. When the Administration took office 
in 2009, there was a proposed 2010-2015 OCS plan on the table.
    This Administration immediately scrapped that plan, and delayed the 
development of a new plan by two years. This delay period is where we 
are now with rising gasoline prices and declining production in the 
OCS.
    While these bills deal directly with our oil and natural gas 
policies, these bills will not be the last word from this Subcommittee. 
In the months ahead, the Subcommittee will continue to focus on 
expanding renewable energy, onshore oil, natural gas and mineral 
production, coal and other critical minerals that are vital to 
renewable energy and new technology.
    The Subcommittee will consider future ``bite size'' proposals that 
generate more energy, create jobs, and more revenue for the federal 
government offered by members on either of the side of the isle.
JOBS
    When Congress talks about creating jobs you will hear various 
proposals from differing sides, often trying to pick and choose those 
favored industries that should be creating jobs, but we should work to 
ensure that as many industries and sectors of our economy are creating 
jobs. Many seem to think that renewables and oil and gas are an either 
or equation, but the truth is we can and should do both.
    Off the coast of Virginia there is no reason we can't proceed 
forward with an aggressive program of wind development, promoting 
responsible oil and natural gas development, while at the same time 
ensuring that the defense, fishing and tourism jobs that exist today 
are protected. There is no one right choice in this recipe we must 
chose to do all these things. And doing so can have a tremendous 
benefit for the American people; just the offshore oil and gas 
development is projected to create more than a million new jobs all 
across America.
RESOURCES
    But resource development isn't just about drilling everywhere. We 
must develop our resources where the resources are. This simple concept 
seems to elude many people, but I believe it is one the America people 
understand.
    Last year, during the height of the BP disaster, the American 
people were wondering why we are drilling in deeper and deeper water 
which is more risky. The reason is simple, that is where the oil is 
located. But that isn't the only place our oil resources are, it is 
just the only place we are allowing drilling to take place. America has 
vast oil resources in the OCS of Alaska and off the coast of California 
in shallow water. And at a shallower depth under the earth, these 
resources are significantly easier to develop and produce and present 
less risk to the people and environment.
REVENUE
    Finally, these bills are also about raising revenue for the federal 
government. In 2008, bonus bids and rentals from the OCS totaled nearly 
$10 billion, in FY2011 the budget estimate is $150 million, a decline 
of $9.85 billion. This tremendous decline is because as a result of 
decisions made by this Administration not to hold any lease sales in 
the OCS in 2011, the first time that has happened since passage of the 
Outer Continental Shelf Lands Act in 1957.
CLOSING
    The bills before us today are the first steps in an aggressive 
energy agenda this Committee will address to help make America more 
energy secure, create jobs and generate revenue to help us balance our 
budget.
                                 ______
                                 

STATEMENT OF HON. RUSH HOLT, A REPRESENTATIVE IN CONGRESS FROM 
                    THE STATE OF NEW JERSEY

    Mr. Holt. Thank you Chairman Lamborn.
    Mr. Chairman, two weeks from today it will be one year 
since the worst oil-related environmental disaster of our 
lifetime. Fifteen people were injured. Eleven workers were 
killed. Oil spewed from the blown-out well for 87 days, 
polluting rich waters of the Gulf of Mexico and shattering the 
livelihoods of thousands of Americans who depend on these 
resources.
    Nearly one year after the BP Deepwater Horizon disaster, 
Congress has not enacted a single reform to improve the safety 
of offshore drilling.
    Now I am sure some of you would say why are we revisiting 
that in light of this legislation before us today. Chairman 
Hastings is a thoughtful person, but I must put in perspective 
this legislation before us today. It seems that I must remind 
us of the events of the past year.
    Rather than having a hearing today on legislation that 
Ranking Member Markey and I have introduced to implement the 
reforms of the independent BP Spill Commission, the majority is 
holding a hearing on three bills that could potentiall,y and I 
would say would likely, make offshore drilling less safe. We 
must put this in perspective.
    Now H.R. 1229 would impose artificial and arbitrary 
deadlines on the Department of the Interior to approve permits 
to drill. Under this bill, after 60 days--whether or not the 
safety and environmental review has been completed by the 
Interior Department--the drilling application would be deemed 
approved.
    It is hard to imagine that a policy response to the 
Deepwater Horizon disaster that you would want to present 
before the American people could be less rigorous oversight and 
regulation of offshore drilling. I can't believe that the 
American people would want that. And the result of the 
majority's legislation could be to actually hamper new permits 
being issued as the Department might be forced in some 
instances to deny permits if the environmental review was not 
completed and the clock was about to run out.
    This legislation would issue a blanket extension of 
existing leases in contrast to this across-the-board approach 
the Department is already working on a case-by-case basis to 
extend existing leases where the action is warranted.
    Indeed, five extensions have been issued by the Department 
and H.R. 1229 would give a free ride to companies even if their 
leases are many years from expiring, which is completely 
unwarranted. H.R. 1229 also contains wholly unwarranted 
provisions designed to close the doors of the courthouse to 
plaintiffs who believe the Federal Government is not complying 
with the law. For heaven sakes, we have had the results of this 
Commission that show so many things that should have been 
brought to light, perhaps through the courts.
    H.R. 1230 would force the Department to rush to hold new 
lease sales in the Gulf of Mexico by prohibiting any further 
environmental review pursuant to NEPA. Somehow the proponents 
of this legislation watched footage of millions of barrels of 
oil spilling into the Gulf and decided that a full NEPA process 
to try to learn from this disaster was to be avoided.
    By deeming the pre-spill NEPA work as sufficient, this 
legislation would transport us back to a time when spill 
response plans were so sloppy they mentioned walruses in the 
Gulf of Mexico and blowout preventers were believed to actually 
prevent blowouts.
    In addition, this legislation would force the Department to 
move forward on a lease sale off the coast of Virginia within 
one year. Mr. Lamborn has said we can drill there without 
harming fishing and tourism. Americans, particularly I would 
say in central New Jersey whom I know well, would disagree.
    H.R. 1231 would open up massive swaths of public land off 
the East and West Coast to drilling. This legislation would 
force the Interior Department to open all of California as well 
as the Mid- and North Atlantic to drilling. Oil companies are 
already holding tens of millions of acres of public land on 
which they are not producing oil and thousands of leasing on 
which they are not even exploring. But here we are considering 
legislation that would reward these companies by giving away 
nearly all of our beaches and coastal areas. It is hard to 
think that before we even enact legislation to improve the 
safety of offshore drilling, which we badly need, we would put 
more economies, more beaches, and potentially more lives at 
risk for another spill and blowout.
    These bills were written as though the Deepwater Horizon 
disaster had never occurred. Another ten seconds, if I may. 
These bills would take us in completely the wrong direction. 
They make offshore drill less safe rather than more safe. This 
Committee and this Congress should be enacting real reform to 
ensure that similar disasters never happen again. Thank you, 
Mr. Chairman.
    [The prepared statement of Mr. Holt follows:]

 Statement of The Honorable Rush D. Holt, Ranking Member, Subcommittee 
  on Energy and Mineral Resources, on H.R. 1229, H.R. 1230, H.R. 1231

    Thank you.
    Mr. Chairman, two weeks from today is the first anniversary of the 
worst oil-related environmental disaster in our nation's history. 
Fifteen people were injured and eleven workers were killed. Oil spewed 
from the blown-out well for 87 days, polluting the rich waters of the 
Gulf of Mexico and shattering the livelihoods of thousands of Americans 
that depend on those resources. Nearly one year after the BP Deepwater 
Horizon disaster, Congress has not enacted a single reform to improve 
the safety of offshore drilling.
    Rather than having a hearing today on legislation that Ranking 
Member Markey and I have introduced to implement the reforms of the 
independent BP spill commission, the majority is holding a hearing on 
three bills that could potentially make offshore drilling less safe.
    H.R. 1229 would impose artificial and arbitrary deadlines on the 
Department of Interior to approve permits to drill. Under this bill, 
after 60 days, whether or not the safety and environmental review has 
been completed by the Interior Department, the drilling application 
would be deemed approved. It is hard to imagine that the policy 
response to the Deepwater Horizon disaster could be less rigorous 
oversight and regulation of offshore drilling. And the result of the 
majority's legislation could be to actually hamper new permits being 
issued, as the Department might be forced in some instances to deny 
permits if the environmental review was not completed as the clock was 
about to run out.
    This legislation also would issue a blanket extension of existing 
leases. In contrast to this across-the-board approach, the Department 
already is working, on a case-by-case basis, to extend existing leases 
where such action is warranted. Indeed, 5 extensions have already been 
issued by the Department. H.R. 1229 would give a free ride to companies 
even if their leases are many years from expiring, which is completely 
unwarranted.
    H.R. 1229 also contains wholly unwarranted provisions designed to 
close the doors of the courthouse to plaintiffs who believe the federal 
government is not complying with the law. These provisions are aimed at 
environmental plaintiffs but will almost certainly impair the legal 
rights of many other potential plaintiffs.
    H.R. 1230 would force the Department to rush to hold new lease 
sales in the Gulf of Mexico by prohibiting any further environmental 
review pursuant to NEPA. Somehow, the proponents of this legislation 
watched footage of millions of barrels of oil spilling into the Gulf 
and decided that a full NEPA process to try to learn from this disaster 
was to be avoided at all costs. By deeming pre-spill NEPA work as 
sufficient, this legislation would transport us back to a time when 
spill response plans were so sloppy they mentioned walruses in the Gulf 
of Mexico and blow-out preventers were believed to always prevent blow-
outs.
    In addition, this legislation would force the Department to move 
forward with a lease sale off the coast of Virginia within 1 year. 
Rather than pausing after the BP spill to reevaluate whether the risks 
of drilling off the east coast are warranted, this legislation would 
require that it happen by a date certain.
    And finally, H.R. 1231 would open up massive swaths of public land 
off the East and West Coasts to drilling. This legislation would force 
the Interior Department to open all of California, as well as the mid 
and North-Atlantic to drilling. Oil companies already are holding tens 
of millions of acres of public land on which they are not producing oil 
and thousands of leases on which they are not even exploring. But here 
we are considering legislation that would reward these companies by 
giving away nearly all of our beaches and coastal areas. It is hard to 
think that before we even enact legislation to improve the safety of 
offshore drilling, we should put more local economies, more beaches and 
potentially more lives at risk from another spill.
    These bills were written as though the Deepwater Horizon disaster 
had never occurred. These bills would take us in the completely wrong 
direction. They could make offshore drilling less safe rather than more 
safe. They could endanger the lives of our workers, our economy, and 
our environment. Instead, this Committee and this Congress should be 
enacting real reforms to ensure that a similar disaster never happens 
again.
                                 ______
                                 
    Mr. Lamborn. Thank you. I now recognize the full Committee 
Chairman for his opening statement.

 STATEMENT OF HON. DOC HASTINGS, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF WASHINGTON

    Mr. Hastings. Thank you, Chairman Lamborn for the courtesy 
of holding this hearing today on the three bills that I 
introduced to create jobs and lower energy prices.
    President Obama is traveling the country this week talking 
about energy. Unfortunately, these speeches represent more 
rhetoric, in my opinion, that doesn't match the President's 
long record of blocking and delaying American energy 
production. The speeches are full of sound bites, but lack 
specific plans on how to create more American energy.
    Meanwhile, House Republicans are taking action. We have 
launched the American Energy Initiative, an effort to expand 
all types of American energy to create American jobs and lower 
energy prices. The three bills that we will be discussing today 
are part of this initiative. These bills take proactive steps 
to expand American energy production and directly reverse Obama 
Administration policies that have placed our American energy 
resources off limits.
    H.R. 1229, The Putting the Gulf Back to Work Act would end 
the Administration's de facto moratorium on the Gulf of Mexico 
in a safe, responsible, transparent manner by centering first, 
firm timelines for considering permits to drill. And it reforms 
current law by requiring the Secretary to issue a permit to 
drill and also requiring the Secretary to conduct a safety 
review.
    H.R. 1230, the Restarting American Offshore Leasing Now Act 
would require the Administration to move forward promptly and 
conduct offshore leases in the Gulf of Mexico and offshore 
Virginia, leases that the Obama Administration has delayed or 
canceled.
    And finally, H.R. 1231, The Reversing of President Obama's 
Offshore Moratorium Act would lift the President's ban on new 
offshore drilling by requiring the Administration to move 
forward in the 2012 to 2017 lease plan with energy production 
in areas containing the most oil and natural gas resources. The 
bill sets a production goal of 3 million barrels per day in 
2027, which would reduce foreign imports by nearly one-third.
    When faced with rising gasoline prices and high 
unemployment, why would we not look for our own American energy 
resources to help find a solution to this problem? Why would we 
turn to OPEC to provide us with more energy when we have 
available resources here at home? Why tell Brazil that the 
United States will be one of their best customers instead of 
producing our own onshore resources? Quite frankly, I am 
baffled by the Obama Administration policies.
    It is unacceptable that the Obama Administration continues 
to slow-walk permits in the Gulf. It is unacceptable that, 
because of the Obama Administration, 2011 will be the first 
year since 1958 that there will not be a single offshore lease 
sale. And it is unacceptable that the Obama Administration has 
singlehandedly placed areas in the Atlantic and Pacific off 
limits to new drilling, areas that were open by both Congress 
and President Bush in 2008. That is why it is crucial that we 
move forward with these bills.
    I propose a drill smart plan, one that targets our efforts 
toward areas where we know we have the most oil and natural gas 
resources. In contrast, the Obama Administration has a drill 
nowhere plan that threatens both our economic recovery and 
frankly harms our national security.
    I once again want to emphasize that these are just the 
first three bills to be introduced as part of the American 
Energy Initiative. There will be an array of bills coming soon 
from this Committee that will focus on renewable energy, 
onshore energy, hydropower, and the critical materials that 
make up our energy mix.
    With American energy comes American jobs. So I am eager to 
hear from our witnesses today to see how these bills to expand 
offshore energy production will help put employers and 
employees in the Gulf of Mexico back to work and create new 
energy jobs from coast-to-coast.
    With that, Mr. Chairman, thanks for your courtesy and I 
yield back my time.
    [The prepared statement of Mr. Hastings follows:]

          Statement of The Honorable Doc Hastings, Chairman, 
                     Committee on Natural Resources

    Thank you Subcommittee Chairman Lamborn for holding this 
legislative hearing today on three bills I recently introduced to 
expand American energy production, create jobs and lower prices.
    President Obama is traveling the country this week talking about 
energy. Unfortunately, in my opinion, these speeches represent more 
rhetoric that doesn't match the President s long record of blocking and 
delaying American energy production. The speeches are full of sounds 
bites, but lack specific plans on how to create more American energy.
    Meanwhile, House Republicans are taking action. We ve launched the 
American Energy Initiative--an effort to expand all types of American 
energy to create jobs and lower energy prices. The three bills we ll be 
discussing today are part of this Initiative.
    These bills take proactive steps to expand American energy 
production and directly reverse Obama Administration policies that have 
placed our American energy resources off-limits.
    H.R. 1229, the Putting the Gulf Back to Work Act, would end the 
Administration s de facto moratorium in the Gulf of Mexico in a safe, 
responsible, transparent manner by setting firm time-lines for 
considering permits to drill. It reforms current law by requiring the 
Secretary to issue a permit to drill and also requiring the Secretary 
to conduct a safety review.
    H.R. 1230, the Restarting American Offshore Leasing Now Act, would 
require the Administration to move forward promptly to conduct offshore 
lease sales in the Gulf of Mexico and offshore Virginia that the Obama 
Administration has delayed or canceled.
    Finally, H.R. 1231, the Reversing President Obama s Offshore 
Moratorium Act, would lift the President s ban on new offshore drilling 
by requiring the Administration to move forward in the 2012-2017 lease 
plan with energy production in areas containing the most oil and 
natural gas resources. The bill sets a production goal of 3 million 
barrels of oil per day by 2027, which would reduce foreign imports by 
nearly one-third.
    When faced with raising gasoline prices and high unemployment, why 
would we not look to our own American energy resources to help provide 
a solution?
    Why would we turn to OPEC to provide us with more energy when we 
have available resources here at home?
    Why tell Brazil that the United States will be one of their best 
customers, instead of producing our own offshore resources?
    Quite frankly, I m baffled by these Obama Administration policies.
    It s unacceptable that the Obama Administration continues to slow-
walk permits in the Gulf.
    It s unacceptable that because of the Obama Administration, 2011 
will be the first year since 1958 that there will not be a single 
offshore lease sale.
    And it s unacceptable that the Obama Administration has single 
handedly placed areas in the Atlantic and Pacific Coasts off-limits to 
new drilling that were opened by both Congress and President Bush in 
2008.
    That s why it s crucial that we move forward with these bills.
    I ve proposed a drill smart plan one that targets our efforts 
towards areas where we know we have the most oil and natural gas 
resources. In contrast, the Obama Administration has a drill nowhere 
new plan that threatens both our economy recovery and our national 
security.
    I once again would like to emphasize that these are just the first 
three bills to be introduced as part of the American Energy Initiative. 
There will be an array of bills coming soon from this Committee that 
will focus on renewable energy, onshore energy, hydropower and critical 
minerals.
    With American energy comes American jobs. I m eager to hear from 
our witnesses today about how these bills to expand offshore energy 
production will help put employers and employees in the Gulf of Mexico 
back to work and create new energy jobs from coast to coast.
                                 ______
                                 
    Mr. Lamborn. Thank you for your statement. Seeing that the 
Ranking Member is not here----
    Mr. Holt. If I could ask unanimous consent that sometime 
later in the hearing, the Ranking Member of the full Committee 
be given the opportunity to make a statement.
    Mr. Lamborn. I have no objection. Is there any other 
objection? If not, we will honor that request.
    At this point, let us proceed. But we will have to find the 
best moment, maybe between panels or after the panel or 
something like that.
    At this point, let us proceed to our witness testimony. We 
have four witnesses with us today. The Honorable Doug Domenech, 
Secretary of Natural Resources for the State of Virginia; Mr. 
Hank Danos, President, Danos and Curole Contractors, Inc.; Dr. 
Joseph R. Mason, Professor, Louisiana State University and 
Senior Fellow at the Wharton School; and Ms. Emily Woglom, 
Director of Government Relations for the Ocean Conservancy.
    And Mr. Domenech, you may begin. Now when you do start, you 
have five minutes as we outlined in our invitation letter. And 
your full statement will appear in the record, of course--your 
full written statement.
    The microphones aren't automatic. You have to affirmatively 
switch them on. The yellow light will come on after four 
minutes and then the red light will come on at five minutes.
    Mr. Domenech, you may begin. Thank you.

    STATEMENT OF MR. DOUGLAS DOMENECH, SECRETARY OF NATURAL 
              RESOURCES FOR THE STATE OF VIRGINIA

    Mr. Domenech. Good morning Mr. Chairman and Members of the 
Subcommittee.
    On behalf of Virginia Governor Bob McDonnell, thank you for 
inviting me to discuss the three energy bills introduced last 
week.
    I am Doug Domenech, Secretary of Natural Resources for the 
Commonwealth of Virginia. In my secretariat, I oversee six 
state agencies and work to implement the Commonwealth's energy 
policy.
    Virginia applauds Chairman Hastings and the other Members 
for the introduction last week of H.R. 1229, H.R. 1230, and 
H.R. 1231. These three bills together expand offshore energy 
production and will create jobs, lower energy costs, generate 
revenue to help pay down the national debt, and improve 
national security by lessening our dependence on foreign 
sources of oil.
    Virginia Governor McDonnell believes that America must have 
an all-of-the-above energy strategy aimed at making certain we 
are developing all our energy sources in an economically and 
environmentally responsible way. This means supporting both 
conventional and renewable sources of energy, including coal, 
oil, natural gas, and also wind, solar, biomass, and nuclear 
production as well. He firmly believes it is critical we reduce 
our dependence on foreign sources of oil.
    The Deepwater Horizon accident was devastating to the Gulf 
states. We know that lessons are being learned and new 
standards have been put in place. We in Virginia believe we 
need nothing less than the safest standards for any operations 
in the Atlantic, but we must not allow this unfortunate 
accident to constrain American energy policy at the expense of 
future domestic energy production, jobs, and rising energy 
costs on every American family and business.
    The Restarting American Offshore Leasing Act now expands 
American energy production and creates jobs by requiring the 
Secretary of the Interior to conduct oil and gas lease sales in 
the Gulf of Mexico and offshore Virginia that have been delayed 
or canceled by the Administration. Governor McDonnell has 
requested directly to President Obama and to Interior Secretary 
Salazar that Interior proceed with the previously scheduled, 
then canceled lease sale off the coast of Virginia.
    Interior initiated the first step for a potential lease 
sale offshore Virginia in November 2008. The area covered by 
the call was about 2.9 million acres and at least 50 miles 
offshore Virginia. Interior estimates that the area may contain 
130 million barrels of oil and 1.14 trillion cubic feet of 
natural gas. Another study estimates the area could produce 
more than a half a billion barrels of oil and 2.5 trillion 
cubic feet of natural gas.
    It is important to note that there is bipartisan support in 
Virginia for offshore oil and gas production. Our bipartisan 
General Assembly is on record in support of offshore 
development as well as local governments, a majority of our 
congressional delegation and both of our U.S. senators.
    Last March 2010, we were grateful and excited that the 
President announced that lease sale 2020 would move forward as 
part of the 2007/2012 five-year plan. However, after the 
Deepwater Horizon accident on April 20, Interior announced an 
indefinite postponement of the comment period on the Virginia 
sale and on May 27 the President canceled the lease sale and 
announced that no areas off the Atlantic Coast would be 
available for energy development, even in the following five-
year plan. This cancellation means no domestic oil and gas in 
the Atlantic will be accessible for development until sometime 
between 2017.
    In response to the President's announcement, Governor 
McDonnell issued the following statement, ``It is my hope that 
the President's action does not signal the end of offshore 
energy exploration and production off Virginia in the years 
ahead. Once we have learned the lessons from this tragic 
accident and made the necessary changes and improvements in the 
offshore industry and government oversight, we should move 
forward with environmentally responsible domestic offshore 
energy production for oil and gas.''
    Since the decision to cancel the Virginia lease sale the 
worldwide conditions affecting oil and energy security 
availability and price have continued to deteriorate. The price 
of crude oil has increased more than 27 percent and the price 
is now over $104 per barrel. It is more urgent than ever that 
we proceed with the responsible development of our domestic 
energy resources off of Virginia and the rest of the South and 
Mid-Atlantic Coast.
    The Restarting American Offshore Leasing Act now would 
require the Secretary to hold Virginia lease sale no more than 
one year after the bill has been signed into law. This bill 
would proceed now with the scheduled lease sales in a prompt, 
timely, and safe manner.
    These bills go a long way toward increasing America's 
energy security; however, there are two issues that should be 
addressed by future legislation--revenue sharing and an 
improved leasing map. In 2006, Congress passed the Gulf of 
Mexico Energy Security Act of 2006 (GOMESA) creating revenue 
sharing with oil-producing states and the Land and Water 
Conservation Fund for coastal restoration projects. It led to 
nearly $30 million in revenue sharing to the states. Virginia 
believes it is important to share the revenues of oil and gas 
exploration with coastal states in a similar way and we 
encourage you to do that in future legislation.
    The Governor has also expressed his concern about the size 
and shape of the Virginia 2020 map. Virginia has a long and 
cooperative relationship with the Navy. In February 2010, DoD 
indicated that 72 percent of the lease area of 2020 should be 
restricted to no oil and gas activity. Virginia believes 
Congress should in future legislation consider redrawing the 
Virginia lease area or include provisions to add additional 
lease blocks for any block that is considered in conflict with 
military operations.
    Thank you very much.
    [The prepared statement of Mr. Domenech follows:]

 Statement of The Honorable Douglas W. Domenech, Secretary of Natural 
Resources, Commonwealth of Virginia, on H.R. 1229, H.R. 1230, and H.R. 
                                  1231

    Good morning Mr. Chairman and members of the Committee. I am Doug 
Domenech, Secretary of Natural Resources for the Commonwealth of 
Virginia. In my Secretariat, I oversee six state agencies; the 
Department of Environmental Quality, the Department of Conservation and 
Recreation, the Virginia Marine Resources Commission, the Department of 
Historic Resources, the Virginia Museum of Natural History, and the 
Department of Game and Inland Fisheries. In addition, my Secretariat 
works closely with the Department of Mines, Minerals and Energy located 
within the Secretariat of Commerce and Trade to implement the 
Commonwealth's energy policy, and my Deputy, Maureen Matsen, serves as 
the Governor's Senior Energy Advisor.
    Virginia applauds the House Natural Resources Chairman, Congressman 
Doc Hastings, and the Committee for the introduction last week of H.R. 
1229 the ``Putting the Gulf Back to Work Act'', H.R. 1230, the 
``Restarting American Offshore Leasing Now Act'', and H.R. 1231, the 
``Reversing President Obama's Offshore Moratorium Act''. These three 
bills expand offshore energy production in order to create jobs, lower 
energy costs, generate revenue to help pay down the national debt, and 
improve national security by lessening our dependence on foreign 
sources of oil.
    Virginia Governor Bob McDonnell believes that America must have an 
``all-of-the-above'' energy strategy aimed at making certain we are 
developing all of our energy resources in an economically and 
environmentally responsible way. He also firmly believes it is critical 
to reduce our dependence on foreign sources of oil. His approach in 
Virginia recognizes that there is a need for a broad energy plan that 
utilizes all aspects of Virginia's natural resources and that benefits 
both the producer and the consumer. This means supporting both 
conventional and renewable sources of energy including oil, coal and 
natural gas, but also wind, solar, biomass, and nuclear production as 
well. By exploring new energy technologies and improving current energy 
processes, Virginia aims to become the ``Energy Capital of the East 
Coast.'' An effective energy plan cannot just rely on a variety of 
energy sources and research and development; it must also address the 
core issue of what we can do to conserve our energy resources and 
improve efficiency.
    The Deepwater Horizon accident was devastating to the Gulf States. 
We know that lessons are being learned and that new standards have been 
put in place. We in Virginia believe we need nothing less than the 
safest standards for any operations in the Atlantic. But we must not 
allow this unfortunate accident to constrain American energy policy at 
the expense of future domestic energy production, jobs, and rising 
costs on every American family and business.
    The Restarting American Offshore Leasing Now Act expands American 
energy production and creates jobs by requiring the Secretary of the 
Interior to conduct oil and natural gas lease sales in the Gulf of 
Mexico and offshore Virginia that have been delayed or cancelled by the 
Obama Administration.
    Governor McDonnell has requested, directly to President Obama and 
to Interior Secretary Salazar, that Interior's Bureau of Ocean Energy 
Management, Regulation and Enforcement (BOEMRE) proceed with the 
previously scheduled, then cancelled, offshore energy lease sale off 
the coast of Virginia.
    In 2008, in response to record-high gasoline prices, both Congress 
and the President lifted the decades-long ban on offshore drilling. 
This opened the entire Pacific and Atlantic Coast to new offshore 
development.
    Interior initiated the first step for a potential lease sale 
offshore Virginia with a Call for Information published in the Federal 
Register on November 13, 2008. The area covered by the Call was about 
2.9 million acres offshore Virginia in the Mid-Atlantic Planning Area, 
and is at least 50 miles offshore. The Bureau estimates that this area 
may contain 130 million barrels of oil and 1.14 trillion cubic feet of 
natural gas.
    The current five-year plan (2007-2012), included a lease sale 
(#220) off the Virginia Coast in 2012.
    There is bipartisan support for oil and gas production offshore of 
Virginia. Our General Assembly is on record in support of offshore 
development, as well as local governments, the majority of the 
Congressional delegation including our two US Senators. On March 31, 
2010 the President announced that lease sale 220 would move forward as 
part of the 2007-12 5-year Plan, opening the possibility for 
exploration and production of oil and natural gas off the coast of 
Virginia. Interior published a Notice reopening the comment period.
    After the Deepwater Horizon accident on April 20, 2010, Interior 
announced an indefinite postponement of the comment period. On May 27, 
2010 the President cancelled the lease sale effective immediately, and 
announced that no areas off the Atlantic Coast would be available for 
energy development in the next five-year plan (2012-2017).
    This cancellation means that no domestic oil and gas available in 
the Atlantic will be accessible for development until sometime beyond 
2017. 2011 will be the first year since 1958 that the federal 
government will not have held an offshore lease sale.
    In response to the President's announcement, Governor Bob McDonnell 
issued the following statement; ``It is my hope that the President's 
action does not signal the end of offshore energy exploration and 
production off Virginia in the years ahead. Once we have learned the 
lessons from this tragic accident, and made the necessary changes and 
improvements in the offshore industry and government oversight, we 
should move forward with environmentally responsible domestic offshore 
energy production for oil and natural gas. This nation needs more 
domestic energy production. If we decrease the amount of energy 
produced here in the United States, we will only increase the amount of 
energy we must import from overseas. We must have the foresight and 
objectivity to not let this tragic accident cripple our ability to 
increase energy production in the United States. That would be a 
tragedy in its own right.''
    Since the decision to cancel the Virginia lease sale, and to 
withdraw the South and Mid-Atlantic from planning the next Plan for OCS 
lease sales for oil and gas development, the world-wide conditions 
affecting oil and energy security, availability, and price have 
continued to deteriorate. The price of crude oil has increased more 
than 27 percent since September 2010, and the price is now over $104 
per barrel. It is more urgent than ever that we proceed with the 
responsible development of our domestic energy resources off of 
Virginia and the rest of the South and Mid-Atlantic Coast.
    The Restarting American Offshore Leasing Now Act would require the 
Secretary of the Interior to hold the Virginia lease sale no later than 
one year after the bill is signed into law. This bill will reverse the 
Administration's actions and proceed now with the scheduled lease sales 
in a prompt, timely and safe manner. The nation cannot afford to wait 
more than 6 years for meaningful expansion of our domestic oil and gas 
resource development. We certainly agree that it is critically 
important for the EIS to incorporate the lessons learned from the 
tragic deep water drilling accident in the Gulf of Mexico. Indeed, we 
have expressed our strong support for a thorough examination of 
prevention, preparation and mitigation strategies. But we remain 
confident that the foundations for effective planning to protect the 
environment can be developed in the course of the EIS scoping, drafting 
and issuance. Further, the time and multiple opportunities for review 
between preparation of a 5 year Lease Plan, and actual issuance of a 
drilling permit, allow ample opportunity to include provisions and 
conditions necessary in light of events and consequences in the Gulf.
    According to a study by the Southeast Energy Alliance, offshore 
energy development in Virginia could create nearly 2,000 jobs and 
produce more than a half billion barrels of oil and 2.5 trillion cubic 
feet of natural gas.
    These bills go a long way toward increasing America's energy 
security. However, there are two issues that should be addressed by 
future legislation: revenue sharing and an improved leasing map.
    In 2006, Congress passed the Gulf of Mexico Energy Security Act of 
2006 (GOMESA). GOMESA created sharing of leasing revenues with oil 
producing states in the Gulf and the Land & Water Conservation Fund for 
coastal restoration projects. Between fiscal years 2008-2010, it led to 
nearly $30 million in revenue sharing to the states and coastal 
political subdivisions.
    Virginia believes it is important to share revenues from oil and 
gas exploration with coastal states in a similar way as it is 
constructed in the Gulf and would encourage Congress to consider such 
legislation in the future.
    The Governor has also expressed his concern about the size and 
shape of the lease sale 220 map. Virginia has a long and cooperative 
relationship with the US Navy. In a February 2010 report, the DOD 
indicated that 72% of the lease area 220 should be restricted to ``no 
oil and gas activity.'' Virginia believes that Congress should in 
future legislation consider redrawing the Virginia lease area or 
include provisions to add additional lease blocks for any block that is 
considered in conflict with military operations.
    Thank you for the opportunity to testify on behalf of the 
Commonwealth of Virginia on these important bills.
                                 ______
                                 
    Mr. Lamborn. Thank you. We will now hear from Mr. Hank 
Danos.

            STATEMENT OF MR. HANK DANOS, PRESIDENT, 
                DANOS & CUROLE CONTRACTORS, INC.

    Mr. Danos. I want to thank the Chairman and the Ranking 
Member for the opportunity to be here this morning and provide 
testimony.
    My name is Hank Danos. I am President of Danos & Curole 
Marine Contractors and we are located in Little Rose, 
Louisiana. Our company was formed 47 years ago as a small 
tugboat business, furnishing transportation to the oil and gas 
industry.
    While we remain a family-owned business, since that time we 
have grown considerably as an oil field service company with a 
wide range of services and what we believe is an outstanding 
track record of performance, a commitment to safety and the 
development of more than 1,000 employees.
    The issues that have resulted from the moratorium and the 
effort to get the industry back up and running are significant. 
And I am pleased to be here to testify in support of these 
legislative efforts and in representation of many companies, 
such as ours, along the Gulf Coast.
    While we have done our best in weathering the storm of 
uncertainty as a result of the moratorium and the slow to 
uncertain pace of permitting, we have had to let construction 
and logistical support people go. It is our hope that the 
operational certainty that would come through these legislative 
efforts, such as these bills would allow us to restore not only 
the jobs that were lost, but also to add new jobs as a result 
of expansion in new areas of OCS.
    We are not a producer, but we are a service company, 
consequently, we are not the applicant submitting the actual 
permit to drill. However, put simply, a lack of exploration 
plans and permits to drill means a lack of rigs working to 
drill new wells and a lack of opportunities for us to provide 
the essential services that these companies look to us to 
facilitate. The supply of new permits to drill is the critical 
life blood for our business and for many businesses like ours.
    Uncertainty about what is required or why a permit might be 
returned can be not only frustrating to applicants, but can 
cause unnecessary delays. The approach taken in H.R. 1229 seems 
to be a common sense way to provide some guidance to the 
applicant and also that the agency will get information to make 
a decision, if, indeed, there are some missing parts in the 
application.
    It now appears that without legislative intervention such 
as H.R. 1230, 2011 will be the first year since 1958 that the 
Federal Government will not hold a lease sale. Leasing is 
simply the first step in a long process of getting to actual 
development. There are numerous steps and regulatory 
requirements that must be met before getting the green light to 
actually drill a well on a lease that a company likely paid 
millions of dollars for earlier and the well may or may not be 
productive. When businesses are unsure of the future, they have 
a tendency to be conservative in adding new jobs and making new 
commitments. Going forward with these lease sales would be a 
very important and reassuring signal to businesses that would 
like to add new jobs and make key investments in the future.
    Any energy strategy that simply pays lip service to 
increasing domestic oil and gas production without highlight 
where that energy will come from is not a serious strategy. 
H.R. 1231 would take a bold response to the present and future 
needs of our energy plans by directing us to areas in OCS with 
the greatest potential. In addition, I am especially pleased to 
see that, under this legislation, the five-year plans would no 
longer occur without a strategic production goal in mind. This 
provision would ensure greater government accountability for 
the results of an administration's proposed policy outcomes.
    Our nation indeed has vast oil and natural gas resources 
off our shores that provide a tremendous opportunity for us to 
enhance and control our energy future. We simply need the will 
as a nation to use these resources.
    In conclusion, these bills take a productive, proactive 
approach to enhancing security and certainty for our businesses 
that are attempting to create additional jobs and economic 
growth, but also these will help us meet the energy challenges 
of the future. I urge the Committee to support these bills. I 
appreciate the opportunity to be here today and will be glad to 
continue these discussions with you.
    [The prepared statement of Mr. Danos follows:]

                  Statement of Hank Danos, President, 
               Danos and Curole Marine Contractors, Inc.

    I want to thank the Chairman and Ranking Member for the opportunity 
to be here this morning to provide testimony on these three bills--H.R. 
1229, The ``Putting the Gulf Back to Work Act'', H.R. 1230, The 
``Restarting American Offshore Leasing Now Act'', and H.R. 1231, The 
``Reversing President Obama's Offshore Moratorium Act.'' The issues 
that have resulted from the moratorium and the effort to get the 
industry back up and running are significant and I am pleased to be 
here to testify in support of these legislative efforts. I feel like I 
represent many companies from the Gulf area that are similar to ours.
    My name is Hank Danos and I am the President of Danos & Curole 
Marine Contractors, Inc. located in Larose, Louisiana. Our company was 
founded in 1947 as a small tugboat business furnishing transportation 
to the oil and gas industry. While we remain a family owned business, 
since that time we have grown considerably as an oilfield services 
company with a wide range of services, and what we believe is an 
outstanding track record of performance, a commitment to safety, and to 
the quality work experience and development of our more than 1000 
employees.
    While we have done the best we can in weathering the storm of 
uncertainty as a result of the moratorium and the slow to uncertain 
pace of permitting, we have had to let some construction and logistical 
support workers go. It is our hope that the operational certainty that 
would come through legislative efforts such as those bills before us 
today would allow us to not only restore some of those lost jobs but 
also to add new jobs as a result of the expansion in access to new 
areas in the Outer Continental Shelf (OCS). Having spoken to numerous 
other businesses about their own operational uncertainty in the region, 
I believe that other gulf based businesses would also be able to add a 
significant amount of jobs if the legislation before us today were 
enacted.
H.R. 1229, the ``Putting the Gulf Back to Work Act''
    As mentioned earlier, we are not a producer, but rather a service 
company. Consequently, we are not the applicant submitting the actual 
permit to drill. However, put simply--a lack of exploration plans and 
permits to drill means a lack of rigs working to drill new wells and a 
lack of opportunities for us to provide the essential services that 
these companies look to us to facilitate. This means that the supply of 
new permits to drill is the critical lifeblood of new business for us 
and for many businesses like us.
    Uncertainty about what is required or why a permit might be 
returned can be not only frustrating to the applicant but can cause 
further unnecessary delays. It seems to be common sense to ensure that 
if a permit cannot be approved, that guidance be provided as to what in 
the application is lacking to ensure that the agency will get the 
information it needs to make a decision on the permit without repeated 
returns, only to see the clock reset.
    In addition, it is essential that the legislation requires that 
permits meet ``all critical safety system requirements, including 
blowout prevention; and oil spill response and containment 
requirements.'' The Department of the Interior has stated that it would 
not be issuing new permits if they were not confident that these 
requirements had been met. It is appropriate to require that new 
permits should continue to clear that bar.
    As I see the threats in the papers from potential litigants opposed 
to new wells in the gulf, I think it is essential to remind the 
committee that we will not be able to judge our post spill ability to 
get up and running and provide the essential energy this country needs 
until we actually have rigs moving on to location and wells being 
drilled. I applaud the inclusion of provisions that would ensure that 
decisions in the court system are made in an expedited fashion as a 
means of mitigating against the further uncertainty from lawsuits that 
has come to the industry as a result of these new threats to block new 
energy development.
H.R. 1230, the ``Restarting American Offshore Leasing Now Act''
    It now appears that without legislative intervention, 2011 will be 
the first year since 1958 that the federal government will not hold an 
offshore lease sale. It has been disappointing to see so many recent 
confusing messages about why leasing is so important. Leasing is simply 
the first step in a long process of getting to actual development. 
There are numerous explorative steps and regulatory requirements that 
must be met before getting the green light to actually drill a well on 
a lease a company likely paid millions for years earlier. The well may 
or may not lead to actual production.
    We cannot expect to meet ambitious national goals about ``boosting 
domestic production'' and ``reducing our dependence upon foreign oil'' 
without feeding potential new leases into the pipeline of future 
production. This legislation would accomplish that by setting 
previously anticipated lease sales back into motion. These lease sales, 
previously a part of the 2012-2017 five year plan, would include two 
Gulf of Mexico lease sales in 2011, one in 2012, and the anticipated 
lease sale off the coast of Virginia in 2011.
    When businesses are unsure of the future they have a tendency to be 
conservative in adding new jobs and making new commitments that invest 
in our economy's growth. That uncertainty is incompatible with lofty 
goals of ``adding new jobs'' and getting the nation's economy back to 
work again.'' Going forward with these sales would be a very important 
and reassuring signal to those businesses that would like to add new 
jobs and make key investments in the future.
H.R. 1231, the ``Reversing President Obama's Offshore Moratorium Act''
    As I mentioned earlier, our nation simply cannot approach lofty 
goals of ``energy independence'' and ``reducing reliance upon foreign 
oil'' with the same policies we have always pursued with regard to the 
development of domestic oil and gas. While I recognize that there are 
also other policy strategies, such as enhancing energy efficiency, 
which will play a role in meeting these goals, we must be bold with 
regard to using the resources that we have here off our own shores. It 
should be noted by the committee, that the U.S. Energy Information 
Administration (EIA) is forecasting that domestic energy demand will 
grow by 14 percent between 2008 and 2035, with more than half of that 
demand expected to be met by oil and natural gas. In addition, they 
anticipate that oil will supply 33 percent of total domestic energy 
consumed, and 85 percent of transportation fuels, with oil continuing 
to be the largest share of our energy need. Any strategy that simply 
pays lip service to increasing domestic oil and gas production without 
highlighting where that energy will come from is not a serious strategy 
and is doomed to fail.
    H.R. 1231 would take a bold response to the present and future 
needs of the nation by directing plans for future development in the 
areas of the OCS with the greatest potential. In addition, I am 
especially pleased to see that under this legislation five year plans 
would no longer occur without a strategic production goal in mind. This 
rudderless approach is presently underscored by the incompatibility of 
a publicly stated goal by the administration of boosting domestic oil 
and gas production in the future with a proposed five year plan for 
2012-2017 that contains no new areas for production. This ensures 
greater government accountability for the results of an 
administration's proposed policy outcomes.
    Our nation indeed has vast oil and natural gas resources off our 
shores that provide a tremendous opportunity for us to enhance our 
control over our energy future and provide desperately needed jobs here 
at home. While any energy strategy must recognize that we will continue 
to draw from resources around the world, there are often efforts to 
lowball America's energy resources. The Bureau of Energy Management, 
Regulation, and Enforcement (BOEMRE) estimates that the undiscovered, 
technically recoverable oil and natural gas resources located in the 
OCS range from 66.6 billion to 115.1 billion barrels of oil and 326.4 
trillion to 565.9 trillion cubic feet of natural gas. These estimates 
are likely quite conservative given that they were not performed with 
the benefit of new technology and that many areas are largely 
unexplored. In fact, the Gulf of Mexico has already exceeded by six 
times its original resource estimates.
Conclusion
    In conclusion, these three bills take a proactive approach to 
enhancing certainty for not only businesses that are attempting to 
create additional jobs and economic growth, but also certainty in how 
this nation will meet its energy challenges both now and into the 
future. Each time consumers see an increase at the pump, we see an 
increased attention to these issues--for a time. That focus is always 
met by those who oppose expanding oil and gas production with the 
response that there is not much that can be done in the short term to 
impact prices now. While it is true that we cannot simply snap our 
fingers and produce more instantaneously, that response continually 
avoids the larger question of what policy choices need to be made now 
to change that outcome in the future.
    According to a recent study, the oil and natural gas industry 
already provides approximately 9.2 million jobs and more than $1 
trillion dollars to our nation's economy. Desperately needed jobs are 
there for the taking if we will simply allow common sense policies to 
ensure orderly development of our nation's OCS resources.
    I appreciate the opportunity to be here today and provide testimony 
and would be happy to answer any questions that members of the 
committee might have for me.
                                 ______
                                 
    Mr. Lamborn. Thank you for being here and for your 
testimony. We will now hear from Professor Joseph R. Mason from 
Louisiana State University.

    STATEMENT OF JOSEPH R. MASON, Ph.D., MOYSE/LBA ENDOWED 
 PROFESSOR, LOUISIANA STATE UNIVERSITY AND SENIOR FELLOW, THE 
                         WHARTON SCHOOL

    Dr. Mason. Good morning and thank you Chairman Lamborn, 
Ranking Member Holt and Members of the Committee for having me 
here to testify today on this very important topic.
    As an economist, my opinions are based on one simple truth, 
every legislative and regulatory decision has implications for 
jobs and output. Hence, foregoing access to energy resources in 
the Outer Continental Shelf in the Gulf of Mexico inextricably 
has economic consequences.
    During the Gulf moratorium, the courts acknowledged such 
views. In response to the Administration's policy, a Federal 
judge in New Orleans blocked enforcement of the moratorium, 
writing that, and I quote, ``The blanket moratorium with no 
parameters seems to assume that because one rig failed, all 
companies and rigs drilling new wells over 500 feet also 
universally present an imminent danger, which was not in the 
Court's opinion sufficient justification for taking economic 
value from private sector jobs and firms.''
    In the field of economics, such value-destroying economic 
takings are not as rare as one might think. Previous research 
gives a worrying indication of what can be expected from the 
regulatory responses to events like Fukushima, Deepwater 
Horizon and the mortgage crisis. The results show that 
regulatory decisions are influenced by many factors beyond the 
dispassionate evaluation of the economic costs and benefits.
    For instance, a recent study by Mian, Sufi, and Trebbi in 
2010 found that Congressional Representatives whose 
constituents had higher rates of mortgage defaults were likely 
to be in favor of the Foreclosure Prevention Act, despite 
economic evidence that foreclosure prevention has unavoidable 
economic costs. Other research by Moran and Weingast from 1982 
showed that politicians influenced the activities of the 
Federal Trade Commission, skewing the work of a supposedly 
independent regulatory agency.
    Grabowski and Vernon, in 1978, showed that the NASA 
Consumer Product Safety Commission (CPSC) tended to focus on 
products where risks were well understood already, ostensibly, 
to better justify their creation to lay outsiders. Moreover, 
only five of the CPSC's top 21 priority products for regulation 
at that time had measurable economic benefits that exceeded 
proposed regulatory costs.
    What we can observe from a large body of economic research 
on the political economy of regulation, therefore, is that both 
elected officials and regulatory agencies are influenced by 
political factors which may lead to suboptimal solutions to 
complicated problems such as energy policy and the mortgage 
crisis.
    In recent years, regulatory agencies have continued to 
impose costly policies upon the economy without congressional 
approval. For instance, while the EPA ruling that carbons 
should be treated as a pollutant was ultimately supported by 
the Supreme Court many in Congress still maintained that the 
agency overstepped its bounds in such a dramatic and 
potentially costly reinterpretation of its rules.
    The carbon ruling, however, is somewhat less problematic 
than the EPA's December 2009 backdoor regulation of phthalates 
used to soften plastics. Although the EPA did not have sound 
scientific evidence upon which to ban phthalates outright, the 
agency imposed the precautionary principle to temporarily halt 
their production until evidence could be provided that they are 
completely safe.
    The Bureau of Ocean Energy Management, Regulation and 
Enforcement's recent Gulf of Mexico drilling policy seems to 
have been based on similar policy reasoning. While specific 
companies, a specific type of platform design, and BP itself 
have been blamed for the Deepwater Horizon blowout, BOEM 
continue to severely restrict not only deepwater but also 
shallow-water drilling in the Gulf of Mexico, despite ongoing 
economic damage to the Gulf region. Then blatantly disregarding 
the Commission's finding, BOEM's first deepwater permit 
approval went to BP.
    In looking at the political economy of new regulatory 
arrangements, therefore, we must look with skepticism and 
concern upon both the political motivations of the regulatory 
officials charged with enforcing the rules and the uncomic 
power that will be concentrated in those regulatory officials 
as a result of their influence over the implementation costs 
and economic redistribution. Without restraint, a toxic mix of 
politics and power may damage both the industry and the 
environment.
    When new agencies like BOEM and the Consumer Financial 
Protection Board, for instance, are created they have a strong 
incentive to prove their worth to their creators and flex their 
muscle with regard to their related industries. As such, new 
agencies regularly undergo dramatic power shifts before 
settling into anything that could be considered a stable role 
in the U.S. regulatory framework.
    The proposed legislation before us can in some ways help 
that evolution by leading the process, balancing regulatory 
accountability and economic growth is therefore a useful lens 
that sharpens our focus on regulatory rent-seeking. Thank you.
    [The prepared statement of Dr. Mason follows:]

         Statement of Dr. Joseph R. Mason, Hermann Moyse, Jr./
        LBA Professor of Finance, Louisiana State University \1\
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    \1\ The opinions expressed here are my own and are not necessarily 
reflective of those of LSU or any other entity.
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I. The Impetus for Increasing U.S. Offshore Oil Production
    Maintaining energy independence by increasing U.S. offshore oil and 
natural gas production has long been recognized as a national 
imperative. In 2006, the U.S. Minerals Management Service (MMS) 
reported to Congress that, ``much of the growth in the Nation's energy 
demand will have to be met by OCS. . .if further increases of imported 
supplies are to be avoided.'' MMS also estimated that, ``OCS oil 
production could account for as much as 40 percent of domestic oil 
production by 2010.'' Furthermore, the MMS indicated that the OCS 
natural gas resources would become an essential source of energy as 
imports from other countries--particularly Canada--decline.
    Apart from national energy concerns, however, economic 
considerations also favor increased development of OCS energy 
resources. Specifically, the boost provided to local onshore economies 
by offshore production would be particularly welcome in the present 
economic climate. Similar to fiscal alternatives presently under 
consideration, OCS development would provide a long-run economic 
stimulus to the U.S. economy because the incremental output, 
employment, and wages provided by OCS development would be spread over 
many years. Unlike those policies, however, this stimulus would not 
require government expenditures to support that long-term growth.
A. The Present State of Offshore U.S. Oil and Gas Production
    Despite its importance, U.S. oil and natural gas production in 
offshore areas is currently limited to only a few regions. At the 
present time, oil and gas is only actively produced off the coast of 
six U.S. states: Alabama, Louisiana, Mississippi, Texas, California, 
and Alaska. The Energy Information Administration (EIA) reports that 
Alabama, Louisiana, Mississippi, and Texas are the only coastal states 
that provide access to all or almost all of their offshore energy 
resources. Only two additional states--Alaska and California--are 
producing any offshore energy supplies. All California OCS Planning 
Areas and most Alaska OCS Planning Areas, however, were not open to any 
new facilities until the recent end of the Congressional and 
Presidential moratoria. The remaining 16 coastal states are not open to 
new production and are not presently extracting any offshore energy 
resources.
    Even without those remaining sixteen states, plus California and 
Alaska, the OCS is already the most important source of U.S. energy 
supplies. According to the MMS, ``the Federal OCS is a major supplier 
of oil and natural gas for the domestic market, contributing more 
energy (oil and natural gas) for U.S. consumption than any single U.S. 
state or country in the world.'' That is, OCS production presently 
meets more U.S. energy demand than any other single source, including 
Saudi Arabia.
B. Offshore Oil Production Stimulates Onshore Economies
    Offshore oil and gas production has a significant effect on local 
onshore economies as well as the national economy. There are broadly 
three ``phases'' of development that contribute to state economic 
growth: (1) the initial exploration and development of offshore 
facilities; (2) the extraction of oil and gas reserves; and (3) 
refining crude oil into finished petroleum products. Industries 
supporting those phases are most evident in the sections of the Gulf of 
Mexico that are currently open to offshore drilling.
    For example, the U.S. shipbuilding industry--based largely in the 
Gulf region--benefits significantly from initial offshore oil 
exploration efforts. Exploration and development also requires 
specialized exploration and drilling vessels, floating drilling rigs, 
and miles and miles of steel pipe, as well as highly educated and 
specialized labor to staff the efforts.
    The onshore support does not end with production. A recent report 
prepared for the U.S. Department of Energy indicates that the Louisiana 
economy is ``highly dependent on a wide variety of industries that 
depend on offshore oil and gas production'' and that offshore 
production supports onshore production in the chemicals, platform 
fabrication, drilling services, transportation, and gas processing. 
Fleets of helicopters and U.S.-built vessels also supply offshore 
facilities with a wide range of industrial and consumer goods, from 
industrial spare parts to groceries. As explained in Section IV.G, 
however, the distance between offshore facilities and onshore 
communities can affect the relative intensity of the local economic 
effects.
    The economic effects in the refining phase are even more diffuse 
than the effects for the two preceding phases. Although significant 
capacity is located in California, Illinois, New Jersey, Louisiana, 
Pennsylvania, Texas, and Washington, additional U.S. refining capacity 
is spread widely around the country. As a result, refinery jobs, wages, 
and tax revenues are even more likely to ``spill over'' into other 
areas of the country, including non-coastal states like Illinois, as 
those are home to many refining and chemical industries that ride the 
economic coattails of oil exploration and extraction.
II.  Offshore Oil and Gas Reserve Estimates and the Sources of their 
        Economic Benefits
    As described in my 2009 white paper, ``The Economic Contribution of 
Increased Offshore Oil Exploration and Production to Regional and 
National Economies,'' available at www.americanenergyalliance.org/
images/aea_offshore_updated_final.pdf, significant oil and gas reserves 
lie under the U.S. Outer Continental Shelf (OCS). According to the 
Energy Information Administration (EIA), the OCS (including Alaskan OCS 
Planning Areas) contains approximately 86 billion barrels of 
recoverable oil and approximately 420 trillion cubic feet of 
recoverable natural gas. As noted by the White House, however, the OCS 
estimates are conservative. Of the total OCS reserves, a significant 
portion was unavailable to exploration until recently. Specifically, 
Presidential and Congressional mandates banned production from OCS 
Planning Areas covering approximately 18 billion barrels of recoverable 
oil and 77.61 trillion cubic feet of recoverable natural gas. These 
bans covered approximately 31 percent of the total recoverable OCS oil 
reserves and 25 percent of the total recoverable OCS natural gas 
reserves.
    Economic benefits of utilizing OCS reserves accrue from three 
primary sources: (1) exploration/platform investments; (2) production; 
and (3) refining. Sources (1) and (3) produce initial affects--that is, 
new industry expenditures--today; in contrast, source (2) produce 
economic effects only once production begins. The analysis therefore 
considers ``initial'' economic effects as those that flow from 
exploration or investments in new refining capacity and long-term 
economic effects as those that flow from production and ongoing 
refining.
A. Exploration and Offshore Facility Development
    In contrast to other industries, the high fixed investment costs 
associated with offshore oil and gas production produce large initial 
investments that reverberate throughout the economy. Once oil or gas 
reserves are located, billions of additional dollars must be spent 
before the well produces even $1 of revenue. For example, oil 
exploration costs can amount to between $200,000 and $759,000 per day 
per site. Additional production in the U.S. will also require a costly 
expansion refining capacity as well. Taken together, the fixed 
expenditures that precede actual offshore oil and gas production can 
amount to billions of dollars.
    For example, Chevron's ``Tahiti'' project in the Gulf of Mexico is 
representative of the large investments that firms must make before 
production is achieved. In 2002, Chevron explored the Tahiti lease--
which lies 100 miles off the U.S. coast at a depth of 4,000 feet--and 
found ``an estimated 400 million to 500 million barrels of recoverable 
resources.'' Chevron estimates that it will take seven years to build 
the necessary infrastructure required to begin production at Tahiti. 
The firm estimates that its total development costs will amount to 
``$4.7 billion--before realizing $1 of return on our investment.''
    As a typical U.S. offshore project, the Tahiti project provides a 
wealth of information regarding the up-front investment costs, length 
of investment, and lifespan of future OCS fields. As noted above, the 
Tahiti field is estimated to hold between 400 million and 500 million 
barrels of oil and oil equivalents (primarily natural gas) and is 
expected to require an initial fixed investment of $4.7 billion. Using 
the mid-point reserve estimate of 450 million barrels of oil 
equivalent, up-front development costs amount to approximately $10.44 
per barrel of oil reserves or $1.86 per 1,000 cubic feet of natural gas 
reserves. These costs will be spread over 7 years, resulting in average 
up-front development expenditures equal to $1.49 per barrel of oil and 
$0.27 per 1,000 cubic feet of natural gas. Chevron also estimates that 
the Tahiti project will produce for ``up to 30 years''. Although 
investment and production times vary widely, the analysis that follows 
uses the Tahiti project numbers--an average initial investment period 
of seven years followed by an average production period of 30 years--as 
indicative of the ``typical'' offshore project. I will thus assume an 
average initial investment period of seven years followed by an average 
production period of 30 years.
    The speed of OCS development also factors into the analysis. 
Because most areas of the U.S. OCS have been closed to new exploration 
and production for almost forty years, it is unclear how quickly firms 
would move to develop new offshore fields. Given its large potential 
reserves, however, the OCS is sure to attract significant investment. 
Without the benefit of government data, a rough estimate suggests that 
annual total investment in OCS fields would be $9.09 billion per year.
    Those annual expenditures are expected to last, on average, the 
full seven years of the development phase. Additional investment in 
states that already support significant production--Alabama, Louisiana, 
Mississippi, and Texas--are limited. Some of the greatest benefits 
accrue to areas that are home to enormous--but unavailable--total 
reserves: California and Florida.
B. Production
    The likely value of state recoverable oil and gas reserves are 
estimated using the likely lifetime revenue that could be generated by 
the project. In that case, average wholesale energy prices provide the 
information necessary to translate reserves into revenues. Taking the 
simple average of the EIA's latest inflation-adjusted energy price 
forecasts through 2030 as provided by its Annual Energy Outlook 2009, 
the average inflation-adjusted price of oil will be $110.64 per barrel 
and the average inflation-adjusted price of natural gas will be $6.83 
per thousand cubic feet. At these prices, the estimated OCS reserves 
are worth about $13 trillion.
    The value of each state's available reserves are calculated as the 
sum of (1) its share of available OCS Planning Area oil reserves times 
$110.64 per barrel and (2) its share of available OCS Planning Area 
natural gas reserves times $6.83 per thousand cubic feet. The same 
method applies to the valuation of total state OCS reserves. By those 
estimation methods, states such as California, facing a budget crisis 
in the current recession, have an estimated $1.65 trillion in resources 
available in nearby OCS planning areas. Florida, while not facing as 
dire a fiscal crisis, has about $0.55 trillion in resources available 
in nearby OCS planning areas. Hence, a permanent relaxation of all 
federal OCS production moratoria would unlock more than $3.4 trillion 
in new production among all the coastal states.
C. Investments in Incremental Refining Capacity
    Since U.S. refineries are presently operating near maximum capacity 
increased offshore oil and gas production would also spur investment in 
new refineries. The U.S. refining industry is presently operating at 
97.9 percent of capacity and can no longer depend on excess foreign 
refining to meet production shortfalls arising from seasonality or 
repairs. In response, many large refiners are already considering 
refinery expansions: ConocoPhillips announced that it planned to spend 
$6.5 billion to $7 billion on capacity expansion at its U.S. 
facilities; Chevron has also considered a major refinery expansion; and 
while Shell is completing a $7 billion expansion and its Port Arthur, 
Texas refinery they are considering further expansion elsewhere.
    Additional refinery investments are likely to occur in the few U.S. 
states that already host significant U.S. refineries. This result is 
largely due to environmental restrictions that severely limit the 
placement of new refining capacity. Current capacity is primarily 
concentrated in California, Louisiana, and Texas.
    The U.S. presently has an operating refining capacity of 
approximately 6.287 billion barrels of crude oil per year. Conservative 
estimates of OCS production would add approximately 3.773 billion 
barrels per year, or about sixty percent of current U.S. operating 
refinery capacity. Because some OCS refining production would most 
likely substitute for foreign production, however, the analysis 
conservatively assumes that only one-quarter of this new OCS production 
necessitates additional U.S. refinery capacity. That is, I estimate 
that U.S. refinery demand would increase by 943.25 million barrels per 
year, or 15 percent of current installed capacity.
    Even this modest capacity increase would require substantial new 
investments. In response to existing capacity constraints, Shell is 
already increasing the capacity of its Port Arthur, Texas refinery. 
This expansion will take approximately two and one-half years to 
complete and cost $7 billion. The facility will add 325,000 barrels per 
day (or 118.6 million barrels per year) in new capacity, at a cost of 
approximately $59.02 per barrel of new annual capacity.
    As noted above, since tough environmental regulations effectively 
limit new refinery capacity to a few states, refinery investments are 
likely to be limited to only a few states with large existing capacity. 
These states can be reasonably assumed to be the same states the 
already have large installed refinery capacity. Hence, incremental 
refinery capacity will be added predominantly in states already home to 
large refining capacity--those with a present capacity of more than 200 
million barrels per year. There are seven such states: California, 
Illinois, Louisiana, New Jersey, Pennsylvania, Texas, and Washington.
    Expected increases in offshore oil production will induce 
approximately $22 billion in refining capacity investments each year 
for two and one half years. California, Texas, and Louisiana will 
receive the bulk of this investment, but investments of more than $1 
billion annually can be expected in Illinois, New Jersey, Pennsylvania, 
and Washington.
III.  Increased Investments in Offshore Oil and Gas Production will 
        Cause Substantial Increases in Wages, Employment, and Taxes, 
        and Profound Effects on Communities Throughout the Nation
    Onshore state and local economies benefit from the development of 
OCS reserves by providing goods and services to offshore oil and gas 
extraction sites. Onshore communities provide all manner of goods and 
services required by offshore oil and gas extraction. A variety of 
industries are involved in this effort: shipbuilders provide 
exploration vessels, permanent and movable platforms, and resupply 
vessels; steelworkers fashion the drilling machinery and specialized 
pipes required for offshore resource extraction; accountants and 
bankers provide financial services; and other onshore employees provide 
groceries, transportation, refining, and other duties. These onshore 
jobs, in turn, support other jobs and other industries (such as retail 
and hospitality establishments).
    The statistical approach known as an ``input-output'' analysis 
measures the economic effects associated with a particular project or 
economic development plan. This approach, which was pioneered by Nobel 
Prize winner Wassily Leontif, has been refined by the U.S. Department 
of Commerce. The most recent version of the Commerce Department's 
analysis is known as the Regional Input-Output Modelling System, or 
``RIMS II.'' The RIMS II model provides a variety of multipliers that 
measure how an economic development project--such as offshore 
drilling--would ``trickle down'' through the economy providing new 
jobs, wages, and government revenues. This analysis can be broken down 
into two parts: (1) a ``direct'' analysis measuring the benefits that 
arise from industries that directly supply offshore oil and gas 
exploration and (2) the ``final'' analysis that measures the direct and 
indirect benefits associated with offshore exploration.
    The RIMS II model is the standard method governmental authorities 
use to evaluate the benefits associated with an economic development 
project. According to the Commerce Department, the RIMS II model has 
been used to evaluate the economic effects of many projects, including: 
opening or closing military bases, tourist expenditures, new energy 
facilities, opening or closing manufacturing plants, shopping malls, 
sports stadiums, and new airport or port facilities.
A.  Opening OCS Planning Areas would Unleash More than $11 trillion in 
        Economic Activity
    The broadest measure of the incremental effect of increased OCS oil 
and natural gas extraction is the effect on total economic output. 
Until OCS production begins, onshore communities will realize only the 
benefits associated with offshore investment. These benefits take two 
forms: (1) the development of the offshore facilities themselves and 
(2) the expansion of onshore refining capacity. These two effects, 
taken together, provide a rough approximation of the additional output 
that would be created by allowing greater access to offshore reserves.
    Of course, the investment expenditures and resulting output 
estimated above is only made to facilitate oil and gas extraction. Once 
extraction begins, additional economic activity continues for the 
lifetime of the oil and natural gas reserves.
    Using the total U.S. multipliers (2.2860 for refining and 2.3938 
for extraction), the total increase in U.S. output from initial 
investment is estimated to be a total of about $0.5 trillion, or 
approximately $73 billion per year for the first seven years the OCS is 
open. For comparative purposes, a $73 billion stimulus amounts to 
approximately 0.5 percent of total U.S. output (GDP) per year.
    Increased OCS oil and gas extraction would yield approximately 
$5.75 trillion in new coastal state output over the lifetime of the 
fields. Approximating the total increase in output associated with 
increasing offshore resource production throughout the U.S. (including 
states in the interior), yields approximately $2.45 trillion in 
additional output.
    The total increase in output in the United States is estimated to 
total approximately $8.2 trillion or about $273 billion per year, which 
amounts to just over two percent of GDP. Because the OCS areas are 
currently unavailable, the entire amount--$8.2 trillion--is completely 
new output created by a simple change in policy allowing resource 
extraction in additional OCS Planning Areas.
B.  Opening OCS Planning Areas could Create Millions of New Jobs
    An economic expansion tied to increased OCS resource production 
would also create millions of new jobs both in the extraction industry 
and in other sectors that serve as suppliers or their employees.
    The annual increase in coastal state employment from initial 
investments in previously unavailable OCS planning areas and additional 
refining capacity is estimated to be 185,320 full-time jobs per year. 
Again, this number does not consider the spill-over effects of 
investment in productive capacity and refining to other U.S. states. 
The total increase in U.S. employment from the investment phase is 
approximately 271,570 full-time jobs per year.
    Applying the BEA multipliers to the estimated production value 
results in approximately 870,000 coastal state jobs in addition to the 
jobs created during the initial investment phase. Again, the total 
increase in U.S. employment in all states (including those in the 
interior) resulting from increased OCS production is 340,000 greater, 
for a total of approximately 1,190,000 jobs be sustained for the entire 
OCS production period.
    Increased investment and production in previously unavailable OCS 
oil and gas extraction and the ancillary industries that support the 
offshore industry would produce thousands of new jobs in stable and 
valuable industries. Among the 271,572 jobs created in the investment 
phase and sustained during the first seven years of the investment 
cycle. The majority of new positions (162,541 jobs, or 60 percent) 
would be created in high-skills fields, such as health care, real 
estate, professional services, manufacturing, administration, finance, 
education, the arts, information, and management. Although the largest 
total increase in employment in the production phase would occur (quite 
naturally) in the mining industry, significant numbers of jobs would be 
created in other industries. Again, many of these new jobs would be 
created in high-skills fields, representing approximately 49 percent of 
all new jobs and approximately 61 percent of all new non-mining jobs.
C.  Opening OCS Planning Areas can Release Trillions of Dollars of 
        Wages to Workers Hit by Recession
    Those jobs pay wages. OCS development is estimated to yield 
approximately $10.7 billion in new wages in coastal states each year. 
OCS production would yield approximately $1.406 trillion in additional 
wage income to workers in coastal states over the lifetime of the 
fields (or $46 billion per year over 30 years). Across the U.S., the 
investment phase would generate approximately $15.7 billion in 
additional annual wages per year for the first seven years and $70 
billion per year for the next thirty years, or approximately $2.1 
trillion in additional wage income.
    BLS data suggest that all four broad industry classifications 
related to oil and gas extraction pay higher wages and similar jobs in 
other industries. Jobs in: (1) Oil and Gas Extraction, (2) Pipeline 
Transportation of Crude Oil, (3) Petroleum and Coal Products 
Manufacturing, and (4) Support Activities for Mining, typically pay 
higher wages than the average American job. Taking this broader 
measure, the average job created by increased offshore oil and gas 
production pays approximately 28 percent more than the average U.S. 
job.
D.  Opening OCS Planning Areas can Contribute Trillions of Dollars in 
        Taxes and other Public Revenues to Local, State, and Federal 
        Governments
    Greater output, more jobs, and higher wages translate into higher 
tax collections and increases in other sources of public revenues. The 
MMS Report to Congress suggests that public revenues derived from OCS 
extraction are significant--the U.S. federal government has collected 
more than $156 billion in lease and levy payments for OCS oil and 
natural gas production. Note that this amount counts only lease and 
royalty payments and thus does not include any sales and income taxes 
paid by firms or workers supported by OCS production.
    Conservative estimates suggest that seven years of initial annual 
exploration and refining investments would produce approximately $4.8 
billion annually in coastal state and local tax revenue and $11.1 
billion in U.S. federal tax income. Over thirty years of production, I 
estimate that the extraction phase of OCS development would yield 
approximately $561 billion ($18.7 billion per year) in coastal state 
and local tax revenue and approximately $1.64 trillion ($54.7 billion 
per year) in new U.S. federal tax income.
E.  The Economic Effects Associated with Increasing U.S. Offshore Oil 
        and Gas Production Vary by Drilling Distance from Shore
    Government sources indicate that the economic effects associated 
with increased OCS oil and gas production are likely to vary with the 
distance from shore. This dynamic has important implications for the 
analysis because increasing OCS development includes a mix of both 
shallow and deep water projects. Deep water projects are far more 
expensive than shallow water projects, however, so far fewer are 
undertaken.
    According to the MMS, the cost of developing a deep water field can 
exceed $1 billion. This cost far exceeds the cost of developing a 
shallow field, which the MMS places at approximately $100 million. 
While some are tempted to argue that deep water fields are 
significantly larger than shallow water fields, that argument in part 
arises from an observational bias arising in part because firms will 
only bear the high cost of development for sufficiently large fields. 
Nonetheless, while it is estimated that deep and ultra deep water oil 
reserves are some 35-60 times the magnitude of shallow water reserves, 
the economics of exploration and development, as well as production, 
dictate that deep and ultra deep projects will not generate sufficient 
production to relieve the importance of shallow water projects any time 
soon.
    The increased cost and offshore distance associated with deep water 
operations has several implications for the above economic analysis. 
While the increased cost of development translates into increased 
purchases of goods and services in local communities, as distance 
increases shore operations can be more easily centralized into a few 
communities that serve many deep water fields. Thus the local economic 
effects associated with deep water production are likely to be greater 
and more concentrated than they are for shallow water production.
IV.  Summary and Conclusions
    The present paper estimates the net local and national economic 
effects that can be expected from opening OCS Planning Areas. In 
contrast to previous analyses of offshore development, the present 
study estimates economic growth and output associated with the 
production phase, but also estimates the economic effects of the 
exploration and development phases as well. In truth, exploration and 
development involve a great deal of economic activity, suggesting that 
opening OCS Planning areas can increase economic growth, provide jobs, 
increase aggregate wages, and add to public revenues both today and for 
years in the future.
    Over the life span of development, OCS planning areas will 
contribute approximately $8.7 trillion dollars to U.S. economic growth, 
of which some $2.2 trillion can be expected to be paid out in wages to 
employees in almost 38 million annual jobs, many in high-paying 
professional career fields.
    That economic growth will also generate just over $1.7 trillion in 
Federal tax revenue, almost $0.6 trillion in state and local tax 
revenue, and inestimable royalty and lease revenue that will in many 
cases be split between the two. Those revenues will contribute to 
schools, health centers, and infrastructure projects that will 
contribute substantially to the quality of life in not only coastal 
regions directly affected by the development, but nationwide. Immediate 
revenues from exploration can also help many coastal states weather the 
effects of the present recession and mortgage crisis without Federal 
aid.
    While some are suggesting limiting OCS Planning Area development to 
areas located more than one hundred miles offshore, it is important to 
point out that such limitations substantially curtail the benefits of 
OCS development. Not only are the costs of such deep and ultradeep 
water development often prohibitive, but production in such areas is 
more volatile as a result and Federal subsidies substantially diminish 
the potential public revenue gains from opening OCS Planning Areas.
    In summary, investment and development in OCS Planning Areas can 
increase economic growth with attendant effects on jobs, wages, taxes, 
and other public revenues, helping to both invigorate and stabilize 
economic growth while reducing oil price volatility. The resulting 
economic growth and public revenues are particularly attractive to 
local economies close to previously prohibited OCS planning areas like 
those off the coasts of California and Florida, which are experiencing 
the full force of recession and mortgage foreclosures. Jobs in these 
areas can be particularly powerful in resuscitating the economy and 
restoring economic growth. It makes no sense to consciously choose to 
forego such a substantial source of economic growth in a recession.
    In closing, a caveat. The present analysis is only meant to be a 
starting point for discussing the economic effects of unavailable OCS 
reserves rather than an exact estimate of the economic effects of OCS 
Planning Area development and operation. Clearly there will be debate 
about many of the parameters used in the analysis. No amount of debate, 
however, should detract from the simple reality that reaffirming the 
OCS moratoria will leave valuable economic growth opportunities on the 
table precisely at a time when the country owes its citizens access to 
jobs and wages that can help them weather the current recession.
                                 ______
                                 
    Mr. Lamborn. Thank you for your testimony. We will now hear 
from Emily Woglom from the Ocean Conservancy. Thank you.

           STATEMENT OF MS. EMILY WOGLOM, DIRECTOR, 
            GOVERNMENT RELATIONS, OCEAN CONSERVANCY

    Ms. Woglom. Thank you, Chairman Lamborn, Chairman Hastings, 
Ranking Member Holt and Members of the Subcommittee thank you 
for the invitation to participate in today's hearing.
    My name is Emily Woglom and I am the Director of Government 
Relations for Ocean Conservancy, a national marine conversation 
organization that has brought scientists and citizens together 
to promote a healthy ocean for the last 40 years.
    I have worked on marine issues since I served as a budget 
and policy analyst for ocean issues at the Office of Management 
and Budget during the Bush Administration and in my academic 
training I focused jointly on research economics and marine 
environmental management.
    Ocean Conservancy recognizes that together we must all 
continue to develop energy sources to sustain and promote 
economic growth and support our social needs. And we appreciate 
having the opportunity today to discuss ways to responsibly and 
safely meet our country's energy demand.
    In two weeks it will have been one year since the beginning 
of the BP oil disaster that killed 11 people and discharged an 
estimated 205 million gallons of oil into the Gulf of Mexico. 
Even a year later, there are still places where oil is coming 
ashore, shrimp trollers are dredging up oil, unusual numbers of 
dead dolphins, turtles, and other wildlife continue to be found 
in the Gulf and we do not yet understand the cause.
    Local residents have unanswered questions about long-term 
health effects of the oil and the dispersants used to combat 
it. And of course, hundreds of thousands of jobs in fisheries, 
tourism, and recreation are directly tied to the health of the 
coastal and marine environment. Fishing and tourism in the Gulf 
bring in $57 billion and support over 830,000 jobs. And yet, it 
is in this environment only a year later that offshore drilling 
continues and Transocean is getting bonuses for their safety 
record and even BP itself is eager to drill in the Gulf.
    Yet, despite a clear roadmap for reform presented by the 
bipartisan National Oil Spill Commission, there has been no 
congressional action to address the systemic problems that led 
to this disaster, and there is still tremendous work to be done 
to fully restore the Gulf ecosystem. But instead of reform and 
restoration, we are here to discuss bills to accelerate the 
very processes that need to be overhauled.
    Under the old system, America gambled on oil industry 
promises and lost. Congress must not double down on that flawed 
system, and instead do everything it can to ensure that the 
highest safety standards are met and proven.
    The bills that are the subject of this hearing--H.R. 1229, 
H.R. 1230, and H.R. 1231--pursue a lopsided approach, a full 
steam ahead path that jeopardizes the health of ecosystems as 
well as the people and businesses that depend on them. Each of 
these three bills irresponsibly prioritizes development and 
production at the cost of safety, science, and environmental 
safeguards.
    Moreover, we view these bills as forcing a choice, placing 
oil companies over fishermen, small business owners, and 
employees of the tourism industry. H.R. 1229 rushes secretarial 
approval of drilling by declaring that permits would be deemed 
approved if the Secretary does not issue a decision within 60 
days.
    H.R. 1230 would subvert the NEPA process by forcing lease 
sales in the Gulf of Mexico and off the coast of Virginia on a 
rushed time line. It would deny Interior the opportunity to 
conduct a thorough and specific environmental review and would 
deny the public the opportunity to learn about and comment on 
these lease sales.
    H.R. 1231 would effectively force Interior to offer for 
lease sweeping areas of the OCS and establish production goals 
for the five-year OCS leasing program. This again would 
incentivize production over safety. In so doing, it would make 
it difficult for the agency to conduct any meaningful, site-
specific analysis of the potential environmental consequences 
and risks of oil and gas activity.
    The last section of H.R. 1231 would force taxpayers to foot 
half the bill for certain oil and gas exploration costs. 
Particularly, in our current fiscal climate oil and gas 
companies, some of the richest corporations on earth, do not 
need another subsidy. To ensure that energy development 
minimizes risks to energy workers, ocean and coastal ecosystems 
and the coastal businesses and economies that rely on them, 
Congress and government regulators must act now.
    There have been some attempts to address this, including 
the Clear Act and Ranking Member Markey's bill, H.R. 501, but 
unfortunately so far no bills have made it to the President's 
desk. Ocean Conservancy encourages any legislation to adhere to 
some core principles.
    First, energy development must protect environmental, 
human, and economic health and must be grounded in science and 
a commitment to an increased understanding of the environment. 
Second, the government must perform rigorous risk assessments 
when permitting development. Third, the government and industry 
must together ensure that they are prepared to respond to a 
worse case disaster, even if such an event is a low 
probability. And finally, Congress must provide the funding 
necessary to ensure adequate preparedness.
    If there is to be a place for oil drilling in the Gulf of 
Mexico, then it should be governed by a set of rules that exist 
because of, not in spite of the BP oil disaster. It is not too 
late to avoid making the same mistakes again. Thank you and I 
look forward to your questions.
    [The prepared statement of Ms. Woglom follows:]

     Statement of Emily Woglom, Director of Government Relations, 
       Ocean Conservancy, on H.R. 1229, H.R. 1230, and H.R. 1231

    Chairman Hastings, Ranking Member Markey, and Members of the 
Committee, thank you for the invitation to participate in today's 
hearing. My name is Emily Woglom, and I am the Director of Government 
Relations for Ocean Conservancy, a national marine conservation 
organization that has brought scientists and citizens together to 
promote a healthy ocean for the last forty years. I have worked on 
marine issues since I served as a budget and policy analyst for ocean 
issues at the Office of Management and Budget during the Bush 
Administration. In my graduate program at Duke University I focused 
jointly on resources economics and marine environmental management. 
Through my training and professional career I have experience looking 
at the intersection of natural resource issues and economic concerns in 
the ocean.
I. INTRODUCTION
    Last spring, an explosion rocked the BP Deepwater Horizon offshore 
drilling rig in the Gulf of Mexico. The explosion and resulting fire 
killed 11 crew members, seriously injured 16 others, and eventually 
sank the rig. The explosion marked the beginning of the ``world's 
largest accidental release of oil into marine waters.'' By the time BP 
effectively stopped the flow of oil on July 15, 2010, its Macondo well 
had discharged an estimated 205 million gallons of oil into the Gulf of 
Mexico. The Gulf disaster impacted lives, livelihoods, and the rich and 
diverse Gulf of Mexico ecosystem that is a national treasure and a 
cornerstone of the regional economy.
    Ocean Conservancy recognizes that the United States must continue 
to develop energy sources needed to sustain and promote economic growth 
and support our social needs. But the catastrophe in the Gulf of Mexico 
shows that we must learn to do so in ways that are safe for energy 
workers and that allow us to maintain a healthy environment for this 
and future generations.\1\ At the same time, conservation--including 
reducing our use of and dependence on hydrocarbons and other high-risk, 
non-renewable energy sources--must be a part of our country's energy 
future. Safe and responsible energy development, coupled with sensible 
conservation measures and investments, will help ensure that there are 
economic opportunities, healthy and diverse ecosystems, and a clean and 
safe environment into the future.
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    \1\ The Gulf disaster is just one of many energy-related disasters 
that have been in the news lately. In 2009, the Montara offshore oil 
platform suffered a blowout and released oil into the Timor Sea for 
more than 70 days. Shortly before the Deepwater Horizon disaster in 
April 2010, there was a massive explosion at the Upper Big Branch coal 
mine in West Virginia that killed 29 miners. And, of course, there is 
an ongoing crisis at Japan's Fukushima Dai-ichi nuclear complex, where 
radioactive water is now leaking into the ocean and slowing response to 
the devastation of the tsunami.
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    Finding a path to safe, responsible, and ultimately sustainable, 
energy development is one of the biggest challenges of our time. 
Congress must not view this issue as a political football that can be 
used to score partisan points. Instead, it must do all in its power to 
bring the nation together and commit to doing energy development right, 
including investing in renewable energy sources and conservation 
programs. The following basic principles should guide the process:
        (1)  Energy development must protect environmental, human, and 
        economic health;
        (2)  Energy development must be grounded in science and a 
        commitment to increased understanding of the environment;
        (3)  Development operations must use the best available, safest 
        engineering and technology;
        (4)  Government regulators must perform rigorous risk 
        assessments;
        (5)  Government regulators and industry operators must ensure 
        that they are prepared to respond to a worst-case disaster, 
        even if such an event is of low probability;
        (6)  Congress must provide the funding necessary to ensure 
        adequate preparedness;
        (7)  Our nation's energy policy must include conservation 
        programs; and
        (8)  Congress must commit to restoration in the Gulf of Mexico.
    Below, in Part II of this testimony, I expand on these guiding 
principles. In Part III, I discuss specific areas where the proposed 
bills that are the subject of this hearing--H.R. 1229, H.R. 1230, and 
H.R. 1231--diverge from these principles. And in Part IV, I suggest 
legislative language that would address some specific aspects of the 
energy issue, including funding for restoration of the Gulf of Mexico, 
science and oil spill preparedness, and an Arctic research and 
monitoring program.
II.  Principles for Safe and Responsible Energy Development
    To ensure that energy development minimizes risks to energy 
workers, ocean and coastal ecosystems, and the coastal businesses and 
economies that rely on them, Congress and government regulators should 
adhere to the principles articulated below.
A. Energy development must protect environmental, human, and economic 
        health.
    In our pursuit of energy, we must minimize risks to the natural 
environment to ensure diverse, healthy ecosystems capable of supporting 
the economy and human health--for this generation and the next. Oil and 
gas lease sales, exploratory drilling, and development and production 
on the Outer Continental Shelf (OCS) are appropriate only when science 
shows that such actions can proceed with minimal risk to the health of 
ocean and coastal ecosystems. Oil and gas activities and other energy 
development activities on the Outer Continental Shelf should be 
consistent with the National Ocean Policy's call to ``protect, 
maintain, and restore the health and biological diversity of ocean, 
coastal, and Great Lakes ecosystems and resources.'' \2\ In addition, 
to help ensure that economic sectors other than oil and gas development 
are given adequate consideration, we should move toward a more 
comprehensive system of regional planning for the conservation and 
management of marine resources.
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    \2\ Executive Order 13547, 75 Fed. Reg. 43,023, 43,023 (July 22, 
2010). The National Ocean Policy also includes calls to ``improve the 
resiliency of ocean, coastal, and Great Lakes ecosystems, communities, 
and economies,'' and to ``use the best available science and knowledge 
to inform decisions affecting the ocean, our coasts, and the Great 
Lakes.'' Id. at 43,023-24.
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    Instead of eroding existing standards, Congress should bolster 
environmental safeguards to help ensure that the marine environment is 
adequately protected from the risks of energy development. The National 
Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, 
for example, noted the need for a ``comprehensive overhaul of both 
leasing and the regulatory policies and institutions used to oversee 
offshore activities.'' \3\ To help minimize risks from OCS activities, 
expert agencies other than the Bureau of Ocean Energy Management, 
Regulation, and Enforcement (BOEMRE) should play a greater role in 
decisions about, and preparation of environmental analyses for, oil and 
gas operations. These agencies should include the National Oceanic and 
Atmospheric Administration (NOAA), the U.S. Fish and Wildlife Service 
(USFWS), the U.S. Coast Guard (USCG), and others. To facilitate more 
meaningful environmental analysis before exploration and drilling 
activities proceed, OCS planning areas--at least in frontier areas--
should be smaller and focused more precisely on specific lease tracts. 
Finally, areas of the marine environment that are particularly 
significant--such as important essential fish habitat, areas of high 
productivity or concentrations of wildlife, migratory pathways, and 
subsistence-use areas--should be protected from the impacts of OCS oil 
and gas activities. Regulators should preserve the resilience of marine 
ecosystems by placing important ecological areas off-limits to 
drilling, or by requiring OCS operators to meet specific, stringent 
precautions before they conduct on-water activities that may affect 
these areas.
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    \3\ National Commission on the BP Deepwater Horizon Oil Spill and 
Offshore Drilling, Deep Water: The Gulf Oil Disaster and the Future of 
Offshore Drilling--Report to the President (Jan. 11, 2011) at 250 
[hereinafter National Commission Report].
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B.  Energy development must be grounded in science and a commitment to 
        increased understanding of the environment.
    Congress must ensure that adequate baseline science is in place 
before OCS activities proceed. Scientific baseline data and risk 
analyses should inform decisions about whether, when, and where to 
allow OCS oil and gas activities. Certain types of scientific 
information are necessary to help plan for and implement oil spill 
response operations. In addition, baseline science is necessary in the 
natural resource damage assessment process following an oil spill 
because the impacts must be measured against the environmental baseline 
that existed prior to the spill.\4\ This is not possible without 
adequate time series of baseline data, and the costs of obtaining such 
data are part of the costs of responsible energy development.
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    \4\ See, e.g., 15 C.F.R. Sec. 990.52 (noting that natural resource 
trustees ``must quantify the degree, and spatial and temporal extent of 
such injuries relative to baseline.''); see also id. Sec. 990.30 
(defining ``baseline'' as ``the condition of the natural resources and 
services that would have existed had the [oil spill] incident not 
occurred.'').
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    Before permitting OCS activities to proceed, we should require the 
availability of specific types and quantities of baseline scientific 
information. This information might include information on physical 
characteristics--such as data on the benthic environment, ocean 
currents, wind and weather patterns, and water temperature and 
salinity--as well as information about the ecosystem, such as the 
presence, distribution, and abundance of species and the web of 
relationships among those species. Collection of baseline science 
should include and incorporate local and traditional knowledge from 
affected communities. This approach would ensure that expert concerns 
are heard from the outset, and would help avoid later complications.
    The need for baseline science information is particularly acute in 
the Arctic OCS. Participants in a workshop \5\ on Natural Resource 
Damage Assessments [NRDA] in the Arctic convened on April 20, 2010--the 
same day as the BP Deepwater Horizon disaster began to unfold--
participants concluded that: ``Even under best-case scenarios, spilled 
oil could have serious consequences for natural resources and local 
communities, requiring a NRDA to be initiated. However, very little, if 
any, NRDA work has been done in the Arctic.'' The National Commission 
noted that ``scientific research on the ecosystems of the Arctic is 
difficult and expensive. Good information exists for only a few 
species, and even for those, just for certain times of the year or in 
certain areas.'' \6\ The Commission recommended ``an immediate, 
comprehensive federal research effort to provide a foundation of 
scientific information on the Arctic (with periodic review by the 
National Academy of Sciences), and annual stock assessments for marine 
mammals, fish, and birds that use the Beaufort and Chukchi Seas.'' \7\
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    \5\ National Oceanic and Atmospheric Administration Office of 
Response and Restoration and University of New Hampshire Coastal 
Response Research Center. Natural Resources Damage Assessment in the 
Arctic: The Dialogue Begins (October 2010) at 4.
    \6\ National Commission Report at 303.
    \7\ Id.
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C.  Development operations must use the best available engineering and 
        technology.
    Going forward, we must ensure that OCS facilities use the best 
available engineering, technology, and safety procedures to maximize 
the protection of workers, ocean and coastal ecosystems, and the 
coastal businesses and economies that rely on them. A recent Department 
of the Interior Inspector General Report concluded that BOEMRE's 
``process for developing or updating standards and regulations has not 
kept pace with new and emerging offshore technologies.'' \8\ Operators 
of all new offshore leases should be required to demonstrate that they 
are using the most effective safety technology for exploration or 
development activity as a precondition to drilling.\9\ Standards 
regarding spill prevention technologies should be implemented, as well. 
These might require redundant engineering controls, such as multiple or 
improved blowout prevention systems, on-site blowout containment 
structures, and double-walled pipes or tanks. All OCS leases should be 
required to incorporate the most environmentally protective timing and 
location stipulations and terms so as to reduce the potential for 
environmental damage and the potential for adverse impact on the 
coastal zone.
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    \8\ Office of Inspector General, U.S. Department of the Interior, A 
New Horizon: Looking to the Future of the Bureau of Ocean Energy 
Management, Regulation and Enforcement (Dec. 2010), at 44.
    \9\ At present, OCSLA provides for ``the use of the best available 
and safest technologies...on all new drilling and production operations 
and, wherever practicable, on existing operations.'' 43 U.S.C. 
Sec. 1347(b). However, this requirement is weakened significantly by 
other provisions: it applies only to certain types of equipment, and 
the Secretary of the Interior may waive the requirement if he 
determines that the additional cost of using the ``best'' or ``safest'' 
technology outweighs the additional benefits of using the technology. 
Id.
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D.  Regulators must perform a rigorous risk assessment.
    As development activities proceed, regulators must ensure a 
rigorous analysis of potential impacts and risks. As noted above, 
federal agencies other than BOEMRE should have a greater role in 
planning for and conducting environmental analyses of OCS oil and gas 
activities. Risk analysis should be science-based, and subject to peer 
review. Analysis pursuant to the National Environmental Policy Act 
(NEPA) should be substantive--not mere window dressing--and OCS 
drilling operations should not be categorically excluded from 
environmental review. All OCS drilling activities should be subject to 
site-specific NEPA analysis, either an Environmental Assessment or an 
Environmental Impact Statement.
    The BP Deepwater Horizon disaster highlighted the risk of failing 
to engage in worst-case oil spill planning. When making decisions that 
involve the potential for catastrophic result--such as a major oil 
spill--environmental analyses must take seriously the potential for 
disaster. This is true even if the probability of an individual 
occurrence is low, because the harm from such an event may be very 
great.\10\ In the future, federal regulators must analyze low-
probability, high-risk events to ensure that they are prepared for a 
worst-case disaster. The Council on Environmental Quality concluded 
that, in light of the BP Deepwater Horizon disaster, BOEMRE must ``take 
steps to incorporate catastrophic risk analysis.'' \11\ The National 
Commission recommended that BOEMRE ``incorporate the `worst-case 
scenario' calculations from industry oil spill response plans into NEPA 
documents and other environmental analyses or reviews'' to inform the 
agency's ``estimates for potential oil spill situations in its 
environmental analyses.'' \12\
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    \10\ See, e.g., id. Sec. 1502.22(b)(4) (noting that in a NEPA 
analysis when information is missing or unavailable, ``reasonably 
foreseeable'' impacts include ``impacts which have catastrophic 
consequences, even if their probability of occurrence is low, provided 
that the analysis of the impacts is supported by credible scientific 
evidence, is not based on pure conjecture, and is within the rule of 
reason'').
    \11\ Council on Envtl. Quality, Report Regarding the Minerals 
Management Service's National Environmental Policy Act Policies, 
Practices, and Procedures as They Relate to Outer Continental Shelf Oil 
and Gas Exploration and Development (Aug. 16, 2010) at 27.
    \12\ National Commission Report at 267.
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    Agency assessment of industry oil spill plans must be more 
rigorous, as well. In the Arctic, BOEMRE approved an oil spill response 
plan in which Shell Offshore, Inc. claimed that it would recover 90 
percent of the oil spilled during a worst case discharge from its 
proposed facility in the Beaufort Sea \13\--even though a 90 percent 
recovery rate is, without question, wholly unrealistic. BOEMRE approved 
the plan despite the fact that in earlier planning documents, the 
agency had acknowledged that ``[o]n average, spill-response efforts 
result in recovery of approximately 10-20% of the oil released to the 
ocean environment.'' \14\ This kind of lax oversight led DOI's Office 
of Inspector General to conclude that BOEMRE's review of oil spill 
response plans ``does not ensure that critical data are correct.'' \15\
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    \13\ See Shell Offshore Inc., Beaufort Sea Regional Exploration Oil 
Discharge Prevention and Contingency Plan (Jan. 2010) at unnumbered 
page following I-12 (containing BOEMRE approval letter); id. at 1-29 
(assuming that only ten percent of the discharge from a hypothetical 
blowout will ``escape [ ] primary offshore recovery efforts'').
    \14\ Minerals Management Service, Final Environmental Impact 
Statement: Beaufort Sea Planning Area Oil and Gas Lease Sales 186, 195, 
and 202 p. IV-17 (Feb. 2003).
    \15\ Office of Inspector General, U.S. Department of the Interior, 
A New Horizon: Looking to the Future of the Bureau of Ocean Energy 
Management, Regulation and Enforcement (Dec. 2010), at 44.
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    To facilitate more serious review of oil spill response plans for 
offshore facilities, broaden the scope of review, and promote better 
information-sharing in the review process, multiple federal agencies 
should review and approve these plans. The National Commission endorsed 
the idea of interagency spill plan review:
        In addition to the Department of the Interior, other agencies 
        with relevant scientific and operational expertise should play 
        a role in evaluating spill response plans to verify that 
        operators can conduct the response and containment operations 
        detailed in their plans. Specifically, oil spill response 
        plans, including source-control measures, should be subject to 
        interagency review and approval by the Coast Guard, EPA, and 
        NOAA. Other parts of the federal government, such as Department 
        of Energy national laboratories that possess relevant 
        scientific expertise, could be consulted.\16\
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    \16\ National Commission Report at 266-67.
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    The Commission also noted that interagency review of oil spill 
response plans for OCS facilities would facilitate greater integration 
of those plans with broader-level area contingency plans and regional 
contingency plans because it would ``involve[e] the agencies with 
primary responsibility for government spill response planning in 
oversight of industry planning.'' \17\ In addition to interagency 
review of oil spill response plans for OCS facilities, there should be 
public comment on such plans.\18\
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    \17\ Id. at 267.
    \18\ See id. (``Plans should also be made available for a public 
comment period prior to final approval and response plans should be 
made available to the public following their approval.'')
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E.  Government regulators and industry operators must ensure that they 
        are prepared to respond to a worst-case disaster.
    Worst-case scenario planning will help federal regulators and OCS 
operators anticipate their needs in the event of a major oil spill or 
other disaster. To protect healthy, diverse ocean ecosystems for future 
generations, regulators and the oil and gas industry must also ensure 
the immediate availability of equipment and trained personnel 
sufficient to contain, control, and clean-up a worst-case discharge.
    Estimates following the BP Deepwater Horizon disaster reveal that 
despite the massive effort that BP activated to clean up the oil \19\ 
response efforts were able to remove or chemically disperse--without 
removal of the dispersed oil--only about one-third of the oil that was 
discharged from the Macondo well.\20\ The National Commission 
determined that ``[t]he technology available for cleaning up oil spills 
has improved only incrementally since 1990'' \21\ The Commission 
further observed that ``[f]ederal research and development programs in 
this area are underfunded,'' and the major oil companies have committed 
minimal resources to in-house research and development related to spill 
response technology.''
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    \19\ At its peak, more than 45,000 people were involved in the 
response effort. National Commission Report at 133.
    \20\ See Jane Lubchenco et al., BP Deepwater Horizon Oil Budget: 
What Happened to the Oil? (Aug. 4, 2010) available at http://
www.restorethegulf.gov/sites/default/files/imported_pdfs/posted/2931/
Oil_Budget_description_8_3_FINAL.844091.pdf (estimating that of the 4.9 
million barrels of oil that was discharged, responders recovered 17% 
directly from the wellhead, skimmed 3%, burned 5%, and chemically 
dispersed 8%, for a total of 33%).
    \21\ National Commission Report at 269.
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    To spur better on-water cleanup results and more investment in 
research and development for response technologies, regulators should 
require operators to demonstrate the ability to meet specific 
performance standards in real-world conditions in the lease area before 
allowing operators to conduct drilling operations. The performance 
standards should require operators to demonstrate in simulated field 
trials that they have in place adequate equipment, personnel, and 
resources to respond effectively in the event of a catastrophic spill. 
Operators should show that they can deploy their resources in real-
world conditions and that the chosen equipment is effective in meeting 
an established oil removal performance target. These spill response 
standards should be enforced through independent third-party review of 
facility response plans and regular audits during the period of 
exploration and production.
F.  Congress must provide the funding necessary to ensure adequate 
        preparedness.
    It will not be enough to require adequate oil spill preparedness in 
legislation or agency regulations. Congress also must commit the 
necessary financial resources to enable relevant federal agencies, such 
as the Coast Guard, NOAA, the Department of the Interior (DOI), and 
others, to do their jobs. Absent stable and adequate funding for oil 
spill preparedness, federal agencies may not be able to carry out their 
responsibilities to plan, prepare, and respond to incidents, and to 
contain, control, and clean-up a major oil spill.
    To ensure that research and development on oil spill response 
technologies is not put off until the next catastrophic spill, Congress 
should provide steady funding for federal agencies to promote and 
conduct such research. The National Commission recommended that 
Congress establish a funding mechanism that is not subject to the 
annual appropriations process to ``increase federal funding for oil 
spill response research by agencies such as [the Department of the] 
Interior, the Coast Guard, EPA, and NOAA--including NOAA's Office of 
Response and Restoration.'' \22\ In addition, agencies may be able to 
increase their own focus on spill response research. For example, the 
DOI Inspector General recommended that DOI ``[c]onduct additional 
research on containment and control measures to determine appropriate 
requirements for containing oil discharge at the source.'' \23\ As 
noted above, agencies also can promote industry investment in oil spill 
response research and development by instituting strict new performance 
standards that require operators of OCS facilities to demonstrate the 
effectiveness of their spill response equipment in real-world 
conditions before they are allowed to conduct drilling activities.\24\
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    \22\ Id. at 270.
    \23\ Office of Inspector General, U.S. Department of the Interior, 
A New Horizon: Looking to the Future of the Bureau of Ocean Energy 
Management, Regulation and Enforcement (Dec. 2010), at 51.
    \24\ See supra, Part II(B)(3).
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G.  Congress must commit to restoration in the Gulf of Mexico.
    A sound energy development policy must include a commitment to 
restoration of the Gulf of Mexico ecosystem and communities. The Gulf's 
people, businesses, and ecosystem suffered a major blow from last 
summer's BP Deepwater Horizon disaster. As we move forward with safer, 
more responsible energy development, we must support restoration 
efforts by committing to a full Natural Resource Damage Assessment 
process and by dedicating Clean Water Act penalties to Gulf restoration 
work.
    Successful restoration of the Gulf ecosystem--including preserving 
the region's unique culture and traditions and promoting its economic 
restoration--will require sound management, stable and coordinated 
funding, prudent project selection, stewardship of the full ecosystem, 
and monitoring and adaptive management over the long-term. Restoration 
should focus on five key priorities:
        1.  Protecting, restoring, and enhancing the coast and 
        wetlands: Restore resilience to coastal areas and nourish 
        wetlands through major projects in the Mississippi River delta 
        region and elsewhere in the five-state region.
        2.  Maintaining healthy, sustainable fisheries: Restore and 
        sustain Gulf of Mexico fisheries through investments in 
        science, technology, fishing fleet performance, and strategies 
        to restore depleted fish populations and support sustainable 
        long-term management.
        3.  Restoring and protecting coastal and marine habitats: 
        Enhance key coastal and marine habitats like oyster reefs, 
        seagrass beds, deepwater corals, and nesting sites for birds 
        and turtles to strengthen and restore critical ecosystems 
        services, such as shoreline protection, tourism, and fishing.
        4.  Shrinking the dead zone in the northern Gulf of Mexico: 
        Implement nutrient reduction strategies in the Mississippi 
        River watershed to reduce the size and duration of the hypoxia 
        zone to improve marine health and increase fisheries 
        productivity in the Gulf of Mexico.
        5.  Taking the pulse of the Gulf ecosystem: Create a 
        permanently-funded, long-term Gulf of Mexico ecosystem 
        monitoring and research program to provide the basis for 
        adaptive management of coastal and marine natural resources.
    Restoration in the Gulf must be well-managed. The restoration 
process should be based on a comprehensive, science-based ecosystem 
restoration strategy, supplemented by annual work plans, progress 
reports, and periodic requests for proposals. Relevant federal entities 
and all Gulf States should be active, full participants. The process 
should engage the public through a formal and recognized process that 
includes broad representation from communities and stakeholders in the 
region. Federal and state partners should commit to incorporating local 
and traditional knowledge in management decisions. The Natural Resource 
Damage Assessment and restoration process (NRDA) conducted in response 
to the BP oil disaster must be well-coordinated with the broader 
restoration planning functions of the Gulf Coast Ecosystem Restoration 
Task Force.
    Stable funding will be critical to successful restoration. Congress 
should dedicate Clean Water Act penalties to fund restoration in the 
Gulf of Mexico, and the National Commission recommended that 80 percent 
of such penalties be dedicated to that purpose. This commitment should 
be done in a way that results in predictable funding streams that are 
consistent from year to year and sustained over the long-term. For 
example, an endowment should be established to support long-term 
research and monitoring needed to assess the health of the Gulf, 
evaluate the efficacy of restoration measures, and facilitate adaptive 
management. The funding stream from the endowment could also provide 
valuable support for the work of Gulf Coast research institutions, 
which are in a good position to make lasting contributions to the 
overall recovery of the Gulf ecosystem and economy.
    Restoration projects should be selected based on established 
criteria that clearly link projects to specific, measurable, feasible 
objectives. The selection and evaluation of projects should be subject 
to independent scientific peer review, and a comprehensive ecosystem 
restoration strategy should coordinate and integrate various 
restoration projects.
    Gulf of Mexico restoration must embrace the whole ecosystem, from 
coasts and marshes under state jurisdictions to open blue-water 
environments managed by the federal government. It should include 
habitat protection and enhancements that provide long-term resiliency 
and sustainability for coastal communities, as well as rehabilitation 
of degraded natural resources and ecosystem services that provide 
sustainable economic opportunity and human uses.
    Finally, successful restoration in the Gulf of Mexico will require 
long-term monitoring and management systems to help identify and 
address lingering oil spill injuries, evaluate the effectiveness of 
restoration projects, and make necessary adjustments. As noted above, 
Ocean Conservancy supports a permanent program that ``takes the pulse 
of the Gulf'' to track ecosystem health, identifies emerging problems, 
and facilitates solutions.
H.  Our nation's energy policy must include conservation programs.
    Ocean Conservancy recognizes that additional energy development--
consistent with the foregoing principles--must be part of this 
country's overall energy policy. Any energy policy must also call for 
and incentivize conservation to reduce our overall energy demand. 
Congress should identify and support programs that effectively reduce 
consumer demand for hydrocarbons. These measures might include 
weatherization, alternative transportation, and other projects.
III.  The Legislative Language in H.R. 1229, H.R. 1230, and H.R. 1231 
        Does Not Conform to the Principles for Safe and Responsible 
        Energy Development.
    The bills that are the subject of this hearing--H.R. 1229, H.R. 
1230, and H.R. 1231--pursue a lop-sided approach that promotes energy 
development without ensuring that such development will be conducted in 
a way that maintains a healthy environment for present and future 
generations. This ``full-steam ahead'' path jeopardizes the health of 
ecosystems, as well as the people and businesses that depend on those 
ecosystems. The following section touches on some of the shortcomings 
of the three bills.
A.  Shortcomings of H.R. 1229, the ``Putting the Gulf of Mexico Back to 
        Work Act''
    H.R. 1229 proposes a series of amendments to the Outer Continental 
Shelf Lands Act (OCSLA) intended to hasten Secretarial approval of 
drilling permits by imposing limits on the Secretary's ability to delay 
or deny approval of such permits, and by declaring that permits would 
be ``deemed approved'' if the Secretary does not issue a decision 
within 60 days. These proposed deadlines would interfere with--or make 
impossible--BOEMRE's ability to conduct thorough, site-specific 
environmental analyses of drilling projects, or to ensure adequate oil 
spill preparedness and response capability. These deadlines would 
effectively elevate production above safety and environmental concerns, 
risking another BP Deepwater Horizon-type incident.
    In addition, this legislation proposes limits on judicial review of 
energy projects in the Gulf of Mexico. These limits are designed to 
discourage litigation that might slow down energy development. 
Insulating BOEMRE from scrutiny and encouraging the agency to rush 
critical environmental analyses and spill plan review simply sets the 
stage for the kind of lax regulatory culture that made possible the BP 
disaster.
B.  Shortcomings of H.R. 1230, the ``Restarting American Offshore 
        Leasing Now Act''
    H.R. 1230 would require certain lease sales in the Gulf of Mexico 
and off the Coast of Virginia. It would require the Secretary of the 
Interior to hold Lease Sale 216 in the Central Gulf of Mexico within 
four months after enactment, Lease Sale 218 in the Western Gulf of 
Mexico within eight months after enactment, and Lease Sale 222 in the 
Central Gulf by June 1, 2012. For all these sales, the Act deems pre-
existing NEPA analyses sufficient--even though those reviews took place 
before the BP Deepwater Horizon disaster. The proposed legislation 
would also require the Secretary to hold Lease Sale 220, off the coast 
of Virginia, no later than one year after enactment.
    By forcing lease sales in quick succession, this legislation would 
place a burden on BOEMRE that would likely only be met by conducting 
the most cursory reviews and superficial analyses. More importantly, 
this legislation subverts the NEPA process. It would deny BOEMRE the 
opportunity to conduct a thorough and specific environmental review--
including more comprehensive worst-case discharge analyses--and would 
deny the public the opportunity to learn about and comment on the lease 
sales. Shortcutting the environmental review process increases risks. 
In fact, H.R. 1229 would effectively eliminate BOEMRE's ability to 
conduct a rigorous site-specific analysis of environmental impacts at 
the drilling stage.
C.  Shortcomings of H.R. 1231, the ``Reversing President Obama's 
        Offshore Moratorium Act''
    H.R. 1231 would amend section 18 of the Outer Continental Shelf 
Lands Act by requiring the Secretary to open certain portions of 
planning areas to oil and gas leasing and open other areas as requested 
by state governors. It would also require the Secretary to establish 
production goals, set specific production goals for the 2012-2017 five-
year OCS leasing program, and require annual progress reports. The Act 
would also require the Secretary to establish regulations for the 
issuance of ``seismic surveying cost credits,'' equal in value to 50 
percent of the costs of the survey.
    This legislation would effectively force BOEMRE to offer for lease 
sweeping areas of the OCS. In so doing, it would make it difficult for 
the agency to conduct any meaningful, site-specific analysis of the 
potential environmental impacts and risks of oil and gas activity. 
Moreover, by flooding the market with OCS leases, it could reduce 
competition and lower bids for OCS areas--diminishing returns to 
taxpayers. The last section of the bill also would harm the American 
public by forcing taxpayers to foot half the bill for certain oil and 
gas exploration costs. Oil and gas companies do not need this subsidy, 
and taxpayers should not have to give their earnings to some of the 
most profitable corporations on the planet.
IV.  The Path Forward: Legislation to Ensure Safer, More Responsible 
        Energy Development and Restoration of the Gulf of Mexico.
    As noted at the outset, intact and diverse ocean ecosystems are 
critical for human health and support a wide array of jobs and 
businesses. The amendments proposed in H.R. 1229, H.R. 1230, and H.R. 
1231 fail to provide critical protections. In contrast, Ocean 
Conservancy supports legislation that will promote energy development 
``done right'': legislation that will not only lead to new sources of 
energy, but will provide the science, safety, and environmental 
safeguards necessary to ensure clean, healthy ecosystems today and in 
the future. Ranking Member Markey has introduced H.R. 501 the 
Implementing the Recommendation of the BP Oil Spill Commission Act of 
2011. We urge the Committee to take up H.R. 501 which addresses many of 
the chronic regulatory problems that led to the Deepwater Horizon 
disaster and would ensure that energy development occurs in a 
responsible manner that would protect our oceans and coasts and the 
businesses and economies that depend on them.
    The National Commission on the BP Deepwater Horizon Oil Spill and 
Offshore Drilling recommended a series of reforms to this country's 
administration of OCS oil and gas activities. For example, the 
Commission recognized the need for science-based decision-making and 
argued: ``To ensure that offshore oil and gas development and 
production proceed in ways that minimize adverse impacts to the natural 
and human environment, decisions about these activities must be 
grounded in strong science.'' \25\ It also recognized the need for 
other federal agencies (beyond BOEMRE) to participate in scientific 
research, environmental review, and other parts of the OCS process.\26\ 
The Commission recommendations called for changes in regulatory 
processes, including changes in BOEMRE's NEPA processes and 
incorporation of ``the `worst-case scenario' calculations from industry 
oil spill response plans'' into NEPA analyses.\27\ They also 
recommended that NOAA provide advice on especially sensitive areas 
``that should be excluded from the leasing program or treated in a 
specific manner due to their ecological sensitivity or for other 
reasons.'' \28\ The Commission recommended new safety and regulatory 
standards for OCS activities and more rigorous oil spill response 
planning and preparedness.\29\ In addition, the Commission recommended 
funding Gulf of Mexico restoration work with 80 percent of the 
penalties associated with the Deepwater Horizon disaster.\30\ Ocean 
Conservancy believes that the Commission's recommendations--if fully 
implemented by government and industry--would address many of the flaws 
in the existing system.
---------------------------------------------------------------------------
    \25\ National Commission Report at 263.
    \26\ Id. at 264, 265.
    \27\ Id. at 267.
    \28\ Id.
    \29\ See, e.g., id. at 252-53, 265.
    \30\ Id. at 280.
---------------------------------------------------------------------------
    In addition to supporting comprehensive OCS oil and gas reform 
legislation as envisioned by the National Commission, Ocean Conservancy 
supports specific legislative priorities that would advance energy 
development while at the same time maintaining a healthy environment 
for this and future generations. Specifically, Ocean Conservancy 
supports:
        (1)  Targeted changes to the Oil Pollution Act of 1990 (OPA 90) 
        that would increase funding available to the U.S. Coast Guard 
        for annual operating expenses; establish minimum funding levels 
        for Coast Guard operating expenses related to the 
        implementation, administration, and enforcement of area 
        contingency plans and facility response plans for oil spills; 
        and establish minimum funding levels for Coast Guard operating 
        expenses related to operations in the Arctic Ocean, where 
        current capacity is extremely limited.
        (2)  Establishment of an Arctic scientific research and 
        monitoring program to be administered by the North Pacific 
        Research Board, in cooperation with the U.S. Arctic Research 
        Commission. At present, our understanding of Arctic ecosystems 
        is limited; and our lack of knowledge precludes informed 
        decisions about whether to allow oil and gas operations, and if 
        so under what conditions.
        (3)  Comprehensive restoration for the Gulf of Mexico ecosystem 
        and economies, using financial resources from the Natural 
        Resource Damage Assessment and Clean Water Act penalties for 
        programs and projects that include restoring coastal wetlands 
        and marine habitats, long-term monitoring and research, 
        shrinking the Gulf hypoxic (``dead'') zones, improving 
        fisheries and wildlife management throughout the Gulf, and 
        enhancing critical nursery habitat and ecosystem services 
        through oyster reef and seagrass restoration.
CONCLUSION
    The United States must move forward with energy development, but we 
must ``do it right.'' Any energy development must be guided by 
principles and practices that will ensure a safe, healthy environment 
for present and future generations. The bills that are the subject of 
this hearing do not clear that hurdle, and Ocean Conservancy cannot 
support them. We look forward to working with the Committee on future 
legislation that takes a more balanced and measured approach to energy 
development on the OCS.
                                 ______
                                 
    Mr. Lamborn. You had perfect timing. That is about as good 
as you can get. Thank you all for your testimony and for being 
here today.
    At this point, I would like to ask unanimous consent for 
the gentleman from Virginia, Representative Wittman, a Member 
of the full Committee to participate in today's hearing.
    Seeing no objection, so ordered.
    We will now have our round of questions. Thank you all for 
being here. Each Member asking questions will have five minutes 
in which to do so. And I will go ahead and start.
    Dr. Mason, in your testimony you state that OCS development 
would provide a long-term economic stimulus to the entire U.S. 
economy, not just the Gulf region. In my home state of Colorado 
that is something I am very interested in. For instance, you 
talk about--I will go ahead and zero in. According to the 
results of your study, do you believe that OCS production 
benefits would apply, not just to the coastal states, but to 
all 50 states? And if so, what are the economic benefits that 
all states would enjoy as a result of OCS development?
    Dr. Mason. In an integrated economy, certainly the entire 
nation benefits from development in any one particular region. 
Development of the Outer Continental Shelf region will involve 
ships that may have to be built with steel that comes from 
steel mills in the Midwest or the South. Sometimes fabricated 
by construction workers in those regions. Food, we will have to 
feed people on those ships. That will be produced throughout 
the nation. Firms will can food, prepare it for delivery. All 
kinds of inputs go into these projects. Some people have called 
these projects floating cities that have to be supported with 
all the means that you have in a typical home or hotel or 
anything else. So those means come from throughout the U.S. 
economy and the benefits spread out throughout the U.S. 
economy.
    By my estimates, the total development of just the 
development of the Outer Continental Shelf region would drive 
about 250,000 additional jobs, just in the development phase, 
not the production phase. Once you start producing, of course, 
you are putting out oil. It needs to be refined. You need 
additional refineries. Those need to be built. The majority of 
refineries are in the Midwest. Those additional jobs and knock-
on jobs would add about 1.2 million jobs per year for the life 
of those wells.
    But instead, we are going in reverse, taking jobs out of 
the Gulf. And now we are also talking about taking jobs out of 
Section 199 deductions and dual capacity deductions for the 
industry to cost the U.S. about 154,000 by my estimate.
    Mr. Lamborn. OK, thank you for that answer.
    Mr. Danos, we on this Committee are acutely aware of the 
economic hardships that have been facing not only thousands of 
Americans put out of work, but also businesses that rely on a 
robust Gulf production industry to provide energy for our 
nation, employ that workforce, and conduct day-to-day business.
    In your testimony you stated that you have had to let some 
construction and logistical support workers go. Can you tell 
approximately how many you have had to release and in your 
opinion what circumstances put you in the position where you 
had to make that decision?
    Mr. Danos. What I know is that since the moratorium and 
since the slow down in permits and drilling in the Gulf of 
Mexico our company has released in excess of 200 jobs. And I 
would hasten to add that those jobs had faces attached to each 
one of them. So this slow down has had an impact. Many of these 
employees live in the communities that I live in and I see them 
regularly. And some of them have indicated to me that they 
would be glad to come back to work if our industry would get up 
and moving.
    The uncertainty and the lack of permits and the lack of 
drilling has cost, not only my company but many companies jobs. 
And we feel that if this legislation was enacted, not only 
would we go back to work with these jobs, but more jobs would 
be created.
    Mr. Lamborn. Mr. Danos, are these good paying jobs that can 
support families?
    Mr. Danos. Absolutely. Many of our people that had these 
jobs were full-time workers. Some of their spouses worked as 
well. Some of them didn't. But they supported their families, 
contributed to our community, and contributed greatly to the 
lifestyle in our communities along the coast.
    Mr. Lamborn. Thank you for your answers. At this point I 
would like to yield to the Ranking Member from New Jersey for 
five minutes.
    Mr. Holt. Thank you, Mr. Chairman. Thank the witnesses.
    I hardly know where to begin, but let me begin with our 
witness from Virginia. I can understand that Virginia may feel 
that it is in Virginia's interest to allow this drilling. I am 
not sure why Virginia would decide that, but I am wondering 
whether Virginia has a yet unpublished method for training fish 
to observe state boundaries and whether Virginia has a 
permanent fence or boom that separates its waters from North 
Carolina and Delaware and New Jersey?
    As we have seen in the Gulf where you have got Texas and 
Louisiana and Mississippi and Alabama and Florida, the fish, 
whether they are breeding or feeding don't seem to recognize 
state boundaries, nor do oil slicks. The territory that you are 
talking about drilling in Virginia is less than one day's oil 
slick travel away from New Jersey, the state that I represent. 
And I can tell you that this is not just a decision that 
Virginia makes.
    So let me ask what consideration of neighboring states have 
you put into your call, Mr. Domenech for drilling off of 
Virginia?
    Mr. Domenech. Thank you for the question.
    Specifically, we have not had contact with our neighboring 
states. Of course, interestingly enough, we do manage our 
fisheries in cooperation with other states and the fish do 
cross state lines. In this case, of course, the law allows 
Virginia to have an identified portion of the Outer Continental 
Shelf. And we think there are some resources out there and 
there are great benefits to the economy and to jobs and to 
American energy security to develop those resources, both 
renewable and conventional.
    Mr. Holt. Let me ask that both the Department of Natural 
Resources that you head and the rest of the government and the 
state consult the neighboring states. This is not just a 
decision for a single state.
    If I may turn to I guess first Mr. Danos. You talked about 
the economic dislocation, the hardship for a number of people. 
I believe it is the case that BP Company set aside $100 million 
for rig workers affected. And because only a few hundred 
workers actually reported that they had been affected--that 
they were out of work and applied for these funds, BP has now 
kind of redefined that fund. Is that your understanding?
    Mr. Danos. I am not sure about the amount of money they set 
aside or who applied for it. What I do know is that our company 
has had to let go approximately 200 people. And that businesses 
such as mine are in turmoil and uncertain about the future. And 
when we are uncertain and when there is a lack of confidence in 
the business community, we are less likely to invest in job 
training and equipment and new jobs.
    Mr. Holt. I would suggest that you direct those workers to 
this BP fund. And I am wondering whether any of the witnesses 
would have anything to say about what I thought was glaring 
absent, which is the number of tourism workers, the number of 
fishers, fishing boat and other processing people who have lost 
their income, lost their jobs. The hotel construction and 
service--we talk about ship construction or oil rig 
construction. The hotel construction, the service industry--
there is enormous economic loss in the Gulf of Mexico there.
    Ms. Woglom. Ranking Member Holt, if I could address that 
question. Think you raise a great point. And I think that if we 
learn nothing else from the BP oil disaster we need to finally 
learn that a healthy coastal economy relies on a healthy 
ecosystem.
    Mr. Lamborn. OK. And thank you. Now the Chairman of the 
full Committee, Doc Hastings of Washington.
    Mr. Hastings. Thank you, Mr. Chairman.
    I would just respond to my friend from New Jersey that the 
question that you asked Mr. Danos will be a subject to the 
hearing we are having in Louisiana in a couple of weeks, so we 
are very concerned about that also.
    I also want to make clear too because there has been 
allusion today about the fact that these bills will not make 
drilling safer, and I just want to point out that H.R. 1229 
includes language that requires permitting by law and requires 
by law a safety review that includes containment. I point that 
out to say that is not in the law today. So to suggest that 
these bills ignore safety I think misses the point entirely.
    Mr. Danos, there's been a lot of work in drafting these 
three bills by adding what we think is certainty into the 
process of developing these resources and ensuring, 
specifically in the Gulf of Mexico, that the delayed or 
canceled leases will be, if you will, re-permitted so that they 
can do what they were given before the delay was put into 
place. But also the three bills look at expanding OCS to those 
areas--now you alluded to this in your testimony--to those 
areas where we think the best resources are, which I think is 
efficiency.
    So my question is pretty simple. You are a support 
industry. You are a medium-sized business. What impact would 
these three bills have then on your medium-sized business and 
service businesses like yours if these bills were to become 
law?
    Mr. Danos. If these bills became law, as I understand it, 
not only would we regain confidence and certainty so that we 
could begin planning and investing and reforming the jobs that 
were lost. But many companies such as ours recruit people from 
all over the country to come to work in our industry. And as we 
open up other areas in OCS, we would offer jobs, more jobs to 
more people. There is a great source of skill and available 
workers from the entire country. Many of them are willing to 
relocate. Many of them do not have to relocate.
    Because of the nature of our work offshore, they work so 
many days at a location and they can return home. So this 
legislation would create some certainty, some confidence, and 
most importantly, some jobs.
    Mr. Hastings. Thank you very much for that.
    And Professor Mason, let me follow up on that because you 
have done a lot of work on the impact this has on the economy 
in that area. And Mr. Lamborn asked you about jobs nationwide. 
Let me be more specific. What would be the impact of job 
creation, specifically, would this have both short-term and 
long-term effects if these bills were to become law?
    Dr. Mason. In the short-term, we are looking at something 
like 250,000 jobs from exploration and development. That 
includes initial surveys of the OCS, which haven't been carried 
out for many, many years. That also includes drawing test 
wells--things like that with all these functions that have to 
be carried out before we can even think about drilling a well 
for production. Those activities, by my estimate, will result 
in 250,000 jobs for a span of seven years in the OCS regions 
that are currently offline today, that is not including the 
Gulf.
    When we get into the production phase, as I said, you have 
the jobs involved in actually producing the oil. Also, refining 
that into petroleum products, chemicals, much of which occurs 
in New Jersey as well as Illinois and California. More 
refineries will be necessary to handle the flow. More flow will 
be forthcoming. Pipelines need to be operated, infrastructure 
built and operated. That will result, by my estimate, in about 
1.2 million jobs for a 30-year average lifetime of a well. So 
the job benefits are very substantial.
    And I just want to add that I don't think anyone would 
advocate here moving ahead without regard to safety. I have to 
say I would agree with Ms. Woglom's policy prescriptions. BOEM 
has moved forward with safety for spill response in approved 
projects. And I am assuming that the Virginia projects would go 
forward with those same restrictions. Nobody wants to move 
forward and have another Deepwater Horizon, but we do want to 
move forward. Thank you.
    Mr. Hastings. I appreciate that. And in a slow economy like 
we have and hopefully we do have a recovery. Obviously, energy 
is an integral part of that. And energy jobs are good-paying 
jobs. I think they go very well together. And I might add just 
one other point in that regard. In an unstable world, it seems 
to me it is in the best interest of our country to be less 
dependent on foreign energy as we possibly can, especially when 
we are sitting on the known resources that we have. So thank 
you very much for your courtesy. I appreciate it.
    Mr. Lamborn. I thank the gentleman. And I would like to 
recognize now the gentlelady from Massachusetts, Representative 
Tsongas.
    Ms. Tsongas. Thank you, Mr. Chairman, and thank you all for 
your testimony here today.
    As I have said before in this Committee, last summer like 
the rest of this country I was dismayed by the terrible 
environmental tragedy in the Gulf. And today as we consider 
these three bills I am again dismayed.
    I am dismayed that rather than putting in place new safety 
and environmental protections the bills being considered today 
are rushing ahead and taking unnecessary risks with the 
environment and the economy. I am particularly concerned with 
H.R. 1231, which would effectively force the Department of the 
Interior to open areas off both the East and West Coast to more 
drilling. This could have a devastating effect on areas off the 
coast of my home state of Massachusetts.
    Massachusetts is home to Georges Bank, which has been at 
the heart of the New England fishing industry and has 
historically been one of the country's most productive fishing 
grounds. Income from Massachusetts fisheries have been valued 
at approximately $350 million annually and 130,000 jobs depend 
on the Massachusetts fishing industry. Allowing oil and gas 
drilling Georges Bank or anywhere in the northeast would 
threaten to destroy these rich fishing grounds and could have a 
devastating effect on my state's economic.
    Ms. Woglom, is there anything in these three bills that 
require safer drilling or that will ensure that the areas off 
of Georges Bank will be protected from an oil spill should 
these areas be opened up to oil and gas drilling?
    Ms. Woglom. Thank you for the question, Congresswoman.
    I think our concerns are that, in fact, in the wake of the 
BP oil spill the National Bipartisan Coastal Commission found 
that there were systemic flaws and problems that led us to not 
anticipate, not be prepared for, and not be able to respond to 
the oil spill that happened. And our view of these bills that 
this Committee is considering today is that they, in fact, are 
not only rushing ahead, but in fact going backwards in terms of 
shortcutting environmental review, not making the systemic 
fundamental reforms that the Westville Commission recommended 
in terms of improving regulatory oversight and environmental 
safety and concerns.
    Ms. Tsongas. Thank you for your response. And I think what 
we all want to see is the capacity to move ahead economically, 
but the certainty we need is not simply around what businesses 
can do or not do. Also, as you undertake your important 
economic activities, there needs to be certainty around the 
protection of the environment that is necessarily impacted as 
you undertake some deepwater drilling.
    So my hope is that instead of passing the bills before us, 
that we will instead pass H.R. 501, which our Ranking Member 
Markey has introduced and which would implement the 
recommendations of the BP Commission, as you suggest, are not 
being heeded in the current legislation before us.
    Also, I would like to say it is inconceivable that we would 
continue to allow drilling to take place in our public 
waterways without oil companies unequivocally demonstrating the 
ability to prevent, mitigate, or clean up in the event of an 
oil spill. In testimony before this Committee we learned that 
tragically insufficient oversight took place at the BP site and 
that in recent years important environment regulations were 
inappropriately waived on behalf of BP.
    With this in mind, I am disappointed that my colleagues are 
putting forward legislation like H.R. 1229 that would rush the 
agency to make critical decisions about safety and the 
environment and that it would deem permits approved without the 
proper oversight and review.
    As you have put, Ms. Woglom, in your testimony legislation 
like H.R. 1229 would ``set the stage for the kind of lax, 
regulatory culture that made possible the BP disaster.'' So I 
urge my colleagues to reconsider this legislation and instead 
put in place real reforms that make for a safer and cleaner 
drilling industry. Thank you.
    Mr. Lamborn. I thank the gentlelady. Next I would like to 
recognize for five minutes the gentleman from Louisiana, 
Representative Fleming.
    Mr. Fleming. Yes, thank you, Mr. Chairman and thank you 
panel.
    Just a couple of opening comments. I find interesting some 
of the statements that are still echoing here today. One is 
those who oppose this legislation are suggesting that we should 
continue to have endless deadlines, endless lawsuits and a 
trickle of permits. And also the idea that we would send our 
workers from Louisiana who are very strong in their work ethics 
to the BP fund to be paid instead of having good jobs I find is 
unbelievable.
    The gentlelady from Massachusetts--her State of 
Massachusetts has a 40 percent import of their natural gas from 
Yemen, yet we are variable in Louisiana, a variable of Saudi 
Arabia of natural gas. So these things really don't add up.
    But let us turn to what is happening in the economy. 
Gasoline at $3.68, driving toward $4 a gallon. Just the other 
day the Federal Reserve Chairman Ben Bernanke said, ``Sustained 
rising in the prices of oil or other commodities would 
represent a threat, both to the economic growth and to overall 
price stability.'' And yet, we also have comments from the 
Administration, and this one I find very interesting. Secretary 
Chu told the Wall Street Journal that energy prices were the 
linchpin to an energy overall. He said, ``Somehow we have to 
figure out how to boost the price of gasoline to the levels of 
Europe.''
    So I would suggest here today, and I there is a question 
embedded in this some place. I would suggest to you today that 
it seems that despite the rhetoric and even with the rhetoric 
that the Administration and all through it are working 
diligently to slow down domestic production of our 
hydrocarbons. And in fact, we now know that we have 1.3 
trillion, with a ``T'', equivalent barrels of oil in both coal, 
natural gas, and oil. And yet, we can't get at it because we 
are continual stymied in doing that.
    And I would say that, being from Louisiana, that the real 
imperative here is the loss of petroleum-related jobs, not the 
loss of the fishing job industries. That is recovering very 
nicely.
    So my question is for Dr. Mason. In your study you point 
out that under the moratorium, not just the oil and gas jobs 
that are lost, but there are also related job losses in fields 
such as arts and entertainment, educational services, food 
services, health care, et cetera. I would like for you to 
comment on that, Dr. Mason.
    Dr. Mason. Of course, oil workers themselves go out and buy 
things with their wages. They take care of their families and 
that is not just food. That is also medical care, daycare, 
education. In fact, about 40 percent of the job losses by the 
BEA's methods that I used in my study are in professional 
fields--teachers, attorneys, finance, insurance, and real 
estate. It is an integrated economy. It is not just about the 
wages that come from the workers directly on the oil platform. 
It is about where they spend that money and the people that 
depend on them and the people that depend on them and the 
people that depend on them throughout the entire U.S. economy.
    The one aspect of my oral testimony I thought I would 
reemphasize is the issue before us is really regulatory rent-
seeking. It was that the regulators ignored safety before the 
blow up and it is that we want them to pay attention to safety 
now, but in a way that also balances the industry. I am talking 
about this foreclosure settlement by the CFTB and we are 
requiring that banks get back to borrowers within 30 days with 
a modification decision. It is not a bad requirement.
    Maybe 30 days is not the right set of days for this 
legislation. Let us talk about that, but there should be an 
accountability provision to the industry to get back with an 
answer so that firms can make real business decisions, provide 
jobs, and economic growth.
    Mr. Fleming. Would you agree, Dr. Mason, that the fact the 
President has, or I would say the Interior Department has with 
President Obama's approval released now eight permits. And also 
his hand-selected panel of experts all of whom said there is no 
reason for a moratorium, wouldn't that implicitly suggest that 
there's no reason not to move forward with drilling?
    Dr. Mason. I don't see a reason unless someone is disputing 
here the BOEM's approval of the response plans its now put into 
place. If there is something more that is necessary there, let 
us certainly put it in place. But it seems like we are building 
the framework for moving forward. It seems like BOEM is moving 
forward. Let us keep them moving forward and let us get back to 
where we were before the spill, which was talking about the OCS 
moving forward into those areas with safe technology that can 
meet the United States's energy needs.
    Mr. Fleming. Yes. Thank you. I yield back.
    Mr. Lamborn. Thank you. At this point, I would like to 
recognize the Ranking Member of the full Committee, who is with 
us today. And in lieu of being here earlier to present his 
opening statement, we will grant him his time at this time to 
give his opening statement for up to five minutes. Thank you.

 STATEMENT OF HON. EDWARD MARKEY, A REPRESENTATIVE IN CONGRESS 
                FROM THE STATE OF MASSACHUSETTS

    Mr. Markey. Thank you, Mr. Chairman, very much.
    When the Challenger shuttle disaster occurred, Congress did 
not require NASA to launch in a rush another space shuttle 
within 60 days. After Hurricane Katrina, Congress did not 
require the Army Corps of Engineers to approve new levees 
within 60 days with the same failed designed.
    Following the Three Mile Island nuclear disaster, Congress 
didn't direct the Nuclear Regulatory Commission to approve 
licenses for new nuclear facilities within 60 days. And after 
the BP oil spill, the worse environmental disaster in American 
history, we should not be legislatively mandating that the 
Interior Department get only 60 days to approve new drilling 
permits.
    We should also not force the Department to use the same 
inadequate environment review to hold lease sales that had been 
scheduled prior to the BP spill. And we should not be opening 
vast new areas of coastlines on the East and West Coasts to 
drilling before implementing safety reforms recommended by the 
independent BP Commission. But that is exactly what the 
Republican majority is proposing today. This legislation will 
do nothing to improve the safety of offshore drilling and could 
instead send us down the same path that led us to the Deepwater 
Horizon disaster.
    The Republican majority is continuing to operate with a 
pre-spill mentality. Following the BP oil spill, we should be 
reviewing the lessons, not lessen the review. The oil industry 
assurances and promises on which the Federal Government relied 
in formulating safety procedures were not worth the paper they 
were written on. They said blowouts could not happen. It did. 
They said the rig would not sink. It did. They said the oil 
could be captured before it reached the shore. It was not.
    The BP Spill Commission concluded that the causes of the BP 
spill were systemic to the entire industry. But the Republican 
majority continues to be in denial that reforms are needed to 
prevent a similar disaster happening again in the future. This 
Committee has not held a single legislative hearing on 
legislation to improve the safety of offshore drilling.
    As part of today's hearing, the majority refused to also 
consider H.R. 501, the legislation that Representative Holt and 
I have introduced with other House Democrats to implement the 
reforms recommended by the BP Commission. The full Committee 
Chairman has also, so far, not allowed the request that I have 
made so that BP and Transocean and Haliburton and Cameron are 
heard here in this Committee on the spill, or for testimony 
from the CEOs of the top five major integrated oil companies 
who are most active in the Gulf. Those are the people who 
should be sitting at that table, telling us what they have done 
in order to make sure that we do not see a repetition of what 
happened last summer. So far, they are the only ones not 
allowed to come in here. They should have been the first ones 
and I am going to continue to insist that those CEOs come here 
and explain, through this Committee, to the American public 
what they have done to make sure that there will not be a 
repetition.
    We don't need another hearing that pushes the same speed-
over-safety attitudes that plagued BP and led to the worst oil 
spill in our nation's history. We don't need legislation that 
gives the Interior Department the same amount of time to review 
a drilling application as landlords give tenants to vacate an 
apartment. And we don't need another bill that ignores any 
attempts to end our addiction to oil and move to alternative 
energy like wind and solar and geothermal.
    What we need is legislation that protects our oil industry 
workers, not the corporate special interests which seek a 
return to the old status quo. What we need is legislation that 
encourages innovation, not technological stagnation, and 
legislation that increases the safety of the oil industry, not 
just its profits. We need to encourage reforms that will 
prevent another disaster, not lead us backwards to a repetition 
of last summer's environmental disaster. Thank you, Mr. 
Chairman. I yield back the balance of my time.
    Mr. Lamborn. Thank you, and please stand by if you wish to 
ask questions in the next round, if you so desire.
    At this point, I would like to recognize the next Member on 
our Subcommittee who was here when the gavel came down, 
Representative Fleischmann from the State of Tennessee.
    Mr. Fleischmann. Thank you, Mr. Chairman.
    My first question, Secretary Domenech, can you please give 
us any insight, sir, as to the degree that this Administration 
has worked with you, Governor McDonnell and the Commonwealth of 
Virginia on the issue of oil and gas leasing? And has this 
Administration specifically sought input or comments from your 
agency on this matter as it applies to your state? Finally, if 
so, what actions have they taken with this information, sir?
    Mr. Domenech. Thank you very much. As I mentioned in my 
opening remarks, we began an effort to have an offshore lease 
in Virginia in 2008. And that, of course, means a number of 
scoping and other kinds of meetings that are the regular due 
course of doing a lease. So there was early on a good amount of 
conversation between Interior and the Commonwealth on the 
issue.
    However, once the Deepwater Horizon event occurred and the 
progression that I mentioned again where initially the 
President said we would have lease sale 2020. And then 
unfortunately it was canceled. And then not only canceled into 
the next five-year plan, but beyond the next five-year plan. We 
haven't really had a lot of contact with Interior about the 
leasing part.
    Ironically, I would say we have an enormous amount of 
cooperation with Interior on offshore wind, which is something 
else we are pursuing. It is a very aggressive, back and forth 
conversation with them on some of the same lease areas that 
they would like to do offshore wind. So we have a two-track 
relationship with Interior at the moment.
    Mr. Fleischmann. Thank you, Mr. Secretary.
    My next question is for Professor Mason. Professor, the 
Outer Continental Shelf, the OCS, leasing program brings in 
billions annually to the U.S. Treasury, sir. Have you done any 
analysis that you would be able to share with us today as to 
the economic impacts of delayed and scaled-back leasing under 
current OCS leasing programs?
    Dr. Mason. That is a great question. Thank you very much.
    My initial interest in this topic came about at a time 
during the financial crisis here when the State of California 
rejected $5 billion in order to develop an existing platform 
and then turned to Washington for help because of their fiscal 
situation.
    I think that these resources can help many states, 
particularly those affected by the crisis--California, Florida 
find their own way out of their own fiscal crisis. I have 
estimated that in the short run we are talking about something 
on the order of $4.8 billion in state and local taxes that are 
being left on the table by not developing the OCS.
    In the longer run, state and local tax revenue amounting to 
$20 billion a year is on the table here. Federal tax revenue in 
the short run of $11 billion in the short run, $55 billion in 
the long run. And then that is with royalty revenue on top of 
that of almost $14 billion a year. So there are substantial tax 
revenues and fiscal revenues that are left on the table here. I 
liken this discussion in my mind to a discussion of a worker 
who broke a leg and cannot work any more and is looking at 
their bank account saying, uh, it is going down a little faster 
than I would like. And the worker has a choice. They can either 
get back to work earlier when the leg might not be completely 
healed, or they can quite spending so much. And that is really 
the choice before us, and we have to decide when the healing is 
adequate and when we can get back, but also in the meantime if 
we are not going to get back right away reign in our spending. 
But that is the very real fiscal choice before us. Thank you.
    Mr. Fleischmann. Thank you, Professor. Mr. Chairman, I 
yield back.
    Mr. Lamborn. Thank you. AT this point, I would like to 
recognize the gentleman from Massachusetts for up to five 
minutes for questions.
    Mr. Markey. Thank you, Mr. Chairman.
    Secretary Domenech and Mr. Danos, the independent BP 
Commission issued a 400-page report making recommendations to 
the Congress to make legislative changes that could improve the 
environment for safety in offshore drilling. And while some of 
these reforms can be done administratively, there are many that 
have to be done legislatively.
    So let me begin by just asking the two of you do you 
believe that $75 million as a penalty for the kind of spill 
that we saw in the Gulf is high enough or should it be higher?
    Mr. Danos. I am familiar with the Commission report, 
generally.
    Mr. Markey. So is $75 million high enough or should there 
be a higher fine that an oil company is assessed in the event 
of an accident like the one that we saw?
    Mr. Danos. What I think is that----
    Mr. Markey. Is it high enough is what I am saying.
    Mr. Danos. What I believe and what I know is that anything 
that adds additional costs----
    Mr. Markey. Is it high enough or not too high, just yes or 
no?
    Mr. Danos. I cannot comment if it is high enough or not 
high enough, other than any penalties and anything that 
Congress does to add costs----
    Mr. Markey. I appreciate that, but don't you need a 
deterrent as well? Don't you need to ensure that they 
understand that there is a price that they can pay? You don't 
want to go there? OK,
    Mr. Domenech? Yes.
    Mr. Domenech. I don't have an opinion on that. I am not an 
expert in that area. Of course, that is a fine that the Federal 
Government does.
    Mr. Markey. OK. How about you Ms. Woglom? Do you have an 
opinion, Ms. Woglom?
    Ms. Woglom. Yes, we think that the oil companies should be 
fully responsible for the damages that they cause.
    Mr. Markey. This is just making sure that oil companies are 
held responsible and that they also have a big stake in making 
sure that safety is built into all of the devices and the 
prices that they have.
    Dr. Mason, do you think it should be higher?
    Dr. Mason. Potentially higher. Yes.
    Mr. Markey. OK.
    Dr. Mason. I agree with Ms. Woglom. They should cover the 
cost of the damages, but I think you were specifically talking 
about a fine or a penalty. I think a higher penalty would be 
access. I have a problem that BP was the first to be allowed 
back in with deepwater drilling permits.
    Mr. Markey. Thank you for that comment as well. I would 
hope that perhaps the first two witnesses who appear not to be 
familiar with the subject would perhaps in writing give us an 
answer to that question.
    From 2004 to 2005 to 2009, while the fatalities in the 
offshore oil and gas industry were more than four times higher 
per person hours worked in the United States's waters than in 
European waters, even though many of the same companies worked 
in both venues. Given that it is four times more deadly to work 
offshore in U.S. waters then the Commission found that safety 
problems were systemic and that not a single new safety measure 
had been enacted into law since the BP disaster, do you think 
Secretary Domenech and Mr. Danos that we should first ensure 
that offshore drilling operations are safe in order to protect 
the lives of the workers since it is four times more dangerous 
to work in the Gulf of Mexico in our rigs than on the European 
rigs out at the same distance? Don't you think it is wise for 
us to pass that safety legislation?
    Mr. Domenech. Working on offshore rigs should be as safe as 
possible. Yes.
    Mr. Markey. So do you think we should try to aspire to be 
the most safe in the world rather in the industrialized world 
the least safe?
    Mr. Domenech. Whatever the industry standard is. I don't 
know exactly. I am not familiar with safety standards.
    Mr. Markey. You are not familiar with safety standards. Are 
you familiar with safety standards, sir? Mr. Danos?
    Mr. Danos. What I know is our company is committed--we have 
a value, not a priority, but a company value to work safe and 
we have an outstanding record.
    Mr. Markey. As an industry, though, and you are here 
representing the whole industry, it is four times more 
dangerous than drilling off of the coast of Europe. Are you 
happy with that measure for the whole industry--not you, the 
whole industry.
    Mr. Danos. Our commitment personally as a company.
    Mr. Markey. No, not you personally. I am saying you are 
good and obviously you must have dragged the average up to only 
four times worse, if you are the best. Do you want the others 
to have to meet your very high standards so that we actually 
can guarantee the workers that they are protected?
    Mr. Danos. We would support safety standards to the highest 
means.
    Mr. Markey. Good. Thank you. How about you, Ms. Woglom, 
would you support that.
    Ms. Woglom. Absolutely. I think the BP oil disaster showed 
that we had systemic failure both in terms of our safety and 
environment.
    Mr. Markey. That should be our goal--the highest standards. 
And I agree with Mr. Danos. That should be the goal of the 
Committee and we have done nothing, thus far, to meet the 
highest standards. So thank you. And I yield back.
    Mr. Lamborn. Thank you. The gentleman from Ohio, Mr. 
Johnson is recognized for five minutes to ask questions.
    Mr. Johnson. Thank you, Mr. Chairman, and thank you all to 
the witnesses for taking the time to be with us to testify.
    I represent eastern and southern Ohio. And when I left the 
district on Monday gas prices were headed toward $4 a gallon 
and my constituents are justifiably worried that as gas prices 
continue to rise and the slow economy recovery that we are 
experiencing this is going to slow down or worse yet stop 
altogether our energy progress. That is why I am a co-sponsor 
of all three of the bills before the Committee today that will 
expand offshore American energy production and stop the Obama 
Administration from blocking access to our nation's natural 
resources.
    And I want to affirm the comments from our Chairman, 
Chairman Hastings, that failure to begin immediately to access 
those resources have, in my opinion, very serious national 
security implications. Last week we heard from Director 
Bromwich from BOEM and he gave, in my estimation, an 
insufficient justification for the long wait time for getting a 
permit approved. That is why I think H.R. 1229, The Putting the 
Gulf of Mexico Back to Work Act is so important. Businesses 
need certainty to move forward with capital investment plans. 
And with H.R. 1229 corporations would know within 30 days of 
whether or not they are able to go forward with their drilling 
plans. America's future generations will continue to be 
dependent on foreign sources of oil if we do not unleash 
America's natural resources.
    Now regrettably, I must challenge my colleague from 
Massachusetts assertion that the Deepwater Horizon event and 
the government's response afterwards could reasonably be 
compared to the space shuttle Challenger or to the Hurricane 
Katrina events. It would be different if the Deepwater Horizon 
event were just the start of the regulatory roadblocks by the 
Obama Administration that have hampered our movement forward 
with tapping into America's resources. But rather it served as 
an accelerate of an already reckless energy policy were we have 
seen a systematic decline in the number of permit approvals.
    Specifically, though, I have a couple of questions for Mr. 
Danos. Mr. Danos, your company has operations across the globe, 
what are the differences that you see in the regulatory 
processes and the ability to operate in foreign countries 
compared to the United States.
    Mr. Danos. In some of the areas that we work there are some 
challenging regulatory processes, but most of them are not 
nearly as comprehensive on the personnel safety and 
environmental side as the regulatory processes are in the Gulf 
of Mexico. So what I would say is that we are held to higher 
standards in the Gulf of Mexico from a safety and environmental 
standpoint than we are in other parts of the world.
    Mr. Johnson. I am certainly OK with being held to a higher 
standard of safety. I also think that America should be 
thriving to be number one in production and be the energy 
leader rather than falling behind and having to be so self-
sufficient on foreign countries for our resources.
    Do you feel that other countries have policies in place 
that allow them easier access to develop their own domestic 
resources than here in the United States?
    Mr. Danos. What I can tell you Congressman is that there 
are many people down in south Louisiana in my part of the 
country that know we have the capabilities, know that we have 
the natural resources, know that we have the wherewithal within 
this country to be less dependent on foreign oil and are 
puzzled. And they often ask me why is it that we have these 
capabilities to create jobs, to become more energy independent 
and yet we aren't doing it and it is easier in other countries.
    Mr. Johnson. I am running out of time, so I hate to cut you 
off there because what you just said points out when we 
questioned Secretary Salazar a couple of weeks ago we asked the 
question there what are we going to do about these $4 gas 
prices? And his comment was that oil is an international 
commodity and America has very little influence over the price 
of oil. And it was my assertion then and remains so now that we 
are essentially sitting here with our hands behind our back 
taking a wait and see approach while the rest of the world is 
moving forward. And I submit that that is a failed energy 
policy with very serious national security implications. And I 
urge that we move forward. I yield back.
    Mr. Lamborn. I thank the gentleman. Next we will hear from 
another Member of our Subcommittee, Representative Landry from 
Louisiana.
    Mr. Landry. Thank you, Mr. Chairman. I would like to 
recognize again Mr. Danos is not only a solid business owner in 
my district, but a constituent as well.
    For the record, it was my understanding that the gentleman 
from Massachusetts made a statement that the Deepwater Horizon 
accident was the largest oil spill in U.S. history and that is 
not the case. The largest oil spill in U.S. history was in 
1910. It was the Lakeview Gusher, which spilled twice the 
amount of oil that the Deepwater Horizon spilled, so I would 
like to make sure we have that on the record.
    Also, the gentleman from Massachusetts continues to talk 
about safety. The Transportation and Infrastructure Committee 
has jurisdiction over the safety portion of the industry in the 
Gulf of Mexico. And what the gentleman fails to tell you that 
he is after a liability issue. And so Mr. Danos, you do a lot 
of work for shallow water drilling contractors and companies, 
is that correct?
    Mr. Danos. Yes, sir.
    Mr. Landry. OK, could you tell me what would happen if they 
removed the liability cap on the shelf for those oil and gas 
companies because those oil and gas companies are small oil and 
gas companies, am I correct?
    Mr. Danos. That is correct. My understanding that if the 
liability cap was removed that there would be more wells shut 
in and shutdown and less production in the Shelf in the Gulf of 
Mexico.
    Mr. Landry. Right. OK, so it would basically destroy the 
shallow water drilling industry is what it would do?
    Mr. Danos. It could.
    Mr. Landry. It could? OK. Thank you.
    Ms. Woglom, you are a big tourism advocate. I mean you 
think that, and I agree with you. I like to travel. 
Particularly, in Florida I guess you would like to see the 
tourism industry grow, is that correct?
    Ms. Woglom. I think we are simply saying that there are a 
multitude of economies in the Gulf that we need to be paying 
attention to.
    Mr. Landry. Right. But you would say tourism is an 
important industry, is that correct?
    Ms. Woglom. Certainly, we think tourism and fishing.
    Mr. Landry. Could you tell me what high energy prices do to 
tourism?
    Ms. Woglom. You know, I am concerned about----
    Mr. Landry. No, no. The question is pretty direct. I mean 
you tell me what $5 gas does to tourism in Florida.
    Ms. Woglom. What I can tell you is that we cannot drill our 
way to lower gas prices.
    Mr. Landry. Can you tell me how we get tourism into 
Florida, other than flying them in? Have they invented an 
electric plane yet?
    Mr. Woglom. What I can tell you is that the government's 
own figures show that gas prices are largely unrelated to 
domestic offshore oil production.
    Mr. Landry. Really? OK, that is a supply and demand 
question. I would love to have that argument with you. I am 
going to run out a little bit of time, but I would like to 
point out something else. Do you know, because last week we had 
a number of witnesses and even Director Bromwich wasn't able to 
answer this for me, but do you know under what safety and 
environmental guidelines Petrobras drills? Do you know what 
they are required?
    Ms. Woglom. I am not familiar with it.
    Mr. Landry. Because you know they are getting ready to 
drill in Cuba, right off the coast of Cuba. That is pretty 
close to Florida. Would you be concerned--you haven't looked up 
to see what requirements they are going to need to meet?
    Ms. Woglom. I wouldn't suggest that a lack of safety 
requirements in Cuba should suggest that we should have a lack 
of safety and environmental review in the U.S.
    Mr. Landry. OK. And last, Dr. Mason, the economic situation 
in the Gulf of Mexico, would you consider that robust?
    Dr. Mason. The economic losses in the Gulf of Mexico?
    Mr. Landry. The situation economically in the Gulf of 
Mexico in regards to the oil and gas industry right now do we 
have a robust economy in the Gulf of Mexico?
    Dr. Mason. We had a robust economy before the moratorium 
came along and shut it down unnecessarily during a recession. 
In fact, there was a great Wall Street Journal report reviewing 
FedBiz evidence. It showed that regions with strong 
manufacturing were largely insulated from the effects of the 
recession.
    Mr. Landry. Great. So it is not robust, but would you say 
that our domestic energy policy currently is a robust energy 
policy?
    Dr. Mason. Our energy policy really is not sustainable. I 
see, going back to the analogy with the space shuttle 
Challenger, there was a very clear desire to launch another 
space shuttle after that. I don't see a clear desire to drill 
another well here. It seems like if anything there's a desire 
to shut down the entire industry and that is why we are not 
only shutting it down with the Gulf moratorium, but trying to 
tax it out of existence with Section 199 and dual capacity. And 
then, of course, trying to keep the OCS shut down and scale it 
back further and further, which brings us back to rent-seeking, 
which is crucial here.
    Removing the regulator from a rent-seeker from the private 
sector to a rent-seeker from politicians. And in my opinion, I 
see a clear, very dangerous path in energy policy right now for 
rent-seeking from wind developers, battery manufacturers, solar 
panel manufacturers to get them in the pockets of politicians 
and regulators in the same way that the oil companies used to 
be.
    There are rents on the line here. Let us be very, very 
careful with policy moving forward so that it can be 
economically meaningful.
    Mr. Landry. Than you so much. I yield back.
    Mr. Lamborn. Thank you. Before we hear from our last 
Member, I just want to remind Members of the Committee and the 
public at large that jurisdiction of liability issues in the 
Gulf of Mexico is under the Transportation and Infrastructure 
Committee, not this Committee, Natural Resources.
    OK, with that, I would like to recognize for our last 
Member to ask questions Representative Wittman from the State 
of Virginia.
    Mr. Wittman. Thank you, Mr. Chairman. And members of the 
panel thank you so much for joining us today.
    I want to begin with Secretary Domenech and pose this 
question to you. I know you are aware of Virginia. And you know 
in Yorktown our only refinery in Virginia just recently shut 
down. We have been working, obviously, to try to get it 
reopened. It is a refinery that is critical to the economy 
there in the region. It employs several hundred highly skilled 
professionals, both production professionals, also chemical 
engineers that run that plant.
    Obviously, it was a concern to us as it closed down. But as 
you look at this total picture, you look at energy production 
and you also look at the ability to refine products that are 
here in the United States. I want to cast a broader perspective 
on this and ask you, do you know that at that refinery in 
Yorktown do you know where the raw products came in for that 
refinery to produce?
    Mr. Domenech. I am afraid I do not.
    Mr. Wittman. OK. Those approximately 63,000 gallons of 
crude oil a day that they produced actually came from foreign 
nations. It came from Canada, the North Sea, South America, and 
the Middle East. So it closed for economic reasons. And one of 
the economic reasons was the cost of production. So they 
weren't able to compete with refined products that were being 
actually imported. As you see today, we have a higher 
percentage of refined products being imported into the United 
States than at any time in the past.
    So my concern is, is that as that production capacity goes 
away that creates some concerns for us. And there was a study 
done by the Southern Energy Alliance that essentially said off 
the Virginia shore about a half a billion gallons of crude oil 
and about 2.5 trillion cubit feet of natural gas. Obviously, a 
significant resource there that I believe we can produce 
safely. And we have a refinery right there on the Virginia 
shores to be able to refine that. And I wanted to ask this. 
While it is no guarantee as where refineries get their feed 
stocks, if we were able to develop those offshore energy 
resources off of Virginia, do you believe that this would be a 
factor in allowing the Yorktown refinery in the future to open 
up its refining capacity again? And how would that affect 
Virginia as far as Virginia's energy independence.
    Mr. Domenech. Thank you for the question.
    Yes, we do think that that refinery would be reactivated 
and people rehired at that location. As you say, every company 
gets to ship its crude to a different location and so it is 
likely that some of that might end up in New Jersey and other 
locations that have refineries. But we do think that that is 
one way to get that refinery up and running as well as 
establish a whole new industry infrastructure there in our port 
facility.
    Mr. Wittman. Very good. I wanted to use that as the 
baseline for a perspective about a domestic energy production 
and then look at policies elsewhere.
    If you listen to the Administration, you heard recently 
about them touting production of offshore energy, specifically 
oil off the coast of Brazil. How do you believe that direction 
in policy equates to the lack of direction in policy on 
developing offshore energy resources, specifically hydrocarbons 
off the United States?
    Mr. Domenech. We also were a little surprised to hear the 
President talk that way in Brazil and at the same time telling 
us in Virginia that we were not going to be allowed to proceed 
with the sale that had already been approved by Interior and 
with a green light from the President. And now put off until 
beyond 2017. So it was ironic for us to hear him say that.
    Mr. Wittman. One other question. I want to again, talking 
about now the foreign production and the encouragement of 
foreign production, the lack of direction or comprehensive 
energy policy that includes the development of domestic 
offshore energy, specifically hydrocarbons, how do you see the 
long-term nature of our energy policy with the continued 
reliance of foreign sources? Do you believe in relation to what 
Virginia has to offer, do you believe that is a viable, 
sustainable, efficient energy policy for this country?
    Mr. Domenech. I do think Virginia's production is part of a 
basket of production that we could contribute to and it is the 
best way for us to get off of foreign sources of oil. If I 
might, on Friday I attended my son's Army Ranger graduation at 
Fort Benning. And I have to admit I thought while I was there 
about sending all these young men off to wars in foreign 
locations when we could be producing that energy here in the 
U.S.
    Mr. Wittman. All right.
    Mr. Lamborn. Thank you for your questions. And I want to 
thank each member of the panel for being here today and for 
your testimony. Please bear in mind that Members of the 
Committee might have additional questions for you for the 
record and I would ask that you respond to these in writing, 
should you receive those.
    If there is no further business----
    Mr. Hastings. Mr. Chairman, I do have some questions I 
would like to submit to ask for written responses from the 
witnesses, if I may.
    And if I may ask of you, I would ask that before we proceed 
any further with this legislation that we schedule some 
hearings to draw lessons from the shocking experiences of last 
summer of last year. Thank you.
    Mr. Lamborn. OK, I would be happy to take that under 
advisement. And if there is no other business, this 
Subcommittee stands adjourned.
    [Whereupon, at 11:44 a.m., the Subcommittee was adjourned.]

                                 
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