```

[Senate Hearing 111-303]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 111-303

                       OFFSHORE ENERGY PRODUCTION

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

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                                   TO

  RECEIVE TESTIMONY ON ENVIRONMENTAL STEWARDSHIP POLICIES RELATED TO 
                       OFFSHORE ENERGY PRODUCTION

                               __________

                           NOVEMBER 19, 2009

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

                  U.S. GOVERNMENT PRINTING OFFICE
55-331 PDF                WASHINGTON : 2010
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001

               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

BYRON L. DORGAN, North Dakota        LISA MURKOWSKI, Alaska
RON WYDEN, Oregon                    RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota            JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana          SAM BROWNBACK, Kansas
MARIA CANTWELL, Washington           JAMES E. RISCH, Idaho
ROBERT MENENDEZ, New Jersey          JOHN McCAIN, Arizona
BLANCHE L. LINCOLN, Arkansas         ROBERT F. BENNETT, Utah
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
EVAN BAYH, Indiana                   JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan            BOB CORKER, Tennessee
MARK UDALL, Colorado
JEANNE SHAHEEN, New Hampshire

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
               McKie Campbell, Republican Staff Director
               Karen K. Billups, Republican Chief Counsel

                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Amos, John F., President, SkyTruth, Shepherdstown, WV............    28
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................     1
Cruickshank, Walter, Deputy Director, Minerals Management 
  Service, Department of the Interior............................     6
Dorgan, Hon. Byron L., U.S. Senator From North Dakota............     3
Hrobsky, Jon, Director, Policy & Government Affairs, National 
  Ocean Industries Association...................................    65
Menendez, Hon. Robert, U.S. Senator From New Jersey..............     5
Murkowski, Hon. Lisa, U.S. Senator From Alaska...................     2
Odum, Marvin E., President, Shell Oil Company, Houston, TX.......    14
Rainey, David, Vice President, Gulf of Mexico Exploration, BP 
  America, Inc., Houston, TX.....................................    35
Short, Jeffrey, Pacific Science Director, Oceana, Juneau, AK.....    42

                                APPENDIX

Responses to additional questions................................    69

 
                       OFFSHORE ENERGY PRODUCTION

                              ----------                              

                      THURSDAY, NOVEMBER 19, 2009

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:35 a.m. in 
room SD-366, Dirksen Senate Office Building, Hon. Jeff 
Bingaman, chairman, presiding.

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

    The Chairman. All right, thank you all for coming. This is 
a hearing on environmental stewardship and offshore oil and gas 
development. These are vitally important issues to the long-
term sustainability of our ocean resources and, obviously, to 
our national energy policy.
    It's my hope that as part of this hearing we can focus on 
the facts surrounding offshore oil and gas production and its 
impact on the environment. At the end of the hearing, I hope 
we'll have a better understanding of these issues that will 
help us in the upcoming debate on these subjects on the Senate 
floor. In the hearing, we're following up on issues that were 
raised during the markup of our energy bill.
    Policy suggestions were made by Senator Dorgan and others 
about ways of addressing environmental concerns in this area. 
These ideas included limitations on structures within the line-
of-sight of the coastline and the creation of ``no 
development'' buffer zones of various sizes between the coast, 
and actual production activities offshore. I think we all 
agreed that such discussion would benefit from a better 
understanding of the facts involved and that a hearing that 
would focus on these issues would be useful.
    The witnesses bring a wide variety of expertise to the 
subject. We have representatives from the Department of the 
Interior's Minerals Management Service, the oil and gas 
industry, experts on ocean resources conservation. Each of 
these witnesses has significant technical and scientific 
experience with oceans and energy development.
    We look forward to a productive discussion. Let me call on 
Senator Murkowski for any comments she has.
    [The prepared statement of Senator Bingaman follows:]
 Prepared Statement of Hon. Jeff Bingaman, U.S. Senator From New Mexico
    Welcome, everyone, to this Full Committee hearing on environmental 
stewardship and offshore oil and gas development. The issues we will 
discuss today are vitally important both to the long term 
sustainability of our ocean resources and to our national energy 
policy. They are much debated, but unfortunately often with more heat 
than light on all sides.
    It is our hope in this hearing to move away from rhetoric and to 
focus on the facts surrounding offshore oil and gas production and its 
impact on the environment. At the end of this hearing I hope that we 
will have a better understanding of these issues that will guide our 
work on the Committee and in the Senate going forward.
    In this hearing we are following up on some issues raised during 
the markup of our energy bill earlier this year. Policy suggestions 
were made by Senator Dorgan and others about ways of addressing 
environmental concerns in this area. These ideas included limitations 
on structures within the line of sight of the coastline and the 
creation of no-development ``buffer zones'' of various sizes between 
the coast and production activities. I think we all agreed that such a 
discussion could benefit from a better understanding of the facts 
involved, and that a hearing focused specifically in this area would be 
useful.
    I look forward to hearing more about the environmental concerns 
presented by offshore development, the technologies and procedures 
available to address those concerns, and policy ideas to further 
environmental protection in the context of this development. It is my 
hope that we can use our time today to focus on these issues in 
particular, given the need for additional factual information in this 
area.
    The panel of witnesses here today brings a wide variety of 
expertise to these issues. We have representatives from the Department 
of the Interior's Minerals Management Service; the oil and gas 
industry; and experts on ocean resources conservation. Each of these 
witnesses has significant technical or scientific experience with 
oceans and energy development, and we look forward to a productive 
discussion.

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

    Senator Murkowski. Thank you, Mr. Chairman. Again, 
appreciate you convening this very important and timely 
hearing.
    I wasn't sure that we were actually going to be returning 
to the OCS development this year after completing our energy 
bill, but I'm glad that we're continuing the conversation.
    To start, I want to again congratulate you and Senator 
Dorgan for working with Republicans to advance an offshore 
production title in the energy bill. I think we recognize that 
there's a need for balance in resource production with our 
responsibility to protect the environment. I do hope that we 
can improve on that production title and get the energy bill 
that we worked so hard on signed into law.
    We have got a duty to prevent and ameliorate environmental 
harm, and certainly buffer zones are one of the many ideas that 
can help protect our coastal areas. But, as we consider our 
options, I think we need to recognize that some of these ideas 
make more sense than others. I'm glad that we have the panel 
here to explore some of those in greater detail.
    Our committee has also debated revenue sharing. I believe 
it's critical to environmental stewardship. Revenue sharing 
should be thought of as a collaboration between the Federal 
Government and coastal producing States necessary to secure 
meaningful production and to ensure that States and communities 
can study and adjust for any environmental impacts they might 
face.
    I'm proud of the bill that Senator Landrieu and I 
introduced, and I would remind my colleagues that there is a 
real and continuing need to reach agreement on this issue, 
because it's not going away. In the meantime, I am compelled to 
voice my growing concern over this administration's approach to 
OCS. It's now been over a year since the offshore moratoria 
were lifted. This committee has voted for greater offshore 
production to boost our economy and our energy security. But, 
there have been many executive actions, and perhaps a few that 
have not been taken, that appear to be taking us in an opposite 
direction.
    As we speak, the President's Ocean Policy Task Force is 
developing recommendations that could effectively zone the 
oceans, in much the same way a local government could plan and 
zone a city.
    In September, the NOAA Administrator signed a letter to MMS 
criticizing most of the 5-year plan and suggesting its own set 
of deferrals, removals, and buffer zones. Then there's the EPA, 
which has taken its authority for the permitting of OCS 
development outside of the Gulf of Mexico, and run with it. The 
agency has taken nearly 4 years now to consider an air permit 
for exploratory ships in our extremely remote Arctic areas.
    Some 200,000 miles, mostly offshore in resource-rich area 
of Alaska, had been proposed as critical habitat for polar 
bear. The Interior Department has committed to viewing all of 
its actions through the lens of climate change. Then hanging 
over all of this is Interior's coming release of the revised 5-
year plan, which will rank the sensitivity of coastal areas as 
a result of litigation by environmental groups.
    So, Senator Dorgan's proposal for line-of-sight 
restrictions and a 25-mile buffer zone is really just one of 
the many pending limitations. But, at least it's originating 
here in the Energy Committee, where it can be properly vetted 
and debated. As we do, I think that we need to keep in mind 
just how many others are seeking authority that could be used 
to make the development process more complex than perhaps it 
should be. Instead of allowing many different agencies to 
control pieces of the offshore development process, we should 
be consolidating management, preferably to just one agency 
under this committee's jurisdiction.
    We'll have to work hard to restore our authority over the 
OCS, but it would be better for both resource development and 
environmental stewardship if we did. I don't think that these 
goals are mutually exclusive, although perhaps some policies 
might tip that balance too far in one direction.
    I'm glad we're having the opportunity to explore this here 
today, Mr. Chairman. Thank you.
    Mr. Chairman. Let me--since we don't have many members, let 
me just see if Senator Dorgan would like to make a statement--
and Senator Menendez, as well--before we hear from the 
witnesses.

  STATEMENT OF HON. BYRON L. DORGAN, U.S. SENATOR FROM NORTH 
                             DAKOTA

    Senator Dorgan. Mr. Chairman, thank you. I asked for this 
hearing because I think, in the midst of discussion about 
climate change and energy policy, the issue of energy security 
will almost certainly require us to pursue the production of 
new energy from virtually every source. The question is, How do 
we produce additional energy, American-produced energy, in a 
manner that is in harmony with our responsibilities for 
environmental stewardship?
    During the debate earlier this year, I withheld an 
amendment that would have established in a requirement--a 
requirement that would set new standards on how oil and gas 
would have been produced on the Outer Continental Shelf, based 
on various types of technologies, in terms of projects--a 
project's distance to shore. I withheld that amendment, and yet 
you indicated you would hold this hearing.
    I requested this hearing really to focus on the technical 
issues of environmental stewardship, rather than to rehash the 
tired questions and old questions, but ones that won't go away 
in other hearings, I assume, on State revenue sharing, royalty 
reform, the 5-year planning process, and so on.
    I think this question of environmental stewardship, and the 
technical questions that relate to that, vis-a-vis, line-of-
sight and 25 miles verses 45 miles, et cetera, are very, very 
important.
    I do want to mention that, during the 2005 hurricane 
season, when Katrina and Rita tore through the Gulf of Mexico, 
we had some damage to facilities in the Gulf--168 platforms had 
some damage, 55 rigs, 560 pipeline segments--and yet there were 
no major oil spills. The total amount of petroleum that was 
spilled as a result of the two most vigorous storms in many, 
many, many decades was 15,000 barrels. That's about the size of 
an Olympic-size swimming pool. So, it suggests--and, I think, 
clearly suggests--that the technology has advanced in a very 
significant way. As a result of that, I offer the amendment 
that would open up the eastern Gulf. That had a 45-mile buffer 
zone, in the amendment that I offered. That eastern Gulf 
amendment, as you know, passed this committee.
    The question with respect to the Outer Continental Shelf, 
all of which is now open, and the production in the Outer 
Continental Shelf, is, What would be done with respect to a 
buffer zone there? The amendment that I had offered would have 
restricted surface presence, have ``no surface presence'' on 
line-of-sight. It would have had a 25-mile-plus ``no surface'' 
restriction. But, I think it is important for us to have a 
discussion in a committee hearing like this. What about these 
buffer zones? What are the consequences of them? How do we do 
the things that are necessary to unlock the opportunities so 
that we can produce more American energy?
    Mr. Chairman, you and I and Senator Domenici and Senator 
Talent were the first to offer legislation to open up Lease 
181. A portion of that is now open as a result. In my judgment, 
more of those areas will become open on the Outer--well, more 
of those areas in the eastern Gulf will become open--all of it 
will become open as a result of our amendment if we get our 
bill to the floor at some point. Then the rest of the Outer 
Continental Shelf is open. So, the question is, How do we 
produce? With what environmental stewardship requirements do we 
begin this venture to produce more American energy?
    So, I thank you very much for calling this hearing, and 
look forward to the witnesses' testimony.
    Mr. Chairman. Thank you.
    Senator Menendez, did you wish to make a statement before 
the witnesses----

STATEMENT OF HON. ROBERT MENENDEZ, U.S. SENATOR FROM NEW JERSEY

    Senator Menendez. Very briefly, Mr. Chairman. Thank you for 
the opportunity.
    You know, for those of us who look at States, like New 
Jersey, with a coastal line that is a national treasure and 
incredibly important to our economy and tourism, and the 
fishing industries that are economic engines of our State, we 
have concerns for any threat or risk to our shore. That is 
taken as seriously as the desire to produce energy. We don't 
think it's an unfettered concern or an unreasonable concern.
    You know, there's natural disasters. Hurricane Katrina and 
Rita alone spilled some 9 million gallons of oil and--offshore 
and onshore operations. We see that, in fact, this is--
recently, the National Academy of Sciences study showed us that 
current cleanup methods are still incapable of removing more 
than a small fraction of the oil spilled in marine waters.
    We look at the testimony this committee just most recently 
had, once again, where we had the Energy Information 
Administration say that the total unfettered drilling that some 
would seek on the Outer Continental Shelf would have no 
significant impact on domestic oil and natural gas production 
or prices. Or prices.
    Finally, I look at just what happened in Australia, with an 
entity that is state-of-the-art and is operating here in the 
United States, and I see millions and millions of oil spilling 
and weeks before, in fact, they cap it off.
    So, I know everybody says that can't happen here. But, the 
fact is that it has happened. MMS has over 40 documented spills 
of 47,000 gallons or more in the last decade or two--couple of 
decades, I should say.
    So, you know, when I look at Rita, Katrina, I look at just 
what happened in Australia, it's a real cause for concern.
    So, I appreciate the balance that you've brought to the 
panel, Mr. Chairman, in today's hearing, and look forward to 
the witnesses.
    Mr. Chairman. Very good.
    Let me introduce our witnesses, and then we'll hear from 
them. Dr. Walter D. Cruickshank is here. He is deputy director 
of the Minerals Management Service in the Department of 
Interior.
    Thank you for being here.
    Mr. Marvin Odum, who's not a regular witness, but a welcome 
witness here. He has been here before. He's president of Shell 
Oil Company in Houston.
    Thank you for coming.
    Mr. John Amos is president of SkyTruth in Shepherdstown, 
West Virginia.
    Thank you for being here.
    Mr. David Rainey is vice president of Gulf of Mexico 
Exploration with BP America.
    Thank you for coming.
    Mr. Jeffery Short is Pacific Science Director for Oceana, 
which is located in Juno, Alaska.
    Thank you very much for being here.
    If each of you could take 5 or 6 minutes and give us the 
main points you think we need to understand about these issues, 
that would be greatly appreciated. Your full statements will be 
included in the record, so you don't need to go through it all 
with us. But, what are the main things we need to understand 
when we consider this set of issues.
    Mr. Cruickshank, you wish to go ahead?

  STATEMENT OF WALTER CRUICKSHANK, DEPUTY DIRECTOR, MINERALS 
         MANAGEMENT SERVICE, DEPARTMENT OF THE INTERIOR

    Mr. Cruickshank. Thank you, Mr. Chairman, Senator 
Murkowski, and members of the committee. Appreciate the 
opportunity to discuss the Minerals Management Service's 
stewardship in promoting environmentally responsible energy and 
mineral development of the Outer Continental Shelf.
    MMS's responsibilities extend over about 1.7 billion acres 
of the Outer Continental Shelf, or OCS. These responsibilities 
range from the initial resource assessments through the 
exploration, development, production, and, ultimately, the 
decommissioning of offshore facilities. We are charged with 
managing access to, and development of, oil and gas, renewable 
energy, and marine minerals in a manner that is operationally 
safe, environmentally sound, prevents waste, and provides a 
fair return to the public for its resources.
    For over 50 years, the Department of the Interior and MMS 
have overseen the OCS program by enforcing regulations, 
developing standards, and conducting environmental and 
technological research. The committee asked me to highlight 
MMS's stewardship role with respect to oil and gas resources. I 
will provide a brief overview of three areas: how we determine 
which areas to lease, our environmental protections and 
standards over energy development, and our research programs. 
More detail on these topics can be found in my written 
statement, which I have submitted for the record.
    The OCS accounts for about 27 percent of the oil and 14 
percent of the natural gas produced in the United States. We 
manage access to this oil and gas through our 5-year OCS Oil 
and Gas Leasing Program. In developing this program, we 
evaluate the economic, social, and environmental values of all 
the resources of the ocean and the OCS, and we look at the 
potential impact of oil and gas exploration on these resources 
and on the marine, coastal, and human environments. After a 5-
year program is finalized, there is further environmental 
review and consultation with other Federal agencies, State, 
local, and tribal governments, and other stakeholders before 
holding any individual lease sale. As a result of this process, 
additional areas may be excluded from leasing and mitigating 
measures may be required to address any potential impacts from 
exploration and development.
    MMS's responsibilities do not end when the leases are 
executed. We oversee a regulatory program that mixes 
prescriptive requirements and performance-based goals: failsafe 
mechanisms, including emergency shutoff valves and other safety 
equipment that are tested regularly; a robust inspection and 
enforcement program, which conducts over 25,000 inspections per 
year; conservation requirements to ensure the greatest ultimate 
recovery of oil and gas from developed fields and to limit the 
flaring and venting of natural gas; oil-spill planning and 
response, including plans for responding to worst-case 
scenarios, and we conduct over 30 unannounced spill drills 
every year to test the capabilities of implementing those 
plans. All of this is done in coordination with other Federal 
agencies and State governments.
    We also administer a comprehensive environmental studies 
program that has invested about $840 million in research to 
support our stewardship role. We conduct studies in a variety 
of subject areas, including marine mammals, benthic biology, 
physical oceanography, fates and effects of discharges, and 
socioeconomics. Our research has added significantly to the 
scientific knowledge of the marine environment. For example, 
nearly 300 new marine species have been discovered as a result 
of the MMS studies.
    Our goal is to provide the information necessary for 
decisionmaking and in an adaptive management framework, and to 
develop workable solutions, such as mitigation measures, for 
activities that could impact the environment.
    MMS also funds research into operational safety, pollution 
prevention, and oil-spill response and cleanup through its 
technology, assessment, and research program. As part of this 
program, MMS manages the Ohmsett wave and test tank facility in 
New Jersey, which provides oil-spill response testing, 
training, and research opportunities to all comers.
    One of the best examples of MMS's environmental stewardship 
is the Flower Garden Banks in the Gulf of Mexico, the 
northernmost coral reef in North America's continental shelf. 
Starting in the 1970s, the Department of Interior began 
extensive studies and monitoring of these coral reefs, leading 
to the development of ``no activity zones'' and buffer zones of 
up to 4 miles where drilling discharges are handled in a manner 
to prevent contact with the coral reefs. In 1988, MMS 
established a monitoring program that now represents the 
longest continuously operating coral reef monitoring program in 
the world. After the Flower Garden Banks became a national 
marine sanctuary in 1992, MMS partnered with NOAA to ensure 
continued protection of these reefs, which now have a higher 
cover of living coral than other reefs off Florida and most 
areas of the Caribbean. They're considered among the healthiest 
coral reefs in the world, while coexisting with oil and gas 
activity.
    In conclusion, the Department of the Interior and MMS are 
poised to continue our commitment to environmental protection 
and safe operations. We look forward to working with the 
committee as we move forward with our OCS oil and gas renewable 
energy and minerals programs.
    Mr. Chairman, this concludes my remarks and I would be 
happy to answer questions.
    [The prepared statement of Mr. Cruickshank follows:]
  Prepared Statement of Walter Cruickshank, Deputy Director, Minerals 
             Management Service, Department of the Interior
    Thank you, Chairman Bingaman, Senator Murkowski, and members of the 
Committee, for the opportunity to discuss the Minerals Management 
Service's (MMS) stewardship in promoting environmentally responsible 
energy and mineral development on the Outer Continental Shelf (OCS).
    The Department of the Interior (Department) and its agencies, 
including the MMS, are public stewards for much of our nation's natural 
resources. The Department manages 500 million acres of land, one-fifth 
of the land mass of the U.S., and over 1.7 billion acres of the OCS. 
About 1/3 of the nation's domestic oil and gas production comes from 
Federal resources managed by the Department.
    This land base includes areas that boast some of the best renewable 
energy resources available for development today. On the OCS, the 
Department of Energy's National Renewable Energy Lab has identified 
more than 1,000 gigawatts of wind potential off the Atlantic coast, and 
more than 900 gigawatts of wind potential off the Pacific coast. 
Secretary Salazar is committed to taking the initiative in these areas 
by contributing to a clean energy-based economy that promotes 
investment and innovation here at home and in an environmentally 
responsible manner. Collectively, the Administration's efforts to 
develop a clean energy economy will generate jobs, improve our energy 
security by reducing our dependence on oil, and reduce greenhouse gas 
emissions.
    We recognize that we will likely be dependent on conventional 
sources of energy--oil, gas and coal--for a significant portion of our 
energy for some time to come. Therefore, it is important that the 
Department continue careful stewardship of energy resources on public 
lands, both onshore and on the OCS. With these objectives in mind, the 
Department has been actively engaged in the Interagency Ocean Policy 
Task Force. The Task Force, established by President Obama is led by 
the White House Council on Environmental Quality and charged with 
developing a recommendation for a national policy that ensures 
protection, maintenance, and restoration of the ocean, our coasts and 
the Great Lakes. It will also recommend a framework for improved 
stewardship, and effective coastal and marine spatial planning designed 
to facilitate better management of multiple uses of the oceans, coasts, 
and Great Lakes, including oil and gas operations and emerging 
renewable energy resources well into the future. We strongly support 
this coordinated approach to sustainable management of our ocean, 
coastal, and Great Lakes resources.
    The MMS is charged with managing access to and development of the 
Nation's energy and mineral resources on the Federal OCS in a manner 
that is operationally safe and environmentally sound, prevents waste, 
and provides a fair return for public resources. MMS is also 
responsible for the management of the mineral revenues generated from 
Federal and American Indian lands onshore and the Federal OCS.
    For 50 years, the Department of the Interior and MMS have overseen 
the OCS oil and gas program by enforcing regulations, developing 
standards, and conducting technology and environmental research. The 
Committee has asked me to highlight MMS'sstewardship role in managing 
OCS oil and gas resources. I will focus on three areas (1) how MMS 
determines which areas to lease to meet the Nation's energy needs; (2) 
the environmental protections and standards for developing OCS energy 
and mineral resources; and (3) MMS research programs.
                       determining areas to lease
    The MMS has cradle-to-grave management and oversight responsibility 
for oil and gas leasing, exploration, and development on the OCS. 
Section 18 of the OCS Lands Act requires the Secretary of the Interior 
to prepare a 5-Year oil and gas leasing program (5-Year Program) that 
consists of a 5-year schedule of proposed lease sales that shows size, 
timing, and location of leasing activity as precisely as possible. The 
OCS Lands Act mandates that the 5-Year Program must balance the 
priorities of meeting national energy needs, ensuring environmentally 
sound and safe operations, and assuring receipt of fair market value to 
the taxpayer. Before any particular lease sale is considered, it must 
be included in an approved 5-Year Program.
    The process to develop a 5-Year program includes three separate 
comment periods, two draft proposals, a final proposal, and the 
development of an environmental impact statement that informs the 
Secretary's decision making. During this process MMS evaluates the 
economic, social, and environmental values of the renewable and 
nonrenewable resources in the OCS and the potential impact of oil and 
gas exploration on other resource values of the OCS and the marine, 
coastal, and human environments. Throughout the stages of developing 
the plan, MMS analysis is based on science and research obtained 
through the MMS Environmental Studies Program, Technology Assessment 
and Research Program, and studies from other sources such as other 
Federal and State agencies, the National Academy of Science, and 
universities.
    In order to balance the priorities of national energy needs, 
environmental protection and receipt of fair market value, the OCS 
Lands Act requires the Secretary to consider information on the 
geographical, geological, and ecological characteristics of each 
region; equitable sharing of development benefits and environmental 
risks; regional and national energy markets; other uses of the OCS; 
interest of potential oil and gas producers; the laws, goals and 
policies of the affected states; the relative environmental sensitivity 
and marine productivity of different areas of the OCS; and the relevant 
environmental and predictive information for different areas of the 
OCS.
    The 5-Year Program initiates the process of deciding how, when and 
where it is appropriate to offer oil and gas leases on the OCS. As the 
leasing process moves forward, the potential areas to be offered for 
lease cannot be expanded from those available in the previous step 
without re-initiating the development of a new 5-Year Program. Thus, 
the entire leasing process proceeds from broad-based planning to a 
narrower focus as actual development is proposed. For example, it was 
at the final proposal stage of the current 2007-2012 5-Year Program, 
that the area 25-miles seaward of the coastline of the Chukchi Sea 
Planning Area was deferred from leasing activity to reduce potential 
environmental impact to the resources. For the Beaufort Sea Planning 
Area, the Barrow and Kaktovik bowhead whale hunt areas were also 
excluded from leasing. In the Central Gulf of Mexico Planning Area, the 
proposed final program included the commitment reached with the 
Governor of Alabama to avoid surface occupancy in a 15-mile area 
offshore Baldwin County, Alabama in order to mitigate visual impacts; 
this stipulation has been consistently included at the lease sale stage 
for all sales in this area since 1999.
    After a new 5-Year Program is finalized, there is further 
environmental review and consultation with other Federal agencies and 
state, local and Tribal governments before holding any individual lease 
sale. As with the 5-Year Program development, the individual sale 
process is conducted in an open, transparent, predictable manner. From 
the Call for Information/Nominations to the Final Notice of Sale, the 
individual lease sale process, described in section 19 of the OCSLA, 
includes many opportunities for public input, in addition to the 
opportunities offered by necessary procedures under the National 
Environmental Policy Act and Coastal Zone Management Act. In all, there 
are eight opportunities for public comment before a final decision is 
made to hold any OCS sale. As a result of environmental review and 
consultations in this pre-lease sale process, additional areas may be 
excluded from leasing and mitigating measures may be required to 
address any potential impacts from oil and gas exploration and 
development. For example, MMS has for decades ensured protection of the 
Flower Garden Banks in the northwest Gulf of Mexico, by prohibiting 
leasing in the immediate area and restricting activities in a 
surrounding buffer zone.
                        oversight of ocs leases
    MMS's stewardship responsibilities do not end once leases are 
executed; they have only begun. The Department of the Interior's OCS 
regulatory program has been in existence for 50 years. The program 
continues to evolve with the goals of improving effectiveness and 
efficiency and ensuring preparedness for new technological challenges 
such as deep water or Arctic operations.
    Our regulatory framework encompasses a variety of components which 
address environmental, safety, and conservation issues. This framework 
includes a three-tiered approach to regulation, relying upon 
prescriptive requirements, performance-based goals, and consensus-based 
technical standards incorporated into MMS regulations. (A consensus-
based technical standard is an industry standard where all concerned 
parties are given a voice in its development. While this process seeks 
agreement with most participants, it also resolves or mitigates the 
objections of the minority. MMS has incorporated 97 such standards into 
our regulations. The MMS continually reviews these regulations to 
update and revise them to ensure that they include the most effective 
requirements for promoting safety and environmental protection on the 
OCS.)
Plan Submissions
    Once a lease has been issued, a lessee/operator must submit plans 
for MMS approval before beginning any activity. The lessee/operator 
must meet certain criteria documented in a site-specific Exploration 
Plan (EP) before beginning exploratory drilling on a lease. If 
exploration results are favorable, the lessee/operator moves to the 
production and development phase of its operations. The lessee/operator 
must submit a Development and Production Plan (DPP) or a Development 
Operations Coordination Document (DOCD).
    In water depths greater than 400 feet, the lessee/operator must 
also submit a Deepwater Operations Plan (DWOP) and a Conservation 
Information Document (CID). The purpose of the DWOP is to ensure that 
MMS has sufficient information to review any development project that 
uses non-conventional production or completion technology (in most 
cases, floating or subsea production systems) from a total system 
approach. MMS evaluates the system to determine whether the project 
will be properly developed, particularly from the standpoint of 
operational safety and environmental protection issues. The purpose of 
the CID is to ensure that all economically producible reservoirs are 
developed.
    Each EP, DPP or DOCD must demonstrate that the proposed activities 
are conducted in a manner that--

   Conforms to Federal laws and regulations
   Is safe
   Prevents waste, conserves natural resources, and protects 
        Federal interests
   Does not unreasonably interfere with other uses of the OCS
   Does not cause undue or serious harm or damage to the human, 
        marine, or coastal environment.

    An Application for Permit to Drill (APD) must be submitted to MMS 
for each and every well drilled on the OCS. Written approval is 
required before an operator may begin to drill any well, sidetrack, 
bypass or to deepen a well. The MMS requires each lessee/operator to 
take necessary precautions to keep wells under control at all times. 
The oil spill financial responsibility requirements must also be met.
Fail-Safe Mechanisms
    Drilling and production safety equipment used on the OCS must be 
designed, installed, used, maintained, and tested in a manner to assure 
the safety and protection of the human, marine, and coastal 
environments. All wells open to hydrocarbon-bearing zones below the 
surface must be equipped with safety devices that will shut off the 
flow from the well in the event of an emergency, unless the well is 
incapable of flowing. All surface production facilities, including 
separators, treaters, compressors, headers, and flowlines, must be 
designed, installed, and maintained in a manner that provides for 
efficiency, safety of operations, and protection of the environment. 
Surface-and subsurface-controlled safety valves and locks must conform 
to the requirements of MMS regulations. Production facilities also have 
stringent requirements concerning electrical systems, flowlines, 
engines, and firefighting systems. The safety-system devices are tested 
by the lessee at specified intervals.
Inspections
    MMS conducts announced and unannounced inspections of OCS 
facilities and any vessels engaged in drilling or downhole operations 
to determine whether an operator's performance is acceptableyear-round. 
Surprise unannounced inspections foster a climate of safe operations, 
maintain an MMS presence, and focus on operators with a poor 
performance record. Noncompliance with requirements for specific 
installations or procedures is followed by prescribed enforcement 
actions consisting of written warnings or shut-ins of platforms, zones 
(wells), equipment, or pipelines. In the event noncompliance is 
detected, the inspector takes the appropriate enforcement action. If an 
operator is found in violation of a safety or environmental 
requirement, a citation is issued requiring that it be fixed within 7 
days. The violation may call for the particular well component, 
production component, or the entire complex to be shut in.
    The Secretary also has other remedies, including the assessment of 
civil penalties for failure to comply with responsibilities under the 
law, a license, a permit, or any regulation or order issued.
Coordination
    Throughout the 5-Year Program, individual sale, and regulatory 
processes, MMS consults with various Federal, state, and local agencies 
that share a stewardship role in managing the OCS. MMS consults with 
the National Oceanic and Atmospheric Administration (NOAA) and the U.S. 
Fish and Wildlife Service to meet the requirements of the Endangered 
Species Act. MMS meets with tribal leaders in accordance with 
government-to-government consultation requirements and to incorporate 
their views in decisions. MMS and other agencies routinely collaborate 
to develop Memoranda of Agreement on various areas of overlapping 
responsibility.
    Exploration and production activities proposed to MMS for approval 
must undergo environmental reviews by other federal agencies in 
compliance with more than ten statutes, executive orders and 
international agreements, in addition to the extensive environmental 
analysis required under NEPA. For example, proposed activities are 
examined for potential impacts to endangered and threatened species and 
habitat under the Endangered Species Act, to fish and habitat under the 
Magnuson-Stevens Fishery Conservation and Management Act, and to 
cultural resources under the National Historic Preservation Act. 
Evaluations of potential effects on marine mammals, birds, coral reefs, 
water quality, air quality, Indian sacred sites, and environmental 
justice also take place under separate consultation processes. Further, 
MMS coordinates with affected states under the Coastal Zone Management 
Act to ensure any MMS-approved activities are consistent with a state's 
federally-approved coastal management program. All of these 
environmental reviews are considered by MMS, along with the NEPA 
analysis, to make decisions on whether to approve an activity, and if 
so, what mitigation and monitoring measures must be put in place to 
eliminate or minimize any potential for adverse affects to these 
valuable marine resources.
    In addition, in 2004, MMS entered into a Memorandum of 
Understanding with the U.S. Coast Guard (USCG). MMS interacts with the 
USCG on a multitude of mission areas at all levels from Headquarters 
down to the field units. For example, MMS has been authorized to 
oversee the Fixed Platform Self-Inspection Program on behalf of the 
USCG, and frequently exchanges information with the USCG to clarify 
policy issues and provide compliance statistics. MMS also interacts 
with the USCG at the Region and District levels to coordinate 
overlapping areas of offshore inspection and accident investigation 
field activities.
    The MMS has been consulting with the military for more than 25 
years at both the planning and operational stages to ensure that each 
agency meets the requirements of its mission while not unduly 
interfering with the other. Coordination under a 1983 MOA between the 
Department and the Department of Defense has yielded no serious 
conflict. For example, seven military communication towers installed by 
the U.S. Air Force offshore Mobile, Alabama support Air Combat 
Maneuvering Instrumentation; MMS coordinates with the Air Force to 
ensure non-interference with military operations in that area. Oil and 
gas activities are restricted so that no activity can take place within 
500 feet of a tower site, and unobstructed lines of sight must be 
maintained between towers. The MOA is in the process of being updated 
to more accurately reflect the current status of the OCS and the new 
offshore renewable energy program.
Conservation of Resources
    Part of the MMS mission is to manage ocean energy and mineral 
resources on the OCS to enhance public benefits, promote responsible 
use, and realize fair value. In order to accomplish this, MMS 
emphasizes the importance of conservation principles, which maximize 
the ultimate recovery of oil and natural gas from currently producing 
reservoirs. Sound conservation practices also ensure that the Nation 
reaps the full benefits of OCS development, including royalty revenues 
to the U.S. Treasury as well as domestic energy.
    Through regulation and oversight, MMS requires a lessee/operator to 
conform to sound conservation practices that ensure all recoverable oil 
and gas reserves are produced and enhanced recovery is used whenever 
possible. Enhanced recovery operations include a variety of methods 
that alter the natural forces in a reservoir to increase the ultimate 
recovery of oil and gas. To this end, in water depths greater than 400 
feet, operators must submit conservation information documents (CID). 
The CID's submitted by the operator undergo a detailed review by a 
multidisciplinary team composed of a petroleum engineer, a geologist 
and a geophysicist. This team reviews the CID to ensure that all 
economically producible hydrocarbon-bearing zones are developed in an 
efficient manner. Waste of hydrocarbons could occur if producible 
hydrocarbon reservoirs are bypassed.
    In addition, all requests to revise or abandon projects in 
deepwater are reviewed to ensure that wells are not prematurely 
abandoned before all economically producible reserves are recovered as 
outlined in the CID.
    In addition, MMS is revising its regulations on flaring and venting 
of natural gas. Flaring and venting are only allowed after receiving 
prior approval from MMS (MMS may deny a request to flare or vent). The 
new regulations will set clearer limits on natural gas flaring and 
venting and require operators to report the amount of natural gas they 
flare separately from the amount of natural gas they vent. In addition, 
we will require operators to install natural gas flare/vent meters on 
any facility that processes more than 2,000 barrels of oil per day. 
These changes will give MMS better data on natural gas flaring and 
venting operations on the OCS.
Oil Spill Planning and Preparedness
    The Oil Pollution Act of 1990 and Executive Order 12777 gives DOI/
MMS authority over oil spill planning and preparedness for facilities 
in state and Federal offshore waters that handle, store, or transport 
oil (excluding deepwater ports). The MMS Oil Spill Program was 
established to oversee planning and preparedness activities of 
operators of regulated facilities in offshore waters. The goal of the 
program is to ensure that, during a response, those who will operate 
oil spill response equipment or serve on management teams are prepared 
to do so in a manner that prevents or minimizes safety hazards to 
responders and the public, and negative impacts to the environment.
    Affected offshore operators must prepare an oil spill response plan 
for MMS approval that includes details on how they will respond to a 
worst-case discharge scenario from both near-shore and far-shore 
locations. Contents of oil spill response plans include spill 
management team members, certification of contracts with oil spill 
removal organizations, notification requirements, sensitive resources, 
dispersant use plans, platform and pipeline information, and specific 
emergency management procedures. On an annual basis, MMS conducts over 
30 unannounced oil spill drills to verify that operators are prepared 
to quickly and efficiently respond to a spill from one of their 
facilities.
                         mms research programs
    The MMS is a leading participant in and supporter of scientific 
research relating to the ocean environment. Environmental stewardship 
is emphasized in all phases of OCS activity from the development of the 
5-Year Program through platform decommissioning and removals. A 
fundamental goal of MMS's Environmental Studies Program is to develop 
workable solutions for those activities in the OCS that could adversely 
affect environmental resources. Since the program'sinception in 1973, 
more than $867 million has been spent on environmental research to 
manage development of offshore energy and mineral resources. This 
allows MMS to determine how to maintain safety and environmental 
protection while approved exploration and development continue. In 
fiscal year 2008 alone, 29 environmental studies were contracted at 
nearly $16 million, and MMS completed 320 environmental assessments and 
two full, detailed environmental impact statements.
    In many areas, MMS research has added significantly to scientific 
knowledge of the marine environment. Nearly 300 new marine species have 
been discovered as a result of the MMS studies. One of these 
discoveries is the fascinating ``iceworm,'' that lives on the surface 
of frozen methane hydrate in deep waters of the Gulf of Mexico.
    One of the most important focuses for scientific study in the 
Alaskan offshore area has been the bowhead whale. Distinctive for its 
huge, comb-like baleen and thick blubber, the bowhead migrates annually 
between the Canadian Beaufort Sea and the Bering Sea. This large whale 
is vitally important to Alaska Native subsistence hunters and coastal 
villages in Alaska that are located along the migration route. The 
whale is protected by U.S. laws and has been designated as an 
endangered species. Since 1979, the MMS has funded and for many years 
conducted the ``Bowhead Whale Aerial Survey Project''to survey the 
bowhead whales'fall migration through the Western Beaufort Sea. During 
many summers between 1979 and 1991, the MMS funded aerial surveys in 
the Chukchi Sea for marine mammals. Since 2008, MMS has funded the 
``Chukchi Offshore Monitoring in Development Area''to provide aerial 
surveys of the migration in the Chukchi Sea Planning Area. This project 
is coordinated through NOAA's National Marine Mammal Laboratory. The 
MMS uses the aerial survey information from the Beaufort and Chukchi 
Seas in the environmental review of OCS activities. Further, the 
information is available for any other entity to use and is posted on 
MMS website and the NOAA Fisheries Alaska Fisheries Science Center 
website.
    The MMS also funds research into operational safety, pollution 
prevention, and oil spill response and cleanup capabilities through its 
Technology Assessment and Research (TAR) Program. In fiscal year 2008, 
the MMS funded 29 TAR studies at nearly $3 million. The components of 
the TAR Program include the Operational Safety and Engineering Research 
program that addresses technological issues associated with the 
complete spectrum of oil and gas operations ranging from the drilling 
of exploratory wells to the removal and decommissioning of facilities 
on the OCS; the Oil Spill Response Research (OSRR) program that covers 
a wide spectrum of oil spill response issues to improve the knowledge 
and technologies used for the detection, containment and cleanup of oil 
spills that may occur on the OCS; and the Renewable Energy Research 
program that addresses technology and engineering issues associated 
with renewable energy projects on the OCS.
    This research enables MMS managers to make better decisions in 
evaluating operational proposals and enables regulators to consider the 
latest technological advancements in enacting new regulations. As a 
result, the MMS has a robust regulatory system designed to prevent 
accidents and oil spills from occurring. This includes redundant well 
control equipment, emergency plans, and production safety systems as 
well as a host of other requirements. This has proven effective both in 
the wake of hurricanes in the Gulf of Mexico and in the Arctic 
conditions on the Alaska OCS.
    Through the OSRR program, MMS also manages the Ohmsett wave and 
test tank facility at the Naval Weapons Station Earle Waterfront in 
Leonardo, New Jersey. Ohmsett provides oil spill response testing, 
training, and research opportunities to government, industry, academia, 
and private organizations on a reimbursable basis. Standard test 
protocols are used at Ohmsett to evaluate oil spill containment booms 
and skimmers. Ohmsett provides the intermediate step between small-
scale and open water testing of equipment. An estimated 95% of the 
performance data on mechanical equipment used today was obtained at 
Ohmsett. Ohmsett is also developing the capability to test renewable 
energy wave and current systems.
         examples of mms stewardship of leased areas on the ocs
    One of the best examples of MMS environmental stewardship is at the 
Flower Garden Banks in the Northwest Gulf of Mexico. These two banks 
are the northernmost coral reefs on the continental shelf of North 
America and have a higher cover of living coral than other reefs off 
Florida or most areas of the Caribbean. They are considered among the 
healthiest coral reefs in the world. They also lie in an area of the 
Gulf of Mexico with extensive hydrocarbon reserves.
    Beginning in the early 1970s, MMS initially required extensive 
monitoring studies of the reefs related to each energy development 
activity, typically many miles away. This requirement was later dropped 
and buffer zones were developed to prevent any possible impacts to the 
coral habitats from energy development activities including physical 
contact as well as discharges from drilling activities. Required 
protection measures range from specific areas where no activity of any 
kind is allowed, up to a four-mile radius where all drilling discharges 
are required to be transported or shunted to near the sea bed in deeper 
water preventing any transport onto the coral reefs.
    Even though surrounded by numerous active oil and gas platforms, 
these coral reefs remain extremely healthy, while the majority of coral 
reefs all over the world suffer from extensive mortality due to heat 
stress and land-based sources of impacts. One existing platform 
structure is located just one mile from the coral reef at the East 
Flower Garden Bank. This platform predates, and is located inside the 
boundaries of the Flower Garden Banks National Marine Sanctuary. It has 
served as a research station in the past through cooperative 
arrangements with industry. Although MMS began research and monitoring 
at the Flower Gardens in the 1970s, both NOAA and MMS began sharing the 
expense of annual monitoring of the reefs beginning shortly after their 
designation as a sanctuary in 1992.
    The MMS has also been a leader in the protection of deep-sea 
biological communities, particularly chemosynthetic communities and 
cold water corals. Chemosynthetic communities (animals living 
independent of photosynthesis required by most all other life on earth) 
were first discovered in the Central Gulf of Mexico during an MMS-
funded study of the deep continental slope in 1984. MMS recognized the 
importance of these unusual habitats and this particular project was 
extended specifically to study these new communities for the first 
time. Through MMS studies, chemosynthetic communities in the Gulf of 
Mexico are the best understood ecosystems of their kind anywhere in the 
world. Avoidance regulations were established beginning in 1988 and 
adapted over time as we learned more about these communities, leading 
to increased buffer distances from both energy production discharge 
locations and physical impacts such as anchors.
    MMS has also been at the forefront of the study of cold water 
corals beginning in the 1990s. The most extensive deep coral habitat in 
the Gulf of Mexico was discovered in 1,500 feet of water southeast of 
Louisiana in 1993, during a standard visual survey required by MMS 
prior to operations. Through an adaptive management approach, 
regulatory policies are being revised to incorporate recent MMS 
scientific findings. Two recent studies have determined that very 
sensitive deepwater coral habitats occur as shallow as 300 meters. 
Amending MMS's regulatory policies to require review for these coral 
habitats beginning at 300 meters rather than 400 meters, will result in 
extended avoidance and buffer distances from all potential deep water 
coral habitats and protect these corals.
    Historic preservation is another aspect of MMS's protection of 
theoffshore environment. The MMS considers the effect of all its 
actions, including lease sales, studies and permits, on the cultural 
heritage of the Nation. To meet this responsibility, it requires the 
oil and gas industry to conduct marine remote-sensing surveys that may 
identify shipwrecks. As a result, a highly sought-after World War II 
German submarine, the U-166, was discovered 45 miles from the mouth of 
the Mississippi River through the joint efforts of MMS and the oil 
industry charged with conducting the surveys. The U-166, the only 
German submarine sunk in the Gulf of Mexico, rests in the crater it 
created when it was sent to the bottom by a depth charge in the summer 
of 1942, shortly after the U-166 torpedoed and sank the passenger 
freighter S.S. Robert E. Lee. The wreckage of the submarine was found 
in 5,000 feet of water. The U-boat's whereabouts had long been disputed 
and it was thought to lie far from its actual resting-place. MMS 
archaeologists were part of the scientific team that was instrumental 
in locating and identifying the World War II U-boat. The discovery 
solved a 59-year old mystery and ended decades of fruitless searching.
    In addition, we have just finished the third year of a four-year 
project jointly sponsored by MMS and NOAA's Office of Ocean Exploration 
and Research, to better understand ocean ecosystems, corals and 
submerged historic and cultural resources in the Gulf of Mexico. By 
working together, we combine our talent, funding and physical resources 
to meet important objectives for both agencies with better results and 
lower costs than either agency could realize alone.
                               conclusion
    The Department and MMS are poised to continue their vital roles in 
managing OCS conventional and renewable energy resources. The magnitude 
and complexity of being a responsible steward requires a continued 
commitment to environmental protection and safe operations on the OCS. 
The MMS takes OCS stewardship responsibilities seriously and is 
committed to regulating the development of the Nation's energy and 
mineral resources through measures to ensure environmental protection 
and safe operations, continued research, and requiring fair returns and 
accurate accounting of revenue generated from the Federal resources.
    We welcome your input on our Nation's energy initiatives and look 
forward to working with the Committee as we move forward with our OCS 
energy and minerals programs. Mr. Chairman, this concludes my remarks. 
I would be happy to answer any questions.

    Mr. Chairman. Thank you very much.
    Mr. Odum, please go right ahead.

  STATEMENT OF MARVIN E. ODUM, PRESIDENT, SHELL OIL COMPANY, 
                          HOUSTON, TX

    Mr. Odum. Thank you, Chairman Bingaman, Ranking Member 
Murkowski, members of the committee. Thank you for the 
opportunity to testify today on environmental stewardship as it 
relates to offshore oil and gas production.
    I'd like to begin by sharing a couple of relevant 
statistics. Global energy demand is projected to increase by 50 
percent over the next 20 years, and could double by the year 
2050. The world faces a daunting challenge, how to meet this 
escalating demand in ways that protect the environment.
    Now, it's very clear that we will need a wide range of 
energies, particularly over the next several decades, including 
alternatives, renewables, nuclear, and more oil and gas from 
the Outer Continental Shelf. Now, fortunately, we're not forced 
to choose between OCS development or the environment. We can 
have both.
    Today, I would like to address questions that often come 
with discussions of OCS exploration and production, and explain 
some of the technologies and safeguards that Shell and the 
industry have in place to protect the environment.
    As a frame of reference, more than 30,000 wells have been 
drilled in the Gulf of Mexico, and thousands of scientific 
studies have been conducted by government, academia, and 
industry, and have shown that we can, and do, manage and 
mitigate environmental impacts responsibly. Our record 
continues to improve.
    We recognize, in the context of a comprehensive energy 
policy, that we need to address the challenges of climate 
change. Shell agrees that we must reduce CO2 
emissions by developing a full range of low-carbon energies, 
along with effective mitigation technologies for fossil fuels 
like carbon capture and sequestration, all preferably within a 
phased-in cap-and-trade program to protect American jobs and 
our economy.
    Now, we should take action on these issues now, but not at 
the expense of further development of the OCS. Access to the 
vast resources in the OCS is critical. We need it and it's good 
for this country. Developing more of our own resources will 
reduce imports, create jobs, provide energy security, and help 
our balance of trade. It will allow these resources to be 
developed in a manner that fits our environmental goals and 
avoid the hypocrisy of being willing to buy from other 
countries rather than produce our own resources.
    Our industry can develop offshore resources with a 
footprint that is smaller than ever before. As an example, 
Shell's Perdido project, in the ultradeep Gulf of Mexico--an 
example is that project. Three different offshore fields, 
covering about 90 square miles, will be tied into a single 
facility located in 8,000 feet of water, 200 miles offshore. 
Now, technically, this single surface point could reach oil and 
gas volumes within a 30-mile radius.
    Offshore oil and gas facilities are complex and highly 
sophisticated. It's critical that they be designed, installed 
and operated for safety and environmental protection. Control 
practices are built on the principle of redundant barriers. For 
example, exploration and production wells entail multiple 
layers of protection, such as proper engineering, materials 
design, and training of staff, realtime monitoring of multiple 
data points, both at the surface and deep in well bores, and 
that's used to detect variations in performance and mitigate 
those items before they become problems. Multiple mechanical 
barriers, such as pressure-sealed well casing, blowout 
preventers, and subsurface safety valves, are utilized.
    Now, despite these safeguards, it is necessary to be 
prepared to react and mitigate if an oil spill occurs. Now, we 
are prepared to respond quickly with the right skills and 
equipment. In Alaska, that means a response time of 1 hour or 
less.
    Now, discharges in the ocean are often cited as a concern. 
Now, this is a highly and effectively regulated activity. Any 
discharge or emission must meet Clean Water Act and Clean Air 
Act requirements. The EPA and the MMS impose tight controls on 
allowable discharges and emissions based upon sound science.
    Now, regulations require drilling fluids, for example, to 
be tested for composition and pass a battery of tests for 
toxicity to marine life and biodegradation rate in the 
environment before they can be discharged.
    Noise is also cited as a concern with respect to marine 
mammals. In Alaska, Shell has a monitoring program that 
includes marine mammal observers, both on board vessels and in 
aircraft, as well as an unprecedented network of seafloor 
acoustic recording devices to capture the sounds of whales, 
other animals, and human activity, helping us understand their 
distribution, their abundance, and the migration routes, as 
well as document any subtle behavioral changes that they might 
make in response to our activity.
    Shell and the industry take very seriously our 
responsibility to develop offshore resources with careful 
regard for the environment. If the government chooses to 
develop parts of the OCS, which is essential to meeting 
America's energy needs, then the OCS leasing program should be 
truly supported. When a lease sale is held, the government 
should be prepared to do the required permitting and 
environmental work in a timely manner by ensuring the necessary 
financial and human resource support. The regulatory system has 
worked well in the Gulf of Mexico for 50 years. The Federal 
system for the Alaska OCS, by contrast, is in need of 
attention.
    In addition, the government should provide revenue sharing 
for impacted coastal communities, not just the Gulf Coast 
States. Some argue that revenue sharing takes money out of the 
Federal treasury. I believe revenue sharing is essential to 
enable offshore development and will bring additional revenues 
into the Federal treasury.
    In summary, we must stop ignoring the fact that oil and gas 
will play a major part in meeting America's energy demands for 
several decades as we transition to a more sustainable energy 
future. Our economy's health and our Nation's security demand 
and deserve nothing less.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Odum follows:]
  Prepared Statement of Marvin E. Odum, President, Shell Oil Company, 
                              Houston, TX
    Mr. Chairman and members of the Committee, I appreciate the 
opportunity to testify today about environmental stewardship and 
offshore oil and gas development.
    This hearing is timely and some might say urgent. World energy 
demand will double in the next 40 years. This demand can only be met if 
all sources of energy and efficiency are accessed. We cannot ignore the 
fact that oil and gas will play a major part in meeting America's 
energy needs for decades to come. The United States has vast oil and 
gas resources on the Outer Continental Shelf (OCS).
    There is some hypocrisy in locking these resources away while 
relying on resources produced in other countries. Instead, we should 
embrace policies that provide access to our own oil and gas resources.
    Let's be clear. As a responsible integrated energy company, Shell 
recognizes that access alone will not solve our energy challenges. We 
also need alternatives and renewables and effective mitigation 
technologies, such as carbon capture and storage (CCS), operating 
within a workable, phased-in cap-and-trade program that best addresses 
CO2 emissions and protects our economy.
    Access to our natural resources will also contribute to U.S. energy 
security and contribute to economic health by creating U.S. jobs and 
improving our balance of trade.
    The record clearly shows that offshore development can occur in an 
environmentally responsible way. We should demand no less.
    There are those who promote a ``do nothing'' approach to OCS 
development. Perhaps they have an outdated view of how the oil and gas 
industry operates today. I appreciate the opportunity to provide the 
facts because the facts show that environmental stewardship and oil and 
gas activity are not mutually exclusive. We do not have to choose 
between OCS development or the environment. We can access OCS resources 
and be good environmental stewards.
    I am hopeful that this hearing will advance discussion so that we 
can come together around the facts, reject the myths and move forward 
on solutions that will fuel economic growth.
    Today I will discuss three major points.

   First, the vast U.S. oil and gas resources that can and must 
        play a critical role in meeting that future energy demand and 
        in fueling the economy
   Second, the oil and gas industry's environmental record on 
        the Outer Continental Shelf and the role of technology and 
        science in environmental stewardship
   Third, the steps that industry and governments can take to 
        ensure environmentally sound development of the OCS.
                              about shell
    Before addressing these points, let me provide background about 
Shell. We are an integrated oil and gas company, dedicated to meeting 
ever-growing energy needs efficiently and responsibly. Shell puts 
safety, sustainability, the global search for viable new energy sources 
and innovative technologies at the heart of how we do business.
    We have a robust portfolio in the Americas that consists of 
offshore and onshore exploration and production, unconventional 
resource development, oil products manufacturing and distribution, 
chemicals, LNG, hydrogen and renewables, including wind and biofuels. 
In 2009, we expect to invest about $31 billion worldwide to develop a 
broad portfolio of energies.
       the ocs: meeting energy demand and driving economic growth
    In summary:

   Global demand for energy will continue to grow, and existing 
        and developing energy sources may well struggle to keep up with 
        demand. Consistent with the desire to transition to a low 
        carbon energy mix as soon as possible, oil and gas resources 
        will be needed for decades to come.
   The U.S. has vast oil and gas resources on the Outer 
        Continental Shelf, and it is within government's ability to 
        reduce imported energy with more domestic supplies.
   Domestic oil and gas production provides energy security, 
        improves the balance of trade figures, creates jobs, generates 
        federal revenue and drives economic stability.
Global Energy Demand
    The world must grapple with the reality that global energy demand 
is projected to increase by roughly 50 percent over the next 20 years 
and could double by 2050. As the global recession fades and economies 
recover, demand will accelerate. A key driver will be the strong 
economic growth and a vast, emerging middle-class in the developing 
nations.
    Just last week, the International Energy Agency warned that rising 
crude prices could hamper economic recovery. In raising its daily oil-
demand forecast by 140,000 barrels, the agency projected that demand 
for oil will increase to 86.2 million barrels a day next year because 
of emerging markets.
U.S. OCS Resources
    The U.S. imports approximately 60 percent of its petroleum needs. 
This is not necessary and can be turned from a problem into an 
opportunity. The U.S. has vast oil and gas resources. According to the 
U.S. Minerals Management Service (MMS), there are 420 trillion cubic 
feet of natural gas and more than 86 billion barrels of oil yet to be 
discovered on the Outer Continental Shelf, including Alaska. To put 
that into perspective, that is enough natural gas to heat 100 million 
homes for 60 years and enough oil to fuel 85 million cars for 35 years. 
My belief is that these resource estimates will continue to increase as 
we develop the technology to discover and produce them.
    Summarized here is the resource potential in four key offshore 
areas of the United States: the Gulf of Mexico, Alaska, the Atlantic 
Coast and the Pacific Coast.

          Gulf of Mexico.--This is the heartland of the U.S. offshore 
        activity. The industry has been exploring for and producing in 
        the Gulf for more than 50 years. Although records from the 
        early days of near-shore production are incomplete or 
        unavailable, we know from MMS and Energy Information 
        Administration (EIA) records dating back to 1980 that the Gulf 
        of Mexico has produced more than 10 billion barrels of oil and 
        more than 73 trillion cubic feet of natural gas. The Gulf of 
        Mexico remains a significant petroleum province. The MMS 
        estimates that there are 45 billion barrels of oil and more 
        than 233 trillion cubic feet of gas. Combined, this is the 
        equivalent of more than 86 billion barrels of oil remaining. 
        With new technology enabling development of deepwater and 
        ultra-deep water, I believe these estimates could be low.
          Shell has been a leader in Gulf of Mexico production. More 
        than 80 percent of our OCS leases are in deep and ultra-deep 
        water. In the coming months, the Shell Perdido project will 
        initiate production with a nameplate capacity of 130,000 
        barrels equivalent per day. It will be the world's deepest 
        drilling and production facility and include the deepest subsea 
        well.
          Shell-operated production in the Gulf of Mexico averages more 
        than 400,000 barrels of oil equivalent per day. In fact, our 
        Mars Platform produces about 3 percent of all U.S. crude 
        production and nearly 1 percent of the nation's total daily 
        crude oil usage.
          Alaska OCS.--Alaska's OCS has world-class oil and gas 
        potential, holding an estimated 27 billion barrels of oil and 
        132 trillion cubic feet of natural gas. Exploring for oil and 
        gas offshore Alaska is not new. A total of 30 wells have been 
        drilled in the Beaufort Sea and five wells drilled in the 
        Chukchi Sea. In the 1980s, Shell acquired federal leases in the 
        Beaufort Sea and drilled seven exploration wells. Although we 
        found oil and gas, developing these wells was not economically 
        viable at that time.
          Now let's fast forward some 25 years. Since 2005, the federal 
        government has held several OCS lease sales in Alaska. Shell 
        participated in making these sales a success and paying the 
        federal treasury nearly $3 billion for ten-year leases in the 
        Beaufort and Chukchi Seas. We have the most environmentally 
        sensitive and thoroughly responsible exploration plan in 
        history, involving hundreds of millions of dollars of 
        investment in equipment, support vessels, baseline studies and 
        workforce training. Yet, we have not drilled a single 
        exploration well, due in large part to permitting delays and 
        litigation. I will share more on this later in my testimony.
          Atlantic and Pacific Coasts.--The oil and gas resource 
        potential off the Atlantic and Pacific Coasts is also 
        substantial. The MMS estimates that there are 4 billion barrels 
        of oil and 37 trillion cubic feet of gas off the Atlantic 
        Coast, and 10 billion barrels of oil and 18 trillion cubic feet 
        of gas off the Pacific Coast. However, assessments of resources 
        have not been updated in decades, and, therefore, it is likely 
        that even greater volumes of oil and gas exist. Although the 
        moratorium on offshore leasing in these coastal areas has been 
        lifted, the government has not yet determined whether and where 
        to allow oil and gas lease sales.

Benefits of Domestic Oil and Gas Development
    We should not be satisfied with having other nations produce their 
energy for our use. The cost is enormous. According to the EIA, the 
U.S. imports nearly 12 million barrels per day or approximately 60 
percent of our consumption. These imports cost the U.S. nearly $600 
billion last year.
    The choice is clear. We can continue to bear the costs of importing 
ever-increasing volumes of oil and gas or we can develop our own 
domestic resources. Producing more oil and gas in the U.S. is a ``no 
lose'' proposition. It will provide energy security, improve the 
balance of trade figures, create jobs and generate federal revenue. In 
sum, domestic oil and gas development is an economic engine.
    An estimated 9.2 million people are directly or indirectly employed 
in the domestic oil and gas industry. This makes the industry one of 
the largest employers in the nation. The industry has some of the 
highest paying jobs in the U.S., about two times the national average. 
A growing oil and gas sector has a positive impact on many other 
sectors of the economy, such as iron and steel, aviation, electronics, 
agriculture, construction, chemicals, plastics, marine vessels, 
telecommunications, manufacturing, trucking and transportation. Most of 
these industries have expressed their support for expanded access to 
the OCS.
    Revenues to federal and state governments also increase as a result 
of domestic oil and gas activity. According to the MMS, the OCS leasing 
program is the second largest source of federal revenue. In 2008, a 
record $23.4 billion was collected from energy production on federal 
lands (onshore and offshore). In total, OCS oil and gas development has 
generated more than $190 billion in federal revenue from lease bonuses 
and royalty payments since 1953, in addition to federal, state and 
local income and property taxes. Future OCS activities would produce 
more federal revenues. A study by ICF International looked at oil and 
natural gas resources (both offshore and onshore) that until recently 
were off limits and concluded that development could generate more than 
$1.7 trillion in government revenue, create many thousands of new jobs 
and enhance our nation's energy security.
    The Land & Water Conservation Fund (LWCF) is almost entirely funded 
from OCS revenues. Washington, D.C. has received $14 million in 85 
grants, Virginia has received $81 million in 377 grants impacting 
46,000 acres of parkland and Maryland received $76 million in 327 
grants impacting 43,000 acres of parkland. Nationally, this program has 
funded more than $7.2 billion (leveraged with a 50-percent match) in 
more than 40,000 projects impacting more than 2.6 million acres of 
parkland across the U.S. Of importance, the LWCF program is at risk if 
additional OCS production is not pursued.
                       environmental stewardship
    Finding environmentally and socially responsible ways to meet the 
nation's energy needs is critical to our business success. We are 
acutely aware of the passion around the potential adverse impacts of 
offshore oil and gas activities. These include:

   GHG emissions from the combustion of oil and natural gas,
   environmental footprint and visual impact,
   risks of a major oil spill on marine wildlife and sensitive 
        environments and whether spilled oil can be cleaned up 
        (especially in Arctic conditions),
   discharges into the ocean and air emissions from offshore 
        platforms,
   noise impacts on marine mammals, and
   operating in sensitive areas.

    The industry has an excellent record of exploring for and 
developing OCS resources. Advances in technology and science have 
enabled this in ways that were unimaginable even a few years ago. We 
can drill safely and efficiently with an ever-smaller environmental 
footprint in ever-greater water depths farther and farther from shore 
with minimal stress on the oceans.
    We can operate as good stewards of the environment and, at the same 
time, address many of our nation's pressing needs, as the U.S. 
Commission on Ocean Policy said:

          America can protect the marine environment while creating 
        jobs, increasing revenues, enhancing security, protecting 
        cultural heritage, expanding trade, and ensuring ample supplies 
        of energy, minerals, healthy foods, and life-saving drugs.

    Shell is very familiar with the work of the Interagency Ocean 
Policy Task Force to develop a national framework for eco-system-based 
management of our nation's oceans. We believe this is an excellent 
opportunity to recognize the importance of offshore energy to our 
country's economy and security, and we acknowledge the vast body of 
existing science that guides us, as I will discuss later in these 
remarks. Shell is hopeful that the Task Force will provide 
recommendations that properly balance the environmental, economic and 
social priorities that ought to guide our national ocean policy.
    Let me address some of those key concerns here.
Climate Change
    There is concern or outright opposition to offshore oil and gas 
development from those who oppose the use of fossil fuels. This 
reflects a concern about the consequences of CO2 emissions 
and global climate change, including concerns about the impacts of the 
changing climate on sea levels, polar ice and ocean acidification.
    Shell agrees that CO2 emissions must be reduced and that 
climate solutions must be embraced. Shell advocates strongly for cap-
and-trade-based legislation to ensure that greenhouse gas reduction 
goals are met, but any program must make a fair allocation of credits.
    Shell also recognizes the ``hard truth'' that the world must rely 
on oil and gas for several decades to come as we transition the U.S. 
energy mix to a lower carbon energy mix. It is simply not reasonable to 
think that we can turn off oil and gas use. And we cannot afford to. We 
need the energy from oil and gas to fuel economic growth and stability. 
Only if we are economically healthy can the transition to new 
technologies, new energy sources and new energy-efficient ways of 
living be achieved. It is important to recognize that this is not an 
``either/or'' situation--either fossil fuels or alternatives, 
renewables and other energy sources. We will need all sources to meet 
demand.
    In addition to advocating for government cap-and-trade frameworks, 
Shell is working to address the climate challenge by

   increasing the efficiency of our own operations;
   establishing a substantial capability in Carbon Capture and 
        Storage;
   continuing research and development on technologies that 
        will increase efficiency and reduce emissions;
   helping our millions of retail and business customers use 
        less energy and emit less CO2; and
   aggressively developing low CO2 sources of 
        energy, including natural gas, biofuels and other low-
        CO2 fuel options.

    Let me say a word about the potential for natural gas because the 
development of our nation's domestic gas resources is a major success 
story for our country. By combining new advanced technologies involving 
horizontal drilling with proven technologies such as hydraulic 
fracturing, we have increased onshore natural gas production by more 
than 20 percent over the past three years--an accomplishment that most 
energy experts thought impossible a few years ago.
    According to some experts, America's known natural gas resources 
now exceed 100 years of supply at current U.S. consumption levels--and 
we are finding more every day. The fact that we have such enormous 
resources gives our country increased energy security and flexibility 
to address issues, such as climate change, since natural gas is a 
clean-burning fuel that can help to reduce carbon emissions. It serves 
as an important bridge as we develop new renewable energy sources. 
Therefore, it is important that policymakers recognize the critical 
role of natural gas as climate and energy legislation is developed. In 
particular, legislation should not inadvertently disadvantage natural 
gas.
Footprint on the OCS
    The oil and gas industry can develop offshore resources with a 
footprint smaller than ever before. This is an important aspect of our 
environmental stewardship. It is possible to develop very large sub-
surface areas with a very small surface expression. The technologies 
that enable this can be applied both near shore and in deepwater. Let 
me describe some of the technologies.
    Our Deepwater technology program focuses on equipment and 
integrated systems required to produce hydrocarbons with fewer and 
smaller surface facilities and reduced environmental impacts. This 
involves the optimal use of subsea production systems and new floating 
drilling and production systems. New technologies include subsea 
separation and boosting, subsea re-injection of produced water and 
long-distance pumping with flow assurance. All of our deepwater 
projects go through an internal carbon footprint and environment impact 
assessment as part of the tollgates to final investment decisions.
    Perdido is an ultra-deep water project in the Gulf of Mexico that 
illustrates the industry's ingenuity and smaller footprint. Three 
different offshore fields covering about 90 square miles in the OCS 
will be tied into a single facility at Perdido. Technically, the 
project provides the infrastructure that could enable future oil and 
gas volumes from a 30-mile radius. That means that about a 3,000-
square-mile area can be developed sharing one facility.
    Even more astounding is the fact that Perdido is in 8,000 feet of 
water 200 miles south of Houston. When the leases were acquired in 
1996, the deepest projects in the Gulf were in 3,000 feet of water. We 
did not have the technology at that time, but we were confident that it 
could be developed.
    There were significant challenges to the project due to water 
depth, water pressure and reservoir characteristics. What mooring 
systems should be used in ultra-deep water? How should we address harsh 
wave loading conditions? How should we overcome the massive hydrostatic 
pressure in order to produce 8,000 feet below the surface of the water?
    Over a period of more than a decade and at a cost of several 
billion dollars, the technology was developed to make the project work. 
For the first time, the oil and gas produced will be separated on the 
seafloor and ``boosted'' to the surface using machines purposely built 
for this project and installed and maintained using robotics. Perdido 
is the first application of wet tree direct vertical access (DVA) wells 
from a spar--a configuration that allows a larger number of subsea 
wells to be accessed from a smaller surface host facility. By utilizing 
a single well slot to access the wells beneath the surface facility, 
the size and cost of project are reduced. At the same time, the number 
of wells that can be accommodated by the surface facility is not 
limited.
    When Perdido begins producing in the next few months, it will be 
the world's deepest offshore oil development, the deepest drilling and 
production facility and the deepest subsea well. It will have a 
nameplate capacity of 130,000 barrels equivalent per day.
    The Ormen Lange project in Norway also demonstrates how technology 
enables offshore development with a small footprint. In fact, there is 
no surface facility on the offshore at all. Despite being in 3,600 feet 
of water with uneven seafloor terrain, strong seafloor currents, 
subzero temperatures and extreme wind and wave conditions, our 
engineers designed a ``Subsea-to-Beach'' production system in which the 
natural gas is produced from subsea wells and transported some 75 miles 
through subsea flowlines to the shore. This complex project producing 
from one of the largest gas wells in the world in the deepest water 
depths in Europe will provide up to 20 percent of the natural gas needs 
of the UK for up to 40 years.
Operational Integrity and Incident Prevention
    Offshore oil and gas facilities are complex and highly 
sophisticated. It is critical that they be designed, installed and 
operated with rigorous attention to preventing incidents of any kind. 
Safety is a core operating principle essential to protecting people and 
the environment. So too is operational excellence. Let me describe some 
of the control practices that are in place when we drill a well and 
during producing operations.
    Well control.--When drilling a well, the pressure in the wellbore 
must be monitored and maintained in a way that gas and fluids in the 
geologic formation do not escape. There are four layers of prevention 
and containment (barriers) that maintain well control. This means that 
if one barrier fails due to operational error or equipment failure, 
there is no loss of well control.

   Layer I includes proper planning and design of the wells to 
        minimize any technical or environmental risks. This way, before 
        we start to ``Drill the Well Right,'' we first decide on ``The 
        Right Well to Drill'' from a technical and environmental 
        perspective. This layer also includes training of our on-site 
        staff on crucial well control procedures.
   Layer II includes early detection of, and timely response 
        to, events where gas or fluids begin to enter the wellbore. 
        When such a ``kick'' is detected, the general response is to 
        immediately shut down the pumps, perform a flow check, shut in 
        the well and kill the well. To help carry out this task, Shell 
        employs its Real Time Operations Centers (RTOCs) in New Orleans 
        and Houston to monitor the wells 24 hours a day, 7 days a week. 
        Through advanced information technology and satellite 
        communications, the experts in the RTOCs monitor in real time 
        what is happening at the drill site offshore. The RTOCs see the 
        same drilling data at the same time as the drillers onsite, 
        such as data from downhole sensors, rig gauges and sub-surface 
        visualization. With those additional ``sets of eyes'' trained 
        to monitor and detect any anomalies in the drilling process, 
        operational concerns of any kind, in particular those 
        associated with well control, can be stopped and mitigated 
        immediately.
   Layer III involves the use of mechanical barriers. Well 
        casing, cemented in the hole, allows for safe deepening of the 
        well and provides long-term protection against formation fluids 
        coming to surface. Blowout preventers (BOPs) are mechanical 
        devices that can shut off a well completely and prevent 
        formation fluids from reaching the surface when the well is 
        drilled. Weekly testing and inspections are performed to ensure 
        their competency and integrity.
   Layer IV represents relief well drilling. If, despite the 
        first three layers of protection, there is the unlikely event 
        of a blowout at an exploration well, site-specific, detailed 
        contingency plans are in place for drilling a relief well. 
        Contingency plans include dynamic surface control measures and 
        the methods of drilling a relief well.

    Production Control.--MMS regulations and industry standards require 
all offshore producing platforms to have safety shutdown equipment. 
Fail-safe sub-surface safety valves must be installed in all wells at 
least 100 feet below the sea floor. These safety valves can be manually 
closed. They are also designed to shut tight whenever there is a loss 
of pressure from the surface facility. For example, if a surface 
platform is pushed over by a hurricane or ocean-going vessel, the 
safety valves will activate and shut in the well. This prevents the 
wells from blowing out.
    At the ``Bridge,'' located in New Orleans, we monitor all of our 
deepwater production systems in the Gulf of Mexico and Brazil (and 
ultimately Alaska). The centralized surveillance center is designed to 
optimize deepwater production rates, equipment reliability and system 
integrity. Specifically, production and equipment data streams are 
continuously scanned to identify any irregularities in performance and, 
if detected, are immediately addressed with technical and operational 
experts. The Bridge enables us to squeeze the most out of the 
reservoirs and maintain our systems and equipment to their best 
operating performance. This identifies potential problems before they 
occur and minimizes downtime.
    During the 2005 hurricanes that devastated the Gulf of Mexico, 
about 115 platforms were destroyed and more than 50 others were 
damaged. There was no loss of life due to the industry's safety and 
evacuation practices. There were no well blowouts because the safety 
valves worked. There were some relatively small oil spills from storage 
tanks located on the platforms, but none that caused oiling of the 
coastline.
Oil Spills: Impacts and Response
    Petroleum poses a range of environmental risks when released into 
the environment, whether as spills or discharges. U.S. federal agencies 
have turned to the National Research Council (NRC) on several instances 
to look at the issue. One of the most widely quoted studies of this 
type, titled Oil in the Sea: Inputs, Fates, and Effects, was completed 
in 1985. This study has been updated twice since then, the most recent 
update occurring in 2003.
    In North American marine waters, most petroleum comes from natural 
seeps (62.5%) rather than from anthropogenic (man-made) discharges 
associated with petroleum-extraction (1.2%), transportation (3.6%) and 
consumption (32.8%) of crude oil and refined products. (Table 1) (NRC, 
2003)

          Table 1: Relative contribution of average, annual releases 
        (1990-1999) 
        of petroleum hydrocarbons in North American Marine Waters

------------------------------------------------------------------------
                                                                 Percent
                                                                    of
                                                 bbls             Total
                                                                   (%)
------------------------------------------------------------------------
Natural Seeps                          1,264,000                 62.5
Petroleum Extraction                   23,700                     1.2
Petroleum Transportation               71,890                     3.6
Petroleum Consumption                  663,600                   32.8
------------------------------------------------------------------------
 (from NRC 2003)

    Offshore seeps of hydrocarbons are known to occur around the United 
States in the Gulf of Mexico and southern California, and released oil 
can be delivered long distances by oceanic currents. Of the 
anthropogenic sources of oil in the sea, consumption is by far the 
largest contributor (32.8% of total and 87.4% of anthropogenic 
sources). As defined in the NRC 2003 report, ``consumption'' 
contributions are storm-and surface-water runoff, use of 2-stroke 
engines, non-tank vessel spills, operational discharges, atmospheric 
deposition and aircraft dumping. These releases due to consumption of 
petroleum products tend to occur in coastal areas.
    Oil and gas extraction activities are often concentrated in regions 
where natural seeps form. Historically, slicks of oil from seeps have 
been incorrectly attributed to releases from oil and gas platforms and 
vice versa. In North America, the largest and best-known natural seeps 
appear to be restricted to the Gulf of Mexico and the waters off of 
southern California, regions that also have extensive oil and gas 
production. In fact, geologists use aerial imagery of oil slicks in the 
ocean to identify likely areas to explore for oil and gas.
    The toxicity of petroleum hydrocarbons to marine organisms is 
dependent on the persistence and bioavailability of specific 
hydrocarbons. A quick and effective response to an oil spill is 
therefore critical in avoiding or minimizing any shoreline impacts. In 
other words, in the unlikely event of a spill we want to respond and 
remove the oil before it can impact sensitive environments.
    Each offshore oil and gas project must have such a plan in place 
before it is permitted to go forward. Given Shell's investment in 
exploring in Alaska's OCS, there are concerns that oil spills in arctic 
conditions or in ice conditions cannot be cleaned up. I would like to 
focus on and hopefully dispel that claim.
    Arctic exploration and production is building on a huge experience 
base in temperate conditions. The experience in the Gulf of Mexico is 
instructive. We know that with proper well design, well controls, 
improved technology and effective training, the likelihood of a 
significant spill incident has been reduced substantially. In fact, the 
MMS calculates that since 1980 less than 0.001% of the oil produced in 
the OCS has spilled. In the unlikely event that a spill does occur, we 
have a dedicated and proven oil spill response capability, including 
equipment, methods and competencies.
    During any spill that occurs in water (warm waters, cold waters or 
ice-covered waters), it is impossible to clean up 100 percent of the 
oil spilled. Depending on air temperature and oil gravity, as much as 
40 percent of the oil can evaporate in the first 24 hours. However, in 
Arctic conditions, the evaporation rate will be lower and depend on 
water temperature and wind conditions. Waves and current can also 
impact the recovery rate since mechanical equipment is typically 
limited to operating in waves up to 2-3 meters. Daylight, access to the 
site, travel time, needed approvals from government agencies and other 
factors can also impact a spill operation.
    Shell accepts the fact that, in some cases, oil spill response in 
ice conditions can be more difficult than in open water. Ice conditions 
will demand more flexibility and planning in tactics, special response 
equipment and strong coordination and competence of staff and 
contractors. It will also require additional planning in areas such as 
forecasting ice conditions, monitoring ice and ice deflection to help 
trap oil. In some cases, the presence of cold water and ice can enhance 
response effectiveness by limiting oil spreading (which in open water 
cannot be controlled) and slowing the weathering process.
    By working with the natural environment, responders can increase 
the response window of opportunity and improve the effectiveness of 
mechanical recovery and in-situ burn techniques. For example, if a 
spill occurred during the winter season under the ice, the oil would be 
trapped, allowing the responders more time to evaluate options for 
recovery or in-situ burning because the oil is semi-stationary under 
the ice.
    Shell believes that it is very important to have the capability to 
include multiple response methods in the planning, have approval to use 
them and to respond with as many tools as needed. The response strategy 
and planning should allow the use of dispersants, in-situ burning and 
other methods that may be applicable. The method(s) selected during a 
response will depend on items such as the weather conditions, type of 
spill and other factors that are decided on a case-by-case basis in 
collaboration with the federal and state on-scene coordinators. 
Additionally, during a spill event the responders may change from one 
tactic to another as the conditions change. Dispersants have been 
proven to be effective in cold waters and can be applied with ice 
present and be effective for spills that cover a large area. In-situ 
burning (which has been used for 30 years around the world) can play an 
important role in the unlikely case of a blowout and can burn up to 95 
percent of the oil spilled.
    Shell has created an unprecedented oil spill response capability to 
support its drilling plans in the Beaufort and Chukchi Seas. We have a 
dedicated fleet of vessels and specialized oil containment equipment, 
which will be on-site 24/7. Spill recovery equipment is state of the 
art and widely acknowledged as proven systems under cold-climate 
conditions and designed to remove the worst-case discharge. The Nanuq 
is an ice-class purpose-built vessel, which can begin recovery within 
an hour of any incident large or small.
Arctic Oil Spill Response Research and Development
    International scientists and operational personnel, under 
management of SINTEF Norwegian Research Institute, spent two weeks in 
May of 2009 in the pack ice in the Norwegian Barents Sea to study the 
behavior of oil spills in Arctic waters and to test various response 
options in realistic oil-in-ice conditions.
    The tests proved that ice acts as a natural boom or protective 
barrier to confine and reduce the spread of an oil spill and to provide 
a longer window of opportunity in which clean-up technologies can be 
used effectively. These tests are the most wide-ranging research and 
development programs ever undertaken to evaluate Arctic oil spills.
    The Joint Industry Project (JIP), under the management of SINTEF, 
was sponsored by six international oil companies, including Shell. The 
MMS was also a project participant. The project's major objectives are 
to further develop knowledge, tools and technologies for oil spill 
response in ice-covered waters. The program has consisted of project 
areas being carried out over a four-year period, ending in 2009. The 
JIP was designed to address key oil spill response issues and scenarios 
that program participants might have to deal with:

          1. The fate and behavior of oil spilled in Arctic conditions
          2. The in-situ burning of oil in Arctic and ice-covered 
        waters
          3. The mechanical recovery of oil in Arctic and ice-covered 
        waters
          4. The use of chemical dispersants in Arctic and ice-covered 
        waters
          5. Monitoring and remote sensing of oil in and under ice
          6. The preparation of a generic oil spill contingency plan
          7. Field experiments at Svalbard, Norway, in offshore ice-
        covered waters

    These real-world offshore tests marked the final stage in the 
largest and most wide-ranging international research and development 
program ever undertaken to enhance understanding, to further improve 
and develop spill-response technologies and to increase the ability to 
react rapidly in the event of an accidental oil spill in ice-covered 
conditions.
Discharges and Emissions
    ``Dumping'' does not occur offshore. In fact, many materials cannot 
be discharged at all, including oily mud and trash and debris. 
Allowable discharges from offshore platforms can include produced 
waters, drilling discharges and air emissions. We understand public 
concern about their potential effect on the environment. Let's be 
clear, however, that any discharge or emission must meet Clean Water 
Act or Clean Air Act requirements. The Environmental Protection Agency 
(EPA) and the MMS permit the allowable discharges and emissions under 
tight controls based upon sound science. Sensitive habitats on the 
seafloor, like corals or chemosynthetic communities in the Gulf of 
Mexico, must be avoided. These permits require drilling mud, for 
example, to be tested for composition before their use, to pass a 
battery of tests for toxicity to marine animals and biodegradation rate 
in the environment before they can be discharged.
    An example of how our industry has developed technology to address 
the challenges of deepwater and environmental performance at the same 
time is new synthetic drilling fluid. This fluid can be recycled and 
reused, and, as a result, discharges are minimized. They increase 
drilling penetration rates, resulting in less time on location and 
reduced air emissions. The EPA has classified this as a ``pollution 
prevention technology.''
    More than 35,000 wells have been drilled in the Gulf of Mexico. For 
more than 20 years, the petroleum industry, the regulatory agencies and 
academic researchers have conducted ocean monitoring around well sites 
to study effects on water quality, sediment quality, and the local 
biological communities. We have found that small areas of the seafloor 
can be temporarily disturbed by the deposition of drill cuttings. 
However, there are no long-lasting effects and no bioaccumulation of 
contaminants that would either jeopardize benthic animals or affect 
human consumption of seafood. In fact, our offshore platforms are some 
of the most prolific areas for recreational fisherman, and our industry 
has successfully coexisted with the commercial fishing industry for 
decades.
Marine Animals and Noise
    In the Gulf of Mexico and offshore Alaska, our operations have to 
coexist with populations of marine mammals that are important to 
protect. Seismic exploration is one operation that is carefully 
regulated by the federal government and managed by the company so that, 
for example, the sounds created don't cause whales to change their 
behavior in ways that might be harmful. Regulations require us to:

   Have trained marine mammal observers onboard to watch for 
        mammals
   When starting, use a ramp-up procedure to gradually increase 
        the sound level being produced, which allows animals to leave 
        the area if the sound is uncomfortable
   Stop any operations if a marine mammal is likely to enter a 
        ``safety zone'' around the operation and wait to restart 
        operations until the zone is all-clear for at least 30 minutes

    In Alaska, Shell goes further. We use observers on aircraft to 
monitor an even larger area around our operations in the Beaufort Sea. 
Since 2006, we have also deployed a network of seafloor acoustic 
recorders across the Chukchi Sea and Beaufort Sea that record the 
sounds of whales, seals, walrus and other animals, along with natural 
sounds like storms and earthquakes and man-made sounds, such as our 
seismic programs and vessels. This information helps us understand the 
distribution, abundance and migration routes of the animals, as well as 
document any subtle behavioral changes that they might make in response 
to our presence.
    Through these programs, we have seen and heard thousands of whales, 
seals, walruses and polar bears, and our monitoring has not detected a 
single one that has been injured by our activities. Our seafloor 
recorders have documented that migrating bowhead whales will swim 
around seismic activities at a distance of a few kilometers. We are now 
studying to determine if this response is biologically significant or 
less significant--like you or I might cross the street to avoid noise 
from a construction site.
Operating in Sensitive Areas
    We have found that multiple uses of our oceans can be 
accommodated--we can conserve special places and have economic 
development. For example, the Flower Garden Banks National Marine 
Sanctuary in the Gulf of Mexico is a national treasure of manta rays, 
whale sharks, coral heads that are bigger than cars and hundreds of 
species of fish and invertebrates. Within a four-mile radius of the 
Flower Garden Banks, hundreds of exploratory wells have been drilled, 
and there are currently 10 production platforms and approximately 160 
km. of pipelines. Twenty-five years of stringent environmental 
monitoring by the National Oceanic and Atmospheric Administration 
(NOAA), the MMS and industry have found no contamination or degradation 
of corals due to oil and gas activity. In fact, our marine biologists 
participate in an annual government/industry dive on the Flower Garden 
Banks, and we have observed firsthand the pristine coral formations and 
wildlife.
Role of Technology
    Technology is not static. What we know and how we operate today 
will evolve. We must continue to find better ways of working through 
technology improvements and breakthroughs that make our operations more 
efficient and environmentally safe. Let me give some examples of what 
Shell is doing.
    Shell has initiated a Future Wells Project involving a range of 
technical experts. Their goal is to identify new technologies and 
processes that will, for example, reduce the volume of well cuttings 
and fluids, increase production rates by reaching the drilling target 
with larger casing, unlock reserves that are currently uneconomic or 
unreachable and reduce our own fuel consumption.
    Shell's interest in the Arctic, in Alaska and Russia, has 
accelerated the development of specific projects that will better equip 
us to work in this arena. Again, we are looking for alternative 
approaches that reduce our environmental footprint in an area that has 
unique characteristics very different from the Gulf of Mexico. We do so 
in order to advance our understanding of the region, to inform our 
design technologies to achieve smaller impact and to respond to 
concerns expressed by many, including the indigenous peoples with 
strong dependence on and cultural ties to the environment.

   Unmanned Aircraft Systems (UAS).--One example of our work 
        involves integrating unmanned aircraft into our existing manned 
        aircraft monitoring programs. The monitoring is essential 
        because it tracks the habits and movements of marine mammals, 
        the movement of sea ice and the operations of offshore 
        operations. The goal of the UAS research program is to reduce 
        the risk and environmental footprint of monitoring. Unlike 
        manned aircraft, the unmanned aircraft can carry compact 
        payloads, which allows standard sensors like electro-optical 
        video, electro-optical stills and infrared to be flown with 
        very little airborne noise or disruption to natural 
        surroundings. In Alaska, the industry and government agencies 
        have collaborated in testing an A-20 ScanEagle system to track 
        walrus, seals and endangered bowhead whales. We expect to be 
        able to detect sea-surface contaminants, track sea ice and find 
        stranded personnel and vessels in broken ice scenarios.
   Marine Sound Reduction Program and Marine Mammal Impacts.--
        Another example involves developing ways to reduce the sound of 
        our operations in the Arctic. Shell's program is intended to 
        better understand sound in Arctic waters and then to develop 
        ways to mitigate man-made sound. This research is part of our 
        marine mammal monitoring initiative in the Beaufort and Chukchi 
        Seas. Together, these two programs seek to understand the 
        sources and characteristics of man-made marine sound and its 
        effect on marine animals so that appropriate sound management 
        plans can be developed. We are analyzing sound data from 
        drilling activities in Alaska waters done during the 1980s and 
        1990s. We are taking acoustic measurements on vessels and 
        drilling rigs to understand the magnitude of sound generated. 
        We are developing sound mitigation designs for new-build 
        vessels and underwater acoustic barriers that could be deployed 
        around existing rigs.

Role of Science
    Scientific knowledge will also evolve. This expanded knowledge is 
critical because it informs government regulators who must issue 
permits, it informs policymakers who must develop sound energy and 
environmental policy and it informs our operational decisions.
    The government plays a leading role in performing scientific 
studies. Since 1973, federal agencies have performed more than 5,000 
scientific studies on the environmental effects of offshore oil and gas 
activities. For example, the National Academy of Sciences has produced 
three reports focused directly on environmental science for offshore 
oil and gas, two with particular focus on Alaska. The Minerals 
Management Service's OCS Environmental Studies Program has spent more 
than $600 million (more than $1 billion in inflation adjusted dollars) 
on scientific studies of offshore oil and gas--about half of that 
directed specifically to Alaska. Money is not a perfect measure for the 
applicability or credibility of the information, but it provides a 
metric of effort and breadth that many people will understand.
    The industry also has a role to play. Oil and gas companies have 
worked on major scientific programs that supplement the research by 
government agencies. In the last 10 years, the industry has published 
studies on the environmental effects of and best management practices 
for pollution prevention technology, emissions from offshore platforms 
that include produced waters, drilling discharges, air emissions, the 
effects of sound on marine life that includes whales and fish, weather 
and oceanographic studies, improved design standards for severe weather 
and even the causes of hypoxia in the Gulf of Mexico.
                       where do we go from here?
    I have discussed the need for and benefits of developing the vast 
offshore oil and gas resources off the U.S. coast. I have discussed the 
industry environmental record and how technology and science are key 
enablers for our environmental stewardship. Now I would like to look 
forward--where do we go from here and what should policymakers do?
                            recommendations
    The federal government has a critical role to play as a steward of 
our oceans. It also has a role to play in supporting the OCS leasing 
program and the sustainable development of its natural resources. Let 
me provide some policy recommendations for your consideration.
First and foremost, the government must support the OCS leasing program
    In areas where OCS leasing has occurred, the government has done 
literally years of environmental analysis in advance of the lease sale. 
It has invited companies to buy the leases, and it has accepted bonus 
bids from companies. In return, the government bears some 
responsibility to the leaseholder. Companies bid on leases with the 
tacit understanding that the government is prepared to do the work that 
allows exploration and development.
    Shell's experience in Alaska is a case in point. We participated in 
the government's Alaska lease sales and paid the U.S. Treasury billions 
of dollars for the leases. We invested hundreds of millions of dollars 
more to prepare for exploration drilling. In order to drill, we must 
have some 30 state and federal permits. We have not yet drilled a 
single exploration well. Permitting delays, coupled with litigation 
delays, have blocked the work for several years. We are hopeful that we 
will be able to drill in 2010, but this will only happen if the federal 
government finally delivers all the permits and if litigation 
challenges do not occur.
    I fully support the permitting work and the regulatory requirements 
that Congress has put in place. Many of those requirements are intended 
to protect the environment. I do not believe the process should be 
``rubber stamped.'' Quite the opposite. I believe that the government 
should have a robust and thorough process that leads to timely 
decisions. Endless delays and inefficiencies should not be tolerated 
because it is a waste of effort and money for all concerned--Shell, the 
government and the taxpayer.
    Specifically, I urge Congress to:

   Fully fund and resource the various federal agencies that 
        handle OCS oil and gas permitting. Inadequate funding and 
        insufficient staff should not be the cause of permitting 
        delays. If the government is going to hold a lease sale, it 
        must be prepared to do the environmental studies and other 
        analyses that underpin OCS permits.
   Impose clear timelines on federal agencies, and hold the 
        agencies to those deadlines so that the private sector has some 
        assurance of action and can plan its investment decisions 
        accordingly. If properly staffed and resourced, the deadline 
        should not be a problem.
   Defend its permits when there is a legal challenge and seek 
        expeditious decisions by the courts. As a result of a court 
        decision last spring, the Department of Interior (DOI) is 
        remedying flaws in its current Five-Year OCS Plan. The DOI 
        needs to move expeditiously to complete this work and in the 
        process, remove the legal ``cloud'' that hangs over the 2008 
        Chukchi lease sale.
   Consider whether the EPA is the appropriate agency to handle 
        OCS permits. In the FY 2010 appropriations report for the EPA, 
        Congress directed the EPA to put adequate staff and resources 
        to permitting OCS facilities and further directed that the EPA 
        ``set clear, reasonable national guidelines for issuing OCS air 
        permits.'' Shell has applied to the EPA for our Alaska 
        exploration work. The 40-month process is still not complete. 
        This should not be replicated or tolerated.
   Increase funding for the MMS Environmental Studies Program. 
        The government should invest now in key studies, ecological 
        characterization and additional baseline science, all of which 
        will be critical to permitting any oil and gas work in OCS 
        areas outside the Gulf of Mexico.
   Establish regional, inter-agency permitting offices to 
        support OCS leasing and permitting. I commend this Committee 
        for including an Alaska-based permitting office in the energy 
        bill that was approved last summer. Such an office will enable 
        agencies to coordinate their regulatory work, share resources 
        and hopefully move expeditiously to approve permits.

Second, the government should support opening new OCS areas to oil and 
        gas development
    As I discussed earlier, the U.S. is blessed with resources. 
Development has multiple energy and economic benefits.
Third, the government should provide revenue sharing for all coastal 
        communities
    States and communities adjacent to offshore development have 
infrastructure needs, such as roads, housing and schools for workers 
and their families, enhanced seaport and air terminal facilities, 
greater demands for basic public services and other expenses common to 
economic growth. Congress recognized this when it provided that the 
four Gulf states could share in federal OCS revenue from Gulf leases. 
Revenue sharing should not be denied to other states that have OCS 
leasing. Today, Alaska is the only other state with OCS leasing by the 
federal government. It is unfair and unreasonable to deny revenue 
sharing to the State of Alaska. Some argue that revenue sharing takes 
money out of the federal treasury. On the contrary, revenue sharing 
will enable offshore development and would bring revenues into the 
federal treasury.
Fourth, the government should ensure that any National Ocean Policy 
        recognizes the importance of offshore energy to the nation's 
        economy and energy security
    The President's Interagency Ocean Policy Task Force is developing a 
national oceans policy. We will see this report by the end of the year. 
I hope the Task Force will provide recommendations that balance the 
nation's environmental, economic and social goals without adding new 
bureaucracies that undermine the existing OCS oil and gas leasing 
program. The Task Force was directed by the President to develop a 
framework for marine spatial planning. This framework should inform 
government decision makers by providing access to environmental and 
ocean user information. It should be used in a way that allows for 
continued multiple uses of the oceans and not as a process to ``zone 
off'' important economic and recreational uses.
Finally, Congress must have the will to support OCS oil and gas 
        development, to embrace a domestic energy policy that works 
        with domestic environmental goals
    The energy future of our country will be determined to a great 
extent by the legislation enacted by Congress.
    In closing, thank you for the opportunity to speak on behalf of 
Shell about issues of paramount importance, ones that cannot be 
overstated or overemphasized.
    The world faces a daunting challenge that demands aggressive, 
collaborative and realistic action to meet escalating energy demand in 
ways that are good for the environment. Shell challenges our elected 
officials to exercise political courage and leadership to make tough--
often unpopular--decisions that are in the best interest of our 
citizens, economy and environment.
    Driving those decisions must be the reality that it will take all 
possible energy sources to meet demand--and that oil and gas will 
remain our primary energy sources for decades to come as we transition 
to a more sustainable energy future.
    Access to vast, untapped natural resources onshore and on the Outer 
Continental Shelf is critical--we need it now. Access is good for 
America. Developing more of our own resources will create jobs, provide 
energy security and help our balance of trade. We must stop sending 
hundreds of billions of dollars out of the country and start developing 
more of our own energy and bolstering our own economy.
    History shows that we can--and do--develop oil and gas resources in 
responsible ways. Our record at Shell is impressive.
    Shell is a leader in environmentally superior operations. We 
advocate globally for carbon dioxide reduction through a phased-in cap-
and-trade program. We see great promise for carbon capture and storage 
as a mitigation technology and are collaborating on numerous CCS 
research and demonstration projects in the U.S., Canada and other parts 
of the world.
    Shell supports continued development of alternatives and 
renewables, with our focus on wind and biofuels. In addition, we are 
increasing production of natural gas, the cleanest-burning fossil fuel. 
New technology has opened up abundant gas resources contained in dense 
rock formations, which will increase supplies dramatically.
    Shell continues to deliver energy to Americans in responsible ways. 
That's our job, day in and day out. Our elected officials have the role 
to move beyond discussion and enact sound, realistic legislation and to 
establish the regulatory framework necessary to bring more energy to 
America. Our economy and our nation's security demand and deserve 
nothing less. Likewise, we should expect nothing less from our 
government.

    The Chairman. Thank you very much.
    Mr. Amos, go right ahead.

STATEMENT OF JOHN F. AMOS, PRESIDENT, SKYTRUTH, SHEPHERDSTOWN, 
                               WV

    Mr. Amos. Mr. Chairman, members of the committee, thank you 
for this opportunity to present some of the ongoing risks 
posted by offshore oil and gas drilling. I've submitted written 
testimony for the record and will summarize my comments here.
    After more than a decade analyzing satellite imagery in the 
commercial sector for oil and gas exploration, I founded 
SkyTruth, a nonprofit corporation dedicated to investigating 
environmental issues, using satellite images and other remote 
sensing technologies. We work to inform decisionmakers and the 
public about the risks posed by resource extraction so we can 
make better decisions about developing our resources, 
understand the worst-case scenarios implied by those risks, and 
ensure that we can effectively respond to those scenarios.
    Our work investigating drilling mishaps, severe storm 
damage, and leaking pipelines demonstrates that major oil 
spills still occur today, including in U.S. waters, despite 
significant advances in technology. This testimony addresses 
several incidences of oil spills observed by SkyTruth that are 
directly related to current offshore oil and gas drilling and 
production and the utility and effectiveness of mitigation 
efforts, such as creating buffer zones.
    Most recently, on August 21, 2009, a production well at the 
new Montara oil platform, off the northwest coast of Australia, 
experienced a blowout, ejecting its cement plug and spraying 
oil and gas into the air and water. The platform and attached 
West Atlas drill rig, seen in this photo, were evacuated. For 
the next 10 weeks, oil and gas flowed unabated from the well. 
To plug the leak, authorities decided to bring in a second rig 
from Singapore and drill a relief well. On November 1, the 
spill was finally stopped by pumping heavy mud into the well. 
Concurrently, the platform and attached rig were engulfed in 
flames and burned for 2 days. The $250-million rig is reported 
to be a total loss, and engineers are assessing the integrity 
of the platform. Difficult work remains to install a permanent 
cement plug in the well.
    Estimates of the amount of oil spilled range from 1.2 
million gallons to more than 9 million gallons. SkyTruth's 
analysis of NASA's satellite images, like the one here, showed 
that oil slicks and sheen moved as far as 225 miles from the 
leaking well and cumulatively impacted more than 24,000 square 
miles of ocean, an area the size of my State of West Virginia. 
Researchers documented impacts from the spill on seabirds and 
marine mammals. Indonesian and Australian fishermen cited fish 
kills and significant declines in catch, and news accounts 
report that fishermen are going bankrupt.
    The Australian government has launched an investigation 
into the causes of the blowout, effectiveness of the response, 
and environmental impacts. The investigation is expected to 
take 6 months.
    Severe storms present another risk. In 2005, as Senator 
Dorgan noted, Hurricanes Katrina and Rita moved through oil 
fields in the Gulf as powerful category-5 storms. SkyTruth's 
analysis of satellite images, including this image taken a few 
days after Katrina made landfall, revealed extensive slicks 
covering more than 700 square miles in the Gulf of Mexico. The 
Minerals Management Service reported that Katrina and Rita 
destroyed more than 100 platforms and damaged 450 offshore 
pipelines.
    These storms caused major spills from the onshore 
facilities that support offshore production. The Coast Guard 
reported that onshore infrastructure spilled 8 million gallons 
of oil into coastal wetlands, streams, and communities. A 
single spill from a ruptured storage tank inundated 1700 homes 
in Louisiana with crude oil.
    Infrastructure can fail even in the absence of storms. In 
calm weather, in July 2009, a major pipeline operated by Shell 
sprang a leak about 30 miles off the Louisiana coast. Divers 
located a crack in the pipe, but 63,000 gallons of oil spilled 
into the Gulf. The resulting slick covered 80 square miles. The 
failed pipeline was installed more than 30 years ago. In 2009, 
it began carrying oil from a new platform almost 200 miles 
south of New Orleans. In a common industry practice, the new 
platform was connected to the old pipeline network.
    Offshore production in the Gulf began in the late 1940s. 
Today, as you can see on this map, the seafloor is crisscrossed 
by 25,000 miles of active pipeline, connecting 3600 platforms 
to coastal facilities. As the pipeline network ages, structural 
failures and spills become increasingly likely.
    In summary, offshore drilling is an inherently risky 
venture. Accidents happen despite the most technologically 
advanced systems. Nature can create insurmountable situations. 
Infrastructure ages and becomes vulnerable. Recent history 
shows that when things go wrong, consequences can be severe. As 
the Senate debates the merits of opening new offshore areas to 
energy development, it is important to understand and carefully 
evaluate the risks posed by offshore drilling. The critical 
first step is acknowledging these risks to the environment and 
to communities that depend on healthy marine and coastal 
ecosystems for their economic wellbeing.
    I thank you for your attention today, and I would be happy 
to answer questions.
    [The prepared statement of Mr. Amos follows:]
       Prepared Statement of John F. Amos, President, Skytruth, 
                           Shepherdstown, WV
    Good morning, Mr. Chairman and members of the committee. Thank you 
for this opportunity to present information about some of the ongoing 
risks posed by offshor important issue for our nation as we face 
increasing political, strategic, environmental and economic 
consequences resulting from our dependence on fossil fuels as the 
primary energy source driving our economy. As the nation embarks on a 
new marine spatial planning process to help us make better informed 
management decisions governing our nation's coastal and marine 
resources, and as the merits of opening new offshore areas to energy 
development carefully evaluate the risks of offshore drilling when 
considering the benefits acknowledging the potential risks of offshore 
oil and gas development to the environment, and communities that depend 
on healthy marine and coastal ecosystems for their economic well
    I received degrees in geology from Cornell University (B.S.) and 
the University of Wyoming (M.S.), and spent nearly a decade working as 
an exploration geol firms, Earth Satellite Corporation (now MDA Federal 
Inc.) and Advanced Resources International. During that time I 
developed expertise in remote sensing and digital mapping: processing 
and analyzing satellite images as a tool to explore for oil and gas, 
minerals, and ground water. I conducted dozens of onshore and offshore 
exploration studies for clients that included British Petroleum, Shell 
Oil Co., Exxon, and the U.S. Department of Energy, among many othe 
NASA-funded study to develop remote sensing techniques for detecting 
and mapping both natural and human-caused oil slicks at sea. I have 
analyzed hundreds of satellite and aerial images of the world's oceans, 
collected by a variety of radar, visible and infrared sensors.
    In 2001 I founded SkyTruth, a non-profit organization dedicated to 
investigating and illustrating environmental issues using satellite 
imagery, digital mapping, and other remote sensing technologies. This 
testimony addresses several instances of oil spills observed by 
SkyTruth that are directly related to current offshore oil and gas 
drilling and production. These incidents are notable for their 
magnitude and/or the potential risk they expose, and include a broad 
range of causes including:

   Drilling accidents (Western Australia, August-November 2009)
   Severe storm damage (Katrina and Rita, 2005; Ike, 2008)
   Aging pipeline infrastructure (Eugene Island Pipeline, July 
        2009)

   i. drilling accidents: the montara / west atlas blowout and spill
    On August 21, 2009, Seadrill, a Norwegian offshore drilling 
services company\1\, was working from their West Atlas portable jackup 
drilling rig at the new Montara oil production platform in the Timor 
Sea, about 150 miles off the coast of Western Australia, at a water 
depth of 260 feet\2\. The West Atlas rig was drilling a new production 
well\3\ when one of the previously completed and temporarily plugged 
wells on the platform experienced a ``blowout,'' ejecting its cement 
plug and spewing oil, natural gas, and vaporized natural gas 
condensate\4\ into the air and water. The rig and platform were 
immediately evacuated, with no injury to the 69 workers involved. Due 
to the extreme fire and explosion hazard posed by the situation, all 
personnel were excluded from the immediate vicinity of the platform and 
rig\5\.
---------------------------------------------------------------------------
    \1\ http://www.seadrill.com/
    \2\ http://www.worleyparsons.com/Projects/Pages/
MontaraPlatform.aspx
    \3\ http://www.offshore-mag.com/index/article-display/6066428130/
articles/offshore/company-news/australianew-zealand/2009/08/seadrill-
issues_update.html
    \4\ http://www.ens-newswire.com/ens/aug2009/2009-08-24-02.asp
    \5\ http://www.abc.net.au/news/stories/2009/08/25/2666754.htm
---------------------------------------------------------------------------
    For the next ten weeks, oil and gas flowed from the damaged well 
unabated\6\, despite repeated attempts to plug the well (Figure 1).* 
Australian authorities and the platform operator, PTTEP-Australasia\7\, 
responded primarily by aerial spraying of chemical dispersants on the 
oil slick, with limited boom-and-skimmer operations to mechanically 
recover the spilled oil. PTTEP determined that the best way to stop the 
flow from the damaged well was to drill a relief well that would 
intercept the damaged well at a point approximately 8,600 feet below 
the seafloor\8\. Because the West Atlas drill rig was deemed too 
hazardous for personnel, a second jackup drill rig, the West Triton, 
was transported from Singapore\9\. The West Triton rig did not arrive 
on-scene until September 10, nearly three weeks after the spill 
began\10\. It was stationed about 6,500 feet from the West Atlas drill 
rig\11\, and began to drill the relief well.
---------------------------------------------------------------------------
    \6\ http://www.watoday.com.au/photogallery/wa-news/the-west-atlas-
oil-spill/20090829-f34l.html
    * All figures have been retained in committee files.
    \7\ http://www.au.pttep.com/
    \8\ http://www.news.com.au/perthnow/story/0,21598,26172761-
5017962,00.html
    \9\ http://www.theaustralian.com.au/news/breaking-news/oil-gas-
leak-to-continue-for-seven-weeks/story-fn3dxity-1225765343929
    \10\ http://www.watoday.com.au/wa-news/mobile-rig-to-clean-up-oil-
arrives-today-20090910-fj8p.html
    \11\ http://www.bloomberg.com/apps/
news?pid=newsarchive&sid=aUYFMY8a.T6U
---------------------------------------------------------------------------
    Nearly one month later, on October 6 the relief well had finally 
reached the target depth and the first attempt was made to intercept 
the damaged well, a target about ten inches in diameter. This attempt 
missed the well\12\, requiring the crew on the West Triton to pull the 
drillstring back and drill forward again on a slightly different 
trajectory, a process that takes several days to accomplish. This 
process was repeated three more times without success. Finally, on 
November 1, the fifth attempt to intercept the damaged well 
succeeded\13\. The West Triton crew began pumping heavy drilling mud 
into the damaged well to squelch the flow of oil and gas. Concurrently, 
the damaged well ignited (Figure 2), engulfing the Montara platform and 
attached West Atlas drill rig in flames\14\. The fire continued for two 
days\15\ before finally burning out all the residual oil and gas in the 
well and other combustible materials on the structures (Figure 3).
---------------------------------------------------------------------------
    \12\ http://www.news.com.au/perthnow/story/0,21598,26172761-
5017962,00.html
    \13\ http://www.google.com/hostednews/afp/article/
ALeqM5gwLtvodwRVStfa7BCRLFsX6WbqPg
    \14\ http://www.google.com/hostednews/afp/article/
ALeqM5jBnSKYWjVXfddqxWb00p8eb6SqXQ
    \15\ http://www.google.com/hostednews/afp/article/
ALeqM5gwLtvodwRVStfa7BCRLFsX6WbqPg
---------------------------------------------------------------------------
    At this time, leakage from the damaged well has been stopped. 
Engineers are assessing the structural integrity of the Montara 
platform, heavily damaged by the fire. The $250M West Atlas drill rig 
is reported to be a total loss\16\. Difficult and complex work remains 
to re-enter the damaged well so a permanent cement plug can be 
installed\17\. The ultimate disposition of the other previously drilled 
production wells has not been announced.
---------------------------------------------------------------------------
    \16\ http://www.bloomberg.com/apps/
news?pid=newsarchive&sid=aFa6kCclA1Yg
    \17\ http://www.google.com/hostednews/afp/article/
ALeqM5gwLtvodwRVStfa7BCRLFsX6WbqPg
---------------------------------------------------------------------------
    Oil and gas flowed uncontrollably from the damaged Montara well for 
73 days. No estimate has been made of the amount of methane--a potent 
greenhouse gas--released during this event. Estimates of the amount of 
oil spilled vary widely. Based on visual approximation only, PTTEP 
estimated 400 barrels (16,800 gallons) per day\18\. The Australian 
government's Department of Resources, Energy and Tourism estimated the 
spill rate at ``up to 2,000'' barrels per day\19\. The Australian 
Greens party collected data on the measured flow rates from other oil 
wells in the vicinity and came up with an estimate of 3,000 barrels per 
day\20\. These spill rates translate into total spill volumes of 1.2 
million gallons, 6.1 million gallons, and 9.2 million gallons 
respectively. For comparison, the Exxon Valdez tanker spill in Alaska 
in 1989 released an estimated 10.8 million gallons\21\.
---------------------------------------------------------------------------
    \18\ http://www.watoday.com.au/wa-news/oil-spill-is-now-one-of-
australias-worst-20091022-hagd.html
    \19\ http://www.theaustralian.com.au/news/nation/timor-oil-leak-
larger-than-claimed/story-e6frg6pf-1225790241987
    \20\ http://www.news.com.au/perthnow/story/0,21498,25996354-
2761,00.html?from=public_rss
    \21\ http://www.sciencentral.com/video/2009/03/24/exxon-valdez-
anniversary/
---------------------------------------------------------------------------
    Even at the lowest estimate of 400 barrels per day, the Montara 
event ranks as the worst productionrelated spill in Australia's 40-year 
history of offshore energy development\22\. SkyTruth obtained daily 
NASA satellite imagery throughout the course of the spill to track and 
measure the locations of oil slicks and sheen in the Timor Sea\23\. 
MODIS\24\ satellites capture light reflected from the Earth's surface 
in visible and infrared wavelengths. MODIS imagery on August 30\25\ 
showed slicks and sheen spread across an area of 2,500 square miles\26\ 
(Figure 4). On September 3 patches of slicks and sheen ranged across 
5,800 square miles\27\ (Figure 5). On September 24, MODIS images showed 
slicks and sheen spanning nearly 10,000 square miles of the Timor 
Sea\28\, an area larger than the state of Maryland\29\.
---------------------------------------------------------------------------
    \22\ http://www.bloomberg.com/apps/
news?pid=20601130&sid=asC4plvYuEuE
    \23\ http://blog.skytruth.org/search?q=timor
    \24\ http://modis.gsfc.nasa.gov/
    \25\ http://earthobservatory.nasa.gov/NaturalHazards/
view.php?id=40029
    \26\ http://blog.skytruth.org/2009/09/timor-sea-drilling-spill-
covers-2500.html
    \27\ http://blog.skytruth.org/2009/09/timor-sea-drilling-spill-
covers-5800.html
    \28\ http://blog.skytruth.org/2009/09/timor-sea-drilling-spill-
september-24.html
    \29\ http://www.ipl.org/div/stateknow/popchart.html#statesbysize
---------------------------------------------------------------------------
    Before the spill was stopped on November 1, satellite images 
obtained and analyzed by SkyTruth showed that oil slicks and sheen had 
cumulatively ranged across more than 24,000 square miles of ocean\30\, 
an area the size of West Virginia. Slicks had moved far into Indonesian 
territorial waters\31\, coming within 40 miles of the Timor coast and 
within 20 miles of islands along Western Australia's biologically rich 
Kimberley coast. Slicks and sheen were observed at times as far as 225 
miles away from the leaking Montara well.
---------------------------------------------------------------------------
    \30\ http://www.flickr.com/photos/skytruth/sets/72157622226354812/
    \31\ http://www.flickr.com/photos/skytruth/3951854968/sizes/l/in/
set-72157622226354812/
---------------------------------------------------------------------------
    Preliminary investigations of the spill's environmental impacts by 
World Wildlife Fund\32\ and by Australian government-funded 
researchers\33\ have documented impacts on seabirds and marine mammals. 
Timorese and Australian fishermen have cited fish kills and significant 
declines in catch in the region affected by the spill and the 
application of dispersants\34\. News accounts report that fishermen are 
going bankrupt as a result of the steep decline in catch\35\. A multi-
year study of the spill's impacts and lingering toxicity is being 
launched\36\; recent studies of the Exxon Valdez spill aftermath 
suggest that measurable impacts on ecosystem health and fisheries can 
be anticipated for decades\37\.
---------------------------------------------------------------------------
    \32\ http://www.wwf.org.au/publications/montaraoilspillreport/
    \33\ http://www.environment.gov.au/coasts/publications/pubs/
montara-rapid-survey.pdf
    \34\ http://www.news.com.au/perthnow/story/0,21598,26286663-
5017007,00.html
    \35\ http://www.abc.net.au/news/stories/2009/11/07/2736012.htm
    \36\ http://thegovmonitor.com/energy_and_environment/australia-
looks-at-long-term-environmental-plan-formontara-oil-spill-13389.html
    \37\ http://www.time.com/time/health/article/0,8599,1902333,00.html
---------------------------------------------------------------------------
    The Australian government has launched an investigation into the 
causes of the Montara blowout, effectiveness of the response, and 
environmental impacts\38\. This investigation is expected to take at 
least six months to come to completion\39\. Ideally, it will include an 
analysis of regulatory gaps or weaknesses that may have contributed to 
or allowed the occurrence of this accident. As with most major spills, 
it is unlikely that the exact causal chain of events will be repeated 
anywhere, including in U.S. waters. Yet the Montara blowout and spill 
offers cautionary lessons about modern offshore drilling, regardless of 
its cause:
---------------------------------------------------------------------------
    \38\ http://www.watoday.com.au/environment/inquiry-announced-into-
timor-sea-oil-spill-20091105-hz7x.html
    \39\ http://www.cbsnews.com/stories/2009/11/05/ap/business/
main5530677.shtml

          1. The West Atlas drill rig is new, technologically advanced 
        equipment, built in 2007\40\. It is a jackup rig\41\, a style 
        commonly used for drilling in relatively shallow water (/www.seadrill.com/stream_file.asp?iEntityId=935
    \41\ http://oilgasglossary.com/jackup-drilling-rig.html
    \42\ http://www.rigzone.com/news/article.asp?a--id=64979
    \43\ http://www.upstreamonline.com/live/article172586.ece
---------------------------------------------------------------------------
          2. The West Atlas rig is owned and operated by Seadrill, a 
        major international offshore drilling contractor that operates 
        a global fleet of 41 drilling units, including nine that are 
        under construction\44\. They have an office in Houston, 
        identify the Gulf of Mexico as an important business 
        target\45\, and are currently under contract with Devon Energy 
        to drill deepwater wells in the U.S. Gulf of Mexico using their 
        new West Sirius semisubmersible rig\46\. All of the personnel 
        present when the Montara blowout occurred were working on the 
        West Atlas rig\47\.
---------------------------------------------------------------------------
    \44\ http://www.seadrill.com/modules/module_123/
proxy.asp?D=2&C=19&I=1772&mid=18
    \45\ http://www.drillingcontractor.org/dcpi/dc-julyaug08/
DC_July08_Seadrill.pdf
    \46\ http://www.rigzone.com/news/article.asp?a_id=69946
    \47\ http://drillingclub.proboards.com/
index.cgi?board=wellcontrol&action=display&thread=4315&page=1
---------------------------------------------------------------------------
          3. The U.S. Minerals Management Service has investigated 18 
        blowouts and 13 losses of well control in the U.S. Gulf of 
        Mexico since 1983, with three such incidents occurring since 
        2007\48\.
---------------------------------------------------------------------------
    \48\ http://www.gomr.mms.gov/homepg/offshore/safety/acc_repo/
accindex.html
---------------------------------------------------------------------------
          4. The Montara platform is located in relatively shallow 
        water (260 feet), and the Montara well suffered a failure 8,600 
        feet below the seafloor. Despite generally calm tropical seas 
        and favorable weather for offshore operations, more than ten 
        weeks elapsed before the Montara blowout could effectively be 
        killed by one of the world's leading well-control contractors 
        (Alert Well Control)\49\. In contrast, drilling in the U.S. 
        Gulf of Mexico has moved into ultradeep waters, approaching 
        10,000 feet for some recently targeted plays on the continental 
        slope\50\, and wells in the Gulf are now being drilled to 
        depths exceeding 30,000 feet below the seafloor\51\. The Gulf 
        of Mexico and Atlantic coasts are regularly hit by tropical 
        storms\52\. Portions of the Arctic, where offshore energy 
        development is being considered, feature adverse winter 
        conditions characterized by sea ice, subzero temperatures, 
        tropical storm-force winds, and low visibility. Effective 
        response to a comparable accident in the deepwater Gulf, or 
        mid-winter Arctic, could be significantly more difficult, 
        prolonged, and costly.
---------------------------------------------------------------------------
    \49\ http://www.upstreamonline.com/live/article197622.ece
    \50\ http://www.gomr.mms.gov/PDFs/2009/2009-016.pdf
    \51\ http://blog.nola.com/tpmoney/2008/05/
mcmoran_says_highprofile_black.html
    \52\ http://commons.wikimedia.org/wiki/
File:Atlantic_hurricane_tracks_1980-2005.jpg
---------------------------------------------------------------------------
           ii. storm damage: hurricanes katrina, rita and ike
    In late August of 2005, Hurricane Katrina moved through oil fields 
in the central Gulf of Mexico as a Category 5 storm\53\. Just three 
weeks later another Category 5 storm, Hurricane Rita\54\, drove through 
the offshore infrastructure in the western Gulf. SkyTruth acquired 
radar satellite images taken a few days after Katrina made 
landfall\55\. Our analysis of these images revealed extensive oil 
slicks covering more than 700 square miles in the Gulf of Mexico 
(Figure 6). Close examination revealed multiple sources for the slicks, 
including known platform locations\56\ (Figure 7). Months later, the 
Minerals Management Service reported that Katrina and Rita had 
destroyed more than 100 platforms (Figure 8) and severely damaged more 
than 50 others; damaged more than 450 pipelines; and caused at least 
124 separate spills in the Gulf totaling 750,000 gallons of oil and 
other liquid hydrocarbons (primarily based on self-reporting by 
industry)\57\. Five drilling rigs were destroyed, and 19 others were 
severely damaged\58\. Nineteen mobile drilling units were broken loose 
from their moorings and set adrift by the storms, dragging their heavy 
anchor chains on the seafloor and causing much of the pipeline 
damage\59\. We conclude that many of the oil slicks SkyTruth identified 
on satellite images of the Gulf resulted from pipelines damaged in this 
manner.
---------------------------------------------------------------------------
    \53\ http://www.katrina.noaa.gov/
    \54\ http://earthobservatory.nasa.gov/NaturalHazards/
view.php?id=15546
    \55\ http://blog.skytruth.org/2007/12/hurricane-katrina-gulf-of-
mexico-oil.html
    \56\ http://skytruth.mediatools.org/node/12846
    \57\ http://www.mms.gov/ooc/press/2006/press0501.htm
    \58\ http://meetingorganizer.copernicus.org/EGU2009/EGU2009-
13707.pdf
    \59\ http://www.mms.gov/tarprojects/581/
44814183_MMS_Katrina_Rita_PL_Final%20Report%20Rev1.pdf
---------------------------------------------------------------------------
    Aside from the direct damage to, and spills from, offshore 
facilities, these storms exposed a significant and previously 
unrecognized risk posed by offshore production: catastrophic spills 
resulted from the onshore oil and gas infrastructure that supports 
offshore production in the Gulf--the refineries, pipelines, and tanks 
required to receive, process, store and distribute oil and gas from 
offshore fields. In a May, 2006 report to the U.S. Department of 
Homeland Security, the U.S. Coast Guard reported that Katrina and Rita 
released over 9 million gallons of oil, not including more than 5,000 
minor spills\60\. Storm-damaged onshore infrastructure spilled 7 to 8 
million gallons of oil into coastal wetlands, streams, and communities. 
A single spill from a ruptured storage tank at the Murphy Oil Refinery 
inundated more than 1,700 homes in the towns of Chalmette and Meraux, 
Louisiana, with more than one million gallons of crude oil\61\ (Figures 
9 and 10).
---------------------------------------------------------------------------
    \60\ http://www.uscg.mil/ccs/npfc/docs/PDFs/Reports/
osltf_report_hurricanes.pdf
    \61\ http://www.epa.gov/katrina/testresults/murphy/
---------------------------------------------------------------------------
    On September 13, 2008, this coastal vulnerability was exposed again 
when Hurricane Ike made landfall near Galveston, Texas, with Category 2 
winds but a storm surge more typical of a Category 5 event. Coastal oil 
facilities were flooded. SkyTruth obtained NOAA aerial survey 
photographs\62\ that showed extensive oil slicks emanating from coastal 
wells\63\ and damaged storage facilities\64\ (Figure 11). Onshore 
facilities related to offshore production continue to pose risks that 
should be acknowledged and effectively managed.
---------------------------------------------------------------------------
    \62\ http://ngs.woc.noaa.gov/ike/IKE0000.HTM
    \63\ http://www.flickr.com/photos/47684393@N00/2861763336/sizes/l/
    \64\ http://www.flickr.com/photos/skytruth/2924786274/sizes/l/
---------------------------------------------------------------------------
               iii. pipeline spills: aging infrastructure
    Oil and gas infrastructure can become damaged and cause oil spills 
even in the absence of major storms. On July 25, 2009, Shell Oil Co. 
reported to the U.S. Coast Guard's National Response Center that they 
had detected a loss of pressure in the Eugene Island Pipeline off 
Louisiana. Divers found a crack in the 20'' diameter pipe at a point 
about 30 miles offshore, in water about 60 feet deep\65\. 63,000 
gallons of oil leaked into the Gulf\66\, a ``medium'' spill by Coast 
Guard definition. Radar satellite imagery from NOAA showed the 
resulting oil slick\67\, which eventually stretched over 15 miles and 
reached a size of 80 square miles\68\ before it was effectively 
dispersed (Figure 12). Had this break occurred from a point closer to 
shore, beaches and coastal resources could have been directly impacted 
(Figure 13), as they were with the 1997 Torch spill from a pipeline 
just off the California coast\69\.
---------------------------------------------------------------------------
    \65\ http://www.incidentnews.gov/attachments/8061/524175/
EugeneIslandNewsRelease090729.pdf
    \66\ http://www.incidentnews.gov/incident/8061
    \67\ http://www.incidentnews.gov/attachments/8061/524191/NESDIS--
Analysis.jpg
    \68\ http://www.incidentnews.gov/entry/524230
    \69\ http://www.dfg.ca.gov/ospr/spill/nrda/nrda_irene.html
---------------------------------------------------------------------------
    The Eugene Island Pipeline was installed in 1976\70\. In 2009\71\ 
it began carrying oil produced from Chevron's new deepwater ``Tahiti'' 
platform\72\, situated approximately 190 miles south of New 
Orleans\73\.
---------------------------------------------------------------------------
    \70\ http://www.reuters.com/article/environmentNews/
idUSTRE56R46E20090729
    \71\ http://www.chevron.com/news/Press/release/?id=2009-05-06
    \72\ http://www.gasandoil.com/goc/company/cnn71530.htm
    \73\ http://www.offshore-technology.com/projects/tahiti/
---------------------------------------------------------------------------
    In a common industry practice, Tahiti was ``tied back'' to the 
existing infrastructure: new pipeline was only extended 55 miles from 
Tahiti to Shell's Boxer platform, where it was connected to the 
existing pipeline network\74\. From Boxer, Tahiti oil flowed to shore 
through older pipelines including the Eugene Island Pipeline.
---------------------------------------------------------------------------
    \74\ http://www.subseaiq.com/data/
Project.aspx?project_id=127&AspxAutoDetectCookieSupport=1
---------------------------------------------------------------------------
    The cause of the Eugene Island Pipeline failure has not yet been 
publicly reported, but as the existing nearshore pipeline network ages, 
structural failures become increasingly likely due to accumulated 
strain and corrosion. Offshore production of oil in the U.S. Gulf of 
Mexico began in the late 1940s\75\. In 2006, federal waters in the Gulf 
of Mexico produced 5.5 trillion cubic feet of natural gas and 400 
million barrels of crude oil\76\. Today, the seafloor in the western 
and central Gulf is crisscrossed by a complex network of over 25,000 
miles of active pipeline, connecting 3,600 platforms and thousands of 
oil and gas wells to coastal processing, storage and distribution 
facilities\77\ (Figure 14). A recent SkyTruth analysis of pipeline data 
from the Minerals Management Service showed that 60 miles of still-
active pipeline exceed 30 years in age. But most of the active pipeline 
segments in the MMS online dataset--totaling over 18,000 miles, or 72% 
of the active pipeline network--lack information pertaining to their 
installation date\78\, so the real extent of the age problem is 
elusive.
---------------------------------------------------------------------------
    \75\ http://www.gomr.mms.gov/homepg/regulate/environ/
history_louisiana.html 76
    \76\ http://tonto.eia.doe.gov/dnav/pet/pet_crd_gom_s1_a.htm
    \77\ http://www.gomr.mms.gov/homepg/pubinfo/repcat/arcinfo/
index.html
    \78\ http://www.gomr.mms.gov/homepg/pubinfo/repcat/arcinfo/zipped/
8321.zip
---------------------------------------------------------------------------
    Rigorous inspection and maintenance, routine monitoring, and 
aggressive programs to decommission aging pipeline can help manage the 
risk. But effective design and implementation of such programs may be 
complicated by the existing regulatory regime for offshore pipelines, 
with jurisdiction split between two separate agencies, the Department 
of Transportation and the Department of the Interior. This is a classic 
example of gaps and overlaps in ocean governance of the kind discussed 
in a widely quoted 2006 paper\79\ in the journal Science.
---------------------------------------------------------------------------
    \79\ Crowder, L.B., G. Osherenko, O.R. Young, S. Airame, E.A. 
Norse, N. Baron, J.C. Day, F. Douvere, C.N. Ehler, B.S. Halpern, S.J. 
Langdon, K.L. McLeod, J.C. Ogden, R.E. Peach, A.A. Rosenberg, and J.A. 
Wilson (2006). Resolving mismatches in U.S. ocean governance. Science, 
v. 313, pp. 617-618
---------------------------------------------------------------------------
                          iv. key observations
    Based on SkyTruth's experience over the past five years 
investigating significant oil spill incidents caused by drilling 
mishaps, severe storm damage, and leaking pipelines, we offer the 
following thoughts:

          1. Offshore oil and gas production is a complex, technically 
        challenging industrial activity. Relatively small spills occur 
        regularly and, although accidents that lead to major spills are 
        not common, they do still occur and pose a continuing threat to 
        other marine and coastal resources, and to the communities and 
        economic systems that depend on the integrity and 
        sustainability of those other resources.
          2. While continual improvements to comprehensive regulation 
        and enforcement, coupled with advances in technology and 
        technique, can significantly reduce the likelihood of accidents 
        that lead to major spills, offshore production still poses 
        risks.
          3. When things go wrong offshore, the results can be 
        disastrous, difficult to remediate, and extremely costly\80\ to 
        both industry and society\81\. The risk becomes much higher in 
        deeper water, in stormy locations, or where other difficult 
        conditions (such as ice cover) slow and complicate oil spill 
        response.
---------------------------------------------------------------------------
    \80\ http://www.watoday.com.au/environment/cause-of-wa-oil-spill-
revealed-20091109-i59k.html
    \81\ http://www.watoday.com.au/wa-news/oil-spill-cleanup-cost-tops-
5-million-20091020-h6qx.html
---------------------------------------------------------------------------
          4. Prepare for the worst. Determine the worst-case scenario 
        wherever drilling is allowed, and integrate that scenario into 
        the processes that will guide the decisionmaking and management 
        of our nation's marine and coastal resources.

    Other impacts, not addressed in this testimony, can also occur. 
This testimony does not provide a comprehensive analysis of the 
pollution that inevitably accompanies an intensive industrial resource 
extraction operation such as oil and gas production. Other important 
topics that should be thoroughly investigated and carefully considered 
when weighing the merits of offshore drilling include:

   The routine, expected pollution from drilling and production 
        activities (air, water).
   The occurrence of minor accidental spills and discharges. 
        See Table 1,* for example, showing the frequency of spills 
        >2100 gallons. Data addressing the frequency and cumulative 
        impact of smaller spills are difficult to come by\82\.
---------------------------------------------------------------------------
    * Table has been retained in committee files.
    \82\ Fraser, G.S., J. Ellis, and L. Hussain, 2007. An international 
comparison of governmental disclosure of hydrocarbon spills from 
offshore oil and gas installations. Marine Pollution Bulletin, v. 56, 
pp. 9-13.

    --Fugitive emissions of methane, a potent greenhouse gas, from oil 
            and gas development activities and facilities.
    --The short- and long-term environmental, economic, and 
            sociological impacts of spills and pollution.

    The Chairman. Thank you for being here.
    Mr. Rainey, go right ahead.

   STATEMENT OF DAVID RAINEY, VICE PRESIDENT, GULF OF MEXICO 
           EXPLORATION, BP AMERICA, INC., HOUSTON, TX

    Mr. Rainey. Thank you, Chairman Bingaman, Ranking Member 
Murkowski, and members of the committee. I am honored to appear 
before you today to share BP's perspective on environmental 
stewardship and offshore energy production.
    Throughout the 20th century, an abundant supply of low cost 
energy has been the driving force behind America's development, 
prosperity, and security. BP supports the view that energy 
security is inseparable from economic security and national 
security. BP is the largest producer of oil and natural gas in 
the U.S. and one of the largest investors in biofuels, wind, 
and solar. We recognize the need to transition to a lower-
carbon economy, but that's--that transition will take time. The 
U.S. will continue to rely on hydrocarbons for many years to 
come. Like any industrial activity, the production and 
transportation of oil and gas have environmental implications. 
The public is highly concerned about this, and we share their 
concerns.
    Releases from oil and gas operations are rare, and the 
application of technology has enabled a dramatic reduction of 
releases from our industry over the last 30 years. To be clear, 
any release from our operations is unacceptable, and we will 
continue to invest in research and technology to drive us to 
our ultimate goal of zero discharge.
    Contrary to popular perception, ours is a high-tech 
industry. To demonstrate this point, I would like to highlight 
three technologies which enable the safe and reliable 
production of offshore oil and gas. These are seismic imaging, 
drilling, and production systems.
    Seismic imaging allows us to predict the possibility of 
hydrocarbon reservoirs below the seabed. Drilling allows us to 
test for the presence of hydrocarbons in the reservoir, and, if 
hydrocarbons are present, the well bore connects the reservoir 
to the surface, where production systems enable us to produce 
the hydrocarbons and deliver them safely to market.
    Our industry has a remarkable track record of moving 
forward the limits of each of these technologies. I would like 
to highlight a few examples of how we have applied these 
technologies in the Gulf of Mexico, in Alaska, and in the 
United Kingdom.
    In the Gulf of Mexico, much of the seabed is underlain by 
shallow salt canopies. These salt canopies obscure the image 
below the seabed in the same way that a pane of frosted glass 
obscures the image on the other side of a window. Early 
exploration focused on areas that had no shallow salt canopy. 
As the fields in these areas were discovered, industry began to 
explore under the thin edges of the canopies and eventually 
under thicker and more complex bodies of salt. Each phase of 
exploration was enabled by advances in seismic imaging 
technology.
    Recently, BP has pioneered a technology known as Wide-
Azimuth Towed Streamer, or WATS. WATS is a 3-dimensional 
acquisition technology which has allowed us to get a better 
view of what lies on the other side of the frosted glass. As a 
result of the application of this technology, we recently 
announced a significant extension to our Mad Dog field, which 
is now firmly established as the third giant field in our Gulf 
of Mexico portfolio.
    Also in the Gulf, we have been progressing the limits of 
drilling and production systems. As drilling technology has 
moved forward enabling discoveries in deeper and deeper water, 
so production technology has followed. A variety of production 
systems has been developed to account for different metocean, 
seabed, and reservoir conditions.
    BP currently operates eight production hubs in the 
deepwater Gulf of Mexico using these technologies. One of 
these, our Marlin hub, has just celebrated its 10th anniversary 
of first production. As the original field has declined, five 
satellite fields up to 18 miles distant have been tied back to 
the Marlin host. This has been enabled by combination of 
directional and extended-reach drilling and subsea production 
technologies. The useful life of the facility has been extended 
and the environmental footprint has been reduced by requiring 
only one surface facility, where six would otherwise have been 
needed. In addition, Marlin has, this year, achieved a second 
peak of production, a very rare occurrence in our industry.
    In Alaska, BP is the only company producing oil and gas 
from the Beaufort Sea. Production began from our Endicott field 
in 1986. Drilling and production take place from an artificial 
gravel island located about 1 mile from the shore. The island 
is connected to shore via a gravel causeway along which oil and 
gas flows through aboveground pipelines. In 2000, production 
began at our Northstar project. The Northstar Island, from 
which drilling and production takes place, is further offshore 
than Endicott. At Northstar, however, there is no causeway and 
production is through a pipeline which is buried below the sea 
bed.
    Our third offshore development in Alaska is the Liberty 
Project, which is currently under development. The reservoir at 
Liberty is located in Beaufort Sea Federal waters, some 6 to 8 
miles from the shoreline. Despite being much further offshore 
than either Endicott or Northstar, at Liberty there will be no 
new island and no new pipeline. Advances in extended-reach 
drilling will allow us to reach the Liberty reservoir from the 
existing facilities at Endicott.
    Finally, I would like to talk about our Wytch Farm 
development in the U.K. Wytch Farm is the largest onshore oil 
and gas development in Western Europe. It is located on the 
south coast of England in one of the most environmentally 
sensitive areas in the U.K. The application of extended-reach 
drilling has allowed the offshore parts of the reservoir to be 
drilled and produced from onshore facilities behind the 
shoreline. By working closely with government, as well as 
surrounding communities and other stake holders, we have been 
able to design and locate the facilities to have minimal 
environmental and visual impacts. This project has been a 
resounding success, it is championed by local communities, by 
government leaders, and industry. In the 1995, it won the 
Queen's Award for Environmental Achievement.
    In summary, I would like to return to the Gulf of Mexico, 
where technology has been a key driver of our success. In 
September, we announced a Tiber discovery, where we set a new 
drilling depth record for the industry at 35,055 feet. There 
are many challenges to overcome to bring Tiber to production, 
but they are exciting challenges and we look forward to 
addressing them. As we do so, we will be ever mindful and 
respectful of the communities and the environments in which we 
operate.
    We look forward to continuing to work with you to secure 
the energy supplies that our Nation will need. Thank you, and I 
will be happy to take your questions.
    [The prepared statement of Mr. Rainey follows:]
  Prepared Statement of David Rainey, Vice President, Gulf of Mexico 
               Exploration, BP America, Inc., Houston, TX
    Chairman Bingaman, Ranking Member Murkowski, and Members of the 
Committee:
    My name is David Rainey, and I am BP's Vice President of 
Exploration for the Gulf of Mexico. I am pleased to appear before you 
today to share BP's perspectives on environmental stewardship and 
offshore energy production.
                        bp in the united states
    BP is the largest oil and gas producer in the US, where we directly 
employ 29,000 people. We have long been a proponent of comprehensive 
energy policies that promote energy security through the development of 
both traditional and non-traditional sources of energy, as well as 
conservation and efficiency. We have also been an advocate of taking a 
precautionary approach to CO2 emissions, and are committed 
to reducing the environmental impacts of both energy production and 
consumption.
                             energy trends
    Throughout the 20th century, an abundant supply of low-cost energy 
was the driving force behind America's development, prosperity, and 
security. Globally, the world uses roughly 80 million barrels of oil a 
day. The US consumes a quarter of this--about 20 million barrels, of 
which we import 60 percent--or 12 million barrels. The Energy 
Information Administration (EIA) projects that US energy demand will 
grow by 11 percent from 2007 to 2030. Satisfying that demand in a 
sustainable way is one of our nation's most significant challenges. If 
anticipated US needs are combined with those of the rest of the world, 
EIA projects that a 35 percent expansion in global oil production will 
be needed. That equates to an additional 30 million barrels of oil 
every day.
    Finding that oil and natural gas will be neither simple nor cheap. 
The era of ``easy oil'' may be over. New supplies are harder to find, 
more difficult and more expensive to extract, and are often located in 
politically unstable parts of the world. Wherever they come from, 
bringing new supplies to fuel our homes, businesses and transportation 
needs will require the investment of hundreds of billions of dollars.
    BP supports the need to transition to a lower-carbon economy--but 
this transition will take time--probably many decades. We believe that 
the nation's and the world's short- to medium-term energy mix will 
continue to be dominated by hydrocarbons, and finding and developing 
oil and gas remains a huge challenge.
                         bp's energy portfolio
    BP is not only the largest oil and gas producer in the United 
States, but also the largest investor in energy of all sorts. In the 
last five years, we have invested approximately $35 billion in the US 
to ensure Americans have the energy and fuels they need to live their 
lives. These include:

          Oil and natural gas: Offshore and onshore, from the Alaskan 
        North Slope to the deep waters of the US Gulf of Mexico, we are 
        a leader in providing America's traditional energy needs.
          Wind: We are major investors in wind generation and have 
        1,000 megawatts (MW) of wind generation on-line. We expect to 
        have an installed capacity of 2,000 MW by the end of 2010. And 
        we also have a land position capable of potentially supporting 
        20,000 MW in the future--one of the largest portfolios in the 
        country.
          Biofuels: We are one of the largest blenders and marketers of 
        biofuels in the nation. BP has committed more than $1.5 billion 
        to biofuels research, development, and production in response 
        to increasing energy demand and the need to reduce overall 
        greenhouse gas emissions. Our cutting-edge research looks to 
        use dedicated non-food crops that will contain more energy and 
        have less impact on the environment and human food supplies 
        than past generations of biofuels. They will also be more 
        compatible with existing engines and transport infrastructure, 
        making them less costly to deploy at scale.
          Carbon Capture and Storage (CCS): BP is involved in three 
        major CCS projects: active operations in Algeria, a planned 
        project in Abu Dhabi, and a potential hydrogen energy project 
        in California.
          Solar: BP's solar business has been operating for over 30 
        years and last year had sales of 162 MW globally. This 
        represents an increase of 29% over 2007 and further growth is 
        expected.

    By investing heavily in a diverse portfolio of energy sources and 
the technologies to support them, BP is helping meet America's energy 
needs while ensuring a more sustainable economy and energy future.
               track record of environmental stewardship
    Like any industrial activity, production and transportation of oil 
and natural gas carries environmental implications. The public is 
rightly concerned about potential impacts and we share these concerns.
    Releases from oil and gas operations are rare, and the application 
of technology has enabled a dramatic reduction in releases from our 
industry over the last 30 years. The National Academy of Sciences 
published its ``Oil in the Sea III'' report in 2002. This report states 
that oil released to the sea from the global oil and natural gas 
declined by 80 percent from 1975 to 2002.
    To be clear, any release of hydrocarbons from our operations into 
the environment is unacceptable, and we continue to invest in research 
and technology to drive us to our ultimate goal of zero discharge.
    Examples of the technologies which have helped to reduce accidental 
releases include:

   Down hole flow control valves that shut down the well 
        automatically if damage to the surface equipment is detected;
   Blowout preventer technology which includes redundant 
        systems and controls;
   New and improved well control techniques which maintain 
        constant control of the fluids in the wellbore;
   Sensors which continually monitor the subsurface and seabed 
        conditions for sudden changes in well pressures; and
   BP's fiber optic network in the US Gulf of Mexico which 
        allows us to monitor well pressures in real time, both at the 
        facility and in our offices in Houston.

    While our intent is to prevent all accidental discharges, we 
conduct regular emergency drills with local, state, and federal 
agencies. All of our production facilities have contingency plans that 
identify the procedures, response equipment, and key personnel needed 
for responding to incidents.
        offshore technologies enabling environmental stewardship
    Three key technologies which enable the safe and reliable 
production of offshore oil and gas resources:

   Seismic imaging;
   Offshore drilling; and
   Offshore production systems.

    Seismic imaging allows us to predict the presence of hydrocarbon 
reservoirs below the sea bed. Drilling allows us to test for the 
presence of hydrocarbons in the reservoirs. When hydrocarbons are 
present, the well bore connects the reservoir to the surface, where 
production systems enable us to produce the hydrocarbons, and deliver 
them safely to the refinery.
    Our industry has a remarkable track record of moving forward the 
limits of each of these technologies. In BP, we have been at the 
forefront of both the development of the technologies, and their 
application. I would like to talk about three specific areas where we 
have employed these technologies: the US Gulf of Mexico, the Beaufort 
Sea offshore Alaska, and our Wytch Farm development in the UK.
                      us deepwater gulf of mexico
    Industry began to explore in the US Gulf of Mexico during the early 
1930's. The first discovery out of site of land was made by Kerr McGee 
in 1947. The MMS classifies water depths greater than 1,000 feet as 
deepwater, and depths beyond 5,000 feet as ultra-deepwater. The first 
deepwater exploration well was drilled in 1975. The first ultra-
deepwater exploration well was drilled in 1987. So, while it took more 
than 40 years for industry to develop the technology to move from the 
shoreline to 1,000 feet water depth, it took just 12 years to move from 
1,000 feet to 5,000 feet. Wells in water depths up to 10,000 feet are 
now routine.
    In the US Gulf of Mexico, shallow salt canopies underlie about 65 
percent of the seabed in the deepwater areas. These salt canopies make 
seismic imaging of the subsurface very challenging. [See Figures 1A and 
1B]* They present the same barrier to our seismic imaging capability 
that a pane of frosted glass presents to our eyes and our ability to 
see through it. The salt canopies bend the seismic waves and obscure 
the image of the underlying geology.
---------------------------------------------------------------------------
    * Figures have been retained in committee files.
---------------------------------------------------------------------------
    Early exploration in the US Deepwater Gulf of Mexico was focused on 
the 35 percent of the area which has no salt canopy. Without the salt, 
conventional seismic imaging worked and fields were discovered as the 
advances in drilling technology enabled industry to move rapidly into 
the deepwater. Much of the success in this period was enabled by 
widely-spaced two dimensional seismic data. The technology challenge 
was about developing the systems to safely produce the oil and gas in 
these water depths. Our colleagues in Shell were at the forefront of 
this phase of Gulf of Mexico development.
    By the mid-1990's, the large fields had been found in the areas of 
the deepwater free of shallow salt canopies. This led industry to turn 
its attention to the challenge of exploring below the salt. To do this, 
we matured a technology known as seismic depth imaging. This technology 
combines geological modeling and computer algorithms to restore the 
seismic wave paths to their correct positions-allowing the image to 
emerge.
    By the late 1990's, depth imaging allowed the industry to begin to 
explore beneath the salt. These early forays were restricted to areas 
where the top and base of the salt were geometrically simple and the 
imaging problem was, from where we stand today, relatively easy to 
solve. BP's Mad Dog, Atlantis, and Thunder Horse discoveries were 
delivered on the back of this technology in 1998 and 1999. Since then, 
we have continued to refine the technology and have been able to 
announce a steady stream of discoveries--most recently Kaskida in 2006, 
Isabela in 2007, Kodiak and Freedom in 2008, and this year Mad Dog 
South and Tiber.
    In 2003, BP began to address the problem of how we would explore 
under more complex salt geometries. We predicted that continuing 
incremental improvements to what was then considered conventional; 
depth imaging methods would soon reach a point of diminishing returns. 
So we set out to create a step change by developing a completely new 
seismic imaging technology.
    Conventional depth imaging is a data processing technology which 
involves some of the most sophisticated computer algorithms ever 
created. These algorithms require powerful super-computers to run them. 
However, the underlying data were acquired using a technology which had 
not changed significantly for 25 years. The data were acquired using a 
single seismic vessel towing both the seismic source and the receivers. 
Effectively, therefore, the data were acquired in two dimensions, but 
at sufficiently close spacing to allow processing in three dimensions.
    BP's Wide Azimuth Towed Streamer (WATS) and Ocean Bottom Node 
technologies involve truly three-dimensional seismic acquisition. They 
were conceptualized, modeled, and piloted at scale in the US Deepwater 
Gulf of Mexico. The WATS pilot was on our Mad Dog Field, and the Nodes 
pilot was on Atlantis. At Mad Dog, the WATS data have contributed 
significantly to our ability to continue to develop the field. The 
successful Mad Dog South appraisal well which we announced in July of 
this year was enabled by these data. At Atlantis, development of the 
North Flank of the field has been enabled through the application of 
nodes technology and production has begun.
    We have worked hard to drive our WATS technology into the market, 
and to refine it to make it cost effective in the exploration arena. 
Today, much of the US Deepwater Gulf of Mexico is covered by what we 
call XWATS--for Exploration WATS--seismic surveys. [See Figure 2] The 
data from these surveys will allow us to continue to move forward the 
limits of where we explore. As a result, we will be more efficient, 
drill fewer wells, and have less impact on the environment as we become 
better at predicting the presence of oil and gas in the subsurface.
    I have mentioned above how drilling technology advanced to allow us 
to drill in deep and ultra-deep waters. As discoveries were made, 
production technology followed. A variety of production systems have 
been developed to account for the different metocean, seabed, and 
reservoir conditions. [See Figure 3]
    BP has been at the forefront of this recent phase of deepwater 
development. Today, we operate eight major producing facilities in the 
US Deepwater Gulf of Mexico. [See Figure 4] They range from the Pompano 
fixed platform, installed in 1994 in 1,300 feet of water, to the 
Atlantis semi-submersible platform, which started production in 2007 
and sits in 7,100 feet of water. In between lie:

   The Marlin tension leg platform in 3,234 feet of water;
   The Holstein, Mad Dog, and Horn Mountain spar facilities in 
        4,344, 4500 and 5,422 feet of water, respectively; and
   The Thunder Horse and Nakika semi-submersible platforms in 
        6,050 feet and 6,340 feet of water, respectively;

    Today Atlantis is the world's deepest oil production facility, an 
honor previously held by both Horn Mountain and Nakika, when they began 
production.
    In addition to enabling the industry to move into ever deeper 
waters, the drilling envelope has been extended by advances in 
directional and extended reach drilling. The Nakika development is an 
example of where these technologies have been combined with subsea 
production technology to bring six otherwise uneconomic discoveries to 
production. These independent, medium-sized fields are tied back to the 
centrally-located semi-submersible production host facility. Distance 
from the central host varies from five to 26 miles. By combining 
directional and extended reach drilling with subsea production systems, 
the environmental footprint has been reduced by requiring only one 
surface facility, where previously six would have been needed. [See 
Figure 5]
    This month marks the tenth anniversary of our Marlin oil and gas 
hub. As the Marlin Field has declined, a series of satellite fields 
have been tied back using subsea production technology. In total, five 
satellite fields have been tied back, with distance from the host 
ranging from two miles to 18 miles. This year, the Dorado and King 
South satellite fields have been brought on line. These tiebacks have 
returned the facility to a second peak of production--a very rare 
occurrence in our industry. Again, the combination of directional and 
extended reach drilling and subsea production technology has enabled 
multiple fields to be developed from a single host platform. The 
environmental footprint has been reduced and the useful life of the 
facility has been extended.
    In addition to directional and extended reach drilling, today's 
drilling technology allows us to drill to total depths which were 
unimaginable just 15 years ago. In the mid-1990s, drilling was 
restricted to roughly 20,000 feet total depth. Today we routinely drill 
to 30,000 feet and below. [See Figure 6] This means that we encounter 
ever greater temperatures and pressures. Our Thunder Horse development 
currently defines the limits for what we call high-pressure/high-
temperature production technology. That said, we are already moving 
beyond these limits. Our Kaskida discovery, with reservoir depths 
ranging from 30,000 feet to 32,500 feet, has reservoir pressures above 
20,000 pounds per square inch. We are currently designing the systems 
which will be required to bring Kaskida to production.
    Finally, we have recently announced our Tiber discovery--which was 
at the time of rig release the deepest well in the history of the oil 
and gas industry at 35,055 feet. Tiber is an exciting discovery, and we 
are working hard to understand the technologies which will be required 
to bring it to production.
                 liberty project, beaufort sea, alaska
    In Alaska, as elsewhere, much of the easy-to-reach oil and natural 
gas has been found and has been, or is being, produced. The new 
opportunities which have emerged are harder to reach and more 
technically challenging. They have become accessible, in large part, 
due to the technological advances we are discussing here today. 
Presently, BP is the only company producing oil and natural gas from 
the Outer Continental Shelf in the Beaufort Sea.
    In 1986, the Endicott field became the first offshore producing 
field in the Beaufort Sea. The Endicott facility lies about a mile 
offshore and produces from an artificial gravel island which is 
connected to the coast by a gravel causeway. Oil and gas produced at 
Endicott come to shore via above-ground pipe lines.
    The next step of Arctic offshore developments in the Beaufort Sea 
was Northstar--also operated by BP. The artificial Northstar Island 
sits in state of Alaska waters, significantly further offshore than the 
Endicott Island. It is accessible by water and air only. There is no 
causeway, and production is through a pipeline which is buried below 
the seabed. The Northstar Island was designed to withstand Beaufort Sea 
ice conditions, and the pipeline was constructed to protect against 
leakage and is buried deep enough to protect against ice scouring on 
the sea bed.
    The latest evolution of the application of offshore Arctic 
technology is BP's Liberty Project which is currently under 
development. The Liberty reservoir is located in Beaufort Sea Federal 
waters, roughly six to eight miles from the North Slope shoreline. The 
project will use existing, expanded facilities associated with Endicott 
and require no additional, roads, causeways or subsea pipelines. The 
key technology which will enable success is directional and ultra-
extended reach drilling.
    During the last three decades, the limits of extended reach 
drilling have moved forward continuously. During the 1980's, three to 
four miles was the maximum horizontal distance which a well could be 
drilled from its surface location. During the 1990's, five to six miles 
became the norm. At Liberty, the wells will reach out six to eight 
miles from the Endicott Island to access the reservoir under the 
Beaufort Sea. [See Figure 7] One of the world's most powerful and most 
sophisticated onshore drilling rigs was constructed (in Washington 
state) to make this possible. For perspective, if the Washington 
Monument were the Liberty drill rig, it could extend out to the Capital 
Beltway and reach a target nearly two miles deep. These will be among 
the most challenging wells ever drilled in the industry.
    Drilling from the expanded Endicott surface facilities is expected 
to start in 2010, and first production is expected in 2011. Through the 
advance of drilling technology we will access a new, 100-million barrel 
field that will produce directly into existing facilities without the 
need for a drilling island, offshore production facility, or subsea 
pipeline.
    Another key to success in the Beaufort Sea has been our 
relationships with our neighbors on the North Slope. These 
relationships have spanned decades and are based on long-term trust and 
commitments to the community. We have staffed an office in Barrow, 
Alaska since 1979 and regularly interact with stakeholders, including 
the North Slope Borough, the Alaska Eskimo Whaling Commission, 
residents of Native Alaskan villages, and others. Things that concern 
our neighbors the most are those that pose a risk to their subsistence 
way of life. Understanding this has allowed a trusting relationship to 
prosper.
                          the wytch farm field
    Located on the south coast of England, Wytch Farm is Western 
Europe's largest onshore oil field. It is located in one of the most 
environmentally sensitive areas of the UK and it is operated by BP. 
[See Figure 8] In 1995, it won The Queen's Award for Environmental 
Achievement. The area has also been designated as an Area of 
Outstanding Natural Beauty, a Site of Special Scientific Interest 
(SSSI), and a World Heritage Coastline. Wytch Farm achieved first oil 
in 1979. Since then, the project has been developed in three phases and 
over 100 wells have been drilled to date. [See Figure 9]
    The Wytch Farm reservoir extends underneath Poole Harbor, which is 
an area similar to Cape Cod here in the US. The reservoir is accessed 
by extended reach drilling from behind the shoreline. Development here 
has been achieved through close co-operation and engagement with 
governments, as well as the surrounding communities. Considerable input 
on the design of facilities was sought from local community and 
environmental stakeholders, including the siting of the operating 
equipment, with various above-ground permanent facilities designed to 
blend into the existing landscape.
    As a result of the area's ecological importance, BP and other 
stakeholders applied strict environmental protection policies and 
established monitoring programs and surveys related to air quality, 
archaeology, seabed ecology, bird and reptile populations. All of these 
surveys were vital in determining how to develop the oilfield and in 
providing baseline data against which BP could monitor its performance.
    In recent years, BP applied extended reach drilling techniques, 
which brought environmental and commercial benefits to the development 
by enabling the furthest parts of the offshore reservoir to be drilled 
from an onshore site. Well M16 set a new world record when it broke the 
six mile barrier in June 1999, reaching a total length of seven miles 
and a depth in excess one mile. In addition, the drilling rig and 
equipment also had noise-abatement controls installed to meet the 
requirements set by local officials.
    Wytch Farm continues to be a resounding success, championed by the 
local community, government leaders, and industry. The application of 
technology has enabled the development of this oil field in the midst 
of one of the most environmentally sensitive coastal environments in 
Europe.
                                summary
    In my testimony today, I have described the evolution of three key 
technologies which have enabled BP and our industry to explore for and 
produce oil and natural gas in some of the most challenging 
environments in the world.
    Seismic imaging is the key technology which enables us to see below 
the seabed and better predict the presence of oil and gas reservoirs. 
Finding oil and gas for the future requires exploring in areas that are 
ever deeper and more complex. To do this, we must continue to apply and 
enhance our seismic imaging technologies.
    Advances in drilling technologies and production systems have been 
significant. They include extended reach drilling, drilling in deeper 
waters, and to greater depths. These advances enable more production 
while reducing environmental impacts and allowing for efficient use of 
existing facilities and infrastructure.
    Floating production systems allow oil and gas to be produced from 
locations that are far removed from onshore oil refineries or 
pipelines. Sub-sea tiebacks allow multiple wells and fields to connect 
to one surface platform from many miles away. This means that fewer 
platforms are required which increases efficiency, and reduces the 
environmental footprint, and the visual profile. Many of the technology 
examples discussed herein have enabled a robust track record of 
environmental stewardship and can reduce or even eliminate the visual 
``footprint'' of offshore energy operations.
    As we continue to move forward the limits of drilling and 
production technology, we are constantly mindful of our aspiration of 
``zero discharge''. The technology to contain oil and gas is constantly 
moving forward as well.
    Technology has been, and will continue to be, the key to our energy 
future. We must continue to invest in exploration and production 
capability and in technology to meet demand. We must also continue to 
develop technologies to increase recovery of oil and gas from 
established hydrocarbon positions here in the US and around the world. 
Finally, to encourage and ensure continued success, we must have stable 
fiscal, regulatory, and leasing policies so that the oil and gas 
industry can continue to maintain investments which create jobs, 
generate revenues and enhance US energy security.
    Thank you for the opportunity to share BP's perspectives on 
environmental stewardship and offshore energy production.

    The Chairman. Thank you very much.
    Mr. Short, go right ahead.

 STATEMENT OF JEFFREY SHORT, PACIFIC SCIENCE DIRECTOR, OCEANA, 
                           JUNEAU, AK

    Mr. Short. Thank you, Mr. Chairman, Senator Murkowski, 
other members of the committee. Good morning.
    I'm the Pacific science director for Oceana, an 
international marine conservation organization dedicated to 
using science, law, and policy to protecting the world's 
oceans. While I understand we're here today to talk about 
environmental stewardship as it relates to offshore oil and gas 
production, I must state for the record that Oceana opposes 
expanded oil development in the OCS because we and many other 
conservation organizations believe the environmental risks are 
poorly understood and are not justified by the economic 
benefits.
    Simply put, the current state of the science is just not 
capable of identifying all of the risks involved, let alone 
assess them with much confidence. We typically approach these 
projects by assuming that we know all we need to know about how 
exploration and production affect the environment, which we use 
to justify doing an inadequate job of characterizing the 
environment before development starts, and then, when impacts 
occur, find we can't really tell what caused them, because we 
didn't document what was there to begin with carefully enough.
    Environmental scientists have made stunning discoveries on 
how oil affects marine life over the last 20 years, making it 
clear that there is a lot more that we need to know. The 
prudent management response is not to pretend that these 
impacts don't exist, but to set the stage for their discovery, 
and to embrace truly precautionary science-based regulation of 
development.
    Along these lines, I commend to you the following 
principles:
    No. 1, decisions about development should be guided by a 
plan that prioritizes marine ecosystems and the services they 
provide and to ensure the integrity of the most important 
ecological areas is adequately protected.
    No. 2, we need to know what is in the ocean and how a 
marine ecosystem functions to have a reasonable chance of 
detecting impacts that really did occur. For example, claims 
that oil and gas development have had little effect on marine 
life in the Gulf of Mexico ring rather hollow, because, 
although we know these ecosystems have changed considerably, we 
do not know exactly how, because we did not establish, 
quantitatively, what was there beforehand.
    No. 3, the status of key ecosystem components should be 
monitored over the course of development and production so that 
natural trends and variability can be accounted for when 
assessing impacts.
    No. 4, the best available technology should be used and 
proposed incident response and recovery methods should be fully 
developed, proven effective, and readily available.
    No. 5, we should insist on adequate predevelopment social 
and economic research to evaluate subsistence and local use of 
the ocean in respective ecosystems.
    No. 6, we recommend increased dedicated funding to the 
National Oceanic and Atmospheric Administration to provide them 
with expanded agency capacity to evaluate the effects of--and 
impacts--of oil on marine ecosystems.
    This needn't be prohibitively expensive. Per barrel 
produced, Norway currently spends over three times as much just 
on response and mitigation technologies as we do on our entire 
oil research program, and just 1 percent of the value of new 
oil produced would represent a tremendous expansion of our 
program.
    Finally, we believe that oil and gas development should 
only occur as part of a plan to move toward an alternative 
renewable energy.
    In closing, I cannot overemphasize the fact that marine 
ecology is still a developing science and that the science of 
oil pollution effects, in particular, is still in its infancy. 
The record of new toxicity mechanisms that continue to be 
discovered virtually guarantees that impacts occur in the 
environment that we still don't even know how to detect. 
Responsible stewardship, therefore, compels us to embrace a 
much higher standard of precaution as we consider the risks 
associated with oil and gas development.
    Thank you for this opportunity to comment, and I look 
forward to answering the committee's questions.
    [The prepared statement of Mr. Short follows:]
Prepared Statement of Jeffrey Short, Pacific Science Director, Oceana, 
                               Juneau, AK
    Good morning. I am the Pacific Science Director for Oceana, an 
international marine conservation organization dedicated to using 
science, law, and policy to protect the world's oceans. Oceana's 
headquarters are in Washington, DC, and we have offices in five states 
as well as Belgium, Belize, Spain, and Chile. Oceana has 300,000 
members and supporters from all 50 states and from 150 countries around 
the globe.
    Prior to joining Oceana, I spent more than 30 years as an 
environmental chemist studying oil pollution fate and effects as an 
employee of the National Oceanic and Atmospheric Administration (NOAA). 
In that role, I led numerous studies on the Exxon Valdez oil spill 
beginning a week after the incident through my retirement from NOAA in 
November 2008. I have a Master of Science degree in chemistry, and I 
wrote the doctoral dissertation for my PhD in fisheries on data 
generated by the spill. With more than 50 professional papers on the 
Exxon Valdez oil spill and related topics, I have advised governments 
in Canada, China, Korea, Norway and Russia on oil pollution issues.
    Our oceans are places of wonder and beauty, and they provide 
important services that we want and need. Oceans are our largest public 
domain and house biological riches that surpass those of our national 
forests and wilderness areas. Oceans provide oxygen we breathe, food we 
eat, medicines we need, and aesthetic and spiritual nourishment. 
Healthy oceans and coastal ecosystems are also economic engines that 
provide valuable jobs, energy resources, and recreation and tourism 
opportunities. Simply put, oceans are essential to our lives and 
livelihoods.
    While I understand that the purpose of this hearing is to discuss 
environmental stewardship as it relates to offshore oil and gas 
production, I must state for the record that Oceana opposes expanded 
offshore oil and gas development. We and so many other environmental 
organizations take this position because we believe the environmental 
risks poorly are understood and are not justified by the potential 
economic benefits. The current lack of baseline information combined 
with the broad suite of toxicological risks, both known and emerging, 
requires responsible stewards to embrace a much higher standard of 
precaution in considering the risks associated with oil and gas 
development. We, therefore, believe that the potentially irreversible 
effects of oil pollution on marine ecosystems and their dependent 
economies do not warrant the questionable, and in any case short-term, 
economic benefits that might be gained from offshore oil and gas 
development.
    That said, Oceana and other conservation groups do support better 
stewardship for our oceans, and we appreciate the fact that the 
Committee has framed this hearing in those terms. As we consider any 
industrial activities in the ocean--oil and gas, shipping, fishing, 
alternative energy development--our first step should be to understand 
and protect the marine environment and those dependent on it. Once we 
understand the functioning of the ecosystem, we can better predict how 
activities might affect it and, therefore, undertake a true stewardship 
and planning effort.
    Too often, this is not the case. Large oil development proposals in 
the marine environment are presented and discussed as engineering 
challenges, without sufficient regard for the complexity of the 
environment in which they would occur, or the often dubious assumptions 
implicit in assessments of environmental risks and mitigation 
technologies. Oil spill contingency plans are presented as exercises in 
damage control, taking for granted that not all damage can be 
controlled, and based on the faulty assumption that the important 
variables and their interactions are adequately understood, 
predictable, and manageable. Similarly, the methods used to evaluate 
mitigation technologies in the field usually do not meet basic 
scientific principles, so that the results, and hence risk assessments 
based on them, are inherently questionable. In truth, our understanding 
of how oil behaves in the environment, the ways it affects organisms, 
and how well response and mitigation measures actually work in the 
field is still in its infancy. That fact alone argues for an especially 
precautionary approach to offshore oil and gas development.
    For example, following the 1989 Exxon Valdez oil spill, scientists 
and spill response managers assumed that oil would be most persistent 
in the uppermost parts of the intertidal zone because oil from the 
spill would be more likely to adhere to the sediments there.\1\ Four 
years after the incident, beach cleanup and monitoring were terminated, 
because hardly any oil was still evident in the upper portion of the 
intertidal zones, either on beach surfaces or beneath.\2\ Subsequently, 
however, residents of the area repeatedly reported finding oil lower 
down in the intertidal zone and just below the beach surface. Sometimes 
enough oil was found to support combustion. Finally in 2001, I led a 
rigorous, quantitative study that involved no assumptions about where 
on a beach oil might be found. That study showed that most of the 
remaining oil was in the more biologically productive mid-tide portion 
of the beach.\3\
---------------------------------------------------------------------------
    \1\ Owens, E. H., In Proceedings, 14th Arctic and Marine Oil Spill 
Program (AMOP) Technical Seminar, Environment Canada, Ottawa, ON, 1991, 
pp. 579-606.
    \2\ Neff, J. M.; Owens, E. H.; Stoker, S. W. In Exxon Valdez Oil 
Spill: Fate and Effects in Alaskan Waters; Wells, P.G., Butler, J. N., 
Hughes, J. S., Eds.; American Society for Testing and Materials Pub. 
1219: Philadelphia, Pennsylvania, 1995; pp 312-346.
    \3\ Short, J. W., Lindeberg, M. R., Harris, P. M., Maselko, J. M., 
Pella, J. J., and Rice, S. D. 2004. An estimate of oil persisting on 
beaches of Prince William Sound, 12 years after the Exxon Valdez oil 
spill. Environmental Science and Technology, 38:19-26.
---------------------------------------------------------------------------
    As it turned out, the policy decision to end cleanup and beach 
monitoring was largely based on unverified assumptions that went 
unquestioned for 9 years. Over the last 20 years, scientists have 
definitively proved false similarly naive assumptions regarding the 
ways in which oil components exert their toxic effects,\4\ the 
identities of many of the compounds that are known to be toxic,\5\ the 
processes that affect the persistence of oil in the environment once 
released,\6\ the efficacy of response and mitigation technologies,\7\ 
and the ecological impacts from disturbances associated with offshore 
oil and gas development.\8\ Each time one of these assumptions is 
proven incorrect, it reinforces the fact that there is a great deal 
that we do not know about these issues.
---------------------------------------------------------------------------
    \4\ Carls, M.C., Rice, S.D., and Hose, J.E. 1999. Sensitivity of 
fish embryos to weathered crude oil: Part I. Low-level exposure during 
incubation causes malformations, genetic damage and mortality in larval 
Pacific herring (Clupea pallasi). Environ. Toxicol Chem 18: 481-493.
      Heintz, R.A., J.W. Short, and Rice, S.D. 1999. Sensitivity of 
fish embryos to weathered crude oil: Part II. Incubating downstream 
from weathered Exxon Valdez crude oil caused increased mortality of 
pink salmon (Oncorhynchus gorbuscha) embryos. Environ. Toxicol Chem 18: 
494-503.
      Incardona, J.P., Collier, T.K., and Scholtz, N.L. 2004. Defects 
in cardiac function precede morphological abnormalities in fish embryos 
exposed to polycyclic aromatic hydrocarbons. Toxicol. Appl. Pharmacol. 
204:191-205.
      Barron, M.G., and Ka'aihue, L. 2001. Potential for photoenhanced 
toxicity of spilled oil in Prince William Sound and Gulf of Alaska 
waters. Mar. Pollut. Bull. 43:86-92.
      Cleveland, L., Little, E.E., Calfee, R.D., and Barron, M.G. 2000. 
Photoenhanced toxicity of weathered oil to Mysidopsis bahia. Aquat. 
Toxicol. 49:63-76.
    \5\ Barron, M.G., Carls, M.C., Heintz, R., and Rice, S.D. 2004. 
Evaluation of fish early life stage toxicity models of chronic 
embryonic exposures to polycyclic aromatic hydrocarbon mixtures. 
Toxicol. Sci. 78:60-67.
      Barron, M.G., Podrabsky, T., Ogle, S., and Ricker, R.W. 1999. Are 
aromatic hydrocarbons the primary determinant of petroleum toxicity to 
aquatic organisms? Aquat. Toxicol. 46:253-268.
      Rowland, S., Donkin, P., Smith, E., and Wriage, E. 2001. Aromatic 
hydrocarbon ``humps'' in the marine environment: unrecognized toxins? 
Environ. Sci. Technol. 35:2640-2644.
    \6\ Burns, K. A., Garrity, S. D., Jorissen, D., MacPherson, J., 
Stoelting, M.; Tierney, J., and Yelle-Simmons, L. 1994. The Galeta oil 
spill. II. Unexpected persistence of oil trapped in mangrove sediments. 
Estuarine Coast. Shelf Sci. 38:349-364.
      Reddy, C. M., Eglinton, T. I., Hounshell, A., White, H. K., Xu, 
L., Gaines, R. B., and Frysinger, G. S. 2002. The West Falmouth oil 
spill after thirty years: the persistence of petroleum hydrocarbons in 
marsh sediments. Environ. Sci. Technol. 36:4754-4760.
      Short, J.W., Irvine, G.V., Mann, D.H., Maselko, J.M., Pella, 
J.J., Lindeberg, M.R., Payne, J.R., Driskell, W.B., and Rice, S.D. 
2007. Slightly weathered Exxon Valdez oil persists in Gulf of Alaska 
beach sediments after 16 years. Environ. Sci. Technol. 41:1245-1250.
    \7\ Fingas, M. 2004. Dispersants, salinity and Prince William 
Sound. Prince William Sound Regional Citizens' Advisory Council Report 
No. 955.431.041201. Prince William Sound Regional Citizens' Advisory 
Council, Anchorage, Alaska.
    \8\ Petersen, C. H., Rice, S. D., Short, J. W., Esler, D., Bodkin, 
J. L., Ballachey, B. E., and Irons, D. B. 2003. Emergence of ecosystem 
based toxicology: Long term consequences of the Exxon Valdez oil spill. 
Science, 302:2082-2086.
---------------------------------------------------------------------------
    This information is important because the risk assessments we 
undertake for oil and gas activities are, by definition, based on what 
we do know and what we assume. Given the fact that we have been wrong 
so many times before, we can rest assured that such assessments 
understate the actual likelihood of serious environmental impacts.
    Given the fundamental nature of the scientific uncertainties that 
remain, we should expect more unwelcome surprises regarding the 
environmental impacts of offshore oil and gas development in the 
future. While we have a better idea of what questions to ask 
scientifically, we have also learned that there are likely to be 
impacts that we do not know how to detect, let alone mitigate, because 
we do not even know what they might be. The prudent management response 
is not to pretend that such impacts do not exist, but to conduct the 
necessary research, account for uncertainty, and embrace truly 
precautionary, science-based regulation. Along these lines, I recommend 
to you the following principles:

          First, decisions about development, such as oil and gas 
        activities should be made in the context of a plan that 
        prioritizes protecting marine ecosystems and the services they 
        provide. Decisions about industrial activities must be based on 
        sound science, planning, and precaution. Critical habitats and 
        processes, including important ecological areas should be 
        identified and appropriate protective measures adopted for them 
        as a predicate to development.
          Second, to make effective decisions about whether industrial 
        activities should occur and, if so, when, where, and how, we 
        need to know what is in the ocean as well as how the marine 
        ecosystem is structured and functions. In the aftermath of the 
        Exxon Valdez spill, consequences for populations of impacted 
        species were often obscured because we did not have a 
        sufficient picture of the pre-impact population sizes. 
        Similarly, the massive development in the Gulf of Mexico 
        occurred with scant attention to the status of the ecosystem 
        beforehand. As a result, claims that oil and gas development 
        has had little effect on marine life in the Gulf of Mexico ring 
        hollow. Although we know that these marine ecosystems have 
        changed considerably, we cannot demonstrate exactly how because 
        we did not establish quantitatively what was there before the 
        development occurred. Without such baseline knowledge about 
        what is in the ocean and how it interrelates, we cannot 
        legitimately evaluate risks prior to industrial activities, and 
        we risk being in the position of wondering what was lost 
        following development or an industrial accident because we did 
        not evaluate what was there to begin with. Yet, that is the 
        current situation in most of the areas where expanded oil and 
        gas drilling has been proposed--there simply is not sufficient 
        ecological baseline information to adequately evaluate or 
        mitigate risks. In the Arctic Ocean, for example, a massive 
        expansion of oil and gas leasing has been authorized despite a 
        paucity of scientific data about the marine ecosystem.
          To better understand the risks and to provide a baseline for 
        decision makers, quantitative assessments of the major 
        ecosystem components as well as ecological studies to provide a 
        basic understanding of the food-web interactions that support 
        them or are affected by them should be conducted prior to 
        authorizing oil and gas activities. These studies should 
        include baseline surveys of pollutants, pre-development 
        population assessments of species at greatest risk, such as 
        seabirds and marine mammals, and studies on their seasonal and 
        spatial variability.
          For large-scale projects, the adequacy of these pre-
        development surveys should be evaluated by an independent panel 
        of experts. Although the Minerals Management Service has 
        expended considerable sums on studies, they were not guided by 
        an integrated ecosystem research plan. As a result, population 
        and distribution data for several vulnerable species that play 
        important roles in the marine ecosystem are either outdated or 
        missing. In contrast, careful formulation of integrated 
        ecosystem research and monitoring plans, such as the Gulf 
        Ecosystem Monitoring plan in Alaska formulated in the aftermath 
        of the Exxon Valdez oil spill,\9\ may furnish more useful 
        information at a fraction of the cost.
---------------------------------------------------------------------------
    \9\ See: http://wwww.evostc.state.ak.us/gem/gemdocs.cfm
---------------------------------------------------------------------------
          Third, the status of key and vulnerable ecosystem components 
        should be monitored over the course of development and 
        subsequent production, so that natural trends and variability 
        can be given due consideration when evaluating oil and gas 
        impacts. Any important but poorly-understood ecological 
        processes identified during the pre-development surveys and 
        subsequent review should be studied in sufficient detail to 
        elucidate and remedy the defects in our understanding. These 
        on-going research and monitoring programs should be tailored to 
        the respective regions where new development is proposed and 
        overseen by an independent body comprising concerned local 
        interests, such as the Regional Citizens' Advisory Councils 
        envisioned in the Oil Pollution Act of 1990. The results of 
        these efforts should be made publicly available not only 
        through websites and publications, but also periodic science 
        symposia in respective ecosystem regions. Funding for these 
        endeavors should be provided largely by those seeking to 
        develop oil and gas leases. An oil spill risk assessment as 
        outlined in S. 1564 introduced by Senator Begich should be a 
        first step to determining if spill clean up is possible and 
        under what conditions.
          Fourth, best available technology must be used, and proposed 
        incident response and recovery methods be fully developed and 
        readily available. These mechanisms must be demonstrated to be 
        effective in the region where new oil and gas development is 
        proceeding, not in some warehouse thousands of miles away, and 
        under realistic environmental conditions in field tests. Oil 
        spill response and recovery plans often rely on dispersants, 
        for example. At this time, however, we have not developed a 
        reliable and scientifically rigorous method for measuring the 
        proportion of oil actually dispersed that did not, and would 
        not, have temporarily disappeared because of wave action only 
        to re-aggregate unmeasured elsewhere.\7\ Once a reliable method 
        for performance evaluation is in hand, it should be applied in 
        field tests to determine dispersant efficacy under a realistic 
        range of temperatures, sea surface salinities and agitation, 
        and oil types, viscosities and slick thicknesses. Similar 
        concerns apply for in situ burning. For mechanical recovery, we 
        need to know how well the proposed techniques can be expected 
        to work in various states of the seas and winds, and for what 
        fraction of the time they can even be deployed successfully. In 
        the Arctic, it has been widely recognized that mechanical 
        recovery is impossible in icy conditions, and it would be 
        useful to know whether such response measures could even be 
        deployed during the long Arctic night.
          A necessary component of these response and recovery methods 
        is adequate infrastructure. We must ensure that all vessels are 
        subject to tracking and that response and recovery equipment is 
        stationed in accessible locations.
          We also must insist that impacts from the exploration 
        process, production wastes, and other pollution are minimized. 
        Exploration for oil, which involves seismic testing, can be 
        harmful to many species of endangered and threatened species 
        including marine mammals, sea turtles and fish.\10\ While we 
        believe these impacts are unjustified in any areas that were 
        previously set aside or protected, as well as in highly 
        sensitive areas such as the Arctic, responsible environmental 
        stewardship requires that these impacts at least be minimized 
        by careful timing and choosing locations where these species 
        are not present. Production wastes, such as drilling muds and 
        produced waters also harm marine ecosystems.\11\ Methods should 
        be developed to treat these wastes prior to releasing them into 
        the environment, or they should not be released at all. 
        Similarly, emissions of air and water pollutants must be 
        minimized by requiring new and better technology, and the 
        introduction of invasive species must be strictly prohibited.
---------------------------------------------------------------------------
    \10\ Engos, A., S. Lokkeborg, E. Ona, and Soldal, A.V. 1996. 
Effects of seismic shooting on local abundance and catch rates of cod 
(Gadus morhua) and haddock (Melanogrammus aeglefinus). Canadian J. 
Fish. Aquatic Sci. 53: pp. 2238-49.
      Mate, B.R., K.M. Stafford, and Ljungblad, D.K. 1994. A change in 
sperm whale (Physeter macrocephalus) distribution correlated to seismic 
surveys in the Gulf of Mexico. J. Acoustical Soc. Am. 96:3268-69.
      Richardson, W.J. ed., ``Marine Mammal and Acoustical Monitoring 
of Western Geophysical's Open-Water Seismic Program in the Alaskan 
Beaufort Sea, 1998'' (1999) (LGL Rep. TA2230-3).
    \11\ Cranford, P.J., Gordon, D.C. Jr., Lee, K., Armsworthy, S.L., 
and Tremblay, G.--H. 1999. Chronic toxicity and physical disturbance 
effects of water-and oil-based drilling fluids and some major 
constituents on adult sea scallops (Placopecten magellanicus). Mar. 
Environ. Res. 48:225-256.
      Ray, J.P., and Engelhardt, F.R. (eds). 1992. Produced water: 
technological/environmental issues and solutions. Proceedings of the 
1992 International Produced Water Symposium, February 4-7, San Diego, 
California. Plenum Press, New York.
---------------------------------------------------------------------------
          Fifth, we should insist on adequate pre-development social 
        and economic research to evaluate subsistence and local use of 
        the ocean in respective ecosystems. As we have seen with beach 
        communities and fishery economies following oil spills and 
        other ocean pollution events, just the perception that seafood 
        could be tainted can lead to devastating market losses for 
        commercial fishers and tourism providers and even more profound 
        disruptions of communities that rely on subsistence for the 
        main supply of food, as is often the case with Alaska Natives. 
        Research before development is the only way to accurately 
        account for these risks in the decision making process.
          Sixth, increased dedicated funding should be provided to the 
        National Oceanic and Atmospheric Administration and through the 
        National Science Foundation to support research on the 
        toxicology of petroleum and petroleum products and their 
        interactions with other contaminants. NOAA in particular has 
        done pioneering work discovering heretofore unanticipated 
        biochemical mechanisms through which petroleum can poison 
        marine biota, such as the embryotoxic effects of certain 
        polycyclic aromatic hydrocarbons (PAH) on fish eggs and the 
        interaction of PAH with sunlight to dramatically increase 
        toxicity.\4\ Funding for this work should be broadened to 
        include research aimed at identifying toxic compounds in 
        petroleum that now remain obscure, as well as the biochemical 
        mechanisms causing their toxic effects. The research methods 
        developed at NOAA in these fields over the last decade hold 
        great promise for producing more discoveries of fundamental 
        value regarding responsible environmental stewardship.
          The funds needed to address all of the concerns listed above 
        amount to a small fraction of likely revenues generated by new 
        oil production. In fact, allocating just 1% of the revenues 
        resulting from expanded offshore oil and gas production would 
        amount to an enormous increase over current funding levels. 
        Currently, the national oil-spill research plan is more than 10 
        years old, and of the $28 million annually authorized to fund 
        it, only about a fourth is actually spent.\12\ In contrast, 
        Norway has spent the equivalent of $10 million on new oil-spill 
        technologies alone since 2006,\12\ and it produces less than a 
        third of the petroleum that the United States does.\13\ Truly 
        responsible environmental stewardship would include substantial 
        funding increases to better support research in all aspects of 
        the environmental impacts of offshore oil and gas development.
---------------------------------------------------------------------------
    \12\ Torrice, M. 2009. Science lags on saving the Arctic from oil 
spills. Science 325:1335.
    \13\ Central Intelligence Agency. 2008. The world factbook. Central 
Intelligence Agency, Washington, DC.
---------------------------------------------------------------------------
          Moreover, the provision of adequate funding would address a 
        chronic asymmetry in the scientific standards used to evaluate 
        the environmental impacts of offshore oil and gas development. 
        Paying inadequate attention to pre-development surveys, 
        ecosystem process and monitoring studies, and ecotoxicological 
        research, has crippled our ability to detect impacts. This 
        failure exacerbates the likelihood of ill-advised policy 
        recommendations. By contrast, there are rigorous standards 
        typically applied to demonstrations of impacts from 
        development. By acquiescing to defective standards prior to 
        impacts but insisting on rigorous standards to demonstrate them 
        afterward, we create a substantial bias that works to promote 
        environmental harm. This bias could be considerably reduced 
        simply by insisting on rigorous and adequately comprehensive 
        pre-development surveys, as well as monitoring over the 
        economic life of approved projects. There should be enough 
        science to have a reasonable chance of detecting population-
        level effects that might result from plausible impacts 
        associated with development within the associated region.
          Finally, new oil and gas activities should occur only as part 
        of a plan to move toward alternative, renewable energy. We can 
        all recognize that the country must undergo a shift to 
        renewable energy. New oil and gas activities must only be 
        undertaken as a bridge to that future. We must ensure that 
        decisions are made and revenues allocated in such a way to move 
        us closer to renewable energy and sustainable living.

    In closing, I cannot overemphasize the fact that marine ecology is 
still a developing science, with new, fundamental discoveries coming on 
a regular basis, and that the science of oil pollution effects is still 
in its infancy. We are never quite sure how oil will behave once 
released, where it will eventually find its way, how it may interact 
with other pollutants, or even all the ways it can harm marine life. 
When we make the effort to look closely, such as happened after the 
Exxon Valdez spill, fundamental surprises typically come to light. 
These discoveries overturn predictions of impacts often stated with 
unfounded confidence beforehand that in retrospect turn out to have 
been based on little more than conjecture. The record of new toxicity 
mechanisms that continue to be discovered, along with longstanding 
evidence of toxic effects that are clearly related to oil exposure but 
that cannot be explained on the basis of what we currently know about 
the toxicity of oil components, virtually guarantees that toxic impacts 
occur in the environment that we do not even know how to detect. 
Recognition of this requires us to embrace a much higher standard of 
precaution as we consider the risks associated with oil and gas 
development. It is largely on the basis of this recognition that we at 
Oceana, along with most of the marine conservation community, believe 
that the potentially irreversible effects of oil pollution on marine 
ecosystems and their dependent economies do not justify the potential 
short-term economic gains that might accrue from offshore oil and gas 
development.

    The Chairman. Thank you all very much for your testimony. 
Let me start with a few questions.
    Dr. Cruickshank, let me ask you, first of all--one of the 
suggestions we've heard and discussed is the idea of 
establishing ``no development buffer zones'' for a certain 
number of miles offshore or in particular sensitive areas. I 
notice, in your testimony, about the--which is it?--the Flower 
Garden Banks--you talk about how MMS established--as I 
understand your testimony--MMS established buffer zones to 
prevent possible impacts on the coral habitats in that area. 
That raises the obvious question, Is this something we should 
have MMS doing instead of having the Congress do it? I mean, 
we--once Congress legislates a buffer zone or a ``no 
development'' zone, whatever you want to call it, we're then 
sort of locked into that until we get the votes to change that 
or until it becomes a big enough priority to change. I'm just 
wondering if it--is this really something that needs to be left 
to the agency with responsibility so that new information can 
be taken into account? What's you're--does the administration 
have a position on that question?
    Mr. Cruickshank. We don't have a position on that 
particular question. We certainly have authority, under current 
law, to establish buffer zones, and we have done so, not only 
in the Flower Garden Banks, but in certain sail areas where 
we've created buffer zones from the coast. We try and do that 
based on what we know about the specifics in an area--the 
specific environmental resources, the other uses of the sea and 
seabed, the particular social values of an area--and, as 
appropriate, we create zones to protect those resources and 
values that are appropriate to protect in a given area. That's 
not to say that everybody would always agree with the decisions 
we make as to where we put buffer zones, and their size, but we 
certainly have the authority to do so.
    The Chairman. Do you also consider establishing buffer 
zones in order to protect the view? I mean, if there's a 
community located there and they're concerned about the 
possibility of rigs in the line-of-sight offshore, do you take 
that into account and perhaps establish buffer zones to deal 
with that, or is that not part of your authority, as you see 
it?
    Mr. Cruickshank. We can, and we have done so in one place. 
We negotiated a lease stipulation with the State of Alabama for 
areas offshore Baldwin County, Alabama. There were some visual 
concerns for the tourism industry in Baldwin County, Alabama, 
and we've negotiated a requirement, on all leases, that they 
take steps to minimize the visual impact in that area. That 
stipulation applies to any lease within 15 miles of the coast 
of that county.
    The Chairman. OK. Why--if you did it there, have you 
considered doing it more broadly as part of a leasing plan, to 
just provide assurance to folks on--who--living on the coast, 
that--so they're--they need not worry about any development 
occurring in a larger area?
    Mr. Cruickshank. It's certainly an option. To date, we have 
not applied that as a general rule across the OCS. We have--did 
so, in that case, because of particular concerns of the State 
and the ability to negotiate with them on an acceptable 
solution. Other buffer zones we have used have been to protect 
subsistence-hunting resources, marine mammal migration paths, 
and the like. So, it really depends on the particular 
circumstances.
    The Chairman. OK. Why don't I stop and defer to Senator 
Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman, and thank you 
all for your testimony this morning.
    Mr. Rainey, I appreciate you stating for the record that 
the oil and gas industry is high-tech. For people who don't 
know about Perdido and about what is occurring at Liberty, it 
is nothing short of phenomenal to think that we can be 
exploring and producing in the depths that you're talking 
about, 35,000 feet is the record, but what's going on at 
Perdido at 8,000 feet, 200 miles offshore, tapping into things 
in a 30-mile radius. I had an opportunity to see what Shell is 
doing with the 4-D seismic technology, and it's better than 
Disneyland, in terms of how you can take technologies and go 
after a resource that is thousands of years old, and do so in 
an environmentally sound way. So, I commend you for the efforts 
that have been made to really play out the technologies so that 
you're able to gain the resource while at the same time working 
to care for the environment.
    Mr. Odum, I thought that you were more than just a little 
bit of a gentleman in your criticism. I wouldn't even call it 
criticism, you just said that when, ``We here at the Federal 
level commit to OCS, the government needs to be prepared to do 
the necessary permitting.'' I think we recognize that up north 
that is not the case, and you have been very gentle in saying 
that the Federal system in Alaska needs attention. It needs 
more than attention, and I think we're failing on that 
commitment when we can't get these permits to you after years 
of waiting. You need to know that we're working to that issue.
    I wanted to ask you, Mr. Odum and, Mr. Rainey, you were 
also involved, and Dr. Cruickshank there was a test that went 
on up in the Barents Sea, off of the coast of Norway, to 
determine how capable we are in responding to a spill in Arctic 
icy conditions. For us in Alaska, as we look to expanded 
offshore, this is something that is of keen interest. This was 
just reported in yesterday's Anchorage Daily News, and the 
conclusion, as I understand it was pretty encouraging, the ice 
can actually act as more of a natural blockade that can trap 
the oil and give responders a greater time period to clean it 
up. Can you speak to this test that was conducted, and I 
understand that it was paid for by the industry, so of course 
that makes it suspect from the get-go. But, MMS was also 
involved, and I would like to explore what we've learned from 
this.
    Mr. Odum. Thank you, Senator. I think the--so, SINTEF is 
the group that organized this. It's a Norwegian research 
institute. As you say, there were a number of industry 
participants, plus also a number of other government-related 
participants, as well.
    The idea behind this study--this was a 3-year study to 
answer these questions about what happens--what's the behavior 
of oil in water that is either partially or all the way up to 
fully ice-covered? So, this was a--an opportunity to do this in 
a real-world situation in the Barents Sea.
    I think it actually--if I could just link it very quickly 
to a statement made earlier--we do a certain amount of 
research--you know, the MMS does, here in this country, but we 
benefit from research that's done all around the world. I think 
this is a great, great example of that.
    It tested the behavior of oil in the water, various 
recovery methods, which would include mechanical-type recovery 
methods, boom and scooping oil out of the water, as well as 
dispersants in ice, as well as in situ burning. What it found 
was that--I think, two major conclusions. One is that each of 
those methods is successful to a degree--and I think ``better 
than expectations'' would be the way to say it--but ten, in a 
mitigating sense, in a preparatory sense as we work in a area, 
we should be prepared to apply all three of those methods. So, 
it was good news, from that perspective, and we're happy to see 
the report out on that.
    Senator Murkowski. Dr. Cruickshank, would you care to 
comment on that?
    Mr. Cruickshank. Yes. So, I'm aware of this report. We're--
SINTEF is coming in to brief us next week on the results, so I 
won't comment on that. But, I would like to note that that's 
only one of a lot of research that's gone on in the ability to 
clean up spills in Arctic waters. Earlier this year, we 
published a report highlighting the research results of about 
10 years of research on this topic, and we can certainly make 
that available to the committee, if it's interested.
    Senator Murkowski. Great, I appreciate it.
    Thank you, Mr. Chairman.
    The Chairman. Senator Dorgan.
    Senator Dorgan. Mr. Chairman, thank you.
    Because there's no longer a restriction on drilling on the 
Outer Continental Shelf, and, I think, because there's a 
generally different view about the eastern Gulf--I mean, 
reflected by the vote in this committee--it seems to me that it 
probably is useful now for your agency, Dr. Cruickshank, to be 
thinking about what kind of buffer zones would be advisable. I 
know you've said you described it in one State because of 
concerns about the State, but do you think it's probably 
advisable for the agency to be thinking about that more 
generally?
    Mr. Cruickshank. It's certainly an option that we have on 
table. We are currently going through over a half million 
comments that we received on a draft proposed program for the 
OCS, and one of the specific questions asked in that program 
was about the applicability of buffer zones and how they might 
be used. So, we're going through and analyzing those comments, 
and it will be among the information that's available to the 
Secretary as he considers his decisions for the OCS.
    Senator Dorgan. I mean, the issue of environmental 
stewardship is about a lot of things. It's about visual line-
of-sight issues with respect to drilling. It's about ecosystems 
and other things. So, I mean, I think all of us are interested 
in trying to determine, What does this mean as we prepare to 
produce more energy here in our country and drill where we 
perhaps have not drilled before? What is our responsibilities 
and requirements for environmental stewardship?
    One of the witnesses raised the question--I think Mr. 
Amos--of the blowout of the new rig in Australia. My 
understanding is that an official from MMS indicated that that 
agency would never have approved the engineering design of the 
well that is leaking off of Australia. Are you familiar with 
that at all?
    Mr. Cruickshank. A bit. Until the Australian government 
completes its investigation, we won't know for sure what caused 
the incident. But, there are some differences between here and 
there that I think are significant.
    The well design is not one that we would have approved. 
They had a single barrier to control the well, we require 
redundant barriers. We also require that the barriers be tested 
at pressures at least as great as those expected to be found in 
the reservoir. It's our understanding there was no such 
requirement to test the barrier offshore Australia.
    We also have what we believe is the most aggressive oil 
spill contingency planning and oil spill drill program in the 
world, where we are constantly making sure people are able to 
respond quickly and muster the equipment quickly to respond to 
spills. Whether any of these would have had any bearing on the 
spill in the Timor Sea, we won't know until Australia completes 
its investigation. But, I do believe that these factors would 
help reduce the likelihood of such a spill, and mitigate 
impacts of any such spill.
    Senator Dorgan. Mr. Amos, you talked about the 9 million 
gallons of oil, Katrina/Rita--and it's--I'm just--I think--I'm 
trying to read this--the storm damage onshore infrastructure 
spill, 7 to 8 million gallons. So, the bulk of that was not 
spilled from offshore drilling, the bulk of that was onshore 
storage. Is that correct?
    Mr. Amos. That's correct.
    Senator Dorgan. OK. The reason I mention that is, my 
colleague from New Jersey used the 9-million-gallon gross 
number, without a description of it. I didn't have the same 
number. But--so, the bulk of that was onshore.
    Mr. Amos. Correct.
    Senator Dorgan. All right. Let me ask, if I can--the 
sources of hydrocarbons in the marine ecosystem from oil 
drilling verses natural seeps and discharges from shipping--
does anybody on the panel have some notion about what kind of 
percentages we're talking about there?
    Mr. Short.
    Mr. Short. Yes, there are much greater inputs of 
hydrocarbons to the marine environment from natural oil seeps 
than there are from exploration activities and development 
activities. The key difference is that when hydrocarbons are 
released into the environment from seeps, the ecosystem has 
adapted to that over centuries, if not millennia. So, birds, 
marine mammals, other biota in the region are--know to avoid 
the area if they're impacted toxicologically.
    Senator Dorgan. So----
    Mr. Short. But, a marine spill or catastrophic release, the 
animals aren't adapted to, so they get clobbered.
    Senator Dorgan. So, there's a difference between seeps and 
discharges and spills and so on--
    Mr. Short. Yes.
    Senator Dorgan [continuing]. Just based on the ecosystem's 
response to it. My understanding is that about 2 percent of the 
volume of oil released into U.S. waters comes from spills. 
About 98 percent comes from seeps and discharges from shipping 
and so on, so forth. I'm not--by that, I'm not suggesting that 
there is not a concern or an interest here. You--Mr. Short, 
you've talked about the need to understand the ecosystem 
better, and the fact that drilling occurred without a baseline 
study. Of course, a baseline study at this point would simply 
describe today's baseline.
    Mr. Short. Exactly.
    Senator Dorgan. I'd--but--and there's a great deal of 
drilling going on in the Gulf, and many of us feel there will 
be more drilling. One of the things that we will rely on very 
substantially is Dr. Cruickshank's agency to make sure that the 
rules, the regulations, the conditions, the restrictions, 
including environmental stewardship, reflect the kind of safety 
that our country will expect and demand with respect to 
offshore drilling. I personally believe that, from the 
standpoint of energy security for this country, which is a very 
important issue for America right now and going forward, we are 
going to produce more American energy. A portion of that is 
going to be offshore oil and gas. The question isn't 
``whether,'' the question is, ``How do we do that in a way that 
accomplishes two goals, greater energy security for our country 
and, at the same time, protecting our environment and our 
ecosystem?''
    So, I really appreciate, Mr. Chairman, your holding this 
hearing, because it relates to the amendment that I withdrew, 
and I think that this will attend, I think, a much longer 
discussion over a longer period of time. But, I thought the 
witnesses gave us a good blend of virtually all of the 
interests and discussion that need to be a part of this.
    The Chairman. Thank you very much.
    Senator Risch.
    Senator Risch. I'll pass.
    The Chairman. All right.
    I think Senator Shaheen was--no. Is that--oh, that's right. 
Senator Shaheen came before Senator Landrieu.
    Senator Shaheen.
    Senator Shaheen. Thank you, Mr. Chairman. You know, we 
women all look alike----
    [Laughter.]
    Senator Shaheen. I'm sorry, but--I didn't mean that. That 
was a shot.
    [Laughter.]
    The Chairman. I didn't suggest you looked the same.
    [Laughter.]
    Senator Shaheen. Thank you all very much for being here.
    I want to follow up on your comment, Dr. Cruickshank, about 
the decision to ask, in Alabama, that the company minimize 
their sight impacts. What exactly does that mean?
    Mr. Cruickshank. What the stipulation calls for is to look 
at opportunities to--instead of building a new platform in 
those waters, to perhaps have subsea completion and tie it back 
to an existing platform, to drill from existing facilities. If 
you're not able to do that, to try and place and design a 
facility so that it will have a minimal visual impact on the 
shoreline.
    Senator Shaheen. Dr. Short, in his testimony, talks about 
the national oil spill research plan being more than 10 years 
old and that only about a fourth of the 28 million authorized 
to fund it has been actually spent. Is that--would you agree 
with that assessment? Should we--what more should we be doing 
in that area?
    Mr. Cruickshank. I can't speak specifically to those 
numbers, though we can get them for you.
    At MMS, we have a budget of about $6 million a year that we 
put into oil spill response research and training programs. 
We've funded that regularly every year to look into improved 
technologies and to operate the National Oil Spill Response 
Test Tank in New Jersey. I know that there are a lot of other 
agencies involved in oil spill research, as well, but I can't 
speak to their levels of funding.
    Senator Shaheen. Dr. Short, would you like to comment on 
your--put that in a context for us. You talked about how much 
Norway has spent on new oil spill technologies. Do you have 
recommendations for what we ought to be doing to address 
cleanup?
    Mr. Short. Addressing much greater emphasis on how well 
these technologies actually work in the field would be the--my 
single greatest recommendation, so that we do field tests that 
are--employ methods of known recovery so we can make 
quantitative comparisons between different approaches, and do 
them in a realistic field setting rather than in the artificial 
settings that are so often employed.
    I don't know what the conditions were in the Barents test. 
I'm very encouraged, and I congratulate Shell and SINTEF for 
pursuing that research. But, typically, these sorts of 
experiments are limited, don't have much replication, and 
they're very expensive to conduct. So, doing them in a rigorous 
way that will give us robust results, I would encourage that 
that further continue.
    Senator Shaheen. Dr. Cruickshank, is it MMS that has the 
responsibility to do that kind of comparative analysis of 
technologies that are available?
    Mr. Cruickshank. I think that the responsibility is shared 
among agencies, and we are certainly one of them.
    I do want to say a little bit more about the test tank we 
have in New Jersey. It's one of a kind in the world, and it's 
about 660 yards long, 75 yards wide, and can create oceanlike 
conditions and test response technologies in real-world 
conditions, a variety of temperatures and sea conditions. It is 
used to try and compare the results of different cleanup 
technologies under different conditions. These--responsible for 
probably about 95 percent of the data that's out there on 
mechanical response information. So, we think this is a very 
valuable resource that we make available to anybody who wants 
to use it to try and improve understanding.
    Senator Shaheen. Is there a lead agency that is charged 
with being the decisionmaker on those kinds of analyses?
    Mr. Cruickshank. I've----
    Senator Shaheen. If there's a discrepancy between what 
agencies come up with?
    Mr. Cruickshank. I'm not sure there's a discrepancy between 
agencies that--we all sit down together. We're involved, NOAA's 
involved, and the Coast Guard is involved, and others, as well. 
We do compare notes on the sorts of research we're conducting, 
and the results that we get.
    Senator Shaheen. Thank you. Just very quickly, for both 
Shell and BP, what--you pointed out the technological 
advancements that have been made by both of those companies in 
the industry in drilling processes. Are you also working on 
those same kinds of research and development efforts when it 
comes to cleanup and how to deal with spills and challenges 
like the ones Mr. Amos showed us?
    Mr. Rainey. I'm not familiar with the details of the 
studies, but I do know that BP participates in research studies 
all over the world on these issues. So, I can get you the 
details if you would like me to.
    Mr. Odum. Senator, my answer----
    Senator Shaheen. Thank you, I'd appreciate that.
    Mr. Odum [continuing]. My answer is really the same. The 
answer is clearly, yes, we do. The studies that we did in 
Norway, which were multimillion-dollar, multiyear studies, were 
to answer exactly this type of question. We recognize that is 
not only important to being able to mitigate a spill if it 
happens, but it's an important enabler to helping convince 
stakeholders that we can actually do this the right way.
    I'll make the point again, too, I think the idea that 
research needs to be one place or the other, we--I think we 
should look at it and say, ``This is research that's shared 
openly all over the world. It's not protected and kept to any 
particular area.'' So, the fact that it is done globally is 
important, I believe.
    Senator Shaheen. Thank you.
    The Chairman. Senator Landrieu.
    Senator Landrieu. Thank you.
    Let me begin, quickly, Mr. Chairman, by just thanking you 
for holding this very important hearing, because, like several 
of my colleagues have said, I think it's important for us to 
really examine the facts and to try to seek the truth, relative 
to the benefits and the risk associated with energy production.
    I particularly like the term ``stewardship,'' and I believe 
that stewardship actually begins with presenting facts in a way 
that tell the truth about what's really happening in offshore 
and onshore oil and gas.
    So, knowing, Mr. Amos, that you would bring your charts, I 
brought some of my own. I'd like to start with a picture first.
    I think my colleagues need to see a satellite image from 
NASA in the Gulf of Mexico, because most of the offshore oil 
and gas drilling in the Nation, of course, has gone on, as Mr. 
Amos said, for 40 years off of the State that I represent. So, 
we would know a lot about this. So, I brought a picture of what 
the Gulf looks like.
    These are oil spills in the Gulf. This was taken, Tom, 
when? 2007. But, Mr. Amos, as you know, none of these spills 
are spills, they're leakages, natural seepage in the Gulf of 
Mexico. On any day, you could take a shot from NASA, in any 
ocean, in any place in the world, and you will see the oil like 
this, because of this chart. I'm going to ask Mr. Amos to read 
this chart. Go ahead, please.
    Mr. Amos. I'm sorry, I can't see it very well from where I 
sit.
    Senator Landrieu. OK. Let me try to read it for you. It 
says petroleum transportation tankering, it's petroleum in 
American waters, 4 percent, which is the blue, from tankering. 
Those are spills caused by tankers that run aground because 
organizations like yours don't encourage safe domestic 
drilling, but we have to bring in oil from other countries, 
which is a lot more hazardous. I'll get to that in a minute.
    So, these tankers run aground and spill oil in lots of 
places, including New Jersey and California and all places. 
Then cars and boats and other sources that Americans drive put 
32 percent of the oil into the oceans. Then natural seepage 
puts 63 percent. Then, you see that little green? It's very 
small, so it's hard for a lot of people to see it, even though 
you don't--some people even have glasses--it's hard to see, so 
I'm going to point it out. It's 1 percent of the oil in the 
oceans--1 percent is from drilling. We could, if we work 
together and be truthful about what's happening, perhaps even 
eliminate that 1 percent, which is a very small portion. That's 
hopefully what this hearing will be about.
    In addition, the other point I would like to make is that 
this 1 percent, which is a risk, and there are impacts, but, to 
put this into perspective, the spill that you cited in 
Australia which causes some people to back up--I want to give 
you these details here. You said it was the largest spill in 
Australia's history. It's true. It leaked 823,000 gallons of 
oil. As Mr. Cruickshank testified, it wouldn't even be allowed 
in this country, because it doesn't stand up to our strict 
environmental rules. But, let's say we had messed up and 
allowed it to produce oil off of our shores. The spill equals 
one-third of the amount necessary to fill the Reflecting Pool 
outside of this Capitol. It's largest spill in the history of 
Australia. It's a pretty long history. The rig that blew didn't 
meet our standards, but if we--it had slipped through and we 
had allowed it to drill, the oil it spilled would fill up a 
third of the Capitol Reflecting Pool.
    So, Mr. Chairman, I think one of the ways forward is for 
people to start telling the truth about what actually happens, 
onshore and off. The risk associated with offshore oil and gas 
drilling domestically are far outweighed by the benefits. I'm 
going to go about 30 seconds over my time. Those benefits would 
be victory in World War II, would be the Industrial Revolution, 
would be the automobile or the airline industry. You do a great 
disservice, you and your organizations, in not telling the 
American people the truth about what happens in domestic 
drilling, onshore and off, and putting it in the perspective 
that it deserves.
    So, my second point--and I'll be very, very brief here--is 
that stewardship also, I think, starts with understanding that 
the more we push this industry off of our own shores and off 
domestically, it goes to countries that we have absolutely no 
control over, that don't even have democracies, that don't have 
lawyers, that don't have courts, that, when things go wrong, it 
can't be fixed easily, countries like Cuba or Venezuela, or 
places like Saudi Arabia or other places.
    So, I would strongly suggest that we have more hearings 
like this. The people that I represent--and I'm going to show 
one more chart, which talks about this, and I'll give back my 
time, Mr. Chairman--we brought this chart. We use it a lot, 
because this is what the Gulf looks like. That doesn't look 
like a bad picture to us, that looks like a jobs picture to us, 
because thousands of people are employed, laying those 
pipelines, working on those rigs, producing tremendous wealth 
for this Nation. We intend to pursue this in other places in 
the country, as well.
    Thank you.
    The Chairman. Dr. Cruickshank, let me ask you, just to be 
clear--Mr. Amos has made the point, which I don't think anyone 
has contradicted, that most of the spill that occurred as a 
result of Katrina and Rita was onshore--I mean, that wound up 
in the Gulf, was onshore, spillage from storage facilities and 
pipelines that were onshore. That's--is that a correct 
description of what you testified to, Mr. Amos?
    Mr. Amos. Senator, that's correct, although I do want to 
point out that you can't have offshore production without 
building those onshore facilities.
    The Chairman. No, I agree with that, and I'm just trying to 
get clear in my mind, Dr. Cruickshank. What is MMS's 
responsibility for preventing spills and leakage from onshore 
facilities such as these?
    Mr. Cruickshank. We have no authority over onshore 
facilities. Those are typically permitted by the States.
    The Chairman. So, that's strictly a State problem, the way 
the law now stands, as you see it.
    Mr. Cruickshank. Yes.
    The Chairman. EPA does not get involved, and the Department 
of Energy does not get involved--
    Mr. Cruickshank. I'm sure there are a number of Federal 
agencies that have rules in permitting, such as EPA, for clean 
air, clean water; Army Corps of Engineers, if wetlands are 
affected. But, in terms of the decisions to build a facility 
and a lot of the specifics about where it's going and how it's 
operating----
    The Chairman. So, the Department of Interior's position 
under the law is that your responsibility for this kind of 
issue commences at the water's edge, essentially. Is that 
accurate, or not?
    Mr. Cruickshank. That's what we have authority to permit. 
What we do require, as part of the environmental review, is 
that a company needs to explain how they're going to get the 
product to shore, where it's going to go, the facilities they 
may use, so that can all be considered and the environmental 
impact statement and any information used in the Coastal Zone 
Management Act reviews.
    The Chairman. But, in these--in the pipelines and the 
storage that is constructed, once that is constructed, the 
question of how hardened that is to resist damage from 
hurricanes, for example, that's not a subject that you address 
through MMS.
    Mr. Cruickshank. That's correct.
    The Chairman. OK.
    Senator Murkowski, do you have any other questions?
    Senator Murkowski. I do, just a couple, Mr. Chairman.
    Senator Landrieu, the last poster that you showed, you 
said, ``This is jobs.'' I think we can go further, it's not 
only jobs, it's energy security for this Nation.
    Senator Landrieu. For America.
    Senator Murkowski [continuing]. It's environmental 
protection.
    I would like to ask you both, Mr. Rainey and Mr. Odum--both 
of your companies work all over the world, not just here in the 
United States. I believe that the environmental standards that 
we put in place, the requirements that we put on you as an 
industry, are pretty tough. I know, certainly in Alaska, 
they're extra tough. It's because we have an environment up 
there that is different, it is unique, and it is harsh, but 
it's also very fragile.
    Can you rank for me, if you will, where the United States 
is in terms of environmental protections and regulations as 
compared to the other places in the world that you operate? 
Where are we?
    Mr. Odum. Certainly, I think the--it's taking a very broad 
perspective. I would say that the U.S. programs are the most 
comprehensive and--``strict'' would probably be appropriate 
word to use, as well--in the world. That's taking into account 
the specific regulations around areas like Alaska, but also the 
comprehensive nature of that entire program across the U.S. 
OCS. I would put it at the top.
    Senator Murkowski. Mr. Rainey.
    Mr. Rainey. Yes, Senator, I would agree with Mr. Odum, 
that, in my view, environmental regulations in the U.S. are 
amongst the most stringent that we see anywhere in the world, 
and they provide the highest level of environmental protection 
that we see anywhere in the world.
    Senator Murkowski. I know there were announcements made 
this past week, in terms of some changes with the U.S. program 
where we are shortening the lease terms, there are additional, 
I would call them ``regulatory burdens,'' but perhaps others 
would describe them otherwise. When we put in place in policies 
that say, ``OK, we're going to shorten your lease terms,'' what 
does that do for you, from a business perspective, and where 
you choose to operate in the globe?
    Mr. Rainey. Thank you, Senator. I can speak to that from an 
explorer's perspective. In BP, we rank our exploration 
opportunities on a global basis. The nature of the leasing and 
the regulatory and the fiscal regime is an important aspect of 
that ranking.
    At the present time, the U.S. receives a very large 
proportion of our global exploration spend. You all know that, 
without successful exploration, there is no development and 
there is no production. So, if we choose to send our 
exploration dollars elsewhere, then the follow-on benefits of 
development and production will go elsewhere, as well.
    Senator Murkowski. ``Go elsewhere'' to nations to where the 
environmental regulations are not near as stringent.
    Mr. Rainey. Exactly.
    Senator Murkowski. We need to think globally about this.
    Mr. Amos, let me ask you--because you made the statement 
that SkyTruth essentially focuses on the risks that are posed 
by resource extraction. Does your organization also focus on 
other energy resources that might have impact to the 
environment? A lot of discussion has taken place in this 
committee about offshore wind. There are some environmental 
challenges with that, and also environmental challenges with 
the onshore wind. Do you do environmental assessments in other 
energy areas as well, or is it just resource extraction?
    Mr. Amos. I would like to correct a misperception, that 
Senator Landrieu suggested that our agency actually takes a 
position on whether more offshore oil or gas drilling should or 
should not be done. We do not take such a position. Our work is 
focused on ensuring, in fact, that drilling for resources can 
and will be done in a more sustainable and environmentally 
friendly manner, wherever it's done, including here in U.S. 
waters. So, I just wanted to correct that.
    I will say that our organization does look at other forms 
of energy production and extraction. As you suggest, no form of 
energy production is without its impacts and risks.
    I would also suggest that the very same technology that 
we've shown you today that can be used to demonstrate what 
happens when things go wrong, even with the best technology--
and they do still go wrong--can also be used to show where 
things are not going wrong. So, we would welcome the 
opportunity to work with you, and to work with representatives 
of industry and government, to use this monitoring technology 
in a publically transparent way so that, hopefully, we can show 
where it's being done right instead of just where it's being 
done wrong.
    Senator Murkowski. I think industry would welcome the 
opportunity to demonstrate where it's being done right.
    Senator Landrieu. I do have a followup.
    The Chairman. I think maybe the others do, too. Let me----
    Senator Landrieu. I'm sorry.
    Senator Shaheen.
    The Chairman. Senator Menendez, I think, would be next, and 
then Senator Shaheen, and then Senator Landrieu.
    Senator Menendez. Thank you, Mr. Chairman. Mr. Chairman, I 
appreciate the hearing.
    Mr. Odum, in your testimony, you painted what I think is a 
pretty absurdly rosy picture of the oil reserves contained in 
the Outer Continental Shelf. Listening to your testimony, one 
might think that we had several Saudi Arabias beyond our shores 
ready to be, you know, drilled and wash over us in low gas 
prices and rainbows. Of course, I have a different picture of 
that, because the Energy Information Administration's 2007 
report on what effects opening the entire OCS to drilling would 
have on energy production and prices states that such a policy, 
quote, ``would not have a significant impact on domestic crude 
oil and natural gas production or prices.'' Then, the EIA 
testified before this committee last month, and they 
reaffirmed, basically, that statement again.
    But, I'm concerned, when, you know, witnesses like yourself 
come before the committee and make these, you know, incredibly 
rosy pictures, because it affects our policy--you know, I'm 
concerned when, in 2004, your parent company was caught 
falsifying its oil reserves, was fined $150 million, faced 
criminal charges, and only recently settled shareholder 
lawsuits. Why would, based upon that experience, the committee 
necessarily believe what you are saying about oil reserves 
versus, you know, predictions?
    Mr. Odum. Thank you, Senator. I think we--the good news is, 
we have the ability to go back to the facts. I think the 
easiest place for me to point to is the Gulf of Mexico. Gulf of 
Mexico right now makes probably on the order of 1.4 million 
barrels a day. We have a project out there,--we call it the 
Mars development--that itself makes a few hundred thousand 
barrels a day. We have the Perdido project, which will come on 
in the next couple of months, which itself will make--has the 
capacity to make 130,000 barrels a day. There are other 
examples from other industry players out there.
    My point is, you know, 1.4 million barrels, in its 
entirety, right now from the Gulf of Mexico, in these discrete 
projects, which are the development opportunities we have out 
there, are adding significant pieces. So, I would disagree, 
fundamentally, that this area, where--you know, the other 
characteristic we've seen in the Gulf of Mexico is, the 
resource estimates have continued to grow as we've been there, 
done additional research, improved technology--throughout the 
history of us being there, those resource estimates have grown. 
I would anticipate the exact same thing would happen at other 
areas of the OCS in the U.S. So, we can make a significant 
difference in----
    Senator Menendez. But, there is a difference between a 
guess and what actually is a reserve, is it not?
    Mr. Odum. There are very clear parameters on which the U.S. 
uses to define what a ``reserve'' is verses what ``resources'' 
are.
    Senator Menendez. Let me ask you this. You, in your 
testimony, state that you believe that those who believe that 
there are serious environmental risks to offshore drilling have 
a, quote, ``outdated view of how the oil and gas industry 
operates today.'' Is it really so outdated, in view of what 
just happened off the coast of Australia, that it spewed oil 
into the ocean--do you have a picture of that?--for over 10 
weeks, and then caught fire before finally being plugged, just 
2 week ago? Is it really just an outdated view to believe that 
environmental effects of drilling, when it's estimated that 9 
million gallons of oil spilled during that spill? Am I just 
being old-fashioned, when that same drilling entity is working 
in U.S. waters today? I find it difficult to--you know, maybe 
you can say that things are safer, but to suggest that there 
are no risks. I want to end there, with that question.
    Then, Mr. Amos, I want to ask you a question. I know that--
earlier, I talked about what happened in Katrina and Rita. I 
was talking about both offshore and onshore spills. When the 
Coast Guard reported to Congress--not me, but the Coast Guard--
that 8 million gallons of oil spilled onshore, and MMS reported 
that over 700,000 gallons spilled offshore, aren't the 
labyrinth of onshore pipelines and refineries directly linked 
to offshore production? If we didn't have the offshore 
production, would we necessarily have all of that additional 
risk? Shouldn't we count that as part of the overall risk 
factor?
    So, if you would both answer those questions, I'd 
appreciate it.
    Mr. Odum. If I go back to the question of, ``Do we have an 
outdated view?'' my point is this, that the technology has 
dramatically changed over the decades, and many people do have 
a view of how they saw the industry 20, 30 years ago. I'm 
telling you, yes, it's very different today.
    As we think about opening new areas of the OCS to 
exploration production, I believe the way to look at it is to 
look at latest developments by the industry in the current 
areas that are open, translate that to the new areas, because 
that's where you see the new technology, and, in addition, all 
the mitigation techniques and other things that we've learned 
over these decades. So, that's where my view, an outdated view, 
comes from.
    Mr. Amos. Thank you, Senator. You're absolutely correct in 
your statement that the onshore and offshore infrastructure is 
essentially one interconnected facility. It should be 
considered as such. The 1700 homes in Louisiana that were 
inundated by crude oil from the spilled storage tank, those 
homeowners probably would not differentiate between where the 
oil came from and who owned it. So, as we consider offshore 
drilling in new areas, it's not just the risk from what happens 
on multibillion-dollar high-tech platforms that are operated by 
the biggest energy companies in the world; it's also the risk 
posed by the network of pipelines and onshore processing and 
storage facilities that are a requirement of supporting that 
offshore development.
    I'd also like to point out that--I think you mentioned that 
the Norwegian company that was drilling off Australia when this 
blowout occurred is a well-respected global operator. They have 
a fleet of 41 drilling platforms around the world. They've 
targeted the Gulf of Mexico as an important area of business 
operations, and have an office in Houston. I think you 
mentioned, they're currently under contract to drill in the 
Gulf of Mexico through 2012. So, it's imperative that we 
understand exactly what caused that blowout and spill in 
Australia. But, as we've seen in our investigations in recent 
years, every individual accident is a unique--a culmination of 
a unique chain of circumstances.
    Senator Menendez. I appreciate it. I've asked Secretary 
Salazar to look into exactly that.
    Thank you very much, Mr. Chairman.
    The Chairman. Senator Shaheen.
    Senator Shaheen. Thank you, Mr. Chairman.
    The Interagency Ocean Policy Task Force that was 
established by President Obama in June released their interim 
report in September. The priorities that the task force laid 
out included ecosystem-based management, comprehensive coastal 
and marine spatial planning, increased scientific knowledge of 
the oceans that we can apply to policy decisions, and improved 
coordination between Federal, State, local, and regional ocean 
management entities.
    Now, we haven't yet seen the final report. But, if we were 
going to incorporate that framework into current policies 
around our oceans and coasts, how would that affect what we're 
currently doing with respect to development, drilling? How 
would existing environmental standards change, or not, based on 
that kind of a framework?
    Dr. Short, I'm going to ask you to, if you would, go first, 
because I think what's being talked about in those 
recommendations is consistent with the kinds of things you were 
talking about in your testimony.
    Mr. Short. Thank you, Senator.
    We would like to see the--those recommendations integrated 
into policies for offshore oil and gas leasing--in particular, 
marine spatial planning and ecosystem-based management aspects 
of them--because too often these--as I mentioned earlier, too 
often these things focus on a zoning approach rather than 
identifying which parts of the marine ecosystem are 
disproportionately productive and vulnerable and need 
protection. We feel that those should be first identified and 
then appropriate protections conferred on them--not necessarily 
to exclude industrial development, but to make sure that we 
preserve the integrity of the function of what they do--and 
that that should be number-one priority of any marine spatial 
planning exercise.
    Along with that, ecosystem-based management could usefully 
be applied to the way that we go about assessing the background 
and then monitoring of ecosystems as these industrial projects 
are--unfold, because we see that, although there is a great 
deal of money often spent on environmental studies, it's not 
spent as intelligently as it could be if you were to take an 
ecosystem approach at the outset to figure out, in a 
fundamental way, what's there and how it works together, what 
it depends on. This doesn't have to cost a fortune. There are 
several examples in Alaska of highly respected ecosystem-based 
management plans--study plans, in effect, primarily now 
directed toward fishery issues--that could be usefully adopted 
toward oil and gas issues, as well.
    Senator Shaheen. Thank you.
    Mr. Rainey and Mr. Odum, how would you see, if those 
priorities were adopted, that changing or affecting the way you 
currently do business?
    Mr. Odum. The--Senator, I think the--the first thing that I 
think is important here is that we recognize what currently 
happens within the purview of the agencies that exist. So, for 
example, the idea of looking out at long-term impacts, at 
multiple uses, that is actually already within the purview of 
the MMS that's done. I may get the terminology wrong, but I 
think it's the OCS Lands Act that, you know, provides for that 
type of analysis. So, first of all, I think it's important to 
recognize what's already done.
    Second of all, if I could be very frank, I mean, one of the 
things that--if I went to the worry side, one of the things 
that worries me is, it creates a very big bureaucracy, 
potentially. It could be done right. If it wasn't done right, 
it could create a large bureaucracy that could potentially put 
us into a mode of slowing things down and just studying forever 
rather than truly moving forward on things. So, I do worry 
about that, to be perfectly open.
    I think the--you know, my personal take on it is that I 
think we need to understand what we mean when we say an 
``adaptive approach.'' I'll use Alaska as an example. There's--
across the Arctic, there, through the Canadian Beaufort, as 
well as the coast off Alaska in the Beaufort and the Chukchi, 
there's been about 112 exploration wells drilled. There's been 
an enormous amount of data collected associated with that 
activity, which has taken great steps forward, in terms of the 
understanding of everything from migration of mammals all the 
way to the impact of noise and so forth. So, that activity 
actually, to a degree, enables the collection of that 
information. We adapt as we learn from that and how we move 
forward.
    So, I think we'd have to be cautious about a program that 
says, ``Are we going to learn and adapt and move forward, or 
are we just going to study until we've answered every possible 
question?'' That's my concern.
    Senator Shaheen. I don't--other than the increased 
scientific knowledge, I don't think it said anything about 
studying. Do you not think increased scientific knowledge is 
appropriate?
    Mr. Odum. No, I certainly do. I mean, I absolutely, fully 
support having the right information.
    Senator Shaheen. Thank you.
    I'm actually out of time, Mr. Rainey.
    The Chairman. Go ahead, if you want to respond.
    Mr. Rainey. I was just going to add, Senator, that I think 
we should remember that scientific knowledge is always moving 
forward. Actually, using the best available and most up-to-date 
scientific information is part of the current regulatory 
system, and it supports the OCS leasing and exploration and 
development programs.
    I think we also need to remember that OCS development has 
been going on for the last 50 years, and it has been going on 
in a way that is both safe and protective of the environment.
    The Chairman. Senator Landrieu.
    Senator Landrieu. Thank you very much.
    Following up, I'd like to use Senator Menendez's picture, 
which is a very disturbing picture, but it's part of the truth 
that I'm going to continue to try to tell. The fact is, these 
things happen.
    On this day, when this picture was taken, however, on this 
rig off the coast of Australia--I'm going rough it; maybe, Mr. 
Rainey, you, or Mr. Odum know better. But, since we have 4,000 
structures like this in the Gulf, I'm going to rough that there 
are 20,000 in the world. So, 19,999 were not on fire. I want to 
repeat, 9,999 were not on fire. This one was. The oil spilled 
from this would fill up, as I said, one-third of the Reflecting 
Pool outside of the Capitol.
    So, let us agree that there are risks associated, but it 
has already been determined, and testified to at this hearing 
by Mr. Cruickshank, who is the expert for the government, does 
not work for oil companies and does not work for SkyTruth, has 
said that this rig would not be allowed to operate in the 
United States of America.
    No. 2. The spill that occurred in my State, in St. Bernard 
Parish, that went--the oil went into 1700 homes--I'm very 
familiar with, because I walked through many of them myself--
was leaked from a holding tank, Mr. Chairman. Murphy Oil, this 
is public record, had 5 or 6 of these large holding tanks that 
are very familiar to places in Louisiana, Texas, New Jersey, 
Alaska--all over the country, actually. They're refined 
products, and sometimes unrefined products, that are held until 
they can be refined in the Nation. There is a regulation that 
says that, when a storm comes--because we have them all the 
time, and have for hundreds of years in the United States--the 
companies have to fill them up so that they're heavy and the 
winds that blow against them won't overtop them. That was not 
done. They are liable, and they paid a significant amount of 
money to people. Now, four or five of the tanks were filled, 
and one was not. Now, that is public record. You all can go 
look at it.
    Mistakes are made every day, even though there are 
regulations and there are enforcements. We've learned from 
that. Mr. Amos, you would be happy to know that I think we've 
adopted new regulations so that maybe inspectors now go out and 
check, before storms come, to see how much these tanks are 
filled up. We did some good things.
    But, those things happen. But, the fact is, people were 
compensated, it was terrible, there was a lot of cleanup. But, 
the same people that had the oil in their homes also worked for 
the company, so they didn't want them to go out of business 
because they would lose their jobs. So, we all rolled up our 
sleeves, we cleaned up, learned, passed new regulations, and 
moved on.
    The third and final point I want to make are the reserves. 
My colleagues continue to say that this whole effort is for 
naught, because there's no oil anywhere anyway, so why drill? 
I'm going to ask you, Mr. Amos, where you support drilling, 
because you said you did, and I want to know specifically in 
what area.
    These are the estimates--not from the oil companies, not 
from the environmental groups; this is from the Minerals 
Management Service--that is proving what Mr. Odum has said is 
true, that the estimates are going up, and they're going up 
because technology's getting better, we're learning how to find 
oil in places we didn't know it was before, and gas. We used to 
have to drill lots of wells before we'd find the oil and gas; 
now, with the new imaging technology, we're finding it more 
quickly. As we continue to produce more, we're finding more. 
So, based on our own data--this is the U.S. Government, this 
isn't Louisiana, this isn't Texas, this isn't Alaska trying to 
tell everybody there's oil out there when there's not--this is 
the U.S. Government saying, ``If you look for it, you'll find 
it.'' There are lots of resources. These resources belong to 
the people of the United States, and they have a right to earn 
a living and to create wealth for them. They actually own these 
resources.
    My final point is this. Mr. Amos, we have found something 
we agree on. You said that we need more environmental support, 
and I agree. If the States of Louisiana, Texas, and Mississippi 
and Alabama, who have--are bearing the burden of this 
production--proudly--we know their risk, their advantages--had 
gotten a portion of the funding that all the other States in 
this country have gotten, based on a 37-and-a-half-percent 
share, which Harry Truman offered to us in 1920, which we did 
not get, it would have generated $23 billion for us just in the 
last 7 years. That would have supported a lot of environmental 
support, rules, and regulations, coastal restoration, flood 
protection, navigation control. But, we have this great 
industry that we're proud of and virtually no help from the 
Federal Government to regulate it in the way that we would wish 
and would want to--although there are great regulations out 
there--for the protection of our coast.
    So, I'm going to conclude with: good stewardship, again, 
starts with telling the truth, painting a clearer picture of 
the hazards and benefits, and sharing the revenues in a way 
that promotes good stewardship of the environment and good 
economic opportunity for the people of our Nation.
    Thank you.
    The Chairman. Let me just ask one additional question, then 
I think we're ready to terminate the hearing.
    Mr. Amos, your satellite imagery and digital mapping and 
remote sensing technologies that you made reference to and have 
in your exhibits here, those are available to our agencies at 
this time? I mean, the information that you collect through 
those. Is that right, or not?
    Mr. Amos. The satellites we collect information from are 
operated by a variety of sources, including the U.S. 
Government. In the case of Australia, the images we showed were 
produced by NASA from NASA taxpayer-funded satellites. But, in 
some cases, we have to buy satellite imagery from commercial 
providers. For oil pollution, in particular, the best tool is 
radar satellite imagery, and the U.S. Government does not 
operate any civilian radar satellites. But, NOAA Satellite 
Services Division does have agreements with other countries to 
purchase those kinds of images, when necessary.
    The Chairman. OK. All right.
    I think there's been useful testimony. I appreciate all of 
you coming. We will try to learn from your written reports and 
see if any action can be taken here in Congress.
    Thank you very much.
    [Whereupon, at 12:15 p.m., the hearing was adjourned.]

    [The following statement was received for the record.]
   Statement of Jon Hrobsky, Director, Policy & Government Affairs, 
                 National Ocean Industries Association
    Thank you for the opportunity to submit written testimony for the 
record regarding the Committee's November 19, 2009 hearing to receive 
testimony on environmental stewardship policies related to offshore 
energy production.
    NOIA is the only national trade association that represents all 
companies engaged in the exploration for, and production of, 
traditional and alternative energy on the nation's Outer Continental 
Shelf. The NOIA membership comprises more than 300 companies engaged in 
activities ranging from producing to drilling, engineering to marine 
and air transport, offshore construction to equipment manufacture and 
supply, shipyards to communications, and geophysical surveying to 
diving operations. As such, this hearing is of particular importance to 
our members.
    While some of your witnesses may be testifying on particular 
environmental stewardship proposals related to offshore energy 
production, we would like to concentrate our testimony on general 
technological advancements and improved safety practices in the 
offshore oil and gas industry which may help guide the committee in 
your decision making.
             a source of constant technological innovation
    Today's offshore technology allows us to produce more energy by 
reaching places that would never before have been possible. New world 
records are always being set.
    Industry recently set one of these records by drilling a well in 
water depths exceeding 10,000 feet. That's the equivalent of 
successfully navigating nearly two miles down from the surface of the 
ocean before even beginning to drill, sometimes another 30.000 feet 
into the earth below the sea floor. The technology required to drill, 
complete and produce this type of well must overcome an environment of 
high pressure (in excess of 20,000 pounds per square inch) and high 
temperature (exceeding 350F). Deep wells such as this are expensive, 
costing as much as $100 million apiece.
    After coming from the ground, the oil or natural gas then travels 
through a pipeline where the temperature is just above freezing and the 
formation of ice crystals threatens to block the flow unless constantly 
supervised and adjusted. At depths far beyond where humans can travel, 
sometimes as much as 5,000 feet or more below the ocean surface, 
Remotely-Operated Vehicles (ROVs) are used to perform maintenance and 
repairs.
    All this is possible with fewer facilities and less impact--even 
visual--than ever before. For example, multiple subsea wells can be 
connected by tiebacks to a single platform over great distances. Such 
an installation is capable of reaching wells on the ocean floor dozens 
of miles away in all directions while connecting to an ocean surface 
platform one mile above.
    Directional drilling also allows for extraction of resources which 
are miles away from the point where the actual well is drilled.
    This cutting edge technology doesn't come cheap, however. The total 
cost of this type of project, including wells drilled and the subsea 
connection system, can exceed $5 billion.
    an exemplary record of environmental protection and stewardship
    The outstanding environmental record of U.S. companies operating 
offshore around the world is well recognized as . . .technologies are 
allowing the offshore industry to venture into deeper waters than ever 
before, while protecting marine life and subsea habitats. . .\1\--even 
in the most challenging areas such as the Arctic and North Sea and in 
otherwise catastrophic weather.
---------------------------------------------------------------------------
    \1\ Clinton Administration DOE report: Environmental Benefits of 
Advanced Oil and Gas Exploration and Production Technology, 1999.
---------------------------------------------------------------------------
    Off the part of our coast in which exploration and production has 
historically been allowed, the safety of our operations was 
demonstrated in the most severe hurricane situations in 2005 and 2008. 
Though many of the exploration and production facilities in the Gulf of 
Mexico were severely damaged or destroyed, the high-tech safety and 
environmental protection equipment and processes worked.
    Careful scientific environmental study and operational planning 
always precede OCS activity. For example, our offshore geophysical 
companies, which conduct seismic work that allows us to ``see'' 
geologic structures beneath the seabed--have worked with the National 
Marine Fisheries Service and MMS to implement many procedures and 
practices designed to avoid harm to marine mammals, including:

   Monitoring for the presence of animals of concern
   Shutdown or no start-up when they are too close
   Slow, gradual ramp-up of operations just in case

    During exploration, jack-up or semi-submersible rigs and drill 
ships have multiple systems and physical barriers to ensure that no 
spill occurs. Most important, along with multiple, redundant remote 
control systems. are ``blowout preventers'' which in deepwater are 
installed on the well at the seabed and are capable of immediate 
closure in event of any emergency.
    Also, a ``downhole safety valve'' in the well itself below the 
seabed provides an added protection barrier in the event of some 
catastrophic event.
    As a result of these safeguards, the offshore oil and gas industry 
has a laudable environmental record, as noted in the ``Oil in the Seas 
III'' National Academy of Sciences study, which finds that although the 
amount of oil produced and transported on the sea continues to rise, 
improved production technology and safety training of personnel have 
significantly reduced both blowouts and daily operational spills.
    The industry remains under intense scrutiny by its two primary 
regulators--the MMS and the U.S. Coast Guard--as well as a host of 
other governmental agencies with oversight responsibilities such as the 
Environmental Protection Agency and the National Oceanic and 
Atmospheric Administration.
    However, it is the MMS that regulates all exploration, development, 
and production activities on about 8,000 active leases to ensure that 
these activities are conducted safely and in an environmentally sound 
manner. The MMS reviews and approves industry exploration and 
development plans before allowing any operations to commence, monitors 
all lease operations to ensure that industry is in compliance with 
relevant requirements, and conducts scheduled and unscheduled 
inspections. In 2008, MMS conducted over 25,000 inspections of OCS 
facilities.
    To summarize, the latest technology and sound management practices 
not only allow for the continued production of domestic energy 
resources, but they have also made the U.S. offshore industry the envy 
of the world. Its environmental record is superb:

   Since 1985, more than 8 billion barrels of oil were produced 
        in federal offshore waters with less than 0.001 percent 
        spilled--a 99.999 percent record for clean operations.
   There has not been an incident involving a significant oil 
        spill from a U.S. exploration and production platform in nearly 
        30 years (since 1980).
   Government statistics show that the injury and illness rate 
        for offshore workers is about 70 percent lower than for all of 
        private industry.
   Today's modern technology includes such environmental 
        protections as automatic subsea well shut-in devices, including 
        sub-seabed safety valves.

    The industry's performance during the 2005 hurricane season 
(Hurricanes Katrina and Rita), which moved through a core area of 
offshore operations, is instructive. While it is true that 115 
platforms were destroyed, the storm threatened over 3,000 facilities, 
the vast majority of which survived. Despite sustained winds reaching 
170 miles per hour and towering waves and the resulting destruction of 
numerous platforms and rigs, there was no significant spill from 
production wells and no injury or loss of life among the 25,000--30,000 
workers who are offshore at any given time.
    We thank you again for this opportunity to submit written 
testimony, and remain available for any further questions.
                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

       Response of John F. Amos to Question From Senator Bingaman
    Question 1. Your testimony expressed concern about the impact of 
the offshore and onshore infrastructure necessary to support offshore 
production. The Minerals Management Service (MMS) testified that their 
jurisdiction generally ends at the state-federal offshore boundary. 
Please discuss your understanding of the governmental entities with 
jurisdiction over this infrastructure, and any view you may have about 
the adequacy of the regulatory oversight for this infrastructure.
    Answer. MMS decisions about outer continental shelf (OCS) leasing 
will generate demand for onshore facilities to support new, or 
additional, offshore exploration and production. Current regulatory 
roles are now provided to impacted coastal states under the federal 
consistency provision of the Coastal Zone Management Act (CZMA), for 
those impacted coastal states that have a federally-approved Coastal 
Zone Management Plan. If OCS leasing expands into previously protected 
federal waters, onshore industrialization in shoreline areas--where 
coastal states have set aside important habitats, parklands, and 
coastal-dependent tourism infrastructure--will likely require continued 
reliance on a strong state role under the CZMA consistency process.
    An additional complicating factor in regulatory oversight is the 
division of offshore pipeline oversight between MMS and the Department 
of Transportation (DOT). It is our understanding that, in general, MMS 
is responsible for ``gathering'' lines that typically collect oil and 
gas from offshore wells and deliver it to platforms, while DOT is 
responsible for ``market'' lines that then bring the product to shore. 
We are not sure how, specifically, a given segment of pipeline is 
assigned to MMS or DOT jurisdiction.
    I would like to take this opportunity to expand on my response to a 
question you asked during the hearing: whether the data and information 
that SkyTruth uses are available to government agencies as well. I 
interpreted your question to refer to the satellite images that we use 
in our work, and answered that government agencies certainly have 
access to those same satellite systems and the images and data they 
produce. I also want to make clear that we routinely make SkyTruth-
processed images and analyses available to the public, including 
government agencies, for non-commercial purposes. For example, we have 
provided images to the Surface Water Quality Bureau of the State of New 
Mexico Environment Department, and to scientists in Wyoming conducting 
studies funded by industry and the Bureau of Land Management. In the 
immediate aftermath of Hurricane Katrina, we worked around the clock to 
produce and publish precision image-maps showing platform and pipeline 
locations and sources of oil leaks in the Gulf of Mexico, and 
informally provided those maps to staff at MMS and NOAA as fast as we 
could generate them. It was our hope that these image-maps would be 
helpful for the response and repair effort so we produced and published 
them as a public service. For an example of one of these image maps, 
see http://skytruth.mediatools.org/sites/default/files/photo_import/
1904/935/11980.jpg.
     Responses of John F. Amos to Questions From Senator Murkowski
    Question 1. You stated in your testimony that ``effective design 
and implementation of safe pipeline systems may be complicated by the 
existing regulatory regime for offshore pipelines, with jurisdiction 
split between two separate agencies, the Department of Transportation 
and the Department of the Interior. This is a classic example of gaps 
and overlaps in ocean governance of the kind discussed in a widely 
quoted 2006 paper in the journal Science.'' Would you agree that it 
makes sense to consolidate as much management as possible of the OCS 
oil and gas resources within one department, with other agencies 
serving in advisory roles?
    Answer. Our observation is that gaps raise the possibility that 
existing or potential problems are not being recognized or effectively 
addressed. However, SkyTruth has no expertise in developing government 
policy and regulation, so we can make no specific recommendations in 
those areas.
    Question 2. From your testimony, it appears that SkyTruth focuses 
much of its efforts on oil and natural gas operations.

          a. Does your organization track or project the impacts that 
        offshore wind installations could have on the marine 
        environment?

    Answer. We're not aware of any large offshore wind projects in U.S. 
waters. We have, however, produced images illustrating the landscape 
footprint of utility-scale onshore wind and solar projects (see our 
renewable energy gallery at http://www.flickr.com/photos/skytruth/sets/
72157616622223819/).

          b. Does your organization track or project the impacts that 
        solar energy, biofuels, and any other onshore alternative 
        energy projects could have?

    Answer. See above.

          c. Would you agree that the development of offshore wind 
        energy, solar energy, biofuels, and other alternative energy 
        resources will impact the environment?

    Answer. We're not experts in understanding the impacts posed by all 
potential sources of energy, particularly offshore in the complex and 
relatively poorly understood marine environment. We know what we see, 
and that's generally limited by the primary technologies we use--
satellite and aerial imagery--to impacts that are directly observable 
on land, or on the ocean's surface. But in general it seems likely that 
any industrial-scale activity to produce and transport energy will have 
impacts on the environment.
    Question 3. As I understand your organization, you obtain, create, 
and supply pictures of resource extraction impacts and potential 
resource extraction impacts to environmental groups and other entities 
interested in documenting and communicating such impacts. Is this 
accurate?
    Answer. SkyTruth produces images that illustrate a range of 
environmental issues, including resource extraction activities such as 
drilling, mining, and logging. We routinely make these images available 
to the public, including interested individuals, conservation 
organizations and government agencies, for noncommercial, educational 
and scientific purposes.

          a. Would you provide a comprehensive list of all of the 
        organizations to whom you have supplied SkyTruth's materials?

    Answer. SkyTruth generally distributes images publicly through our 
website and online image galleries, so it's not possible for us to 
compile a comprehensive list. However, we do know that users of our 
images have included the Bureau of Land Management, the New Mexico 
state government, Trout Unlimited, Rocky Mountain Elk Foundation, World 
Wildlife Fund-Australia, The Wilderness Society, Sierra Club, 
Earthworks, Appalachian Voices, PBS, NBC Nightly News, and CBS Evening 
News, among others.

          b. Of these groups, how many have taken positions generally 
        or specifically opposing the projects of which you've provided 
        photographs?

    Answer. I have no way of knowing this (see above). Certainly many 
of the conservation groups that have used our images advocate for 
changes in the way public lands and resources are managed.

          c. If all or an overwhelming percentage of the groups to whom 
        you supply your pictures oppose offshore and onshore drilling 
        projects, how is it true to state, as you did in testimony 
        before this committee, that your group takes no position on the 
        issue?

    Answer. We don't know what percentage of citizens groups, 
organizations, or other public entities using our work are opposing 
drilling projects (see above). SkyTruth believes that the relative 
risks, benefits, and impacts of all industrial uses of public lands and 
waters should be acknowledged, fully presented to the public, and 
carefully weighed as part of the decisionmaking process about how to 
best manage those public resources. Our role is to help provide 
information about these risks, benefits and impacts, using remote 
sensing technologies, to those engaged in policy debates.
    Question 4. Several of the images on your website and in your 
testimony aren't actual photos of development but they're photos of an 
area with your own drawings of what your organization believes some 
possible future development might look like. Do you ever run these 
images by the proposed developer of the area to verify whether they 
happen to agree or disagree with your sketches?
    Answer. SkyTruth simulations are based on satellite and aerial 
imagery of actual pollution incidents, and on existing, comparable, 
developments. To the extent possible we use published plans or 
applications from the proposed developers, and government rules and 
management practices that would likely apply.
    Question 5. Your testimony cites what you label catastrophic oil 
spills resulting from hurricanes Katrina and Rita, but these larger 
spills seem to have occurred onshore from the refineries, the 
pipelines, and other infrastructure associated with delivering the 
products to customers. I'm not sure how this is specifically relevant 
to the debate about offshore development. Wouldn't similar risks apply 
to the same types of facilities much further inland, supporting on-
shore development, if they were hit by other disasters like tornadoes 
or earthquakes?
    Answer. Hurricane Katrina caused damage to OCS facilities that 
spilled more than 700,000 gallons of oil and condensate offshore, 
cumulatively a ``major'' spill by Coast Guard definition. Among other 
spills, Hurricane Rita caused 1.9 million gallons of heavy fuel oil to 
spill into the Gulf from a damaged barge; most of this product sank 
into the water and could not be recovered (http://www.darrp.noaa.gov/
southeast/dbl152/).
    SkyTruth's work with severe storms highlights the 
interconnectedness between offshore development and onshore 
infrastructure. In the case of Hurricanes Katrina, Rita, and Ike, these 
facilities caused significant spills. Communities that are being asked 
to consider drilling off their shores should be aware that coastal 
infrastructure is also implied by that development, and can be a source 
of damaging spills. For this reason, the information I presented on 
coastal spills is directly relevant to offshore development.
    Although I have no knowledge of major spills caused by earthquakes 
or tornadoes, large earthquakes certainly have the potential to damage 
pipelines and storage facilities. Seismic and volcanic activity present 
hazards somewhat unique to Alaska: Cook Inlet risked a major spill 
early this year from an oil storage tank facility located in the well-
documented path of dangerous mudflows from the latest eruption of 
Redoubt Volcano, and the facility has since been closed (http://
www.rigzone.com/news/article.asp?a_id=82587). All such risks should be 
acknowledged and incorporated into the decisionmaking processes that 
inform resource management and emergency preparedness.
    Question 6. I'm trying to get a better sense of your organization 
SkyTruth's philosophy. What I'm getting from your testimony is that the 
risks of offshore development outweigh the benefits. My question is 
where and how you may suggest Americans obtain our 20 million barrels 
of oil each day in the immediate to short term. Do you think tankers 
from abroad, presumably increasing traffic in the Houston ship channel 
to make up for a slowdown in domestic production, would be a safer 
measure until our Nation ceases to consume oil?
    Answer. The risks and benefits of offshore development should be 
honestly and publicly debated as part of an ongoing national 
decisionmaking process. Industry spends millions of dollars each year 
reiterating the benefits of drilling to the public and to influential 
decisionmakers. However, the impacts of development and the continued 
risk of accidental spills often are not apparent to the public and 
decisionmakers. These impacts would need to be considered in 
comprehensive cost-benefit analyses to address the question of benefit 
vs. risk. SkyTruth doesn't engage in comprehensive cost-benefit 
analysis; that is well beyond the scope of our mission and current 
resources. Rather, we provide information on impacts and risks to be 
included in such public policy debates.

          a. Where, specifically, have your pictures revealed that oil 
        development can be or is being conducted in a safe manner?

    Answer. With a publicly transparent, systematic program of regular 
monitoring, we could demonstrate over time that development is avoiding 
some observable impacts (such as moderate to large oil spills, or 
excessive landscape fragmentation). Such a program would require 
substantial resources to buy and process the stream of imagery required 
to do this kind of systematic monitoring. To date, these resources have 
not been dedicated to implement such a monitoring effort here in the 
US.
    To help evaluate the safety of offshore energy development, we 
recommend forming a partnership among government agencies, industry, 
researchers, citizens groups and other stakeholders to design and 
conduct routine OCS monitoring. SkyTruth has worked with two satellite 
data receiving, processing and analysis facilities that could house 
such a monitoring program: the Center for Southeastern Tropical 
Advanced Remote Sensing (CSTARS) at the University of Miami (http://
cstars.rsmas.miami.edu/), and the Alaska Satellite Facility (ASF) at 
the University of Alaska-Fairbanks (http://www.asf.alaska.edu/).
    Question 7. Concentrated oil spills always have some environmental 
impact--that's why we agree that oil and gas should always be produced 
as safely as possible, under stringent conditions. However, according 
to a report issued in 2003 by the National Academy of Sciences (Oil in 
the Sea III), extraction activities release far less oil each year than 
consumption activities, which in turn release far less than natural 
seepages. In fact, the NAS report found that extraction activities--
which your organization so closely tracks--accounts for just 1 percent 
of the oil entering North American waters each year. Taking this a step 
further, multiple peer-reviewed studies [see http://www.ia.ucsb.edu/pa/
display.aspx?pkey=412] have found that the offshore production of oil 
could actually help reduce the amount that naturally seeps from the 
ocean floor.
    Answer. I understand from SkyTruth's scientific advisors that there 
is a substantial difference in toxicological impact between slow, 
steady-state, widely distributed seepage of weathered and biodegraded 
oil, vs. the sudden concentrated release of raw crude oil into an 
environment that has not evolved mechanisms to accommodate it. The 
deaths of marine mammals, birds, fishes and shellfish that result from 
major oil spills attests to that difference.
    In fact, entirely unique and potentially valuable ecosystems of 
hydrocarbon-metabolizing organisms have developed on the seafloor 
around many of the natural seeps in the Gulf of Mexico. I personally 
observed these organisms on two deep research dives in the Gulf, at 
water depths over 1,000 feet (http://tinyurl.com/y9edj5l). These 
organisms survive by ``eating'' the oil and gas that emerges from the 
seeps. In this case, if oil production actually reduced the flow of oil 
from these natural seeps, it could extinguish rare communities of 
organisms that are not yet well-studied. This would not necessarily be 
a net positive outcome, since these seeps and communities are an 
integral part of the marine environment in this area.
    In addition, natural seeps are not ubiquitous. Background research 
for a NASA-funded study I participated in determined that in US waters, 
most natural oil seeps occur on the continental slope in the deepwater 
Gulf of Mexico, and in the Santa Barbara Channel off southern 
California (http://www.nasa.gov/home/hqnews/1999/99-001.txt).
    Question 8. Although accidental spills or blowouts involve a much 
more concentrated release of oil than natural seeps, much of the 
testimony discusses toxicity of oil in the sea and the idea that its 
continued buildup and dispersal may have toxic effects. Is this any 
less true of a constant seepage of oil from the seabed than from the 1 
percent of the ocean's oil from production related releases?
    Answer. See above. The acute toxicity of a major oil spill can have 
effects on the environment and on economically valuable fisheries that 
can last for decades (http://tinyurl.com/cfekru). Natural seepage, as a 
long-term natural phenomenon, is part of the evolved landscape where it 
occurs; therefore the local ecosystem is adapted to that local flux of 
hydrocarbons.
    Question 9. Have you ever considered that oil production could 
actually have a positive environmental impact, insofar that it could be 
reducing the rate of natural seepages?
    Answer. See above. The arbitrary destruction of unique and 
potentially important seep ecosystems, that have evolved over a long 
period of time, would not necessarily be a positive environmental or 
economic outcome.
    Question 10. Would policies not be more efficient in terms of 
reducing oil in the sea to focus on reducing the amount of oil that is 
spilled during consumption activities, rather than narrowly focusing on 
a part of the process that is believed to account for nearly 30 times 
less spillage each year?
    Answer. As the personal opinion of a seafood lover and a body-
surfing fanatic, I think our nation should diligently work to reduce 
all human-caused sources of oil pollution in the sea.
    Question 11. I understand your organization also tracks and 
projects the effects of domestic mining operations. While you certainly 
have every right to do that, have you considered mining's importance to 
the development of clean energy technologies? Some of the largest wind 
turbines can contain 335 tons of steel (forged with iron ore), nearly 5 
tons of copper, 3 tons of aluminum, and up to 2 tons of rare earths. If 
we refuse to produce our own mineral resources, we will simply cede the 
front end of the clean energy supply chain, fall further behind in the 
development of these technologies, and trade our dependence on foreign 
oil for an equally devastating dependence on foreign minerals. So, do 
you believe the environmental impacts that can be associated with 
hardrock mining outweigh the beneficial effects of the raw minerals and 
metals that it yields?
    Answer. Again, SkyTruth's mission is to help the public and 
decisionmakers become aware of the impacts of mining so that these 
impacts can be honestly acknowledged, debated, and incorporated into 
the planning process for mine approval, bonding, permitting and 
closure. SkyTruth does not have the expertise or resources to engage in 
comprehensive cost-benefit analyses.
    Question 12. Since your career as a geologist began, have you 
observed any meaningful improvements in the development of offshore or 
onshore oil and gas development in the U.S.?
    Answer. Most of the technical advances I'm aware of come in the 
area of seismic data processing and analysis, and drilling and 
completion technology. These advances improve industry's ability to 
profitably locate and produce resources from unconventional reservoirs, 
complex geologic settings, and logistically challenging environments.
    Question 13. Since SkyTruth's inception, can you illustrate any 
success stories in terms of influencing policy and regulation, or 
providing pictures to groups that do so influence, that has resulted in 
meaningfully safer offshore oil and gas development?
    Answer. I'm not aware of any such examples with certainty but I 
consider it possible that our post-Katrina oil spill imagery helped 
spur MMS and industry to rapidly develop new, stricter requirements for 
the mooring systems of mobile drilling units; and spurred NOAA to 
acquire satellite imagery after severe storms, enhancing our nation's 
ability to evaluate and respond to storm-damaged infrastructure.
    Question 14. On November 5th of this year, you headlined a briefing 
in the Capitol, presented by the Sierra Club, on the ``risks associated 
with including offshore drilling in the upcoming climate legislation.'' 
Was a member of Congress a sponsor of this briefing, and was a member 
of Congress present at this briefing?
    Answer. My understanding is that Senator Bill Nelson sponsored this 
briefing, which was attended by one of his staff. No members of 
Congress attended. SkyTruth was invited to provide information on 
recent offshore oil spills, similar to our testimony on November 19. We 
clearly stated that we do not promote any particular legislative or 
policy prescriptions related to offshore drilling.
       Response of John F. Amos to Question From Senator Menendez
    Question 1. The Australian oil spill in the Timor Sea is the latest 
and best known mishap, but isn't it true that in the just the last six 
months there have been other oil spills, in the U.S. and around the 
world? Please describe what you know of these incidents and comment on 
how they illustrate our current risk for spills despite the existence 
of advanced technology and regulatory laws.
    Answer. There have been other oil spills since June 2009, including 
the following:

   Prudhoe Bay pipeline spill, December 2009--an above-ground, 
        onshore pipeline operated by British Petroleum in the Lisburne 
        field ruptured and spilled 46,000 gallons of mixed oil and 
        water onto the tundra (http://dec.alaska.gov/spar/perp/
        response/sum_fy10/091129301/091129301_index.ht m), one of the 
        biggest spills to occur on the North Slope (http://www.adn.com/
        money/industries/oil/prudhoe/story/1046914.html). A 200,000 
        gallon spill from a poorly maintained BP pipeline in March 2006 
        still ranks as the largest North Slope spill (http://
        www.adn.com/money/industries/oil/story/876063.html). Lack of 
        inspections and regular maintenance resulted in corrosion that 
        caused the 2006 spill; the cause of the 2009 spill is under 
        investigation.
   Dubai Star tanker spill, December 2009--a 2007-built tanker 
        carrying jet fuel was at anchor in San Francisco Bay and 
        loading bunker fuel from a barge when a mechanical failure 
        occurred, spilling fuel onto the deck and into the Bay. 
        Responders were immediately activated but the resulting oil 
        slick reached 2 miles in length and 200 yards in width, and was 
        not contained for four hours (http://www.mercurynews.com/
        topstories/ ci_13677172).
   Eugene Island Pipeline, July 2009--a large-diameter pipeline 
        operated by Shell Oil Co. sprang a leak about 30 miles off the 
        Louisiana coast and spilled 63,000 gallons into the Gulf of 
        Mexico (http://www.incidentnews.gov/incident/8061), creating an 
        80-square-mile oil slick before the spill could be contained. 
        The pipeline was installed in 1976 and recently began carrying 
        oil produced from a new platform located in deep water 190 
        miles south of New Orleans. It is common for new producing 
        fields to be tied back in to the existing pipeline network 
        closer to shore. To the best of our knowledge, no cause has yet 
        been determined for this failure.
   Mystery spill, July 2009--tar balls began washing ashore on 
        the beaches of South Padre Island, Texas. The source of the oil 
        is unknown (http://www.mysanantonio.com/news/51521182.html).
   Norway tanker spill, July 2009--One of Norway's worst oil 
        spills ever occurred when a tanker ran aground and spilled part 
        of its cargo of diesel fuel (http://www.independent.co.uk/news/
        world/europe/norway-cleans-up-after-oil-spill-1769714.html). 
        The captain of the vessel failed to call for assistance when 
        his engine failed in stormy conditions.

    These spills result from a mix of old and new technology, but what 
they share (for those where a cause has been established) is the 
element of human error: neglected maintenance, and failing to follow 
the law and best practices. Technology advances can provide a measure 
of protection from spills, but we observe that accidents due to 
equipment failure, bad practices, and bad decisions continue to have 
serious consequences.
                                 ______
                                 
     Responses of Marvin E. Odum to Questions From Senator Bingaman
    Question 1. The Committee heard testimony about the infrastructure 
necessary to support offshore oil and gas production and to bring the 
product onshore. Please state the extent to which your company 
typically is involved in the development, construction or maintenance 
of this infrastructure. If you do not typically handle this directly, 
please indicate the extent to which you are involved with the entities 
who are responsible for this infrastructure.
    Answer. Shell is an integrated energy company with exploration, 
development, and producing capability. We also own and operate pipeline 
transportation infrastructure, which transports crude oil and natural 
gas from offshore platforms to shore for refining and marketing. While 
we do have design engineering capability in-house, we typically manage 
development projects in-house and contract with engineering firms to 
design the facilities. Construction and installation of offshore 
infrastructure is performed by contactors and managed by our project 
engineers and construction staff. Shell operates its own platforms and 
pipelines with the help of contactors that Shell requires be trained to 
Shell and Industry standards.
    In some cases, we determine that facilities (including pipelines 
and platforms) owned and operated by other companies can be used in 
lieu of constructing new infrastructure. Doing so generates efficiency 
and reduces the infrastructure footprint. For example, our Perdido 
facility in the Gulf of Mexico utilized new technology to make a world 
record water depth subsea tie-in to an existing pipeline.
    Question 2. The Committee also heard testimony to the effect that 
the Minerals Management Service's authority ends ``at the water's 
edge.'' Please state your understanding of the various government 
entities--federal, state, or local--responsible for permitting, 
oversight, or spill response related to the infrastructure necessary to 
support offshore production or to bring the product onshore.
    Answer. The Mineral Management Service's (MMS) authority for 
leasing and regulatory enforcement for oil and gas facilities begins at 
the dividing line between the state territorial seas and the Outer 
Continental Shelf (OCS). The territorial seas typically extend from the 
shoreline out to three nautical miles but can extend further out in the 
case of Texas and Florida. The MMS is also required to consult with any 
Federal agency that has regulatory jurisdiction. There are, however, 
some exceptions to the MMS's jurisdiction and a myriad of other federal 
statutes and agencies that impact offshore development and peripheral 
activities. These include:

   For oil spill prevention and response preparedness under the 
        Oil Pollution Act requirements, the President delegated 
        authority over oil and gas facilities--including pipelines--to 
        MMS from the shoreline out to and including the offshore 
        platforms. This includes the state territorial seas.
   The U.S. Coast Guard (USCG) has jurisdiction for actual 
        response to an oil spill from oil and gas facilities and for 
        workplace safety on offshore platforms.
   The Department of Transportation has jurisdiction for the 
        design, construction, and maintenance of offshore pipelines 
        downstream of the oil and gas sales point.
    The Environmental Protection Agency (EPA) has authority to 
        regulate water discharges in the OCS and air emissions in the 
        OCS, except for the central and western Gulf of Mexico.
   The Fish and Wildlife Service and the National Marine 
        Fisheries Service have authority to regulate activities for the 
        protection of marine mammals that could be impacted by offshore 
        projects.

    Offshore facilities are subject to the Federal consistency 
requirements of the Coastal Zone Management Act (CZMA), whereby a 
coastal state can determine whether any project receiving a Federal 
permit is consistent with its coastal management program. If an 
offshore project requires on onshore pipeline or onshore processing 
facilities, that portion of the project is subject to the permitting 
requirements of the coastal state and the local jurisdictions, such as 
zoning requirements of a county.
    Question 3. The Committee heard testimony regarding oil spills that 
occurred during severe storms in the Gulf of Mexico from onshore oil 
and gas infrastructure that supports offshore production--refineries, 
pipelines, and tanks required to receive, process, store and distribute 
oil and gas from offshore fields. Please describe your company's 
involvement in developing and maintaining this onshore infrastructure, 
and your understanding of the governmental entities responsible for 
permitting, oversight and spill response for this infrastructure.
    Answer. Coastal states and local jurisdictions (county, parish, or 
town) will have jurisdiction for onshore pipelines and other 
infrastructure. Shell has constructed and does maintain onshore oil and 
gas infrastructure that support offshore production. This is primarily 
pipelines and pumping and storage facilities along the coast where 
offshore pipelines come ashore. In addition, Shell owns and operates 
refineries, pipelines, and tanks required to receive, process, store 
and distribute oil and gas from offshore fields. These facilities are 
designed to withstand operational and environmental loading, such as 
internal pressures and wind and wave loads as prescribed by Industry 
standards and required by both Federal and state regulations. We 
perform regular inspections of and maintenance on these facilities as 
required by Shell policies and state and Federal regulations.
    A spill or discharge from a facility onshore or offshore that 
causes the release of a pollutant or results in a sheen on the water is 
reported to the National Response Center (NRC), which is the national 
point of contact and operations center for the release of any hazardous 
substances that occurs in the U.S. The NRC will relay information to 
the appropriate federal on-scene coordinators (USCG or EPA, depending 
on the spill's location), which in turn will contact and mobilize other 
federal and state incident teams. The first and most immediate 
response; however, is that of the facility, and the facility's response 
plan is immediately activated in the event of a spill. For this reason, 
the facility's response equipment and the quantity, operation, and 
location of this equipment and supplies are all critical to effective 
spill recovery and clean-up.
    Responses of Marvin E. Odum to Questions From Senator Murkowski
    Question 1. Can you amplify for me your concerns about domestic 
energy production and, if regulatory uncertainty and overly burdensome 
litigation continues to stall development, what we can expect to see in 
terms of driving energy jobs and production overseas? Feel free to 
answer in numbers of actual jobs and numbers of barrels of oil, or 
percentages, whichever is available.
    Answer. When considering an investment in a multi-year, multi-
million or billion dollar exploration and development project, a 
company looks at many factors including the applicable fiscal terms, 
regulatory requirements and legal or political risks. The project's 
attractiveness is impacted if there is a high potential for legal 
challenge or political interference; or if the fiscal terms or the 
regulations are uncertain or unstable.
    It is difficult for me to say how many US oil and gas projects and 
associated jobs have been left ``on the table'' due to a company's 
analysis of these criteria. I can say, first, that oil and gas 
development in the central and western Gulf of Mexico over the last 50 
years has been successful in large part due to clear and equitable 
``rules of the road;'' and second, we are seeing that the ``rules of 
the road'' are not as clear in other areas of the OCS that are opening 
up. This should be a concern to policymakers. Let me provide two 
examples.
    In the OCS off the coast of Alaska, we have experienced a delay of 
three years in acquiring permits necessary to drill exploratory wells 
in the Beaufort Sea and incurred hundreds of million dollars in costs 
for preparation and equipment and personnel mobilization. Limited term 
leases were acquired from MMS in 2005, and we have not been able to 
drill a well. A recent study by the Institute of Social and Economic 
Research of the University of Alaska\1\ quantifies OCS development 
could generate an annual average of 35,000 jobs over the next 50 years 
for the state of Alaska alone. These jobs represent a total payroll of 
$72 billion (2007$) over the 50-year period. OCS-related employment 
growth could more than offset losses from the decline of petroleum 
production on state lands and could help sustain the Alaska economy for 
several decades.
---------------------------------------------------------------------------
    \1\ Economic Analysis of Future Offshore Oil & Gas Development: 
Beaufort Sea, Chukchi Sea, and North Aleutian Basin, Northern Economics 
and the Institute of Social and Economic Research of the University of 
Alaska, March 2009.
---------------------------------------------------------------------------
    In the Eastern Gulf of Mexico, we have received approval from MMS 
for an exploration plan in ultra-deep water, but issuance of an air 
permit from EPA will take an additional 18-24 months. The Gulf of 
Mexico Energy Security Act of 2006 opened several million acres of the 
Eastern Gulf to leasing but failed to adequately provide for 
streamlined air permitting, such as that applied in the central and 
western Gulf of Mexico. To help illustrate the significance of the oil 
and gas industry relative to job creation, a recent study entitled, 
``The Energy Sector: Still a Giant Economic Engine for the Louisiana 
Economy'' by Dr. Loren C. Scott, Ph.D found that in 2005 alone the oil 
and gas industry supported $70.2 billion in sales in Louisiana firms, 
generated over $12.7 billon in household earnings for Louisianans, and 
supported 320,280 jobs in the state.
    Question 2. When evaluating offshore oil and gas development 
opportunities in nations outside the U.S., what are some of the main 
factors a company might take into account when assessing the 
attractiveness of the investment climate?
    Answer. Oil and gas exploration and development opportunities both 
in the U.S. and around the world are evaluated on a number of criteria. 
The internal screening process is designed to ensure that investments 
are made in projects that will successfully grow the business and 
return value to our shareholders. Among the criteria applied to a 
proposed exploration or development project are:

   The recoverable oil and gas volume and price forecast
   The cost to bring the resource to market, including 
        applicable fiscal terms, and any uncertainty about the 
        applicable legal and regulatory regime that might increase 
        project costs
   The ability to meet a schedule, which is affected by 
        litigation and regulatory delays
   The predictability and certainty of gaining a license to 
        operate and the security of that license
   The technology required to develop the resource--does it 
        exist?
   The potential environmental and social factors associated 
        with the project The political stability of the resource 
        holding country
   Access to skilled workers

    Question 3. When we talk about environmental stewardship on a 
global level, knowing what we know about the U.S. program, is it better 
or worse for the world's environment when the U.S. adds to its 
environmental restrictions things like shorter lease terms and 
heightened regulatory burdens?
    Answer. Like any policy that impacts the factors listed above (in 
Murkowski Response No. 2), shorter lease terms and heightened 
regulatory burdens reduce the attractiveness and global competitiveness 
of U.S. energy prospects. Failure to provide for adequate timeframes to 
explore and properly evaluate offshore leaseholds before having to make 
a multi-million dollar decision would impact the viability and 
prospective value of domestic lease rights and could influence the 
energy industry to pursue more attractive foreign alternatives. 
Unnecessary regulatory burdens have a similar economic impact. Because 
U.S. demand will need to be met, the effect of overly burdensome 
regulation is to force the importation of foreign energy sources that 
may have greater environmental impacts or risks.
    The U.S. has very high safety standards and environmental controls. 
The environmental record over the past 40 years, as documented by the 
Department of Interior and the National Academy of Sciences, attests 
that such a regulatory framework is effective and is continuously 
improving. We know this because other countries copy what we have here 
in the U.S. On the other side of the equation, for every barrel of oil 
or TCF of natural gas that the U.S. imports rather than produces 
domestically, the U.S. effectively increases environmental risks while 
exporting the environmental effects of production and transport.
    Any policies that unnecessarily favor less stringent environmental 
alternatives are obviously contrary to U.S. goals regarding global 
environmental stewardship.
    When you add the tremendous economic and national security benefits 
from domestic production compared to imports, the net benefits weigh 
greatly in favor of domestic development of our energy resources.
    Question 4. While EIA has said that increased domestic offshore oil 
and gas production would not result in meaningful energy price 
differences for Americans, do you think that a major ramp up of 
development in the Atlantic, Pacific, Eastern Gulf, and Alaska OCS 
would send a market signal that could, in fact, affect world price of 
oil?
    Answer. It is very difficult to predict oil prices with any degree 
of certainty--given the multitude of factors, anticipated and 
unanticipated--which can come into play over time. Any price impact 
would also depend on whether more investment in productive capacity for 
oil in the U.S. OCS adds to, or substitutes for, investment in capacity 
in other regions of the world. In the first case, this could result in 
a more moderate price environment. It the second case, it may not, 
depending on the relative cost and volume profiles of competing 
developments. Increased access to development options in the lower 48 
OCS and Alaska OCS would clearly improve the set of investment choices 
available to the oil and gas industry and allow growth of additional 
producing capacity and supply where economic parameters and market 
needs are most favorable.

          a. Is the analysis the same for natural gas prices as oil, 
        even though natural gas is not based on a world price?

    Answer. Although gas prices in the U.S. tend to be more closely 
related to supply and demand developments in North America, rather than 
global trends, similar considerations to oil apply.
    Question 5. Senator Menendez indicated that not only would price be 
unaffected by increased domestic offshore drilling, but that 
``production'' would be unaffected by increased domestic offshore 
drilling. Is it accurate to imply that increasing production would have 
no effect on energy security?
    Answer. As indicated in my response to question #4, we do not agree 
with the Senator's basic assumption. If we assume, however, that 
``energy security'' means a stable energy supply that promotes and 
fuels a healthy economy, then there can be no doubt that increasing 
domestic production will contribute to domestic energy security.

   Each barrel of oil produced in the U.S. will displace a 
        barrel of oil imported from abroad and is a more secure supply 
        source.
   Nearly $1 billion is exported from the U.S. to other nations 
        in order to import oil. This export of U.S. dollars has an 
        adverse effect on our balance of trade and therefore, an 
        adverse impact on the overall economic health of the U.S. 
        economy.
   Exploration and production in the U.S. will create jobs. 
        Over 9 million people are employed directly and indirectly by 
        the domestic oil and gas industry. A study by the University of 
        Alaska concluded that developing the vast resources off the 
        coast of Alaska will create 35,000 annual jobs in Alaska and 
        the lower 48 states.
   Exploration and production on U.S. land creates revenue for 
        the federal government in the form of bonus bids, rentals and 
        royalties. The industry is the largest revenue source for the 
        federal government after the Internal Revenue Service.
   Increasing oil and gas production in the U.S. will generate 
        tax revenues for federal, state and local governments in the 
        form of income taxes, sales taxes, property taxes and the like.

    In sum, by creating more jobs, more government revenue, and more 
energy, increasing domestic production will substantially enhance the 
health of the economy and make us less dependent on foreign sources. A 
healthy economy will be essential as we move to invest in a lower 
carbon future.
    Question 6. Environmental stewardship has improved through 
directional drilling and subsea tiebacks, among other improvements, as 
I understand it. Can you describe your environmental record in terms of 
exploration, development, and production for both Alaska and the Gulf 
of Mexico?
    Answer. I refer you to my written testimony submitted to the 
Committee where I covered our environmental record, which I was not 
able to go into detail during my oral testimony. Let me provide a 
condensed response for you here. The oil and gas industry can develop 
offshore (and onshore) resources with a footprint smaller than ever 
before. This is an important aspect of our environmental stewardship. 
It is possible to develop very large sub-surface areas with a very 
small surface expression. The technologies that enable this can be 
applied both near shore and in deepwater. Let me describe some of the 
technologies.
    Our deepwater technology program focuses on equipment and 
integrated systems required to produce hydrocarbons with fewer and 
smaller surface facilities and reduced environmental impacts. This 
involves the optimal use of subsea production systems and new floating 
drilling and production systems. New technologies include subsea 
separation and boosting, subsea re-injection of produced water and 
long-distance pumping with flow assurance. All of our deepwater 
projects go through an internal carbon footprint and environment impact 
assessment as part of the tollgates to final investment decisions.
    Gulf of Mexico. Perdido is an ultra-deep water project in the Gulf 
of Mexico that illustrates the industry's ingenuity and smaller 
footprint. Three different offshore fields covering about 90 square 
miles in the OCS will be tied into a single floating surface facility 
at Perdido. Technically, the project provides the infrastructure that 
could enable future oil and gas volumes from a 30-mile radius. That 
means that about a 3,000-square-mile area can be developed sharing one 
floating facility.
    Alaska. Shell hopes to drill two exploratory wells in the Alaska 
OCS in 2010. Shell has created an unprecedented oil spill response 
capability to support its drilling plans in the Beaufort and Chukchi 
Seas. We have a dedicated fleet of vessels and specialized oil 
containment equipment, which will be on-site 24/7. Spill recovery 
equipment is state of the art and widely acknowledged as proven systems 
under cold-climate conditions and designed to remove the worst-case 
discharge. The Nanuq is an ice-class purpose-built vessel, which can 
begin recovery within an hour of any incident large or small.
    Question 7. Seismic data acquisition has also improved over the 
years. Please describe any environmental benefit that may be conferred 
as a result, and feel free to discuss any additional benefits to the 
OCS program through this technology.
    Answer. Environmental performance of all aspects of our business 
continues to improve as we understand and incorporate the latest 
information into the way we work. These improvements, such as passive 
acoustic monitoring and air gun technology, go a long way in mitigating 
the environmental effects of seismic exploration. Operational 
commitment is also a factor. In the Alaska OCS, for instance, Shell 
seismic vessels followed a gradual sound ramp up profile at 
commencement of any seismic survey, to give marine mammals time to 
clear the area. We also maintained constant vigilance for marine 
mammals with trained native observers on board the seismic ships and 
with airborne monitors flying ahead on its planned course. Seismic 
operations ceased with any sighting and did not restart until the area 
was clear.
    Still, the oil and gas industry, geophysical contractors, and 
governmental regulatory agencies continue to further scientific 
understanding of the effects of sound on marine life, to investigate if 
additional improvements can be made. For example, a joint industry 
program (JIP) organized by the International Association of Oil and Gas 
Producers has provided approximately $24 million USD to advance 
scientific understanding of the effects of sound generated by offshore 
oil and gas exploration and production operations on marine mammals, 
fish, and reptiles through independent research by some of the leading 
scientists and institutions in the field. This work is available to 
all--the public, the scientific community, and international regulators 
at: http://www.soundandmarinelife.org/
    In addition to mitigating the environmental impacts of seismic 
exploration, improvements in seismic data acquisition include 3-D 
seismic, wide azimuth seismic, and enhanced processing and 
visualization. These improvements allow us to see below salt 
formations, which typically ``whiteout'' or blur seismic data and 
better pinpoint oil and gas reservoirs. This results in a smaller 
environmental footprint (i.e., fewer exploratory and appraisal wells, 
fewer platforms, and more productive wells). It also better enables us 
to locate potential hazards to drilling, such as shallow gas 
formations.
    Question 8. How are competing uses in the offshore areas dealt with 
currently under existing laws and regulations--does this work and are 
changes needed?
    Answer. We don't believe that significant changes are needed to 
balance multiple-uses of offshore areas. There is a robust, effective 
system already in place to balance environmental stewardship and 
responsible energy development of the OCS that takes into consideration 
multiple-uses of the ocean. The leasing process established by the 
Outer Continental Shelf Lands Act requires the Secretary of Interior to 
consult with other agencies to obtain information pertinent to 
responsible OCS oil and gas leasing, exploration, and development 
decisions as well as to monitor the human, marine, and coastal 
environments. The MMS puts stipulations on operations in place during 
the planning process to minimize and mitigate potential conflicts 
between different user groups. The MMS is also obligated to incorporate 
public concern and potential conflicts between different user groups 
through the public participation process and response.
    The system works in the Gulf of Mexico. For example, the oil and 
gas industry has co-existed with the sport and commercial fishing 
industry in the Gulf for decades and also co-exists within the 
protected boundaries of the Flower Garden Banks National Marine 
Sanctuary (FGBNMS). In the Gulf, it's common for fishermen to target 
areas around platforms because they serve as artificial habitat for so 
many important species. A 2002 study from the MMS reported that the 
total economic output to Gulf coastal counties associated with sport 
fishing and diving activities near oil and gas structures is more than 
$300 million per year\2\. At the Flower Garden Banks National Marine 
Sanctuary, 25 years of stringent environmental monitoring by NOAA, MMS, 
and industry has found no contamination or degradation of corals due to 
oil and gas activity, even though hundreds of exploratory wells have 
been drilled, and there are currently 10 production platforms and 
approx. 160 km of pipelines within 4 miles of the sanctuary boundary.
---------------------------------------------------------------------------
    \2\ Hiett, R.L. and J.W. Milon. 2001. Economic Impact of 
Recreational Fishing and Diving Associated with Offshore Oil and Gas 
Structures in the Gulf of Mexico: Final Report. OCS Study MMS 2002-010. 
U.S. Dept. of the Interior, Minerals Management Service, Gulf of Mexico 
OCS Region, New Orleans, LA. 98 pp.
---------------------------------------------------------------------------
       Response of Marvin E. Odum to Question From Senator Dorgan
    Question 1. Earlier this year in this committee, I proposed an 
amendment which is one of the primary reasons for the oversight 
hearing. Through my approach, the MMS would be authorized to go through 
a rulemaking process to issue regulations and would consider a range of 
local and other conditions during that process. In federal waters, the 
Secretary would establish zones which would determine what kind of 
restrictions would be placed on surface activities. The onus is then 
placed on individual companies to develop innovative technology 
solutions in those zones. Renewable development (i.e. wind turbines 
offshore) and previously existing oil and gas projects would be exempt. 
I believe that if we could pursue this approach, it is possible to 
deploy innovative technology applications to limit the environmental 
footprint and significantly reduce the visual impact while increasing 
access to resources.
    Given your company's experience with projects in other regions and 
the testimony that you have presented, do you believe that this is a 
concept that you could support?
    Answer. The footprint and visual impact of offshore oil and gas 
activities could be addressed through the process you describe. As new 
areas of the Outer Continental Shelf (OCS) are opened to oil and gas 
leasing, perhaps such a proposal merits consideration. I will note that 
the federal agencies currently have tools to protect sensitive areas 
offshore. For example, MMS requires buffer zones around corals and 
chemosynthetic communities on the seafloor and around marine protected 
areas. Currently, States control activities in their Territorial Seas 
(generally three miles from the coast) and require that offshore 
projects do not conflict with coastal management plans, which can 
include view shed criteria.
     Responses of Marvin E. Odum to Questions From Senator Menendez
    Question 1. Much of your testimony has focused on the spill 
prevention capacity of your company. But realistically, an accident is 
an accident, and by its very nature cannot be fully anticipated or 
prevented. Yet, some preliminary reports have shown that the recent 
Australian oil spill in the Timor Sea happened as a result of 
negligence on the part of its operator. On this issue, how can your 
company ensure that human error is not a factor in drilling operations? 
If we cannot prevent human error, are we not then to assume that 
further accidents could happen?
    Answer. I invite you and your staff to tour Shell's facilities to 
meet the men and women involved with our operations and the technology 
they employ to ensure the safety and integrity of our operations. In my 
testimony, I described some of the technology, such as the multiple 
redundant barriers in place when drilling exploration wells. I 
described the exploration and production control rooms that are manned 
24/7 and see in real time the operations that occur offshore. Should 
there be any anomaly in those operations, experts both on-site and 
onshore work to understand the anomaly and resolve it before it becomes 
an incident. Shell takes extreme measures to avoid incidents that will 
pose a danger to our employees, to the residents of the communities in 
which we operate, or to the environment.
    Question 2. One of the troubling aspects of the Australian spill is 
that it took three weeks before any efforts to plug the leak were even 
attempted. This was the case despite the fact that the rig is in 
relatively shallow water and mild weather conditions were present. How 
would Shell be able to respond to a well blow-out if it happened in the 
wake of a disaster similar to Hurricane Katrina? Or, if it happened in 
the frigid conditions of the Beaufort Sea, or far offshore in the 
Chukchi Sea, in the winter? How long do you think it would take to stop 
a spill and clean it up under those conditions?
    Answer. Further to my response to the question above, Shell has a 
robust contingency plan in place to deal with a loss of well control. 
In the Gulf of Mexico, all drilling operations are shutdown prior to a 
hurricane entering the Gulf. If a well blow-out occurred as a result of 
a hurricane, the same relief well drilling plan is put in place--there 
is no difference. Access to a suitable drilling rig would not be a 
problem.
    In Alaska, the drillship is equipped with special devices that 
allow it to disconnect from the well quickly (within minutes) and move 
away from the site to avoid damage by the blowout. This allows the same 
drillship to drill the relief well for the blowout. In the Timor Sea 
incident the original rig was a jackup rig could not escape quickly, so 
it was evacuated at the beginning of the leak. A second jackup rig had 
to be activated, equipped for service, manned, mobilized to the well 
site, jacked to the proper height, a relief well planned and drilling 
operations initiated all while the leak was still in progress.
    The MMS requires all offshore operators to have a relief well 
drilling plan with a blowout kill plan before initiating well drilling 
operations. Adequate casing, wellheads, the guide base, cement, 
drilling fluids, a second Blow Out Preventor (BOP) and all other 
components of the relief well must be aboard the drillship or its 
supporting fleet or within ``easy reach''. Unlike the Timor Sea 
incident, in its offshore U.S. operations, Shell will be ready to 
initiate the relief well drilling process almost immediately.
    It is difficult to say how long it would take to stop a spill and 
clean it up since there are a variety of factors and conditions that 
will affect this. We have designed our systems to minimize this time as 
much as reasonably possible.
     Responses of Marvin E. Odum to Questions From Senator Sessions
    Question 1. In your opinion, do shorter lease terms, an increase in 
royalties, and an increase in taxes play a part in determining which 
country your company with produce?
    Answer. Yes. Although there are other intangible factors that play 
a role in our investment decisions, economic reality dictates that such 
costs and lease terms are a critical determinant. We have a serious 
responsibility to our shareholders to thoughtfully and analytically 
select the most favorable economic alternative.
    Question 2. The oil and gas industry directly and indirectly employ 
9.2 million people, so could someone explain to me why with double 
digit unemployment numbers are we not moving forward with increasing 
domestic production and employing individuals here at home?
    Answer. Shell supports government policies that will enable the 
growth of domestic production and believes that increasing domestic oil 
and gas production is a ``win-win-win.'' Such policies will generate 
jobs, contribute to government revenues and improve the overall US 
economy. As noted, over 9 million people are employed directly and 
indirectly by the domestic oil and gas industry. A study by the 
University of Alaska concluded that developing the vast resources off 
the coast of Alaska would create 35,000 annual jobs in Alaska and the 
lower 48 states.
    Question 3. In total, the OCS development has generated $190 
billion in federal revenue from bonus bids and royalty payments. Its 
puzzles me with record breaking deficit numbers, why the 5 year plan 
for OCS is getting delayed when it could produce federal revenues. Does 
anyone have an opinion on this?
    Answer. With all due respect, the US Department of the Interior is 
in the best position to explain the reason for delay in issuing the 5-
year OCS leasing plan. It is true that the oil and gas industry makes a 
substantial contribution to federal revenues each year in the form of 
bonus bids, rentals and royalties, as well as in tax revenues generated 
by associated jobs.
    Question 4. What is the role of the National Oceanic and 
Atmospheric Administration (NOAA) in OCS development? NOAA 
Administrator Lubchenco sent a letter to MMS dated September 21, 2009, 
which also appeared the LA Times commenting on the OCS proposed 5-year 
plan--2010-2015. However, NOAA later claimed it was an unofficial 
letter. How is MMS bound or inclined to react to this letter's 
contents?
    Answer. With all due respect, the MMS is better positioned to 
comment on whether or not it will react to or be bound by the Sept. 21, 
2009 letter that NOAA submitted and withdrew. I read the letter and 
believe that it contained serious factual inaccuracies, unfounded 
allegations and important omissions. Therefore, I sent a response to 
the NOAA Administrator in an attempt to set the record straight. I 
attach that letter here for your review.
    Question 5. How many agencies does an oil and natural gas company 
have to deal with to produce from a federal offshore lease? Does this 
number of different and competing bureaucracies make operations in the 
OCS more efficient or less efficient?
    Answer. I have attempted to answer the question of regulatory 
jurisdiction in my response to Senator Bingaman's question #2. The 
number of agencies varies by the nature of the specific activity, 
location of the offshore lease and whether the state and local 
jurisdictions are involved. Suffice it to say, there are many agencies. 
However, the number of agencies and regulations is not as problematic 
as agencies not working together effectively and agencies whose policy 
and objectives are at odds with the responsible development of federal 
OCS resources.
    For example, if an agency's mission is primarily conservation 
related, it may not diligently and objectively review and process 
regulatory approvals unless a national federal policy provides such 
guidance.
    I call your attention, though, to the effectiveness of the 
regulatory framework (and the corresponding environmental record) of 
the central and western Gulf of Mexico. The regulatory agencies work 
cooperatively to review and process regulatory approvals and maintain 
the highest standard of environmental and safety standards of anywhere 
in the world. I question why this model can't be replicated in other 
areas of the OCS. We strongly support the provision in the Senate 
Energy bill for an Alaska OCS permitting office with direction to major 
federal agencies to work cooperatively to process permits.
    Question 6. We've heard the U.S. ranks very high in environmental 
stewardship. How high does the U.S. rank in terms of applying its 
stewardship policies in such a way as to provide certainty to the 
process of leasing and developing the OCS?
    Answer. The environmental statutes and regulatory regimes that 
implement those statutes are among the most protective in the world. 
That is why many say that the US ranks very high in environmental 
stewardship. In the same vein, the US offshore leasing program in the 
Gulf of Mexico has been among the most transparent and certain in the 
world. As federal leasing of other offshore areas occurs, there appears 
to be valid reason to be concerned that the ``rules of the road'' are 
less clear and less certain.
    The example is the OCS off Alaska. The federal government has held 
lease sales there, awarded leases and collected billions of dollars in 
bonus bids and rentals. Shell paid about $2.2 billion for leases; we 
invested about another $1 billion; and have been ``shovel ready'' to 
explore since 2007. Due to legal and regulatory roadblocks, we have not 
yet been able to drill a single exploration well. We have urged 
policymakers to address this dilemma.
                                 ______
                                 
      Response of Jeffrey Short to Question From Senator Bingaman
    Question 1. You testified that current scientific knowledge related 
to the impacts of offshore oil and gas production on the marine 
environment is inadequate. You recommended that additional research be 
conducted. Please be more specific about the highest priority areas of 
research that you believe are necessary. Also state which research 
entities or agencies you believe to be best suited to conduct this 
priority research.
    Answer. My written statement details, at a broad level, the 
scientific research that must be undertaken before we can make informed 
decisions about whether oil and gas production should occur offshore 
and, if so, when, where, and how. We cannot fully evaluate the 
potential impacts of production without understanding the marine 
ecosystem, and the necessary steps to beginning that understanding are 
outlined in my written statement.
    The three priority areas for research are in the toxicology of oil 
pollution, in oil spill cleanup and mitigation technology, and in 
gathering basic scientific information in Arctic coastal and marine 
environments. In toxicology, research on the biochemical mechanisms of 
toxic impacts of polycyclic aromatic hydrocarbons (PAH) on developing 
embryos is likely to be immediately rewarding, and the toxicity of 
other oil components such as the alkylbenzenes (Rowland et al. 2001) 
that have been identified as toxic as a class but have not been 
examined in detail are also likely to be fruitful. In cleanup and 
mitigation, quantitative methods for assessing the efficacy of existing 
and new methods are urgently needed. Cleanup and mitigation methods are 
typically ``evaluated'' with little or no regard for routine scientific 
practices elsewhere such as use of positive and negative controls, 
comparison with reference standards, determination of precision through 
replication, etc. In general, much higher standards of scientific 
evaluation should be mandated for qualifying performance claims for 
these technologies.
    As I highlighted in my testimony and below, we should have 
sufficient understanding of ecosystems to conduct a quantitative risk 
assessment of impacts. Our understanding of Arctic marine ecosystems is 
especially deficient. With few exceptions we do not know even basic 
information such as the abundance and distribution of marine species. A 
large expansion of oil and gas activities is occurring in the U.S. 
portion of the Arctic Ocean. An investment in research to at least 
attain a basic understanding of Arctic ecosystems is necessary to 
inform the public and decision makers of the risks and trade-offs to 
developing this region.
    The agency most qualified to perform research in these areas is the 
National Oceanic and Atmospheric Administration (NOAA). Scientists at 
NOAA discovered the embryotoxic effects of PAH and have done subsequent 
pioneering studies on the biochemical mechanisms responsible. Modest 
but sustained support for continuing these studies is almost certain to 
lead to practically useful insights regarding the ways that oil affects 
wildlife, and possibly humans as well. NOAA's Office of Response and 
Restoration has the most direct experience with using practical methods 
for mitigating oil spills when they occur, and hence is best equipped 
to evaluate technological improvements. NOAA is also well suited to 
conduct much of the research necessary to gain a better understanding 
of Arctic marine ecosystems.
     Responses of Jeffrey Short to Questions From Senator Murkowski
    Question 1. I agree with your testimony that there should be a plan 
that balances ecosystems with resource management. I also certainly 
agree with best available technology and continuing research on how to 
better prevent and mitigate risks for offshore development. My question 
is, since there is always room for improvement, does that mean that the 
science may never quite be good enough for some to accept offshore 
development?
    Answer. Thank you, Senator Murkowski, for your support of balanced 
and comprehensive planning. Please do not hesitate to ask if there is 
anything I or my colleagues can do to further your efforts in that 
regard.
    With regard to your specific question, while it may be true that 
some people are never satisfied with anything, the more relevant issue 
here is how much science is adequate. Just because scientific enquiry 
is boundless should not be used as an excuse to forego investment in 
enough science to achieve a basic understanding of ecosystem 
functioning. In my view, adequate science here means sufficient 
understanding of the ecosystem to conduct a quantitative risk 
assessment of impacts that may occur because of offshore development. 
Ability to couch impacts in terms of a known distribution of likely 
outcomes is key here, as distinct from unsupported opinions of agency 
staff, contractors and others, all having varying degrees of 
credentials, which has typically been the case to the present.
    By definition, ``risk'' is uncertainty that is quantifiable. This 
implies that the most important sources of risk are known, as well as 
the uncertainties associated with each source. Applied to a risk 
assessment of ecosystem impacts from defined events such as an oil 
spill or well blowout, a quantitative assessment of ecosystem risks 
would require a basic understanding of how the ecosystem works. This 
means knowledge of the major ecosystem components (i.e. species) and 
their food web dependencies, including their seasonal variability. Once 
a basic food-web is constructed, comprising the dominant species, the 
energy flows connecting them and the natural variability of these 
species or functional equivalents, it is possible to run Monte Carlo 
simulations of effects from impact scenarios. These simulations allow 
estimation of the probability of specified responses, and hence a 
quantitative specification of risk.
    Question 2. Your testimony indicates that 4 years after the Valdez 
spill, ``monitoring was terminated.'' I want to give you a chance to 
clarify this; has there really been no monitoring of the coastal areas 
around the Valdez spill since 1993?
    Answer. Thank you for the opportunity to clarify this statement. I 
was referring to the monitoring done by Shoreline Cleanup Assessment 
Teams (SCAT) to evaluate the persistence of oil remaining on beaches 
oiled by the 1989 Exxon Valdez oil spill. This monitoring was 
terminated after the summer of 1993, when it was determined that 
natural dispersion and degradation processes would remove any remaining 
oil. Subsequently, research that I led in 2001 demonstrated that the 
assumptions underlying this determination were substantially incorrect 
(see Short et al. 2004, 2006).
    In particular, the 1993 decision assumed that (1) observation and 
persistence of oil on the surface of beaches was closely correlated 
with the location of oil beneath the surface (2) that the subsurface 
oil was located in the upper intertidal; (3) that clay-oil flocculation 
processes, recently discovered to be an apparently effective natural 
dispersion process (Bragg and Yang 1993) would rapidly disperse 
remaining subsurface oil, and (4) microbial degradation would 
effectively degrade any remaining oil within beaches. All four of these 
assumptions turned out to be incorrect. Subsequent studies carried out 
after 2000 showed that the location of visually-evident surface oil and 
obscured subsurface oil were poorly correlated, so that monitoring oil 
persistence at locations where surface oil was present (and where most 
monitoring effort was directed) gave little information on the 
persistence of subsurface oil. Surface oil was located mainly in the 
upper intertidal, whereas subsurface oil was concentrated near the mid-
tide level on beaches. These two factors led to mis-allocations of 
monitoring effort for subsurface oil from 1990 to 1993, so that efforts 
were put toward the wrong beaches and the wrong places on beaches.
    The unanticipated persistence of oil in some locations shows that 
natural dispersion processes including clay-oil flocculation and 
microbial degradation were less effective than expected. Indeed, in 
some places the composition of the oil remaining today is similar to 
that of oil present near the end of 1989 (Short et al. 2007a). The 
reasons for this persistence are currently under investigation.
    The surprising persistence of oil on beaches of Prince William 
Sound following the Exxon Valdez oil spill serves as an excellent 
example of my primary point: that management decisions regarding the 
environmental impacts of oil are far too often based on unwarranted 
assumptions that usually go unchallenged. Tragic though it was, the 
Exxon Valdez oil spill provided a rare opportunity to evaluate some of 
these assumptions, because the remote setting was conducive to 
evaluating impacts with scant interference from other sources of 
pollution, and because the settlement funds provided a relatively ample 
source of funding for the scientific studies. These studies led to 
realization that oil was not only much more persistent than expected, 
it was also much more toxic to fish embryos (Carls et al. 1999, Heintz 
et al. 1999), and the toxic components were not those thought to be 
primarily responsible for toxicity prior to 1989 (Incardona et al. 
2004). These discoveries clearly indicate that much more needs to be 
learned about how oil affects marine ecosystems to support sound 
management decisions, and the agency best positioned to investigate 
these issues is the National Oceanic and Atmospheric Administration.
    Question 3. Are you or your organization familiar with the 
population of sperm whales in the Gulf of Mexico?
    Answer. Oceana is not familiar with the population of sperm whales 
in the Gulf of Mexico.

          a. Has the population increased or decreased as the Gulf 
        continues to be developed?

    Answer. Oceana is not familiar with the status of the sperm whale 
population in the Gulf of Mexico.

          b. Would you agree that we continue to learn new information 
        about marine mammals through monitoring programs associated 
        directly with, and dependent upon, deepwater oil and natural 
        gas programs?

    Answer. The collection of new information about marine life in 
general helps us better understand how marine ecosystems are structured 
and function. We should, however, strive to understand ecosystems 
before industrial activities proceed in order to better assess the risk 
of activities to the health of the ecosystem and provide critical 
baseline information. Monitoring that is conducted during operations 
can then be compared to baseline conditions to help determine if 
impacts have occurred. Such monitoring should be independently 
verified.

          c. Is there any conclusive or empirical evidence that these 
        marine mammals have been harmed by seismic activity in the Gulf 
        of Mexico?

    Answer. I am not familiar with research that has been done on the 
impacts of seismic activity in the Gulf of Mexico, but it is my 
understanding that MMS did commission a study that showed some effects 
of seismic on sperm whales. Without adequate baseline information, it 
is extremely difficult to demonstrate harm to a population of marine 
mammals. Furthermore, marine mammals can be especially difficult to 
study. If there is a lack of sufficient science to determine effects, 
that is not necessarily an indicator of a lack of effects.
    Question 4. Concentrated oil spills always have some environmental 
impact--that's why we agree that oil and gas should always be produced 
as safely as possible, under stringent conditions. However, according 
to a report issued in 2003 by the National Academy of Sciences (Oil in 
the Sea III), extraction activities release far less oil each year than 
consumption activities, which in turn release far less than natural 
seepages. In fact, the NAS report found that extraction activities--
which your organization so closely tracks--accounts for just 1 percent 
of the oil entering North American waters each year. Taking this a step 
further, multiple peerreviewed studies [see http://www.ia.ucsb.edu/pa/
display.aspx?pkey=412] have found that the offshore production of oil 
could actually help reduce the amount that naturally seeps from the 
ocean floor.

          a. Although accidental spills or blowouts involve a much more 
        concentrated release of oil than natural seeps, much of your 
        testimony discusses toxicity of oil in the sea and the idea 
        that its continued buildup and dispersal may have toxic or 
        poisoning effects. Is this risk any less for a constant seepage 
        of oil from the seabed than from the 1 percent of the ocean's 
        oil from production related releases?

    Answer. Thank you for the opportunity to elaborate on this issue. 
Comparing the total amount of oil released by seeps and development is 
diverting Congress and the public from the real issue here. The fact 
that natural seeps release oil into the environment has little bearing 
on the risks posed by catastrophic spills and blowouts, or even on 
chronic, intermittent releases of oil related to development 
activities.
    Natural seeps provide a reliable source of reduced carbon for 
microbial communities that detoxify the oil by assimilating and 
decomposing the toxic components. More complex and mobile organisms are 
able to avoid areas impacted by the toxic components of oil seeps, thus 
avoiding the toxic effects of oil. Many sessile organisms have adapted 
over long time periods to such seeps, which is not possible in an 
accidental spill. Furthermore, pollution from oil seeps is largely 
unavoidable. In contrast, pollution from oil spills, blowouts and even 
urban runoff are more variable in both time and space, and hence enter 
environments where populations of microbes capable of decomposing the 
toxic components of oil are low, more complex organisms are not 
habituated to inputs.

          b. Have you ever considered that oil production could 
        actually have a positive environmental impact, insofar that it 
        could be reducing the rate of natural seepages?

    Answer. I am not aware of any scientific data supporting this 
contention. In my studies of natural oil seeps in Alaska (Short et al. 
2007b), my petroleum geologist colleagues have remarked that while oil 
seeps reliably indicate the regional presence of oil, they are 
typically poor indicators of specific, economically attractive deposits 
because the seepage usually means that most of the oil associated with 
the deposit from which it arises has already seeped away. To the extent 
that this is true, tapping unconnected oil deposits nearby would have 
little or no effect on oil seepage rates.

          c. Would policies not be more efficient in terms of reducing 
        oil in the sea to focus on reducing the amount of oil that is 
        spilled during consumption activities, rather than narrowly 
        focusing on a part of the process that is believed to account 
        for nearly 30 times less spillage each year? In other words, 
        should more taxpayer dollars be directed towards dealing with 
        production or consumption spills?

    Answer. Careful assessment of the impacts of oil released into the 
environment from consumption activities deserves far more scientific 
scrutiny than has so far been devoted to it. At present, too little is 
known about these impacts to provide a reasonably sound basis for 
resolving this question.
    Question 5. Your testimony states ``When we make the effort to look 
closely. . .fundamental surprises typically come to light. These 
discoveries overturn predictions of impacts often stated with unfounded 
confidence beforehand that in retrospect turnout to have been based on 
little more than conjecture.'' Does this principle ever apply to 
predictions of both environmental organizations as well as offshore 
drilling proponents in terms of what an impact might or might not turn 
out to be?
    Answer. Again, thank you for the opportunity to clarify this 
important point. I want to be clear that my answer is emphatically in 
the affirmative. If, on the basis of rigorously conducted science, a 
practice or activity can be shown to have negligible or otherwise 
environmentally acceptable impacts, then we should not waste time or 
resources to oppose them, and I am personally committed to this 
principle.
    For example, in 2001 I participated in a study of toxic 
hydrocarbons in the discharge from the ballast water treatment facility 
at the Alyeska marine oil terminal into Port Valdez, Alaska (Salazar et 
al. 2002). Our study clearly showed that the most contaminated site 
located just above the discharge diffuser was cleaner than the 
supposedly clean, un-impacted reference site in similar studies of the 
Sullom Voe marine oil terminal in the United Kingdom. I was 
subsequently quite vocal in my defense of the outstanding job done by 
Alyeska to treat their discharges, and our study effectively laid to 
rest concerns regarding suspected effects of these discharges on the 
biological resources of Port Valdez. So as a matter of principle as 
well as practice, I strongly believe that when industry can be clearly 
shown to be doing an environmentally responsible job, they deserve the 
support and applause of the environmental community.
    Question 6. Presume a major increase in efficiencies, biofuels, 
electric cars, and other efforts to reduce American consumption of oil, 
but that millions of barrels a day will still be consumed for many 
decades to come. What is Oceana's position on where, specifically, such 
oil should come from, and if there is no such position, why not?
    Answer. Careful review of America's oil production and consumption 
figures show that a major national initiative to reduce dependence on 
oil could eliminate our dependence on foreign oil, especially oil from 
countries other than Canada and Mexico, our closest trading partners. 
Based on data for 2008 from the Energy Information Agency, the United 
States consumed 19.5 million barrels per day (MBD), of which 11.1 MBD 
was imported (EIA 2009). Of this, 9.0 MBD was used for gasoline for 
transportation, 4.6 MBD for diesel fuel and home heating oil (not 
including jet fuel), and 1.9 MBD for liquid petroleum gas. Reducing our 
consumption through conservation, alternative energy sources and 
increased efficiencies of these three components of consumption by 72%, 
an achievable goal, would eliminate our need for imported oil entirely. 
Assuming the 2.5 MBD we import from Canada remains a reliable 
additional source reduces our conservation requirement to 55% and our 
imports from Mexico reduce it even further.\1\
---------------------------------------------------------------------------
    \1\ Note that these scenarios assume no reductions in jet fuel 
consumption through conservation or increased energy efficiency.
---------------------------------------------------------------------------
    Such a conservation program would have multiple benefits for the 
United States. It would dramatically reduce our balance of payments, 
increase our latitude in foreign policy with respect to countries from 
whom we import oil and who are less friendly toward the United States 
than are Canada and Mexico, dramatically lower our emissions of carbon 
dioxide thus helping to mitigate global warming, and substantially 
lower the cost of all petroleum products that are still used, thus 
enhancing the efficiency of our economy. For as is well known the price 
of petroleum is very sensitive to supply, and were the United States to 
effectively increase supply by 10 MBD through conservation, increased 
energy efficiency and alternative energy, the price of petroleum would 
plummet.
    Question 7. Since Oceana's inception, can you illustrate any 
success stories in terms of influencing policy and regulation that has 
resulted in meaningfully safer offshore oil and gas development?
    Answer. In the nearly ten years of Oceana's existence, decisions 
about offshore oil and gas activities have focused on opening new areas 
to leasing and increasing seismic and other activities. Those decisions 
have been made without a comparable increase in available science or 
clean-up technology.
                                 ______
                                 
   Responses of Walter Cruickshank to Questions From Senator Bingaman
    Question 1. Offshore oil and gas production involves not only 
production wells, but also considerable infrastructure to support those 
wells, to bring the product onshore, and to process or transport the 
product once it is onshore. This includes onshore refineries, pipelines 
and tanks required to receive, process, store and distribute oil and 
gas from offshore fields. Please describe MMS' authority and 
responsibility regarding permitting, oversight, and spill response for 
the offshore and onshore infrastructure necessary to support offshore 
oil and gas production. Include in your response a discussion of the 
extent to which MMS' analysis of offshore activity under the National 
Environmental Policy Act (NEPA) includes impacts caused by this 
infrastructure.
    Answer. MMS has no authority under OCSLA or any other law to 
regulate OCS-related activities in State waters and onshore. While 
MMS's permitting authority ends at the Federal/State boundary, impacts 
of any new OCS-related infrastructure in State waters and onshore which 
will be installed in order to serve the OCS production activities are 
considered indirect impacts and must be analyzed in MMS's NEPA 
documents. At the lease sale stage, NEPA documents analyze 
programmatically the impacts of coastal infrastructure including 
existing oil refineries and pipelines, and this analysis typically 
extends to the first onshore processing point. While the States, Army 
Corps of Engineers, Federal Energy Regulatory Commission and/or 
Department of Transportation have permitting authority for OCS-related 
activities in State waters and onshore, the MMS prepares NEPA documents 
to address the general impacts from hypothetical new OCS-related 
facilities that could extend into State water or onshore areas. Actual 
permitting for construction or expansion of any OCS-related coastal 
facility, such as a pipeline or gas processing plant, would not be 
within MMS purview. Detailed impact analyses and any mitigation 
requirements for OCS-related infrastructure in State waters and onshore 
fall under the purview of permitting agencies such as those listed 
above.
    The MMS's responsibilities under the Oil Pollution Act of 1990 (OPA 
90) include spill prevention, review, and approval of oil-spill 
response plans (OSRP); inspection of oil-spill containment and cleanup 
equipment; and ensuring oil-spill financial responsibility for all 
offshore facilities seaward of the coast line.
    Question 2. Please describe your understanding of the authority and 
responsibility of other government entities or agencies, including 
federal, state, or local authorities, regarding the permitting, 
oversight or spill response for this infrastructure both offshore and 
onshore. Also describe any ways in which MMS coordinates with any of 
these entities in carrying out its responsibilities.
    Answer. The OCSLA directs the Secretary to conserve the Nation's 
natural resources; develop natural gas and oil reserves in an orderly 
and timely manner; meet the energy needs of the country; protect the 
human, marine, and coastal environments; and receive a fair and 
equitable return on the resources of the OCS. The Department uses 
marine spatial planning (MSP) as a collaborative process of working 
with other Federal agencies, along with its diverse stakeholders, to 
meet its stewardship and ocean resource management responsibilities 
using an adaptive and ecosystem-based approach to management. To that 
end, MMS presently leads the development of a Web-based Multipurpose 
Marine Cadastre, in a partnership with NOAA. The Cadastre is intended 
to evolve toward meeting the needs of the entire U.S. ocean community 
for the purpose of planning ocean uses, avoiding conflicts, and 
determining the necessary participants for individual project 
assessments.
    The following agencies are those with whom the MMS shares 
jurisdiction of the OCS and works collaboratively either as lead or in 
a participating capacity:

          Coast Guard
           Maritime safety and security
           Cranes on mobile facilities
           Facilitate spill clean-up in Federal and state 
        waters
           Aids to navigation, fairways and anchorage areas
           Offshore workplace health and safety
           Hazardous materials storage

          Army Corps of Engineers
           Offshore structures locations
           Evaluates permit applications for essentially all 
        construction activities that occur in the Nation's waters

          Air Force and Navy
           Designated military warning and water test areas
           Decommissioning and site clearance

          States
           Permitting and oversight of oil and gas operations 
        in state waters
           Coastal Zone Management--Coastal area protection, 
        preservation.

          Environmental Protection Agency
           Water quality in state and federal waters,
           Air quality in all OCS areas except the Gulf of 
        Mexico west of 8730'W longitude\1\
---------------------------------------------------------------------------
    \1\ Under provisions of the Clean Air Act Amendments (CAAA) of 
1990, the Environmental Protection Agency's (EPA) Administrator, in 
consultation with the Department of the Interior's Secretary and the 
U.S. Coast Guard's Commandant, established requirements to control air 
pollution in Outer Continental Shelf (OCS) areas of the Arctic, 
Atlantic, Pacific, and eastward of 8730'W longitude in the Gulf of 
Mexico

          National Oceanic and Atmospheric Administration
           Coastal Zone Management--Coastal area protection, 
        preservation
           Marine sanctuaries
           Marine mammal protection
           Endangered species
           Essential fish habitat
           Commercial fisheries
           Consultation for Decommissioning
           Fishermen's Contingency Fund
           Provide oil spill response scientific support

          Fish and Wildlife Service
           Marine mammal protection
           Endangered species

          Department of Transportation
           Oversight of transportation pipelines offshore and 
        onshore (Pipeline and Hazardous Materials Safety Administration 
        (PHMSA))

          Federal Aviation Administration
           Oceanic air traffic (helicopters), towers

          Occupational Safety and Health Administration
           Safe and healthful working conditions

    As described above, onshore regulation rests with the States, Army 
Corps of Engineers, Federal Energy Regulatory Commission and/or 
Department of Transportation
    Question 3. The Committee heard testimony that existing research 
efforts related to the marine ecosystem and the impact of industrial 
activities in particular areas is inadequate. Specifically, concern was 
expressed about the lack of baseline data, an integrated ecosystem 
research plan, monitoring of vulnerable ecosystem components, and 
information on best available technology. What is MMS' view of the 
adequacy of its research capacity in this area? Are there other federal 
entities that currently complement MMS' research? What if any 
additional resources for research does MMS need to ensure that these 
issues are adequately addressed?
    Answer. The MMS is committed to maintaining the capability to 
conduct the research needed to ensure safe and environmentally sound 
offshore energy development. The MMS does not operate research 
facilities and therefore seeks the most highly qualified scientists 
through a selective and competitive process to meet mission 
requirements.
    This approach has been successfully followed since the 1970s when 
the OCS Environmental Studies Program (ESP) began. The ESP research 
strategy has evolved over the years. Initially the focus was on the 
development of statistically significant baseline information. 
Following recommendations from a National Academy of Sciences review, 
the program strategy evolved to gathering focused, scientific 
information that could inform management decisions, such as the 
development of protective measures and identifying vulnerable ecosystem 
components. This approach has served the program and the scientific 
community well. Over the decades, the offshore energy program created 
the stimulus for pioneering research that otherwise would not have 
occurred. This research has led to discovery of new habitats and new 
species, description and modeling of physical processes, and an 
improved body of scientific knowledge regarding the ecosystem 
components that could possibly be impacted by offshore energy 
development.
    MMS has a strong record of gathering baseline data and monitoring 
information in areas that actively experience offshore energy 
development. Notably, our early studies of the Flower Gardens Banks 
(now part of the Flower Garden Banks National Marine Sanctuary) in the 
1970's evolved to a continuous monitoring program that, decades later, 
attests to the successful management of, and coexistence of, oil and 
gas activities in proximity to one of the healthiest coral reefs in the 
world. Another example of MMS development of baseline data with 
subsequent long-term monitoring is the establishment of the Multi-
agency Rocky Intertidal Network (MARINe) which started along the 
Pacific coast in the area of offshore oil development. That program has 
gathered several decades of observations and has grown over the years 
to include more than a dozen partners. Through the addition of numerous 
new partners, the MARINe program has expanded to include the entire 
west coast from Alaska to Mexico and is currently adding new sites on 
the east coast. The use of MARINe monitoring results and processes have 
been instrumental for a number of notable events including the M/V 
Cosco Bussan oil spill in San Francisco Bay in 2007 and the closure of 
the black abalone fishery in Southern California.
    MMS has the responsibility for environmental assessment and 
environmental research to support offshore energy activities. To carry 
out these responsibilities, MMS works with other science agencies 
including the National Oceanic and Atmospheric Administration (NOAA), 
U.S. Fish and Wildlife Service, U.S. Geological Survey (USGS), 
Environmental Protection Agency, and many other agencies that have 
complementary interests. Frequently, MMS will use the research 
capabilities within another federal agency to meet mission 
requirements. For example, NOAA performs much of the marine mammal 
research in offshore Alaska to meet MMS scientific information needs. 
Similarly, the MMS utilizes the scientific capabilities of the USGS to 
carry out mission research in Louisiana and California. Our federal 
partners in turn utilize the body of scientific knowledge that includes 
MMS funded research to accomplish their mission. For example, much of 
the MMS marine mammal research will be used by MMS and the NOAA 
National Marine Fisheries Service for biological consultations under 
the Endangered Species Act. On several occasions, MMS-managed research 
has received awards for excellence in partnering from the National 
Oceanographic Partnership Program (NOPP) and the Department of the 
Interior.
  Responses of Walter Cruickshank to Questions From Senator Murkowski
    Question 1. Are you able to speak to Mr. Amos' account of the 
Eugene Island pipeline spill this past summer insofar as whether it 
resulted in any environmental degradation such as oiled birds or 
mammals or fisheries impacts? Did it reach shore?
    Answer. The Eugene Island Pipeline oil spill, which occurred on 
July 25, 2009, was from a Shell pipeline that is regulated by the 
Department of Transportation (DOT). DOT is conducting the investigation 
of the incident. The Unified Command for the Eugene Island Pipeline oil 
spill announced that clean-up operations were completed on August 3, 
2009.
    The July 25, 2009 spill from the 20'' Eugene Island Pipeline 
released approximately 1,500 barrels (63,000 gallons) of crude oil 
before it was secured on July 27, 2009. The actual break was 
approximately 33 miles offshore and 60 miles southwest of Houma, LA. 
There were no reports of contacts to mammals, birds, fish, other 
wildlife species, or coastal habitats. There were no reported contacts 
to shore. The Marine Spill Response Corporation (MSRC) responded to the 
spill by applying dispersants and skimming surface oil.
    Question 2. Can you talk about the Rigs to Reef program and how it 
figures into the agency's environmental stewardship priorities? On this 
point, would you characterize your experience with the impact of oil 
rigs on fishing to be a positive or negative one?
    Answer. MMS is proud of the Rigs to Reefs program and its place in 
our environmental stewardship priorities. Natural hard substrate is 
limited in the Gulf of Mexico OCS region. Oil and gas platforms 
contribute substantially to local and regional abundance of reef 
habitat and the abundance of reef associated fishes. In many areas, 
platforms also allow the development of numerous species of coral. All 
offshore platforms, including those in the Rigs to Reefs program, 
provide protected areas from trawling and associated impacts such as 
bycatch (living creatures captured unintentionally). Coastal states 
with approved, State specific, artificial reef plans can identify 
offshore areas and sites suitable for artificial reef developments. The 
total number of platforms that have been used in all states' Rigs to 
Reefs programs over its entire history is 323 as of 2009 (Alabama 4; 
Florida 3; Louisiana 215; Mississippi 8 and Texas 93). These 
substantial additional areas of hard bottom habitat result in an 
overall positive impact to the Gulf of Mexico. MMS works very closely 
with the states' artificial reef coordinators to ensure the program is 
run efficiently and provides a benefit to fishermen and the environment 
without unreasonable impediments to other users or to oil and gas 
infrastructure and future exploration and development.
    Question 3. Can you describe the process at Interior for ranking 
the environmental sensitivity of coastal areas under the Outer 
Continental Shelf Lands Act? Do you have all the information you need 
to have completed this exercise in environmental stewardship? Can you 
provide a status update on this as relates to the 5-year plan.
    Answer. It would be premature to describe the process for ranking 
the environmental sensitivity of coastal areas for the 5-year OCS 
program, as the Department has not yet finalized the analysis required 
by the D.C. Circuit in last year's Center for Biological Diversity 
case. As required by the Court, the Department's consideration goes 
beyond NOAA's Environmental Sensitivity Index (ESI) data to analyze the 
sensitivity of (shoreline) coastal habitats as well as the sensitivity 
of offshore (marine) resources.
    Question 4. You mentioned your engagement with the President's 
Ocean Policy Task Force. To what extent has MMS ceded any of its 
authority over managing the OCS energy resources to this interagency 
commission? Do you think that energy priorities will be lower or higher 
upon completion of the recommendations?
    Answer. The OCS Lands Act and the Energy Policy Act of 2005 vest 
the Department with authority and responsibility for mineral and energy 
development on the OCS, in conjunction with other relevant statutes 
such as the National Environmental Policy Act (NEPA), Marine Mammal 
Protection Act (MMPA), Coastal Zone Management Act (CZMA), etc. The 
Ocean Policy Task Force intends to provide policy guidance, encourage 
efficiencies among governmental entities, and provide a better 
framework for application of existing laws and agency authorities, but 
it does not supersede these laws and authorities.
    Question 5. In soliciting comments for the Chukchi POE application 
from Shell, did any DOI office issue a direct or specific solicitation, 
apart from the Federal Register, to the North Slope Borough or any 
other specific entity?
    Answer. The MMS Alaska OCS Region formally solicited comments on 
the Chukchi Exploration Plan (EP) from multiple stakeholders. The MMS 
made direct distribution of the EP to the North Slope Borough, Alaska 
Eskimo Whaling Commission, Alaska Beluga Whale Committee, Alaska Eskimo 
Walrus Commission, Ice Seal Commission, Nanuk Commission, Federally 
recognized tribes, local community leaders and Federal and State 
agencies. The MMS also posted the EP on the MMS Alaska OCS Region 
webpage and provided copies of the EP to local libraries in Anchorage 
and Fairbanks for direct access to the public. MMS also formally 
notified several environmental organizations that the EP was available 
for review. The MMS offered to conduct government-to-government 
consultations with Federally recognized tribes and to meet with any 
interested party. The Native Village of Point Hope, the North West 
Arctic Borough and the Village of Wainwright each requested a meeting, 
which MMS staff attended in person or by teleconference.
    Question 6. Are you aware of any coordination between any DOI 
office and outside environmental organizations in the formulation of 
official comments or rulemakings?
    Answer. MMS does collaborate with other federal, state, tribal and 
non-governmental organizations (e.g., environmental groups) on many 
topics, such as developing studies, soliciting input on environmental 
analyses during public comment periods, and formulating mitigation and 
monitoring measures. While we would review any input from various 
parties, we independently develop and transmit official MMS comments 
for various governmental actions and do not assist outside 
environmental organizations in the formulation of their official 
comments. For an action where MMS is the main Federal agency, we review 
any comments from environmental organizations received during the 
public comment process and consider them during the rulemaking process, 
as we do with any other entity.
    Question 7. What is the average length of time, from application 
receipt to approval, for MMS to issue an air permit for the Western and 
Central Gulf of Mexico?
    Answer. MMS does not ``issue a permit,'' but does require 
operations to limit air pollutant emissions. Air emissions are 
evaluated and approved as part of an Exploration Plan (EP) or 
Development Operations Coordination Document (DOCD) submitted to MMS by 
an offshore operator.
    The legal foundation for the air reporting required in EPs and 
DOCDs is set forth in the Outer Continental Shelf Lands Act (43 U.S.C. 
1334(a)(8)).\2\ ``The regulations prescribed by the Secretary under 
this subsection shall include, but not be limited to, provisions--for 
compliance with the national ambient air quality standards pursuant to 
the Clean Air Act (42 U.S.C. 7401 et seq.) to the extent that 
activities authorized under this subchapter significantly affect the 
air quality of any State.''
---------------------------------------------------------------------------
    \2\ Air emissions information requirements for EPs and DOCDs are 
specified at 30 CFR 250.218 and 250.249.
---------------------------------------------------------------------------
    The Clean Air Act Amendments of 1990 provide that the Secretary of 
the Interior will work with the U.S. Environmental Protection Agency's 
(USEPA) Administrator to establish requirements to control air 
pollution in OCS areas of the Gulf of Mexico westward of 87o30' 
longitude. For sources located in areas under MMS jurisdiction, 
regulations are promulgated by 30 CFR 250 Subpart C.
    The purpose of the EP and DOCD is to determine if proposed 
activities will comply with applicable United States federal laws and 
regulations including the Clean Air Act; unreasonably interfere with 
other uses of the area; interfere with or endanger operations on other 
leases; result in pollution; create hazardous or unsafe conditions; and 
to determine if proposed activities will cause serious or undue harm or 
damage to life, property, any other mineral deposits (in leased or 
unleased areas), the national security or defense, the marine, coastal, 
or human environment.
    The contents of an EP and DOCD include, but are not limited to, a 
description of the proposed activities; a description of the drilling 
unit, if applicable, with brief discussion of safety and pollution 
prevention features; and, for DOCDs, proposed or existing structure 
locations and a description of each proposed piece of infrastructure 
(including any production equipment to be installed), and a brief 
discussion of safety and pollution prevention features of each item.
    EP and DOCD reporting requirements are promulgated at 30 CFR 250 
Subpart B and further clarified in Minerals Management Service Notice 
to Lessees No. 2008-G04, Information Requirements for Exploration Plans 
and Development Operations Coordination Documents.
    If an EP or DOCD is accurate and complete when submitted, including 
air emissions information, the document must be approved or 
conditionally approved (approved with modifications) within 30 days for 
an EP (30CFR 250.233) or within 120 days for a DOCD (30CFR 250.270). 
The clock does not start until the plan is deemed complete by MMS. EPs 
or DOCDs that are deemed incomplete are sent back for corrections, 
which usually take 2 to 4 additional weeks. Submission of inadequate or 
inaccurate information in any of the multiple plan reviews within the 
EP or DOCD can require modification of a plan, which slows down the 
review and approval process.
    For the period 1991 through 2009, the average time from application 
receipt to approval (including the time to deem plans complete) was 43 
days for an EP and 60 days for a DOCD. The DOCD typically has more 
information submitted related to oil and gas production and 
transportation facilities and equipment.
    Question 8. Are shorter lease terms, such as the proposed reduction 
from 10-to-7 years and 8-to-5 years, projected to confer any benefit in 
terms of environmental stewardship?
    Answer. The policy proposal for Lease Sale 213 is to shorten 
primary lease terms from 10 to 7 years in 800-1600 meters of water 
depth in the Gulf of Mexico, with extension from 7 to 10 years in the 
primary term granted in return for commencing an exploration well 
within the new initial 7-year primary term. A similar policy is being 
proposed for leases in 400-800 meters, where 8-year term leases will be 
shortened to 5 years with extension to 8 years for commencing an 
exploration well within the first 5 years of the lease. However, that 
second proposed policy change reflects a similar existing policy in 
which 8-year primary term leases are cancelled at the end of 5 years if 
an exploratory well is not commenced within the first 5 years of the 
lease.
    MMS's internal analysis indicates that industry is already capable 
of operating on these timeframes (see response to next question). One 
effect of the proposal as it relates to 7-year term leases will be to 
accelerate drilling on some leases that would otherwise have been 
drilled closer to the end of the 10-year primary term. Another effect 
will be to speed up the relinquishment and reoffering of leases that 
otherwise would be held to the end of the 10-year primary term. Because 
this would only affect a narrow band of leases, a reduction or increase 
of overall production is not anticipated. Therefore, MMS does not 
anticipate negative or positive environmental impacts from this policy 
proposal.
    Question 9. What evidence is there to prove or strongly indicate 
that the length of existing lease terms is resulting in the U.S. 
taxpayer failing to derive the maximum benefit from OCS oil and gas 
development?
    Answer. As proposed in the Proposed Notice of Sale for Central Gulf 
of Mexico OCS Sale 213, the existing lease term of 10 years would be 
shortened to 7 years for leases in water depths from 800 to 1600 meters 
deep in the Gulf of Mexico, but they would receive an automatic 3-year 
extension provided drilling has started by the end of the seventh year 
after lease issuance. Evidence derived from detailed data MMS routinely 
collects on OCS activity strongly indicates that the evolution of 
capabilities in these water depths have decreased time necessary for 
exploration. In contrast to earlier periods, deepwater leases that have 
completed their primary term in the last 5 years show that nearly all 
producing leases in 800 to 1600 meters of water commenced drilling by 
year 7. In 800 to 1200 meters of water, 92% of leases issued from 1995 
to 1999 that have achieved production were found to have started 
drilling by the 7th year of their lease term, up from 33% of those 
issued from 1985 to 1989. The data are similar in 1200 to 1600 meters, 
where 85% of producing leases issued from 1995 to 1999 were drilled by 
year 7, up from 25% for those issued from 1985 to 1989. Almost all 
prospective leases that were not drilled by year 7 either were extended 
through unitization or encountered unusual circumstances that led to 
authorized extensions beyond the 10-year primary term through 
suspensions. Because the unitization and suspension programs handle 
such unusual cases, the primary term does not need to be set to 
accommodate the exceptional cases.
    The shortened drilling periods will improve taxpayer benefit 
largely by expediting re-leasing and exploration on non-producing 
leases. In some cases lessees that otherwise would have postponed 
drilling until near year 10 will find ways to drill earlier. Those who 
do not accelerate drilling will relinquish their blocks sooner so those 
tracts can be reoffered to others who may have different ideas about 
their oil and gas potential. Earlier reoffering will accelerate the 
receipt of new bids for the relinquished acreage and its evaluation by 
new lessees.
    Question 10. How are competing uses in the offshore areas dealt 
with currently under existing laws and regulations--does this work and 
are changes needed?
    Answer. Under existing laws and regulations, MMS is the lead for 
all energy and mineral resources activities on the OCS. Several other 
federal agencies also have jurisdiction over certain aspects of OCS 
activities. At the lease sale stage, MMS coordinates with those federal 
agencies along with a number of affected State agencies. This 
coordination includes, but is not limited to, consultations required 
under the Endangered Species Act with the National Marine Fisheries 
Service and Fish and Wildlife Service; Essential Fish Habitat 
consultation with the National Marine Fisheries Service; and Coastal 
Zone Management Act consistency determination with affected States. In 
addition, MMS and the United States Coast Guard have several Memoranda 
of Understanding and Memoranda of Agreement regarding our respective 
responsibilities in such areas as oil discharge planning, preparedness, 
and response; incident investigations, floating offshore facilities, 
civil penalties and general jurisdictional concerns.
    For post-lease activity, the number of federal agencies an oil and 
gas company must deal with directly depends on the lease location and 
type of activity proposed. A list of those pertinent federal agencies 
was previously provided above in reply to Chairman Bingaman's second 
question. Not every federal agency listed above is involved in the 
review and approval of every OCS oil and gas proposal, but every 
proposal does involve consultations with at least a few of these 
agencies. The MMS strives to ensure that its NEPA and other analyses 
contain all the information needed for decision-making, including 
information related to compliance with laws and regulations outside 
MMS' direct purview. Our collaborative processes continue to work 
successfully as they are currently structured under existing laws and 
regulations.
    Responses of Walter Cruickshank to Questions From Senator Dorgan
    Question 1. Earlier this year in this committee, I proposed an 
amendment which is one of the primary reasons for the oversight 
hearing. Through my approach, the MMS would be authorized to go through 
a rulemaking process to issue regulations and would consider a range of 
local and other conditions during that process. In federal waters, the 
Secretary would establish zones which would determine what kind of 
restrictions would be placed on surface activities. The onus is then 
placed on individual companies to develop innovative technology 
solutions in those zones. Renewable projects (i.e. wind turbines 
offshore) and previously existing oil and gas projects would be exempt. 
I believe that if we could pursue this approach, it is possible to 
deploy innovative technology applications to limit the environmental 
footprint and significantly reduce the visual impact while increasing 
access to resources.
    Is this the type of approach that could have environmental merits 
and also allow for increased access to hydrocarbon resources near shore 
in the federal waters?
    Answer. A similar approach is already in use off of Baldwin County, 
Alabama to limit visual impacts per the State's request. Since 1999, 
MMS has adopted in each annual Central Gulf of Mexico lease sale a 
lease stipulation that requires consultation when developing plans for 
fixed structures within 15 miles of the coast of Baldwin County. MMS's 
NEPA documents also analyze deferring this area, but have found that 
the stipulation adequately addresses adverse visual impacts.
    The stipulation states that in order to minimize visual impacts 
from development operations on this area, lessees must contact other 
lessees and operators of leases in the vicinity to determine if 
existing or planned surface production structures can be shared. If the 
lessee cannot formulate a feasible development scenario that does not 
call for new surface structure(s), the operator should ensure that new 
structures are the minimum necessary for the proper development of the 
block and that they will be constructed and placed, using orientation, 
camouflage, or other design measures in such a manner as to limit their 
visibility from shore.
    Likewise, the use of newer technological innovations in the Gulf of 
Mexico now allows the use of subsea development projects to 'tie-back' 
to existing structures. It is possible to forego surface structures in 
near-shore environments by connecting subsea production to structures 
as far away as 45 miles away for oil and 77 miles away for natural gas. 
The use of this technology also allows for the minimization of the 
number of offshore facilities, reducing multiple use conflicts, and 
aesthetics. This technique also provides policymakers with an option to 
allow coastal buffer zones with no permanent surface structures without 
putting the oil and gas resources out of reach.
    In the Pacific Region, some leases, particularly those close to 
shore, contain a stipulation ``all platforms will be an acceptable 
design, properly camouflaged and subject to other conditions to protect 
aesthetic values.'' In other cases, mitigation attached to the 
development plan and environmental documents addressed aesthetic 
concerns. In both cases, these measures result in the use of a paint 
color anticipated to reduce visual impacts. In the latter case, these 
mitigation measures were coordinated with the U.S. Coast Guard, State 
of California Coastal Commission, California State Lands Commission, 
adjacent counties, industry and MMS.
    Question 2. If buffer zones on structures within certain distances 
from shore are implemented, do you have a view on the environmental 
issues intended to be addressed, and what are the appropriate distances 
to be identified for such limitations? How would the MMS take this into 
consideration?
    Answer. Alternatives, including buffer zones, are identified during 
the public scoping process for the 5-Year Program and individual lease 
sales. All reasonable alternatives would then be analyzed in MMS's NEPA 
documents. Buffer zones are usually proposed with the intention of 
limiting visual impacts or risk of an oil spill contacting shore. In 
addition, buffer zones are used to protect sensitive areas such as 
critical habitat for endangered and threatened species. The appropriate 
buffer distance to address visual impacts would depend on such things 
as the type of structures, coastal elevation, and presence of historic 
properties, while risk of oil spill contact with sensitive 
archaeological and biological resources would depend on prevailing 
winds and currents, and the presence of any such resources.
    Question 3. Another witness, Dr. Jeffrey Short, Pacific Science 
Director of Oceana, made strong assertions that much more needed to be 
done in terms of better understanding of the marine ecosystem in order 
to protect it from serious environmental damage. He stated that the 
U.S. does not have a good baseline record of the original state of the 
environment in the Gulf of Mexico before we started oil and gas 
operations, so we cannot assess the impact of these activities on the 
environment in the Gulf of Mexico. He indicated that we need to study 
and monitor ecosystems and technologies before projects were able to 
proceed and that funding needed to be provided for that.
    Answer. The MMS places a high priority on conducting an integrated 
scientific program that develops information on living marine resources 
and their interaction with, and influence by physical and other 
environmental processes. MMS's environmental research strategy is 
developed around an understanding of the energy technologies and the 
potential nature of impacts they might produce. This focus provides the 
greatest opportunity to successfully develop the scientific information 
needed to mitigate environmental impacts. It is true that many areas of 
the marine environment have been exposed to impacts from fishing, 
shipping, naval operations, and in some cases, offshore oil and gas 
development. Baseline environmental conditions are constantly changing, 
but that does not preclude the conduct of scientifically valid studies 
to assess impacts. In the Gulf of Mexico, highly regarded studies 
published in peer-reviewed scientific journals describe the localized 
impacts that can be measured around drill sites and/or production 
platforms. MMS sponsored pioneering research of biologic communities on 
the continental slope in the 1980's, long before the oil industry had 
moved into these water depths. MMS research led to important 
discoveries of chemosynthetic communities of biological organisms that 
were subsequently protected through operational regulations. MMS 
environmental research moved into still deeper Gulf of Mexico waters, 
and many of these studies, in collaboration with federal partners in 
NOAA and USGS, identified new chemosynthetic and deepwater coral 
communities. This research has informed resource managers and has led 
to additional protections for these deepwater biological communities.
    Follow-on research and monitoring then assesses the effectiveness 
of the mitigation. As a research strategy, MMS will continue to conduct 
studies of marine ecosystems in areas that are being considered for 
development, and it will continue to conduct studies throughout the 
life of the offshore energy development activity.
    Question 4. Is this the type of work that the MMS has authority to 
do? If so, what kinds of research and analysis are underway at the MMS 
that would respond to the concerns of Dr. Short? Do you know of any 
areas in the world where we do have adequate baseline data and where we 
have been able to measure the impact of oil and gas activities? What do 
these studies show as the impact of oil and gas activities and how 
concerned should we be about their environmental impact when compared 
to other activities in the marine environment in other regions of the 
world?
    Answer. The OCS Lands Act provides MMS with the authority to 
conduct the research needed to manage offshore energy development in a 
safe and environmentally sound manner. MMS conducts a broad array of 
environmental research designed to meet the needs in a particular OCS 
area. While a general research strategy can be described, the 
scientific knowledge base and state of OCS activity varies from the 
Gulf of Mexico to the Pacific and from the Atlantic to offshore Alaska. 
The research programs in each of these areas will vary depending on 
these and other factors. The MMS conducts public workshops to give the 
scientific community and stakeholders the opportunity to work with MMS 
scientists as we develop our research plans. In addition, the MMS has 
established an independent Scientific Advisory Committee (chartered 
under the Federal Advisory Committee Act) that provides advice on the 
Environmental Studies Program research direction and focus. This input, 
numerous reviews by the National Academy of Sciences over the years, 
and publication of scientific findings in peer-reviewed scientific 
journals, all combine to validate the kinds of research and analyses 
that are undertaken.
    Considerable resources have been allocated towards gathering 
baseline data in each of the OCS areas over the decades. However, MMS 
data gathering does not continue when the prospect of offshore energy 
development no longer exists. The Gulf of Mexico is probably the most 
studied and well described area in the world. In the 1970's, baseline 
studies evolved into focused ecosystem studies and monitoring studies. 
These studies provide a solid basis for the management of potential 
impacts from offshore oil and gas activities. Notably, our early 
studies of the Flower Gardens Banks (now part of the Flower Gardens 
National Marine Sanctuary) in the 1970's evolved to a continuous 
monitoring program that, decades later, attests to the successful 
management of, and coexistence of, oil and gas activities in proximity 
to one of the healthiest coral reefs in the world.
    While other regions around the world undergo oil and gas 
development, few have been developed under the broad safety and 
environmental safeguards afforded through U.S. regulations. MMS has 
invested more than $800 million in environmental research since the 
beginning of the program studying marine life and ecosystem processes. 
No other program in the world can match the investment and regulatory 
protections of the United States. Notwithstanding that fact, we do 
engage with colleagues from around the world to learn from their 
experiences and to share our knowledge. For example, we have 
collaborated on many scientific projects related to offshore oil and 
gas activities offshore Canada, Norway, Mexico, and Australia.
   Responses of Walter Cruickshank to Questions From Senator Menendez
    Question 1. Dr. Cruickshank, I am concerned about the offshore 
activities of Seadrill--the operator of the failed rig in the Australia 
disaster. They operate here in the United States and have at least one 
rig in the Gulf of Mexico. In a recent letter to Secretary Salazar, I 
requested that the Department of the Interior conduct a full 
investigation of Seadrill and its activities in American waters to 
ensure that a similar accident is not repeated here at home. Has MMS 
independently done anything to examine Seadrill, its activities in US 
waters or its compliance with US law? How is Seadrill's safety record, 
and what exactly about the Australian spill makes you convinced it 
couldn't happen here?
    Answer. The MMS is conducting the requested analysis of Seadrill's 
compliance and safety record. As mentioned in a response to your 
letter, we anticipate completing this analysis by the end of February 
2010.
    Regulations governing U.S. OCS drilling operations provide that on 
the U.S OCS--

   The drilling program would have to be submitted to MMS as 
        required in the regulations. The program would have to satisfy 
        MMS engineers before it was approved by the MMS District 
        Supervisor.
   The casing would have to be cemented in accordance with the 
        requirements in the drilling regulations.
   The casing would have to be pressure tested to 70% of the 
        minimum internal yield for 30 minutes with less than a 10% 
        pressure drop. This test would have likely identified the 
        problem with the primary cement job on the Timor Sea well.
   For suspended wells, the operator would have to set a 
        secondary plug in the casing as described in the 
        decommissioning regulations .
   The operation would be inspected by MMS personnel at least 
        once during the course of the drilling operations, and all 
        casing, cementing, and testing information would be closely 
        reviewed.

    Each of these requirements separately, and certainly all of them 
together, should have prevented the drilling operations that occurred 
in the West Timor Sea, as we understand them. The Australian 
Government's final review of the causes of the West Timor spill, 
however, has yet to be completed.
    Question 2. Dr. Cruickshank, according to statistics compiled by 
the MMS, there have been over 40 spills greater than 42,000 gallons 
(1,000 barrels) since 1964. During Hurricanes Katrina and Rita alone, 
some 9 million gallons of oil were spilled from offshore and onshore 
operations.5 Oil is extremely toxic to a wide variety of marine 
species, and as noted by a recent National Academy of Sciences study, 
current cleanup methods are, ``incapable of removing more than a small 
fraction of the oil spilled in marine waters.'' Why is it so difficult 
to clean up oil once it is spilled into coastal ecosystems?
    Answer. A primary focus of the MMS regulatory program is spill 
prevention. MMS is also a leader in spill preparedness, response 
research, and studies to address the potential effects of spills on 
marine and coastal resources. The ability to clean up oil varies with 
each circumstance depending on the product released, location, weather 
conditions and more. MMS requires offshore operators to have the 
necessary equipment on standby, usually through contracts with oil 
spill response companies, to respond to a worst case scenario spill. 
Booms, skimmers, and other response equipment frequently recover 
substantial volumes of oil given the right circumstances. In the open 
ocean, any remaining oil will weather and become entrained in the water 
column and will be diluted by the far greater volume of ocean water so 
as not to raise the oil concentration above natural conditions.
    An oil spill that comes in contact with shore can become entrained 
in sensitive habitats where attempts to remove the oil may cause more 
damage than the oil. Since 1964, only 10 OCS spills have contacted 
shore; all originated 19 miles or less from shore, and only one caused 
substantial harm to wildlife and habitats (1969). Deepwater tracts 
generate much of the current offshore oil production and are expected 
to generate more each year. Deepwater tracts are generally 50 or more 
miles offshore, from where it is highly unlikely a spill would contact 
shore.
    There have been 36 petroleum spills of 42,000 gallons (1,000 
barrels) or greater from Federal OCS oil and gas activities since 1964. 
Most of these spills had no recorded contacts to marine species or 
coastal habitats. Only six of these spills contacted shore, the last of 
which was in 1998. Most of the contacts were minor, with no wildlife 
contacts recorded and minimal beach cleanup required. The exception was 
the 80,000 barrel Santa Barbara spill in 1969, which had substantial 
contacts to birds and to coastal habitats. Current OCS regulations have 
far more stringent requirements for well casing, which would have 
prevented the Santa Barbara well failure.
    The OCS petroleum spill record has improved greatly over time from 
the first 15-year record of approximately 10,300 barrels produced per 
barrel spilled (1964-1978), to more than 88,400 barrels produced per 
barrel spilled (1979-1993), to more than 140,000 barrels produced per 
barrel spilled (1994-2008)
    The article referenced in the question supporting the Hurricane 
Katrina and Rita spill statistics was published by the Houston 
Chronicle in November 2005 and was written prior to any comprehensive 
spill statistics being available for Hurricanes Katrina and Rita and 
should be considered preliminary.
    Over 250,000 barrels of oil spilled onshore and in Louisiana State 
waters during Hurricane Katrina. This included nine crude oil spills of 
1,000 barrels and greater from onshore oil refinery tank farms totaling 
more than 193,000 barrels. Most of the remaining spillage was reported 
as dispersed during Hurricane Katrina. Over 22,000 barrels of oil 
spilled onshore and in Louisiana State waters during Hurricane Rita. 
This included three crude oil spills of 1,000 barrels and greater 
totaling 10,783 barrels of which 7,500 barrels were reported recovered. 
Most of the remaining spillage was reported as dispersed during 
Hurricane Rita. (Source: Louisiana Department of Environmental Quality, 
December 2007).
    By far the greatest amount of oil spilled as a result of the 
hurricanes came from facilities not regulated by MMS. An estimated 8 
million gallons of oil were spilled from coastal oil storage facilities 
and approximately 50 percent of this was recovered. An additional 1.46 
million gallons were spilled onshore or in State waters as a result of 
Hurricane Katrina and none of the oil was recovered. An estimated 0.49 
million gallons of crude oil from eleven onshore or coastal facilities 
in State waters released during Hurricane Rita and approximately 70 
percent of this was recovered. An additional 45 spills resulting in 
0.43 million gallons occurred onshore or in coastal waters as a result 
of Hurricane Katrina with none of the oil recovered. Finally, 
approximately 3.3 million gallons were spilled from a tank barge, when 
it struck a submerged oil platform that had been damaged during the 
storms and only 4.8 percent was recovered.
    MMS reported the following petroleum losses from offshore 
structures during: Hurricane Ivan, 4,645 barrels; Hurricane Katrina, 
4,729 barrels; Hurricane Rita, 8,734 barrels; and Hurricanes Gustav/
Ike, 5,858 barrels for a total of 23,966 barrels (811,482 gallons). 
Over 1 million gallons were spilled from federal offshore oil platforms 
and associated pipelines during these storms. The loss of hydrocarbons 
from wells and pipelines was minimized by the successful operation of 
the safety valves that MMS requires to be installed. All OCS facilities 
in areas threatened by the storms' approach were shut in before the 
hurricanes so that oil losses were mostly limited to the oil stored on 
the damaged platforms and rigs or contained in damaged pipeline 
sections between the check valves. The hydrocarbons lost during the 
hurricanes were thoroughly dispersed offshore by the hostile sea 
conditions, which eliminated the potential for oiling the shores. 
However, some of the platforms and pipelines damaged during the 2004, 
2005, and 2008 hurricane seasons continue to release small volumes of 
oil, some with short duration releases, and repairs have not been fully 
completed for all facilities and pipelines. These small volumes 
amounted to an additional 1,767 barrels (about 74,000 gallons) through 
the end of 2009.
    There were no accounts of environmental consequences resulting from 
spills from OCS facilities that occurred during major hurricanes from 
2002 through 2008:

   no spill contacts to the shoreline
   no oiling of marine mammals, birds, or other wildlife
   no large volumes of oil on the ocean surface to be collected 
        or cleaned up
   no identified environmental impacts from any OCS spills from 
        these hurricanes
   Responses of Walter Cruickshank to Questions From Senator Sessions
    Question 1. Has the Minerals Management Service (MMS) taken a 
stance on revenue sharing?
    Answer. The Administration has not taken a position on establishing 
additional revenue sharing programs.
    Question 2. MMS announced yesterday that it disbursed $10.68 
billion in Fiscal Year 2009 for mineral development (oil, gas and 
coal), but in FY 08 the Department of Interior's MMS distributed $23.4 
billion. Could you please explain why there has been a significant 
decline?
    Answer. In the last five years, the Department has disbursed an 
average of more than $13 billion annually. It is important to note that 
the FY 2008 disbursement of over $23 billion was an anomaly due in part 
to the high prices of oil and gas boosting royalties and causing record 
bonus bids for Outer Continental Shelf leases. In FY 2008, MMS 
disbursed approximately $23.4 billion in total revenues with $10.1 
billion in bonus bids, $.3 billion in rents and $13 billion in 
royalties and other revenues. In FY 2009, MMS disbursed approximately 
$10.7 billion in total revenues with $1.3 billion in bonus bids, $.3 
billion in rents, and $9.1 billion in royalties and other revenue.
    Question 3. My state of Alabama received revenues through Fiscal 
Year 2009 in amount of $ 17.2 million, but I noticed that several 
onshore states specifically New Mexico received $388.5 million. In your 
opinion, wouldn't allowing revenue sharing and additional production 
off coastal states help with state budget issues?
    Answer. The Gulf of Mexico Energy Security Act established a 
revenue sharing program with four Gulf of Mexico coastal producing 
states. The MMS allocates and distributes the funds annually, based on 
a formula established under the Act. Congress authorized the States' 
use of the funds for mitigation of damage to fish, wildlife, or natural 
resources; implementation of a federally-approved marine, coastal, or 
comprehensive conservation management plan; mitigation of the impact of 
OCS activities through the funding of onshore infrastructure projects; 
and the planning and administrative costs of such projects.
    Question 4. How can MMS justify its recent announcement to shorten 
lease terms in deepwater Gulf of Mexico, when the Department of 
Interior Inspector General has testified that this could be 
counterproductive by reducing interest in leases? Was there any 
analysis completed beforehand by MMS to study the impacts this decision 
could have?
    Answer. As set forth in the Proposed Notice of Sale for Central 
Gulf of Mexico OCS Sale 213, the existing lease term of 10 years would 
be shortened to 7 years for leases in water depths from 800 to 1600 
meters deep in the Gulf of Mexico, but those leases would receive an 
automatic 3-year extension provided drilling has started by the end of 
the seventh year after lease issuance. The shortened period to start 
drilling recognizes the evolution of capabilities in the deeper water 
depths and the decreased time necessary for exploration and 
infrastructure development. Over the last 25 years, industry has become 
more experienced with deepwater drilling, offshore development 
technology has improved and infrastructure has spread into the deeper 
waters of the Gulf of Mexico. The number of possible host facilities 
emerging from existing prospects has increased, so more fields will 
likely be produced by less costly tie-back arrangements. Consequently, 
parts of the deepwater Gulf basin can reasonably be explored and 
developed in less than a decade.
    Analysis of data accumulated by MMS as part of its duties to manage 
the OCS confirm that industry has become able to identify and drill the 
prospective leases in up to 1600 meters of water depth in the Gulf in 
less than 10 years. In contrast to earlier periods, deepwater leases 
that have completed their primary term in the last 5 years show that 
nearly all producing leases in 800 to 1600 meters of water commenced 
drilling by year 7. In 800 to 1200 meters of water, 92% of leases 
issued from 1995 to 1999 that have achieved production were found to 
have started drilling by the 7th year of their lease term, up from 33% 
of those issued from 1985 to 1989. The data are similar in 1200 to 1600 
meters, where 85% of producing leases issued from 1995 to 1999 were 
drilled by year 7, up from 25% for those issued from 1985 to 1989.
    These data show that most leases not drilled by year 7 were 
eventually relinquished undrilled, while the relatively few leases 
drilled after the 7th year were almost invariably relinquished, 
presumably because those wells did not result in the discovery 
resources worth developing. Almost all prospective leases that were not 
drilled by year 7 either were extended through unitization or 
confronted unusual circumstances that led to authorized extensions 
beyond the 10-year primary term suspensions. Because the unitization 
and suspension programs handle such unusual cases, the primary term 
need not deal with those kinds of productive leases.
    Question 5. Secretary Salazar has made several decisions that has 
made it increasingly difficult for producers to supply domestic oil and 
natural gas and increase energy security. Secretary Salazar has 
repeatedly stated that the Obama Administration is not ``anti-oil and 
gas,'' yet when it comes to Interior's onshore and offshore natural gas 
and oil program, the record suggests otherwise. The 2010-2015 5-year 
plan, as of today, is still stuck at Interior and Secretary Salazar is 
indicating that whatever revised plan comes out will have to go through 
additional public comment time as well as resubmission to DC Circuit. 
You have been with the agency for at least 4 other 5 year plans. Why is 
this particular plan taking so long to become final?
    Answer. The 2007-12 program is being revised to meet the mandate of 
the U.S. Court of Appeals for the D.C. Circuit, which found fault with 
the program developed by the prior Secretary June 2007. The Court found 
that in using the NOAA Environmental Sensitivity Index that addresses 
shoreline/coastal habitats only, the Department had failed to consider 
the relative environmental sensitivity of the entirety of `` the outer 
Continental Shelf'' of the different areas, as required by section 18 
of the OCS Lands Act. The Department formed a team of well-qualified 
scientists and other subject matter experts that conducted a more 
complete environmental sensitivity analysis. The Secretary is 
considering the new information along with the existing information and 
analysis that was either upheld by the court or not challenged, 
including the Final EIS, to make the necessary decisions under the Act 
to balance the potentials for environmental damage, discovery of oil 
and gas, and adverse impact on the coastal zone. In accordance with the 
Government's petition to the Court, the Preliminary Final Program will 
be announced for public comment and submitted to the President and 
Congress, before being finally approved. It should be noted that, in 
response to a petition for reconsideration filed by Secretary Salazar, 
the Court limited its order to three areas of the Alaska OCS, so that 
other sales included in the 2007-2012 program are proceeding without 
awaiting the curative work.. The last sale was Western Gulf of Mexico 
Sale 210 held in August of 2009. The next proposed sale is Central Gulf 
of Mexico Sale 213 scheduled for March 2010.
    In mid-2008, the previous Administration began preparation of a 5-
Year Program and issued a Draft Proposed Program for 2010-2015 on 
January 16, 2009 with a 60-day comment period. The Secretary extended 
the comment period an additional 180 days and held four regional 
meetings to allow for greater public input. Over 530,000 comments were 
received and are being summarized and considered for the next 
decisions, beginning with the announcement of public meetings for 
scoping issues for preparation of a draft EIS. The current program does 
not expire until June 30, 2012. Accordingly, the preparation process of 
a new program does not affect sales in the current program for 2007-
2012.
    Question 6. Has Carol Browner, Energy Czar, been briefed in regards 
to the 5 year plan and has she had any input in deciding to move 
forward?
    Answer. MMS has not briefed Ms. Browner.
    Question 7. The oil and gas industry directly and indirectly employ 
9.2 million people, so could someone explain to me why with double 
digit unemployment numbers are we not moving forward with increasing 
domestic production and employ individuals here at home?
    Answer. President Obama expects the Department of the Interior to 
make significant progress toward a new energy future, with attention to 
responsible domestic production of conventional energy resources as 
well as a strong new emphasis on renewable energy production and 
transmission. We are delivering on this task. Since January 20, 2009, 
we have offered tens of millions of acres of onshore and offshore lands 
for oil and gas leasing, adopted a new framework for renewable energy 
development in the OCS, and expedited the review of solar, wind, and 
geothermal energy projects on public lands. These actions will create 
more supplies of conventional and renewable domestic energy, leading to 
more jobs.
    Question 8. In total, the OCS development has generated $190 
billion in federal revenue from bonus bids and royalty payments. Its 
puzzles me with record breaking deficit numbers, why the 5 year plan 
for OCS is getting delayed when it could produce federal revenues. Does 
anyone have an opinion on this?
    Answer. The Department is currently operating under the existing 
OCS Leasing Program, 2007-2012. While Secretary Salazar did extend the 
comment period last February for an out-of-cycle Draft Proposed 
Program, which the previous Administration released on January 16, 
2009, the Department expects to issue an approved Final Program and 
Final EIS, with a schedule of offshore lease sales to allow for 
activities to be conducted in an environmentally safe and operationally 
sound manner, prior to the scheduled expiration of the current program.
    Question 9. What is the role of the National Oceanic and 
Atmospheric Administration (NOAA) in OCS development? NOAA 
Administrator Lubchenco sent a letter to MMS dated September 21, 2009, 
which also appeared the LA Times commenting on the OCS proposed 5 year 
plan-2010-2015. However, NOAA later claimed it was an unofficial 
letter. How is MMS bound or inclined to react to this letter's 
contents?
    Answer. During the 5-Year Program preparation process, comments are 
solicited three separate times, the initial Request for Information, 
the Draft Proposed Program and the Proposed Program. In addition to 
public comment, pursuant to statutory requirements, MMS specifically 
solicits review and comment from Governors and other Federal agencies, 
including NOAA. On September 30, 2009, NOAA sent a follow-up letter 
clarifying that their earlier letter was intended to provide informal 
comments to start a dialogue between the agencies on a variety of 
issues. The Department has had a long-standing relationship with NOAA 
and their highly-respected scientists and other experts. The Department 
looks forward to continuing this relationship and pursuing this 
dialogue with NOAA throughout the entire OCS process. MMS is not bound 
by NOAA's comments, except to the extent that NOAA is providing an 
official position on a mandate under NOAA's authority that requires 
certain actions or responses from MMS, but will give careful 
consideration to its recommendations as well as those of other 
commenters.
    Question 10. How many agencies does an oil and natural gas company 
have to deal with to produce from a federal offshore lease? Does this 
number of different and competing bureaucracies make operations in the 
OCS more efficient or less efficient?
    Answer. While MMS is the lead for all energy and mineral resources 
activities on the OCS, several other Federal agencies also have 
jurisdiction over certain aspects of OCS activities. At the lease sale 
stage, MMS coordinates with several federal and state agencies. This 
coordination includes, but is not limited to, consultations required 
under the Endangered Species Act with the National Marine Fisheries 
Service and Fish and Wildlife Service; Essential Fish Habitat 
consultation with the National Marine Fisheries Service; and Coastal 
Zone Management Act consistency determination with affected States.
    For post-lease activity, the number of Federal agencies an oil and 
gas company must deal with directly depends on the lease location and 
type of activity proposed. In addition to MMS, the following Federal 
agencies may also have jurisdiction over an individual proposal:

   Department of Defense (including the U.S. Army Corps of 
        Engineers)
   Department of Transportation (including U.S. Maritime 
        Administration)
   Environmental Protection Agency
   Federal Aviation Administration
   Federal Energy Regulatory Commission
   National Aeronautics and Space Administration
   National Marine Fisheries Service
   National Park Service
   Fish and Wildlife Service
   U.S. Coast Guard

    While not every Federal agency listed above is involved in the 
review and approval of every OCS oil and gas proposal, every proposal 
does involve at least a few of these agencies. The magnitude of this 
involvement ranges from receipt of notifications to issuing permits.
    Because MMS is the lead for OCS oil and gas activities, MMS 
considers the overall proposal, while other Federal agencies may look 
at one aspect of the proposal. These agencies have various specialties 
that in many cases can bring forth pertinent information more 
efficiently than one or two agencies could. It is not the number of 
agencies, but rather, how they coordinate and cooperate that makes the 
difference in efficiency. MMS strives to ensure that its NEPA and other 
analyses contain the information needed for decision-making, including 
information related to compliance with laws and regulation outside MMS' 
direct purview. MMS and other Federal agencies have worked together and 
will continue to work together to promote the efficiency of the 
permitting process for OCS oil and gas activities.
                                 ______
                                 
      Responses of David Rainey to Questions From Senator Bingaman
    Question 1. The Committee heard testimony about the offshore 
infrastructure necessary to support offshore oil and gas production and 
to bring the product onshore. Please state the extent to which your 
company typically is involved in the development, construction or 
maintenance of this infrastructure. If you do not typically handle this 
directly, please indicate the extent to which you are involved with the 
entities who are responsible for this infrastructure.
    Answer. BP currently operates eight deepwater projects in the Gulf 
of Mexico. In some cases, BP owns pipeline capacity to bring oil and 
gas production to shore and in others, we utilize existing capacity 
owned by other producers or pipeline operators. The development, 
construction and maintenance of the infrastructure required to support 
offshore oil and gas production is an integral part of BP's business. 
BP recently completed the delivery of a series of five new developments 
in the deepwater Gulf of Mexico, they included: Mad Dog, Holstein, 
Nakika, Atlantis and Thunderhorse. As we proceeded with the development 
of these projects, we were also engaged in the installation of the 
critical pipeline infrastructure to bring the oil and gas produced from 
these facilities to shore. BP undertook these investments because there 
was no existing capacity to bring these volumes to shore. These 
collective investments are called the Mardi Gras Pipeline 
Transportation System. The project transports production from the five 
major deepwater Gulf of Mexico projects previously mentioned and also 
transports 50 percent of all current deepwater Gulf production at 
depths of more than 7,000 feet. This transportation system consists of 
five main lines which total 490 miles--Okeanos (100 miles), Proteus (70 
miles), Endymion (90 miles), Caesar (115 miles) and Cleopatra (115 
miles)--and is the highest capacity deepwater pipeline system ever 
built. The Mardi Gras system is able to move more than one million 
barrels of crude and 1.5 billion cubic feet of natural gas per day. 
This project is but one example of the investment BP has made and 
continues to make in the safe and environmentally responsible 
exploration, development, production and transportation of offshore oil 
and gas resources to consumers and businesses in the United States.
    Question 2. The Committee also heard testimony to the effect that 
the Minerals Management Service's authority ends ``at the water's 
edge.'' Please state your understanding of the various government 
entities--federal, state, or local--responsible for permitting, 
oversight, or spill response related to the offshore infrastructure 
necessary to support offshore production or to bring the product 
onshore.
    Answer. The Department of Interior, through the Minerals Management 
Service, is charged with implementation of the OCS Lands Act. Many 
other agencies regulate activity on the OCS, including a number of 
federal and state agencies responsible for implementing laws and 
regulations relating to the protection of the environment and marine 
life. These laws, and the agencies charged with their oversight, are 
able to assure adequate oversight and rigor with respect to safety and 
the environment on the OCS.
    Among the laws designed to address those concerns are: Coastal Zone 
Management Act, National Environmental Policy Act, Rivers and Harbors 
Act, Clean Water Act, Oil Pollution Act, Clean Air Act, Noise Pollution 
Control Act, Comprehensive Environmental Response, Compensation, and 
Liability Act, Resource Conservation and Recovery Act, Endangered 
Species Act, Marine Mammal Protection Act, Migratory Bird Treaty Act, 
Magnuson-Stevens Fishery Conservation and Management Act, National 
Fishing Enhancement Act, as well as acts designed to protect historical 
and ecologically important resources, including the National Marine 
Sanctuaries Act, Antiquities Act, Abandoned Shipwrecks Act, 
Archeological Resources Protection Act, and National Historic 
Preservation Act.
    In addition to the MMS, other federal agencies and departments 
having influence on operations on the OCS are: Department of 
Transportation, Department of Homeland Security (Customs and Border 
Patrol, U.S. Coast Guard), Department of Commerce (National Oceanic and 
Atmospheric Administration, National Marine Fisheries Service), 
Department of Interior (Fish & Wildlife Service), Army Corps of 
Engineers, Federal Energy Regulatory Commission, Environmental 
Protection Agency, Department of Labor, Occupational Safety and Health 
Administration.
    State agencies involved in OCS operations include: Departments of 
Natural Resources, Offices of Conservation, Departments of 
Environmental Quality, State Mineral Boards, State Land Offices, 
Railroad Commissions, and various local government entities.
    Question 3. The Committee heard testimony regarding oil spills that 
occurred during severe storms in the Gulf of Mexico from onshore oil 
and gas infrastructure that supports offshore production--refineries, 
pipelines, and tanks required to receive process, store and distribute 
oil and gas from offshore fields. Please describe your company's 
involvement in developing and maintaining this onshore infrastructure, 
and your understanding of the governmental entities responsible for 
permitting, oversight and spill response for this infrastructure.
    Answer. BP is involved in the production and transportation of oil 
and gas from onshore facilities to onshore refineries and natural gas 
processing facilities. Where we have owner and operator positions, we 
are accountable for the maintenance of these facilities. All onshore 
facilities are regulated by state and federal pipeline transportation 
authorities, as well as environmental agencies.
    All pipelines operated by BP which deliver oil and natural gas from 
offshore facilities to onshore locations are equipped with high and 
low-pressure sensors. In the event of a change in pipeline pressure 
beyond a specified set point, the pressure sensors will trigger an 
alarm to the facility operator and/or shut down the pipeline. When 
alerted of a potential pipeline emergency BP will first shut down the 
operation and investigate the cause including ensuring that the 
pressure sensing equipment is not malfunctioning, and then will 
visually observe the pipeline, if possible, to determine the source. If 
the source is not within observable range, BP will contact the sending 
and receiving facilities to determine the abnormality. In the event a 
release is discovered, the BP Pipeline Response Plan with its 
predetermined response capabilities will be activated.
    Question 4. BP has recently reported a spill from a pipeline that 
serves Prudhoe Bay in Alaska. Please describe the cause of this spill 
and state which governmental entities are involved in regulating that 
pipeline and in assisting in the spill response. Please indicate 
whether there is any difference between the pipeline infrastructure 
involved in that spill and the onshore infrastructure that is utilized 
to transport oil produced offshore.
    Answer. On November 29 while performing routine rounds, a BP 
operator discovered an oil leak on an 18 inch oil production line to 
its Lisburne Production Center (LPC). Workers have identified the 
specific point of the leak. It is a rupture, roughly 24-inches long, 
running lengthwise on the bottom of the 18-inch diameter pipe. The 
rupture, by visual inspection, appears to have been caused by 
overpressure in the pipeline, linked to ice forming inside the pipe. 
Large ice plugs have been identified on both sides of the leak. The 
investigation into the incident continues, and is expected to 
conclusively determine the cause.
    The pipeline in question is regulated by the State of Alaska 
through the Department of Natural Resources, the Department of 
Environmental Conservation and the Alaska Oil and Gas Conservation 
Commission. The response to the incident is being managed through a 
Unified Command structure. The Unified Command is comprised of BP, the 
Alaska Department of Environmental Conservation, the North Slope 
Borough and the US Environmental Protection Agency. The US Coast Guard 
has also participated.
    The design of every pipeline system is unique to its specific 
circumstances and needs. Each design takes into consideration items 
such as the type of service (full or partially processed oil, multi-
phase production, water, gas, etc), the properties of the oil produced 
(e.g. SPE specific gravity, paraffin content, etc.), operating 
pressures, fluid temperatures, and external temperatures. In addition, 
pipeline construction, control and monitoring technology continues to 
evolve and is applied as applicable to each project.
     Responses of David Rainey to Questions From Senator Murkowski
    Question 1. Can you amplify for me your concerns about domestic 
energy production and, if regulatory uncertainty and overly burdensome 
litigation continues to stall development, what we can expect to see in 
terms of driving energy jobs and production overseas? Feel free to 
answer in numbers of actual jobs and numbers of barrels of oil, or 
percentages, whichever is available.
    Answer. As a company involved in many aspects of energy 
development--wind, solar, biofuels, oil, natural gas, and shale gas--we 
remain very concerned about the impact that litigation is having on US 
energy development. No form of energy is immune; wind is now seeing 
significant development challenges just like oil and natural gas. 
Recently, the industry has seen challenges to seismic acquisition 
programs, the MMS Five-year leasing program and other project specific 
matters. BP is intimately familiar with ``public challenges'' (i.e. 
protests, challenges or litigation) involving BP America Production 
Company. These challenges have the potential to affect oil and gas 
leasing and development decisions made by the United Stats Department 
of the Interior, Bureau of Land Management: San Juan Citizens Alliance 
v. Norton (United States Court of Appeals for the Tenth Judicial 
Circuit); San Juan Citizens Alliance v. Stiles (United States District 
Court for the District of Colorado); and Biodiversity Conservation 
Alliance v. Bureau of Land Management (United States District Court for 
the District of Wyoming).
    In additional to litigation, BP is also concerned about the 
cumulative effects of others policy proposals, including higher 
taxation, legislative initiatives, and proposed regulatory changes on 
the oil and gas industry. It is true that increased level of 
uncertainty brought about by these multiple policy initiatives does not 
enhance the attractiveness of the US. We believe the result of 
increased uncertainty could lead to reduced investment, which will mean 
less energy production, fewer jobs, lower revenues to state and federal 
treasuries, etc.
    Question 2. When evaluating offshore oil and gas development 
opportunities in nations outside the U.S., what are some of the main 
factors a company might take into account when assessing the 
attractiveness of the investment climate?
    Answer. Key factors that companies look for when assessing the 
attractiveness of an area for long term investment include: economic 
attractiveness and the ability to make a return on the investment for 
shareholders, historical fiscal stability, and stable regulatory 
regimes. Other factors that also are assessed include:

   Level of technical risk--the ability to find and develop the 
        resource
   Technical challenges such as water and reservoir deeper, 
        pressures, temperatures.
   The attractiveness of the opportunity (size of the 
        opportunity, ease of developing, will new technologies be 
        required, etc.)
   Fiscal arrangements--for example in some Production Sharing 
        Agreements, which are popular outside the US, countries allow 
        companies to recover capital investment before applying 
        royalties, taxes, etc.
   Upfront capital investment required by BP before starting to 
        receive money back.
   Amount of capital required
   Type of fiscal regime and the level of complexity (federal 
        vs. state, a 3 x 3 mile block, or a 30 x 30 miles block
   Progressive or regressive tax structures

    Question 3. When we talk about environmental stewardship on a 
global level, knowing what we know about the U.S. program, is it better 
or worse for the world's environment when the U.S. adds to its 
environmental restrictions things like shorter lease terms and 
heightened regulatory burdens?
    Answer. The OCS has been safely and reliably producing oil and 
natural gas for the nation for over 50 years. The current regulatory 
structures and lease terms have served the US Government and industry 
well. Stable fiscal, regulatory and leasing policies are important to 
sustainable oil and natural gas development which help the nation meet 
its goals for energy and economic security.
    We would be concerned about the creation of additional regulation 
that duplicates current practices of Federal and State governments and 
would not add value or enhance the consultation that already takes 
place between the various government agencies, oil and gas companies 
and other stakeholders. Onerous regulation and bureaucracy would 
discourage companies from investing in the United States versus 
elsewhere, reduce government revenues and opportunities for jobs 
related to our industry's activities, and also have potential overall 
negative impacts on the environment because we would likely import more 
oil from other countries that may have less stringent environmental 
standards.
    Stringent regulatory oversight in the US helps maintain 
environmental performance. Offshore operators operate under 17 major 
permits and must follow 90 sets of federal regulations.
    In accordance with National Environmental Policy Act (NEPA), the 
Minerals Management Service prepares environmental documents on lease 
sales and other major exploration and production related activities to 
be informed on environmental consequences of their decisions. For 
example, environmental impacts of seismic acquisition in the OCS are 
addressed in Environmental Impact Statements. Mitigation and monitoring 
requirements are determined during consultation processes with US Fish 
and Wildlife, National Marine Fisheries Service and state Coastal Zone 
Management agencies.
    The MMS strictly governs well drilling programs. The policies 
followed by the industry and MMS regulations ensure that wells on the 
US OCS are cased, cemented, protected with internal plugs and monitored 
to prevent problems during drilling of wells. The United States has the 
most effective oil spill prevention and response regime in the world. 
The OCS leases produce about 1.4 million barrels of oil per day. MMS 
calculates that since 1980 less than 0.001% of the oil produced in the 
OCS has spilled. Natural seepage of oil from the ocean floor is much 
greater.
    Industry's performance during Hurricanes Katrina and Rita 
demonstrated the success of the environmental protection built into 
offshore operations. MMS estimates 3,050 of 4,000 Gulf platforms and 
22,000 of 33,000 miles of pipelines were in direct paths of the storms. 
About 115 platforms were destroyed and over 50 others damaged. There 
was no loss of life and there were no significant oil spills from OCS 
facilities.
    In addition, Federal lease sales include a 5 Year plan with both 
draft and final environmental impact statements and solicitation of 
public comment no fewer than three times. The Federal Lease Sale 
planning process is public lengthy and elaborate.
    We are very concerned about reducing lease terms and in a letter to 
Mr. Marshal Rose, Chief, Economics Division, Minerals Management 
Service, on November 24, 2009, BP urged the Minerals Management Service 
to reconsider its proposal to reduce lease terms in oil and gas Lease 
Sale 213 for the Central Gulf of Mexico Planning Area to be held March 
17, 2010 (letter is attached herein). Stable and predictable leasing 
structures have encouraged significant investments which have led to a 
dramatic increase in production in the past decade. Today the GoM 
accounts for almost one quarter of the oil produced in the United 
States. Key to the success has been a stable leasing program, including 
lease terms that do not change from one sale to another.
    We believe that the proposed reduction of lease terms could produce 
serious unintended consequences. The proposal will likely impact the 
overall attractiveness of the GoM in comparison with other areas around 
the world. If the region becomes less attractive for investment, this 
will result in reduced revenues to the US. Furthermore, limiting the 
terms of leases in water depths of up to 1600 meters likely will result 
in the drilling of fewer exploration wells. We also believe that the 
proposed changes could result in production of less oil from fewer 
deepwater projects, not more. This will cause the US to import more oil 
from other locations where environmental laws are less stringent. The 
US balance of trade would also be negatively impacted with fewer jobs 
created and US energy and national security could be undermined.
    Policies that drive companies to drill additional wells merely to 
retain leases or extend shortened lease terms will result in a waste of 
resources simply for the purpose of extending the term of the lease. 
This is inconsistent with the Congressional declaration of policy found 
in the Outer Continental Shelf Lands Act, particularly Congress' stated 
policy of ``. . .expeditious and orderly development, subject to 
environmental safeguards, in a manner which is consistent with the 
maintenance of competition and other national needs. . .'' This could 
lead to inefficiencies in the GoM drilling sector and unnecessary 
environmental risks.
    Due in large part to advances in seismic imaging, deepwater 
drilling technology and production systems technology, the industry is 
able to explore previously inaccessible areas of the Outer Continental 
Shelf. New supplies are harder to find, more difficult and more 
expensive to extract and take much more time and resources of all kinds 
to bring online, not less. As a result, we need a more flexible leasing 
program to support safe and reliable oil and gas development in the US 
OCS, not one which is more restrictive.
    Question 4. While EIA has said that increased domestic offshore oil 
and gas production would not result in meaningful energy price 
differences for Americans, do you think that a major ramp up of 
development in the Atlantic, Pacific, Eastern Gulf, and Alaska OCS 
would send a market signal that could, in fact, affect world price of 
oil?

          a. Is the analysis the same for natural gas prices as oil, 
        even though natural gas is not based on a world price?

    Answer. The market impact of developing areas of the OCS currently 
closed to development would ultimately depend on the volumes of oil 
(and natural gas) discovered and produced. Based on official data, the 
National Petroleum Council estimated in 2007 that undiscovered, 
technically recoverable resources in Federal OCS moratoria areas 
amounted to 17.8 billion barrels of oil and 76.5 Tcf of natural gas, 
which the NPC estimated could support production by 2025 of 1 Mb/d and 
3.8 bcf/d, respectively. (NPC Hard Truths, tables 2-12 and 2-13)
    New discoveries could begin to impact prices even before production 
started if they contributed to changing market expectations of short-
and long-term future supply availability. Moreover, the market impact 
could be amplified if opening OCS acreage to development were part of a 
larger energy policy package aiming to increase domestic production, 
slow demand growth, and increase the flexibility of the US and global 
economic systems to deal with changing market circumstances. The market 
impact would also be affected by the reactions of consumers and 
producers alike to the changing supply prospects signaled by such an 
opening.
    While there is not an integrated global natural gas market, 
regional markets have become increasingly linked in recent years. And 
US natural gas prices would be likely to efficiently reflect the market 
impact of any new supplies that resulted from a lifting of OCS 
moratoria.
    Question 5. Senator Menendez indicated that not only would price be 
unaffected by increased domestic offshore drilling, but that 
``production'' would be unaffected by increased domestic offshore 
drilling. Is it accurate to say that increasing production would have 
no effect on energy security?
    Answer. The market impact of increased domestic offshore drilling 
would ultimately depend on the volumes of oil (and natural gas) 
discovered and produced. It is true that oil is a global market--and 
the US natural gas market has become more linked to other regional gas 
markets--so developments here must be assessed in a global context. 
That said, an increase in domestic oil and natural gas production that 
resulted from an increase in offshore drilling would be likely to have 
an impact. The extent of that impact would depend on the additional 
volume of oil and natural gas produced; the impact on market 
perceptions about short-and long-term supply availability; and the 
reactions of other market participants to these changes.
    Given the global nature of the oil market--and the increasingly 
linked nature of natural gas markets--import independence would not 
totally isolate the US from energy supply disruptions abroad. However, 
increased domestic production would benefit the economy by creating 
domestic jobs and by reducing the trade deficit. The National Petroleum 
Council estimated in 2007 that opening Federal OCS moratoria areas to 
development could attract a cumulative total of $98 billion in new 
investment by 2025; create more than 130,000 (direct) jobs; raise $41 
billion in federal royalties and $28 billion in federal income taxes; 
and reduce the trade deficit by $145 billion. (NPC Hard Truths, table 
2-13)
    Question 6. Environmental stewardship has improved through 
directional drilling and subsea tiebacks, among other improvements, as 
I understand it. Can you describe your environmental record in terms of 
exploration, development, and production for both Alaska and the Gulf 
of Mexico?
    Answer. The record of BP and the industry when viewed through a 
historical perspective is one of extraordinary success both in the Gulf 
of Mexico and Alaska. While we have had incidents, our objective and 
aspiration is to have none. Any release of oil from our facilities is 
unacceptable. Operations today include regulatory requirements for 
blow-out preventers and also include multiple technological and 
mechanical redundancies to ensure that releases do not occur and the 
environment is protected. In addition, inspection and maintenance 
programs ensure that facilities are regularly monitored to prevent 
incidents and releases from occurring.
    Question 7. Seismic data acquisition has also improved over the 
years. Please describe any environmental benefit that may be conferred 
as a result, and feel free to discuss any additional benefits to the 
OCS program through this technology.
    Answer. Seismic imaging allows us to predict the presence of 
hydrocarbon reservoirs below the sea bed. BP's Wide Azimuth Towed 
Streamer (WATS) and Ocean Bottom Node technologies involve truly three-
dimensional seismic acquisition and help in improvement of imaging 
below salt and other complicated geology. These acquisition 
technologies have been adopted industry-wide in the Gulf of Mexico. 
Additionally, improvement in seismic imaging in a producing field over 
time helps in monitoring fluid movement. As a result, we as an industry 
will be more efficient, drill fewer wells, and have less impact on the 
environment as we become better at predicting the presence of oil and 
gas in the subsurface.
    This ability to more clearly see the reservoir increases drilling 
success. Fewer wells drilled to find and develop a reservoir lead to 
incrementally less emissions per barrel of oil produced from drilling 
and its logistical support operations. That means less discharges to 
air and water and fewer solid wastes. And energy efficiency per barrel 
of oil produced is improved.
    Increased seismic success in the OCS results in more barrels of oil 
and gas produced domestically which can have environmental benefits. 
This provides energy closer to the end user reducing air emissions and 
fuel consumption from transporting imported oil. This lessens the 
carbon footprint for the same barrel of oil and risks from transporting 
oil via tankers.
    Furthermore, BP has developed the attached OCS resources assessment 
document which we feel will assist policy makers in trying to 
understand the issues government and industry should consider as it 
contemplates opening new areas.
    Question 8. How are competing uses in the offshore areas dealt with 
currently under existing laws and regulations--does this work and are 
changes needed?
    Answer. The Minerals Management Service process has proven to be an 
effective, deliberate public process that provides area residents and 
other users of the OCS with extensive opportunities for comment and 
consultation.

   Draft and final environmental impact statements are 
        prepared, soliciting public comment.
   MMS holds scoping sessions and public hearings in local 
        communities during the stages in the lease sale planning 
        process.
   These are supplemented with numerous formal and informal 
        contacts and consultations with various stakeholders.
   Effective multiple-use planning continues when leases are 
        awarded as companies seek approval for exploration plans, 
        consulting with potential affected communities.

    Policy needs to allow for true multiple uses, encourage cooperative 
efforts that engage all stakeholders, including industry and commercial 
users, and consider all benefits that the United States and its 
communities derive from oceans, lakes and coasts.
    National policy should be built on extensive region and local 
stakeholder investment already in place. For example, BP already 
participates in a number of voluntary efforts with stakeholders in 
areas it operates including (but not limited to):

   Numerous consultation and coordinated research efforts with 
        communities and sustenance resource users in Alaska;
   Participation in the Gulf of Mexico Foundation, founded to 
        help protect the health and productivity of the Gulf;
   And the SERPENT Project which facilitates scientific 
        research with academia using industry resources.

    All oil and gas development projects in the OCS go through a 
permitting process that involves multiple agencies at the local, state, 
and federal levels. Nearly every state and federal permit process 
requires, at a minimum, public notice. Direct consultation with 
communities and stakeholders is an agency requirement for more complex 
projects, including those requiring an environmental impact statement.
    For example, in Alaska, BP's development projects require approvals 
from the Borough's Planning Department, Planning Commission and 
Assembly and this also includes consultation with key communities and 
subsistence hunters. BP Alaska's Liberty project provides a recent 
example of the extensive nature of these consultation requirements. In 
order to develop the Liberty field, the company was required to obtain 
over 25 major permits. These include: federal permits (e.g., U.S. Army 
Corps of Engineers wetlands fill, U.S. Fish and Wildlife Service marine 
mammal authorization, and U.S Environmental Protection Agency camp 
wastewater permit), state permits (e.g. Alaska Department of Natural 
Resources land use and water use permits, Alaska Department of 
Environmental Conservation air quality permit) and Borough permits 
(rezoning and master plan approval). For each of these there was a 
formal public consultation requirement as part of the permit approval 
process. This included public notice, public meetings, and federal and 
state government consultations.
    BP takes a proactive role in this consultation. In the case of the 
Northstar EIS process, we recognized the critical role the Borough 
would have in overall project review, and we insisted the Borough be 
involved in the planning and preparation of the EIS for Northstar by 
making them a cooperating agency. In designing our environmental marine 
mammal monitoring, BP works closely with the Borough with an extensive 
peer-review process lasting several days. Along with federal agencies 
such as the Minerals Management Service and the National Marine 
Fisheries Service, the Alaska Eskimo Whaling Commission, individual 
hunters and Borough staff are very involved in these meetings and offer 
very detailed comments.
    Borough officials have ongoing access to our facilities and 
periodically meet with BP on matters relating to Borough jurisdiction 
and concern. Planning Commission members are invited to visit the field 
and are regularly updated on activities and issues. BP also goes beyond 
the required legal or regulatory requirements for consultation and 
pursues a healthy, ongoing working relationship with the North Slope 
community. Some examples are:

   Since the mid 1980s when BP has had a need to conduct any 
        activities in offshore waters during later summer and fall, BP 
        has negotiated annual Conflict Avoidance Agreements with the 
        Alaska Eskimo Whaling Commission and key whaling captains 
        associations of villages closest to our activities. The CAA is 
        an agreement to minimize the potential for conflicts and 
        negative impacts between subsistence hunters and industry 
        operators and includes mutually agreed upon mitigation 
        measures.
   BP shares scientific data with the Borough and participates 
        in scientific working groups.
   A company policy (``The Good Neighbor Policy'') designed to 
        mitigate the potential effects in the event of a large offshore 
        oil spill related to the Northstar facility
       Responses of David Rainey to Questions From Senator Dorgan
    Question 1. Earlier this year in this committee, I proposed an 
amendment which is one of the primary reasons for the oversight 
hearing. Through my approach, the MMS would be authorized to go through 
a rulemaking process to issue regulations and would consider a range of 
local and other conditions during that process. In federal waters, the 
Secretary would establish zones which would determine what kind of 
restrictions would be placed on surface activities. The onus is then 
placed on individual companies to develop innovative technology 
solutions in those zones. Renewable development (i.e. wind turbines 
offshore) and previously existing oil and gas projects would be exempt. 
I believe that if we could pursue this approach, it is possible to 
deploy innovative technology applications to limit the environmental 
footprint and significantly reduce the visual impact while increasing 
access to resources.
    Given your company's experience with projects in other regions and 
the testimony that you have presented, do you believe that this is a 
concept that you could support?
    Answer. BP fundamentally believes that it is possible to deploy 
innovative technology applications to limit environmental footprints 
and reduce visual impacts while increasing access to resources. BP 
supports a pragmatic approach to offshore energy development. Our 
experience--at Wytch Farm, in the environmentally sensitive Poole 
Harbor area of southern England and the Liberty Project in Alaska--
clearly demonstrates that these objectives can be achieved through 
innovative technology solutions.
    Question 2. The extended reach drilling from onshore as a part of 
the Poole Harbor/Wytch Farm Field in the U.K. seems particularly 
interesting to me. You have effectively been able to use technology to 
drill 11 kilometers offshore in a very ecological sensitive location. 
As you explain, over 100 wells have been drilled so far.
    Answer. Wytch Farm has been developed by BP to be Western Europe's 
largest known onshore oil field in one of the most environmentally 
sensitive areas of the UK. It is an Area of Outstanding Natural Beauty, 
featuring: Sites of Special Scientific Interest (SSSI), Special 
Protection Areas, World Heritage Coastline, Ramsar Sites (designated 
wetlands of international importance), National Trust land, National 
Nature Reserves.
    Development has been achieved through close co-operation and 
openness with the surrounding communities. Local liaison committees 
were formed to consult fully with all statutory and non-regulatory 
bodies and local residents are kept informed of relevant activities. 
Careful consideration was given to the levels, shape and general 
arrangement of the developed area and the siting of the operating 
equipment, with the various above-ground permanent facilities designed 
to blend into the existing landscape.
    As a result of the area's ecological importance, BP vigorously 
applied its environmental protection policy, establishing a monitoring 
program covering 23 studies, from archaeology and seabed ecology, to 
surveys of the wintering bird population, reptile communities and the 
red squirrel colony on Furzey Island, to the health of heathland, reed 
beds and saltmarshes. The results of these surveys were vital in 
determining both how to develop the oilfield and in providing baseline 
data against which BP could monitor its performance.
    Regular atmospheric monitoring around the oilfield facilities, 
together with observation of lichens on nearby trees, indicate that the 
air quality around existing well sites and the gathering station 
generally suffers no adverse impacts from BP's activities in the area.
    In recent years, BP has pioneered significant advances in extended 
reach drilling techniques, which has brought considerable environmental 
benefits to the development by enabling the furthest parts of the 
offshore Sherwood reservoir to be drilled from an onshore site. Well 
M16 set a new world record when it broke the 10km barrier in June 1999, 
reaching a displacement distance of 10,728m, a total length of 11,278m 
and a depth of 1638m. The drilling rig and ancillary equipment had a 
comprehensive noise-control package installed to meet the strict noise 
criteria imposed by Dorset County Council.
    In 1995, the Wytch Farm Development won The Queen's Award for 
Environmental Achievement in acknowledgement of the innovative, 
technologically challenging and environmentally beneficial manner in 
which the offshore section of the Sherwood reservoir was being 
developed.
    BP continues to manage an area of land around the site in order to 
integrate Wytch Farm into the Purbeck countryside and to ensure that 
due consideration is given to the ecology of the area for the life of 
the oilfield.
                         development/facilities
    There have been three phases of development at Wytch Farm, which 
has a total of 98 wells, 63 producers and 35 injectors, operating from 
10 sites.
                                 export
    The heart of the project is at Wytch Heath, the site of the 
gathering station, where the crude oil and liquid petroleum gases 
(LPGs) from the reservoirs are separated.
    LPG is stored in 12 large steel vessels and is loaded into road 
tankers and transported to the local market. A 16-inch diameter 
pipeline exports up to 110,000 barrels of crude oil a day, 91km via the 
Fawley Refinery across Southampton Water to Hamble Oil Terminal. Here 
it is stored in five tanks before being exported by tanker.
    At the gathering station there is a parallel 48km, 8-inch diameter 
pipeline that was laid by BP on behalf of British Gas. It exports two 
million cubic feet a day of methane/ethane to Sopley, north of 
Christchurch, for feeding into the main domestic gas network.
                               fast facts

----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
Field description                         Wytch Farm oil field comprises three separate reservoirs that lie
                                           under Poole Harbour and Poole Bay, in Dorset, South-west England.
----------------------------------------------------------------------------------------------------------------
Location                                  17 miles from Poole, Dorset
----------------------------------------------------------------------------------------------------------------
Block number                              PL089 (main onshore fields); PI259 (small onshore area under
                                           sandbanks); 98/6 and 98/7 (Sherwood offshore)
----------------------------------------------------------------------------------------------------------------
Participants                              BP (Operator--67.5%), Premier (12.5%), Maersk (7.5%), ONEPM (7.5%),
                                           Talisman (5%)
----------------------------------------------------------------------------------------------------------------
Discovered                                1959-1978
----------------------------------------------------------------------------------------------------------------
Start-up                                  1979 (Stage I); 1990 (Stage II), 1994 (Stage III)
----------------------------------------------------------------------------------------------------------------
Average daily production (2007)           23,000 bpd oil; 6 mmscfd gas; 50 tonnes LPGs
----------------------------------------------------------------------------------------------------------------
 Peak production                          1997--110,000 bpd
----------------------------------------------------------------------------------------------------------------

    Question 3. Can you tell me more about how this project came about? 
How were local communities and governments engaged? What kind of 
consultative process was undertaken before the project began? What 
kinds of policies were put in place to meet the strict environmental 
conditions? Do you think that this approach is something that could be 
employed in the U.S. federal OCS?
    Answer. See response to previous question. Yes, the approaches that 
were taken at Wytch Farm and which are being take at our Liberty 
project in Alaska could certainly be employed in the US federal OCS.
       Response of David Rainey to Question From Senator Menendez
    Question 1. I think that the environmental integrity of offshore 
oil operations should not be limited to what happens on platforms. 
Pipelines, tankers/barges and onshore facilities--all necessary for oil 
production--are also at risk for spills. In March 2006 the largest 
crude oil spill in the history of North Slope operations brought 
national attention to the chronic problem of spills. BP was fined $20 
million including criminal penalties and probation for knowingly 
neglecting corroded pipelines. As a result, the federal government and 
the State of Alaska have filed separate lawsuits against BP. In 2007 BP 
shut down Northstar oil field, which lies six miles offshore of the 
Prudhoe Bay field in the Beaufort Sea, after a worker noticed a leak in 
some pipe. What has BP learned from these experiences and how can you 
assure us this problem will not happen again?
    Answer. In 2006 BPXA set up the Technical Directorate to provide in 
addition to other roles integrity management capability and oversight 
of North Slope operations with respect to engineering standards, 
operating systems development and corrosion management. Over the past 3 
years, this team has successfully introduced a new corrosion control 
strategy, doubled the size of the corrosion, inspection and chemicals 
group, and implemented a new BP Operating Management System. These 
actions have made a significant improvement to the integrity of our 
facilities and operating systems.
      Responses of David Rainey to Questions From Senator Sessions
    Question 1. In your opinion, do shorter lease terms, an increase in 
royalties, and an increase in taxes play a part in determining which 
country your company with produce?
    Answer. Lease terms, royalty rates and taxes all play a critical 
role in determining how BP approaches investment decisions around the 
world.
    BP is especially concerned about what we see as a trend toward 
higher levels of government take. This includes recent increases in 
royalty rates on leases across the GoM, new taxes on GoM production 
being contemplated by Congress and the administration, and escalating 
rental rates. These actions, when combined with a reduction in lease 
terms, have the undesired effect of decreasing the competitiveness of 
the GoM.
    We believe that a reduction of lease terms as recently proposed by 
MMS could produce serious unintended detrimental consequences. The 
proposal will likely impact the overall attractiveness of the GoM in 
comparison with other areas around the world. If the region becomes 
less attractive for investment, this will result in a reduction in 
revenues to the US Treasury from lower bonus bids on leases, reduced 
rental payments and lower royalties. Furthermore, limiting the terms of 
leases in water depths up to 1600 meters will likely result in the 
drilling of fewer exploration wells. We also believe that the proposed 
changes could result in production of less oil from fewer deepwater 
projects, not more. This will cause the US to import more oil from 
other locations where environmental laws are less stringent. The US 
balance of trade would also be negatively impacted, fewer jobs will be 
created, and US energy and national security could be undermined.
    To encourage continued success with domestic energy development, we 
must have stable leasing, fiscal, and regulatory policies. They are 
critical to continuing investments which create jobs, generate revenues 
and enhance US energy and national security.
    Also please see attached comments submitted by BP on the Notice of 
Lease Sale 213 proposal to reduce lease terms for leases in the Gulf of 
Mexico:
    Question 2. The oil and gas industry directly and indirectly employ 
9.2 million people, so could someone explain to me why with double 
digit unemployment numbers are we not moving forward with increasing 
domestic production and employing individuals here at home?
    Answer. The oil and gas industry does directly and indirectly 
employ over nine million people in the US. We believe that increasing 
access to new areas would have a significant stimulative impact on the 
domestic employment situation. In the energy industry, the best way to 
increase investment and create new jobs is to promote policies which 
open new areas to exploration and development. The US government can 
play an important role in this respect. The impact of such policy 
proposals would be to create jobs in a multitude of areas, including 
oil and gas exploration, development and production, pipeline 
manufacturing and construction, equipment manufacturing, offshore 
service sector expansion, natural gas plant construction and 
installation, as well as the service sectors which support these 
activities. While many of the jobs would be construction related, a 
significant number would sustained by an expanding industry.
    Question 3. In total, the OCS development has generated $190 
billion in federal revenue from bonus bids and royalty payments. Its 
puzzles me with record breaking deficit numbers, why the 5 year plan 
for OCS is getting delayed when it could produce federal revenues. Does 
anyone have an opinion on this?
    Answer. BP believes that the current MMS Five-year leasing program 
is robust and should continue as originally outlined. Furthermore, we 
support the proposed 2010-2015 Five-year plan and would like to see it 
move forward expeditiously so that the US can begin to enjoy the 
economic and energy benefits that come from opening new areas.
    Question 4. What is the role of the National Oceanic and 
Atmospheric Administration (NOAA) in OCS development? NOAA 
Administrator Lubchenco sent a letter to MMS dated September 21, 2009, 
which also appeared the LA Times commenting on the OCS proposed 5 year 
plan--2010-2015. However, NOAA later claimed it was an unofficial 
letter. How is MMS bound or inclined to react to this letter's 
contents?
    Question 5. How many agencies does an oil and natural gas company 
have to deal with to produce from a federal offshore lease? Does this 
number of different and competing bureaucracies make operations in the 
OCS more efficient or less efficient?
    Answer. The Department of Interior, through the MMS, is charged 
with implementation of the OCS Lands Act. Many other agencies regulate 
activity on the OCS, including a number of federal and state agencies 
responsible for implementing laws and regulations relating to the 
protection of the environment and marine life. These laws, and the 
agencies charged with their oversight, are able to assure adequate 
oversight and rigor with respect to safety and the environment on the 
OCS.
    Among the laws designed to address those concerns are Coastal Zone 
Management Act, National Environmental Policy Act, Rivers and Harbors 
Act, Clean Water Act, Oil Pollution Act, Clean Air Act, Noise Pollution 
Control Act, Comprehensive Environmental Response, Compensation, and 
Liability Act, Resource Conservation and Recovery Act, Endangered 
Species Act, Marine Mammal Protection Act, Migratory Bird Treaty Act, 
Magnuson-Stevens Fishery Conservation and Management Act, National 
Fishing Enhancement Act, as well as acts designed to protect historical 
and ecologically important resources, including the National Marine 
Sanctuaries Act, Antiquities Act, Abandoned Shipwrecks Act, 
Archeological Resources Protection Act, and National Historic 
Preservation Act.
    In addition to the MMS, other federal agencies and departments 
having influence on operations on the OCS are: Department of 
Transportation, Department of Homeland Security (Customs and Border 
Patrol, U.S. Coast Guard), Department of Commerce (National Oceanic and 
Atmospheric Administration, National Marine Fisheries Service), 
Department of Interior (Fish & Wildlife Service), Department of the 
Army (Corps of Engineers), Federal Energy Regulatory Commission (FERC), 
Environmental Protection Agency (EPA), Department of Labor, 
Occupational Safety and Health Administration.
    State agencies involved in OCS operations include: Departments of 
Natural Resources, Offices of Conservation, Departments of 
Environmental Quality, State Mineral Boards, State Land Offices, 
Railroad Commission, and various local government entities.
    Question 6. We've heard the U.S. ranks very high in environmental 
stewardship. How high does the U.S. rank in terms of applying its 
stewardship policies in such a way as to provide certainty to the 
process of leasing and developing the OCS?
    Answer. The United States has well developed and understood 
environmental laws and regulations which have directed leasing and 
development in the OCS for many decades. US OCS environmental 
regulatory programs are looked at as models by some countries new to 
offshore energy development.
    The National Environmental Policy Act (NEPA) has provided the 
framework for environmental policymaking since 1969. Minerals 
Management Service (MMS) produces NEPA documents for each of the major 
stages of energy development planning--from the overarching 5 Year 
Leasing Program EIS, through each of the NEPA documents for the energy 
lease sales, exploration, development and production plans. The MMS 
Environmental Studies Program has conducted environmental research in 
support of the NEPA process for over 35 years. Federal and state 
agencies participate in the NEPA process as cooperating or consulting 
agencies. And public comment is an important part of the process.
    Stewardship is recognized as high in part because of the 
comprehensive nature of the NEPA analysis. Environmental, biological, 
archaeological, socioeconomic, and geological conditions or potential 
conflicts, or other information that might bear upon the potential 
leasing, exploration, and development of the program area and vicinity 
are considered and addressed. The NEPA process used for leasing and 
development aides in delivering certainty by providing a balanced forum 
for early identification, avoidance, and resolution of potential 
conflicts.
   Attachment I.--Outer Continental Shelf (OCS) Resource Assessment 
                                Proposal
                             may 1st, 2009
    Congressional and Administration officials have called for an 
updated resource assessment of the US Outer Continental Shelf (OCS). By 
far, the most powerful tool in assessing oil and gas potential on the 
OCS is marine seismic data. Current resource assessments are based on 
data which were acquired 20 to 30 years ago. Seismic technology has 
improved dramatically in the intervening period, as has the 
understanding of deepwater exploration potential. New data will provide 
valuable insights into the crustal structure and geology of the OCS, 
and help to "refresh" existing geophysical and well log databases.

   New seismic data is the enabling technology to help both 
        government and industry deliver timely and more accurate 
        resource assessments on which to base a new MMS Five-year 
        Leasing Plan.
   Seismic acquisition programs should be scaled appropriately 
        for the different phases of evaluation in order to minimize 
        costs and environmental impacts. For example:

    --A logical first step is to acquire low-density, two-dimensional 
            (2D) regional seismic data via an Environmental Assessment 
            (Note: An EA determines if significant impact may occur 
            requiring an Environmental Impact Statement)
    --Areas with greatest exploration potential would be high-graded, 
            and subsequently, high density 2D or three dimensional (3D) 
            seismic would be acquired in focused areas where 
            prospectivity is demonstrated. Such activities would be 
            part of a Programmatic Environmental Impact Statement 
            (PEIS), which could take up to two years to complete and 
            cover multiple Geophysical & Geological (G&G) activities. 
            PEIS should be undertaken in a timely manner along the East 
            and West Coasts in support of future exploration activity.

   If required, a Steering Board of government and industry 
        experts could be formed to guide the design and development of 
        the seismic acquisition. This would ensure government access 
        to, and input from subject matter experts.
Regional framework and 2D seismic
    To the best of our knowledge, no significant industry seismic data 
has been acquired off the US East Coast in 30 years, West Coast and 
south Alaska in over 20 years. A regional 2D, long record length (to 
enable deep imaging) sparsely spaced seismic grid will provide much-
needed and timely data to enable an improved and updated resource 
assessment. This data will serve to ``refresh'' and tie existing 
vintage seismic data, provide insights into deep crustal structure and 
will enable us to better tie existing seismic datasets into a common 
framework.
    Figure 1* is an example of a ``vintage'' 2D seismic section 
compared with a modern (2006) 2D section. These sections are a cross 
section, or vertical slice, through an offshore basin. Please note the 
detailed geology revealed in the modern 2006 section, where the deeper 
geology reveals both insights into the crustal structure as well as a 
new play type.
---------------------------------------------------------------------------
    * All figures have been retained in committee files.
---------------------------------------------------------------------------
    Timing: This type of survey can be obtained under an Environmental 
Assessment. This would enable the acquisition of new data within 6-12 
months, beginning as early as 3Q 2009.
    Funding model: Industry could fund the low-density 2D program as a 
speculative seismic shoot and data would be provided at no cost to MMS 
by the seismic contractor.
    Survey Design: Wide spacing (a seismic line every 50-100 miles).
    Potential Environmental Impacts: Wide seismic line spacing 
minimizes environmental impacts. Impacts will be addressed in the 
Environmental Assessment and Incidental Harassment Authorization (IHA). 
Mitigation and monitoring requirements will be identified during 
consultation processes with US Fish and Wildlife, National Marine 
Fisheries Service and state Coastal Zone Management agencies. Typical 
mitigation during seismic acquisition includes marine mammal observers, 
ramp up procedures and exclusion zones.
Resource assessment
    Regional evaluation enables geoscientists and engineers to generate 
an updated resource assessment of the oil and gas potential of the OCS. 
This will help focus further exploration activity in the most 
prospective areas and down-grade/eliminate other areas, thus reducing 
overall cost and environmental impacts of an offshore leasing program. 
New seismic data, combined with global exploration insights gained over 
the past 3 decades, will certainly reveal new exploration concepts. A 
Steering Board of subject matter experts, as mentioned previously, 
could be utilized to ensure robust seismic acquisition.
Forward timeline, data requirements and links to a 5 year plan
    In the MMS draft 2010-2015 5 year plan, East and West Coast area-
wide sales will begin in 2012. Area-wide Programmatic Environmental 
Impact assessments for the East and West OCS (including S. Alaska) 
could be initiated as early as mid-2009, and would require at 18-24 
months for completion. While a PEIS could not be in place for a timely 
regional assessment of offshore oil and gas resources, this would 
provide a robust environmental assessment in support of future focused 
2D or 3D seismic.
    New regional seismic, coupled with existing seismic, will not be 
sufficient to define prospects in all areas of the OCS. However, 
process of high-grading on sparse, widely spaced data, then focusing 
dense 2D or 3D seismic over the most prospective areas is a typical 
practice of the petroleum industry. This process is efficient in terms 
of time, cost and environmental impact, because it focuses activity 
into only those areas that are deemed as prospective. This could be 
funded as a "speculative" seismic project, where a number of companies 
share the costs. The data is owned by the acquiring geophysical 
company, shared with the MMS and can be purchased by any interested 
party.
                      Attachment II.--BP Comments
                                   BP America Inc.,
                                Gulf of Mexico Exploration,
                                    Houston, TX, November 24, 2009.
Mr. Marshal Rose,
Chief, Economics Division, Minerals Management Service (MS-4050), 381 
        Elden Street, Herndon, VA.
Subject: Comments on the Proposed Changes in Lease Terms, Proposed 
Notice of Sale 213, Central Planning Area, Gulf of Mexico

    Dear Mr. Rose: The Minerals Management Service (MMS) has proposed 
that oil and gas Lease Sale 213 for the Central Gulf of Mexico (GoM) 
Planning Area be held March 17, 2010. The Proposed Notice of Sale 213 
published in the Federal Register on November 16, 2009 includes a 
revision of lease terms for the blocks in water depths of 400 meters to 
less than 1600 meters. Under the proposal, blocks in 400 to 800 meters 
are proposed to change from an 8-year lease term to a five-year initial 
lease term, where commencement of an exploratory well would extend the 
lease term to eight years. Furthermore, blocks in 800 to less than 1600 
meters are proposed to change from a ten-year initial lease term to a 
seven-year initial lease term, where commencement of an exploratory 
well would extend the lease term to ten years.
Retain current lease terms
    BP America strongly supports a continuation of the regular leasing 
program in the central and western GoM--the region has been safely and 
reliably producing oil and natural gas for the nation for over 50 
years. However, we are very concerned about reducing lease terms. We 
urge MMS to reconsider this proposal. We believe the appropriate 
approach is to retain the current lease term structures for these 
waters because they have served the US Government and industry well. 
Stable and predictable leasing structures have encouraged significant 
investments which have led to a dramatic increase in production in the 
GoM over the past decade. Today, the GoM accounts for almost one 
quarter of the oil produced in the US. Key to the success has been a 
stable leasing program, including lease terms that do not change from 
one sale to another.
Potential for significant unintended consequences
    We believe that the proposed reduction of lease terms could produce 
serious unintended detrimental consequences. The proposal will likely 
impactthe overall attractiveness ofthe GoM in comparison with other 
areas around the world. If the region becomes less attractive for 
investment, this will result in a reduction in revenues to the US 
Treasury from lower bonus bids on leases, reduced lease rental 
payments, and lower royalty payments. Furthermore, limiting the terms 
of leases in water depths up to 1600 meters will likely result in the 
drilling of fewer exploration wells. Fewer exploration wells will 
result in fewer discoveries, fewer development projects, and less 
production. This will cause the US to import more oil from other 
locations where environmental laws are less stringent. The US balance 
of trade would also be negatively impacted, fewer jobs will be created, 
and US energy and national security could be undermined.
    Policies that drive companies to drill additional wells merely to 
retain or extend shortened lease terms will result in a waste of 
resources simply for the purpose of extending the term ofthe lease. 
This is inconsistent with the Congressional declaration of policy found 
in Sec. 1332 of the Outer Continental Shelf Lands Act, particularly 
Congress' stated policy of ``. . .expeditious and orderly development, 
subject to environmental safeguards, in a manner which is consistent 
with the maintenance of competition and other national needs. . .'' 
This could also lead to inefficiencies in the GoM drilling sector and 
unnecessary environmental risks.
GoM complexity demands regulatory flexibility
    The GoM is one of the most complex oil and gas basins in the world. 
This complexity is demonstrated by very deep, subsalt, high pressure 
and high temperature reservoirs that are currently being explored and 
appraised. It was not until earlier in this decade that the industry 
was able to position exploration wells and appraise discoveries in 
complex subsalt and high pressure strata. The complexity of the 
subsurface requires long periods of time to acquire and process 
seismicim ages before being able to safely design and execute wells 
which today take at least a year to plan. Therefore, past experiences 
regarding the timeframes from lease acquisition to the first 
exploration well are not appropriate analogues for the present and the 
future.
Water depth should not be the only driver
    We believe that water depth should not be the primary driver of 
lease terms. More often than not, it is the subsurface difficulties 
associated with imaging and drilling designs that require industry to 
need more time to image, plan, and execute the drilling of deep water 
wells. We believe this fact is recognized by MMS, and especially so in 
the deep water and ultra deep gas plays on the shelf. MMS has issued 
Notices to Lessees and Suspensions of Operations regarding the 
evaluation, planning and drilling of ultra deep gas wells on the shelf. 
In doing so, MMS has acknowledged that these operations are as 
challenging as those in the deep water even though the leases are in 
less than 200 meters of water.
Technology challenges require time to overcome
    Industry has always operated on the cutting edge of technology. 
This is more the case today than ever before. Due in large part to 
advances in seismicim aging, deep water drilling technology and 
production systems technology, the industry is able to explore 
previously inaccessible areas of the GoM. The chalenges of operating in 
deeper water, subsalt, and at higher temperatures and pressures are 
extraordinary. The fact remains, new supplies are harder to find, more 
difficult and more expensive to extract and take much more time and 
resources of all kinds to bring online, not less. These facts call for 
a more flexible leasing program , not one which is more restrictive.
Drilling costs are increasing
    Today, exploration wells cost between $100 and $250 million each 
and take several years to plan and execute. On average, only one in 
three exploration wells will find sufficient commercial quantities of 
oil and gas to develop. When discoveries are made, the projects that 
bring them to production often require the development of new 
technology. These projects are hugely expensive and require many years 
to deliver. This said, the projects are being delivered with a safety 
and environmental record that would be the envy of any industry.
Next generation of discoveries will require more time
    The next generation of discoveries in the GoM will require more 
time and more investment to move from discovery to production. Today, 
exploration wells in the GoM target reservoirs lying as much as 6 to 7 
miles below sea level. Water depth is just one element of increased 
complexity. Subsurface challenges associated with seismic imaging and 
drilling designs have an even more significant impact on the time and 
investment required. As the remaining resources become increasingly 
difficult to discover, and more challenging and expensive to develop, 
stable and predictable leasing, regulatory, and fiscal regimes will 
continue to be important to successful oil and gas resource 
development.
Ten year lease terms are critical
    Today, the significant amount of uncertainty involved, and the 
technology and investment required justify the full 10-year lease term. 
As we move to deeper and more chalenging environments, whether they be 
on the shelf or in deepwaters, there is no reasonable logic for shorter 
lease terms.
Kaskida example
    With more difficult to image and deeper prospects our recent 
successes like Kaskida clearly demonstrate that it may take a full ten 
years from the initial lead identification and lease acquisition to 
drill the exploration well . It took ten years for us to produce a 
seismic image of sufficient quality to safely plan and execute the 
exploration well at Kaskida (see timeline below).* We believe this will 
be a typical timeline for many future GoM prospects.
---------------------------------------------------------------------------
    * Graphic has been retained in committee files.
---------------------------------------------------------------------------
New play concepts will be discouraged
    The current ten-year lease term for deepwater areas of the GoM 
enables industry to adequately evaluate new play concepts. Examples 
include recent success in assessing the Paleogene/Lower Tertiary plays 
where industry has discovered billions of barrels of oil and gas in-
place. New play concepts require sufficient time, investment and 
technology to be properly assessed and tested. Often, one well is 
selected to test a play concept; however, there is a group of related 
prospects on other leases which are dependent upon the outcome of the 
play test. If lease terms are reduced, the incentive to pursue new play 
concepts will be severely diminished as industry will be less likely to 
test a single prospect in a new play if they do not hold a portfolio of 
leases with ``follow-on'' prospectivity.
Hub developments
    While conventional plays in the GoM mature, field sizes are 
decreasing. As a result, in order to make a discovery economically 
viable it is often required that multiple discoveries are tied together 
into a single hub, or production facility. Such circumstances require 
that industry has the time and flexibility to mature each of these 
opportunities individually. This concept is demonstrated by BP's Nakika 
development, which includes six separate fields tied together into a 
common host/hub facility. None of these fields was economic on its own. 
However, the hub concept enabled collective development. Under the 
proposal, industry will be discouraged from pursuing such opportunities 
because ofthe lack of time available to fully explore and appraise 
multiple fields.
Escalating rental rates
    The Notice also includes new, escalating rental rates for leases in 
the GoM. BP is concerned about what we see as a trend toward higher 
levels of government take. This includes recent increases in royalty 
rates on leases across the GoM, new taxes on GoM production being 
contemplated by Congress and the administration, and escalating rental 
rates. These actions, when combined with a reduction in lease terms, 
have the undesired effect of decreasing the competitiveness of the GoM. 
We urge MMS to retain the existing rental rate structure.
Conclusion
    Technology has been, and will continue to be, the key to our energy 
future. We must continue to invest in exploration and production 
capability, and in technology to meet demand. We must also continue to 
develop technologies to increase recovery of oil and gas from 
established hydrocarbon positions in the US. To encourage and ensure 
continued success, we must have stable leasing, fiscal, and regulatory 
policies so that the oil and gas industry can continue to maintain 
investments which create jobs, generate revenues and enhance US energy 
and national security.
    BP appreciates the opportunity to comment on the Proposed Notice of 
Sale 213. In order to enhance the nation's economic, energy, and 
national security, the U.S. clearly needs to aggressively expand 
offshore access and open all available areas to oil and gas leasing, 
exploration and development, rather than limiting the opportunities by 
reducing lease terms. A dramatic change in policy with regard to lease 
terms, as proposed in the Notice, sends the wrong signal to industry 
and undermines the confidence built in the leasing program overdecades. 
Again, BP urges the MMS to reconsider this proposal and retain the 
current lease term structure. We would welcome the opportunity to 
further discuss our comments.
            Sincerely,
                                           David I. Rainey,
                                                    Vice President.


```