U.S. GOVERNMENT PRINTING OFFICE

44–388 CC WASHINGTON : 1997

OVERSIGHT FIELD HEARING ON BUREAU OF LAND

MANAGEMENT AND U.S. FOREST SERVICE OIL

AND GAS REGULATIONS REGARDING ACCESS

AND PERMITTING ISSUES

OVERSIGHT HEARING

BEFORE THE

SUBCOMMITTEE ON ENERGY

AND MINERAL RESOURCES

OF THE

COMMITTEE ON RESOURCES

HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTH CONGRESS

FIRST SESSION

ON

MONDAY, JUNE 30, 1997, CASPER, WYOMING

Serial No. 105–50

Printed for the use of the Committee on Resources

(
(II)

COMMITTEE ON RESOURCES

DON YOUNG, Alaska, Chairman

W.J. (BILLY) TAUZIN, Louisiana

JAMES V. HANSEN, Utah

JIM SAXTON, New Jersey

ELTON GALLEGLY, California

JOHN J. DUNCAN, JR., Tennessee

JOEL HEFLEY, Colorado

JOHN T. DOOLITTLE, California

WAYNE T. GILCHREST, Maryland

KEN CALVERT, California

RICHARD W. POMBO, California

BARBARA CUBIN, Wyoming

HELEN CHENOWETH, Idaho

LINDA SMITH, Washington

GEORGE P. RADANOVICH, California

WALTER B. JONES, JR., North Carolina

WILLIAM M. (MAC) THORNBERRY, Texas

JOHN SHADEGG, Arizona

JOHN E. ENSIGN, Nevada

ROBERT F. SMITH, Oregon

CHRIS CANNON, Utah

KEVIN BRADY, Texas

JOHN PETERSON, Pennsylvania

RICK HILL, Montana

BOB SCHAFFER, Colorado

JIM GIBBONS, Nevada

MICHAEL D. CRAPO, Idaho

GEORGE MILLER, California

EDWARD J. MARKEY, Massachusetts

NICK J. RAHALL II, West Virginia

BRUCE F. VENTO, Minnesota

DALE E. KILDEE, Michigan

PETER A. DEFAZIO, Oregon

ENI F.H. FALEOMAVAEGA, American

Samoa

NEIL ABERCROMBIE, Hawaii

SOLOMON P. ORTIZ, Texas

OWEN B. PICKETT, Virginia

FRANK PALLONE, JR., New Jersey

CALVIN M. DOOLEY, California

CARLOS A. ROMERO-BARCELO ́ , Puerto

Rico

MAURICE D. HINCHEY, New York

ROBERT A. UNDERWOOD, Guam

SAM FARR, California

PATRICK J. KENNEDY, Rhode Island

ADAM SMITH, Washington

WILLIAM D. DELAHUNT, Massachusetts

CHRIS JOHN, Louisiana

DONNA CHRISTIAN-GREEN, Virgin Islands

RON KIND, Wisconsin

LLOYD DOGGETT, Texas

LLOYD A. JONES, Chief of Staff

ELIZABETH MEGGINSON, Chief Counsel

CHRISTINE KENNEDY, Chief Clerk/Administrator

JOHN LAWRENCE, Democratic Staff Director

SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

BARBARA CUBIN, Wyoming, CHAIRMAN

W.J. (BILLY) TAUZIN, Louisiana

JOHN L. DUNCAN, JR., Tennessee

KEN CALVERT, California

WILLIAM M. (MAC) THORNBERRY, Texas

CHRIS CANNON, Utah

KEVIN BRADY, Texas

JIM GIBBONS, Nevada

CARLOS ROMERO-BARCELO ́ , Puerto Rico

NICK J. RAHALL II, West Virginia

SOLOMON P. ORTIZ, Texas

CALVIN M. DOOLEY, California

CHRIS JOHN, Louisiana

DONNA CHRISTIAN-GREEN, Virgin Islands

——— ———

BILL CONDIT, Professional Staff

SHARLA BICKLEY, Professional Staff

DEBORAH LANZONE, Democratic Counsel
(III)

C O N T E N T S

Page

Hearing held June 30, 1997 .................................................................................... 1

Statements of Members:

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

Wyoming ........................................................................................................ 2

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

Statements of witnesses:

Abbey, Robert, Acting State Director, Bureau of Land Management, Colorado ................................................................................................................ 10

Prepared statement of ............................................................................... 107

Basko, Donald, Supervisor, Oil and Gas Conservation Commission ............ 34

Letter from Mr. Basko to Mr. Al Pierson ................................................ 155

Belton, Terry, Rocky Mountain Oil and Gas Association .............................. 57

Prepared statement of ............................................................................... 190

Carter, James W., Chairman, Public Lands Committee, Interstate Oil

and Gas Compact Commission .................................................................... 39

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

Fancher, George H., Jr., Owner, Fancher Oil Company ............................... 63

Prepared statement of ............................................................................... 94

Flora, Gloria, Supervisor, Lewis and Clark National Forest, Forest Service, U.S. Department of Agriculture ............................................................ 12

Prepared statement of ............................................................................... 92

Guy, Gina .......................................................................................................... 14

Prepared statement of ............................................................................... 93

Hoskins, Robert, Member of the Board of Directors, Wyoming Wildlife

Federation ...................................................................................................... 76

Prepared statement of ............................................................................... 211

Magagna, Jim, Director of Federal Land Policy, State of Wyoming ............ 36

Prepared statement of ............................................................................... 152

Martin, John W., President, McMurry Oil Company, Independent Petroleum Association of Mountain States .......................................................... 60

Prepared statement of ............................................................................... 202

Nance, Robert, President and CEO, Nance Petroleum Corporation ............ 54

Prepared statement of ............................................................................... 101

Pierson, Alan, State Director, Bureau of Land Management, Wyoming ..... 7

Prepared statement of ............................................................................... 99

Smith, Robin M., Senior Environmental Specialist, Chevron USA Production Company ................................................................................................ 51

Prepared statement of ............................................................................... 186

Throop, Tom, Executive Director, Wyoming Outdoor Council ...................... 78

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

Tipton, Tim N., Production Manager, Rocky Mountain Region, Marathon

Oil Company .................................................................................................. 49

Prepared statement of ............................................................................... 166

Additional material supplied:

Briefing Paper—Oil and gas regulations regarding access and permitting

issues .............................................................................................................. 5

Dept of the Interior, Office of the Solicitor, letter to Director, Bureau

of Land Management .................................................................................... 115
(1)

OVERSIGHT FIELD HEARING ON BUREAU OF

LAND MANAGEMENT AND U.S. FOREST

SERVICE OIL AND GAS REGULATIONS REGARDING ACCESS AND PERMITTING ISSUES

MONDAY, JUNE 30, 1997

U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON

ENERGY AND MINERAL RESOURCES, COMMITTEE ON RESOURCES, Casper, WY.

The Subcommittee met, pursuant to notice, at 10 a.m., at the

Basko Building, 777 West First Street, Casper, Wyoming, Hon.

Barbara Cubin [Chairwoman of the Subcommittee] presiding.

Mrs. CUBIN. If the first panel would please take your places at

the table.

Sorry we’re starting late. I had every intention of getting here

early. And my son and I set the burglar alarm off at our house and

had trouble trying to get it fixed so that the police wouldn’t take

us up to jail, instead of here.

The Subcommittee on Energy and Mineral Resources will come

to order. I want to thank everyone for being with us today.

First, I’ll introduce myself. I’m Barbara Cubin, Chairman of the

Subcommittee on Minerals and Energy of the Committee on Resources; Bill Condit, and Sharla Bickley.

I have my staff here. Patty McDonald is my chief of staff. And

then my district representatives who are stationed here in Casper,

Vivian Stokes and Mantha Phillips.

So if you have any questions throughout the day and you see—

and you see staff around, feel free to ask anyone for anything that

you might need.

I’m not—I want to get the hearing started and go straight

through as quickly as we can. We have a lot of witnesses to hear

from, and all of their testimony is quite pertinent.

I thank everyone for submitting their testimony earlier. I have,

in fact, read everyone’s testimony and feel prepared to go on.

I will—after the first two panels, I will call a recess for about 15

to 20 minutes. And then we’ll get right back at it. So if you want

to plan around that somehow, that will be fine. So I figure that recess will be from 12:30—roughly—around 12:30 to 1. We’ll be gone

20 minutes and then start right back up.

I also wanted you to know that, as a matter of rule, I always

swear in all the witnesses that testify in front of this Committee.

So I—and I always tell people that because I don’t want them

thinking that—that we think anyone isn’t going to tell the truth.
2

We know everyone is going to tell the truth. But it’s just good practice, in my opinion, to swear in all of the witnesses.

STATEMENT OF THE HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WYOMING

Mrs. CUBIN. Today, the Subcommittee on Energy and Mineral

Resources meets to continue oversight of Federal oil and gas leasing programs. During the last Congress, the Subcommittee held

two hearings on our Nation’s energy policy, or lack thereof, I

should say, and began a review of the role that our public lands

and the Outer Continental Shelf play in providing a domestic supply of crude oil and natural gas.

The Committee on Resources, of which this Subcommittee is a

part, is the panel of jurisdiction within the House of Representatives which oversees Federal land management by the Department

of the Interior agencies and by the Department of Agriculture’s

Forest Service.

The Subcommittee has jurisdiction over the laws governing the

disposition of the Federal mineral estate, from leased commodities

like oil and gas, coal and trona, to metallic minerals like gold, silver, copper claimed under the mining law.

We are what I call an upstream Subcommittee. What I mean by

that is that the legislation that—we have jurisdiction over the legislation that involves mineral leasing issues and access to one’s

lease for exploration and production. But downstream issues such

as pipeline rights-of-way and EPA-imposed regulation of emissions

and so on, for example, are not under the jurisdiction of this Subcommittee.

Obviously, it is the total regulatory framework that we live

under which impacts public resource use decisions. And often the

tail wags the dog. For example, someone might choose not to develop a mine site because of future potential liability that might

come with reworking the mine; And therefore, some of our good

mineral deposits are never, ever developed. And the Congress, as

a whole, is the one that has to address the issues of the minerals

and of the access to them.

But this Committee will focus on the piece of the action that we

have—namely, should this part of public lands or that part of the

OCS be open to mineral leasing, and if so, under what type of regulation of access and permitting.

And that’s why I’ve called this hearing, to further our inquiry in

finding ways to decrease our dependency on foreign sources of oil

and gas. And where better to look than our public lands?

These issues facing both Congress and the executive branch are

not easy to resolve. Finding and maintaining a proper balance in

the exploitation of mineral resources versus potentially competing

uses for the surface estate is an age-old problem. Ownership of the

subsurface rights was dominant in such—in a lot of disputes over

history, as a matter of fact, as is evidenced by the corollary to the

biblical passage, ‘‘The meek shall inherit the earth, but not the

mineral rights.’’

Clearly, attitudes have shifted toward requiring oil and gas operators to do more to protect surface values in the exercise of their

mineral rights. I think that’s a good thing. And I don’t think that
3

anyone involved in the entire issue would say that that wasn’t a

good thing.

But at what point has the pendulum swung too far? The combination of de facto wilderness areas established in the circumvention of the public participation process mandated by Congress and

the extraordinary costs associated with environmental assessments

that ripen into full-blown environmental impact statements at the

drop of a hat, or at the drop of a well-placed comment, together

with ever-increasing mitigation requirements, proliferation of no

surface occupancy lease stipulations, and other costly measures,

sum to a high hurdle for our domestic producers to jump over in

order to invest in our public lands.

Are there ways to achieve the same, or even better, level of protection of wildlife, air and water, and important cultural resources

without scaring away investment and pricing the independent producer out of the picture?

I, like many others, was skeptical, to say the very least, when

Secretary Babbitt first announced the Green River Basin Advisory

Committee idea 2 years ago. But he, of course, went right ahead,

anyway. He often doesn’t call me for my opinion on what he does,

and I often don’t call him.

[Laughter.]

Mrs. CUBIN. Now, although a full consensus was reached for the

recommendation of eco-credits against one’s royalty obligation for

going above and beyond the call of duty, so to speak, Mr. Babbitt

seems quite reluctant to support the idea of a pilot project to test

out the concept.

But this idea was agreed to by Colorado’s Governor as well as

Wyoming’s. Why? Because the Department of Energy’s economic

model calculates increased revenues to the States and the Federal

treasury, with eco-credits production coming on-line sooner than it

might otherwise.

Instead, the Interior Secretary and his solicitor appear to be

ready to formally reject the recommendation, signaling that the

Mineral Leasing Act constrains his ability to offer this relief administratively.

But mind you, the Secretary is poised to stretch his authorities

to the breaking point when it suits his policies. For example, he’s

ready to sell Federal oil rights right out from underneath existing

leases, escrow those funds, and buy up old-growth redwoods threatened by the chainsaw and call it a FLPMA-authorized exchange. It

didn’t wash in Congress. There was no public input on it, but he

proceeded, anyway. It shows you the length to which the Secretary

will go to have creative interpretations when it so suits his mood.

So rather than hiding behind the so-called cost-recovery mandates, let’s get the job done. If we need to amend the Mineral Leasing Act, or any other Federal statute, for that matter, to implement

consensus good ideas, then we can do that.

I’m hereby putting the ball in the Secretary’s court. He should

send Congress a draft bill, and then the GRBAC folks will have

done something truly praiseworthy. Their investment in time, energy, and good will truly should reap dividends because it was done

by very bright people who know the issue and everyone involved

agreed on the results.
4

[The prepared statement of Hon. Barbara Cubin follows:]

STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS FROM THE

STATE OF WYOMING

Today the Subcommittee on Energy & Mineral Resources meets to continue oversight of Federal oil and gas leasing programs. During the last Congress the Subcommittee held two hearings on our Nation’s energy policy, or lack thereof, and

began a review of the role that our public lands and Outer Continental Shelf play

in providing a domestic supply of crude oil and natural gas. The Committee on Resources, of which this Subcommittee is a part, is the panel of jurisdiction within the

House of Representatives which oversees Federal land management by Department

of the Interior agencies and the Department of Agriculture’s Forest Service.

The Subcommittee has jurisdiction over the laws governing the disposition of the

Federal mineral estate—from leased commodities like oil and gas, coal and trona,

to metallic minerals like gold, silver and copper claimed under the mining law. We

are an ‘‘upstream’’ subcommittee in that legislation involving mineral leasing issues

and access to one’s lease for exploration and production are in our bailiwick, but

‘‘downstream’’ issues such pipeline rights-of-way and EPA-imposed regulation of refined emissions, for example, are not.

Obviously, it is the total regulatory framework that we live under which impacts

public resource use decisions, and often the tail wags the dog, so to speak. For example, potential Superfund liability years hence may well influence a mining company to stay away from reworking an old mining district, despite good potential for

further ore discoveries. And the Congress, as a whole, addresses these issues ultimately. But, this committee must focus on the piece of the action we do have—

namely, should this part of the public lands or that part of the OCS be open to mineral leasing—and if so, under what type of regulation of access and permitting?

And that’s why I’ve called this hearing, to further our inquiry in finding ways to

decrease our dependency on foreign sources of oil and gas—and where better to look

than to our public lands. This issue facing both Congress and the executive branch,

are not easy to solve. Finding and maintaining a proper ‘‘balance’’ in the exploitation of mineral resources versus potentially competing uses of the surface estate

is an age-old problem. Ownership of the subsurface rights was dominant in such disputes over much of history, as evidenced by the corollary to the biblical passage,

‘‘The meek shall inherit the Earth . . . but not the mineral rights!’’ Clearly, attitudes

have shifted toward requiring oil and gas operators to do more to protect surface

values in the exercise of their mineral rights. And, for the most part, that’s a good

thing. Just look at the oil patch today versus thirty years ago.

But, at what point has the pendulum swung too far? The combination of ‘‘de facto’’

wilderness areas established in circumvention of the public participation process

mandated by Congress, and the extraordinary costs associated with environmental

assessments that ‘‘ripen’’ into full-blown environmental impact statements at the

drop of a hat (or a well-placed comment), together with ever-increasing mitigation

requirements, proliferation of ‘‘no surface occupancy’’ lease stipulations, and other

costly measures, sum to a high hurdle for our domestic producers to jump over in

order to invest in our public lands.

Are there ways to achieve the same, or even better, level of protection of wildlife,

air and water, and important cultural resources without scaring away investment

and pricing out the independent producer? I, like many others, was skeptical (to say

the least) when Secretary Babbitt first announced the Green River Basin Advisory

Committee idea 2 years ago, but of course he went ahead anyway. Now, although

a full consensus was reached for the recommendation of ‘‘eco-credits’’ against one’s

royalty obligation for going ‘‘above and beyond the call of duty’’ so to speak, Mr.

Babbitt seems quite reluctant to support the idea of a ‘‘pilot project’’ to test out the

concept. But, this idea was agreed to by Colorado’s Governor as well as our own.

Why? Because, the Department of Energy’s economic model calculates increased revenues to the States and Federal treasury. With eco-credits production comes on-line

sooner than it might otherwise, if at all.

Instead the Interior Secretary and his Solicitor appear to be ready to formally reject the recommendation signaling that the Mineral Leasing Act constrains his ability to offer this relief administratively. But mind you, the Secretary is poised to

stretch his authorities to the breaking point when it suits his policies. For example,

he’s ready to sell Federal oil rights out from underneath existing lessees, escrow

those funds, and buy up old-growth redwoods threatened by the chainsaw, and call

it a ‘‘FLPMA-authorized exchange.’’ It didn’t wash in Congress, but it shows you the

length to which creative interpretations can be had in the Department of the Interior when the boss wants one.
5

So, rather than hiding behind so-called cost-recovery mandates, let’s get the job

done. If we need to amend the Mineral Leasing Act, or any other Federal statute

for that matter, to implement consensus good ideas, then we can do so. I’m hereby

putting the ball in the Secretary’s court. He should send Congress a draft bill, and

then the GRBAC folks will have done something truly praiseworthy.

As Governor Jim Geringer said at the Western Governors’ Association meeting

last week, ‘‘I’m tired of being up-dated. I want to do something.’’

BRIEFING PAPER—OVERSIGHT FIELD HEARING ON JUNE 30, 1997

CASPER, WYOMING

OIL AND GAS REGULATIONS REGARDING ACCESS AND PERMITTING

ISSUES.

The Subcommittee is holding an oversight hearing in Casper, Wyoming to hear

from the regulators, the regulated community and the public about project-specific

and general policies that effectively prohibit or delay oil and gas exploration and development on public lands. The Department of the Interior’s Bureau of Land Management (BLM) and the Department of Agriculture’s Forest Service (USFS) are

charged with proper management of these lands in the public interest. But, is the

public well-served by the continuing trend away from promoting development

through a long-standing multiple-use policy toward one of strict preservation?

Expected Witnesses

The Subcommittee has invited representatives from the Administration, including

a DoI Regional Solicitor, the State Directors for BLM in Wyoming and Colorado, and

the Lewis & Clark National Forest Supervisor. State interests will be represented

by the Wyoming Office of Lands and Investments, the Wyoming Oil and Gas Commission and the Interstate Oil and Gas Compact Commission. Industry and public

panels will include major and independent oil and gas producers and associations

and Wyoming environmental organizations.

Issues

Wilderness

The Federal Land Protection and Management Act of 1976 (FLPMA), Section 603

provided a process for identification of wilderness study areas (WSAs) on BLM-managed public land by 1991. Since then, the Secretary of the Interior has interpreted

this mandate to include managing all WSAs—whether recommended suitable or not

suitable—as wilderness, in order to maintain the status quo with respect to a WSA’s

‘‘wilderness character’’ until the Congress has had opportunity to legislate such

areas as ‘‘designated wilderness,’’ (i.e., components of the National Wilderness Preservation System initially established by the 1964 Wilderness Act). Generally, candidate areas for wilderness study by BLM had to be greater than 5,000 contiguous

‘‘roadless’’ acres or they were dropped from the initial inventory. Controversy over

definitional terms arose during the winnowing process and were dealt with via BLM

policy directives, principally during the Carter and Reagan Administrations that led

to ‘‘final’’ state-by-state recommendations by BLM and the Secretary through then

President Bush to Congress, few of which have been acted upon.

Now, at the direction of the Secretary, the BLM has effectively set aside ‘‘faux’’

wilderness study areas in Colorado, at the urging of the Colorado Environmental

Coalition, and without opportunity for public input. Some of these lands had previously been identified as suitable for oil and gas leasing with specific surface-disturbance stipulations. Additionally, under color of ‘‘in-aid-of-legislation’’ policy, Secretary Babbitt has directed BLM not lease public lands outside WSAs which would

be designated Wilderness if H.R. 1500 (Hinchey, D-NY) were enacted. The Subcommittee is concerned with the effective withdrawal of additional lands in Colorado

and Utah (and likely elsewhere, but not yet identified) outside of the FLMPA-mandated process.

Because the Mineral Leasing Act of 1920 makes the lease-or-not-to-lease decision

wholly at the discretion of the Secretary, oil and gas interests which would like to

bid at competitive auction for leases on such lands may lack standing to sue in court

despite the obvious lapses in fair and unbiased administrative procedures in the creation of the ‘‘faux’’ WSAs policy. Because judicial remedies are thus constrained, a

legislative check on possible abuse of power by the executive branch is all the more

timely. Given the fiscal austerity of the times and the attendant limitations on
6

BLM’s resources, is the public best served by an agency acting outside the clear legislative mandate of its organic act (FLPMA) and thereby increasingly ignoring its

legitimate tasks and responsibilities as a land (and minerals) manager?

Permitting Delays

Uncertainty plagues the Federal leasing and post-lease permitting process alike.

The domestic industry’s continued survival is dependent upon smart investment decisions and responsible development. Producers that choose to invest in and develop

Federal lands over private lands or prospects overseas need defined time-frames and

consistent, cost-effective regulations in order to succeed and thereby provide the

public fair its share of revenues. The National Environmental Policy Act (NEPA) is

the framework by which permitting for these activities is decided. The NEPA process requires an environmental evaluation, usually in the form of an Environmental

Assessment (EA) for proposals likely to have little or no impact, or an Environmental Impact Statement (EIS) for major Federal actions affecting the human environment, and is undertaken to document the likely impacts of development on Federal lands.

One example of permitting and process delays is the is Cave Gulch-BullfrogWaltman Natural Gas Development Project in Natrona County, Wyoming. The estimated production potential from the field ranges from 600 billion to one trillion

cubic feet of natural gas and planned development would indude about 160 gas

wells drilled in the next 10 years. Although the field was discovered in 1959, industry interest heightened in 1994 at which time two separate EAs were initiated. One

of the EAs was completed with a Finding of No Significant Impact (FONSI) after

8 months of review. The other EA was suspended after twelve months later. Because industry’s interest in the field continued to grow as the gas discovery was delineated, BLM initiated an EIS. Eighteen months and over one-half million dollars

later, the EIS was finalized with the same mitigation measures required by the first

EA. The Final EIS was published on June 19th and focused on managing raptor

nesting and on air quality issues associated with natural gas processing. Issues of

interest to the Subcommittee include questions of ‘‘balance’’ by the agency in reviewing the Nation’s needs and desires for ‘‘clean’’ natural gas as a fuel, the huge reserve

potential of this field, and sensitive wildlife habitat in the area. In other words,

would implementation of the stipulations derived from the initial EA allowed more

timely development of a resource which this Administration professes to be in favor

of utilizing over less clean burning fuels?

Another area of concern is the Draft EIS for oil and gas leasing in the Lewis and

Clark National Forest in Montana. The Forest Service has released a draft EIS with

an alternative which would outright preclude exploration and development of almost

one-quarter of the available acres (those not in designated wilderness or wilderness

study areas), with the remaining acreage restricted by a no surface occupancy stipulation or other restrictive conditions. The Governor of Montana has requested the

Forest Service select a more balanced approach to the alternative selected in the

draft EIS. A record of decision (RoD)is expected early this fall.

Cost Recovery and Eco-royalty Relief

The Department of the Interior Solicitor has issued a memorandum opinion on

BLM’s mandate for recovery of agency costs associated with permissive uses of public lands, specifically minerals development. Cost recovery is the method by which

the Federal Government establishes fees with respect to transactions involving the

public lands to recover the reasonable processing costs of services. A recent speech

given by a Solicitor’s office representative to a BLM workshop compared the cost

recovery initiative to that of owning, licensing and driving a car. The analogy recognized that if you follow all the requirements and pay the fees for registering, inspecting and licensing a car, then government sanctions your activity, i.e. you get

to drive your car! However, this facile comparison fails to recognize the common

practice of industry paying fees and costs associated with environmental studies,

then facing uncertainty and inordinate delays for oil and gas leases and permits,

not to mention the proportion of projects that are denied. Would the public accept

such treatment from automobile insurers and state governments if the analogy to

minerals permitting cost recovery were exact? Clearly, not, with the possible exception of long suffering residents of the District of Columbia who have become used to

inordinate delays and ineffective government. Does the cost recovery formula consider the current practice whereby industry pays for the costly studies associated

with the EIS or EA? The oil and gas industry should expect to pay their fair share

of these costs for the right to lease, explore and develop public lands, and shouldn’t

the Federal Government be expected to provide a fair and cost effective regulatory

process for the industry to participate?
7

The ‘‘eco-credits’’ royalty relief proposal grew out of recommendations from the

Green River Basin Advisory Council (GRBAC), established by Secretary Babbitt to

study ways to develop southwestern Wyoming and Northwestern Colorado’s natural

gas potential while protecting the environment. The GRBAC was a 17-member

panel including representatives from the county governments, oil and gas industry,

state and Federal resource agencies, and the environmental community. Although

initially criticized as ‘‘another layer of bureaucracy’’ by some, the GRBAC idea eventually was embraced by representatives from all facets of the debate.

Upon completion of the project in February of this year, three recommendations

were forwarded to Secretary Babitt including the eco-royalty relief, or eco-credit,

proposal with unanimous baby the panel (as was required by its charter for ‘‘consensus’’). The proposal would allow an oil and gas operator a royalty credit against

previous expenditures for certain environmental studies which are the responsibility

of the Federal agency (as per NEPA), monitoring studies and mitigation measures

that go beyond ‘‘standard operating procedures.’’

The GRBAC saw this initiative as one that would promote environmental protection yet allow operators to recoup some costs which industry believes to be extraordinary to rational NEPA compliance. The GRBAC transmittal letter to Secretary

Babbitt stated:

‘‘In particular, eco-royalty relief is critical to the success of the NEPA streamlining recommendations and the successful mitigation of potential impacts,

whether they be direct, indirect, or cumulative.’’

Conclusion

The Subcommittee on Energy & Mineral Resources will take testimony in Casper

from representatives of all sides in the oil and gas development ‘‘equation.’’ Oversight of BLM/USFS policy in this area is a principal function of the Subcommittee,

which may ripen into legislative initiatives to balance Federal Government land

management policies with respect to mineral development with non-mineral uses,

and thereby potentially reverse the trend of investment capital leaving our onshore

public lands for more favorable business climates.

Mrs. CUBIN. Let me remind the witnesses that, under our Committee rules, they must limit their oral arguments to 5 minutes,

but that their entire statement will appear in the record. We will

also allow the entire panel to testify, before questioning any of the

witnesses.

Now I will introduce our first panel of witnesses. Mr. Al Pierson—thank you, Al, for being here—the State Director, the Bureau

of Land Management for Wyoming; Mr. Robert Abbey, Acting State

Director, Bureau of Land Management for Colorado; Ms. Gloria

Flora, Supervisor of Lewis and Clark National Forest, USDA, Forest Service; and Ms. Gina Guy, Department of the Interior Regional Solicitor.

Again, I would like to swear in the witnesses. If these witnesses

would please rise and raise your right hands, we’ll do it panel by

panel.

[Witnesses sworn.]

Mrs. CUBIN. Then we will just go right into the testimony. And

Mr. Pierson, if you’d start for us today.

I have to tell you, I know there are only two microphones, and

you have to talk right straight into them or you can’t be heard.

STATEMENT OF ALAN PIERSON, STATE DIRECTOR, BUREAU

OF LAND MANAGEMENT, WYOMING

Mr. PIERSON. OK. Good morning, Madam Chairman.

I appreciate the opportunity to come before you today to discuss

the Bureau of Land Management’s role in Federal resource management in Wyoming.
8

We have made a number of significant accomplishments and

have many projects and initiatives in progress which reflect our

commitment to an open and cooperative process.

Within the State of Wyoming, the BLM manages 18.4 million

acres of public lands. Of that, 17.9 million acres are available for

oil and gas leasing and about 8 million acres are currently under

lease. We also manage an additional 11 million acres of subsurface

estate where we do not have jurisdiction over the surface.

Since the earliest days, our government has recognized that public lands should be managed for the local, as well as the national,

interest. Statutes have created a balance so that revenues from

public lands in Wyoming are shared with the State. Wyoming communities benefit from this arrangement. Each year, Federal mineral revenues amount to about $500 million from the public lands.

Almost $250 million of these revenues go directly to the State to

fund a number of its programs.

Our most recent oil and gas lease sale, held on June 3rd, re- sulted in $5.1 million in receipts with almost 85 percent of the

tracts being sold. This suggests that our decision, in August of a

year ago, to offer only tracts nominated by industry is paying off.

Generally, the buyers nominate desirable tracts for inclusion in the

sale. This process helps us reduce the number of properties that

get offered repeatedly but not bid on.

BLM Wyoming is responsible for administering oil and gas minerals management laws on all federally owned minerals in Wyoming and Nebraska. Major operational responsibilities on Federal

and Indian lands include processing Applications for Permits to

Drill, unit agreements, and suspensions of operations and production, and so forth. We are also responsible for drainage protection

and enforcement, inspection and enforcement of oil and gas operational and reclamation activities, and production accountability.

BLM-Wyoming is first in the Nation in generating Federal onshore oil production and royalty revenues. We are second only to

New Mexico in natural gas production and gas royalty revenues received from the Federal onshore minerals. Southwest Wyoming is

one of the leading gas producing regions in the United States.

The following information, current as of the end of this last fiscal

year, provides the status of wells and completions on Federal and

Indian lands in Wyoming, and outstanding unit and

communitization agreements.

In the interest of brevity, Madam Chairman, I believe I’ll just

skip the table. It’s in tabular form.

Mrs. CUBIN. Sure.

Mr. PIERSON. In addition to our operational responsibilities in developing mineral resources, we are also charged with, or share with

other Federal agencies, the charge of protecting other resources.

This is part of an overall process which begins with a Resource

Management Plan. Our planning system is designed for multiple

use and sustained yield and is tiered from general guidance to site

specific elements. With the help of other Federal agencies, State

and local governments and the public, we prepare plans for the

overall land use and resource management in an entire resource

area. The Resource Management Plan specifies general criteria for

managing such resources as riparian areas, cultural sites, wildlife
9

habitat, historic trails, livestock grazing, as well as minerals development on the public lands. This plan is followed by more specific

activity planning which provides detailed analyses and decisions on

specific sites. BLM is able to manage oil and gas development

alongside other types of land uses by stipulating protective measures in the oil and gas lease document. These protective measures

are developed in part during the land use planning process, which

includes extensive public participation. Protective stipulations

allow oil and gas development to coexist with other surface uses on

the public lands.

That brings us to the subject of Cave Gulch. The Cave GulchBullfrog-Waltman project area is located in Natrona County. It encompasses 25,093 acres of mixed Federal, State and private lands.

Although the BLM only manages 7,375 surface acres in the area,

76 percent of the mineral estate is Federal.

Following the discovery of a rich natural gas field in the Cave

Gulch Unit in 1994 by Barrett Resources, the BLM prepared an environmental assessment to address Barrett’s development proposal.

Based on potential environmental impacts contained in the Barrett

environmental assessment, we determined that impacts were not

expected to be significant; therefore, an Impact Statement would

not be required. In 1995, we issued approval for Barrett and Chevron Production Company to develop the field.

Subsequent to this initial decision, we received additional development proposals from Barrett and Chevron. Upon review, we

found that the mitigation measures to protect raptors could not be

carried out with the new proposals in hand.

In January 1996, we decided to reevaluate the decision to allow

Barrett to develop the field because of Barrett’s expanded development proposal and because of the inadequate raptor protective

measures in the Barrett proposal. We determined that the analysis

required an environmental impact statement to assess all of the direct and cumulative impacts from the combined Cave Gulch-Bullfrog-Waltman project area development proposals. We suspended

further work on the Chevron environmental assessment, which was

being prepared for the Bullfrog Unit adjacent to Cave Gulch.

Following that decision, the BLM established criteria for a moderate amount of development activities while the final EIS was

being prepared. An interim agreement, involving numerous parties,

including conservation groups and the affected companies, has led

to some development in the interim. As of February 1st of this

year, 42 gas wells have been drilled.

BLM issued the Final EIS earlier this month. Comment period

ends July 20th. The Record of Decision is expected to be completed

and signed no later than August 4th.

The preferred alternative in the final EIS addresses a number of

issues raised in response to the draft EIS. It provides for increased

natural gas production in the project area by allowing the operators to drill and develop 160—approximately 160 wells over the

next 10 years, from 107 new pads and 24 existing pads, in addition

to existing drilling and production operations. Any impacts to the

raptor population and habitat can be effectively mitigated with artificial nest structures and buffers around those nests. As a result

of a cooperative effort between the BLM, Fish and Wildlife Service
10

and the operators, we can immediately begin to implement these

mitigative measures.

The final EIS also has an expanded socioeconomics and cumulative impacts analysis for air quality.

The total State severance tax for the 30- to 40-year life of this project is estimated to be $63 million. Total Federal mineral royalties are estimated at $116.8, half of which goes over to the State

of Wyoming. In addition, the State will receive an estimated $6

million over the life of the project from mineral royalties, and the

ad valorem property and production revenues from the lands for

the life of the project are estimated at $76 million.

One final subject I would like to touch on is the Green River

Basin Advisory Committee recommendations.

The advisory committee reached consensus on five recommendations and, in March 1997, forwarded these recommendations

through the BLM to the Secretary of Interior for approval. They include road standards, NEPA streaming—streamlining, eco-royalty

relief, transportation planning, and opportunities for partnership.

To date, all but one of these recommendations can or are being implemented.

Eco-royalty relief is currently under review by the Department’s

Solicitor’s Office. This recommendation would establish a 5-year

pilot project for eco-royalty relief in the Greater Green River Basin.

Under the pilot, producers in Wyoming would be allowed to take

a royalty reduction on production of up to $4 million per year. Half

of that could go toward NEPA implementation and development

and half of it could go to monitoring and mitigation above and beyond the required standard operating procedures, required stipulations, or standard conditions of approval for mitigation.

Madam Chairman, I welcome the Subcommittee’s continued interest in BLM programs and their effect on the State of Wyoming.

I appreciate this opportunity to provide information on the activities we are involved in, and I look forward to responding to any

questions that you may have.

[The prepared statement of Mr. Pierson may be found at end of

hearing.]

Mrs. CUBIN. Thank you, Mr. Pierson.

Mr. Abbey?

STATEMENT OF ROBERT ABBEY, ACTING STATE DIRECTOR,

BUREAU OF LAND MANAGEMENT, COLORADO

Mr. ABBEY. Good morning.

Madam Chairman, members of the staff, I too appreciate the opportunity to discuss with you the oil and gas program for the Bureau of Land Management in the State of Colorado. I would like

to give you a general overview of our program and also briefly discuss the BLM’s Colorado State office policy concerning actions

within non-wilderness study area lands included in the Colorado

Environmental Coalition’s wilderness proposal for BLM lands.

The BLM-Colorado is responsible for administering oil and gas

minerals management laws on all federally owned minerals in the

State. Within the State of Colorado, the BLM manages 8.3 million

acres of surface and minerals and 5.3 million acres of reserved mineral estate, where we do not have jurisdiction over the surface. In
11

cooperation with the Forest Service, the BLM also administers

mineral leasing on approximately 12.8 million acres of national forests. This totals over 26 million acres of Federal mineral estate

within the State of Colorado, of which 3.3 million acres, I’ve been

told, is currently under lease and nearly 20 million acres are available for oil and gas leasing.

During fiscal year 1996, 255 oil and gas leases, covering nearly

218,000 acres, were sold at competitive sales. This amounted to 70

percent of the offered tracts sold, generating $1.9 million in revenue. We too credit our high sale rate to the fact that we do not

roll-over or re-offer dead leases. In Colorado, we offer only those

lands requested by the public or where drainage either is occurring

or determined likely to occur. Of the $78 million in total oil and

gas revenues generated in fiscal year 1996, in accordance with the

Mineral Leasing Act approximately 35 million went directly to the

State of Colorado.

One of BLM-Colorado’s most significant accomplishments during

1996 involved streamlining the way we process operating rights

transfers. These transfers allow the holder of the lease to enter the

lands and conduct oil and gas operations. In May 1996, BLM-Colorado had an 18-month backlog in processing these transfers. We

developed new, streamlined procedures, which remain consistent

with the requirements of the Mineral Leasing Act and national

BLM policy, that allowed us to eliminate this backlog within 6

weeks, greatly improving our customer service.

We have also entered into Memorandums of Understanding with

the Colorado Oil and Gas Conservation Commission relative to

hearings and spacing and are currently looking at ways to apply

the State’s Orphan Well Fund to wells on public lands. We look forward to continuing our joint efforts to become more efficient and

effective.

Congresswoman Cubin, if I could, I’ve provided information summarizing oil and gas activities on Federal lands in the State of Colorado as part of the record. I’m going to forego restating those facts

at this point in time and move on.

If I may, I’d like to briefly discuss our Office’s policy regarding

conservationists’ proposed wilderness areas and how we’re dealing

with this issue in Colorado.

In 1994, the Colorado Environmental Coalition, a consortium of

47 environmental groups in Colorado, published the ‘‘Conservationists’ Wilderness Proposal for BLM Lands in Colorado.’’ The proposal recommended wilderness protection for 300,000 acres of

BLM-administered lands and an additional 250,000 acres of Forest

Service lands outside existing wilderness study areas. Since that

time, the BLM-Colorado State office has, as a matter of practice,

not offered oil and gas leases within the CEC proposed areas while

a policy for handling discretionary actions within these areas was

being developed.

Overall management direction for public land use is established

by the BLM through the land use planning process. The Resource

Management Plan, as Al pointed out, identifies which lands are appropriate and eligible for various uses and under what terms and

conditions uses can take place. With regard to the management of

all public lands in Colorado, including the lands proposed for wil-
12

derness designation by CEC, where there is substantial public concern that a discretionary action could harm a resource value that

may not have been sufficiently analyzed in this plan, the BLM has

the authority to postpone approving that action for a reasonable period of time to allow the issue to be resolved through the planning

process.

In light of evolving changes in public land use patterns, on-theground conditions, and an increase of legitimate, yet conflicting,

uses, we in the BLM-Colorado State Office determined that it

would be prudent to take another look at the CEC proposed areas.

We have, therefore, initiated a review to determine if there are

roadless tracts of at least 5,000 acres, or roadless tracts contiguous

to existing wilderness study areas that may require further evaluation, prior to allowing certain resource development to occur.

Attached to my testimony that I submitted to the Subcommittee

is a copy of my May 19th, 1997, Instruction Memorandum, issued

to managers in Colorado, entitled ‘‘Policy for the Management of

Lands Described in the Colorado Environmental Coalition’s Wilderness Proposal for BLM Lands.’’ I, or my representative, provided

feedback to our, Colorado’s, three Resource Advisory Councils at

meetings in early May to describe whatever procedures we would

be following to address this issue in Colorado.

After my other cohorts up here get through with their introductory remarks, I, too, would be happy to respond to any questions

you may have.

[The prepared statement of Mr. Abbey may be found at end of

hearing.]

Mrs. CUBIN. Thank you.

Ms. Flora?

STATEMENT OF GLORIA FLORA, SUPERVISOR, LEWIS AND

CLARK NATIONAL FOREST, FOREST SERVICE, U.S. DEPARTMENT OF AGRICULTURE

Ms. FLORA. Thank you, Madam Chairman and members of the

staff. I appreciate the opportunity to discuss the Forest Service’s

Northern Region oil and gas program and the draft environmental

impact statement for oil and gas leasing on the Lewis and Clark

National Forest.

In response to the Secretary’s oil and gas resources regulation of

1990, the Forest Service developed a schedule for analyzing all

areas under its jurisdiction where industry had expressed a high

interest in leasing. The analyses and decisions for 90 percent of the

areas which were scheduled are now complete. In 1998, environmental impact statements addressing oil and gas leasing will be

completed for all high potential oil and gas areas in the Northern

Region.

Thus far, EISs have been completed in North Dakota, the Little

Missouri Grasslands EIS, in Montana on part of the Custer National Forest and Beaverhead National Forest. Final EISs for the

Helena and Lewis and Clark National Forests will be released this

fall. The Custer National Forest will complete the EIS on high potential areas in South Dakota in 1998. As a result, the Northern

Region has processed 1,039 leases since 1991.
13

We are proud that we’ve been able to meet the challenge of providing oil and gas development opportunities in an environmentally

sound manner. It should be noted that many of these high potential oil and gas areas also have high values for threatened and endangered species habitat, cultural resources, recreation, and water

resources. Through mitigation efforts and some restrictions on

leases, we’ve been able to lease approximately 450,000 acres, bringing in approximately $10 million in bonus bids to the United States

Treasury. In addition, 5.5 billion cubic feet of gas and 3.7 million

barrels of oil were produced from National Forest System lands in

the Northern Region in 1996.

Specifically regarding the Lewis and Clark oil and gas program,

this forest has been analyzing the opportunities for leasing for oil

and gas through an EIS process that began in February 1994. The

area being analyzed in this EIS encompasses some 1.86 million

acres, located on the Rocky Mountain Front, north and west of

Great Falls, and six isolated mountain ranges in central Montana,

east and south of Great Falls.

In addition to being a high potential area for oil and gas, 21 percent of the area is congressionally designated wilderness, 9 percent

is in the Montana wilderness study areas also designated by Congress, and another 3 percent has been recommended for wilderness

through the forest planning process under the National Forest

Management Act. Sixteen percent of the area is already leased for

oil and gas, but not without controversy. For instance, the BadgerTwo Medicine Area has an approved Application to Drill and a

pending APD. However, leases in this area have been suspended

until resolution on a traditional cultural property.

The history of oil and gas leasing on the Front is complex and

heated. Minimal development has taken place on the 52 existing

leases. Ten lease applications are pending because at the time of

their submittal the areas were under consideration for wilderness

designation by Congress. Another 19 leases involving 26.6 thousand acres have been canceled due to court order.

Issues such as protection for a traditional cultural district which

may be eligible for listing on the National Register of Historic

Places, protection of the grizzly bear, strongly conflicting social values, and the economics of oil and gas development where leases

may require no surface occupancy stipulations are examples of

some of the difficult issues affecting decisions both on existing

leases and future leasing options.

Regarding the status of the Lewis and Clark Oil and Gas Leasing EIS, the draft EIS was released in August 1996 and the public

comment period closed in December 1996. The preferred alternative identified in the draft EIS proposes oil and gas leasing for

approximately 52 percent, nearly a million acres, of the forest. In

response to the draft, the public provided 1,495 comments, and we

are in the process of analyzing those comments and incorporating

information provided in the comments into the final EIS. The final

EIS and the Record of Decision are scheduled to be issued in August of this year.

Let me close by saying that there has been extensive involvement by individuals, environmental groups, the petroleum indus-
14

try, the tribes and the agencies at the Federal, State and local level

in this EIS process. It has been very open and very public.

That concludes my prepared testimony, and I, too, would be

pleased to answer any questions the panel might have.

[The prepared statement of Ms. Flora may be found at end of

hearing.]

Mrs. CUBIN. Ms. Guy?

STATEMENT OF GINA GUY

Ms. GUY. Thank you, Madam Chairman. It’s a pleasure to be

here, especially to be back home in Wyoming.

I was asked to testify today in connection with the cost recovery

opinion that was issued by the Office of the Solicitor in Washington, DC, having to do with the legal authorities that the BLM

has relative to recovery costs for mineral processing documents.

This opinion was issued on December 5, 1996, and is attached as

an appendix to my opinion. It’s very lengthy. So I didn’t want to—

certainly couldn’t possibly read it in 5 minutes. But my effort

would be to explain why it happened and to outline the most basic

elements of that.

It was issued after BLM came to the Office of the Solicitor in response to two separate reports by the Department’s Office of Inspector General, suggesting that BLM had not maximized the authorities which it had in terms of recovering the costs in connection

with permit applications or processing for various types of mineral

documents which would have conferred a benefit on a private person.

The theory that the government has cost recovery authority was

first expressed in a statute called the Independent Offices Appropriations Act, passed in 1952, and sort of reduced to binding government policy in 1959 by an OMB Circular No. A–25, published

first in 1959 and last updated in 1993. That circular provides that

it is the policy of the U.S. Government that, where the government

provides a service providing a benefit to an identifiable person,

then the government has the authority to recover all of those costs.

The theory of that was also incorporated into the Federal Land

Management Policy Act, which became effective in 1976, following

extensive meetings over a period of years by the Public Land Law

Review Commission.

And in FLPMA, as the acronym is called, there are what are

called reasonableness factors that governed why, under what circumstances, and when the government should exercise that cost recovery authority, how they are weighed, and whether or not some,

but not all, of the costs should be recovered, depending on whether,

and how private the benefit is versus the public one.

The actual FLPMA reasonableness factors are the monetary

value of the rights and privileges sought, exclusive of management

overhead, the monetary value of the right and privileges sought by

the applicant, the efficiency to government process, the public service provided as apportioned between the general public interest and

the exclusive benefit of the applicant.

The law provides that BLM has the authority to recoup all of its

costs. And it’s a judgment call on the part of BLM, which has been
15

exemplified in some regulations incident to FLPMA, about how

that authority should be exercised.

There’s a case from the 9th Circuit that requires BLM to consider all of those factors, particularly, for example, the public

versus private benefit. The BLM believes that it has the authority

to exercise cost recovery authority with respect to basic FLPMA actions such as rights-of-way as well as actions under the Mineral

Leasing Act.

The Office of the Solicitor, as you know, Congresswoman Cubin,

is the legal advisor to the Department of the Interior. And our office will be advising BLM, as it requests, with respect to the development of the rulemaking, to incorporate some of the principles in

the cost recovery opinion. But until that happens, it is just that,

an opinion.

One of the things that’s very important about this rulemaking

action is that there will be extensive public hearings seeking public

input about how that weighing exercise should happen with respect

to the reasonableness factors.

Touching just for a moment on the recommendations of the

Green River Basin Advisory Committee, John Leshy, the Solicitor,

has asked me to explain to the Committee that the issue of the ecoroyalty (eco-credits) was in the office and that he expects to issue

an opinion within the next several weeks.

This concludes my formal testimony. I’d be happy to answer your

questions. Thank you.

[The prepared statement of Ms. Guy may be found at end of

hearing.]

Mrs. CUBIN. Thank you.

Where do you start?

Well, obviously, there are several different topics going on here.

And so I think I’ll just start asking you, Mr. Pierson, and just kind

of go down the line.

In your testimony, you stated that the original Barrett environmental assessment for Cave Gulch was inadequate for raptor protection, and this is a quote, ‘‘mitigation measures to protect raptors

could not be carried out.’’

Could you describe to me the difference in that proposal and the

requirements for raptor protection that came out in the final EIS?

Mr. PIERSON. Yes. The proposal in the Barrett EA decision that

was vacated was for artificial nest structures onsite, on the project

area. The final EIS, as it is issued—and while the Record of Decision is not signed yet, the EIS is out for final review—has the establishment of artificial nest structures offsite, in a low potential

development area, where the birds will have secure nesting and

hunting areas, versus onsite, where a lot of development activity

was—or is scheduled to occur.

Mrs. CUBIN. OK. So are the number of nests—is the number the

same?

Mr. PIERSON. Actually, I think the potential numbers of sites offsite is greater. There’s 40-some, I believe, which will allow us to

pick and choose among those 40. The number of birds hasn’t

changed that need to nest out there.

What we’re trying to do is find a secure nesting site where they

will not be disturbed and still allow the development to occur.
16

Mrs. CUBIN. What I am kind of trying to get around to in this

questioning is we have cost recovery on the table. Certainly, that

is, at the very least, controversial. And now there was an EA that

recommended this mitigation for the raptors, 2 years and some

months before, and maybe three-quarters of a million dollars later,

and that doesn’t count lost revenues to the State, to the Federal

Government, taxes for schools.

What I’m trying to get at is, is there really that much difference

for the enormous cost in between, and how are we going to get this

regulatory process to become more realistic so that there isn’t this

constant fighting and so that we don’t have this enormous problem

we have. I mean the difference between the EA and the recommended—the EIS seems negligible compared to the enormous

cost.

Could you comment on that for me, Al?

Mr. PIERSON. I’ll try. You’ve covered a lot of ground, but I will

try.

The—one major difference in the EIS, as it is now produced,

versus the original Barrett environmental assessment is the kind

of decision that you can make. You can make one of two decisions

with an environmental assessment, an EA, either that there is no

significant impact or that you need to go on and do an EIS. You

have the ability in an EIS to tradeoff some resources, to accept

some significant impact, or at least the potential for some significant impact, in the EIS, where you do not in the EA.

What we found, after first—after approving the first Barrett EA,

was that companies were drilling, they were learning more, the

proposal was changing, and they had essentially drilled themselves

right out of the ability to mitigate as they had agreed to do in the

environmental assessment. Chevron was on-line to——

Mrs. CUBIN. In what way?

Mr. PIERSON. Placing wells in secure artificial nest sites.

Mrs. CUBIN. How many changes actually were proposed?

Mr. PIERSON. I don’t have those numbers. But they—but the area

that was originally set for mitigation sites now had wells proposed

on them. And you can’t very well build a well pad on a raptor nest

site. It just won’t work, particularly for 6 or 8 weeks in the spring,

when they’re nesting.

So at that point we didn’t have the options that we had available

to us at the time we approved the environmental assessment. The

company’s needs had changed, their proposal had changed, the

project had grown. The companies had learned much more about

the area as they drilled wells. The find was bigger than predicted

and many more wells. So it was a different project at that point

than what was initially approved.

Mrs. CUBIN. OK. Well, I wasn’t implying that, necessarily—

maybe I was, but not definitely, that an EIS shouldn’t have been

done. I don’t think that was my point.

It just seems to me that with such a little change from the original EA to the final opinion there has to be a more effective way,

there has to be a less expensive way, to do this process.

There’s nobody here who wants to degrade the environment.

There’s nobody here that wants to cause raptors to, you know, have

problems or become extinct, or even close to that.
17

But can you make any suggestions for the future? I mean, did

we learn anything from this Cave Gulch deal at all?

Mr. PIERSON. I think we did. We spent, we, the companies, the

conservation community, the county, and other interested parties,

spent a lot of time trying to get ourselves on some kind of an agreement that we could all live with on this one.

Had we done that up front, we maybe would have reached the

same conclusion faster.

But as you well know, Madam Chairman, the gas development

production business is not an exact science. And had the BLM said

no, we will not allow you to change your proposal that we approved

in the EA, we’re going to hold you exactly to what you said you

would do, then we wouldn’t have had—we wouldn’t have had to go

to an EIS, but it would not have helped the company in any way.

Companies, as they develop a field, they don’t know exactly what

they’re going to need to do when they first go into it. You have to

remain flexible enough to accommodate changes, based on what

you learn as you drill wells. Unfortunately, in this case, the

changes were great enough that we could no longer say there is no

significant impact, based on the laws that we have to operate

under.

Mrs. CUBIN. Speaking of the companies not knowing exactly

what they’re going to run into and how changes and alterations

and amendments have to be made, it’s my understanding that, as

of September 15th of this year, approximately 120 customers that

are currently serviced with dry gas from Cave Gulch will have to

switch to use propane, which will, in effect, double their monthly

fuel bill. This switch comes about, as I understand it, because of

the increased production from Cave Gulch and the use of the current line changing to wet gas that will subsequently be processed

at Douglas.

At what point in the process did the BLM hear from the producers about changes in that transportation line? And at the same

time, did the BLM consider the effect on customers along this line

when they were looking at the socioeconomic impact?

Mr. PIERSON. I’m not aware of that switch, Madam Chairman. If

I could research that and submit it for the record, I would.

Mrs. CUBIN. I’d appreciate that.

The thing is that it bothers me. I’m concerned that—first of all,

that enough emphasis wasn’t put on the socioeconomic issues. And

I kind of see that—as a personal opinion, I kind of see that

throughout the minerals leasing and the patenting process.

Mr. PIERSON. Uh-huh.

Mrs. CUBIN. As I said, that’s just an opinion. But I think that

sometimes a certain segment isn’t heard enough.

And I’m going to switch now to Mr. Abbey, since this kind of goes

along with his point.

It’s my understanding that the Colorado Environmental Coalition—is that what it is, the name of the organization there? It’s my

understanding that that——

Mr. ABBEY. (Nodding.)

Mrs. CUBIN. [continuing] organization was given access to the

BLM data base to insert the CEC’s designation of wilderness areas

on BLM records. Certainly, I have never heard of any other in-
18

volved party having that kind of access or input. And wouldn’t you

consider that a rather unbalanced collection of information?

Mr. ABBEY. Madam Chairman, I guess, as far as data bases are

concerned—and I’d like for you, if you could, to be a little more specific about what data base.

Certainly, the inventory information that we collected in our inventory, that was completed in 1980, is a matter of public record,

and that information is available to anyone.

It is my understanding, too, that when the Colorado Environmental Coalition was involved in going back to the public lands,

and going back to regarding that, is that they did have—did use

that information to come back in and state that they did not believe BLM in Colorado did a very good job of inventorying public

lands.

Mrs. CUBIN. Excuse me. Who was that?

Mr. ABBEY. The Colorado Environmental Coalition, when they

were preparing their own wilderness evaluations.

Mrs. CUBIN. And they said they didn’t do a good job?

Mr. ABBEY. That’s correct.

Mrs. CUBIN. And that’s when they were allowed to go to the data

base?

Mr. ABBEY. If that’s the data base you’re questioning. They were

allowed to look at our records, as well as anyone who needs that

information.

Mrs. CUBIN. Were they allowed to make entries?

Mr. ABBEY. Not at all. There would be no purpose in them making entries into our earlier inventory.

Mrs. CUBIN. And maybe, Ms. Guy, you can answer this. I don’t

care who answers it.

Wilderness study areas were to be identified and then, according

to the original law, then the Congress would act upon making some

areas wilderness and others not.

Well, I think that that expired in 1991, is that right, this identification process ended in 1991? Is that right?

Ms. GUY. I believe that’s pending in the Federal Court in Utah,

that question of whether or not the Secretary of Agriculture, Secretary of the Interior, having the authority—on an ongoing basis,

to make recommendations.

Mrs. CUBIN. So there’s——

Ms. GUY. I’d be happy to respond for the record. I believe that’s

pending now. I have no personal knowledge of it, but what I would

ask the Chairman is if I could respond on it.

Mrs. CUBIN. Yes, I’d appreciate that. Because what it seems to

me has happened throughout this process is that Congress passed

a law asking for wilderness study areas to be identified, at which

point they would evaluate those wilderness study areas. Some

would be made wilderness, and probably some wouldn’t.

What has essentially happened is that all of those areas are now

treated as wilderness areas. There’s no activity allowed on those

that is outside the area of what is allowed in a wilderness.

Mr. ABBEY. Yeah. In Colorado, the BLM completed its wilderness

inventory in 1980. Subsequently, we studied those 800,000 acres

that were identified as wilderness study areas to determine existing rights that were in there, conflicts in uses, other values that
19

would be affected by wilderness designation. And we followed up in

our studies with some recommendations to the administration

where we recommended——

Mrs. CUBIN. When was that?

Mr. ABBEY. That was in 1991, where we recommended to the administration 400,000 acres of the 800,000 acres that had been identified as wilderness study areas should be recommended to Congress for possible wilderness designation.

In 1993, the administration’s recommendations were forwarded

to Congress.

There has not been any action by Members of Congress regarding public lands in the State of Colorado. So we are required, under

law, to manage all 800,000 acres of wilderness study areas under

what we refer to as the Interim Management Policy, and that’s to

protect any existing wilderness values that may exist out there

until action by Congress to either designate those acreages or to release those acreages.

Mrs. CUBIN. I think that’s questionable. I don’t think that you

can say that as a statement of fact. I think that this is a policy that

has been adopted by the Interior Department, but I don’t believe

that’s law. Is that correct or not?

Mr. ABBEY. Well, you have——

Mrs. CUBIN. That you have to manage all 800,000 acres as wilderness areas, isn’t that stretching it a bit much? Because what

should happen is if Congress wanted to make a wilderness area the

Congress would in fact do it.

Mr. ABBEY. You would hope. But the fact is that 800,000 acres

of public lands in the State of Colorado are wilderness study areas,

and so they are being managed, particularly the IMP, to protect

any values that exist out there.

Now, hopefully, you can convince your—the delegation from Colorado to introduce wilderness legislation for public lands in Colorado

so that we can resolve this issue once and for all.

Mrs. CUBIN. Staff just helped me clear up this question.

Mr. ABBEY. OK.

Mrs. CUBIN. You’re talking about the legal wilderness study

areas, not the CEC’s recommendations.

Mr. ABBEY. That’s correct.

Mrs. CUBIN. That’s what I’m talking about.

Mr. ABBEY. OK.

Mrs. CUBIN. The CEC’s recommendation.

Mr. ABBEY. The CEC’s recommendation is basically—and how

we’re managing those is based upon guidance that was issued in

1994 by Assistant Secretary Bob Armstrong, which basically told

BLM offices to pay careful and particular attention to development

proposals that could limit Congress’s ability to designate certain

BLM areas as wilderness, even though these areas are not designated formally as wilderness study areas.

So you’re absolutely correct. That is not addressed by law. That

is their own policy.

Our inventory which we are conducting right now provides for a

second look to ensure that the information regarding the presence

or absence of wilderness characteristics in Colorado is entirely current and accurate.
20

The inventory also will serve the public interest because the results are going to be made public, and if any land management recommendations or decisions are made in the future regarding

changing the way we’re managing those CEC-proposed areas, then

such actions will be subject to full public participation, in following

the language of the planning process that we have in place.

So that is, in fact, an internal policy.

Mrs. CUBIN. So CEC was able to establish these areas that now

nothing can take place on them.

And what if the Rocky Mountain Oil and Gas Association wanted

access to your computers? Would you allow them to go in and say,

OK, this and this and this has to be done and that would affect

everyone, no public input, just open your mouth and take it?

Mr. ABBEY. Yeah, we’re—you know, again, as far as access to our

computers, they can have access to our information and data,

which is public information.

The way the Colorado Environmental Coalition and the conservation interests in Colorado addressed wilderness and came up with

their own proposal certainly was outside the spectrum of public involvement. And that’s why we are having to go back and revisit

these areas. It was our intentions to raise this flag, to bring this

information to the public and use our planning process, which will

certainly involve opportunities for public comment and recommendations on how these areas should be managed in the future.

Mrs. CUBIN. So here we are with a situation of extreme budgetary constraints, and the BLM has a certain mission, and it costs

money to fulfill that mission. But now you are using money that

is being given to fulfill that mission to redo what’s already been

done.

Mr. ABBEY. That was done in 1980, yes, ma’am. So it’s been 17

years.

The key thing here is that we are directing funding out of our

wilderness program to revisit these Colorado Environmental Coalition proposed wilderness areas. We estimate that the cost from our

budget is going to be around $25,000. It’s money that was normally

going to be used to monitor existing wilderness study areas that

we’re having to direct toward this inventory of wilderness areas, or

whether or not they’re wilderness is what the determination will

make here shortly.

We’re using individuals from the public to assist us in that wilderness review. These members represent a broad spectrum of interests, from the environmental interest to the industry interest. So

that is helping us offset the cost of this wilderness inventory.

Mrs. CUBIN. One thing maybe I should know, but I don’t know.

How did it work out that CEC was able to just go in, no input, no

nothing, just get BLM to identify psuedo-wilderness study areas or

whatever you want to call them? How did that happen?

Mr. ABBEY. We didn’t identify these psuedo-wilderness areas.

Again, this is a conservationists’ proposal.

We have never sanctioned their recommendations or actually formally acknowledged the fact that these areas do possess wilderness

character. That’s the whole purpose for our review right now, is to

go back in and determine whether or not these areas are, in fact,
21

wilderness and whether or not they would meet minimum wilderness criteria. As you know the conservationists’ proposal for Colorado is just one groups’ opinion.

Mrs. CUBIN. Is that—did this happen because Dave Alberswerth

told you to do it or said that it should happen? I have a memo that

seems to indicate that to me.

Mr. ABBEY. This whole issue thing kicked around since 1994,

shortly after the conservationists printed their wilderness proposal

for Colorado. Then State Director Bob Moore had agreed not to

lease public land tracts within the conservationists’ proposed wilderness until we had a policy, either from Washington or the State

of Colorado, identifying how we would proceed in dealing with the

conservationists’ proposal.

So since 1994, we have been under the assumption that the

BLM, since Colorado is not the only State where there are conservationists who hold this opinion, that the BLM overall would

issue a bureau-wide policy telling us or giving us some guidance on

how best to address these conservationists’ proposals.

The best we got was a written memorandum in 1994 from Assistant Secretary Bob Armstrong telling us and instructing us to pay

careful and particular attention to these types of proposals.

So we were told by our Washington office that we could expect

a policy on how to deal with these types of issues sometime in

1996.

In November 1996, when there wasn’t any bureau-wide policy

and when it did not appear that there was going to be a bureauwide policy addressing this issue, we in the Colorado State Office

put out our own.

Our policy was reviewed by the Solicitor’s Office in Washington;

it was reviewed by the Assistant Secretary’s Office, which Dave

Alberswerth is a member of or a staff member of; it was reviewed

by our Washington office. And based upon all their comments and

suggested changes, we did finalize our policy in May, which we’re

using to guide our actions.

Mrs. CUBIN. And that policy is?

Mr. ABBEY. The policy that we’re using is to—where we have proposals pending, that approvals that could have irreversible or irretrievable impacts within the conservationists’ proposed areas, that

we would go out and review these areas to determine whether or

not they have wilderness character.

If we determine that these areas are, in fact, roadless and they

possess wilderness character, then we would use our land use planning process to address different management prescriptions on

those lands that are not currently being advocated in our current

land use plans.

If we find that those areas do contain roads, then we would look

at those areas to determine whether or not our current land use

prescriptions for those areas are still adequate, and therefore we

could use our existing land use plans to guide future management

actions.

Mrs. CUBIN. So let me see if I understand.

Mr. ABBEY. OK.

Mrs. CUBIN. If it—if you go out and find out it’s a roadless area,

it will be treated as wilderness.
22

Mr. ABBEY. No, ma’am. What we would do, if we find these areas

are roadless, then what we will do is use our land use planning

process to do further scoping to look at other alternatives for managing these lands.

A wilderness—a designation of wilderness study area certainly is

one option, but it is not the only option. We have other management prescriptions that are available to us that would protect any

values that are found out there on those tracts.

And so we could take a different approach. Or we could actually

just stay with our current land use plans and continue to manage

those tracts under the current prescriptions.

Mrs. CUBIN. You know, it’s a—it’s a constant mixed message that

I get. I believe, and I know it to be true, that the Congress of the

United States is the only entity that can establish a wilderness.

Mr. ABBEY. That’s true.

Mrs. CUBIN. I know that to be true. But it seems to me that regulators can establish what is something that is basically a wilderness area because I would say what a wilderness area is is what

you can do with it, on it. So regulators establish wilderness areas

and call them something else. I’ve seen things like this happen

throughout my time that I’ve been in Congress. It’s interesting. I’m

thinking now of the eco-credits, that the Secretary just doesn’t

think he quite has the authority to do a pilot project.

I mean this is not at you.

Mr. ABBEY. Yeah.

Mrs. CUBIN. I know the Secretary is the Secretary.

But then a contradiction I’d like to tell you about is there were

some proposed rules that were brought out just recently, in 1996.

The public input was given in 1991 and put on the shelf. And there

was a recommended course of action. This is for a hard rock mining, bonding.

And there was a person named Dave Alberswerth that testified

on behalf of an environmental organization.

Well, Dave Alberswerth now is the guy who’s going to decide—

who has decided what the final regulations will be. And guess

what? They’re 95 percent of the testimony that he gave back in

1991. And nobody else’s—I don’t say nobody, but maybe 5 percent

of other people’s opinions are in there.

I think I see this throughout—throughout the government. And

I realize that all of you have people that you work for and that

there are certain things that you have to do.

But I—I think that your jobs are more than to try to find a way

around the letter of the law, around the concept of the law, just to

establish somebody else’s agenda. I think that is one of the biggest

problems that we have between the public and the government.

Back to you for a second now. As part of your discussions with

the States regarding the transfer of inspection and enforcement

functions, BLM and the States agree that the individual States

would submit a proposal by August. Wyoming submitted their letter to take over these responsibilities and establish a single regulatory program for oil and gas on June 13th, 1997.

Can you tell us how you’re going to proceed now in responding

to that letter, and do you have an idea what the timetables are

going to be to implement that transfer?
23

Mr. PIERSON. Yes. I do intend to respond to the letter. The letter

is not a proposal. We’ve had numerous discussions and some correspondence with the State Oil and Gas Commission. This—the letter that you’re referring to I recently received is, again, a statement about—kind of a position statement. I don’t have a proposal

in hand to evaluate in terms of costs or effectiveness or standards

that would be applied or any of that. And it would be real helpful

if I had something like that to evaluate.

The idea of transferring the inspection and enforcement responsibilities has been with the Bureau and with the State since the

passage of the Federal Oil and Gas Royalty Management Act. And

I believe in that, too. This was discussion—that’s what was offered

a year and a half ago. That’s been expanded greatly by some States

in terms of desiring to take on the responsibilities, at least operations responsibilities, far beyond inspection and enforcement. So

we need to get past that.

And then I need to see a proposal that deals with how enforcement and inspection would be taken on, are there cost savings, how

will it be paid for, will it meet the standards, including independent production verification. That has been a big issue. And the

primary reason that the Bureau has a rigid, stringent IME program now is to ensure that the Federal royalties are reported properly and collected properly. There needs to be an element in there

dealing with environmental surface protection. I’ve not seen anything in that, in the proposal except, I believe, a statement saying

they were not interested in it.

And I need to see some specifics. I stand ready to do that. Just

haven’t seen it, Madam Chairman.

Mrs. CUBIN. I think a huge part of the problem with Cave Gulch

was a result of poor communication. And so I implore you, please,

don’t let that happen with this particular issue. Even if you think

it shouldn’t be your responsibility to call and say, hey, I don’t have

this yet, maybe it would be nice if you did. And I’ll ask the same

of Jim Magagna.

Mr. PIERSON. That would be good because those calls have been

made and we’re ready to sit down and talk with him. There’s just,

at this point, not a proposal to evaluate.

Mrs. CUBIN. We had a hearing of this Subcommittee on March

4th where BLM Assistant Director Ward Tipton testified. And then

in a followup letter on April the 9th, I asked him if he would provide the State of Wyoming numbers that the State had been requesting for some time, quite some time, on how BLM spends its

money to carry out its oil and gas program in Wyoming.

And what I specifically asked for was Wyoming’s contribution to

the net receipts sharing cost. That’s been 3 months, and we still

have no reply.

Mr. PIERSON. Yeah. That was requested of our Washington office?

Mrs. CUBIN. It was requested of Ward Tipton, yes, twice.

Mr. PIERSON. And it’s a——

Mrs. CUBIN. At a March 4th hearing and then a reminder on

April 9th. And certainly that will help the State be able to get the

information to you that you need.
24

Another question that I submitted to the BLM on April 9th concerns the Green River Advisory Committee precedent. Are there

other advisory committees working now? Do you know?

Mr. PIERSON. None that I’m aware of at this point. And the

Green River Basin Committee has—the charter has expired. It was

chartered for one year, and they did complete their work timely.

Mrs. CUBIN. Do you have plans to establish any more committees?

Mr. PIERSON. I’m not aware of any at this point.

Mrs. CUBIN. Give me your opinion of the whole process, the results, and just the whole process.

Mr. PIERSON. Of the Green River Basin?

Mrs. CUBIN. Right.

Mr. PIERSON. I, as you probably know, was very skeptical of that

committee, going in.

Mrs. CUBIN. We both were, for different reasons.

Mr. PIERSON. I was asked for my advice. I gave it. And the decision was made to go ahead with it. And at that point it became my

job to make it happen, and we did that.

The first meeting, as you may recall, there were some 1,200 people that attended that meeting, and most of them were angry. They

felt like there was not a process in place for them to participate in

discussions about gas development in southwest Wyoming and

other impacts that were occurring nor to be a part of it. People,

service companies in particular, were unemployed. There was a lot

of misinformation around. There was some truth in that the gas

drilling was slowing down and the NEPA process and the appeals

and all this other stuff was going to result in the shutdown of drilling and oil and gas activity in southwest Wyoming.

So that was the purpose of the advisory committee, to see if we

could sit down as Federal, State, local, private landowners, environmental groups, industry, and try to—try to sort out among the

various interests in the two States a course of action or some recommendations that could help us get on with some development in

a environmentally responsible way, that people could agree to.

Over the course of 12 months, I believe we had nine or ten meetings. The first one was very contentious, went on forever with public comment. People were sort of staking out their positions. And

you know how all of that works.

Mrs. CUBIN. I do.

Mr. PIERSON. At the end of the process, we had arrived at five

recommendations that we had consensus on. There were about 20

people that attended the last meeting, and I believe three wanted

to speak. And they all spoke very much in favor of the work that

had been done and the process that had been used, versus at the

first meeting a lot of people spoke. I can’t even remember how

many. And they, almost by the numbers, were opposed to even trying this process.

So in that respect, I think it was very successful. It concluded

with five recommendations, four of which are underway right now.

And the fifth is the eco-royalty relief issue. That remains under review in the Secretary’s office, and I don’t know where it’s going to

come out.
25

But I think we did learn that people meaning well, but having

very much different opinions about how things should be done, can

work together. And given that this was chartered for one year and

it didn’t go on forever, I’d say it was a success, a very big success.

Mrs. CUBIN. Well, and certainly, I think that four of the five recommendations are going to be—or are being implemented speaks

well for the process.

Frankly, I—never mind.

Ms. Flora, I know that you have an early flight to catch.

Ms. FLORA. Well, I think I’m probably too late for that. So let’s

just take our time.

Mrs. CUBIN. When I read the background information on Lewis

and Clark National Forest, the bottom line appears to me to be

that the Forest Service has concluded that oil and gas development

is in conflict with all other resources.

Why don’t you believe that these alleged conflicts can be mitigated and that there can be some development?

Ms. FLORA. Well, I don’t share your conclusion, but I’ll attempt

to answer your concern.

We have spent many years, not just in working on this EIS, but

also on various oil and gas issues across the forest. We have conducted very public and open processes, as well as using the best resource information available and the best resource information that

we could obtain from the oil and gas industry.

In conclusion, when we look at the resource issues and we look

at the socioeconomic issues involved, we have put forth a proposal

that we feel is most responsive to the concerns that have been expressed and will result in the capability to develop this. As I said

in my earlier testimony, over 50 percent of the forest would be open

for leasing and potential development.

I don’t think that that speaks to or supports the conclusion that

we find that oil and gas exploration development is in conflict with

all resources and not possible.

Mrs. CUBIN. What I’m fumbling for are my notes on exactly how

much of the forest is to be used for different things.

Ms. FLORA. If you pause, I’ll fumble for mine.

Mrs. CUBIN. OK. I think I found this.

OK. Let’s see. OK. The draft EIS analyzes 1,862,453 acres of

which 610,634 are legally unavailable due to their classification of

wilderness, or wilderness study areas. This leaves about 1.2 million

acres subject to review for oil and gas leasing. And the Forest Service’s preferred alternative makes 60 percent of this area either administratively unavailable for leasing or unavailable for surface occupancy, while the remaining 40 percent is subject to severely restricted stipulations.

So in practical terms, the preferred alternative allows for oil and

gas leasing on an extremely limited area containing a high potential for discovery, one-mile corridors along existing roads in certain

basins and one-mile no surface occupancy stip along the eastern

boundary of the Rocky Mountain National Forest, and that’s out of

1.8 million—over 1.8 million acres.

Ms. FLORA. That’s—the figures that you were just using, as far

as describing the preferred alternative, is focusing on the Rocky
26

Mountain front. We’re looking at the entire forest. The figures that

you mention as far as acreage——

Mrs. CUBIN. Excuse me for a second. I need to respond to your

first statement.

But the area that I’m referring to is where the high potential

production is, and the rest of the forest has a much, much lower

potential for production.

Ms. FLORA. That’s correct.

Mrs. CUBIN. So I think that bears out my point, that this is one

of those things that, you know, call something—decide what something is, and then call it something different, and people won’t

know that it’s the same.

Ms. FLORA. I hardly think people are that easily fooled.

Mrs. CUBIN. Well, nor do I. But nonetheless, your statement that,

what was it, 60 percent is there for production, or possible production, I mean it just simply isn’t true when you consider where the

high potential for production is.

Ms. FLORA. Well, I don’t think it’s a fact that it’s not true. If

we’re talking about high potential areas, then we can’t talk about

the whole forest; we’re talking about the Rocky Mountain front. If

we’re talking about the whole forest we can talk about the whole

forest.

Mrs. CUBIN. If I—well, we don’t need to—obviously, we agree to

disagree about this.

However, if I have a yard and half of it is full of flowers and the

other half has two flowers in it and I can’t pick any flowers from

the big side, you can’t expect me to get a good bouquet. That’s basically what we have here, the potential for production is extremely

limited by the decisions that are being made.

And maybe you can’t answer this question, since we aren’t operating off the same foundation. But how do you—how do you explain

fulfilling your mandate of multiple use when—and your obligation

of producing the minerals to the best extent possible—how do you

explain that you’re doing that?

Ms. FLORA. Well, the multiple use mandate is really quite well

crafted, and it’s quite well stated, not only in the Multiple Use Sustained Act, but also the Federal Land Policy Act.

Mrs. CUBIN. I’m talking about what you do as opposed to what

you’re supposed to do.

Ms. FLORA. I thought I was doing what I was supposed to do.

The multiple use concept is that you attempt to provide the most

beneficial uses possible to the widest range of people possible over

a very large scale of land, but not to the point such that you cannot

make different choices as conditions change, and also for present

and for future generations. So in implementing that multiple use

policy and the plethora of laws that accompany it, one also needs

to balance what the public has to say about the situation.

In the case of the oil and gas EIS, as you know, we have received

about 1,500 comments. Eighty percent of those supported less development than in the preferred alternative. Ten percent supported—didn’t specify a level of development, just expressed specific concerns about certain resources. And 10 percent supported

greater development.
27

Mrs. CUBIN. How do you treat public input where you have a certain organization mobilized and they all send in the same postcard

with their names signed or the same letter with their names

signed? Do those all have equal weight in decisionmaking with letters that are written by people from varying backgrounds and varying interests?

Ms. FLORA. No, we segregate those comments out. What we look

at, when we’re analyzing the comments—you know, it’s not a voting contest. We’re not counting up votes and whoever gets the most

wins.

When we do our comment analysis, we segregate those signatures that have arrived on a petition, and we also segregate out

those letters that are either on a preprinted form or they obviously

use language that is very structured and follows solicitation letters

that organizations and industries have sent out, so we know exactly how many comments have—or how many of those numbers

of the 1,500 have been identified in the petition format or what we

call an organized letter writing campaign. It was a very small percentage, and there were petitions and letter campaigns on both

sides of the issue.

But the majority of comments received—and I’m sorry, I don’t

have the figures with me. But the majority of comments received

were from individuals or on letterhead of some nature that were

substantive personalized comments.

Mrs. CUBIN. So the 1,500 that you were talking about did or did

not include the names on petitions?

Ms. FLORA. It does include that, but I would say we had about

300 names on petitions and organized letters on both sides of the

fence.

Mrs. CUBIN. None of those are important?

Ms. FLORA. No. You get a sense of where people are coming from,

if you will, but it does perhaps indicate that those persons have not

spent a great deal of time in analyzing the issues themselves.

Mrs. CUBIN. What is the Forest Service’s response to Governor

Racicot in his request for a more balanced alternative? He certainly, in all the statements that’s he’s made, publicly and privately, feels that—that mineral development has taken the real

short end of the stick there in Montana. So how have you responded to him, and do you intend to do anything?

Ms. FLORA. We have not responded to his comments individually.

What we have done are taken his comments and segregated them

out in development of the responses in the final EIS. And so each

issue that he raised is similar to other comments, and we’re grouping those comments and responding to each particular comment

and point individually.

Mrs. CUBIN. So does a Governor, for example, have—do you

weigh his testimony or her testimony heavier than someone else,

or is it just in the mix? And I don’t have any opinion what’s right.

Ms. FLORA. Yeah, and that’s a different question. We do try—we

do recognize that the Governor represents, certainly, a majority of

the people in the State who bothered to vote and put that Governor

in position. And the—also, the Governor’s letter attempted to incorporate responses from various agencies, State agencies, although it

did not include all State agencies. So we recognize that it’s a broad-
28

er scope and that there are certainly vested interests and concerns

and a great wealth of knowledge behind that.

So besides, a letter from Bob P. Jones, public at large, versus a

letter from the Governor, we certainly put a lot more weight on the

letter from the Governor.

Mrs. CUBIN. Because some of the elected officials, Congressman

Rick Hill from Montana and Governor Racicot, and maybe other

folks from Montana who would like to know more information

about this, I’m sure we’re going to have another hearing on the

Lewis and Clark National Forest situation. So I don’t need to ask

you any more questions.

What time did you say your plane left?

Ms. FLORA. It leaves at noon.

Mrs. CUBIN. I think you can make it.

Ms. FLORA. If my cab can get me and my luggage together in the

same place, I possibly can.

Mrs. CUBIN. Well, you know, if I had a staffer around here that

could take you out there, that would be all right.

Ms. FLORA. You bet.

Mrs. CUBIN. Is anybody here? OK. Yeah.

Ms. FLORA. Great. I thank you very much, and certainly would

welcome any more questions. It’s a most interesting subject and, as

I say, been going on for decades, not just during the duration of

this EIS process.

Mrs. CUBIN. That’s certainly correct. And if we have any further

questions, we’ll submit them in writing.

Ms. FLORA. Thank you.

Mrs. CUBIN. So if you hurry——

Ms. FLORA. Well, I always love an adrenaline rush.

Mrs. CUBIN. By the way, I just wanted you to remember your

plane runs on petroleum products.

[Laughter and applause.]

Mrs. CUBIN. I have all these different testimonies and questions.

And a lot of them—I don’t want to drag this on forever, but if I

get some of this out of the way, I can get organized.

Mr. Pierson, I just want to go back, just for a minute, to the decision to do the environmental impact statement, as well as the environment assessment.

Are there documents—was this just decided verbally? Are there

documents that are available that you could send us about that decision?

Mr. PIERSON. Sure. Those would be in our Casper district office

here. I could either supply them through your office here or——

Mrs. CUBIN. That would be fine.

Mr. PIERSON. OK. Yes, there were documents. There were a lot

of meetings occurring at the time with companies and everybody

else.

Mrs. CUBIN. I have to ask you this for the Natrona County commissioners. And of course, this goes to local input for socioeconomic

issues. And the decision was made that the county commissioners

could not have cooperating agency status.

Mr. PIERSON. Uh-huh.

Mrs. CUBIN. Would you just give me an explanation of that?
29

Mr. PIERSON. Sure. Cooperating agency status is granted to an

agency, usually a Federal agency, who has—who has jurisdiction.

An example of that is—or could be a State agency in the case of

our DEQ, for example, where OSM delegates authority to DEQ to

manage mining and reclamation.

Mrs. CUBIN. So who determines that jurisdiction?

Mr. PIERSON. Usually by law. For example, the State has primacy in air quality. It comes from the EPA—the President to the

EPA to the State. Same is true with water quality, with water

rights, those kinds of things.

In the case of Natrona County and their request to become a cooperating agency, it implies that there is decisionmaking authority

and that the county would have to concur with and actually make

the same decision that BLM arrives at on public lands. It simply

was not the case.

Mrs. CUBIN. Would you repeat that for me?

Mr. PIERSON. Would imply some decisionmaking authority over

the decisions that were made in Cave Gulch, that is whether we’re

going to mitigate for raptors, whether we’re going to comply with

the National Environment Policy Act, as opposed to where they do

have—where they do have jurisdiction, and that is over health and

law enforcement in the county, any work permits, licenses that

would be required.

Mrs. CUBIN. They wouldn’t—they wouldn’t have an opinion on

whether or not you were going to comply with NEPA?

Mr. PIERSON. Certainly have an opinion whether we should mitigate for raptors or not and what that might cost and what birds

are worth. That’s all important information, but it doesn’t have

anything to do with complying with the Federal law that we have

to comply with.

Mrs. CUBIN. OK. I want to understand this a little bit. When you

have your team and, you know, I assume there are—there are

some different folks that have cooperating agency status, is every

decision to be unanimous? I mean it wouldn’t be OK for them to

disagree and still have the process move on? I just don’t understand the exclusion.

Mr. PIERSON. The difference is jurisdiction and signing the record

of decision. Yes, you have to have——

Mrs. CUBIN. OK, jurisdiction. Explain that to me.

Mr. PIERSON. The question—the question here in this case was

does the county have the authority or jurisdiction to make the decisions in Cave Gulch on Federal minerals.

Mrs. CUBIN. That implies that the county would be the only one

making the decision, and that’s not what cooperating agency status

is.

So tell me frankly, nuts and bolts, real specific reasons that they

could not have cooperating agency status.

Mr. PIERSON. For the reasons I just described. The county would

need to have signed the Record of Decision, that they—and become

a signatory to the EIS.

Mrs. CUBIN. They never had the opportunity for that.

Mr. PIERSON. That’s right.

Mrs. CUBIN. So how do you know they wouldn’t?

Mr. PIERSON. Because——
30

Mrs. CUBIN. So you’re saying, well, you can’t do it because you

can’t do it.

Mr. PIERSON. Because there’s no jurisdiction there.

Mrs. CUBIN. That’s what I’m asking.

Mr. PIERSON. Right.

Mrs. CUBIN. Explain what that is to me.

Mr. PIERSON. Does the county have decisionmaking authority on

Federal resources on Federal lands, that’s the real decision.

Mrs. CUBIN. The county has the expertise that is absolutely

essential——

Mr. PIERSON. I don’t think anybody questions that.

Mrs. CUBIN. [continuing] for producing a good document.

Mr. PIERSON. Do they?

Mrs. CUBIN. Of course, they do.

Tell me why they don’t, Al. Tell me why they don’t. Tell me what

you—what you just said was they couldn’t have cooperating agency

status because they wouldn’t agree to the final document, they

wouldn’t sign it. Well, they didn’t have the opportunity to sign it.

So that isn’t a good reason.

Mr. PIERSON. I didn’t jump to the conclusion that they wouldn’t

sign it. I just said they do not have jurisdiction and couldn’t sign

it.

Mrs. CUBIN. Well, that’s what I want you to explain to me. I

want you to tell me exactly why they don’t have jurisdiction.

Mr. PIERSON. Because they do not have management jurisdiction

over Federal resources, just because they happen to fall within a

certain county. That is the responsibility of the Secretary of the Interior in this case and on down to the Bureau of Land Management.

Mrs. CUBIN. List some cooperating agencies, some entities that

have cooperating agency status.

Mr. PIERSON. Oh, Bureau of Reclamation over in the Fontenelle

EIS.

Mrs. CUBIN. And do they have anything to do with the mineral

resources of this country?

Mr. PIERSON. They manage the surface of part of the Fontenelle

EIS area and yes, they do, they make the decisions on what’s available for lease. We just lease it for them. We just provide the service—provide the service of lease operations once it is leased. Yes,

that is Federal land withdrawn to the Bureau of Reclamation for

reclamation purposes. So they have management responsibility on

that land.

Mrs. CUBIN. Go on.

Mr. PIERSON. The U.S. Forest Service on the grasslands where

we develop coal and oil and gas.

Mrs. CUBIN. OK. Let’s shorten this, because I know this.

Is there any entity ever that has not been a Federal Government

agency or subagency or something that has had cooperating agency

status?

Mr. PIERSON. Yeah. I think Wyoming DEQ on mining and reclamation has it.

Mrs. CUBIN. And what is their authority over Federal minerals?

Mr. PIERSON. Their authority is delegated through the Office of

Surface Mining to the State, with the recognized State—they are
31

a recognized regulatory agent to administer subsurface mining and

control on the Reclamation Act. They have primacy, for example,

in reclamation plans and mining plans. They are the approval authority in that instance.

Mrs. CUBIN. So since the expertise of the county commissioners

would be socioeconomic factors, it seems to me that, just by definition, those socioeconomic factors don’t have the same weight that

the other aspects have.

Mr. PIERSON. No, I don’t think that’s the case. The difference is

the BLM doesn’t manage the socioeconomics. We certainly have an

impact on it. And that’s why we went to——

Mrs. CUBIN. What do you mean they don’t?

Mr. PIERSON. We don’t manage the socioeconomics.

Mrs. CUBIN. No, you don’t manage it. Do you consider it?

Mr. PIERSON. Certainly, we do.

Mrs. CUBIN. How much? Heavily?

Mr. PIERSON. We went to great lengths in the Cave Gulch EIS

to include the county in that part of the analysis, to use every piece

of information that they chose to provide to us, to verify it, just like

we do every other piece of information coming from anyplace else,

and to expand greatly the socioeconomic section in that EIS. I referred to it in my testimony.

Mrs. CUBIN. I don’t think they would feel they had a lot of input.

But you know what this reminds me of? The blind people that are

told to describe an elephant, and they’re at different ends. That’s

what this reminds me of. I guess it’s a perspective that, as government officials, we have to be as inclusive as possible. I can’t see—

I can’t understand the reason that that status was denied.

Mr. PIERSON. Well, I believe I have explained that. We researched that. We asked our solicitors to provide us help on it. And

it basically boils down to the county not having jurisdiction in the

decisions that were to be made in the EIS.

Now, that does not—that does not relieve us or the county of our

responsibilities to cooperate, to be a part of the process all the way

through. And in those cases that really do have an impact and the

county has good information to provide into their analysis, such as

socioeconomic, it is—regardless of what you call it, you still have

to have it in there, and the cooperation is necessary, desirable, and

I believe was here on Cave Gulch.

Mrs. CUBIN. OK. I want to talk a little bit about cost recovery.

And certainly, this is probably one of the most controversial things

we’re going to be dealing with.

Is the Department of Interior now drafting regulations for cost

recovery?

Ms. GUY. I don’t believe so, but I need to verify that. If so, it

would be done in Washington, that the Solicitor’s Office would not

be involved unless the BLM regulations staff had specific questions. And ordinarily, they don’t review it until the whole thing is

done.

Mrs. CUBIN. So you don’t know?

Ms. GUY. Yes, that’s correct, but I will attempt to respond.

Mrs. CUBIN. Would you do that?

And also I’d appreciate it if you could furnish a timetable for me

as to when those proposals might come out.
32

If administrative costs are currently deducted from royalties collected on Federal lands, would it be a duplicate charge by them assessing industry for minerals document processing?

Ms. GUY. I guess I—the answer is I don’t know what you mean

by administrative costs versus document processing. But it’s possible that they would be the same thing.

Mrs. CUBIN. I think they’re paying administrative costs right

now, and then—then document processing on top of that would

be—would be——

Ms. GUY. This would all be addressed in whatever rulemaking

emerges.

Mrs. CUBIN. And you don’t have any idea of any of the proposed

services that will be assessed charges?

Ms. GUY. No, I don’t, Madam Chairman, because the Solicitor’s

opinion was requested by BLM in a way to give it a lot of options,

where the Office believed that it had authority to proceed. But it’s

up to BLM to choose how it wants to go. And the BLM would be

the agency to make that decision about what sorts of things it

wanted to include. And then there would be the notice and comment period and ask for the public to provide input on those factors, how it should weigh the reasonableness factors. The courts

have said that the BLM has to include all the factors. But how

those are weighed is something that would be initiated to be considered in the rulemaking process.

Mrs. CUBIN. I can see how this cost recovery might become very

difficult for the BLM because I should think the people who pay

the money would expect a good return. They would expect more because they’re paying more. And I think they rightfully ought to be

able to expect that.

I have observed personally, and I have been told with documentation, of circumstances where, frankly, industry’s money has

just been poured down a rat hole. It has been wasted in terms of

time, in terms of delays in being able to start your project. And because I don’t want to embarrass anybody here today, some of them

are pretty egregious.

When money is handled that way, on the EAs and on the EISs,

why—why would the government think that they could ask for

more money when they don’t even handle the money that they—

well, that is spent on their function, that they don’t even handle

that well?

Ms. GUY. Madam Chairman, all the Solicitor’s opinion says is

they have the authority. What the agency does with it, that authority, is really a question I’d have to defer to BLM.

Mrs. CUBIN. So basically, I guess we’re not going to get any more

information today about cost recovery, other than the fact that the

Solicitor says that it’s OK for the government to assess costs.

Ms. GUY. If the criteria set out in the Independent Offices Appropriation Act, the OMB circular are met, along with those in

FLMPA (if aplicable). If a private individual is receiving a benefit

not available to the general public, the policy is that the government may recover those costs. And the IOAA indicated that, to the

extent possible, such service provided is to be self-sustaining. But

you’ll also recall that one of the FLPMA reasonableness factors is
33

efficiency of government process. This speaks to that, whether it’s

BLM or some other government agency.

Mrs. CUBIN. Then the remedy for that—if one of the businesses

didn’t think that their money was being handled responsibly, then

the remedy would be go to Court?

Ms. GUY. They could proceed to administrative challenge or negotiation.

Mrs. CUBIN. So spend more money on top of that. So the remedy

might be worse than the illness.

Ms. GUY. Maybe not.

Mrs. CUBIN. You have a comment?

Mr. ABBEY. If I may, Madam Chairman, your comment regarding

cost recovery is certainly on the mark.

A proponent who is paying the bill deserves a quality document

in a timely manner. The cost recovery program as administered by

the BLM is subject to audit. If a company believes that they’re contributing funding to a particular product and they’re not getting

quality service and sort of inefficient service, then our records are

subject to being audited to determine how we had to use that

money. So that’s already available to the company or to the proponent.

Mrs. CUBIN. I’ve seriously considered, as chairman of this Subcommittee, asking the GAO for an audit on the permitting access

to public lands. I don’t know how soon that will be able to be done;

however, I think it’s something that the truth—the facts need to

be brought out into the light of day so that—you know, by an unbiased agency, so that we have a better idea of exactly what is going

on because the perception is sure there that this administration

has an agenda for the public lands that doesn’t necessarily coincide

with what the laws for public lands say.

I want to ask one question about the net sharing receipts formula that is in the law. I think it says that the States pay onefourth of the total of the bill and Forest Service and MMS costs for

onshore mineral leasing. Do you have any idea how that would affect the States?

Ms. GUY. I do not, depending on what BLM proposes.

Mrs. CUBIN. Well, what I would really appreciate a lot is if you

could get the answer for me soon as to whether or not rules and

regulations are being drafted and, if they are, what that timetable

is.

Ms. GUY. Certainly.

Mrs. CUBIN. Do either of you know?

Mr. PIERSON. I believe late 1997 is when we expect to have the

regulations out for public review.

Mrs. CUBIN. I didn’t hear what you said.

Mr. PIERSON. I said I believe that late 1997 is when the regulations are due to come out for public review.

Mrs. CUBIN. So they are being drafted; right?

Mr. PIERSON. So far as I know. They’re probably in the very early

stages of being drafted.

Mrs. CUBIN. OK. Thank you.

I don’t have any further questions. Thank you very much. I appreciate your patience.

If the second panel would please come forward.
34

If you wouldn’t mind standing, I’ll give you the oath.

[Witnesses sworn.]

Mrs. CUBIN. And Mr. Basko, I understand this is your very last

day of work. And I—I mean of full-time work. And I just want to

thank you so sincerely for the years of service that you have

blessed the State of Wyoming with. You truly are one of the stalwarts in this industry and in this State. And you are a person that

I am proud to know professionally and personally. And I think this

beautiful building is the least we could do, to name it after you,

for all the work you have done.

I know you’re going to work half time for 6 months or so. But

I just hope you will hang around for a long time because we still

need—we need your brain, and we need your good common sense.

So if you will start the second panel testimony.

STATEMENT OF DONALD BASKO, SUPERVISOR, OIL AND GAS

CONSERVATION COMMISSION

Mr. BASKO. Thank you, Madam Chairman.

You’ve already covered some of what I was going to say, but I’ll

read it to you one more time.

My name is Donald Basko, the supervisor of the Wyoming Oil

and Gas Commission. I have been employed with the Commission

for the last 37 and a quarter years. Today is my last day of fulltime employment; however, the Commission was kind enough to

give me a contract for six more months at half time.

I wish to touch on three concerns: The first, the assumption of

enforcement and inspection responsibilities from BLM; the Cave

Gulch EIS, specifically, and statewide delays of opportunities to

drill caused by the general EIS process; and third, the recent field

inspections of oilfield inspections by Wyoming—or the U.S. Fish

and Wildlife Service and EPA, particularly the detailed checklist

and the high-handed attitude of the Fifth Team from the Criminal

Investigation Group, and the misleading purpose of those inspections.

For several years now, the States have been negotiating with

BLM regarding the takeover of enforcement and inspection responsibilities. In my view, in spite of the face-to-face meetings, very little progress has been made. The problem has been that at least

Wyoming is unwilling to replicate the activities of the BLM. Site

security is a particular concern.

There are also a number of other unresolved issues the State—

between the State and BLM. I have attached a copy of the letter—

of my letter of June 13, 1997, which was referenced earlier, to Mr.

Al Pierson with BLM because it sets out some of the provisions I

feel should be a part of the agreement. This letter was prompted

by a request from BLM to respond by August 1st of 1997. In essence, I believe that there should be one program, that the State

is not interested in the NEPA process, that savings in running the

program should result in lower administrative costs to the State,

and that reimbursement for running the program should become—

should come from the royalties stream.

Further, our program of regulations is a good one. At some point

we would consider taking over the Application for Permit to Drill,
35

and realizing that this may not be feasible without a change in the

law, we stand ready to support that legislation.

Finally, I am still waiting for a detailed breakdown of the cost

to BLM for E and I in Wyoming. I feel that this is a requirement,

so we can see where we can make some savings. I am not interested in taking over the program only to be reimbursed for what

we do. However, if we can save a significant number of dollars and

the State would be the beneficiary of half that savings, then the

program is worthwhile looking at.

As you recall, the second issue, regarding the Cave Gulch EIS,

is as follows:

The Green River Basin Advisory Committee made several recommendations to the Secretary of the Interior, Bruce Babbitt. One

of those was to streamline the NEPA process by reducing the timeframe from approximately 26 months down to 16 months. The second was the required road standards consistent with the ultimate

use of the road; in other words, to require construction of a road

to a wildcat well that could be either rehabilitated, if the well were

dry and abandoned, or upgraded if it became a producer. Both of

these recommendations could have been introduced by BLM without the prompting from GRBAC.

To industry and the environmental community, the third and

most important recommendation was the concept of eco-credits.

Eco-credits would provide reimbursement through royalty reduction to the company paying for the EIS or other environmental documents and an equal amount for mitigation to environmental concerns—for mitigation of environmental concerns. This recommendation was rejected by Interior as being contrary to law, and no apparent way around the decision was offered. The two other recommendations were of lesser importance.

My purpose in bringing this issue up is I am wondering if BLM

has employed the streamlined NEPA process at Cave Gulch, and

if they are using the road standard recommendation for roads, or

is everything business as usual.

The final issue I’d like to bring up is to discuss the fly over inspection of pits in Wyoming.

On January 9, 1997, the U.S. Fish and Wildlife Service and EPA

was asked for a meeting with the Commission staff and the DEQ.

Also in attendance were representatives from the BIA and the Forest Service. The meeting was to discuss oilfield pits and their impact on migratory birds. They were informed—we were informed

that the U.S. Fish and Wildlife Service, with help from the EPA,

was going to fly the State and make note of any pits they thought

were a threat to the migratory birds.

Aerial surveys were conducted in April 1997. On May 19th, 1997,

we received a list of 213 pits U.S. Fish and Wildlife Service and

EPA had identified as problem pits. This list was subsequently reduced to 210 sites, of which 91 were the responsibility of the Commission, 86 BLM, 20 DEQ, and 13 BIA. We immediately sent our

technicians into the field to check on all the State and fee mineral

pits. We were informed by U.S. Fish and Wildlife Service that we

had 30 days with operators—to work with operators in solving the

problems. At that point U.S. Fish and Wildlife Service intended to

put four teams in the field to do a ground inspection of the pits.
36

We were under the impression that these folks were looking for

problems that were a threat to migratory birds. However, at the

last minute, after a number of phone calls, we received a checklist

that they’d planned to use, which was 12 pages long and constituted a full-blown audit of all Federal regulations. This was not

just to protect migratory birds, but a power grab by EPA to assume

regulation of oilfield pits. This has traditionally been the State’s responsibility.

In addition, EPA put a fifth team in the field, without any notice,

from their Criminal Investigation Group. This group had no State

or BLM representation, nor did they want any. They took the position that they did not have to ask anyone for permission to do anything, including going on operator’s leases without permission or

prior warning.

This last item may not be germane to this committee, but I wanted you to know how other branches of our government perform.

My secretary’s spellcheck was on vacation, I guess, because ‘‘germane’’ is spelled wrong.

In conclusion, I think the BLM is less than sincere about delegating E and I to the States that are unwilling to take every step

that they take in all activities. Second, the delays in Cave Gulch

were unconscionable, cost people jobs, the government tax dollars,

and companies the opportunity to develop their leases. Finally, the

attitude of EPA, particularly in inspections of oilfield pits in Wyoming, is a demonstration of government at its worst.

I’d be happy to answer any questions, Madam Chairman.

I did note that Mr. Pierson told you that he’s waiting for a proposal from the State. Let me turn that around. It would be helpful

to me if he sent me a proposal of what he expects. And then we

can see what we’re willing to do.

[The prepared statement of Mr. Basko may be found at end of

hearing.]

Mrs. CUBIN. Thank you.

Mr. Magagna, welcome.

STATEMENT OF JIM MAGAGNA, DIRECTOR OF FEDERAL LAND

POLICY, STATE OF WYOMING

Mr. MAGAGNA. Thank you. Thank you, Madam Chairman. And

first, on behalf of Governor Jim Geringer, let me welcome you and

your staff to Wyoming and express our gratitude for your scheduling this hearing on an issue that is so critical to the socioeconomic viability of the State of Wyoming.

I’d like to take this opportunity to expand on two or three of the

issues that I addressed in my written testimony.

You are certainly well aware of the land ownership pattern in

Wyoming, as well as the mineral ownership pattern. Due to this

intermingled pattern, we often find that State trust lands and private lands are really, in many areas of the State, held hostage to

mineral development that takes place on the Federal land.

Oil and gas, for example, is usually developed on a field basis,

and most of those fields are going to contain scattered tracts of

State land and in many areas scattered tracts of private lands, if

any, together with the Federal lands.
37

So while we have, particularly in the case of State trust lands,

an obligation to produce revenue from those lands, which means

being active in the development of our mineral resources, we often

find ourselves thwarted by policies in the Federal land agencies

that discourage surrounding mineral development.

Even in those cases where it would seem apparent that we

should be able to proceed—and Cave Gulch again stands out as an

example. There a well, successful well, was completed on State

lands, and yet production and revenues to the State from that well

were delayed by several months because of BLM’s refusal to allow

the laying of a gathering line from that well to carry gas to a transportation pipeline, to remove it from the State land. So we’re hurt

in many ways there.

Once each month, I have the opportunity to sit in the very chair

that you’re sitting in today chairing the Oil and Gas Conservation

Commission. And our charge there is to promote conservation

through development, careful development, of our oil and gas resources in the State as well as protect the correlative rights of the

various parties holding mineral rights in the State.

One of my greatest frustrations, and I believe I can speak for my

fellow commissioners as well on this matter, is when parties appear before us and there would seem to be an obvious resolution

to an issue, a decision that this Commission could issue, that would

protect the interest of all the parties. We’re told, no, we can’t go

that route because the BLM has said that they will not accept it.

Unfortunately, they’re not a party that comes before the Commission. They’re not subject to our jurisdiction. So it’s like we’re attempting to balance the relative interests with one of the key parties not subject to our jurisdiction, not before us in a formal sense

as we’re acting on these matters. The implications are very broad.

Cave Gulch, I know, is going to be talked about a lot of times

today because it’s such a fine example of many of the issues we’re

addressing.

Let me move back, though, to 2 years ago, when Governor

Geringer held his first partnership conference in Wyoming. It was

entitled ‘‘The Wyoming Partnership: Minerals, Energy, and the Future,’’ held right here in Casper, with representatives of the mineral industry and related groups.

Among the consistent items that came out of that conference and

through the workshops in that conference were the frustration over

access to Federal lands, over permitting delays on Federal lands

and over restrictions on production from those lands. In fact, and

not stated in my written testimony, but certainly apparent in the

outcome of that conference, was the call for the State to look at

ways that they could expand their ability to assume control of

those particular functions.

This ties in, I believe, very much with Mr. Basko’s comments on

inspection and enforcement because that’s one major part of the

regulatory process that is involved there.

I continually hear in my position as Director of the Office of Federal Land Policy is from producers who are frustrated in their attempts to do business on Federal lands in Wyoming. Wyoming, particularly in the oil segment, is highly dependent on our independents. Excuse the pun there. They don’t have the resources finan-
38

cially to withstand a one- or two- or three-year delay process while

permitting takes place, while the need for process is played out and

appeals subsequent to that are carried forward before they are finally able to operate on Federal lands and receive a revenue therefrom. And of course, we in the State, as a primary beneficiary of

those revenues, are suffering at the same time.

In the case of larger producers, the major companies operating

in Wyoming, what I hear constantly from their local people employed and stationed here in Wyoming is their frustration that they

can’t compete successfully for their company’s resource dollars for

development and production because at the corporate level the

companies are looking at where can they receive the best return in

the shortest timeframe, time being money in this case, from the investment of their limited budgets. Repeatedly they are finding that

Wyoming and some of the other heavily Federal Rocky Mountain

States are not a good place to put those limited dollars because of

the delays that are involved in getting a return on those investments.

The Green River Basin Advisory Committee has been discussed

earlier by Mr. Pierson. Let me just comment briefly on two items

there, having served on that Committee. One, while I know there

are five recommendations and four of them are going forward to

some degree, my observation would be that the success of those recommendations is relative to the level within the agency at which

they can be implemented. Those, for example, on transportation

planning that lent themselves to implementation at the district

level within the Bureau of Land Management are moving forward

quite well. The one on shortening the NEPA process, which is subject to a broader level of input and guidance, is being tried in a

field test in the Jonah field development in Wyoming. Based on the

conversations that I have had, both with industry and with agency

employees, I’m led to believe that, while some progress is being

made, we’re likely, as members of the GRBAC, to be very disappointed in the final results of that trial of significantly shortening and simplifying the NEPA process.

Finally, let me talk just briefly about the socioeconomic standards and analysis that’s done by the Federal agencies, and in this

case, particularly, by BLM.

My observation would be that, even when as in the final Cave

Gulch EIS, BLM does make a significantly improved effort to do socioeconomic impact analysis, that analysis is always going to suffer

from the perspective that’s brought to them. We need to know if

this action is going to have a negative socioeconomic impact or a

positive impact relative to the status quo.

We at the State level are looking at economic development for

the State of Wyoming. It makes little sense for us to project forward and have an economic development plan for a State whose

economy is heavily mineral dependent when 68 percent of our gas

production and 60 percent of our oil production is coming from Federal minerals because, while we can develop the best plan in the

world; we cannot guide the implementation of that plan, given that

heavy Federal presence.

In doing socioeconomic analysis, the Federal agencies do not look

at what the impacts of a particular project or a land use plan will
39

be on the State’s economics goals or on local government’s economic

goals. They’re simply looking at them in absolute terms, relative to

the status quo. That’s not adequate to allow the State government

to build an economic future that is going to be based on our federally controlled natural resources.

Finally, in closing, I feel compelled to enter into the fray on the

discussion of cooperating agency status.

In my office, we have done a rather thorough analysis of a wide

array of Federal environmental land management laws, which

make reference to State and local governments as having the ability to have cooperating agency status. I fail to find in that analysis

the requirements outlined by Mr. Pierson, that they have to be in

a decisionmaking position relative to the Federal resource before

they can have such status. And in fact, and quite frustratingly,

we’re getting very mixed signals from one Federal land agency to

the other and extremely mixed signals between the agencies at the

Wyoming level and some of the leaders within the administration

at the national level. We’ve repeatedly been assured, in fact, personally by Katie McGinty, who’s the head of the Council on Environmental Quality, that cooperating agency status is available to

State agencies, to County governments.

I believe that this issue, whatever the current law provides,

needs to be resolved. There needs to be some consistency in the application of the law as it’s been adopted by Congress toward the

role of State agencies, local governments, conservation districts,

any of those governmental entities, into these decisionmaking processes. And we do believe that they should be entitled to, in many

circumstances, cooperating agency status.

I would submit, Madam Chairman, that very likely it’s going to

take your assistance and the assistance of Congress to finally provide some definitive, consistent answers to that question, which

has really taken on a life of its own. I believe whether or not

they’re willing to listen to a County commission just as much without giving them that status, it’s become a barrier to the communication that you referenced earlier that is so critical between local

governments and the Federal managers in the oil and gas arena.

With that, again I want to thank you for this opportunity today

and express our appreciation to you for the fine work you do in

these areas as Chair of the Subcommittee that’s so important to

the State of Wyoming.

[The prepared statement of Mr. Magagna may be found at end

of hearing.]

Mrs. CUBIN. Thank you very much.

Mr. Carter, would you——

STATEMENT OF JAMES W. CARTER, CHAIRMAN, PUBLIC

LANDS COMMITTEE, INTERSTATE OIL AND GAS COMPACT

COMMISSION

Mr. CARTER. Thank you.

Madam Chairman, the Interstate Oil and Gas Compact Commission appreciates this opportunity to address you on oil and gas regulatory issues. I’m Jim Carter. I’m the Director of the Utah Division of Oil, Gas and Mining, but I’m appearing before you today as

Co-chair of the IOGCC’s Public Lands Committee.
40

The Public Lands Committee has set out for itself an ambitious

plan of work to study and make recommendations on a series of oil

and gas matters relating to public lands, including land withdrawals, royalty in kind, idle wells, regulatory reform and cost recovery, among other issues. Although the Committee is in the early

stages of work on those issues, I can share with you the gist of our

discussions to date.

IOGCC Public Lands Committee members are supportive of the

recommendations made by the Green River Basin Advisory Committee, particularly with regard to eco-credits. And I won’t go into

making any further comments on that because that’s been well discussed.

The Public Lands Committee’s thoughts on cost recovery are

mixed. To the extent that cost recovery can facilitate timely BLM

review and permitting processes, the State would generally be supportive; that is, to the extent that cost recovery is utilized to purchase higher levels of service. If, however, cost recovery is simply

an alternate revenue source for the BLM, the States would not be

likely to be supportive, particularly in light of the fact that the

States are contributing to the administrative cost share of the overall expenses of operating the minerals program.

The issues surrounding access to oil and gas reserves on federally managed property generally fall outside the regulatory purview of the IOGCC states. Access issues do relate, however, to the

conservation mission of State regulators to see that maximum economic recovery of oil and gas resources is achieved, consistent with

other law, regulation and public policy. From the conservation

standpoint, the IOGCC states believe that lands deemed to be suitable for oil and gas development by the BLM’s public land planning

and environmental review processes should not be made unavailable unilaterally or by decisions or processes which are other than

the public processes by which BLM is required to make such decisions. The Public Lands Committee looks forward to providing the

Committee with additional analysis and recommendations as our

work progresses.

With regard to general regulatory issues, you are well aware that

one of the major items of work of the Public Lands Committee for

the past months has been the proposal by the BLM to transfer certain oil and gas regulatory functions to the States and tribes. I

have appeared before this Subcommittee before. I’d like to thank

you again for the Subcommittee’s support of, and the encouragement of, this ongoing discussion with the Bureau of Land Management.

I don’t have any specific progress to report to you today. I’ll spare

you discussing where we have been and what we have done over

the last few months.

But based on the discussions held and the input we’ve received

to date, the IOGCC sees three areas of opportunity for improvement of State and Federal oil and gas regulatory programs, along

the lines suggested by the Subcommittee.

The first is improvement of coordination and communication between existing State and BLM regulatory programs. Simple, improved coordination and communication will go a long way.
41

A second opportunity is for delegation of inspection and enforcement functions from the BLM to the States pursuant to existing

statutory authorities. Mr. Basko has addressed that in some detail.

I’ll skip over my detailed discussion of that, except to say that

there are several States, in addition to the State of Wyoming, that

are putting together proposals and will finally have them submitted to the BLM. As I said, the IOGCC does see some opportunity, given that limited delegation of authorities. We think we

can save some money and make things work out.

The IOGCC States remain convinced, however, that the greatest

opportunities for streamlining, simplification and improvement of

regulatory programs lie in consolidation of State and Federal oil

and gas regulatory programs in each State. The IOGCC States see

several opportunities for congressional action to simplify implementation of the existing BLM regulatory programs, and to broaden opportunities for the BLM and the States to work better together to

optimize regulatory programs.

A good example is BLM’s program for ensuring production accountability. Site security was one of those aspects. As Assistant

Secretary Bob Armstrong put it in a letter to the IOGCC, dated

June 5th of this year, ‘‘The Bureau of Land Management’’—I’m

quoting here. ‘‘The Bureau of Land Management’s oil and gas inspection and enforcement program has been carefully scrutinized

by the Office of the Inspector General, the General Accounting Office, and the Senate Select Committee on Indian Affairs. Recommendations made by those organizations have resulted in the

evolution of BLM’s program into its current form.’’

Unfortunately, those outside organizations have focused on

changing the processes the BLM utilizes to ensure production accountability, rather than on the actual results of program implementation itself. The BLM finds itself constrained to insist that the

States perform production accountability activities on Federal

lands in the same manner—in the same manner it does to make

a delegation of Federal production accountability responsibilities to

the States. The States are not willing to replicate Federal processes. Congress could clarify and simplify its charge to the BLM

with regard to production accountability, and direct the BLM and

the Minerals Management Service to collaborate in developing a

simpler, more cost-effective program for ensuring production accountability based on bottom-line results rather than the techniques BLM currently uses to achieve its objectives.

Another approach which could resolve this quandary, and other

problems as well, would be to modify the Secretary of the Interior’s

delegation authority with regard to oil and gas regulatory programs. The model created by the Surface Mining Control Reclamation Act is instructive. Under SMCRA, the Federal Office of Surface Mining Reclamation and Enforcement does not delegate regulatory authority to the States. Instead, the States develop their

own regulatory programs for coal mining as a matter of State law.

OSM must then make a determination that the State regulatory

program is no less effective than the Federal program. If it is no

less effective, OSM defers to State regulation of coal, under the

State’s own program. OSM retains an oversight role to ensure that
42

the on-the-ground results mandated by SMCRA are achieved by

limitation of the State by its own program.

If the Secretary and the Director of the BLM had similar authority with regard to oil and gas regulation, the long-standing debate

over the meaning and scope of the term ‘‘delegation’’ could be

mooted.

The IOGCC States are committed to continuing the work—to

work more closely with the BLM to identify opportunities for

streamlining and regulatory program improvement. As well, several IOGCC States, as I mentioned, will be making delegation proposals under existing FOGRMA delegation authorities. The IOGCC

believes, however, that the BLM and the States must have broader

authority to allow application of State regulations to Federal properties if significant cost savings and economies are to be achieved.

The IOGCC also believes that continuing work toward consolidation of regulatory programs will benefit the regulated community

and provide more efficient and better service to all our customers.

Thank you.

[The prepared statement of Mr. Carter may be found at end of

hearing.]

Mrs. CUBIN. Thank you very much.

There are some questions that I’m going to ask that will be brief

just because I wanted them to be on the record. Then I would like

to have a little bit of a dialog with you.

Mr. Basko, I’ll start with you.

You indicated that you support a single regulatory program in

each State for oil and gas activities. Could you explain what the

current situation is and why your proposal would be better for the

State, the country and the industry?

Mr. BASKO. Well, obviously, the BLM does things differently than

we do, particularly in the arena of site security. I’ve suggested to

the BLM several times that, rather than have people run to the

field and check valves and rattle chains and whatever else they do,

that that same level of comfort could be achieved by comparing

with computers the gross production, the sales and what is reported as production for the purpose of taxation. And I haven’t gotten very far with it.

They feel that the presence of an inspector in the field has the

same impact as a highway patrolman that keeps people from

speeding. And yet you see people speeding all the time. And so I

think if somebody is going to steal oil or whatever from a lease, as

soon as the inspector leaves the field he’s going to take it, and that

really isn’t a deterrent.

Certainly, it would be of benefit to the operators if they were operating under one set of rules, rather than two, especially where

there are adjoining Federal, State and fee leases. And I think that’s

what I meant by a uniform regulatory program.

As I said in my testimony, we haven’t gotten very far with BLM

in resolving any of these issues. The biggest thing that I’m concerned about is, if there is a savings to be had, that the State be

the beneficiary of half of that savings. And although that’s implied,

it hasn’t come back as a firm commitment that that’s what would

happen. Otherwise, I’m—I guess I must say that I’m not interested

in the program just to do it for a fee.
43

Mrs. CUBIN. Right. So it is fair for us to say on the record that

you are confident that the State can properly protect the environment; is that right?

Mr. BASKO. Yeah, I believe so.

We’re a little different than some of the other States. Some of the

States duplicate activities that the BLM does with their own people

on Federal lands. And I think of North Dakota right off the bat,

where they witness plug and abandonment procedures on all wells

regardless of ownership. And we don’t do that. So there’s a greater

opportunity in some of the States to eliminate that duplication.

And we’re spread so thin that we don’t have that luxury of being

able to go out on a Federal lease and witness anything. Oh, I suppose on rare occasions we might do something like that, but generally speaking, that’s not true.

Mrs. CUBIN. Do you think this Subcommittee ought to consider

legislation to implement eco-royalty relief or eco-royalty credits?

Mr. MAGAGNA. I’ll make an attempt to answer that. I’ll say that

the Secretary has not committed to me that everything has been

placed back on the shoulders of the Solicitor’s office, but I believe—

I believe, if we want that to go forward, that’s where it needs to

come from.

The caution I would note, though, is in the provision that comes

out of the Green River Basin Advisory Committee can’t be implemented without the agreement of the States of Wyoming and Colorado.

I think it is critically important that we believe in the proposal,

and we would like to see it go forward, so long as it doesn’t become

the excuse you used earlier, the high cost of some of these documents that industry is now paying.

Eco-relief is designed to provide some opportunities for reimbursement to industry there. If it is truly that, it can go forward.

It needs safeguards to make sure it doesn’t become an added cost

burden and you end up with the industry as well as the States as

well as the Federal Government being financially impacted further

by this. But I believe it’s a concept that ought to be explored by

the Congress with appropriate safeguards.

That was the benefit. It was a 2-year trial, and it was based in

a very localized area. I’m not sure, as the State of Wyoming, we’re

ready to have it legislatively mandated. I think it needs to be tested.

Mrs. CUBIN. Were the environmental organizations supportive of

that part of the GRBAC report?

Mr. MAGAGNA. I don’t want to pretend to speak for them. But

yes, they were. It was a consensus recommendation. It has something for everyone. The industry stood to receive some financial relief in terms of NEPA, the environmental opportunity, and the enhanced litigation beyond that that’s mandated. And the State, even

though we would be giving up 50 percent of the moneys going into

the program, stood to benefit from enhanced rate of development,

assuming that it, in fact, led to an increased development scenario.

If it fails to lead to the increased rate of development, then certainly we, as a State, would not remain supportive of it because of

its direct impact on our share of royalty dollars.
44

Mrs. CUBIN. And certainly, that would be the problem if it did

require legislation for a pilot project because it’s a lot easier to implement rules and regulations, have public input, than it is to get

an act of Congress to approve something or take it off the books

once it’s there. So ideally, it could be formulated by the BLM, by

the Secretary of Interior, as a pilot project. In my opinion, that

seems to be ideal.

Mr. Magagna, you said that you did an evaluation of the—or an

assessment of the cooperating agency status, that you’ve gone

through it. And I wondered if you could supply a copy of that to

us for the record.

Mr. MAGAGNA. Be pleased to.

[The information referred to may be found at end of hearing.]

Mrs. CUBIN. I would appreciate that very much.

Do you think—does it seem to you, Jim, that the State governments, that industry, is more in an adversarial position with the

Federal agencies? And I want to make just a little bit more of a

delineation here.

It has been my experience that the land managers on ground, in

whatever State it is, tend to be much more open-minded, to want

to work with the local folks and to want to get things done, rather

than delay them, whereas in Washington that is not the way it is.

What kind of relationship is it? Is it truly an adversarial relationship with Washington, with the local managers?

Mr. MAGAGNA. I would say it is certainly not an adversarial relationship with the local managers for the most part. I think the

State of Wyoming has a very good, open communication with the

Federal resource managers and generally a good working relationship. In fact, I would go so far as to say especially good, given the

fact that their direction from Washington is so often inconsistent

with the needs and the goals of the State of Wyoming.

They’re put in a very difficult position. Oftentimes, when we see

opportunities for cooperation, we’re not able to cooperate because to

do so, to move in a direction that would be acceptable with the

State of Wyoming, would simply not be consistent with the direction that they’re being given at that point in time from Washington.

And I might add that, certainly, resource management suffers I

believe that the people that are on the ground are looking at what’s

best for the resource and as are the people of Wyoming, where so

often the people in power in Washington at any given point in

time, in administration, are looking to implement a philosophy

rather than manage a resource.

Mrs. CUBIN. I absolutely agree with that. That is the picture that

I get both from Washington and from here. And the frustrating

thing is that many times the person in Washington who ultimately

makes the decision may never even have laid eyes on the situation,

on the ground, or know very little about the area. I know that you

are aware, and Congressmen, too, people in Washington have the

idea that all of our public lands look like Grand Teton National

Park. And so, when we are mining and drilling for oil and gas, they

are convinced that we are polluting the water and there are horrible scenes of these rigs going up and dead animals laying in the

water. And that is the truth. I am not exaggerating.
45

So in August it’s already been reported, but there will be about

20 to 30 Congressmen coming out to look at coal mines, look at

public lands and look at some oil and gas exploration. And I can’t

wait, because I can’t wait until they see it. I think it’s beautiful,

the sagebrush and alkali where you can look and look and look and

there is no water there, but—and to me it is beautiful. But they

aren’t going to find it to be what they think they’re going to find.

Education and communication is the most important job that I

have. And I honestly think that it’s the most important job that everyone in this room has.

And speaking of communication, Don, I just heard two things

here today that I’d sure like to see get off the ground and going.

Mr. Pierson is saying they didn’t do anything because they don’t

have this and this and this from the State, and the State says we

don’t know what to submit because they haven’t told us what they

want. And so if that could just be opened up. I don’t know how,

but it seems that ought to be easy. That ought to be the easy part.

And so I hope that can happen.

One proposal—Mr. Carter, you brought this up, and I think it’s

really worth looking into. I don’t want to have this hearing just so

everybody can complain, you know, and other people defend themselves. I really would like to be able to find some solutions that we

could implement in the short term at least, and we could be planning for solutions in the long term. One of those suggestions was

setting up the regulatory access permitting process in the same

structure as SMCRA, where the State—Federal Government has

certain requirements and the State has to meet them. The State

devises their own plan and their own enforcement and inspection

and so on, and then the Federal Government approves the plan,

and from then on the State has primacy to enforce, manage and so

on.

How realistic do you think something like that really is?

Mr. CARTER. In my own view, here’s what it would take. And let

me background.

As you know, one of the things that my agency in Utah does is

operate the State of Utah’s coal-regulatory program under a primacy program under the Office of Surface Mining. So I’m familiar

with that process. I also worked on a steering committee on oversight process.

And what we found we needed to do to get away from being more

stringent or less stringent was to agree upon what the objectives

were. When you’re finished, everything else is some aspect of that.

My idea is, for a similar process to be successful, BLM is going

to need to be willing to depart from a discussion just of their processes. And I understand the production accountability is a classic:

We do it this way and we’ve always done it this way and we have

all these pressures to do it this way. What is it you’re trying to

achieve? Trying to get all the money. How much money are you

spending to get all the money?

This is a roundabout answer, but I think it’s a realistic one, if

we are able to convince the BLM and ourselves of what the objectives of our programs are and State what success is in each of

those categories and then be willing to look at a variety of a different methods for achieving those results.
46

There’s a concern in a centralized environment, that you can’t

turn the field folks loose too much. And I think this relates to how

we work with BLM. They look at an on-the-ground, common sense

solution to achieve the goal, whereas if you’re three steps removed

you want to try to steer the outcome through the process. So you

create these increasingly detailed processes to reduce their problems.

But if we can agree on objectives and agree on measures and

agree on the results or what the quality is if you fail to achieve the

objectives, then that would provide a basis for having the states

implement their long-standing and successful programs.

Mrs. CUBIN. I think that that approach is one that would help.

Certainly, it isn’t one without its own drawbacks.

I introduced a bill relating to SMCRA, because the Federal Government kept coming in and issuing notices of violations on 10-day

notices over and above the State’s. And there would even be arguments between the State and the Federal Government whether or

not there was a violation. And just because the legislation was

pending, I believe—I think the number of those things decreased

like three or four hundred percent. So sometimes babysitting helps.

[Laughter.]

Mrs. CUBIN. Another proposal or possible option—and any of you

climb in and say anything—as you know, MMS does the permitting

and regulating of offshore drilling. How—would it be much better,

or how much better would it be, to have one agency, rather than

the Forest Service, the Park Service, Bureau of Reclamation, everybody who gives input, what are the pros and cons of having one

agency do it like the MMS does it for the offshore?

Mr. CARTER. Any takers there? I’ll take a stab.

Let me repeat to you some of the things I have heard in discussions and pros and cons that emerge. There’s an argument that an

agency that does a number of things is always at odds with itself

about what it’s trying to accomplish and is not able to develop a

clear mission and it’s struggling with itself. One school of thought

would be that’s a good thing. Another school of thought would be

that’s not.

My sense would be it’s more important to have it in an agency

that has a fairly narrow focus. Whether that’s MMS, I don’t know.

But I see other land managing agencies that successfully manage

their lands, like the Forest Service, without having oil and gas regulatory responsibilities, and that tells me BLM could also.

And whether the accounting for the royalties should be administered as it currently is I’m not sure. There’s a field presence, as

was pointed out. But if we see discrepancies, we go out or if we

have complaints, we have suspicious activity, then we go out and

do a field inspection. But whether that’s two functions or it could

be designed into a single agency I’m not sure.

Mrs. CUBIN. It seems like a single agency would be cheaper and

maybe more efficient, although it may be too one-sided. But if an

agency did that using scientists from another agency, there could

be a certain amount of protection and make sure that all the aspects were looked at.

Mr. MAGAGNA. I would offer one more comment. I would certainly agree with everything Mr. Carter said, but would offer a
47

note of caution, that that would need to be accompanied by very,

very clear direction of that responsibility because, as the land management’s agency, it’s going to be very difficult. I expect that for

BLM to say OK, when we get to the point of a decision to lease

or a lease being listed, probably a decision to lease once a land use

plan is done, then we’re going to give that up. The interrelationship

between the multiple uses doesn’t stop. And if you had MMS trying

to do that with a more focused procedure, I think it would have

more viability. But at the same time they need to be constantly relating back to the land agency. I guess you’ve got cooperating agency status, although I would be somewhat fearful you would have

non-cooperating agency status in that scenario, simply being put in

the position of having to deal on the same issue with two agencies

where now they’re dealing with one, at least on those circumstances.

Mrs. CUBIN. You know, another thing I have learned since I have

been in Washington is that lots of times it isn’t the law that is

causing the problems, it is the rules and regulations and the interpretation of those by different managers as they come in. I wonder,

were the problems with access and the problems with permitting

as severe before President Clinton was elected to office? I have to

be up front here. You know how I am.

[Laughter.]

Mrs. CUBIN. Secretary Babbitt does have a different agenda, does

have a different philosophy. He would like to blow up every dam

on the Colorado River system. He was angry with Helen

Chenoweth because of an exchange we had. So the next week or

two he went to her district and donned himself with fire-fighting

clothes and took a match and threw it on there. I mean if that

wasn’t an in-your-face Chenoweth wish I don’t know what is. I

think, as a general rule, when you pass a law based on a person

or a particular situation it’s generally not going to be a very good

law. I think you have to base laws on good sound policy and then

have to work within those parameters.

So, Don, you’ve been around. Help me with this. Is it different

than it used to be, and why? You can’t be fired. Remember that.

Mr. BASKO. No, not really. I think it’s become more difficult and

more divisive. And to give you an example, we have nine district

offices—I guess they call them district offices—for BLM in Wyoming. And operators tell me that operating in one district is not the

same as in another one. They interpret things differently, even

across county lines or section lines where the division between the

two exists. And so there’s that frustration in interpreting these

laws, even between the different offices within BLM, which is—you

know, that becomes a problem for operators. What is acceptable in

one district is not necessarily the way it is in the next one.

Mrs. CUBIN. And that indicates lack of leadership, it would seem

to me.

Mr. BASKO. Well, you know, I guess you have to say that. We entered into a memorandum of understanding with the BLM about

who would do certain downhole functions several years ago. And at

that time Bob Bennett was the acting director. And I said if we

sign that does that mean that’s the law of the land? He said not
48

necessarily; they’re all independent. And I said why are we doing

this if we’re not all going to agree this is a way it’s going to be?

Mrs. CUBIN. I think it’s an accurate statement to say there is

confusion in the leadership in the Department of Interior.

I wanted to point out that three of the four Federal witnesses are

still here today, learning today. And in Washington they come in

and testify for 5 minutes and split. They don’t even want to hear

what’s going on. They don’t even want to know. They have a different agenda. And I’d like to thank you for staying. I think that

that indicates that things are better on the ground than in Washington.

I don’t think I have any other questions.

Mr. BASKO. Just one more comment on the eco-credit topic. I

was—had the opportunity to sit next to Bob Armstrong at an executive committee meeting of the Interstate Oil and Gas in Washington in March. This subject of eco-credits came up. And he

turned to me and said we can’t do it; it’s contrary to law. So unless

he’s changed his position, that’s the official position of the Secretary of the Interior.

Mrs. CUBIN. That’s interesting. We just had a hearing and

passed a law that allows penalty for legally kill a polar bear in

Canada to legally bring the pelt to the United States. Well, the

agencies, the Department of Interior, didn’t want that to happen.

And so when they promulgated their rules and regulations they especially denied that to happen. What happened was this. As Don

Young, the chairman of the committee—it was his bill in the first

place. So we had a hearing because we now have a mechanism

through the Congress where we can eliminate rules and regulations that we feel are not consistent with legislative intent. So at

this hearing, I believe it was Ward Tipton, when I was questioning

him on how can you get this rule from this law, he said we interpret it as we want it to be.

[Laughter.]

Mrs. CUBIN. And I just think that that happens an awful lot.

One last remark. Don, you talked about EPA coming in the pits.

And this committee does not have jurisdiction over the EPA or

those issues. But fortunately, I’m on the Commerce Committee,

and we do have jurisdiction over the EPA on the Subcommittee I’m

serving on. And I will be inquiring more as to what action and

what justification and authority for that action was there.

Mr. BASKO. They didn’t tell the Governor they were putting that

15 in the field. They said, no, there is no 15, when in fact they

were out there already.

Mrs. CUBIN. Thank you very much. We will break until quarter

after one. So everybody go have a nap.

[Recess.]

[Witnesses sworn.]

Mrs. CUBIN. Thank you all very much for being here. I really do

appreciate it. I think it will be very beneficiary for everyone involved.

So we will start Panel No. III with Mr. Tipton, please.
49

STATEMENT OF TIM N. TIPTON, PRODUCTION MANAGER,

ROCKY MOUNTAIN REGION, MARATHON OIL COMPANY

Mr. TIPTON. Thank you, Madam Chairman. I’m Tim Tipton, Region Production Manager for Marathon Oil Company’s Rocky

Mountain Region, which covers all Western States.

We produce approximately 35,000 barrels of oil and approximately 70 million cubic feet of natural gas per day. Marathon holds

over 900 Federal leases in Wyoming, Colorado, and Utah.

Southwestern Wyoming and northwestern Colorado have one of

the largest remaining natural gas accumulations in the continental

United States. Integrated, independent oil and gas companies have

recently renewed their interest in exploration and development activity in these areas. Hydrocarbon accumulations have been identified on land owned by the United States and managed by the BLM.

Timely access to these lands is critical to each State’s economy.

While the example I’m about to cite occurred in Colorado, I believe it’s a pattern which is spilling over to other Western States

and is symptomatic of the inordinate delays and unjustified barriers to access to public lands.

In August 1996, Marathon filed an Expression of Interest in

BLM-managed lands in northwestern Colorado. BLM withdrew

some of the parcels from the November 1996 sale, even though a

Resource Management Plan identified them as suitable for oil and

gas leasing with certain surface stipulations. The parcels had been

the subject of an Environmental Impact Statement and a final

Record of Decision.

Colorado BLM withdrew the nominated parcels because they

were in areas suggested by the Colorado Environment Coalition

(the CEC) as having wilderness characteristics. Marathon did not

know that, in 1994, the Colorado BLM had agreed with the CEC

to manage hundreds of thousands of acres of additional public

lands as wilderness. The agreement was reached without public notice or participation. The BLM had earlier inventoried all public

land in Colorado and found the CEC-identified lands to not have

wilderness characteristics.

In FLPMA, Congress specifically mandated that public land be

managed for multiple use and sustained yield and that management practices recognize the nation’s need for domestic sources of

minerals. Development of energy resources and protection of the

environment including Wilderness Areas are specifically governed

by FLPMA.

Section 103 of FLPMA required the inventory of public lands for

wilderness characteristics to be accomplished within a 15-year period, between 1976 and 1991. BLM inventoried lands and had

made recommendations to Congress for Wyoming, Colorado, Utah,

and other States. As I understand it, these recommendations remain pending, although those lands identified by the BLM as Wilderness Study Areas are being managed as wilderness. FLPMA requires an Act of Congress before the designation of wilderness can

become effective.

I want to make it absolutely clear that Marathon is not advocating oil and gas operations on public lands that have been legitimately designated as Wilderness Study Areas via the 603 process,

nor are we proposing that the BLM direct legitimate Wilderness
50

Study Areas to be open for oil and gas leasing. Marathon believes

in the protection of Wilderness Areas if they are properly designated and have wilderness characteristics. Just as importantly,

Marathon believes in and supports appropriate public participation

in land use decisions, as required by FLPMA. We have a good relationship with State BLM staff and find them very cooperative in

oil and gas leasing efforts.

Colorado BLM, however, has recently finalized a policy to reinventory public lands for potential Wilderness Areas. This policy

was made final after Marathon brought legal action against the

BLM challenging their agreement with the CEC. I understand that

the BLM is also dedicating additional resources in Utah for the reinventory of lands at the insistence of the Southern Utah Wilderness Alliance. I have also seen a publication by the Sierra Club advocating designation and reinventory of additional lands in Wyoming as wilderness lands. The experience in Colorado is not isolated.

Marathon is concerned that FLPMA-mandated public input and

resource management planning has become sidetracked and is

being ignored to the detriment of responsible mineral development.

BLM resources are being directed to duplicate an inventory process

that was previously ordered by Congress and carried out to completion by the BLM. Section 603 of FLPMA is the exclusive source of

authority for the Secretary to conduct wilderness inventory processes. That authority expired in 1991.

Congress declared that the BLM wilderness inventory process

would not be open-ended. The State Directors in Utah and Colorado have been directed by the Washington office of the Department of the Interior to pay particular and careful attention to management of lands identified by environmental groups as having wilderness characteristics. These actions represent the de facto withdrawal of lands from other appropriate public use, lands which

have been identified through the public process as being appropriate for uses other than wilderness designation.

As an example of the kind of problems we are faced with, the

CEC was given access to the BLM data base to insert the CEC’s

designation of wilderness areas on BLM records.

In Utah, the Southern Utah Wilderness Alliance gave legal advice to the State Director about the Director’s power to inventory,

identify and manage lands as wilderness outside of the Section 603

FLPMA process.

Marathon’s lawsuit against the BLM questioning the legality of

the government’s actions was recently dismissed on the narrow

ground of standing. Marathon intends to appeal the decision, as the

merits of the case were not reached.

But irrespective of the outcome of any legal challenge, Marathon

believes that Congress is the best arbiter of Congress’s intent.

Interior has ordered its employees to act to preserve Congress’s

actions—options for designation of Wilderness Areas—yet has

made no proposal outside of Section 603 to Congress.

The Department of Interior intends to be—appears to be—managing public lands to satisfy a narrow constituency, to the exclusion

of legitimate and necessary mineral development. In the instance

I have mentioned, the Department is not carrying out its congres-
51

sionally mandated policy to manage lands for multiple use, sustained yield, and protection of domestic mineral resources.

Thank you for allowing me time to bring this matter to your attention.

[The prepared statement of Mr. Tipton may be found at end of

hearing.]

Mrs. CUBIN. Thank you very much.

Mr. Robin Smith, with Chevron.

STATEMENT OF ROBIN M. SMITH, SENIOR ENVIRONMENTAL

SPECIALIST, CHEVRON USA PRODUCTION COMPANY

Mr. SMITH. Thank you, Madam Chairman. My name is Robin

Smith. My family and I are residents of Casper, and for more than

18 years I have worked throughout Wyoming as a petroleum geologist for Chevron USA Production Company. For the past 2 years,

I have been the Waltman Area Project Coordinator for Chevron

here in Casper.

The Waltman-Bullfrog field is adjacent to the Cave Gulch field,

which has been mentioned many times this morning.

I appreciate the invitation to relate my company’s recent experience in developing this world-class resource.

You’ve heard this over and over again this morning, but I’m

going to say it again. Projects which occur on our nation’s Federal

lands are extremely important, not only important to Chevron, but

important to every citizen in Natrona County, the State of Wyoming, and ultimately, all American citizens. Investments for natural gas development on Federal lands are important to the country because they provide clean-burning fuels, they are domestically

produced energy sources, they generate thousands of American

jobs, they help sustain and improve the economy, and they generate badly needed revenue for the local, State and Federal Governments.

This morning I want to share with you Chevron’s experiences at

Waltman–Bullfrog Field as examples of what is, and what is not,

working in the Bureau of Land Management’s permitting and National Environmental Policy Act compliance processes. Since we

have been producing oil and gas at the Waltman and Bullfrog units

since the 1950’s, I feel Chevron is in a unique position to comment

on the merits of the varying degrees of governmental oversight that

this field has experienced.

I’m going to skip a lot of my written testimony, again because it’s

already been covered. But just in a nutshell, a latest round of proposed development by a number of operators in the field area has

led to increased analysis by the BLM of the operators’ activities

and their potential associated impacts. This analysis was initiated

in late 1994, and to date it’s consisted of one complete EA, one

nearly complete EA, and an EIS that is in the final comment period.

The BLM announced in January 1996 that the EAs that were either completed or being completed were not acceptable and that a

full-blown environmental impact statement would be required. And

I’d like to state for the record here that Chevron did not alter our

development proposal that was originally proposed in the Chevron

field development EA.
52

Though it was recognized that it would add cost and result in

significant delays in responsible development of this field, the operators did agree to fund the EIS, as is almost always the case, to

try to speed the process along.

As I mentioned, we are now in the final comment period of the

EIS for the Cave Gulch-Bullfrog-Waltman Natural Gas Development Project. And the final EIS is scheduled to be issued around

August the 4th. BLM’s preferred alternative in the final EIS is essentially the same decision that was made over 2 years ago in

Barrett’s initial EA.

The oil and gas industry is held to unprecedented standards on

Federal lands in States such as Wyoming. In most cases imposition

of these standards result in an extreme case of overregulation

whereby the industry and the Federal Government both expend

huge sums of money and effort in the pursuit of NEPA compliance

that, in my opinion, generally results in little benefit to the environment.

These costs, as you’ve also heard this morning, are set to increase as initiatives for cost recovery are introduced. And in my experience again, the delay is increased because of understaffing of

the BLM offices to current—to handle the current workload.

But at the Waltman-Bullfrog fields, NEPA compliance has come

at a great cost to almost everyone that was involved in the process.

The operators have funded nearly three-quarters of a million dollars of NEPA analysis to date, and approximately two and a half

years have been expended compiling these studies. And I’m not trying to be melodramatic, but this is a part of those studies that

we’ve done at the Cave Gulch-Waltman field. And I want you to remember that at the beginning of my testimony I said we’ve been

producing oil and gas out there since the 1950’s. So this is a field

that’s seen 40 years of development.

Of course, that three-quarters of a million dollar figure does not

include the salaries or expenses of the numerous oil and gas company employees, BLM employees, Wyoming State employees, Federal, State and county employees, Federal, State and county elected

officials and their staffs, or the private citizens who have been involved in the process. When you add to that the lost revenues associated with the delay in natural gas production out there, the figure is easily several million dollars of lost or delayed revenues.

Over the last several months, BLM and industry have begun

working together in a much more constructive fashion on this

project. But in the beginning that wasn’t necessarily the case. Representatives from the BLM, the city, the county, the State, congressional delegation, industry and conservation groups all sat at the

table and endeavored to understand each other’s viewpoints and

concerns. Unfortunately, some of the participants used what they

had learned at those meetings to try to publicly undermine the entire consensus process. This only served to pit BLM against stakeholders and proponents of the action, and each entity felt that their

trust had been betrayed.

In order for the NEPA process to proceed smoothly, in my opinion, there has got to be a basis of mutual trust and respect among

the members of the parties involved. It’s absolutely impossible to

proceed in a consensus-building effort if the participants’ goals are
53

mutually exclusive and if one or another group has an agenda

which they are not willing to honestly reveal and discuss. I think

you heard that again, over and over, this morning.

I want to point out, though, that BLM does deserve credit for recognizing that there was a problem and taking the necessary steps

to restore trust in communication among the parties who were willing to work with them toward solutions.

As you also heard over and over again this morning, Wyoming

is a State whose economy depends heavily on revenues from the

minerals extraction industry. And I’ve got some figures in my written testimony that I won’t go over.

But I think the point that I want to make is that with 50 percent

of the lands and two-thirds of the mineral estate in Wyoming

under the control of the Federal Government and the heavy dependence on these industries for Wyoming’s economy, that we’ve

got to try to find some solutions to the problems that we’ve heard

about this morning.

Wyoming citizens, the people who live, play and work here, overwhelmingly support the responsible development of the State’s

great natural resources. According to public opinion polls conducted

by the Wyoming Heritage Society, 80 percent of those surveyed believed that oil and gas development could coexist with recreational

uses and wildlife.

Chevron understands and appreciates the need for protecting all

resources on Federal lands. We also believe that improvements in

BLM’s permitting and NEPA’s compliance processes is absolutely

critical.

We believe that the costs and the current timeframes for many

oil and gas operations in conducting NEPA studies can be greatly

reduced without compromising protection of the environment. We

believe these improvements can be accomplished in great part by

widely implementing all of the NEPA streamlining recommendations made by the Green River Basin Advisory Committee, which

we’ve also heard about this morning. The outcome of the process

could be so much more practical if timeframes and costs could be

reduced. And instead of wasting dollars on repetitive environmental studies, moneys could be diverted to monitoring projects or

mitigations or eco-royalty relief that would create or improve habitat.

In closing, I’d like to say, in agreement with the comments that

Mr. Carter made on the previous panel, I believe that we’ve lost

sight of our goals. The NEPA process needs to focus on producing

benefits to, and protection of, the environment, instead of focusing

on the process itself and making sure that the process complies

with the process. Otherwise, it just becomes a classic case of form

over function.

I believe much of the problem appears to have occurred from the

fear of threatened or real litigation by the conservation groups on

almost every Federal decision made approving development in Wyoming in the last several years.

Thank you again for the opportunity to share Chevron’s views.

And I’ll be glad to answer any questions after the rest of the panel

members speak.
54

[The prepared statement of Mr. Smith may be found at end of

hearing.]

Mrs. CUBIN. Thank you very much.

Next, I’d like to call on Mr. Robert Nance, President of Nance Petroleum.

STATEMENT OF ROBERT NANCE, PRESIDENT AND CEO,

NANCE PETROLEUM CORPORATION

Mr. NANCE. Thank you, Madam Chairman.

I’m Bob Nance, President and CEO of Nance Petroleum Corporation, from Billings, Montana.

And I guess my being here contradicts an AP story that appeared

in yesterday morning’s Billings Gazette, that the people of Montana were barred, I think the way that headline said, from this

hearing.

We have Federal production in Montana.

Mrs. CUBIN. I’ve been in a lot better bars than this.

Mr. NANCE. Pardon me?

Mrs. CUBIN. I’ve been in a lot better bars than this.

[Laughter.]

Mr. NANCE. Yeah, that’s it.

We have Federal production on—or Federal production on leases

in Montana, North Dakota, South Dakota and Wyoming.

I am here also today on behalf of the Independent Petroleum Association of America, IPAA, which represents nearly 6,000 of America’s oil and gas producers.

I’d like to thank you for holding this hearing to increase revenues for the Treasury, States, and the education from public land

activities.

Frankly, independents resist doing business on many Federal

lands because of the hassle and the red tape. That’s true even

though we know that one of the last frontiers for unexplored, major

oil and gas reserves is onshore public lands. The lack of access, the

uncertainty of permits, the costly regulations have chilled the Wildcatter spirit for developing public lands. To restore a can-do attitude for public lands, the IPAA is proposing a six-point reform program for consideration.

I’d like to go—and some of these things have been talked about

this morning.

No. 1, increase public lands available for development. We can do

this by restoring multiple use as a mandate for Federal lands requiring risk management and restricting unilateral land withdrawals.

No. 2, eliminate Federal activities which duplicate State activities. The IPAA advocates the legislative transfer of regulatory responsibilities to the States wherever possible. We believe that that

saves money for everybody. The way producers look at it, if we

have to pay for the cost of government, then we want the most

cost-effective government to provide those services. Most likely,

that’s going to be the States.

No. 3, establish an advocate for onshore development. We need

to study ways to consolidate those government functions not transferred to the States to a single Federal agency with a clear mul-
55

tiple use mandate. I think that’s being done now in the Federal offshore.

No. 4, increase certainty. Last August, I attended President Clinton’s signing of the royalty fairness law in Jackson Hole, Wyoming,

and I had the opportunity to discuss with the President the excessive amount of time it takes to obtain a permit or lease and the

uncertainties of doing business on the public lands. I suggested to

the President that the government should streamline the permitting and leasing process and, within a date certain, make leasing,

permitting and appeal decisions. The President expressed support

for these concepts.

No. 5, reduce costly regulatory burdens. We’d like to streamline

programs and prevent the shift of regulatory costs to oil and gas

producers. My written testimony contains a number of suggestions

regarding cost recovery and offsetting costs against royalty payments. So I won’t get into those right now.

No. 6, implement incentive programs. We need to continue the

royalty enhancement program for stripper oil wells, royalty incentive for marginal gas wells, and investment credits for frontier

areas.

This is a very aggressive reform program. Many of these initiatives may have to be accomplished via a legislative vehicle. But the

IPAA stands ready to work with this committee and with the administration to develop the comprehensive blueprint for reform.

I would like to take a couple of minutes of the Committee’s time

to discuss another example of land preservation right in my own

back yard, and that’s the draft EIS prepared by the Forest Service

for the Lewis and Clark Forest in Montana.

The Rocky Mountain division of the forest is in the over-thrust

belt and has the potential to contain a minimum of two trillion

cubic feet of gas or perhaps as much as 11 trillion cubic feet of gas,

and that’s according to the Forest Service’s own study. There have

been other studies done by industry and other organizations that

put that potential a lot higher than that.

The Montana thrust belt is rated third in the entire country for

potential conventional gas reserves and second for potential deep

gas reserves. Unfortunately, I must report that the independents

believe that under the current circumstances and attitudes of the

government, these reserves won’t be explored and produced.

And I can point to the fact that the reason that we feel that way

is that there’s been no lease issues on forest lands in the State of

Montana for 17 years—16 years, I’m sorry. Nineteen eighty one

was the last time a Forest Service lease was issued in Montana.

The Forest Service maintains that 52 percent of the Lewis and

Clark, or about 1.2 million acres, will remain open for leasing

under their preferred alternative; however, the plain fact is that

these leases would be so severely restricted in stipulations, including no service occupancy, that for all practical purposes the 1.2 million acres have been taken out of play.

We can’t wish oil and gas out of the ground. We have to go on

the land to evaluate it, drill it and produce it.

The Forest Service plan is an empty promise that does not provide a meaningful opportunity to explore for or produce oil and gas.

This is extremely disappointing.
56

The Forest Service itself estimates that if the oil and gas industry were turned loose, with no restrictions, standard lease terms,

that we would drill only 30 wells and, in fact, only 300 acres of that

forest. I can’t comment on that, because that’s their estimate. But

if you have a calculator, you’d see we’re talking about less than one

quarter of 1 percent of the entire forest.

I’d also like to point out some concerns we have with the Forest

Service analysis. Even though the Forest Service claims otherwise,

there is no question it gave more weight to environmental impacts

than to the socioeconomic impacts. It assumed that mineral resource development is in direct conflict with all other resources and

that these conflicts cannot be mitigated. It did not take into account the many technical advances which allow drilling to be conducted in sensitive areas with minimal impact to the environment.

It ignored the impact that these reserves would have on the national security and trade balance, which is contrary to their own

program policy documents.

We agree with Governor Mark Racicot of Montana, who stated,

in response to the Forest Service, that with regard to the Rocky

Mountain front, ‘‘resource protection and leasing for oil and gas potential can occur in a more balanced manner.’’

The Governor recommended additional leasing within this Rocky

Mountain division. He recognizes that oil and gas development occurs in phases and that the Forest Service has the ability to control

the process.

Madam Chairwoman, time is running out. Our latest report from

the Forest Service is that they are planning to issue a record of decision sometime this fall. I’m not sure there’s much we can do

about it. However, we do urge this committee to intervene to help

convince the Forest Service to adopt the recommendations of Governor Racicot. And I would hope, in the least, they would respond

to him, rather than not, as they have in the past.

In the long term, we believe that the only permanent solution for

giving mineral development a fair and reasonable chance on public

lands is to reconfirm a multiple use mandate and require the Federal Government to equally weigh the importance of socioeconomic

impacts and the views of State officials in its land use decisionmaking process.

Again, I want to thank you, Madam Chairwoman, for coming out

here to listen to the challenges we face on public lands and to offer

assistance in changing the current operating environment. We can

no longer afford to ignore needed mineral revenues lying dormant

beneath public lands. Through reform of the Federal oil and gas

regulatory program, oil and gas producers can begin to bring these

revenues to the surface for the use of the nation, the States, and

most importantly, those educating the children of the West. We

stand ready to help in a blueprint for reform, or however you think

we can be.

Thank you very much.

[The prepared statement of Mr. Nance may be found at end of

hearing.]

Mrs. CUBIN. Thank you, Mr. Nance.

Now call on Mr. Terry Belton from RMOGA.
57

STATEMENT OF TERRY BELTON, ROCKY MOUNTAIN OIL AND

GAS ASSOCIATION

Mr. BELTON. Madam Chairwoman, my name is Terry Belton. I

am here today representing the Rocky Mountain Oil and Gas Association. I also work for Texaco and was a member of the Green

River Advisory Committee.

I’d like to discuss several issues of importance to the oil and gas

industry in the Rocky Mountain States.

RMOGA is extremely troubled by the growing trend in the Department of Interior’s policies in recent years which threaten future prospects for oil and gas exploration and development on public lands.

Specifically, I will discuss DOI’s unwillingness to adopt and implement GRBAC’s eco-royalty relief recommendations; development

of new, comprehensive cost recovery measures in DOI’s minerals

program; lack of consideration given socioeconomic factors by Federal land management agencies when making decisions pursuant

to NEPA, as well as some other NEPA concerns, particularly the

delays, costs and uncertainty which accompany the NEPA process;

and some thoughts on GRBAC’s NEPA streamlining recommendations.

We were going to spend a lot of time talking about the de-facto

wilderness land withdrawals by BLM, but I feel that’s been wellcovered today by Marathon Oil. So I think we’ll probably minimize

our time on that issue.

On eco-royalty relief, industry initially opposed establishment of

GRBAC due to concerns over potential additional permitting delays

and greater uncertainty already associated with the already

lengthy and cumbersome NEPA process. However, when DOI

moved ahead with this initiative, we endeavored to make the best

of it. After much hard work and dedication, GRBAC members developed a consensus-based innovative solution to reduce conflicts in

the Green River Basin and to ensure reasonable development of oil

and gas while protecting, and in many cases enhancing, the environment through the use of eco-royalty relief.

This is a voluntary, two-pronged approach which balances oil and

gas development with the need to protect the environment by allowing a credit to be taken against royalty payments in situations

where operators pay for NEPA documentation and related activities, which are BLM’s responsibility, and in instances where project

mitigation or monitoring go above and beyond lease and regulatory

requirements. The final GRBAC report included a Department of

Energy final analysis which indicated application of eco-royalty relief would actually help accelerate royalty payments to the States

and Counties in the Green River Basin.

Unanimously agreed upon by industry, environmental groups

and affected States and counties, the ERR recommendation proposed a 5-year pilot project. I’m not going to go into the details of

that. I think they were probably covered by one of our speakers

earlier.

But we have yet to receive an official response on the Final Report/Recommendations, but all the indications are that it’s been

killed by the Solicitor’s office. We are convinced Secretary Babbitt

has the authority to implement eco-royalty relief but are extremely
58

disappointed that the Department has failed to adopt this concept

and particularly disappointed that they haven’t assumed leadership

in finding ways to make it work. GRBAC has done its job. Unfortunately, the Department of Interior has dropped the ball, and a winwin opportunity has so far been lost.

Cost recovery. In December 1996, the Solicitor’s Office issued its

M–36987 opinion, which claims that BLM not only has the authority to recover all costs associated with minerals document processing, including NEPA documentation, but it is also legally mandated to do so. And I stress this ‘‘legally mandated’’ because, as I

heard it earlier in the solicitor’s testimony, this was shifted back

to the BLM to make a decision on whether to implement this or

not. This was not the thrust of the opinion. The opinion basically

said that BLM has to do it. So BLM is kind of between a rock and

a hard place.

We believe that this opinion is politically motivated by an administration that is more interested in creating an off-budget source of

funding and constraining mineral development on public lands

than allowing such development to proceed in an environmentally

sound manner. We are concerned the administration’s intent is to

balance the Federal budget and reduce the deficit by increasing

fees for public land users, such as oil and gas producers. New cost

recovery measures must not be aimed at providing alternative or

supplementary funding for BLM programs.

We especially take exception to the concept of DOI charging additional fees for minerals processing without assurances that BLM

service will be commensurate with fees paid. We have no guarantee

that customer service will be enhanced, permits expedited. We predict the majority of these fees would go to a general fund, not be

redirected back to programs in the geographical areas that generated these fees. This could lead to an unprecedented revenue collection by the agency. If these additional funds are retained by

BLM, the revenue windfall, and I stress ‘‘windfall,’’ could lead to

further BLM budget cuts by Congress. This, in turn, would expand

the ever-increasing burden on industry and other public land users

to fund the Federal Government.

A coalition of industry associations, many of whom are represented here today, have submitted a FOIA request to determine

the extent of this cost recovery effort and its financial impact on

oil and gas operations on public lands.

Madam Chairman, you earlier in the testimony discussed the

idea of a GAO inquiry. We support that. We believe that’s a great

idea. We believe that this would provide an objective analysis and

come up with some reasonable recommendations. GAO could also

compare the revenue generated by the onshore oil and gas program

with the cost of the administration.

Industry already pays its own way. According to the MMS, industry paid about $650 million in bonuses, rents and royalties in

1996 to the Federal Government. It is our understanding that a

significant portion, about 25 percent, of this revenue is used to pay

for the administration of its oil and gas program before MMS disperses to the States the net receipts share. It would seem that the

Department of Interior intends to charge industry twice for the administration costs of the onshore oil and gas program.
59

There is a limit to what industry is able and willing to pay. Oil

and gas operators, regardless of their size, have finite resources

available to them and will cease to invest in the exploration and

development of Federal lands if additional operating costs imposed

by the Federal Government render projects uneconomical. Further

decline in domestic exploration and development due to a cost recovery program would also have a significant socioeconomic impact

on Western States and their citizens who rely on such activities as

a critical component of their economic well-being.

But it’s been covered in earlier testimony. I was going to discuss

the de facto wilderness at length. The only thing I will say here

is that we support everything that’s been said about the BLM policy of withdrawing lands from leasing, both in Colorado and Utah.

We believe that a process has been utilized through the FLPMA,

a wilderness review process and land management review process

and so forth. And we, industry, bought into that. We have accepted

the results, and we believe the administration should do the same

thing.

NEPA concerns. In the two decades since FLPMA, NFMA and

NEPA were enacted, it is plainly evident that socioeconomic needs

and impacts and values have played little or no role in the Federal

decisionmaking process. When the lack of adequate analysis of socioeconomic impacts and benefits in the NEPA process is raised as

an issue to Federal land managers, industry is often told that

NEPA merely requires an analysis of environmental impacts of decisions. The cursory socioeconomic analysis included in the NEPA

documentation is of little value in making decisions which affect

the immediate and future economic conditions of user groups,

States and local communities. The conspicuous lack of attention to

socioeconomic benefits stemming from commodity development and

the adverse economic impacts of severe limitations on uses due to

aesthetic or other reasons is of tremendous concern to the Western

States who are adversely affected because they hold 90 percent of

the Federal lands within their borders.

Delays, uncertainty and costs associated with the NEPA process

are also primary industry concerns. While the Department of Interior has formally adopted the GRBAC NEPA Streamlining recommendations, we are concerned that little has been done outside

the application of the Jonah project in Wyoming regarding its implementation. GRBAC’s goal was to improve the quality of documentation while cutting delays and paperwork associated with the

process by 50 percent. Even though the committee’s focus was on

the Green River Basin, the elements of NEPA streamlining should

be implemented Bureau-wide. To do so would be in the best interest of the Department of Interior, industry and the public. The

Subcommittee could ensure and monitor DOI’s implementation of

NEPA streamlining recommendations by requiring an annual report from BLM that identifies time, manpower and cost savings realized by the agency.

The following RMOGA recommendations are designed to provide

for a balanced policy that encourages environmentally responsible

exploration and development of oil and gas resources on public

lands:
60

No. 1, subcommittee support in the advocacy of GRBAC ecoroyalty relief recommendations.

No. 2, subcommittee advocacy in support for marginal gas

royalty relief and renewal of the stripper oil royalty relief program.

No. 3, GAO study of the potential effects of the Department

of Interior’s cost recovery measures on the domestic industry.

No.4, review of DOI de facto wilderness policy discussed earlier.

No. 5, advocacy of greater consideration of socioeconomic impacts in NEPA documents and the Federal decisionmaking

process.

And finally, an annual progress report from BLM detailing

implementation of GRBAC’s NEPA streamlining recommendations.

One final note. I just wanted to stress the importance that we

feel of renewing the stripper oil program. We feel this has been a

critical program in lengthening the economic life of many fields in

the Rocky Mountain region. And as far as I’ve been able to ascertain, the target set by BLM in instituting the program has been

reached. The statistics bear that out. So I think the program has

been successful. We think it’s critical to renew that program.

We appreciate the opportunity to provide you with our views. I’ll

be glad to answer any questions at this time.

[The prepared statement of Mr. Belton may be found at end of

hearing.]

Mrs. CUBIN. Thank you very much.

And I guess our next witness will tell us how well those GRBAC

things are being implemented. John Martin, McMurry Oil Company.

STATEMENT OF JOHN W. MARTIN, PRESIDENT, McMURRY OIL

COMPANY, INDEPENDENT PETROLEUM ASSOCIATION OF

MOUNTAIN STATES

Mr. MARTIN. Thank you. Madam Chairwoman and Committee,

thank you for having me here today.

I represent IPAMS’ hundreds of members that are independent

oil and gas producers in the Rocky Mountain region. And I’m here

as well to represent my company, McMurry Oil Company. We’re

probably the tail of the dog here today, 17 employees and strong.

And I want you to know that we’re glad to be able to report from

the foxhole about how this EIS procedure is working.

Our Jonah field project is the test case for the GRBAC streamlined environmental impact statement process.

What I’d like to do quickly is—I want to thank IPAMS first for

the staff and the people that helped contribute the remarks that

are contained in the written testimony. And I certainly concur and

will heartily support everything that is presented there.

However, I wanted to spend my 5 minutes to tell you some of the

day-to-day, real life things that we face as we try to develop oil and

gas on Federal leases. And so to that end, I want to talk briefly

about the environmental impact statement process that we’ve been

undergoing for some time, and in so doing talk about the legislation by regulation, which is alive and well, talk about the Endan-
61

gered Species Act as it relates to that, and talk about air quality,

which are the—these are the topics that hit me the hardest in our

process.

I’ve heard, since the beginning of testimony today, that legislation by regulation really is the problem, and I couldn’t agree more.

Congress passes a well-intentioned law, and the Federal agencies

do with it as they will in many cases. And that’s difficult for us to

live with and to understand what we have to do.

Agencies tend to microregulate. I’ve seen a trend in the past 5

years where—you asked the question was it better 4 years ago.

Yeah, it was. It certainly was. And it’s tough now because every

single thing that occurs in any environmental impact statement

across the board, you see it show up everywhere else. It’s kind of

like a magnet. If it shows up in Cave Gulch, we’d better put it in

Jones, just to be safe. And it’s a lousy precedent, but it’s the way

it’s working.

The APD process, the permit to drill process that we go through

from the BLM, I think, is unreasonably long. It takes forever, and

it’s 30 days if it’s a miracle. It’s more likely 60 to 90 days, if there

are no problems, and God knows how long it will be if you find an

arrowhead or half an arrowhead or somebody thinks there might

be an endangered species nearby.

So at Waltman, there’s a Federal APD. Thirty days if it’s a miracle. A hundred and eighty days, who knows. You can go to the

State of Wyoming and get permission to drill an oil and gas well

on a State lease or a fee lease and be out of there in two or three

days, and you’re going to be bound by some mighty tough regulations. They don’t cut you any slack, but they give you the ability

to get going and get on with your life.

I think that the BLM should take heed of how Wyoming has its

processes going. Lease stipulations are growing every day. If you’ve

ever seen the book that comes out, look at the small print, lease

stipulations. The stipulations take up more print space than the

documents in the actual Federal parcels do. And I see that same

little tendency there, well, gee, if we’ve got a stip for that over

here, maybe we’d better put it on anything within 50 miles. You

can mark my words. That’s the trend that I see that is alarming.

We’ve had drilling delays and restrictions in Jonah field for some

of the doggonedest [sic] reasons. Most of them have had to do—a

lot of them have had to do with archeology. Archeology is a growing

field of interest in there. You know, we have to arch-check anything. If they even think there’s a sign or whatnot, we’re delayed.

We shut a rig down this winter because of frost restrictions. For

frost restrictions we put 14 guys out of work? Yeah, frost restrictions. Well, you can’t separate topsoil when the ground is frozen.

OK, so topsoil is more important than jobs. OK, if that’s the way.

The other reasons are archeology. You can’t really look for arrowheads and you can’t see pot parts very well if you dig it up in

chunks, rather than have the ground unfrozen.

I mean, those are the reasons, and that’s real. That happened to

us this winter.

I concur with Robin’s comment, and I think the Federal agencies

generally are in fear of lawsuits by environmental agencies and
62

they react and make decisions accordingly. I’ve seen it. I can’t

prove it. But I tell you that’s my opinion.

The environmental impact statement process that’s supposed to

be streamlined, it really isn’t. We’re going to get a record decision,

if we’re lucky, in November. It’s been delayed. It should have come

out in August. It’s been delayed, and I’ll tell you why it’s been delayed, because the air quality provision of it is being argued among

Federal agencies. They can’t decide what protocols to use and how

to tell whether air quality is good, bad or indifferent. And so we

sit there, I guess, with our arms crossed, waiting for them to decide

how we address air quality.

Here’s what we have so far. And it’s not as impressive as Robin’s

stack, but it’s getting there. But the air quality part is not here yet.

We don’t know what it will do, what it will say. And air quality

is a critical issue to me. I’ve lived in Wyoming for 23 years. Nobody

can argue wanting good air quality more than I will.

But the problem is air quality is being used as an excuse. It’s

being used as the issue to drag this process on and perhaps delay

us, for whatever reason.

Quickly, because I know I’m running out of time, on the Endangered Species Act, I’ve got a couple of things. It’s a well-intentioned

Act gone astray. It needs to be changed. It’s a tool—it’s a tool for

stalling or delaying. The listing criteria, I think, is flawed.

I have a solution. I say that no species can be listed unless 50

percent of the Congress can identify it from a picture out of 50

choices.

[Laughter.]

Mr. MARTIN. Yeah, that’s pretty funny, but you think about it.

I had it suggested to me that we have flip cards for our field personnel so we could recognize a Rocky Mountain clover, when I

asked what’s a Rocky Mountain clover. It’s not endangered, but it’s

a candidate. So we have to worry about the 100 million species that

exist plus candidates, plus subspecies and whatnot. The law has

gone astray, and it needs to be fixed.

And I will quickly say that our project at Jonah is the solution,

not the problem.

One important thing about socioeconomic impacts, I agree that

they are not given the weight they deserve. But there’s another aspect of it that I think is very important to be considered. We’ve

identified probably a trillion cubic feet of natural gas that we can

produce out of our Jonah field. Nobody will take the time, despite

my constant harping and carping, to determine the air quality,

whether it will be better or worse if that trillion cubic feet stays

in the ground or is delayed or an alternative fuel is burned somewhere else in the United States that might not be as good for the

air as natural gas. Nobody will sit and talk to me about that. It’s

a lot of work, but it’s a heck of a valid point. So I lay that on the

table.

And with that, I thank you for caring. I thank you for being kind

enough to come and listen to us. And I’d be happy to answer questions when you finish.

[The prepared statement of Mr. Martin may be found at end of

hearing.]

Mrs. CUBIN. Thank you, John.
63

Next is George Fancher, Jr., Fancher Oil Company.

STATEMENT OF GEORGE H. FANCHER, JR., OWNER, FANCHER

OIL COMPANY

Mr. FANCHER. Thank you, Madam Chairman, for the privilege of

appearing before you and your staff on Energy and Mineral Resources. It is time we examine the issues which are adversely affecting our industry. You are to be complimented on your interest

in listening to some of the problems that producers in the Rocky

Mountain region are having with governmental agencies such as

the BLM.

The goal of government should be to encourage and help industry

be more efficient and to economically develop and produce the domestic oil and gas reserves that are available in the United States.

My name is George Fancher, and I am the owner of Fancher Oil

Company, a small independent producer located in Denver, Colorado. I have been active in Wyoming and the Rocky Mountain region since 1969. I am a member of IPAMS, WIPA, and so forth.

However, today I am not representing any organization, and my

comments reflect only my concern about the procedures used by the

BLM in approving the environmental impact statement for the Express Pipeline Project. As a result of my experience with the Express Project, I am concerned about the lack of a comprehensive

process to evaluate the need for and impact of an international

pipeline on local and State economies and to the domestic oil and

gas industry.

The Express Pipeline has been in operation for only a few

months, and its impact upon crude oil prices has already been felt.

Prices for crude oil have fallen by approximately $2.50 a barrel and

have virtually wiped out the bonus over posted price which Wyoming crude oil producers were receiving. I expect that by the end

of the year that bonuses will no longer exist. This is due to the fact

that Express Pipeline will be shipping 172,000 barrels a day of

crude oil from Hardisty, Alberta, to its connection with the Platte

Pipeline here at Casper, Wyoming. I anticipate that substantial

quantities of crude oil being shipped on Express will be used to

compete with oil produced by Rocky Mountain producers in markets which include Wyoming, Colorado and Utah. The balance of

Express’s crude will be shipped eastward on the Platte Pipeline to

its terminus at Wood River, Illinois.

In my view, the BLM did an inadequate job of evaluating the impact of this pipeline. In fact, the BLM capitulated to Express after

Express’s attorneys objected to the consultants’ analysis which resulted in dramatic changes to their revised report.

While the initial report concluded that there would be a price reduction of $2.50 per barrel for all types of Wyoming crude as a result of the pipeline, the revised report concluded that there would

be a price reduction of only $.35 a barrel.

The initial report concluded that the potential total cumulative

loss of income to Wyoming producers resulting in the lower prices

could be as much as $2.1 billion. In the final report, the BLM consultants concluded the potential loss of income resulting would be

a $.35 reduction, but by 2005 would be only $196 million. Thus, the

consultants changed their evaluation of cumulative impact to local
64

producers from $2.1 billion to $196 million, a change of over $1.9

billion.

Now, because of the radical changes between the two reports, the

Wyoming State office of the BLM should have been very concerned

about this shift and sought independent review. The Wyoming

State office never independently challenged or even questioned this

dramatic $1.9 billion change and the consultants’ reversal of its initial conclusion. The WSO never disclosed the presence of the two

radically different socioeconomic analyses and never disclosed why

it rejected the initial report and accepted the revised report. They

made no attempt to quantify the loss of nonrenewable natural resources which will result from the construction and operation of the

pipeline. Thus, the Wyoming State office of the BLM, breached its

obligations under NEPA to independently review and analyze the

consultants’ work on socioeconomic impacts and failed to ensure

the professional integrity of the analysis contained in the consultants’ final report. The first time the public had an opportunity to

review the analysis performed by the consultants was when the

FEIS was issued.

In particular, on June the 13th, 1996, I learned that the consultants had new information which would have caused them to reach

different conclusions from those in the final report. On or about

June the 20th, 1996, I spoke to Mr. Ogaard of the BLM about the

consultants’ new information. Mr. Ogaard informed me that he did

not really care if there was new information or if the consultants’

opinion may have changed, that he had to draw the line somewhere and the WSO was not about to reopen the case to consider

the impact the pipeline would have on domestic crude oil production and related socioeconomic impacts.

It was, and is, reasonably foreseeable that the inundation of

large volumes of Canadian crude oil in the Rocky Mountain region

would cause the price of oil in Wyoming to fall and wells to be

shut-in, resulting in a loss of otherwise recoverable domestic natural resources, which violates one of the fundamental purposes of

the National Environmental Policy Act, which is the prevention of

waste of nonrenewable natural resources. The WSO was obligated

to evaluate and disclose ‘‘any irreversible and irretrievable commitments of resources which would be involved in the proposed action

should it be implemented,’’ including the loss to domestic oil reserves resulting from the project.

As many as two-thirds of all marginal properties (including nonheavy oil properties), could be lost during a period of sustained low

oil prices. The danger in losing the marginal wells is that, although

production from individual wells may be small, their collective production is significant, accounting for one-third of all domestic production excluding Alaska.

Nowhere in the analysis of the socioeconomic impact of the pipeline did the Wyoming State office address the impact of these regulations which were promulgated by its own agency. Neither the

draft EIS nor the final EIS contained any analysis of the economic

limits of domestic oil production or any quantification of the domestic oil reserves which will be lost as a result of the proposed pipeline.
65

The failure of the BLM to adequately assess the impact of Express on local prices violates NEPA, which provides that it is the

responsibility of the Federal Government to enhance the quality of

renewable resources and approach the maximum attainable recycling of depletable resources. Crude oil is a natural resource, but

it is depletable. If fields or wells have to be abandoned before the

resource has been produced to its maximum attainable limit, then

waste will occur. The prevention of waste of natural resources is

a fundamental purpose of NEPA. The broad aim of NEPA is well

established.

Here, economic and environmental effects are clearly interrelated. It is reasonably foreseeable that the pipeline will cause a

substantial number of domestic oil wells to be shut-in, resulting in

the loss of otherwise recoverable domestic natural resources.

In summary, the process must ensure that the socioeconomic aspects of the NEPA process receive more comprehensive treatment

than was done with the Express Pipeline Project. The failure to

disclose the radical shift in the analysis of the socioeconomic impact of this pipeline to the public must be prevented in the future,

especially where the lack of a truly independent analysis may lead

to the waste of natural resources.

In the future, our industry will be faced with similar situations

involving foreign oil and gas projects that will directly impact the

domestic energy industry. The Express Pipeline Project illustrates

the fact that no State or Federal Governmental agency has the

final or overall authority to evaluate the need for and the impact

of an international pipeline on local and State economies and the

domestic energy industry in general.

Because of the many questions that the Express Pipeline has

raised, I recommend that the government, in conjunction with industry, develop a comprehensive approval process for foreign pipelines transporting foreign crude oil, natural gas and/or refined

products into this country which will evaluate the viability and effect of the project on all concerned.

Thank you.

[The prepared statement of Mr. Fancher may be found at end of

hearing.]

Mrs. CUBIN. Thank you, Mr. Fancher.

There’s just a common thread through everyone’s testimony

today that has had dealings with trying to get permitting accomplished for exploration and production.

I talked a little bit about an adversarial relationship between the

parties involved in the process. And certainly, another party that

is involved in the process was referred to by a couple of you on the

panel, is that the government, or the BLM, or the permitting agency, sometimes makes decisions based on whether or not they think

they are going to be sued by an environmental organization.

I don’t—I don’t believe that today there are companies that are

willing to pollute the land or the water or the air. I honestly, in

my heart, believe that everybody in this room wants to reach some

kind of balance between the environment, jobs in the economy, and

producing energy. I really do believe that.

And, you know, everyone might have a—different groups might

have a different take on where that is. But I do believe that.
66

I wonder if just a couple of you from the panel would describe

to me what you think a win-win situation would be. Is there such

a thing as a win-win situation in today’s environment?

Terry?

Mr. BELTON. Well, ironically, I think the GRBAC eco-royalty relief recommendation was just that. I mean, I think what it did—

one of the reasons we came out with our recommendations was we

threw off the table all the controversial issues. All the things we

couldn’t agree on we just threw off the table. And what we did was

we said let’s look for things we all want. And, you know, one of our

big issues was the added cost of NEPA documentation, cultural

surveys, inventories, you’ve heard the litany today of the problems

we’re having.

We need some way to offset those costs. Those are not our responsibility; they’re BLM’s responsibility. But we’re paying for it.

And if those costs increase—if those costs continue to increase,

it will put us out of business, essentially, because operators are

faced with the choice between operating on private land versus

Federal land. How long are they going to endure these kinds of

delays and costs? So this is one of our main concerns.

One of the main concerns of the environmental groups was to try

to mitigate potential impacts and to have a better way of assessing

those impacts.

I was surprised in the process to find that there were—there was

a lot of commonality. In other words, a lot of the conclusions we

drew were the same. We all felt the process was flawed, that the

documentation was flawed. And I found the environmental

groups—although this may sound naive, I always felt previously

that all they wanted was the longer it takes the better it is. But

that’s not what played out on the Committee. What played out on

the Committee is not the quantity of the paper and time, but the

quality of the analysis.

And so I think, once we stressed improving the quality of the

documentation while cutting the time and cost, it made sense to everybody.

So what you have is a tool that will enable operators to discuss

controversial issues fairly early on and put those issues to rest. But

you can do one of two things. One of the things it can do is it can

keep the project at the EA level and not into the EIS level, which

is time and money. The other thing is, even if there is an EIS, you

can settle those controversies early enough where you can move on.

You can get on with it.

The reason eco-royalty relief is so important it that it provides

an incentive for operators to come to the table and say, OK, we

really don’t want to have to go out and do a block survey on raptor

nests, but if we can reduce our royalties by those costs then maybe

we’ll agree to it. That’s not going to guarantee it’s going to solve

all the problems, but it’s a move ahead. One incentive that might

enable that process to move on.

So these are just some of the things that I think were win-win’s

that came out of that process and that I think are good. I think

eco-streamlining is another one.
67

Mrs. CUBIN. My reaction to that is that in theory it sounds great,

but we just heard from John Martin, of McMurry Oil Company,

that it isn’t working.

Mr. MARTIN. Right, right.

Mrs. CUBIN. So I guess that’s what I’m asking. How do we facilitate a win-win situation, given what we have today?

Mr. NANCE. Madam Chairwoman, I think we have to get back to

the basics, and I think it has to be—somebody has to mandate, and

it probably is going to have to be Congress, mandate a multiuse attitude on Federal lands. I think if we could come to that, everybody

could come to a point where we start there and all the agencies are

focused in on that, then we can sit down and work out our differences. But I think until that happens I don’t see it happening.

And I think it’s going to have to be mandated.

Mrs. CUBIN. Thank you. Mr. Tipton, you stated that Marathon

intended to appeal the lawsuit, Marathon vs. Babbitt, at this point;

is that right?

Mr. TIPTON. That’s right. Those are our intentions.

Mrs. CUBIN. And it was thrown out. Would you refresh my memory? It was thrown out because they said Marathon didn’t have

standing because you weren’t entitled to bring—you didn’t have the

right to a permit or something?

Mr. TIPTON. As it was explained to us, the reason it was thrown

out is the judge felt like he did not have the authority to grant us

a decision that would satisfy what he interpreted our request to be.

In other words, he said he did not have the power to force the Department of Interior to grant us leases, which is not what we were

after to begin with. We just wanted the existing process to be enforced as it was intended to be.

Mrs. CUBIN. It seems to me that industry as a whole is harmed,

if you will, by being unable to bid on certain tracts of land. Has

Marathon sought out any other organizations that might want to

join with them in pursuing this action?

Mr. TIPTON. You bet. We’ve publicized our efforts. We’ve gone

through PAW, RMOGA, and different agencies. As Terry indicated,

a lot of people are encountering the same type problems. There’s

general, widespread support for our cause, and it’s disappointing to

see the decisions that have been made so far.

And in the end, it’s not just the oil companies that are suffering.

Every delay in a well drilled on Federal lands is money that the

State loses in revenues. And as we stand now, battling money and

needs for school funding, all we’re doing is compounding the problem by continuing to delay access on Federal lands.

Mrs. CUBIN. I’ve heard some other common threads through this

discussion today. The NEPA process seems to be more involved

with the process than the result. Certainly, that’s true of the super

fund, where more than half of the money that’s paid into the super

fund goes to litigation, and actually there’s very little cleanup of

toxic sites.

The Endangered Species Act, Mr. Martin brought up the problems with that. In California, during the floods this year, there

were some levees that the Corps of Engineers said these levees will

fail, and when they fail, human life will be lost, but it would re-
68

quire a whole environmental impact statement to maintain existing

levees.

There were elderberry bushes on those levees. No elderberry beetles, which is the endangered species, but the bushes.

The water came. The levees failed. And six people died.

And I don’t think that is what—I know that’s not what the law

is intended to do. And I think it’s just incumbent on everyone in

government, from the Congress to the people that work for State

and Federal agencies, to get a grip. This is just out of control. It

is just ridiculous.

Another point that I want to make that I picked up from a lot

of your testimony is that not only is it harder to invest in places

like Wyoming when you want to produce some wells, it’s easier to

invest in Oklahoma or Texas where you don’t have to deal with all

the Federal problems, but it’s easier, even yet, to take your business overseas.

Now, environmental organizations, their main objection to the

production and exploration are possible degradation to the environment. Well, what kind of regulations are there overseas? Is this a

world environment or is this just a Wyoming environment because

it’s got public lands in it? I mean, we just have to get some common

sense into some of this.

Mr. Smith, I worked with you throughout the environmental impact statement process there at Cave Gulch. I understand you don’t

have a record of decision signed yet.

Mr. SMITH. No. It’s due.

Mrs. CUBIN. So will you be real nice until it’s signed, or can I

ask you some mean stuff?

[Laughter.]

Mr. SMITH. Go ahead. I’ll take my chances.

Mrs. CUBIN. Could you give me some examples of the breakdown,

I don’t care whether it was communications, but just the frustrations you faced and kind of a time line on some of those things so

that I can have a good understanding, and an understanding in the

record, of the sort of things that we’re talking about here? Because

I think if we don’t have specifics it isn’t going to help. So would

you mind doing that?

Mr. SMITH. Well, one example that Mr. Magagna brought up this

morning was a situation where we had State leases that were within the Bullfrog unit. So the leases were committed to the unit.

However, they weren’t Federal minerals; it wasn’t Federal surface,

and so the BLM didn’t administer our activities on those leases.

We wanted to drill a couple of wells on those leases and run a

gathering line from those leases, from those wells on those leases,

to a central sales point in the field. That gathering line system, primarily, would run from the wells along existing access roads to an

existing County highway, down to the metering station.

We were told that—well, let me first say what our position was.

Our position was that because these gathering lines were in the

unit that we didn’t have to file a right-of-way application, that we

could request approval from BLM with a sundry notice.

The determination at the local level was that no, we had to file

a right-of-way application, which we did, and in the interest of trying to speed things along, once again, because we wanted to get
69

these wells drilled and on-line so that we could start seeing some

revenues from them.

After we complied with that request and filed the right-of-way

application, we were then told that the approval of that application

would have to be withheld until the wells were drilled because,

until the wells were drilled and there was a need shown by the production from those wells, we didn’t need to put the gathering lines

in. So they couldn’t answer right away.

Time frame on that was—I think we filed the right-of-way application in July. We had a February 1 raptor stipulation out there

that we were fighting. I think we got approval in December, if I’m

not mistaken, to lay those lines. And it was approved through the

application of the sundry notice, rather than the right-of-way application.

I think this goes back——

Mrs. CUBIN. So that was about 5 months?

Mr. SMITH. Yeah, about 5 months. Now, there were——

Mrs. CUBIN. For a right-of-way.

Mr. SMITH. Yes, for a right-of-way, less than two miles of gathering lines.

It didn’t delay the production of the wells. I think there was a

misstatement this morning. We were able to drill the wells at the

time that we wanted to and get the wells on-line before the raptor

stipulations kicked in. So we didn’t have delayed production of

those wells.

But a tremendous amount of effort and frustration went into trying to resolve that issue, which I think that you’re aware of because we involved you in that.

Again, I want to say that many times the problem is the interpretation of the regulations. Like John said, it’s not the act; it’s the

interpretation of those regulations that creates many of these problems.

Another example, I guess, would be the—I hate to even bring

this up, but the Chevron Waltman No. 43 well.

Mrs. CUBIN. I hate for you to bring that up. So does Tom.

Mr. SMITH. You heard this morning that we were allowed some

moderate interim development by the BLM. They were in a consensus process, whereby a number of wells, I think 14 wells, were

allowed to be drilled while the EIS was being conducted, which was

a very nice thing for, I think, everyone concerned. We got some production. We got some more wells drilled. We understand better the

geology of the field, which is very complicated. We understand better how many wells we need to drill because of that.

One of the wells that we proposed was the Chevron Waltman No.

43. We proposed that well in the interim package because we felt

that we had a royalty rights issue or a drainage problem by an offsite operator. In the consensus process a number of locations for

that well were proposed, and I felt like, matter of factly, and without any analysis, that might be a problem, that this might be a

problem. So we’re not going to approve that well.

I kept trying to raise the issue of drainage. And we still were denied permission to drill that well.

At that point, we felt we had a problem that we had to resolve

then and there. So I went back to the BLM and sat down and said
70

we have to resolve this; it’s not all right to have ‘‘no’’ as an answer

because we’re—our rights are being infringed on.

A number of solutions were discussed. And eventually, what happened was the 43 well location was approved to be drilled directionally. We gave up another well that had been approved in the

interim development package in order to keep the impacts of that

package at that same level. And that timeframe for all of that was

probably another 4 months, 5 months, of a lot of letter writing,

meetings and discussion, and finger-pointing and raised tempers

and other things.

Those are two of the best examples I think I can give you.

Mrs. CUBIN. I think you mentioned also that understaffing at the

BLM was a problem.

Mr. SMITH. Uh-huh.

Mrs. CUBIN. Could you go into that a little more for me, please?

Mr. SMITH. Yeah. It’s a situation that I think we’re facing in another part of the State, rather than the Platte River Resource Area.

In southwest Wyoming, we have a unit called the Birch Creek unit,

and we’re trying to get some wells approved over there. We scheduled onsites with the BLM personnel, who canceled on us twice due

to scheduling conflicts. We had a meeting with the district manager, and she suggested that we get someone else in there to—

rather than somebody from that resource area office, but from another resource area out, to sort of fill in for the people because they

were so overwhelmed by the APDs and onsites that they had to

come back. And what’s happened in that situation is that person

did work with us, but he won’t make a decision without talking to

the person that wouldn’t—or wasn’t able to come in the first place.

So we have a situation where the BLM personnel are just literally not able to handle the work load that they’re faced with.

That’s a seasonal thing over there because of the winter range restrictions that we have, too. I need to point that out. They go

months, I think, without a lot of APD activity and then, in the

spring, get hit with tons of them all at once.

So it’s difficult to solve. You can’t add staff and have them sit

around all winter waiting for the APDs to get in. But it is a problem that impacts the business.

Mrs. CUBIN. And did it impact—I mean, it seems to me I recall

having a meeting with BLM where they didn’t have a biologist that

they really needed to move Cave Gulch along expeditiously.

Mr. SMITH. They do have a biologist in the Platte River Resource

Area, but Cave Gulch isn’t his only project that he’s working on,

although they did move the Cave Gulch to the list—to the top of

the priority list. Everything else can’t stop just because of that. He

still has to do other things, and that impacted his list somewhat,

too.

Mrs. CUBIN. Were you satisfied with industry’s role in assisting

the BLM develop the mitigation for raptors?

Mr. SMITH. If you’d asked me that question 6 months ago, the

answer would have been no. But, as I said in my testimony, I think

that our relationship has improved dramatically, and I believe that

there’s a lot better communication between BLM and industry on

this project, and I think we are working constructively together

now toward cost efficiency and effective mitigation, which has been
71

our goal. Our goal has not been to avoid mitigation, but to make

sure that the mitigation that we pay for doesn’t cost us more than

it should and that it actually works, that it impacts—that the impacts that we’re trying to mitigate are mitigated. That’s what’s important to us.

Mrs. CUBIN. Well, speaking about paying for it, would you explain to me exactly how the money bid is handled with all of this?

Do you just give money to BLM and they have the work done?

When you do a NEPA study or an EIS, how does that money transaction work?

Mr. SMITH. It’s between industry and the contractor, the consultant that produces these reports. In this case it’s Gary Holsan. BLM

determines that the study needs to be done. We go to them with

the proposal. They respond to us and say you’re going to do an environmental assessment.

It’s our responsibility. If we’re not budgeted to do it, if we don’t

have people to do it, if you want us to do it it will be x-number

of years, generally an unacceptable number of years to industry. So

we say we will fund the study in order to expedite this process.

It’s a very strange relationship because the consultant is paid by

industry but works for BLM, which creates some concerns.

Mrs. CUBIN. OK. It’s paid for by industry, but they work for

BLM?

Mr. SMITH. For BLM. They are doing the analysis at the direction of and for the benefit of the Bureau of Land Management.

Mrs. CUBIN. ‘‘At the direction of,’’ explain that to me a little

more. BLM tells them what information they want or do they tell

them how to document it or what?

Mr. SMITH. Both. They—what industry’s role is—I think it’s easier to describe what that is, is we propose an action. In the case of

Waltman-Bull Frog-Cave Gulch, we proposed drilling a number of

wells from a number of well pads.

The consultant then begins gathering information and working

with an interdisciplinary team within the BLM that’s comprised of

a number of individuals with different areas of expertise. And the

consultant has an interdisciplinary team that basically mirrors

what the BLM has. And those team members exchange information, ideas, and discussions on their areas of expertise, and, generally, over time, produce a document like this.

Mrs. CUBIN. Is there much disagreement ever between the consultant and the BLM?

Mr. SMITH. I’m not sure that I can comment on that. We’re not

generally privy to all of those discussions. So I’m not sure what

takes place. I’m sure there are disagreements. I’m sure there are.

Mrs. CUBIN. As time goes on, do you get—I mean, do they say,

well, we need more; we need more or—up front, or do they say

these are the things we’re going to need and these are the professionals we need to study them?

Mr. SMITH. In the case of Cave Gulch and Waltman and Bullfrog,

it’s been involving a data base. We have started out monitoring

small areas for raptor nesting, habitat and activity. And as the EAs

progressed and the EIS progressed, that area of monitoring has

grown and grown to the point that we are now monitoring an area
72

of about 273 square miles, around the project area of about 40

square miles.

Mrs. CUBIN. So would you say that the uncertainty—or that uncertainty with your investments and how much it’s going to cost up

front and—you know, is that a factor in when the company decides

where they’re going to invest their money?

Mr. SMITH. Certainly. As you mentioned this morning, we have

budgetary constraints. There’s only so much money in the pot. And

the companies are going to invest that money where they can see

the fastest and the best return on their investments. A lot of economic analysis takes into account the risk. And the risk in operating on Federal lands is whether or not you’re going to be able to

operate this year or next year or the year after that. It’s very difficult to plan your business.

Mrs. CUBIN. Not even considering the risk of not getting oil or

gas when you drill.

Mr. SMITH. Yeah, that’s right.

Mrs. CUBIN. Mr. Nance, you mentioned in your testimony that

technology was not considered in the EIS for the Lewis and Clark

Forest. What kind of technology were you referring to?

Mr. NANCE. Well, evaluation technology primarily, but also the

ability to drill wells more efficiently and in a more environmentally

friendly manner. Nobody is going to go in to a high risk area like

Lewis and Clark and drill expensive wells without a fair amount

of data being required beforehand. And that data, in today’s world,

is probably going to be 3D-seismic. That can be done in a very environmentally friendly way now. It can be very costly. It would probably be hand-held drills that would have to be walked through the

forest and you could drill a hole that is not very deep to—for the

charges for the seismic that comes out with a pile of dirt about this

high that is very easily filled back in and very little problems with

the surface. That can be done. A primacord can be used on the surface. That may be a little noisy for wildlife around here. I’m not

sure. But there are several ways to do 3D-seismic in there to give

us an evaluation.

And while we think that there’s an awful lot of reserves there,

it’s all not going to be productive. So we have got to be pretty specific about our evaluation process.

But that’s going to be awfully expensive. And nobody is going to

be willing to go in there and spend that kind of money without the

assurance that you’re going to get a lease or, when you get a lease,

that your permit to drill is going to be acted upon.

I think probably Robin can speak maybe to that better than anybody. I think Chevron, as I understand it, has had a permit to drill

pending in the Lewis and Clark for about the last 16 or 17 years.

So nobody is going to do that sort of thing without the assurance

that they can do something with it. So it’s sort of like the chicken

and the egg thing. But it can be done.

And you said awhile ago that we all are concerned about the environment. And there’s not a soul here that’s sitting at this table,

I don’t think, that is choosing to live in the Rocky Mountains without concern about the environment. We’re going to do it in a sensible way.
73

And there are ways to do it. We can drill wells from a single pad.

Locations can be small, contained mud pits. There’s a lot of things

that can be done that was not considered at all.

Mrs. CUBIN. I think in your testimony that was related to the

Lewis and Clark Forest, National Forest.

Mr. NANCE. Yeah.

Mrs. CUBIN. Are you aware of other instances where that technology has been taken into consideration?

Mr. NANCE. Well, I believe down in Wyoming, in the Thrust Belt

of Wyoming, and in Utah. I can’t specifically tell you what fields,

but I’m sure that there—well, I know there is. There is Wyoming

and the Thrust Belt in Utah that have been done that way, and

Canada.

Mrs. CUBIN. So maybe just depends on the regulator that is looking at the proposal than it is actual policy?

Mr. NANCE. I don’t know. I don’t know whether the regulator in

Montana really wants to look at the ability of industry to do that.

I think it’s the motivation behind why they’re making the regulations that they’re making.

Mrs. CUBIN. It would seem to be.

Would you support legislation transferring—all of you or any of

you, transferring the responsibilities to the States?

Mr. NANCE. Absolutely. I think in one of IPAA’s recommendations that we do recommend the transfer of that kind of regulations

to the States. I think it would be much more effective.

Mrs. CUBIN. Mr. Fancher, I was very interested in your testimony about the Express Pipeline. I have wondered, and I’ve asked

people, haven’t really been able to get a good answer.

I think it took 9 months to permit the Express Pipeline coming

down from Canada, across the international border. It’s my understanding it crossed seven rivers or——

Mr. NANCE. In Montana.

Mrs. CUBIN. [continuing] in Montana, and then it came down

through Cave Gulch. It was permitted in 9 months?

Mr. FANCHER. Uh-huh.

Mrs. CUBIN. And Cave Gulch itself took a couple of years, and

it isn’t quite done yet.

Do any of you have any idea why that is?

Mr. FANCHER. I can explain. Well, I think they used the

Altamont right-of-way to some extent.

Mrs. CUBIN. And what did that entail then? What did that——

Mr. FANCHER. You know what the Altamont——

Mrs. CUBIN. Yes, I do.

Mr. FANCHER. That was a gas line they had proposed to built,

but they never did build. But they did acquire the EIS environmental work on that prior to that.

Now, the Altamont line didn’t end up in Casper. It was going

down in western Wyoming. So they had to do some additional EIS

work. And we were amazed at how fast they got it done.

Mrs. CUBIN. So did the Express Pipeline buy that information, if

you will?

Mr. FANCHER. I don’t know whether they were given that information or whether they bought it. I don’t know how they acquired

it, but they did use it. And I think that’s fine. I think they should
74

be able to use whatever was available to them. There’s no sense in

reinventing the wheel, when you’re trying to do it again.

But regardless of that, just the size of the project and the fact

that they had to do additional EIS work, it was amazing to us,

comparing it to some of the projects that we have tried to get approval on in the past, much smaller projects, as to how fast they

were able to act on that.

Mrs. CUBIN. I think the thing that really just sort of makes me

want to laugh is that it went through Cave Gulch. It’s just hard

to understand that.

Mr. FANCHER. Strange things do happen.

[Laughter.]

Mrs. CUBIN. Well, they do. That’s right. And there may very well

be some other good reasons, but I have not been able to find anyone that could give them to me, other than the information from

the EIS about Altamont. I was aware of that.

What do you recommend as a solution to the problems that you

pointed out with the environmental impact statement and the decision that was made for Express Pipeline? Where do we go from

here?

Mr. FANCHER. I think that we need to develop it. We’re going to

have other pipelines that are going to be proposed. I think there’s

six or seven new pipelines proposed from Canada into the United

States on the drawing board right now.

I think that the study that was done was inadequate, as I mentioned, and they didn’t really consider the impact that the line

would have on the economy in the States and on the domestic oil

and gas industry. And it seems like that government doesn’t care

what—if a—if a line or more imported oil has a negative effect on

our industry. They don’t care about that.

In other words, all that the American people care about, and I

perceive the government too, all they care about is they have cheap

energy, and they don’t care where it comes from.

And we’re losing our infrastructure. We’re not going to be here,

when they need us down the road, if they don’t keep us in business.

And when I say keep us in business, we don’t want any subsidies

as such. We just want a level playing field.

We can’t compete with all the other countries around the world

because our standards are much higher. It costs us more to operate, yet we get paid a lower price, too.

Mrs. CUBIN. So am I correct in this summary of your testimony,

that you aren’t asking for any change or any action on the Express

Pipeline and that whole issue, but you would like to have some sort

of legislation protection, if you will, for future international pipelines that might be built?

Mr. FANCHER. Well, I think that the impact of Express should be

analyzed for the benefit of the people in Wyoming, the municipalities and so forth, that are going to be severely impacted, as well

as the State, because they have to figure out where they’re going

to make up the difference.

Mrs. CUBIN. I missed a little bit of your testimony. You said that

there was a big change in the report, and at one point a $9 billion

change in estimates. Who made that?
75

Mr. FANCHER. Well, the—the BLM had a consultant that did an

analysis on the socioeconomic impact of the pipeline. It’s a consulting firm they use by the name of Petroleum Information Corporation. And they did this at the 11th hour. There wasn’t any socioeconomic study done until the initial scoping analysis that was

a report which was done on Express pipeline. And so they hired

this firm at the 11th hour. And they did an initial report that said

there was going to be a significant impact.

Express didn’t like that. They made comments to the BLM. And

in 10 days they changed the report to reflect that there was only

going to be a small impact and only on sweet crude, not on sour

crude.

All of that is in my written testimony.

And so the reporting process was kind of a farce. And really, the

BLM considers that they don’t need to consider socioeconomic impacts. In other words, that’s not their job. Their job is only to look

at what effects something like that has on the environment.

And that was the point I’m trying to make, is that there needs

to be somewhere in the process that we think that the BLM

through the NEPA process, that they should fairly review that sort

of thing. But if they don’t, I don’t know who else will or who else

would want to. And that’s something that I think you need to look

into.

Mrs. CUBIN. Thank you.

Mr. Martin, what do you perceive from all your years of experience to be the biggest threat to the oil and gas industry in terms

of land management policy? Is it access? Is it ESA? Is it air? What

is it?

Mr. MARTIN. Well, in southwest Wyoming, which is where most

of my experience falls from, it’s—the air quality issue is the one

that’s arisen to the forefront.

Mrs. CUBIN. Would this be Utah, Grand Canyon?

Mr. MARTIN. Yes, it’s the same area. It’s air quality as it relates

to any and every environmental impact statement that has been

done or is underway or that will be done because that’s the new,

difficult issue—I think that’s the most difficult issue to come to

grips with.

And to that end, I would like to clarify, in case there is any misunderstanding, yes, we have had great difficulty with our environmental impact statement process, as most of them are. But I think

the BLM managers are as frustrated with it as I am. And I think,

to their credit, they have done an enormous amount—I will give

them an A+ for effort. I think they are trying, to the best of their

ability, to make it work.

But I have seen the breakdown and the arguments over how do

you measure air quality, how do you get a baseline, what’s it going

to mean. And you can’t answer those questions. The data doesn’t

exist, or doesn’t exist in sufficient quantity, to allow for a decision

that you’re absolutely confident is correct.

And so what happens is the Federal agencies have not been able

to get together on a protocol. I think that they have now, but it’s—

I really don’t know what it’s going to be, what it’s going to turn

out.
76

And so that issue alone has delayed our EIS. Now, maybe that’s

a growing pain. Maybe that’s something that can, and should, and

ought to be eliminated in the future ones, but it’s certainly a big

problem for us.

But air quality in southwest Wyoming. You know, there’s the

matter of the 977 tons of NOx issue that came out. We don’t see

any legal basis for it. We think that if you study it and look at

what it really means, that it only includes our industry, doesn’t include other sources. It was thrown out on appeal, thank goodness,

but it’s still there. It’s going to trigger something, and I’m not sure

what, but it’s going to trigger something. And when it occurs, and

it’s going to occur sooner or later, because now anybody that has

any kind of a permit is rushing to the gate to get permits that use

up that 977, and one day a bell might ring somewhere, and I’m not

sure where we’re going to be or what we’re going to do.

Mrs. CUBIN. I am in complete agreement with you, especially

when you look at the new proposal that Carol Brown has made

that the President has since come out in support of. I think that

you’re right. I think that’s going to be one of the problems.

I know you have to go, Terry. So I’m going to ask you one quick

question.

Talking about the de facto wilderness areas withdrawals, in your

testimony you said it was done in secret, secret agreements. Was

that with the CEC? Is that what you were referring to?

Mr. BELTON. Yes, that’s what I was referring to.

Mrs. CUBIN. OK. That’s what I thought. Thank you.

Mr. BELTON. Thank you.

Mrs. CUBIN. I don’t think I have any more questions for the

panel. I thank you for being here. I know some of you have planes

to catch, and I appreciate your being here. Thank you.

Thank you all for waiting. Would you raise your right hands?

[Witnesses sworn.]

Mrs. CUBIN. It has been a long day. Again, I thank you for bearing with us all day.

And we’ll start this panel by asking Mr. Robert Hoskins, who’s

a member of the board of the Wyoming Wildlife Federation, to talk

to us.

STATEMENT OF ROBERT HOSKINS, MEMBER OF THE BOARD

OF DIRECTORS, WYOMING WILDLIFE FEDERATION

Mr. HOSKINS. Thank you, Representative Cubin, Members of the

Committee.

As you said, my name is Robert Hoskins. I serve on the board

of directors for the nonprofit Wyoming Wildlife Federation. Our

members are 4,000 hunters, anglers, and wildlife enthusiasts who

share an unwavering commitment to wildlife and the protection of

public lands in our State to benefit all citizens.

As you know, our executive director, Dan Chu, served on the

GRBAC. So if you have any specific questions about the GRBAC,

I would request that you direct those to him, since I was not on

that Committee.

In any case, today I will discuss what we expect from the

GRBAC’s recommendations to the Secretary of the Interior, as you

requested. In particular, I wish to address our one expectation that
77

GRBAC failed to meet, assessing and mitigating the cumulative

impacts of industrial development on wildlife and wildlife habitat

in the Green River Basin.

What the GRBAC faced was the unprecedented intensity and

scope of natural gas development proposed for the Green River

Basin over the next 20 years. The GRBAC’s charge was to reach

consensus on managing two world class resources, the Basin’s massive natural gas reserves and its incomparable wildlife resource.

The GRBAC held its first meeting in March 1996 under a cloud

of misinformation spread by industry groups, not to mention Wyoming State officials. Nevertheless, GRBAC members developed recommendations for the more efficient management of natural gas

development: NEPA streamlining, updated road standards, eco-royalty relief, transportation planning, and partnership opportunities.

Unfortunately, in our opinion, the GRBAC dropped the ball on

protecting the Green River Basin’s incomparable wildlife resource.

It failed to address the Federation’s primary concern, the identification, analysis and mitigation of the cumulative impacts of industrial development on wildlife. Given our willingness to reach

consensus, particularly on the controversial eco-royalty relief, we

are deeply disappointed with the GRBAC’s failure to develop recommendations for dealing with the undeniable threat of cumulative

impacts. Therefore, we consider the work of the GRBAC unfinished

and we intend to vigorously press the issue until it is resolved to

our satisfaction.

What are cumulative impacts? Simply, and getting away from

the legal jargon, they are the disruptions, displacements, degradation, and destruction of natural resources by unsustainable human

economic activities that occur over a very long period of time.

The historical and scientific record of the cumulative impact of

man’s economic activities on the environment is unassailable. Developing case law and legal scholarship on NEPA and watershed

protection—and the Green River Basin is clearly a major watershed—indicate that cumulative impacts analysis is necessary, especially when development on Federal land triggers substantive legislation like the Clean Water Act, the Clean Air Act, the Endangered

Species Act, or the Migratory Bird Treaty Act.

Historically, no industry has remained unscathed from scientific

findings that its activities produce long-term, harmful impacts on

the environment. That’s what environmental laws are about.

Nevertheless, industry refuses to acknowledge the cumulative

impacts of its activities, claiming that we do not have adequate information that demonstrates those impacts, nor the technology to

mitigate them even if we did. From our standpoint, this claim

makes as much sense as would a claim that deferred equipment

maintenance has no cumulative impact on industry operations and

earnings.

The oil and gas industry cannot deny the facts. Over the last decade and a half, the scientific disciplines of conservation biology and

restoration ecology have produced much research into the longterm harmful impact of human economic activities. Activities that

fragment and degrade wildlife habitat, or create opportunities for

exotic species to invade disturbed land, have severe, long-term impacts. This research has been widely published.
78

Industry’s primary objection to cumulative impacts analysis and

mitigation is the cost and the requirement that development, and

thus profits, be spread out over a long period of time. We don’t believe those complaints are good enough for the Green River Basin’s

incomparable wildlife resource. For the privilege of using publicly

owned resources for profit, we expect industry to accept full responsibility for its actions and pay for its impacts on the Green River

Basin. Nevertheless, in the spirit of compromise we tried to meet

industry’s concerns over cost by supporting eco-royalty relief. If ecoroyalty relief comes about, we fully expect cumulative impact analysis to be funded.

We believe it would be easier for industry to embark on cumulative impacts analysis and mitigation if it would integrate with its

operations an innovative, science-based management scheme called

adaptive management. Such an approach would treat all operations

as scientific experiments; that is, operations would be designed to

produce scientific information on cumulative impacts as a necessary operational output.

In closing, I wish to make clear our expectations. We are committed to the GRBAC’s recommendations. Nevertheless, in return,

we expect the Federal Government and the oil and gas industry to

acknowledge their unqualified responsibilities to identify, analyze,

and mitigate cumulative impacts on wildlife, wildlife habitat, and

other public lands values. We believe that if development is prudent and carefully managed over the long term, such impacts can

be mitigated if properly funded.

Thank you for this opportunity to present our views.

[The prepared statement of Mr. Hoskins may be found at end of

hearing.]

Mrs. CUBIN. Thank you.

Next witness is Mr. Tom Throop, of the Wyoming Outdoor Council.

STATEMENT OF TOM THROOP, EXECUTIVE DIRECTOR,

WYOMING OUTDOOR COUNCIL

Mr. THROOP. Thank you, Madam Chair, and thank you for the

invitation to participate and the opportunity to testify today.

Robert, you certainly were well-rehearsed ahead of time. That

was right on 5 minutes.

Mrs. CUBIN. Take your time. We’ve listened to a lot.

Mr. THROOP. My name is Tom Throop. I’m executive director of

the Wyoming Outdoor Council, and we go by the acronym of WOC.

And we are all Wyoming, as we’re unaffiliated with any regional

or national organizations. And we do appreciate the opportunity

and the invitation.

At the same time I need to tell you that the public interest organizations from our sister States of Montana and Colorado are very

upset with this hearing, as you may know. The scope of the hearing

directly relates to issues that are being dealt with in those States.

Witnesses have been here representing seats in industry that hear

from both of those States, who have been here from both of those

States, yet there was no notice or invitation to the public interest

groups in Colorado or Montana.
79

Our phones rang off the hook all last week. And I promised them

that I would relay that concern. They view this hearing and process as extremely unfair and do believe that if you’re going to discuss issues that affect their States, hearings should be held in

those States. And you may well plan to do that, but they are not

aware of that, nor am I, and that public interest witnesses from

those States should be invited to testify. And again, I promised I

would tell you that.

Let me begin by reminding the Committee that the lands in

question are public lands, owned jointly by all the citizens of the

United States. By law, these public lands must be managed and,

in fact, are mandated to be managed for multiple use.

In the definition of multiple use, it states the resources are not

to be managed for the greatest economic return or the greatest unit

output. Increasingly, however, we are seeing a fundamental shift

away from a multiple use to a dominant use for energy and mineral development, which I think this has been aptly demonstrated

today, often at the expense of the public lands’ uses for wildlife and

habitat, open space, historic recreation opportunities, clean air,

clean water and overall environmental quality.

The BLM’s management plans for the public lands in Wyoming

that are, in part, the subject of this hearing today, authorize oil

and gas leasing on an astounding 98 percent of the total lands

available, including crucial big game wintering, areas of critical environmental concern, and areas having high scenic routing.

Presently, oil and gas leases cover the vast majority of the areas

under discussion, approximately 90 percent, and do not carry stipulations sufficient to protect the surface resources on these lands.

There are, in fact, a multitude of uses and very significant environmental issues to be dealt with on the public lands of the Green

River Basin and at Cave Gulch. For example, Federal law requires

that there be careful review prior to development activities on

these lands. For example, there are cumulative impacts to a host

of wildlife species and their habitat.

Let me assure you that the air quality and visibility issues are

a very real and legitimate issue, not an excuse. And there are a

host of groups that are working on these issues. These groups have

not reached consensus on how to protect Class I wilderness areas

from emissions, nitrogen, and volatile organic compounds, VOCs.

Maintaining historic recreation opportunities, implementation of

the Clean Water Act on public lands, protecting significant cultural

and archeological resources are also significant environmental and

land use considerations that must be dealt with before these lands

are developed.

Concerning the GRBAC, we did request the formation of this

process, and appreciated the Secretary’s appointment and Assistant

Secretary Bob Armstrong’s personal attention to the Committee in

this process. The GRBAC, as Terry Belton aptly described, was a

collaborative process that we enthusiastically endorse. Certainly,

Mr. Hoskins was correct that many of the issues that we wanted

to be dealt with were not dealt with. But one of the ground rules

is that issues that we could all agree on would be dealt with and

those we didn’t agree on would be set aside.
80

Most of the recommendations can be implemented administratively. For example, the excellent work that was done by the committee on transportation issues. We certainly hope that the Secretary will approve the primary, outstanding issue, which is the

eco-royalty relief. If the Secretary does not approve eco-royalty relief, there is a readily available alternative that will accomplish the

same objective that you ought to be aware of. The BLM can change

its policy for Wyoming and give Wyoming BLM the authority to authorize offsite mitigation, like is done in other Western States.

And finally, I wanted to mention on this issue that, though this

issue is not resolved, we feel strongly that the government should

not pay for industry’s NEPA analysis. This is their responsibility.

It should be a cost of their development proposals.

We are surprised and disappointed that Cave Gulch was characterized as field development delays. And we obviously have some

intense personal experience with that issue, as you know. We were

involved throughout the process.

Cave Gulch is on a fast track the likes of which we’ve never witnessed before for a major, full field development project. While a

fast-track EIS has been underway during the past year, industry

was given virtually everything it wanted in the interim development agreement, that we clearly agreed to and clearly supported,

but even though, such a far-reaching interim development agreement was unprecedented. Even though the interim development

agreement was a collaborative process, it was agreed to by all the

parties. BLM broke the agreement when one of the companies

wanted one more well that was specifically excluded because it was

deemed to violate NEPA. We’ve been around that one before.

The final EIS is on the street. The BLM openly admits that their

decision sacrifices other resources on the public lands in this area.

For example, because industry didn’t like it, BLM deleted the

raptor recovery area for a species that is in Canada for USA listing, the Ferruginous hawk.

Though most people believe we should be taking actions to prevent listing of threatened and endangered species, BLM takes an

action at Cave Gulch that cumulatively adds one more step toward

listing.

Cave Gulch operators can say that they have some—Cave Gulch

operators say they have somehow experienced obstructions at Cave

Gulch. From our perspective, it’s the best demonstration yet that

Wyoming is still viewed by some of those companies as a Third

World resource colony, where quick and easy is all that matters.

The best gauge to demonstrate whether we have a problem or

not are the numbers. To quote from the April 9th edition of the

Star Tribune, the rig counts for Wyoming and the Rocky Mountain

region have soared over the figures from last year. According to the

Petroleum Information Corporation, Wyoming had 15 rigs in the

State at the same time last year. This year, there are 35, or a 133

percent increase. Wyoming had the largest increase in the nation,

twice the increase in No. 2 Louisiana. For the Rocky Mountain region, the rig count is up 36 percent. In addition, there are hundreds, if not thousands, of wells that have been approved that are

not being developed by the companies who hold approvals to develop it, because of market problems, higher priority projects and
81

a host of other economic reasons. Examples are 72 wells at Stage

Coach Draw, 750 wells at Wamsutter 2, 1,300 wells at Fontenelle,

and 1,300 wells at Moxa Arch have all been approved, just to name

a few.

Things are pretty busy here in Wyoming. And if allegations of access and regulatory issues are any kind of inhibitor to development

in the State, it’s nothing more than a thinly disguised attempt by

some, certainly not all, oil, gas and mineral companies to commandeer this nation’s land to their own use.

In closing, the single most important factor in expediting development, and I’d like to echo precisely what Terry Belton said, but

in my own words, is industry’s willingness to come to the table

early in the process to participate in identifying key issues early

and to work in good faith to resolve issues early with the U.S. Forest Service, EPA, the U.S. Fish and Wildlife Service, the Wyoming

Game and Fish Department, to name a few, as well as the citizens

of Wyoming.

Historically, industry has instead ignored the pleas for collaboration and, as a result, has forced many of the significant issues to

be dealt with in appeals and litigation. Fortunately, we are beginning to see the culture of decisionmaking change—for example,

GRBAC and a host of quality air quality processes that are currently underway. But we still have a long journey ahead of us.

And, Representative Cubin, I plead with you to play a constructive role by working to help bring the parties together to find solutions to the problems that we face. Now, I must admit today has

felt a little bit more of a witch hunt.

[The prepared statement of Mr. Throop may be found at end of

hearing.]

Mrs. CUBIN. Thank you very much for your comments, Mr.

Throop.

I first will respond to the out-of-State folks who wished that they

had been invited.

We encouraged for many weeks the Democrats on the Committee

to identify the people that they wanted us to invite. I guess they

didn’t care whether or not people came, because they never did do

that. I knew the people in my State that, you know, I thought

would present a good picture, you being one. And so that’s why

these folks were invited.

And as I said earlier, we will have more hearings. This is just

one of several. So no one ever will be barred from the process as

long as I have the chairmanship of this Committee. I think it’s very

important.

You and I have worked together earlier. I want to ask you something. It’s kind of a—I hope it’s not a personal question, but maybe.

When we talked out at the BLM building, at that time you were

very upset about something that happened. And I’m not passing

judgment on who was right or wrong because, frankly, I don’t

know. But I wonder, now that this time has passed, are you still

willing to hang in there and try to get solutions made, like you

were doing at that time, and so that one incident there, that No.

43, didn’t sour you on the whole process of cooperation?
82

Mr. THROOP. Absolutely. Let me be very clear about this. Our

primary method of problem resolution is through collaboration and

cooperative decisionmaking among all the parties.

I want to be equally candid with you and tell you that, most of

the time when we seek collaborative processes with many of the

multinational corporations that do business in this State, we are

told clearly that they aren’t going to give us the time of day unless

we can stop their project or slow their project down to a timetable

that’s not acceptable to them. And unfortunately, the culture, historically, has been appeal and litigate first and then you can begin

discussions.

That is not the way we want to do business. We would like to

collaborate on every issue and are absolutely sincere that the solution is getting the parties together early in the process, identifying

issues, and trying to resolve those issues.

They’re not always going to work. And I think, by and large, the

Cave Gulch interim development process was, over all, a positive.

There was a problem as time has passed, and I think the primary

problem was between our organization and Chevron. And I still

consider Robin Smith, you know, an acquaintance, a friend, and

somebody I respect, and harbor no personal animosities or resentment.

But I think the primary problem we have here is companies who

want to work through a regulatory process that’s as minimal as

possible with as few distractions as possible. We are a distraction,

and collaboration is a distraction, and they won’t do it unless

they’re forced to do so.

But from our perspective that’s our No. 1 approach. We will always do it first. It’s a sad commentary that we have two attorneys

full-time on our staff, but that’s the way we’ve been forced to do

business in this State, appeal, litigate first, and then you get their

attention and they’ll give you their attention and then you can

begin to find some collaborative solutions. Even when we have an

appeal or even when we have litigation, we are always looking for

that opportunity, get the parties to the table and try to collaboratively come up with something that will work for all of us.

But unfortunately, until very recently, those opportunities have

been very few and far between, and hopefully that climate is

changing.

Mrs. CUBIN. Are you satisfied with the final EIS on Cave Gulch?

Mr. THROOP. We are unequivocally not satisfied with the final

EIS on Cave Gulch.

Mrs. CUBIN. Do you think that you could be and still have development?

Mr. THROOP. Oh, absolutely, absolutely.

Mrs. CUBIN. What would those—what changes would there be?

Mr. THROOP. Well, we strongly believe—let me say, first of all,

we are not going to appeal the final EIS, even though we’re dissatisfied with it. From our perspective, we believe that that area, for

lack of a better way to describe it, will become a national sacrifice

area, that the other resources will be sacrificed. It will be converted

to a dominant use for oil and gas. And we believe that there’s nothing that we can do to prevent that from occurring.
83

Now, specifically to your question, there are a number of steps

that the industry, in collaboration with the Federal agencies, could

have taken to have protected the raptors. They chose not to do so.

As I mentioned—I think, as I mentioned in my testimony, I actually made a good note of that piece, but there was—let’s see if I

have that. No, I did mention that the raptor recovery area was

originally proposed. That is something that would have—if that

had remained in the document, that would have resulted in a better decision. One has to understand the Ferruginous hawk. They’re

very susceptible to human activities. And we believe extremely

strongly the consultants that we’ve been consulting with. We believe very strongly that the land will not be adequately protected

for Ferruginous hawk and other species. And again, we believe that

in this area we’re moving to a dominant use.

And that’s a scenario that we’re seeing throughout Wyoming,

where you have 98 percent of the available lands in the Green

River Basin that are available for oil and gas leasing and development. That’s not multiple use. That’s dominant use. Many other resources will be sacrificed in that process. Very special areas that

should be protected, critical habitat, areas of environmental concern, are not being adequately protected.

So again, we think that if we had had the parties together there

truly would have been a collaborative process. There was a collaborative process in the interim. Coming out of that interim development at Cave Gulch, there was the—kind of theory or thought that

there may be some collaborative efforts toward the final EIS. None

of that happened. There was zero collaboration. But again, we’re

folding the tent on that one. We think that that’s a lost area, and

we’re going to let it go.

Mrs. CUBIN. You know, I think balance—balance has to be the

most important word to each and every one of us.

You know, I talked to you a little earlier about the levees in California that were not repaired. There was an amendment on the—

offered to the Endangered Species Act. And what it said was in

order to save human life or prevent substantial property loss you

can maintain existing levees without doing an environmental impact study. That was defeated in the Congress because the Sierra

Club and a lot of the environmental organizations came in and lobbied against that. People voted and have subsequently said let’s

have another revote on that, I didn’t understand that six people

were going to die.

And I know those kinds of things hurt what you believe in, just

as much as somebody polluting an area hurts what these producers

believe in.

And so I’m glad to hear that you do want to continue to talk

about these issues and try to get them worked out so we don’t have

to deal with those extreme things and say, see, that’s your fault

and, see, that’s your fault. I think assessing blame is certainly not

a constructive thing to do and it certainly is a waste of time.

Would you tell me a little bit about what you meant in this statement. In your testimony you said BLM can change its policies for

Wyoming and give Wyoming BLM the authority to authorize an

offsite mitigation, like it’s done in other Western States. What were

you referring to there, Tom?
84

Mr. THROOP. If, let’s say, for example, there’s a full field development that is approved and APDs are approved where we have, let’s

say, 8 wells per section or 16 wells per section. I think it gets very

obvious at that point that, with a well every 40 acres or a well

every 80 acres on a leasehold, that the opportunities to do onsite

mitigation for the loss of other natural resources are nonexistent;

and if there is going to be mitigation, it’s going to have to be offsite.

There are other Western States where BLM is given the authority

and, in fact, does use offsite mitigation as a way to mitigate impacts to development on BLM lands. I know New Mexico is an example of one State where BLM in that State uses offsite mitigation.

In Wyoming, there’s a decision, and I think it’s at the Washington, DC, level, but there’s a decision that Wyoming could not

use offsite mitigation in order to mitigate impacts on a leasehold.

If that policy were to be changed and BLM was given the authority

to authorize and utilize offsite mitigation in the decisions that they

make in this State, in large measure eco-royalty relief may not be

as necessary.

Mrs. CUBIN. That’s just what I was thinking, wouldn’t eco-royalty

relief address that?

Mr. THROOP. Eco-royalty relief would clearly address that, and

we clearly support that. We were part of the process that made

that recommendation, and we unequivocally support that. But it

sounds like it’s going to be difficult to get it through the executive

branch, and if it is to be adopted it’s going to have to be done by

the legislative branch. And I thought your comments were particularly insightful about the advantages and disadvantages in doing

that legislatively.

Mrs. CUBIN. It’s hard to know, isn’t it?

Mr. THROOP. It’s hard to know and, if it’s not possible to do that,

a fall-back position, clearly a second strategy, may be to do the offsite mitigation.

Mrs. CUBIN. You said that BLM in New Mexico can do offsite

mitigation, but the BLM in Wyoming can’t. Who makes that decision, who can and who can’t?

Mr. THROOP. I’m not—and, in fact, if Dan Heilig, who’s our associate director and the head of our legal department, was here, he

could tell you that. I’m a little bit unclear. Mr. Pierson may be able

to answer that question.

But my understanding was that that was a policy decision that

was made by BLM in Washington, DC. And I do not know why

there would be a difference between policy decisions for implementation between New Mexico versus Wyoming. And I will, for myself,

figure that one out.

Mrs. CUBIN. Some of those things are a mystery.

Mr. THROOP. Yes.

Mrs. CUBIN. You referred to a 90 percent figure of land that is

available. Are you saying that the oil and gas industry impacts 90

percent of the land? Is that what you meant?

Mr. THROOP. What I meant here was, of the BLM lands that are

available for leasing in the Green River Basin and in the Cave

Gulch-Bullfrog area, it’s my understanding that approximately 90

percent of those lands are under lease, of the BLM lands.
85

Mrs. CUBIN. You were on the GRBAC, weren’t you?

Mr. THROOP. I was not. Dan Heilig, our associate director, was.

I followed the process pretty closely. So, like Robert, I can’t definitively respond to specific questions.

Mrs. CUBIN. I asked the other panel what would—and I think

you’ve answered it partially, but just so you have the opportunity

to add more, if you wish, what would you consider to be a win-win

situation for minerals development from where you sit today?

Mr. THROOP. And I want to make it very clear that I fully agree

with you. The most important word is balance, you know, is multiple use, is balance, in the allocation of how resources are used

and protected on public lands. And I believe strongly that there is

a win-win situation in virtually every issue that we face. And I

think what it takes is it takes parties who are willing to invest in

the collaboration. I think it takes parties who are willing to leave

their egos and their predetermined positions at the door, be willing

to identify issues early on in the process, be willing to compromise,

be willing to work with the other parties, to try to walk in one another’s shoes and resolve each other’s issues. And I believe strongly

that that can be done.

And specifically, in oil and gas development of minerals, it’s very

important to the economy and the future of Wyoming. I have two

children in schools in this State and they’re getting a good education, and I know where the resources are coming from, and I appreciate it.

But we don’t have to, to a frenzy, destroy the other crucially important public land resources in the wake of that development,

where we have crucial winter range, wildlife habitat, calving areas,

migration corridors. There can be protection for those areas.

Where there are raptor concentration areas and there are sensitive seasons, I think we can put on seasonal restrictions that will

work for industry as well as work for the other resources. Where

there are soils problems or where there are air quality concerns or

where there are water quality problems, we can work together to

try to find solutions that allow development to go forward but not

sacrifice those other resources.

And I clearly believe that that can be done in a balanced fashion

that brings all parties to the table and gives collaborative solutions.

We just haven’t quite arrived there yet. I think the GRBAC is a

good start.

I’d like to mention that on the Jonah 2 project I was very surprised to hear John Martin say that that process is not working.

We have been very involved in that Jonah 2 project. And I will

tell you clearly that one of the biggest problems that we had in

Jonah 2 and other projects in southwest Wyoming is that BLM was

very late in the process to bring other cooperating agencies to the

table. They knew the Forest Service was going to be involved. They

knew the EPA was going to be involved. But they tried to shut

them out of the process until it was obvious they could not do so.

Industry and BLM were very late in getting the scope and the

details of the project in Jonah 2 to the other agencies so it could

be modeled, in the first place, and determinations could be made

as to what kind of air quality impacts there would be. There has

been a delay from August to November. But frankly, the primary
86

reason for that delay is BLM and industry was very late getting

the scope and details of the project to the other agencies so they

could model and provide input.

Mrs. CUBIN. Well, I think Mr. Martin’s testimony was that the

problem was they disagreed. So even as we speak, there’s a stalemate, and they can’t move forward. And the success was, the way

I would interpret it, to be measured by whether or not, in fact,

going through the steps they did would reduce the amount of time

to complete the NEPA process. And I think his assessment, what

I understood him to say, was that it wasn’t working because it

wasn’t achieving the goal they set out to achieve.

Mr. THROOP. And I’m telling you I believe strongly that it is definitely achieving the goal that GRBAC set out to achieve. The process is not stalemated. The process is moving forward. I’ve attended

those same meetings. In fact, I didn’t see him at the last meeting,

and I was at the last meeting. But I’m here to tell you I think the

process is going forward very well and that could be a model.

If you also look at Mr. Martin’s testimony, he also talked about

how he felt that the air quality requirements they’re going to face

in that project were unfair and that we should be able to pollute

a little here so we can possibly have some beneficial impacts on air

quality maybe in some larger area somewhere else. That’s not the

law. This is the largest Class I clean air shift in the lower 48

States that is potentially going to be impacted here. There are

Class I wilderness areas that have been designated by Congress.

The Clean Air Act is very clear that those wilderness areas cannot

be degraded. And that’s what this process is all about now, is trying to determine how do we facilitate development but at the same

time not negatively impact one of the single most significant resources that we have in the State. And that’s the largest block of

clean air in the entire lower 48 States.

Mrs. CUBIN. I think I’ll let you take that up with Mr. Martin.

Mr. THROOP. Sure.

Mrs. CUBIN. That would be a good place to work it out, to start.

What is your response to the fact that, because of the difficulty

that is experienced in dealing with the Federal Government in trying to get permits, that investment goes to Texas, Oklahoma,

places where they don’t have public land to deal with, and then,

on top of that, maybe worse, to other countries. What is your reaction to that?

Mr. THROOP. Well, let me be very clear with my reaction. I don’t

believe it.

Mrs. CUBIN. Oh, that’s interesting. I sure do.

Mr. THROOP. Oh, well, we may have a difference of opinion on

that. But you look at the number of companies, you look at the

number of operators that are actively involved in development in

this State, and you look at the time lines for the processes, you

know, here compared to other Western States, and my understanding is all of the information indicates that there’s nothing out

of the norm here, that what we’re experiencing——

Mrs. CUBIN. I’m not talking about just Wyoming. I’m talking

about public land States.

Mr. THROOP. And there may well be an issue there. But I think

we do, again, need to remember that these are public lands that
87

are owned by every single citizen of the United States and Wyoming, and that there are other extremely important resources on

those lands.

And GRBAC, I guess I heard earlier that the number of months

was 16 months, was the target for getting an EIS completed. I

think if we look at the Cave Gulch EIS process, it’s probably pretty

close to 16 months. And I don’t think it was many more than that.

If we count back and look at those dates, I don’t think it will be

many more than that. And again, that process and project was very

definitely fast-tracked, and many of the other public interests not

adequately considered.

You know, again, I don’t believe that these large companies who

are doing business here are disadvantaged in this State.

Mrs. CUBIN. Even over Louisiana or Alaska?

Mr. THROOP. No.

Mrs. CUBIN. You don’t think that it’s a disadvantage to have to

do the environmental impact statement and go through all of the

things required to get that when you don’t have to do any of it in

Louisiana?

Mr. THROOP. I definitely do not, because these are different

lands, these are different resources. These are public land resources. And the numbers speak for themselves. You know, again,

what are we, the No. 2 natural gas-producing State, behind New

Mexico? We have a very active oil industry in this State that certainly has had more impacts—in fact, they both have had far more

impacts by market price and access to transportation of product

than any other factor. And if you look at the amount of product

that we’re producing in this State and you look at the number of

companies that are doing business in this State and, if they are

truly, in fact, here for the long-term, they should be willing to roll

up their sleeves and work for the citizens of Wyoming. You can certainly get access to that resource for the national benefit, but also

to protect those other crucially important land resources that are

on those lands, some of the most spectacular wildlife herds in the

country, the cleanest air in the country.

Mrs. CUBIN. I love it.

Mr. THROOP. We all love it. So let’s have balanced decisions that

protect those resources while developing oil and gas for this State

and its nation’s future. It’s all very obtainable.

Mrs. CUBIN. Didn’t mean to leave you out of this whole thing.

Would you give me your response to my question about companies going out of the State dealing with the Federal Government

and also going out of the country as well?

Mr. HOSKINS. Well, first of all, I will point out that these are, in

fact, public lands and they are part of the sovereignty, sovereign

ownership of the people of the United States. As Tom said, they’re

not going elsewhere. If they make that decision, that’s a business

decision.

I think one of the things that truly bothers me, when I hear a

lot of talk about the socioeconomic impacts and the failure to analyze those, we should ask ourselves what true benefits are we getting from the oil and gas industry in this State. Obviously, most

of our tax revenues come from mining, but also oil and gas. And

you have to ask yourself what benefit to the State is such a reli-
88

ance on a small and narrow range of economic development. And

when I think about the issues of companies deciding to go elsewhere, I have to think it might be something like when the military bases closed around the country. And a lot of people might—

you can talk to those who say one of the best things that ever happened to them was that the military base closed, because it forced

the community to think about its long-term economic development

in terms of diversity, rather than relying on one resource to fund

their areas.

Economic extraction of minerals from the West over the last few

years has been associated with a number of things. One of the big

problems, when the boom started in 1970’s, was the impact on—

the socioeconomic impact, alcoholism, drugs, crime, additional impacts on infrastructure and those kinds of things, and that’s why

Wyoming passed the industrial siting act, to try to deal with some

of those things.

I think the issue then comes down to what degree will the oil

and gas industry be a part of a diversified economy in the West,

and I think right now it is not. And so my personal belief—and I’m

not going to say this is the Wyoming Wildlife Federation’s, but my

personal feeling is that we need to look at controlling the development of oil and gas in this State and the West to allow communities to sit down and do the hard work that’s necessary to look to

the future and diversify their economies, because it is simply not

happening now.

Mrs. CUBIN. Why isn’t it happening now?

Mr. HOSKINS. It would be just a personal opinion. I believe that

it’s largely cultural, that we have been doing extraction in the West

for over a hundred years now and we’re just addicted to it. It’s an

addiction, like an addiction to alcohol and drugs. We are addicted

to the easy money that comes out of the minerals industry. You

know, we in Wyoming don’t have to pay income tax. That’s great.

What happens when the oil and gas industry goes into a bust, like

it did in the 1980’s?

Mrs. CUBIN. Where are you originally from?

Mr. HOSKINS. I’m from North Carolina, and I grew up raising tobacco, and so all of my friends who stayed in tobacco were looking

at the same kinds of things that I think that people in the West

who are involved in the extraction industries are looking at. And

in North Carolina, people simply don’t want to think that things

will be different. And right now they are learning that it is going

to be different, although they’re probably going to be able to ship

everything overseas to—because people smoke quite a bit overseas.

Mrs. CUBIN. You know, just the response that you’ve given, as

compared to the response that Tom gave us, it seems to me you

have different goals. Tom would like to achieve some balance and

be able to produce the resources, and you would like to not produce

the resources.

Mr. HOSKINS. What I’m saying is I would like to see more diversity in the economics of the West, and we simply don’t have that

now.

Mrs. CUBIN. I find it interesting that lots of times people move

here because they love it. Then the first thing they want to do is

change it to how it was where they came from or something and
89

eliminate what they came here for in the first place. I’m not saying

that’s you, but I find that a lot.

Are you satisfied, Robert, with the EIS on Cave Gulch?

Mr. HOSKINS. Well, once again, the Federation hasn’t gotten involved in this. My primary concern with the EIS is the political—

the politics of it. I was not here when the original scoping meeting

was held. I was living in Laramie at the time. I did come up and

I attended the March 11th hearing. And I’m deeply concerned with

the political atmosphere, circus atmosphere that I saw at the BLM

meeting.

Mrs. CUBIN. And what was that date?

Mr. HOSKINS. That was on the 11th of March, I think. It was

right after the legislative session.

And my primary concern with that was the issue that everybody

seemed to be heating up on was that that was a conflict between

birds and jobs. And in particular, virtually everyone who stood up

and spoke was talking about how the 6-month stipulation, that it

was absolutely—that they treated it as if it was absolute, that

there was 6 months where nobody could do anything around in the

areas, around the raptor areas. And if you look carefully at the

draft EIS where they talk about that, those were extremely limited

to buffer zones, a quarter mile or half mile buffer zones around

various nesting sites and, of course, applied to the raptor—key

raptor area, and that area was bound by BLM. And there was a

lot of disagreement over that. It was not—did not have much potential for gas exploration or drilling in that area. People might

disagree with that, but that’s what the issue was.

And so I was concerned, when everybody stood up and berated

the BLM and environmentalists for causing, quote unquote, delays

in the Cave Gulch development, that they sort of keyed in on this

6-month stipulation, by claiming it was an absolute stipulation

where nobody could do anything during that 6 months, which was

false.

So I have to ask the question when I look at the political process

that’s involved around Cave Gulch is that, if everybody has his

ducks in a row, why is it necessary to sort of resort to that kind

of misinformation.

It was also clear that many people who spoke simply hadn’t read

the draft EIS and were simply going on what they had been told

to say. I don’t call that public participation.

So as far as——

Mrs. CUBIN. So if you had it to do yourself, you’d make all the

decisions?

Mr. HOSKINS. No. The decisions—this brings up another question. The decisions are the Federal Government’s. Seems to me if

we were to look for, you know, closing down the delays, quote unquote, it seems to me we’d have to make an amendment to recognize that the final authority belongs to the Federal Government.

Doesn’t belong to Natrona County, doesn’t belong to Wyoming,

doesn’t belong to the oil and gas industry. It belongs to the Federal

Government.

And I think that these constant challenges to the authority of the

Federal Government over Federal lands is probably just as much

responsible for political delays as anything else, if we spent a lot
90

less time trying to do end runs around with the lawyers and complaining about interpreting—how regulations are interpreted.

When I was in the military, that’s the most rigid organization in

the Federal Government. We all interpreted regulations based

upon our own knowledge and our own experience. If it happens in

the military you know it’s going to happen in the BLM. I think

that’s something that obfuscates the issue. We need to recognize

that the Federal Government is the final authority on Federal

lands and start dealing with that and accepting that and going forward from there.

Mrs. CUBIN. Thank you. I appreciate your testimony from both

of you.

You know, I think another solution that we need to start working

toward is I think we need to make land exchanges. It would be so

much more economically feasible for the Federal Government to

manage a larger portion of land and get rid of some of these parcels

where there’s Federal land in between all private and State and so

on. If we could just accommodate larger blocks of land, I think everybody would be happier. There would be better recreational use

on the Federal land. They wouldn’t even have to allow mining or

drilling.

Mr. THROOP. We would agree with you entirely. We think that’s

a really good future solution, land exchanges.

The problem we’re seeing right now is there’s such inequality in

the two land exchanges that are the focus of the attention.

Mrs. CUBIN. You mean the two now?

Mr. THROOP. The Two Trails in the Big Horn Basin and then the

Elk Mountain-Seminole in the south central.

And I guess our primary concern is if we have such inequitable

land exchanges that sacrifice the public interest to such an alarming degree, the public is going to react by saying land exchanges

are the same as selling our public lands, and they’re going to oppose those as well.

In a former life, I was a chairman of a board of county commissioners and was involved in two very large land exchanges that included two Federal agencies, a State agency, and a County government. And those had public support because all of the interests

worked jointly to try to make certain that private interests were

protected, but also public interests were protected as well. And

that’s something—that’s a message that you can send to the BLM,

if you’re going to exchange, let’s make sure there’s something in it

for the public.

Mrs. CUBIN. And I guess, if those decisions were easy and those

exchanges were easy and everyone agreed, we probably wouldn’t be

here today talking about this problem that we have.

Thank you.

Mr. HOSKINS. Let me—could I just make one other quick mention?

Mrs. CUBIN. Sure.

Mr. HOSKINS. I think there is a lot of middle ground that we can

work with. I wanted to mention a couple of areas where I totally

agree with Robin Smith.

Inadequate resources within BLM, you know, that’s something

that industry and the conservation community strongly agree on.
91

Also this bizarre relationship between BLM and industry and

independent consultants, that’s one that’s troubling to us as well,

and maybe for slightly different reasons. But I thought Robin’s description of that issue was a very good one.

There’s a lot of common ground here.

And I think one—a point I’d like to leave you with is, certainly,

the parties have to be willing to come to the table, but we also need

to establish a climate in this State where the decisionmaking bodies, both legislative and executive branch decisionmaking bodies,

establish a climate where there’s an expectation that the parties

will come together and try to find common ground. I strongly believe at this point the feedback from the agencies, both the legislative and executive branches of the State and Federal Government,

is go ahead and do your end runs; you’ll get away with it, and not

requiring or establishing a climate where collaboration is something that has a high value and is a requirement of the decisionmaking process.

Mrs. CUBIN. Certainly can keep working for that.

Thank you very much. Thank you, all of you, for being here

today.

This Subcommittee stands adjourned.

[Whereupon, the Subcommittee was adjourned.]

[Additional material submitted for the record follows.]
92

STATEMENT OF GLORIA FLORA, FOREST SUPERVISOR, LEWIS AND CLARK NATIONAL

FOREST, USDA, FOREST SERVICE

Madam Chairman and Members of the Subcommittee:

Thank you for the opportunity to discuss the Forest Service’s Northern Region oil

and gas program and the Draft Environmental Impact Statement (HIS) for oil and

gas leasing on the Lewis and Clark National Forest.

In response to the Secretary’s Oil and Gas Resources Regulation of 1990, the Forest Service developed a schedule for analyzing all areas under its jurisdiction where

industry had expressed a high interest in leasing. The analyses and decisions forgo

percept of the areas which were scheduled are now complete.

Background

The Northern Regional Forester has been analyzing the opportunities for oil and

gas leasing on areas with high mineral potential on National Forests and Grasslands in Montana, North Dakota, South Dakota, and Northern Idaho in accordance

with the Secretary’s regulations (36 CFR 228). In 1998, Environmental Impact

Statements (EIS) addressing oil and gas leasing will be completed for all ‘‘high potential’’ oil and gas areas in the Northern Region.

Thus far, EIS’s have been completed in North Dakota (Little Missouri EIS), and

in Montana on the Beartooth Ranger District of the Custer National Forest and

Beaverhead National Forest. Final EIS’s for the Helena and Lewis and Clark National Forests will be released this fall. The Custer National Forest will complete

the EIS on high potential areas in South Dakota in 1998. As a result, the Northern

Region has processed 1,039 leases since 1991.

We are proud that we’ve been able to meet the challenge of providing oil and gas

development opportunities in an environmentally sound manner. It should be noted

that many of these high potential oil and gas areas also have high values for threatened and endangered species habitat, cultural resources, recreation, and water resources. Through mitigation efforts and some restrictions on leases, we’ve been able

lease approximately 450,000 acres, bringing in approximately $10 million in bonus

bids to the United States Treasury. In addition, 5.5 billion cubic feet of gas and 3.7

million barrels of oil were produced from National Forest System lands in the

Northern Region in 1996.

Lewis and Clark Oil and Gas Program

The Lewis and Clark National Forest has been analyzing the opportunities for

leasing for oil and gas through an EIS process that began February 24, 1994. The

area being analyzed in this EIS encompasses some 1.86 million acres, located on the

Rocky Mountain Front north and west of Great Falls and several isolated mountain

ranges in central Montana, east and south of Great Falls.

In addition to being a high potential area for oil and gas, 21 percent of the area

is Congressionally designated wilderness, 9 percent is in the Montana Wilderness

Study Areas also designated by the Congress, and another 3 percent has been recommended for wilderness through the forest planning process under the National

Forest Management Act. Sixteen percent of the area is already leased for oil and

gas, but not without controversy. For instance, the Badger-Two Medicine Area has

an approved Application to Drill (APD) and a pending APD. However, leases in this

area have been suspended until resolution is reached on a traditional cultural property.

The history of oil and gas leasing on the Front is complex and heated. Minimal

development has taken place on the 52 existing leases. Ten lease applications are

pending because at the time of their submittal, the areas were under consideration

for wilderness designation by the Congress. Another 19 leases involving 26,653

acres have been canceled due to court order.

Issues such as protection for a traditional cultural district which may be eligible

for listing on the National Register of Historic Places, protection of the grizzly bear,

strongly conflicting social values, and the economics of oil and gas development

where leases may require No Surface Occupancy stipulations are examples of the

difficult issues affecting decisions both on existing leases and future leasing options.

Status of Lewis and Clark Oil and Gas Leasing EIS

The draft EIS was released in August of 1996 and the public comment period

closed in December, 1996. The preferred alternative identified in the Draft EIS proposes oil and gas leasing for approximately 52 percent—nearly a million acres—of

the forest. In response to the draft, the public provided 1,495 comments and we are

in the process of analyzing those comments and incorporating information provided

in the comments into the final EIS. The final EIS and the Record of Decision are

scheduled to be issued in August, 1997.
93

Conclusion

Let me close by saying that there has been extensive involvement by individuals,

environmental groups, the petroleum industry, the tribes and agencies at the federal, state and local level in this EIS process. It has been a very open and public

process.

That concludes my prepared testimony. I would be pleased to answer questions

you may have.

STATEMENT OF GINA GUY, REGIONAL SOLICITOR, ROCKY MOUNTAIN REGION,

DEPARTMENT OF THE INTERIOR

Good morning Madam Chairman and Members of the Subcommittee, Ladies and

Gentlemen. It is a pleasure to be with you today.

I. Cost-recovery Opinion.

As the members of the Subcommittee are aware, the Office of the Solicitor recently issued an opinion to the Director, Bureau of Land Management (M-36987;

December 5, 1996) on the subject ‘‘BLM’s Authority to Recover Costs of Minerals

Document Processing.’’ A copy of the Opinion is appended for the record. The Opinion was intended to assist BLM in its cost recovery efforts in response to two separate reports from the Department’s Office of Inspector General, which concluded

that BLM’s delay in undertaking certain cost recovery actions pursuant to existing

authorities had resulted in the loss of significant sums.

It is important to distinguish cost recovery from royalty payments, lease rentals,

and bonus bids which are monies paid to the United States (and in some cases

shared with states) for the privilege of exploring for and producing federal minerals.

Costs which may be subject to recovery in the minerals area refer only to the processing costs incurred by the BLM. BLM is authorized to recover its reasonable processing costs from identifiable beneficiaries who receive a special benefit beyond the

benefits received by the general public.

The policy of the Federal government to recover costs for services resulting in private benefits has been in force at least since the Eisenhower Administration. The

Independent Offices Appropriation Act (IOWA), passed in 1952, provided generally

for cost recovery by federal agencies so as to make the services furnished as nearly

self-sustaining as possible. This statute was interpreted in 1959 by the Office of

Management and Budget in OMB Circular A-25, last updated in 1993. The circular

stated that it is the general policy of the United States Government to assess user

charges against ‘‘each identifiable recipient for special benefits derived from Federal

activities beyond those received by the general public.’’

Conversely, the circular also provided that no costs could be recovered when the

identity of the beneficiary is obscure, and the service primarily benefits the general

public at large. An example of this would be the preparation of a programmatic environmental impact statement in support of a general agency program, such as a

Resource Management Plan for a BLM district or a General Management Plan by

the National Park Service for a particular park.

The circular also provides that even when the public benefits as a ‘‘necessary consequence’’ of the service provided to an identifiable recipient, the agency is not required under the IOAA to allocate any cost to the public and may seek to recover

the full cost of the service. Thus, even if the public derives some incidental benefit,

such as contribution to the general knowledge base as a result of environmental

studies, in connection with processing of a federal permit or license or other document sought by or issued to an identifiable party, the government has the authority

under the IOAA to recover all its costs. This could also be described as a ‘‘but for’’

test: if the agency would not have incurred the cost but for the service to an identifiable recipient, the agency may recover the full cost irrespective of the incidental

benefit to the public. This policy has been incorporated in Interior’s Departmental

Manual, which allows some exceptions, most notably in cases where the cost of collection would consume an unduly large amount of the money collected, and if the

recipient is engaged in a non-profit activity devoted to the public safety, health or

welfare.

Agency efforts to pursue cost recovery and the reasonableness of the fees sought

have spawned a great deal of litigation over the years. At the same time, the Congress has not hesitated to enact new laws or expand existing statutes with respect

to cost recovery authority. Much of that litigation and the statutes pertinent to today’s healing are discussed in detail in the Opinion.

One of the most important sources of BLM’s cost recovery authority is found in

the Federal Land Policy and Management Act (‘‘FLPMA’’), enacted in 1976 after
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years of debate and an exhaustive report from the Public Land Law Review Commission. FLPMA (Section 304) addresses two types of fees: filing fees and processing

fees. Filing fees are basically nominal fees intended to limit filings to serious applicants. Processing fees reimburse the government for reasonable processing costs.

The statute provides authority for BLM to recoup reasonable costs which include,

but are not limited to, the costs of special studies; environmental impact statements;

monitoring construction, operation, maintenance, and termination of any authorized

facility; or other special activities. In determining what costs are reasonable under

FLPMA, BLM may decide that less than all costs should be recovered. Statutorily

identified reasonableness factors include actual costs (exclusive of management

overhead), the monetary value of the rights or privileges sought, the efficiency to

government process, the public service provided, and an apportionment between the

general public interest and the exclusive benefit of the applicant. The Congress has

provided that BLM has the authority to recover up to its full processing costs. Case

law requires that BLM, in determining what is reasonable, consider all of the

FLPMA reasonableness factors, such as the benefit of the project to the public. BLM

can consider, for example, whether the project provides a specific public service,

such as better road access, in reaching its decision on cost recovery pursuant to

FLPMA.

Subject to the reasonableness factors, the BLM may exercise cost recovery authority under FLPMA when it processes actions taken pursuant to the Mineral Leasing

Act in situations where an identifiable beneficiary receives a benefit or privilege beyond those received by the general public. Therefore, many of the BLM’s costs incurred in the competitive leasing process for both coal and oil and gas are recoverable.

The Office of the Solicitor will continue to offer such assistance as BLM may request in the development of cost-recovery rulemakings. The rulemakings will be designed to implement the Solicitor’s Opinion, and will include the opportunity for

public comment about how the BLM should weigh the various reasonableness factors.

II. Green River Basin Advisory Council Report

At the request of Assistant Secretary Armstrong, the Office of the Solicitor is examining the recommendations with respect to royalty ‘‘ecocredits’’. An opinion is in

progress, but is not yet complete.

This concludes my prepared statement. I would be happy to answer any questions

the Subcommittee may have.

STATEMENT OF GEORGE H. FANCHER, JR.

Thank you Madam Chairman for the privilege to appear before you and the subcommittee on Energy and Mineral Resources. It is time we examine the issues

which are adversely affecting our industry. You are to be complimented on your interest in listening to some of the problems that producers in the Rocky Mountain

Region are having with governmental agencies such as the BLM. The goal of the

government should be to encourage and help private industry to be more efficient

and to economically develop and produce the domestic oil and gas reserves that are

available in the United States.

My name is George Fancher and I am the owner of Fancher Oil Company, a small

independent producer located in Denver, Colorado. I have been active in the Rocky

Mountain area since 1969. I am a member of the Independent Petroleum Association of Mountain States (IPAMS), the Wyoming Independent Producers Association

(WIPA), and the Independent Petroleum Association of America (IPAA). From 1991

through 1996, I served as Chairman of IPAMS Crude Oil Committee and last year

I was a member of Governor Geringer’s State and Industry Negotiating Committee

for the Express Pipeline Project State Land’s Right-of-Way issue.

However, today, I am not representing any organization and my comments reflect

only my concern about the procedures used by the BLM in approving the Environmental Impact Statement (FEIS) for the Express Pipeline Project which is projected

to deliver 172,000 BPD of Canadian crude oil from Hardisty, Alberta to Casper, Wyoming. As a result of my experience with the Express Project, I am concerned about

the lack of a comprehensive process to evaluate the need for and impact of an international pipeline on local and state economies and to the domestic oil and gas industry.

The Express Pipeline has been in operation for only a few months and its impact

upon crude oil prices has already been felt. Prices for crude oil have fallen by approximately $2.50 a barrel and have virtually wiped out the premiums (bonus) over
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posted price which Wyoming crude oil producers were receiving. I expect that by the

end of the year the premiums will no longer exist. This is due to the fact that by

the end of the year Express Pipeline will be shipping approximately 172,000 barrels

of crude oil per day from Hardisty, Alberta to its connection with the Platte Pipeline

at Casper, Wyoming. I anticipate that substantial quantities of crude oil being

shipped on Express Pipeline will be used to compete with oil produced by Rocky

Mountain oil producers in markets which include Wyoming, Colorado, and Utah.

The balance of Express’ crude will be shipped eastward on the Platte Pipeline to

its terminus at Wood River, Illinois.

Initial studies commissioned by the BLM of the socio-economic impact of the pipeline predicted the effect which is now being felt. The initial studies concluded that

there would be a price reduction of approximately $2.50 per barrel for all types of

Wyoming crude as a result of the pipeline. The initial report by the BLM’s consultants concluded that the potential total cumulative loss of income to Wyoming producers resulting from foregone production (accelerated decline) and lower prices

through 2005 would be as much as $2.1 billion. The initial report also found the

total impact on Wyoming state and local tax revenues would be about $23.3 million

in 1997. These initial reports directly contradicted conclusions reached by the BLM

in the Draft Environmental Impact Statement for Express Pipeline (‘‘DEIS’’) stating

that the pipeline would not directly affect oil production in Wyoming and Montana.

The initial report described above confirmed comments made by producers which

were received by the BLM after the DEIS was published, that there would be a substantial impact on crude oil production in Wyoming.

In my view, the BLM did an inadequate job in evaluating the impact of this pipeline. In fact, the BLM capitulated to Express after Express’ attorneys objected to

the consultants analysis which resulted in dramatic changes to their revised report.

While the initial report concluded that there would be a price reduction of $2.50

per barrel for all types of Wyoming crude as a result of the Pipeline, the revised

report concluded that there would be a price reduction of only $1 per barrel for just

Wyoming sweet crude, and that since ‘‘sweet crude only comprises 35 percent of Wyoming’s total production, the overall income and tax revenue effects would be similar to a $0.35 per barrel decline for all Wyoming production.’’ The initial report stated that ‘‘the total impact on Wyoming State and local tax revenues would be about

$23.3 million in 1997.’’ Ten days after receiving criticisms from Express’ attorney,

however, the BLM consultant revised its report and concluded that ‘‘[t]he total impact on Wyoming State and local tax revenues would amount to $3.4 million in

1997.’’

Also, the initial report concluded that ‘‘[t]he potential total cumulative loss of income to Wyoming producers resulting from foregone production (accelerated decline)

and lower prices through 2005 could be as much as $2.1 billion.’’ Ten days later,

BLM’s consultant concluded that the Pipeline ‘‘is not expected to accelerate the overall rate of decline in production of Wyoming oil’’ and that ‘‘[b]ased on the projected

annual rate of decline of 4.0 percent for the next ten years, the potential loss of income resulting from the $1 per barrel reduction in sweet crude through 2005 could

be as much as $195.8 million.’’ In the span of ten days, the BLM’s consultant

changed its evaluation of the cumulative impact to local producers from $2.1 billion

through 2005 to $195.8 million through 2005 (a change of over $1.9 billion).

The Final EIS incorporated the conclusions of the revised report issued ten days

after Express’s attorney criticized the initial report.

The final EIS report recognized that the premiums or bonus being paid at that

time for sweet crude were in the range of $2.25 per bbl and up to $4.50 per bbl

for general sour crude. With refineries in the region operating at capacity, the impact of an additional 100,000 BPD of crude via Express was only expected to reduce

the price of sweet crude by $1 per bbl and would have no effect on Wyoming general

sour crude.

The final report contains numerous flaws including, but not limited to 1) the use

of the same production decline rate to forecast what would happen without the Pipeline and what would happen with the Pipeline; 2) the failure to adequately support

its conclusion that even though a bonus in the range of $2.25 to $4.50 per barrel

is being paid for Wyoming crude oil because of purported shortages of oil, and even

though the consultants assumed that the Pipeline would more than adequately meet

local demand for crude oil, that somehow the Pipeline would effectively reduce the

price of Wyoming crude by only $.35 per barrel; 3) the failure to specifically identify

the sources upon which the consultants relied for material assumptions; 4) inconsistent assumptions concerning transportation costs; and 5) an inadequately supported assumption that Canadian crude will not displace Rocky Mountain oil production; 6) failure of the WSO to include information based on regional historical
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retail gasoline prices and, whether or not a crude oil oversupply has ever resulted

in lower gasoline prices at the pump.

Because of the radical changes between these two reports, the Wyoming State Office of the BLM (WSO) should have been very concerned about this shift and sought

independent review. The WSO never independently challenged or even questioned

this dramatic $1.9 billion change and the consultant’s reversal of its initial conclusion. The WSO never disclosed the presence of the two radically different socio-economic analyzes and never disclosed why it rejected the initial Report and accepted

the revised Report. The WSO made no attempt to quantify the loss of non-renewable

natural resources which will result from the construction and operation of the Pipeline. Thus, the WSO breached its obligations under NEPA to independently review

and analyze the consultant’s work on socio-economic impacts and failed to ensure

the professional integrity of the analysis contained in the consultant’s Final Report.

The first time the public had an opportunity to review the analysis performed by

the reports was when the FEIS was issued.

The WSO refused to extend the FEIS comment period to allow the Governor of

Wyoming an opportunity to address the final report which was disclosed to the public for the first time in the FEIS. The WSO failed to adequately address and consider relevant information submitted to it during the commenting process on the

FEIS which put into question the validity of key assumptions upon which the final

report was based, including the transcript of a March 20, 1996 hearing held before

the Wyoming State Senate Select Committee on Mineral Transportation which was

submitted to the WSO, and other information concerning domestic oil production

and related socio-economic impacts this Pipeline would cause. The WSO should have

treated the final report as new information not previously disclosed in the DEIS and

afforded the public the same commenting opportunity which was provided on other

areas originally covered in the DEIS.

On June 13, 1996, I learned that the consultant had new information which would

have caused them to reach different conclusions from those in the final report. On

or about June 20, 1996, I spoke to Mr. Ogaard of the WSO about the consultant’s

new information. Mr. Ogaard informed me that he did not really care if there was

new information or if the consultant’s opinion may have changed, that he had to

draw the line somewhere and the WSO was not about to re-open the case to consider the impact the pipeline would have on domestic crude oil production and related socio-economic impacts.

It was and is reasonably foreseeable that the inundation of large volumes of Canadian crude oil in the Rocky Mountain region would cause the price of oil in Wyoming

to fall and wells to be shut-in, resulting in a loss of otherwise recoverable domestic

natural resources which violates one of the fundamental purposes of NEPA which

is the prevention of waste of non-renewable natural resources. The WSO was obligated to evaluate and disclose ‘‘any irreversible and irretrievable commitments of

resources which would be involved in the proposed action should it be implemented’’

including the loss to domestic oil reserves resulting from the project.

‘‘In order to encourage the greatest recovery of oil and in the interest of conservation,’’ the BLM announced new regulations reducing the rate of federal royalties for

heavy grades of crude oil. 61 Fed. Reg. 4748 (February 8, 1996). These new rules

were designed to ‘‘provide an economic incentive to implement enhanced oil recovery

projects, and delay the plugging of [marginal] wells until the maximum amount of

economically recoverable oil can be obtained from the reservoir or field.’’ 61 Fed.

Reg. at 4748. The BLM explained why it felt royalty relief was needed:

As many as two-thirds of all marginal properties (including non-heavy oil properties) could be lost during a period of sustained low oil prices (Marginal Wells,

a Report of the National Petroleum Council, 1994, p.3). The danger in losing

the marginal wells is that, although production from individual wells may be

small, their collective production is significant, accounting for one-third of onshore domestic production excluding Alaska.

Nowhere in the analysis of the socio-economic impact of the Pipeline did the WSO

address the impact of these regulations which were promulgated by its own agency.

Neither the DEIS nor the FEIS contained any analysis of the economic limits of domestic oil production or any quantification of the domestic oil reserves which will

be lost as a result of the proposed Pipeline.

The failure of the BLM to adequately assess the impact of Express on local prices

violates NEPA which provides that it is the responsibility of the Federal Government to Enhance the quality of renewable resources and approach the maximum attainable recycling of depletable resources. Crude oil is a natural resource, but it is

depletable. If fields or wells have to be abandoned before the resource has been produced to its maximum attainable limit, then waste will occur. The prevention of
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waste of natural resources is a fundamental purpose of NEPA. The broad aim of

NEPA is well established.

The National Environmental Policy Act contains no exhaustive list of so-called

‘‘environmental considerations’’ but without question its aims extend beyond

sewage and garbage and even beyond water and air pollution. The act must be

construed to include protection of the quality of life . . . (citations omitted).

When economic and environmental effects are interrelated, the EIS must discuss

all of the effects of the proposal on the human environment, including social and

economic. The scope of effects to be considered under NEPA is expansive. Under

NEPA, the term ‘‘effects’’ includes:

Indirect effects, which are caused by the action and are later in time or farther

removed in distance, but are still reasonably foreseeable. Effects and impacts

as used in these regulations are synonymous . . . Effects includes . . . economic,

social, or health, whether direct, indirect or cumulative. Effects may also include those resulting from actions which may have both beneficial and detrimental effects, even if on balance the agency believes that the effect will be beneficial.

A cumulative impact is defined in NEPA regulations as:

[T]he impact on the environment which results from the incremental impact of

the action when added to other past, present, and reasonably foreseeable future

actions regardless of what agency (Federal or non-Federal) or person undertakes such other actions. Cumulative impacts can result from individually

minor but collectively significant actions taking place over a period of time.

Here economic and environmental effects are clearly interrelated. It is ‘‘reasonably

foreseeable’’ that the Pipeline will cause a substantial number of domestic oil wells

to be shut in, resulting in the loss of otherwise recoverable domestic natural resources.

In summary, the process must ensure that the socio-economic aspects of the

NEPA process receive more comprehensive treatment than was done with the Express Pipeline project. The failure to disclose the radical shift in the analysis of the

socio-economic impact of this pipeline to the public must be prevented in the future,

especially where the lack of a truly independent analysis may lead to the waste of

natural resources.

In the future, our industry will be faced with similar situations involving foreign

oil and gas projects that will directly impact the domestic energy industry. The Express Pipeline Project illustrates the fact that no state or federal governmental

agency has the final or overall authority to evaluate the need for and the impact

of an international pipeline on local and state economies and the domestic energy

industry in general.

Because of the many questions that the Express pipeline has raised, I recommend

that the government, in conjunction with industry, develop a comprehensive approval process for foreign pipelines transporting foreign crude oil, natural gas and/

or refined products into this country which will evaluate the viability and effect of

the project on all concerned.

STATEMENT OF TOM THROOP, EXECUTIVE DIRECTOR, WYOMING OUTDOOR COUNCIL

My name is Tom Throop and I’m the executive director for the Wyoming Outdoor

Council (WOC). WOC was established by Wyoming citizens 30 years ago in 1967

and today remains the leading voice for the conservation of Wyoming’s natural resources and the protection of its environment. WOC is a non-profit membership organization governed by a 17-member board of directors comprised of Wyoming citizens and has a staff of four. WOC is all Wyoming, as we are unaffiliated with any

regional or national groups.

Throughout its history, WOC has played a leading role in helping to resolve some

of the state’s most difficult natural resource challenges, from coal strip mining in

the Powder River Basin, to unsustainable timber harvests and clearcutting on the

Bridger-Teton and Shoshone National Forests and now energy and mineral development in the Green River Basin and the southern Big Horn Mountains.

I thank you for the invitation and the opportunity to testify. At the same time,

I need to tell you that the public interest organizations from our sister states of

Montana and Colorado are very upset with this hearing. The scope of this hearing

directly relates to issues that are being dealt with in those states. Witnesses representing public agencies and industry are here from both those states. Yet there

was no notice nor invitations to public interest groups in Colorado and Montana.

They view this hearing and process as extremely unfair and believe that if you are

going to discuss issues that affect their states, hearings should be held in those
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states and public interest group witnesses from those states should be invited to testify.

Let me begin by reminding the Committee that the lands in question are public

lands owned jointly by all the citizens of the United States, and Wyoming. By law,

these public lands must be managed for multiple use. In the definition of multiple

use, it states that resources are not to be managed for the greatest economic return

or greatest unit output. Increasingly, however, we are seeing a fundamental shift

away from multiple use to dominant use for energy and mineral development, often

at the expense of the public land’s uses for wildlife and habitat, open space, historic

recreation opportunities, clean air, clean water and overall environmental quality.

The BLM’s management plans for the public lands in Wyoming that are the subject

of this hearing authorize oil and gas leasing on all lands outside witness study

areas; or an astounding 98 percent of the total lands available, including crucial big

game winter range, areas of critical environmental concern and areas having high

scenic value. Presently, oil and gas leases cover the vast majority of the areas under

discussion, approximately 90 percent, and do not carry stipulations sufficient to protect the surface resources.

There are a multitude of uses and very significant environmental issues to be

dealt with on the public lands of the Green River Basin and Cave Gulch. Federal

law requires that there be careful review prior to development activities on these

public lands. For example, there are cumulative impacts to a host of wildlife species

and their habitat, including antelope, deer, elk, raptors and sage grouse. Air quality

and visibility are major issues and the groups working on these issues have not yet

reached consensus on how to protect Class I wilderness areas from emissions of nitrogen and volatile organic compounds (VOCs). Implementation of the Clean Water

Act on the public lands, maintaining historic recreation opportunities, and protecting significant cultural and archaeological resources are also significant environmental and land use considerations that must be dealt before these lands are developed.

Concerning the Green River Basin Advisory Committee (GRBAC), we requested

the formation of this FACA process and appreciated the Secretary’s appointment

and Assistant Secretary Bob Armstrong’s personal attention. GRBAC was a collaborative process and product that we enthusiastically endorse. Most of the recommendations can be implemented administratively, for example the excellent work

done by the Committee on transportation issues. We sincerely expect and hope that

the Secretary will approve the primary outstanding issue, eco-royalty relief. If the

Secretary does not, there is a readily available alternative that will accomplish the

same objective. BLM can change its policy for Wyoming and give Wyoming BLM the

authority to authorize off-site mitigation like is done in other western states. It is

obvious that if development occurs at 8 or 16 wells per section, there is no remaining opportunity for on-site mitigation. Any mitigation must occur off the lease. And

finally, though this issue was not resolved, we feel strongly that the government

should NOT pay for industry’s NEPA analysis. That is their responsibility and a

cost of their development proposals.

We are surprised and disappointed, Representative Cubin, that you would characterize Cave Gulch in your letter of June 18th as ‘‘Cave Gulch field development

delays.’’ We have been involved in Cave Gulch throughout the entire process. Cave

Gulch is on a fast track the likes of which we have never before witnessed. In fact,

the process has been so bad that the district manager has been driven off, the area

manager corrupted, and staff morale at an all-time low and the worst in the state.

While the fast-track EIS has been underway during the past year, industry was

given everything it wanted in an interim development agreement, even though such

a far-reaching interim development agreement was unprecedented. Even though the

interim development agreement was a collaborative process that was agreed to by

all the parties, BLM broke the agreement when they discovered Chevron wanted

one more well that was specifically excluded because it was deemed to violate

NEPA. The final EIS and Record of Record of Decision are on the street. BLM openly admits that the decision sacrifices the other resources on the public lands of this

area. For example, because industry didn’t like it, BLM deleted the raptor recovery

area for a candidate species for ESA listing, the ferrugenous hawk. Though most

people believe we should be taking actions to prevent listing of threatened and endangered species, BLM takes an action at Cave Gulch that cumulatively adds one

more step toward listing. That these multi-national corporations headquartered outside Wyoming can say that they have somehow experienced obstructions at Cave

Gulch is the best demonstration yet that Wyoming is still viewed by some of these

companies as a third-world resource colony where quick and easy is all that matters.
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The best gauge to demonstrate whether we have a problem or not are the numbers. To quote from the April 9th edition of the Casper Star Tribune, ‘‘The rig

counts for Wyoming and the Rocky Mountain region have soared over the figures

from . . . last year.’’ According to the Petroleum Information Corporation, Wyoming

had 15 rigs in the state at the same time last year. This year, there are 35, or a

133 percent increase. Wyoming had the largest increase in the nation, twice the increase of #2 Louisiana. For the Rocky Mountain region, the rig count is up 36 percent.

In addition, there are hundreds, if not thousands, of APDs that have been approved, but are not being developed by the companies who hold approvals to develop, because of market problems, higher priority projects, and a host of other economic reasons. Examples are 72 wells at Stagecoach Draw, 750 wells at Wamsutter

II, 1,300 wells at Fontenelle, and 1,300 wells at Moxa Arch have all been approved,

just to name a few. Things are pretty busy here in Wyoming and the allegation that

access and regulatory issues are any kind of inhibitor to development in this state

is nothing more than a thinly disguised attempt by some, certainly not all, oil, gas

and minerals companies to commandeer this nation’s public lands for their own use.

In closing, the single most important factor in expediting development is industry’s willingness to come to the table early in the process, to participate in identifying key issues early and to work in good faith to resolve issues early with the U.S.

Forest Service, EPA, U.S. Fish and Wildlife Service, Wyoming Game and Fish Department, to name a few, and the citizens of Wyoming. Historically, industry has

instead ignored pleas for collaboration, and as a result, has forced many of the significant issues to be dealt with in appeals or litigation. Fortunately, we are beginning to see the culture of decisionmaking change, for example, the GRBAC and a

host of air quality processes that are currently underway, but we still have a long

journey ahead of us. Representative Cubin, I plead with you to play a constructive

role by working to help bring the parties together to find Wyoming solutions to Wyoming problems. Thank you.

STATEMENT OF ALAN PIERSON, STATE DIRECTOR, BUREAU OF LAND MANAGEMENT,

WYOMING

Good Morning, Madam Chairman. I appreciate the opportunity to come before you

today to discuss the Bureau of Land Management’s (BLM) involvement with Federal

resource management in Wyoming. We have made a number of significant accomplishments and have many projects and initiatives in progress which reflect our

commitment to an open and cooperative process.

Overview

Within the state of Wyoming, the BLM manages some 18.4 million acres of public

lands. Of that, about 17.9 million acres are available for oil and gas leasing and

about 8 million acres are currently leased. We also manage 11 million acres of minerals where we do not have jurisdiction over the surface.

Since the earliest days of our country, our Government has recognized that public

lands should be managed for the local, as well as the national interest. Statutes

have created a balance so that revenues from public lands in Wyoming are shared

with the State. Wyoming communities benefit from this arrangement. Each year,

Federal mineral revenues amount to about $500 million from Wyoming’s public

lands. Almost $250 million of these revenues go directly to the State to fund a number of its programs. Our most recent oil and gas lease sale, held on June 3, 1997,

resulted in $5.1 million in receipts with 85 percent of the tracts sold. This suggests

that our August, 1996 decision to offer only nominated tracts is paying off. Generally, buyers nominate desirable tracts for inclusion in the sale. This process helps

to reduce the number of properties included repeatedly in lease sales and minimizes

the amount of personnel required to conduct sale activities.

BLM OIL AND GAS PROGRAM IN WYOMING

BLM Wyoming is typically responsible for administering oil and gas minerals

management laws on all federally owned minerals in Wyoming and Nebraska. Major

operational responsibilities on Federal and Indian lands include processing applications for: permits to drill, unit agreements, and suspensions of operations and production, etc. We are also typically responsible for drainage protection enforcement
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responsibilities, inspection and enforcement of oil and gas operational and reclamation activities, and production accountability. BLM Wyoming is first in the nation

in generating Federal onshore oil production and royalty revenues. BLM Wyoming

is second only to New Mexico for natural gas production and gas royalty revenues

received from Federal onshore mineral leases. Southwest Wyoming is one of the

leading gas producing regions in the United States.

The following information, current as of the end of last fiscal year, provides the

status of wells and completions on Federal and Indian lands in Wyoming, and outstanding unit and communitization agreements activity:

BLM Wyoming (Historical Data through end of FY 96)

7,124 producing oil wells

2,978 producing gas wells

1,174 shut-in oil wells

519 shut-in gas wells

2,801 service wells (this includes injection and disposal wells, water source wells,

etc.)

17,457 plugged and abandoned wells

19,179 oil and gas leases under supervision encompassing 12,478,659 acres

726 exploratory and secondary unit agreements

512 enhanced recovery unit agreements

1,290 communitization agreements

8 gas storage agreements

3 development contracts

476 APD’s (Applications for Permit to Drill) approved in FY 96

Protecting Environmental Resources

In addition to our operational responsibilities in developing mineral resources, we

are also charged with or share with other Federal agencies the charge of protecting

other resources. This is part of an overall process which begins with a resource management plan (RMP). BLM’s planning is designed for multiple use and sustained

yield and is tiered from general guidance to site specific elements. With the help

of other Federal agencies, State and local governments and the public, we prepare

plans for overall land use and resource management to serve an entire resource

area. The RMP specifies general criteria for managing such resources as riparian

areas, cultural sites, wildlife habitat, historic trails, and livestock grazing, as well

as minerals development. This plan is followed by more specific activity planning

which provides detailed analyses and decisions on specific sites. BLM is able to

manage oil and gas development alongside other types of land uses by stipulating

protective measure requirements in the oil and gas lease document. The protective

measures are developed in part during the land use planning process, which includes extensive public participation. Protect measure stipulations allow oil and gas

development to coexist with other surface uses of public lands.

Cave Gulch

That brings us to the subject of Cave Gulch. The Cave Gulch-Bullfrog-Waltman

project area is located in Natrona County and encompasses 25,093 acres of mixed

Federal, State, and private lands. Although the BLM manages only 7,375 surface

acres in the area, 76.5 percent of the mineral estate is Federal.

Following discovery of a rich natural gas field in the Cave Gulch Unit in 1994

by Barrett Resources Corporation, the BLM prepared an environmental assessment

(EA) to address Barrett’s development proposal. Based on potential environmental

impacts contained in the Barrett EA, we determined that impacts were not expected

to be significant, therefore, an environmental impact statement (EIS) would not be

required. In 1995, the BLM issued approval to Barrett and Chevron USA Production

Company to develop the field.

Subsequent to this initial decision, we received additional development proposals

from Barrett and Chevron. Upon review, we found that mitigation measures to protect raptors could not be carried out. In January 1996, the BLM decided to reevaluate its decision to allow Barrett to develop the field because of Barrett’s expanded

development proposal and because of the inadequate raptor protection measures in

Barrett’s proposal. The BLM determined that the analysis required an EIS to assess

all of the direct and cumulative impacts from the combined Cave Gulch-Bullfrog-
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Waltman project area development proposals. We suspended further work on the

Chevron EA which was being prepared for the Bullfrog Unit adjacent to Cave Gulch.

Following that decision, the BLM established criteria for a moderate amount of

development activities while the final EIS was being prepared. An interim agreement involving various parties, including conservation groups and the affected companies, has led to some development. As of February 1, 1997, 42 natural gas wells

have been drilled.

BLM issued the Cave Gulch-Bullfrog-Waltman Final EIS earlier this month for

public comment. The comment period ends July 20, 1997. The Record of Decision

is expected to be complete and ready for signature by August 4, 1997.

The preferred alternative in the final EIS addresses a number of the issues raised

in response to the draft EIS. It provides for increased natural gas production in the

Cave Gulch-Bullfrog-Waltman project area by allowing the operators to drill and develop approximately 160 natural gas wells over the next 10 years on 107 new and

24 existing well sites, in addition to existing drilling and production operations. Any

impacts to the raptor population and habitat can be effectively mitigated with artificial nest sites and buffers around the nests. As a result of a cooperative effort by

the BLM, U.S. Fish and Wildlife Service and the operators, BLM can immediately

begin to implement these mitigative measures.

The final EIS also has an expanded socio-economic and cumulative impacts analysis of air quality. The total State severance tax for the 30 to 40-year life of the

project is estimated to be about $63 million. Total Federal mineral royalties are estimated to be $116.8 million, half of which goes to the States. In addition, the State

will receive royalties of $6 million, over the life of the project. Total estimated ad

valorem property and production tax revenues from their lands for the life of the

project are about $76 million.

Green River Basin Advisory Committee

One final subject I would like to touch on is the Green River Basin Advisory Committee recommendations.

The Green River Basin Advisory Committee reached consensus on five recommendations and, in March 1997, forwarded these recommendations through the

BLM to the Secretary of the Interior for approval. They include road standards,

NEPA process streamlining, eco-royalty relief, transportation planning, and opportunities for partnership. To date, all but one of these recommendations can and are

being implemented. Eco-royalty relief is currently under review by the Department’s

Solicitor’s Office. This recommendation would establish a 5-year pilot project for ecoroyalty relief in the Greater Green River Basin. Under the pilot, producers in Wyoming would be allowed to take a royalty reduction on production of up to $4 million

($2 million for NEPA implementation and $2 million for monitoring and mitigation)

annually to be used for monitoring studies and any mitigation measures which go

above and beyond standard operating procedures, required stipulations, or standard

conditions of approval for mitigation.

Madam Chairman, I welcome the subcommittee’s continued interest in the BLM’s

programs and their effect on the State of Wyoming. I appreciate this opportunity

to provide information on the activities we are involved in, and I look forward to

responding to any questions you may have.

STATEMENT OF BOB NANCE, PRESIDENT AND CHIEF EXECUTIVE OFFICER, NANCE

PETROLEUM

Dear Madam Chairwoman and members of the Committee:

I am Bob Nance, president and CEO of Nance Petroleum, an independent producer who has federal production in Montana, North Dakota, and Wyoming. I am

here today on behalf of Nance Petroleum and the Independent Petroleum Association of America (‘‘IPAA’’), a national trade association representing nearly 6,000

members of America’s oil and gas producing community.

The IPAA has increased its efforts at the national level in the last couple years

in the areas of federal onshore and offshore oil and gas issues. The association has

a very active Land and Royalty Committee specifically dedicated to creating a business environment that encourages producers to explore and produce on federal

lands. I’ve been appointed to be the Vice-Chairman of Lands for this IPAA committee.

Why has IPAA stepped-up its efforts on public lands? The reason is simple. We

must make public lands accessible to the independent oil and gas community if we
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are going to increase domestic production. Each year the IPAA surveys its membership to determine if independents are increasing their activities on onshore federal

leases. Year after year the answer comes back the same—no! This is alarming, especially given that government reports, supported by private and industry studies, indicate that one of the last frontiers for unexplored onshore oil and gas reserves lie

beneath public lands.

We need to open these potential reserves to independents who drill over 85 percent of the wells in the U.S. and produce nearly 45 percent of America’s oil and twothirds of its natural gas. We thank you and the Committee for coming to the West

to advance the cause of removing impediments to sound and safe exploration of the

federal lands spread throughout the Rockies. If independent producers are successful in developing public lands, then everyone benefits by creating more jobs, stimulating the economy and increasing federal and state revenues, especially for education. To accomplish this goal, reform of the federal government’s oil and gas federal land programs is needed now, not ten years from now, after the government

concludes another series of studies and pilots.

To move ahead with reform, we need to identify the barriers prohibiting independents from drilling on federal lands:

1. Lack of access. The vast majority of high-potential, federal lands remain unavailable for leasing. And if they are leased, stipulations, such as no surface occupancy, are added, precluding any drilling or seismic evaluation. The Department of Interior has neutralized an advocacy for onshore development and has

replaced multiple-use with land preservation.

2. Uncertainty. Once making a financial commitment to develop a federal prospect, you are likely to experience indefinite delays in obtaining a lease and a

permit to drill. The delays result in independents walking away from potential

reserves.

3. Costly regulations. If you do obtain your lease, and hopefully your drilling

permit, the cost to drill and operate a federal lease far exceeds a private lease

transaction. Many federal requirements duplicate state processes. Unnecessary

regulatory requirements kill plausible projects. More and more, the government

is deferring its costs by shifting burdens onto industry.

How can we encourage independents to drill and produce from federal lands?

The IPAA is proposing a six-point reform plan:

1. Increase public lands available for development. This reform goal can be accomplished in a number of ways: restoring multiple-use as a mandate for federal lands, requiring risk management for decision making, restricting unilateral withdrawal of lands by the executive branch and stopping Secretarial policies which prohibit multiple-use of lands already determined to be outside the

scope of a wilderness area. We support efforts to legally challenge the Secretary’s authority to create ‘‘de facto’’ wilderness areas (e.g., Marathon v. Babbitt).

2. Eliminate federal activities which duplicate state activities. If the state and

federal governments are performing similar oil and gas regulatory activities, we

support consolidation of the two programs and having the single program administered by the state. States, and its citizens, who receive 50 percent of all

royalty streams, must have a more direct role in federal oil and gas regulatory

programs.

3. Establish an advocate for onshore development. Oil and gas responsibilities

are spread throughout the U.S. government. For programs not transferred to

the state, we recommend studying the benefits and drawbacks of consolidating

all oil and gas regulatory programs into a single agency, such as the Minerals

Management Service’s Offshore Program.

4. Increase certainty. Set definitive time-frames, a date certain, for issuing

leases and development approvals. This is a concept that appears to have the

support of the President. Additionally, similar to what was accomplished under

the Royalty Fairness Law for royalty appeals, have the IBLA decide oil and gas

BLM appeals within a date certain.

5. Reduce costly regulatory burdens. Implement recommendations to streamline

regulatory processes like issuing drilling permits. Prevent the shift of regulatory

costs to oil and gas producers who already pay rents, royalties, and bonuses totaling more than approximately $650 million a year for onshore properties.

There are a number of ways to proceed with cost recovery: 1) give the Secretary

clearer authority to offset environmental and other related costs against royalty

payments; 2) clarify that cost recovery is not appropriate for oil and gas activities due to the rents, royalties and bonuses; or, 3) dedicate a portion of the revenue from oil and gas royalty streams going to the Reclamation Fund (approxi-
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mately $350 million per year) to cover the government’s costs to administer

these programs. This reallocation of proceeds would save the states millions of

dollars by eliminating the need for states to pay a quarter of the government’s

costs.

6. Implement incentive programs. Such programs are critical for encouraging development and/or sustaining production from marginal wells. Examples of such

programs include continuation of the royalty enhancement program for stripper

oil wells, royalty incentives for marginal gas wells and investment credits for

frontier areas. An incentive program could also be created for abandoned well

sites.

This is a very aggressive reform program. Many of these initiatives may have to

be accomplished via a legislative vehicle. The IPAA stands ready to work with the

Committee in developing a comprehensive blueprint for reform.

I will now expand further on three of the six reform initiatives:

1. Consolidating federal and state regulatory activities.

Even though this project seems to be slow moving, IPAA, for the record, continues

to support state transfer to the fullest extent possible if significant cost savings can

be realized for both the government and industry. We need to begin to quantify potential cost savings. If this type of reform is able to save real dollars, we believe

a legislative effort will be necessary.

This legislative initiative may absolutely be necessary if the BLM is successful in

implementing a program to recover its costs. If we are going to pay for the cost of

the government to do business, we want the entity who is most cost-effective to provide those services. If given unencumbered authority, it appears that the states can

perform federal oil and gas regulatory activities at a fraction of the cost. Lower government costs equate to lower cost recovery which reduces the impact on producers.

2. Public land access and the Lewis and Clark Forest.

There are many recent examples, which demonstrate that multiple-use has been

replaced with land preservation (e.g. Escalante National Monument, re-inventorying

Wilderness Study Areas and not allowing development of lands determined to be

outside the scope of wilderness study areas). I want to discuss another example of

land preservation right in my own backyard—the draft EIS prepared by the Forest

Service for the Lewis and Clark Forest.

The Rocky Mountain Division of the Forest is in the over-thrust belt and has the

potential to contain as much as 2.5 to 11.1 trillion cubic feet of gas, as estimated

by the Forest Service. Less conservative estimates reveal that approximately 83 trillion cubic feet of gas could be remaining in the over-thrust belt largely in Montana,

as estimated by the Geological Survey of Canada. Governor Racicot estimates that

gas from this area could heat 369,000 residences in Montana for a period of 60 to

275 years. The Montana Thrust Belt is rated third in the entire country for conventional gas reserves and second for deep gas reserves. Unfortunately, the Forest

Service has turned its back on this world class gas reserve to favor the desires of

those who prefer to place public lands off limits for multiple-use.

When the Forest Service issued its draft EIS August 9, 1996, it is our conclusion

that its preferred alternative essentially eliminates oil and gas development in the

Rocky Mountain Division. These reserves will be abandoned for a minimum of 10

to 15 years, if not indefinitely. The draft EIS analyzes 1,862,453 acres, of which

610,634 acres are legally unavailable due to their classification as wilderness or wilderness study areas. This leaves 1,230,612 acres subject to review for oil and gas

leasing. The Forest Service’s preferred alternative makes 60 percent of this area either administratively unavailable for leasing or unavailable for surface occupancy,

while the remaining 40 percent is subject to severely restrictive stipulations. In

practical terms, the preferred alternative allows for oil and gas leasing on an extremely limited area containing high potential for discovery—one mile corridors

along existing roads in certain basins and a one mile, no surface occupancy strip

along the eastern boundary of the Rocky Mountain Division of the Forest.

The preferred alternative does not provide a meaningful opportunity to explore for

and produce oil and gas from the Lewis and Clark Forest. This is extremely disappointing. The Forest Service’s own analysis of an unconstrained development scenario projected that only 30 wells would be drilled, impacting only 300 acres if leasing were allowed throughout the entire Forest. Yet, with an impact of less than a

quarter of one percent on the entire forest, the Forest Service is promoting land

preservation by requiring no surface occupancy or other very restrictive surface use

conditions.

I’d like to point out some flaws in the analysis which seems to falsely support

their conclusions. One of the most important flaws is the insignificance given to the
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socio-economic impacts of oil and gas development. For education alone, Governor

Racicot has highlighted this fact by pointing out that the Forest Service’s preference

will cost the state $2 to $7 million per year in lost revenue.

The Forest Service claims that it did evaluate the biological, physical, social, and

economic impacts of oil and gas leasing. They claim that the authorized officer

weighed each of these effects when arriving at a decision as to which lands should

be made available or offered for lease. We believe that the Forest Service did not

equally weigh the socio-economic impacts against alleged environmental impacts. It

appears that much more weight was given to biological and physical impacts of oil

and gas leasing.

The Forest Service assumes that mineral resource development is in indirect conflict with other resources and that these conflicts cannot be mitigated. This view results in the authorized officer giving a preference to land preservation over multiple

use. The Forest Service ignores a number of tools the government has available to

protect resources during the leasing and permitting phases of oil and gas development. In fact, in many cases, mitigation measures related to oil and gas resources

can improve other resources, such as wildlife habitat.

Additionally, we believe the Forest Service failed to take into account the many

technical advances which allow drilling to be conducted in sensitive areas with minimal impact to the environment. The Forest Service acknowledges that it assumed

the ‘‘basics’’ when it comes to oil and gas exploration and the use of new technologies was not considered in its analysis. Sound science and the advancements in

technology allow for the effective management of all resources in the Rocky Mountain Region.

The Forest Service ignores its own Minerals Program Policy (revised August 8,

1995) which states, ‘‘. . . the national forests and grasslands have an essential role

in contributing to an adequate and stable supply of mineral and energy resources.’’

One of the policy objectives is to, ‘‘Maintain opportunities to access mineral and energy resources that are important to sustain viable rural economies and to contribute

to the national defense and economic growth.’’ With regard to the Lewis and Clark

Forest, the Forest Service readily admits that, ‘‘. . . trade balance and National security is beyond the scope of this analysis.’’ This is very unfortunate. As I stated early,

the future of domestic production is dependent on the development of potential vast

oil and gas reserves which lie beneath federal land.

We agree with Governor Racicot who stated in a letter dated December 12, 1996,

to Gloria E. Flora; Supervisor of the Lewis and Clark National Forest, that with

regard to the Rocky Mountain Front, ‘‘. . . resource protection and leasing for oil and

gas potential can occur in a more balanced manner.’’ He goes on to urge the Lewis

and Clark Forest to reconsider adoption of the preferred alternative in favor of an

alternative that provides additional opportunity for leasing within the Rocky Mountain Division, consider the phased nature of the oil and gas development process

and the ability of the Forest to control individual activities and location, and develop

creative stipulations and mitigation measures to accomplish resource protection.

We hope the Forest Service is seriously considering the views of the Governor and

his constituency—the citizens of Montana. The Governor’s view should outweigh the

hundreds of letters submitted via an environmental lobbying campaign. Through the

use of alerts and form letters, environmentalists were able to have ‘‘concerned citizens,’’ from across the country, despite the unfamiliarity with the Lewis and Clark

Forest, send in letters of opposition to multiple-use. If the views of the state are

ignored, it further exemplifies the need to return more power to the state when it

comes to deciding how best to manage the public resources contained within their

boundaries.

Madam Chairwoman, time is running out. Our latest report from the Forest Service is that they are planning to issue a record of decision sometime in the fall. I’m

not sure there is much we can do. However, if the Committee can intervene to help

convince the Forest Service to consider other alternatives before making a final decision, this would be helpful. At a minimum, before making a final decision, the Forest Service should allow seismic testing to be conducted in the area. There are a

number of techniques, other than just heliport, that can provide for 3D seismic with

minimal surface disturbance. In this way, we can delineate areas with the highest

potential for development and conduct a more accurate analysis of impacts.

In the long-term, we believe that the only permanent solution for giving mineral

development a fair and reasonable chance on public lands, is to reconfirm a multiple-use mandate and require the federal government to equally weigh the importance of socio-economic impacts and the views of state officials in its land use decision making process. This legislative mandate could require the federal government

not to discard mineral development before conducting a risk assessment and at-
105

tempting to mitigate conflicts. Environmental impacts must be on a level playing

field with the impacts on humans, the economy, and the state in general.

3. Certainty for the leasing and permitting processes.

On behalf of IPAA, I attended the presidential signing of the Royalty Fairness

Law last August in Jackson Hole, Wyoming. Now that I have mentioned Royalty

Fairness, on behalf of IPAA, I want to thank the Chairwoman and the entire Committee and staff for passage of this important reform initiative. Hopefully, we can

accomplish similar reform of the BLM’s and Forest Service’s oil and gas regulatory

practices.

Prior to signing the bill, President Clinton met with representatives from the oil

and gas industry to discuss a number of issues. The issue I personally raised with

the President was the excessive amount of time it takes to obtain a permit and the

uncertainty associated with doing business on public lands. I suggested to the president that the government should, within a date certain, notify a producer if it is

going to issue a lease or a drilling permit. If the government’s answer is no, set

forth a timetable for determining how the alleged conflicts can be mitigated.

The President responded to these comments by stating the following: 1) He was

frustrated with the fact that the drilling permit process had not been streamlined.

He has asked the department to accomplish this goal; and, 2) He can understand

the need for certainty when attempting to develop public lands. It appeared that he

supported the idea of establishing specific time-frames for the BLM’s oil and gas

processes.

The President’s remarks were very encouraging. We would like to work with the

committee and the administration in developing bipartisan legislation to accomplish

this type of reform. There a number of details that would have to be worked out,

but, certainly, we should be able to develop a legislative package that results in a

more efficient leasing, permitting, and appeals process. By adding certainty, independents will be more likely to commit capital to public land projects, as this capital

will not be tied-up indefinitely in a never-ending decision making process.

Conclusion

Again, I want to thank you Madam Chairwoman and the entire committee for

coming out West to listen to the challenges we face on public lands and offer assistance in changing the current operating environment. We can no longer afford to ignore needed mineral revenues lying dormant beneath public lands. Through reform

of the federal oil and gas regulatory program, we can begin to bring these revenues

to the surface for use by the nation, states, and most importantly, those educating

the children of the West. We stand ready to help develop a blueprint for reform.

With your leadership and through hearings like the one today, we can make a difference on public lands. Thank you.

ANSWERS TO QUESTIONS FROM CHAIRMAN OF THE COMMITTEE BY MS. GINA GUY

U.S. DEPARTMENT OF THE INTERIOR

OFFICE OF THE SOLICITOR

ROCKY MOUNTAIN REGION,

755 PARFET STREET, SUITE 151,

LAKEWOOD, COLORADO 80215

July 16, 1997

The Honorable Barbara Cubin,

Chair, Subcommittee on Energy and Mineral Resources,

Resources Committee,

U.S. House of Representatives,

Washington, DC 20515

Re: Proposed Rulemaking; Bureau of Land Management; Cost Recovery for Mineral

Document Processing

DEAR MRS. CUBIN: At your Subcommittee’s Field Hearing in Casper on June 30,

you asked about the relationship between the cost recovery opinion and the state’s

one-fourth share of administrative costs. I responded that it was my understanding

that such costs would be addressed in the proposed rulemaking.

I believe I misunderstood your question. The cost recovery rulemaking will apply

to amounts applicants reimburse BLM for BLM’s processing of documents in order

for the applicant to receive a benefit or privilege not available to the public at large.

What you may have been referring to is the allocation of administrative costs

against the royalties payable to states pursuant to the Mineral Leasing Act, as

amended, 30 U.8.C. §191(b)(1). The 1993 amendment to that section (Public Law
106

103–66) removed the provision that payments to states would not be reduced by administrative costs incurred in royalty collection. This statutory cost-sharing program

with the states benefiting from the federal on-shore mineral leasing program was

discussed in the cost recovery M-opinion:

Receipts retained by the United States under this section are paid into the

Treasury and do not directly fund program operations. This section provides no

new source of recovery for administrative costs and merely ensures that states

share the burden of such costs for a program from which they benefit. This section has no bearing on fees charged to recoup the costs of agency services.

M–36987, at 24 n.27 (Dec. 5, 1996). Therefore, the rulemaking will not address

the issue of revenue and costs shared with the states.

I apologize for any confusion my remarks might have caused, and request that

this clarification be added to the record of the hearing.

Sincerely,

Gina Guy,

Regional Solicitor
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