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S. HRG. 109–727 

EXAMINATION OF OIL AND GAS ACTIVITIES 

HEARING 

BEFORE A

SUBCOMMITTEE OF THE 

COMMITTEE ON APPROPRIATIONS 

UNITED STATES SENATE 

ONE HUNDRED NINTH CONGRESS 

FIRST SESSION 

SPECIAL HEARING 

OCTOBER 25, 2005—WASHINTON, DC 

Printed for the use of the Committee on Appropriations 

( 

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html 
(II) 

COMMITTEE ON APPROPRIATIONS 

THAD COCHRAN, Mississippi, Chairman 

TED STEVENS, Alaska 

ARLEN SPECTER, Pennsylvania 

PETE V. DOMENICI, New Mexico 

CHRISTOPHER S. BOND, Missouri 

MITCH MCCONNELL, Kentucky 

CONRAD BURNS, Montana 

RICHARD C. SHELBY, Alabama 

JUDD GREGG, New Hampshire 

ROBERT F. BENNETT, Utah 

LARRY CRAIG, Idaho 

KAY BAILEY HUTCHISON, Texas 

MIKE DEWINE, Ohio 

SAM BROWNBACK, Kansas 

WAYNE ALLARD, Colorado 

ROBERT C. BYRD, West Virginia 

DANIEL K. INOUYE, Hawaii 

PATRICK J. LEAHY, Vermont 

TOM HARKIN, Iowa 

BARBARA A. MIKULSKI, Maryland 

HARRY REID, Nevada 

HERB KOHL, Wisconsin 

PATTY MURRAY, Washington 

BYRON L. DORGAN, North Dakota 

DIANNE FEINSTEIN, California 

RICHARD J. DURBIN, Illinois 

TIM JOHNSON, South Dakota 

MARY L. LANDRIEU, Louisiana 

J. KEITH KENNEDY, Staff Director 

TERRENCE E. SAUVAIN, Minority Staff Director 

SUBCOMMITTEE ON INTERIOR AND RELATED AGENCIES

CONRAD BURNS, Montana Chairman 

TED STEVENS, Alaska 

THAD COCHRAN, Mississippi 

PETE V. DOMENICI, New Mexico 

ROBERT F. BENNETT, Utah 

JUDD GREGG, New Hampshire 

LARRY CRAIG, Idaho 

WAYNE ALLARD, Colorado 

BYRON L. DORGAN, North Dakota 

ROBERT C. BYRD, West Virginia 

PATRICK J. LEAHY, Vermont 

HARRY REID, Nevada 

DIANNE FEINSTEIN, California 

BARBARA A. MIKULSKI, Maryland 

HERB KOHL, Wisconsin 

Professional Staff 

BRUCE EVANS

GINNY JAMES

LEIF FONNESBECK

RYAN THOMAS

REBECCA BENN

PETER KIEFHABER (Minority) 

RACHAEL TAYLOR (Minority) 

SCOTT DALZELL (Minority) 

Administrative Support 

MICHELE GORDON
(III) 

C O N T E N T S 

Page 

Opening statement of Senator Conrad Burns ....................................................... 1 

Statement of Senator Larry Craig ......................................................................... 3 

Statement of Senator Wayne Allard ...................................................................... 4 

Statement of Senator Robert F. Bennett ............................................................... 5 

Statement of Hon. Kathleen Clarke, Director, Bureau of Land Management, 

Department of the Interior .................................................................................. 6 

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

Statement of Logan Magruder, president, Idependent Pertoleum Association 

of the Mountain States ........................................................................................ 17 

Statement of Ford B. West, president, The Fertilized Institute .......................... 27 

Prepared statement .......................................................................................... 29 

Statement of Paul N. Cicio, Executive Director, Industrial Energy Consumers 

of America ............................................................................................................. 34 

Prepared statement .......................................................................................... 35 

(1) 

EXAMINATION OF OIL AND GAS ACTIVITIES 

TUESDAY, OCTOBER 25, 2005 

U.S. SENATE, 

SUBCOMMITTEE ON INTERIOR AND RELATED AGENCIES, 

COMMITTEE ON APPROPRIATIONS, 

Washington, DC. 

The subcommittee met at 10 a.m., in room SD–124, Dirksen Senate Office Building, Hon. Conrad Burns (chairman) presiding. 

Present: Senators Burns, Stevens, Domenici, Bennett, Craig, Allard, and Dorgan. 

OPENING STATEMENT OF SENATOR CONRAD BURNS

Senator BURNS. We will call the subcommittee to order, and I 

want to thank, first of all, our witnesses for coming today. 

This is to just kind of review the problem of production of natural gas and oil on our public lands. 

I want to thank the Director of BLM for coming this morning. 

Kathleen, thank you very much. We will probably just start the 

discussion at the table and hope that some facts come out that we 

can deal with and see what action maybe Congress could take. 

Working with our Federal bureaucracy that is in charge of this, we 

could cut through some redtape, maybe. 

We have with us this morning Kathleen Clarke, Director of the 

Bureau of Land Management; Logan Magruder, President of the 

Independent Petroleum Association of the Mountain States; Paul 

Cicio, Executive Director of Industrial Energy Consumers of America; and Ford West with The Fertilizer Institute. 

I would say that it is very important that agriculture have a 

voice here because natural gas, of course, is the feedstock to fertilizer, and we have seen our fertilizer prices escalate and I have 

not seen the price of wheat escalate yet. So we are sort of between 

a rock and a hard place. 

For as long as I have been in the Senate, I have been keenly interested in the ongoing attempt to supply our Nation with sufficient energy to fuel our economy. All segments of the economy are 

directly impacted by the cost of fuel to produce and move our output. I would tell you yesterday I bought gasoline for $2.35 a gallon. 

You folks who have not been shopping around, it is out there. 

Senator CRAIG. Do not give the address or you will empty the 

room. 

Senator BURNS. There was a big enough crowd there. They do 

not need any more business, by the way. I will put it that way. 
2 

But nonetheless, from keeping warm in our homes and moving 

our food to market, the American taxpayers face tighter budgets as 

a result of these energy costs. 

Data from the Energy Information Administration illustrate just 

how much of a burden the average American is facing. Those who 

heat with natural gas are facing a 48 percent increase, or $350 

above last year’s cost, to heat this winter. The increases are similar 

for heating with propane and, of course, with fuel oil. If these expectations hold true, the consumer costs for delivering natural gas 

in my home State of Montana will have doubled since 2002. 

The projections for gasoline and related problems are just as 

dire. Over the last 3 years, the average price of gasoline in Montana has also doubled, according to the data presented by the EIA. 

Clearly, we have a problem, but we see some gasoline coming 

down. 

We are not seeing any decline in diesel fuel, however, and that 

sort of concerns me because I got in a situation a couple of weeks 

ago where we ended up a couple of trucks short because they just 

parked them. There was no relaxation at all as far as diesel cost. 

For the past decade, Congress grappled with the passage of the 

energy bill to help address some of these problems that are hindering our energy production in this country. With the passage of 

the comprehensive energy bill earlier this year, many have held it 

up as a silver bullet solution to our energy problems. Unfortunately, as most of us know, there is no such thing as a silver bullet, 

and the bullet does not mean anything if you do not have any gunpowder behind it. So in our case, adequate funding for provisions 

and authorities included in the energy bill are the gunpowder we 

must find if we expect some relief. 

Today I expect testimony to be pretty factual as we take a look. 

I know Director Clarke spent a great deal of time trying to find solutions to address the slow process to approve applications for a 

permit to drill. I must note that the subcommittee still fields numerous complaints that the process continues to be unnecessarily 

burdensome. It is slow and seemingly arbitrary depending on the 

personal opinions and the workload of the local bureau employees. 

I look forward to the Director’s update this morning on her efforts 

to rectify some of these problems and tell us if the sizeable backlog 

of APD’s is being managed appropriately. 

More importantly, I believe the cost of the provisions included in 

the energy bill falling on BLM’s shoulders needs to be fully explain 

to the members of this subcommittee. This is a committee on appropriations. We have primary responsibility to fund this program 

and to ensure that they have enough money to work on these problems. Clearly, more funding will need to be allocated for BLM’s oil 

and gas efforts, and we expect production to increase in a sound 

and constructive manner. 

With estimates ranging from $100 million in the next fiscal year, 

I believe we need BLM to give us an idea on how this money will 

be spent and give us an indication of whether we can expect a sizeable increase in supply for American consumers. Will this investment really spur production and bring more royalty income to the 

Federal Government? That is an important part. Minerals management is probably one of the largest revenue streams into the Fed-
3 

eral Government that we have in the Federal Government. These 

are some questions that we hope to tackle. 

Of course, we have got some folks who are very much interested 

here, both on the consumer side, on the production side, and of 

course, the responsibility we have as a Federal agency to make 

sure that we try to get as much production as we possibly can. 

I have got some figures I am going to pass along in a little bit. 

You know, we keep talking about 181 and offshore in the Outer 

Continental Shelf. It takes a long time to build a platform. It takes 

a long time even if you opened it up now. When would the first 

supply of gas start to flow? When we have trillions of cubic feet of 

natural gas onshore that still produces the lion’s share of our natural gas where pipelines are in place, where the infrastructure is 

to drill and to move it, and this is why I am focusing here mostly 

today on onshore because I happen to think that is where the actions we take will have the largest impact upon the supply of natural gas in this country. 

So, again, I want to thank the witnesses for coming today, and 

now I will turn it over to Larry Craig, who is on the Energy Committee and has a great interest in this. Larry Craig. 

STATEMENT OF SENATOR LARRY CRAIG

Senator CRAIG. Well, Mr. Chairman, thank you. I will be brief. 

The chairman has spoken of increasing complaints of failure to 

process and stack-up in application. I would like to know who is 

asleep at the switch. For this administration to be criticized as 

being anti-environmental and to be processing less applications 

than the Clinton administration, so I am told—I am anxious to 

hear if that is true—would suggest that the work is not getting 

done. We are in an energy crisis, and I would be anxious to hear 

if the BLM is at a crisis mode. They ought to be. I anticipate the 

Director is going to speak to that. 

I understand and I read in here the processing of applications for 

permits to drill and offering parcels of Federal land for oil and gas 

leasing will be BLM’s major priority. I wish it had said, is BLM’s 

major priority, has been for the last 5 years, and we are operating 

at peak capacity. Yet, we hear today that on an office-to-office 

basis, in all fairness, there is a significant variance in performance 

levels. 

I am frustrated by all of that. The cost of gas is dislocating this 

economy and sending it offshore, and we ought to be at a racer’s 

speed, complying with the law, but getting the work done in half 

the time. If that means reprioritizing budgets, reallocating resources, doing less for some and more for others, I know of nothing 

more important for our country to be doing than getting us back 

into the business of production. That is what I am hearing. 

So, Director Clarke, I am extremely interested in hearing from 

you this morning because if what I hear is true, then I would suspect we need you back here every quarter reporting to us on the 

increased performance that will come and will increasingly come. 

If you were anticipating 3,000 applications and you are going to get 

10,000, then there ought to be a significant shuffling of personnel 

and people and talent to make that happen, all within the law and 

certainly within the environmental restrictions necessitated. But if 
4 

there are problems, I would hope you would come to this committee 

or the Energy Committee and say, we cannot get there unless we 

have the following things done for us to allow us that kind of flexibility. 

We are shuffling madly now and I know we are behind the curve. 

The bill we passed in August that facilitates a great many things 

should have been passed 7 years ago, but there were many here 

who simply could not see the future as some of us who spent a lot 

of time on this issue did. 

I would hope that the performance record that is out there with 

our BLM and the Department of the Interior is significantly better 

than is currently being reported to me. That is the purpose for this 

hearing, amongst others. If it is not, then we will have to find out 

why it is not and ask that changes be made to make it happen. 

There is nothing more important for this country right now, 

whether it is the high prices in the Northeast, whether it is the dislocation of the chemical industry of our country and sending it offshore, whether it is misdirected policy—and it has been—to suggest 

that we ought to be generating electricity out of natural gas, as it 

happened during the Clinton years, foolish but real, that has put 

us where we are. I would hope that all of a sudden we awaken 

from our sleep and get at the business of performing at a phenomenal rate of speed to get our work done. 

Mr. Chairman. 

Senator BURNS. Thank you, Senator Craig. 

Senator Allard. 

STATEMENT OF SENATOR WAYNE ALLARD

Senator ALLARD. Mr. Chairman, I would like to commend you for 

holding this hearing. I think one of the most important functions 

we can do as Senators is oversight. So many times we get ourselves 

involved with passing legislation and do not do enough oversight. 

So I really do appreciate it. 

I think this hearing is very timely in light of many of the concerns that you and Senator Craig have both raised. 

One provision that was included in the Energy Policy Act set 

policies regarding oil shale, which is a promising fuel source found 

in abundance in the Rocky Mountain region, primarily Colorado, 

Utah, and Wyoming. The oil shale in this region produces very 

light crude, suitable to fill needs for jet fuel and other very pure 

fuels. During the last several years, a handful of companies have 

worked to develop technologies which will allow for economically 

and environmentally feasible development of this resource. 

Some of the richest deposits of oil shale lie under Federal lands. 

This area, now under the purview of BLM, was formerly known as 

the Naval Oil Shale Reserve. I know that BLM Director Kathleen 

Clarke, who is with us today, is very familiar with this area and 

this resource. The energy legislation we passed allows for smallscale demonstration projects and includes provisions that will help 

lead to commercialization after the demonstration projects have 

proven themselves. These provisions are intended to be a proverbial light at the end of the tunnel. 

Now, western Colorado is at the center of the Intermountain 

Rockies’ natural gas boom. The White River BLM field office in 
5 

Meeker projected in 1997 that their reasonable, foreseeable development over the next 20 years would consist of 1,100 wells, averaging 55 wells per year. 

Now we will just fast forward to 2005, this year, and we see that 

the White River field office is now preparing to undertake an environmental impact statement which is, I might add, largely funded 

by companies interested in exploring natural gas in this area, in 

order to prepare for industry estimates for up to 13,000 wells over 

the next 20 years. 

As this boom of activity continues throughout western Colorado, 

it will be imperative for BLM to communicate to this and to other 

committees what sort of needs arise throughout the agency. I believe the unique partnership being entered into with the White 

River field office and those companies interested in exploring in the 

Piceance Creek area is a shining example of out-of-the-box thinking, and I am hopeful that your agency will seek out similar partnerships in the future. 

While I focused on a few narrow provisions, Mr. Chairman, there 

are many parts of the Energy Policy Act that are very important 

to my State and the entire Nation. I look forward to the testimony 

of these witnesses and the answers to the questions that will be 

asked of them today. 

Senator BURNS. Thank you very much, Senator Allard. 

Senator Bennett. 

STATEMENT OF SENATOR ROBERT F. BENNETT

Senator BENNETT. Thank you, Mr. Chairman, and welcome to all 

the witnesses. If anybody does not know, Kathleen Clarke is a 

product of the State of Utah, and we are all very proud of her and 

her service and I want to welcome her particularly here today. 

The energy bill, I think, was a landmark experience and one that 

should act as a stimulus for this hearing. The significant thing 

about the energy bill in my view is that it talks about different 

sources of energy and power and begins to segment them in ways 

that make sense. The emphasis is on nuclear power. You use nuclear power to generate electricity, which means that natural gas 

can be used in another area where it is more efficient. ANWR, 

which I strongly support, is part of the energy bill. We get oil out 

of ANWR which is used for transportation and you begin to get 

some coherence in the way the different sources of energy are allocated. 

But I would hope in this hearing, in addition to talking about 

such things as ANWR, which is years away, and more drilling off 

of the Gulf of Mexico—we see as a result of Katrina how constrained and small that area was so that it could be damaged by 

a single hurricane. If we had stretched the drilling out along a 

larger shore where the energy is, we would not be as vulnerable 

to hurricanes as we are. 

But those are all long-term kinds of things. I would hope today 

we could talk about some short-term sorts of things that I think 

the Department is focusing on and could help, such prosaic issues 

as speeding up the approval of APD’s, or is it ADP’s? I am dyslexic 

here. Moving the paperwork faster, looking at the layers within the 

Department of the Interior where, for all kinds of good intentions, 
6 

more and more layers of approval have been put on things that 

slow everything down. If there is something that could be done to 

clear some of that out, get approvals faster, we do not need to wait 

for ANWR to come on line to get the benefit of those kinds of activities. 

I have looked through the testimony of our witnesses here and 

see signs that they are very much on top of this and aware of this. 

I hope out of today’s hearings we can get some indication from 

them as to what they have in mind. 

So I think with the passage of the Energy Policy Act, Congress 

has finally taken the steps that it needs to take in order to move 

things forward. I am grateful to you, Mr. Chairman, for calling this 

oversight hearing so we can see what the administration is doing 

in a similar fashion. 

Senator BURNS. Thank you very much. 

It is the taxpayers’ money. 

I made a rash statement a while ago where the lion’s share of 

our natural gas comes from onshore. 79 percent comes from onshore. Yet, we get all involved in these emotional issues. We have 

a lot more out there to recover, and where we have got the infrastructure to do it and get it online quickly, that is where we should 

be focusing our attention. 

Thank you, Ms. Clarke, for coming this morning, and we look forward to your testimony. 

STATEMENT OF HON. KATHLEEN CLARKE, DIRECTOR, BUREAU OF 

LAND MANAGEMENT, DEPARTMENT OF THE INTERIOR 

ACCOMPANIED BY: 

MIKE TAYLOR, ACTING BUDGET OFFICER, BUREAU OF RECLAMATION, DEPARTMENT OF THE INTERIOR 

TOM LONNIE, ASSISTANT DIRECTOR FOR MINERALS, REALTY, AND 

RESOURCE PROTECTION, BUREU OF RECLAMATION, DEPARTMENT OF THE INTERIOR 

Ms. CLARKE. Thank you. 

Mr. Chairman and members of the subcommittee, thank you for 

the opportunity to appear here today to answer your questions, as 

well as to discuss BLM’s oil and gas program, and to consider our 

efforts to provide responsible and reasonable access to the public 

lands for energy development. I am accompanied by Mike Taylor, 

who is the Acting Budget Officer for BLM, and Mr. Tom Lonnie, 

BLM’s Assistant Director for Minerals, Realty, and Resource Protection. I have submitted a written statement for the record. 

Senator BURNS. While we are at this point, your complete statement will be made part of the record, and if you all can kind of 

condense it, keep your statements down to around 5 minutes, we 

will get a lot of this done this morning before lunch. 

Ms. CLARKE. Thank you. 

Would you like me to proceed? 

Senator BURNS. Yes, please. 

Ms. CLARKE. Recent natural disasters and rising gasoline prices 

have reminded Americans how dependent we are on reliable supplies of energy. Beyond the impact of these events, the United 

States faces an ever-widening gap between its production and consumption of energy, a gap that, if not closed, poses long-term risks 

to the U.S. economy and to America’s national security. 
7 

In response to this challenge, President Bush developed a national energy policy that led to congressional passage of the Energy 

Policy Act of 2005. The goal of the new law is to ensure a reliable 

supply of affordable energy for America’s families and businesses. 

This is essential if the United States is to expand its economy, 

meet the needs of a growing population, enhance Americans’ quality of life, and protect national security. 

Federal lands and waters, which account for about 30 percent of 

America’s energy production, are critical to addressing the Nation’s 

energy needs. This was made clear by a detailed inventory of Federal lands in five key western geographic basins, which found that 

these lands contain nearly 140 trillion cubic feet of natural gas. 

That is enough to heat more than 55 million homes for nearly 30 

years. 

This same inventory, conducted by the Department of the Interior and Department of Energy under the Energy Policy and Conservation Act, estimated that Federal lands contain about 68 percent of all undiscovered U.S. oil resources and contain 74 percent 

of undiscovered natural gas resources. 

The Bureau of Land Management, as the manager of more public 

lands than any other Federal agency, clearly plays a key role in the 

development of the Nation’s energy resources. In managing this 

public land, over 260 million acres of surface and an additional 700 

million acres of subsurface acres of mineral estate, the BLM provides for multiple uses of the land, including energy development. 

The BLM also ensures that activities on the public lands are conducted in a manner that minimizes impacts to the environment. 

In the case of oil and gas exploration, less than 1 percent of the 

land managed by the BLM experiences surface disturbance from oil 

and gas activity. 

During the past 4 years, the BLM has worked diligently to improve oil and gas permitting. I have put charts over here that indicate what the increase is in APD processing and approvals. Received is in dark blue, but actual approved APD’s, as you will notice, has nearly doubled from the year I assumed my position. 

We have next to that chart a chart which talks about the production of natural gas on BLM lands which has also increased. 

In 2005, the fact is we approved over 7,000 APD’s, which is, as 

I said, nearly double what we did in 2002. 

The demand for APD’s is going up, and we expect to receive 

about 9,200 applications for permits to drill next year. 

The establishment of the seven pilot offices, as authorized by the 

Energy Policy Act, will certainly facilitate greater coordination 

among the Federal and State agencies that are all involved and 

linked to the processing of APD’s. These offices will serve both to 

expedite permit processing and, as well, to increase the number of 

permits we are able to approve. With the pilot offices in place, it 

is estimated that an additional 3,000 APD’s could be processed over 

the next 5 years, which is the life of the pilot program. This would 

result in increased production equivalent to 1,670 billion cubic feet 

of natural gas over a 15-year period, which would be enough to 

heat 1.5 million homes over that period. A very significant difference that will come from the establishment of those offices. 
8 

As we expand the production of energy on BLM lands, it is important to note that we are also increasing our commitment of resources for inspection, enforcement, and monitoring of the public 

lands. 

BLM has undertaken other initiatives to improve energy development from Federal lands. For example, beginning in 2001, we initiated the largest effort in our history to update land use plans. Most 

of those plans, I will say, were the first-ever plans that had never 

been updated from the enactment of FLPMA. The BLM, you should 

know, uses a community-based and highly collaborative approach 

to planning that complies with FLPMA, the National Environmental Policy Act, and administration mandates to offer cooperating agency status to State and local governments. We are currently reprioritizing our existing planning schedule to make sure 

that we are moving to the front of the line any plans that present 

energy potential and get those to the front of the line and get those 

done. 

As it implements the Energy Policy Act, the Bureau will continue 

to protect the land by carrying out thorough environmental reviews 

and analyses of projects. Our reviews are conducted in accordance 

with the National Environmental Policy Act and the BLM land use 

plans, which the Bureau develops and updates through a process 

that involves and engages general public participation. It should be 

kept in mind that the new energy law does not change the requirements of the Endangered Species Act, the National Historic Preservation Act, the Clean Water Act, or the Clean Air Act. 

To ensure an effective and orderly implementation of the Energy 

Policy Act, I have appointed a team of professionals to identify 

tasks and to track our implementation of this effort. There are over 

29 significant tasks that BLM has as a result of the act, and this 

team has stepped way out and we are well down the road and moving forward with implementation. 

In fiscal year 2006 and in future years, we expect to see a continuation of the unprecedented high demand for energy and mineral leases and permits. Providing access for the development of oil, 

natural gas, oil shale, coal bed natural gas, coal, and renewable energy will help the Nation meet its goals for secure and diverse energy sources. The BLM plans to meet the unprecedented demand 

through a combination of past appropriations increases, new revenue sources provided by the Energy Act, process improvements 

demanded by the Energy Act, and a continuing program of innovation and improvement to increase effectiveness and reduce costs. 

PREPARED STATEMENT

I appreciate the support of this committee. You certainly have 

supported our energy programs in the past, and I look forward to 

a continuing dialogue to identify where we can bring additional improvement to our programs and additional energy to the American 

people. 

I will welcome your questions now or whenever is appropriate. 

Senator BURNS. We thank you for coming this morning and taking part in this discussion. 

[The statement follows:] 
9 

PREPARED STATEMENT OF HON. KATHLEEN CLARKE

Mr. Chairman and Members of the Subcommittee, thank you for the opportunity 

to appear here today to discuss the Oil and Gas Management Program administered 

by the Bureau of Land Management (BLM). I am accompanied by Mike Taylor, the 

BLM’s Acting Budget Officer, and Tom Lonnie, the BLM’s Assistant Director for 

Minerals, Realty and Resource Protection. 

As you know, in the past few years BLM has placed strong emphasis on addressing the Nation’s demand for energy resources through the implementation of the 

President’s National Energy Policy. For example, BLM has made considerable 

progress in addressing the increasing numbers of Applications for Permits to Drill 

(APDs) submitted by the oil and gas industry. Funding increases provided by Congress, along with substantial improvements in our approval process, have allowed 

BLM to process a record number of APDs in 2005. 

The recently enacted Energy Policy Act of 2005 has given BLM several important 

tools that help in this effort. After reviewing our oil and gas program in general, 

this testimony will review some of the policy changes that allow BLM to more efficiently process APDs, and how BLM is implementing specific sections of the Energy 

Policy Act of 2005. 

The BLM manages wide swaths of public land in the western United States, both 

surface and subsurface. Our mandate from Congress through the Federal Land Policy and Management Act of 1976 (FLPMA) is to manage the public lands for multiple uses and to sustain the health, diversity and productivity of these lands for 

the use and enjoyment of present and future generations. 

The range of activities on the public lands managed by the BLM is as diverse as 

the land itself. Commercial uses, such as oil and gas production, mineral development, livestock grazing, and timber harvest coexist with various other uses, such 

as recreation, and cultural and historic preservation. Responsible stewardship of the 

public lands means the BLM must balance multiple and potentially conflicting uses, 

including increased demands for recreation and open space and energy production. 

Demand for energy in this country has outstripped domestic energy production. 

Although domestic energy production has nearly doubled in the past 50 years, population growth, increased economic activity and more intensive use of energy in the 

residential transportation sectors, have resulted in significantly higher demands for 

energy. Today the United States imports close to 60 per cent of the oil used. The 

Energy Information Agency projects that number to grow to 70 percent in 20 years. 

Natural gas demand will grow by 40 percent in that same time period. 

We must find ways to reduce our energy consumption and increase our energy efficiency and domestic energy production. Further, our energy production needs to be 

secure, affordable, and environmentally-sound. 

OVERVIEW OF THE ONSHORE OIL AND GAS PROGRAM

The Mineral Leasing Act of 1920, as amended, and the Mineral Leasing Act for 

Acquired Lands of 1947, as amended, vest responsibility with the BLM for managing oil and gas leasing on approximately 700 million acres of BLM, national forest, and other Federal lands, as well as private lands where the mineral rights have 

been retained by the Federal Government. The BLM works to ensure that development of mineral resources is in the best interest of the Nation. 

The BLM’s Oil and Gas Management program is one of the major mineral leasing 

programs in the Federal government. The BLM administers over 45,000 oil and gas 

leases, of which 21,000 are currently producing. Less than one percent of the surface 

Federal mineral estate is disturbed by oil and gas production operations. The 74,000 

Federal and Indian onshore oil and gas wells account for eleven percent of the Nation’s natural gas and five percent of the Nation’s oil, with sales values exceeding 

$15.4 billion in fiscal year 2004. Domestic production of natural gas has been increasing over the last three years. In fiscal year 2002, 2.1 trillion cubic feet (Tcf) 

of natural gas were produced from Federal (non-Indian) lands. In fiscal years 2003 

and 2004, 2.2 Tcf and 3.1 Tcf, respectively, were produced. In addition to the Federal onshore leases, the BLM supervises the operational activities of 3,700 producing Indian oil and gas leases. In fiscal year 2004, 308 million cubic feet (MMcf) 

of natural gas was produced from American Indian lands. 

In 2003, the Department of the Interior released an Energy Policy and Conservation Act (EPCA) report. This joint study by the BLM, USGS, DOE, and USFS examined five basins in Montana, Wyoming, Utah, Colorado, and New Mexico. The report 

found that these basins contain the largest on-shore resource of natural gas in the 

lower 48 states. These on-shore basins contain an estimated 139 trillion cubic feet 

of gas on Federal lands—enough to heat 55 million homes for almost 30 years. 
10 

RESOURCE MANAGEMENT PLAN AMENDMENTS

Before any leasing, APD issuance or actual oil and gas production can occur on 

public land, the BLM must have a land use plan that allows for that use in that 

area. All 261 million acres of BLM lands are covered by one of 162 land use plans. 

Beginning in 2001, with the direction and support of Congress, the BLM initiated 

the largest effort in its history to revise or update its original plans where needed, 

based on plan evaluations. To date, the BLM has completed 33 amendments or revisions, with another 60 currently in various stages of completion. Twenty-five of 

these on-going plans have a significant oil and gas component, and approximately 

25 of the 60 on-going plans will be complete in 2006. BLM will continue to prioritize 

plan efforts in areas with high energy potential as identified in the EPCA report. 

The BLM uses a community-based and highly collaborative approach to planning 

that complies with the FLPMA, the National Environmental Policy Act (NEPA), and 

the President’s requirements for cooperating agency status for state and local governments. This includes collaboration with specific working groups that focus on resource management plan development. The collaborative process is one in which interested parties, often with widely varied interests, work together to seek solutions 

with broad support for managing public lands, including issues related to the development of oil and natural gas resources on BLM-managed lands. Resource Advisory 

Councils (RACs) or their functional equivalents are integral to public involvement 

and collaboration. The BLM recently revised its planning regulations to require the 

involvement of State, local and tribal governments as cooperating agencies in the 

development of its land use plans. Normally, BLM serves as the lead agency, though 

in some cases, other governmental entities serve with the BLM as joint leads. 

LEASING PROGRAM OVERVIEW

Public lands are available for oil and gas leasing only after they are evaluated 

through the BLM’s multiple-use planning process. In areas where development of 

oil and gas resources would conflict with the management of other resources or public land uses, we consider the use of mitigating measures and in some cases we attach mitigation measures to leases as either stipulations requiring certain actions 

or as restrictions on surface occupancy. 

Types of Oil and Gas Leases.—The BLM issues two types of leases for oil and gas 

exploration and development on lands owned or controlled by the Federal Government—competitive and noncompetitive. The Federal Onshore Oil and Gas Leasing 

Reform Act of 1987 requires that all public lands available for oil and gas leasing 

be offered first by competitive oral auction. Noncompetitive oil and gas leases may 

be issued only after the lands have been offered competitively and failed to receive 

a bid. For a period of two years after the lease sale, unleased parcels may be acquired on a noncompetitive basis. 

Lease Terms and Conditions.—Leases grant the lessees the right to explore and 

drill for, extract, remove, and dispose of oil and gas deposits, except helium, that 

may be found in the leased lands. The leases are granted on the condition that the 

lessees will obtain BLM approval before conducting any surface-disturbing activities. The oil and gas lease conveys the right to develop those resources on the leased 

land. The lessee or his operator cannot build a house on the land, cultivate the land, 

or remove any minerals other than oil and gas from the leased land. 

Lease Expiration or Termination.—Oil and gas leases expire at the end of their 

primary term—the 10th year—unless diligent drilling operations are in progress on 

or for the benefit of the lease; the lease contains a well capable of producing oil or 

gas in paying quantities; or the lease is receiving or is entitled to receive an allocation of production under the terms of an approved communitization agreement or 

unit agreement. 

Leases without a producible well automatically terminate if the lessee fails to 

make full and timely payment of the annual rental. The rental must be received 

by the Minerals Management Service on or before the anniversary date of the lease. 

There is a short reinstatement period for certain situations where the rental is received late. 

The owner of a lease also may surrender the lease in whole or in part by filing 

a written relinquishment with the proper BLM State Office having jurisdiction over 

the lands. A relinquishment takes effect on the date it is filed. However, the lessee 

must plug any abandoned well, perform other work as may be required by the BLM 

to place a leasehold in proper condition for abandonment, and bring his account into 

good standing. If the lessee fails to perform the necessary work, the lessee’s bond 

will be used to do so, and the lessee will be prohibited from leasing additional Federal lands. 

A nonproducing lease may be cancelled for failure to comply with lease terms. 
11 

PROCESSING OF APPLICATIONS FOR PERMITS TO DRILL (APDS)

In the past two years, the BLM has experienced a sharp increase in demand for 

natural gas drilling permits, and expects that demand to continue, especially in the 

EPCA basins: Powder River Basin in Wyoming and Montana, the San Juan Basin 

in New Mexico and Colorado, and the Uinta/Piceance Basins in Colorado and Utah. 

In addition, recent discoveries in the Greater Green River Basin in southwestern 

Wyoming and northwestern Colorado will result in additional demand for drilling 

permits in these areas. BLM now expects to receive 9,200 new permit applications 

in 2006, a 32 percent increase over 2004. In contrast, last winter when BLM prepared the 2006 President’s Budget Request, we anticipated receiving only 6,700 new 

permits in 2006. BLM estimates that another 10,000 new permit applications will 

be submitted in 2007. This demand for drilling permits is being driven largely by 

natural gas prices, which have roughly doubled in the last twelve months. 

It has been necessary to adjust BLM’s workload planning for new APDs to keep 

up with the accelerated demand for energy which has accompanied the increase in 

commodity prices. The processing of Applications for Permits to Drill (APDs) and 

offering parcels of Federal land for oil and gas leasing will be BLM’s major priority 

in the effort to increase the production of energy from Federal lands. Increased 

funding provided by Congress and management improvements have enabled the 

BLM to make significant progress in responding to increasing demand. In 2006, 

Congress provided an additional $2.0 million in discretionary funding. In addition, 

BLM has also made adjustments within the existing budget to address the demand 

for APDs. For example, in 2005, BLM identified and reprogrammed an additional 

$2.5 million to the oil and gas program to respond to the demand for APDs. 

One example of BLM management improvements over the past few years that 

have resulted in processing APDs at a lower cost is the policy of encouraging the 

industry to develop Plans of Development (PODs) for groups of APDs, which allows 

for more efficient analysis of multiple APDs in one area to comply with NEPA and 

other environmental laws. A July 21, 2005, Government Accountability Office report 

on oil and gas development found this and other BLM strategies to be effective, stating that the bundling of permit applications ‘‘can encourage companies to plan their 

drilling operations more carefully and help BLM better assess the cumulative environmental impacts of drilling activities.’’ BLM has also applied several innovations, 

such as the use of Quality Assurance Teams. These innovations and other policy 

changes have had the effect of streamlining APD processing and lowering BLM’s average cost to process an APD in 2005 to $3,730, from a cost of $4,000 that was estimated at the beginning of 2005. 

BLM began making these management improvements in fiscal year 2004, and in 

that year BLM approved 6,452 (on both Federal and Indian lands). Additional funding in fiscal year 2005 and more experience with various management improvements resulted in approving 7,018 APDs in fiscal year 2005. By the end of fiscal 

year 2006, the BLM plans to substantially reduce the inventory of APDs pending 

for more than 60 days to 1,226, a reduction of 45 percent from 2004 and a reduction 

of 50 percent from the end of fiscal year 2005. The anticipated backlog at the end 

of fiscal year 2006 is larger than anticipated this past winter when BLM presented 

the fiscal year 2006 President’s Budget Request, but that estimate was based on a 

lower estimate of the number of applications that industry would submit, and prior 

to the most recent increase in natural gas prices. 

BLM’s effort to process more APDs in recent years is having a significant effect 

on the nation’s natural gas production as shown in the chart below. 
12 

When the final 2005 production data becomes available, BLM expects to see a further increase in natural gas production as a result of the increase in APD approvals. 

APD Processing at Pilot Offices.—Section 365 of the Energy Policy Act establishes 

a pilot program at seven offices, called the Pilot offices, to test new management 

strategies designed to further expedite the processing of APDs. These strategies include placing employees of other Federal agencies in the BLM offices to provide an 

increased focus on processing the APDs. 

The Act requires the Secretary, within 90 days of enactment, to enter into a 

Memorandum of Understanding (MOU) with the Secretary of Agriculture, the Administrator of EPA and the Chief of the U.S. Army Corps of Engineers in order to 

implement this improved process. We anticipate that this MOU will be signed within the next few days. 

The BLM is working with other regulatory agencies, and State partners, to develop the most effective and efficient permitting process for each of the seven pilot 

offices, where currently 70 percent of all APDs are processed. The Act established 

the BLM Permit Processing Improvement Fund (Fund) and provided that the Federal share of all mineral rental revenue would be deposited into the Fund. Monies 

in this Fund can be used to support the coordination and processing of oil and gas 

use authorizations at the Pilot Project Offices: Rawlins, Buffalo, Miles City, Farmington, Carlsbad, Grand Junction/Glenwood Springs, and Vernal. 

The estimated $19.0 million in rental revenue in 2006 will add capability at these 

offices to improve their ability to keep up with demand for APDs, will support the 

permitting processing arrangements with other agencies, including State partners, 

and will help meet the higher inspection and monitoring workload, which has followed the sustained increase in approved APDs. New Treasury accounts have been 

established so that the Pilot offices will be able to access these funds. BLM is also 

developing goals, and a process to measure and report on the Pilot offices’ progress 

toward those goals. 

In order to implement this more effective and efficient permitting process, BLM 

managers, along with our partner agencies, are also engaged in intensive planning 

and recruitment efforts, which will ensure staff and support are in place to meet 

the growing demand for APDs at these offices. BLM recently issued a nationwide 

vacancy announcement to recruit Petroleum Engineering Technicians and Natural 

Resource Specialists in the Pilot Offices. 

I look forward to keeping you informed of our progress toward implementing the 

goals of this section of the Act and the lessons learned as we implement the Pilot 

office concept. 

APD Processing at Non-Pilot Offices.—Like the Pilot offices, the non-Pilot offices 

are experiencing a sharp and sustained demand for APDs. In 2006, BLM expects 

to receive 2,500 new applications for permits at these offices, a 29 percent increase 

over 2004. However, due to the language in Section 365 of the Energy Policy Act 

delaying the implementation of APD cost recovery until 2015, these offices will not 

receive any additional funds in 2006 to meet this demand. I am asking my staff to 
13 

identify opportunities to direct base funding to process additional APDs at these offices. I also anticipate the need to propose a reprogramming of some of BLM’s base 

funding. My staff is currently evaluating allocations of funding to the State Offices 

and will have a recommendation to me regarding this potential reprogramming 

soon. 

Summary of BLM’s APD Processing in 2006.—The base funding provided by Congress in 2006, the mineral rental revenue provided to Pilot offices by the Energy 

Act, and the efficiencies gained from management improvements will enable the 

BLM to process an estimated 10,326 APDs in 2006, a level that is 40 percent more 

than the number processed in 2004 and 31 percent more than the 7,900 APDs that 

BLM estimated for 2006 when preparing the fiscal year 2006 President’s Budget Request. BLM expects to receive 9,200 new APDs in 2006, a 32 percent increase over 

2004. The additional funding and the management improvements will allow BLM 

to respond to this sharp increase in demand for new APDs, and allow the BLM to 

substantially reduce, by the end of fiscal year 2006, the inventory of APDs pending 

for more than 60 days to 1,226 applications. This is a 50 percent reduction from the 

number pending over 60 days at the end of 2005. The table below displays the 2006 

estimated APDs compared with prior year actuals. 

OIL AND GAS APDs 

2004 

actual 

2005 

actual 

2006 

estimate 

Pending APDs less than 60 days old at start of year ......................................... 888 1,082 1,450 

Pending APDs greater than 60 days old at start of year .................................... 2,780 2,214 2,461 

Total Pending APDs at start of year ........................................................ 3,668 3,296 3,911 

New APDs Received ............................................................................................... 6,979 8,351 9,186 

Total APDs Processed ............................................................................................ 6,452 7,018 TBD

Pending APDs less than 60 days old at end of year ........................................... 7,351 7,736 10,326 

Pending APDs greater than 60 days old at end of year ...................................... 1,082 1,450 1,545 

Total Pending APDs at end of year ....................................................................... 2,214 2,461 1,226 

INSPECTION AND ENFORCEMENT FUNCTIONS

In addition to processing APDs, the BLM also inspects oil and gas operations. 

This function is critical to verifying the proper payment of royalties and ensuring 

necessary environmental protection. In 2004, BLM inspectors performed nearly 

19,000 inspections to ensure compliance with permit stipulations, thereby protecting 

the environment and human health and safety, and verifying the proper accounting 

of production from Federal and Indian lands. The BLM finds that with rare exceptions, oil and gas operators diligently comply with lease stipulations, conditions or 

approvals, and operate effective, environmentally-sound exploration and development facilities. 

The Government Accountability Office recently issued a report on the BLM’s inspection and enforcement program, concluding that BLM is behind in inspections 

due to heavy APD workloads. However, the Inspection and Enforcement staff continues to grow, with the budget for enforcement up $4.8 million during the period 

of 2002 to 2004. We also allocated an additional $1.0 million in 2005 to help with 

compliance with inspection and monitoring activities. Field managers are working 

to prioritize their workforce to meet their environmental inspection and enforcement 

obligations. 

LOOKING TO THE FUTURE: THE ALASKA NATURAL GAS PIPELINE

In 2006, the BLM will continue leasing, exploration and development activities in 

the National Petroleum Reserve-Alaska (NPR–A), an area covering more than 23 

million acres in the northwest corner of the State. Development of these oil and gas 

resources is an important component of the President’s National Energy Policy. The 

first significant commercial production from the NPR–A is expected as early as 

2008. 

The BLM will also participate in the inter-agency activities relating to the siting 

of an Alaska Natural Gas Pipeline. On October 13, 2004, the President signed into 

law the Alaska Natural Gas Pipeline Act, (ANGPA), legislation that greatly enhances the prospects for construction of the Alaska Natural Gas Pipeline, which will 

provide enhanced access to the natural gas supplies on the North Slope of Alaska. 
14 

There are currently two Federal rights-of-way granted for an Alaskan gas pipeline: (1) the Alaska Natural Gas Transportation System (ANGTS) project, sponsored 

by Trans-Canada and issued in 1980; and (2) the Trans-Alaska Gas System (TAGS) 

project, sponsored by Yukon Pacific Corporation and issued in 1988. Other proposed 

projects include one sponsored by the North Slope Producers (ConocoPhillips, BP, 

and ExxonMobil) and another proposed by the Alaska Gasline Port Authority referred to as the ‘‘All Alaska’’ project. 

In order to meet the intent and provisions of the Alaska Natural Gas Pipeline Act, 

the Federal agencies with jurisdiction have been meeting regularly and are developing an interagency Memorandum of Understanding to define roles and responsibilities in the authorization of the Alaska Natural Gas Pipeline. 

BLM’S OIL AND GAS MANAGEMENT PROGRAM AND THE ENERGY POLICY ACT OF 2005

The Energy Policy Act of 2005 is a comprehensive piece of energy legislation addressing conservation; energy supply from oil, gas, coal and renewable sources 

(wind, biomass, geothermal and solar); distribution of energy; and research into future sources of energy. The BLM has a role to play in each of these areas. Most 

immediately, however, the Energy Policy Act of 2005 contains several provisions 

through which the BLM can work to improve the APD permit approval process, expand its capacity to process APDs, expedite oil and gas leasing on public lands, and 

ensure natural gas production on public lands occurs in an environmentally-responsible manner. The Act also establishes a new funding source to support these activities. BLM will continue its streamlining efforts in leasing and permitting through 

implementation of the Act; for example, the BLM is working with other regulating 

agencies, including State partners, to develop the most effective and efficient permitting process for each of the Pilot offices. The objective of these arrangements is 

to shorten the length of time required to issue permits for oil and gas activities to 

interested parties while ensuring that the Nation’s energy resources are developed 

in an environmentally-responsible manner. 

Immediately following passage of the Act, the Director of the BLM designated a 

team to guide BLM’s implementation of the Act. During the last several weeks, this 

team has been closely coordinating the analysis and implementation of the bill with 

the other Department of the Interior bureaus such as the Minerals Management 

Service, the U.S. Fish and Wildlife Service and the U.S. Geologic Survey. In addition, BLM has been meeting with other interested Federal and State agencies to develop the framework of agreements that are needed to move forward on the various 

provisions. 

Implementation of the Pilot Offices is discussed above in relation to APDs. Some 

of the other key sections in the Act related to BLM’s Oil and Gas Management Program, and the actions that BLM is currently taking to implement each of these important provisions include: 

—Management of Federal Oil and Gas Leasing (Section 362).—Section 362 requires BLM to ensure timely action on leases and permits, to ensure expeditious 

NEPA compliance, to improve consultation and coordination with the States 

and the public, to improve the management of oil and gas leasing information 

and to improve inspection and enforcement. This applies to all BLM offices, including offices that are not designated as Pilot offices in Section 365 of the Energy Act. The BLM will strive to meet the objectives of Section 362 by continuing ongoing efforts to improve efficiencies and cost effectiveness in its Oil 

and Gas Program and strategic management of its budget resources. 

—Deadline for Consideration of Applications for Permits (Section 366).—This section requires BLM to notify applicants within ten days that an APD is complete 

or notify the applicant of any additional information needed for the application 

to be complete. The Act further requires BLM to issue the permit within 30 

days if NEPA requirements have been met, or to defer the permit and notify 

the applicant of reasons for the deferral. The BLM issued guidance to BLM 

Field Offices on September 15, 2005, to implement these provisions of the Act. 

In addition, these provisions will be included in a reissuance of Oil and Gas Onshore Order Number 1. 

—Naval Petroleum Reserve Number 2 (NPR–2) (Sections 331–334).—This section 

transferred administrative jurisdiction of NPR–2 in California from the Department of Energy to the BLM. BLM management of NPR–2 allows for effective 

development of potentially significant energy reserves. The transfer potentially 

increases access to Federal oil and gas resources by placing approximately 2,500 

acres of unleased Federal mineral estate up for competitive lease bids. BLM has 

begun a land use plan amendment and environmental analysis for these lands, 
15 

with publication of the first planning effort in the Federal Register on September 26, 2005. —North Slope Science Initiative (NSSI) (Section 348).—To implement Section 348 

of the Energy Act, BLM will continue its ongoing participation in the NSSI organization, and to the extent possible, support high priority research, inventory 

and monitoring projects in Alaska’s North Slope identified by and under the direction of the NSSI. The NSSI is an organized, chartered, and jointly-funded entity that guides inventory, monitoring, and research efforts at the Federal, state 

and local levels in support of resource management on the north slope. This research will greatly assist the BLM in identifying environmentally sensitive, 

technically feasible means of production. The BLM anticipates that non-Federal 

partners will contribute substantial resources to this effort, which promises to 

result in a solid scientific basis for land use decisions. A call for nominations 

for members to serve on the NSSI Technical Advisory Panel was published in 

the Federal Register on September 12, 2005. —Orphaned, Abandoned and Idle Wells (Section 349).—BLM has an ongoing program to monitor and remediate orphaned, abandoned and idle wells. The Energy Policy Act provides new tools and direction to manage these wells. In 2005, 

BLM remediated one government-owned well in the National Petroleum Reserve-Alaska in order to prevent a spill of contaminants into the Beaufort Sea. 

In 2006, BLM is preparing a risk assessment of other wells in the area and developing plans to further respond to accelerated shoreline erosion issues in this 

area, and will use $750,000 provided by Congress in 2006 to continue this remediation effort in Alaska. 

Section 349 of the Energy Policy Act of 2005 also provides new authority to 

contract with oil and gas lessees to complete well abandonment and remediation. The Secretary is authorized to issue rules that would establish this new 

program and to allow a credit against royalty payments to offset the cost of 

these remediations. BLM is currently analyzing the potential application of this 

new authority to complete the necessary well remediations in Alaska and other 

States and is identifying rule revisions needed to implement this section of the 

Act. Once regulations are in place, oil and gas operators will be able to assist 

in remediating wells on leases they hold. —Gas Hydrates (Section 353).—Section 353 of the Energy Policy Act of 2005 contains provisions intended to promote natural gas production from natural gas 

hydrate resources through royalty incentives. The Act requires the Secretary to 

review opportunities to enhance production of natural gas from gas hydrate resources. BLM, in cooperation with USGS, and industry partners is actively engaged in this project and will continue to assist with the development of the 

information base which would be needed to prepare a gas hydrate leasing program. BLM’s current gas hydrate effort is located in Alaska. Non-Federal partners are also providing contributions to this project. 

—Consultation Regarding Oil and Gas Leasing (Section 363).—Section 363 requires BLM and the Forest Service to establish two joint mineral leasing systems. A database system will track applications and the status of applications. 

A second system using GIS will track surface resource values and will provide 

information in support of processing mining plans of operations and oil and gas 

APDs. There are a number of security and operating system technical issues 

that must be resolved in order to meet the requirements of Section 363. BLM 

plans to implement the system over the next two years. 

—Estimates of Oil and Gas Resources Underlying Onshore Federal Land (Section 

364).—This section modified Section 604 of the Energy Policy Act of 2000 to require BLM to evaluate post-lease restrictions on development of energy resources, and to look at issues that restrict the transportation of energy resources to markets. BLM will issue a report on the second phase of the project 

shortly, which will include a review of the post-lease restrictions. BLM will examine transportation issues in future phases of the project. 

—Energy Right-of-Way Corridors on Federal Land (Section 368).—This section requires BLM to consult with Federal agencies and other interested parties, and 

then designate corridors for oil, gas and hydrogen pipelines and electricity 

transmission and distribution facilities for western States. The Act requires the 

BLM to complete the environmental analyses and amendments to land use 

plans that support these corridors, within two years. BLM has already begun 

the process to designate these corridors, publishing a public notice regarding 

the corridor planning effort in the Federal Register on September 7, 2005. In 

addition, we will hold a series of public scoping meetings in 11 locations in the 

western States between October 26 and November 3, 2005, and we have established a web site http.//corridoreis.anl.gov for this project. BLM is in the process 
16 

of sending letters to the western governors which will explain the corridor designation process and ask for their involvement. The Department of Energy and 

the U.S. Forest Service are partners in this effort. 

—Oil Shale, Tar Sands and Other Strategic Unconventional Fuels (Section 369).— 

This section complements BLM’s recent progress in making oil shale resources 

available for research and development activities, a process the BLM began in 

2004. The Act requires the BLM to make public lands available for the conduct 

of oil shale research and development activities. In response to its announcement of an oil shale research, development, and demonstration program, the 

BLM has received 20 nominations for parcels of public land to be leased in Colorado, Utah, and Wyoming. An interdisciplinary team is considering the potential of each nomination to advance oil shale technology and the economic viability and environmental effects. The team will then make recommendations for 

awarding leases. Representatives from the three States, the Department of Energy, and the Department of Defense have been invited to participate on the 

team, as have BLM staff members from the affected States. In addition to furthering development of oil shale resources, the oil shale research and development program will assist the BLM in developing appropriate regulations for 

commercial oil shale leasing, which the Energy Policy Act calls for beginning 

in 2007. 

In addition to leasing lands for oil shale research and development purposes, 

the Act requires BLM to complete a programmatic EIS for a commercial leasing 

program for both oil shale and tar sands resources on public lands. In 2006, 

BLM plans to use a $1.0 million funding increase provided by Congress to manage the oil shale research and development leasing program and to take the initial steps leading to the preparation of the oil shale and tar sands programmatic 

EIS. 

—NEPA Review (Section 390).—This section allows BLM to authorize certain oil 

and gas activities under NEPA’s categorical exclusion provision rather than a 

more costly and time consuming environmental analysis. The Act’s statutory 

categorical exclusions apply to five categories of oil and gas exploration and development on Federal oil and gas leases. For example, individual surface disturbances of less than five acres are within the categorical exclusions so long 

as the total surface disturbance on the lease is not greater than 150 acres and 

site-specific analysis in a document prepared pursuant to NEPA has been previously completed. Guidance was issued to BLM Field Offices on September 30, 

2005, to implement this provision of the Act. In addition, this provision will be 

included in a reissuance of Oil and Gas Onshore Order Number 1. 

CONCLUSION

In fiscal year 2006 and in future years, we expect to see a continuation of the 

unprecedented high demand for energy and minerals leases and permits. Providing 

access for the development of oil, natural gas, oil shale, coal bed natural gas, coal 

and renewable energy will help the Nation meet its goals for secure and diverse energy sources. The BLM plans to meet this unprecedented demand, through a combination of past appropriations increases, new revenue sources provided by the Energy Act, process improvements provided by the Energy Policy Act and a continuing 

program of innovations to increase effectiveness and reduce costs. 

I appreciate the support this subcommittee has provided for our energy programs 

in past years and I look forward to continuing a dialogue with you in the months 

and years ahead. Thank you for the opportunity to testify today about the BLM’s 

Oil and Gas Management and the Energy Policy Act. I would be happy to answer 

any questions you have. 

Senator BURNS. Mr. Logan Magruder, President of the Independent Petroleum Association of the Mountain States, is pretty familiar with my end of the world out there. We look forward to your 

testimony. If you want to condense that a little bit, but your full 

statement will be made part of the record. Thank you for coming 

this morning. 
17 

STATEMENT OF LOGAN MAGRUDER, PRESIDENT, INDEPENDENT PETROLEUM ASSOCIATION OF THE MOUNTAIN STATES 

Mr. MAGRUDER. After listening to your introductions, I do not 

feel like I really need to testify today. I think everybody is on point 

with the issues. 

But I would like to thank you for the opportunity to testify on 

behalf of IPAMS, which is a 13-State regional organization in the 

Rocky Mountain region, along with six other cooperating trade associations. They include the Domestic Petroleum Council, IPAA, 

U.S. Oil and Gas Association, API, IADC, and the Natural Gas 

Supply Association. All have weighed in on this testimony today. 

What I would like to do is just make some overarching comments. 

I can assure you the producing community is very much aware 

of the need and demand for natural gas. We feel that the Rocky 

Mountain region—and it is said time and time again—is unique. It 

is located in the center of the United States. The production level 

is about 22 percent of that that we use in the United States, and 

it is on par with the Gulf of Mexico. It is unique in that it is not 

concentrated, as someone mentioned earlier. Plus, the profile of the 

production stream is a long-lived profile. So it is a very dependable 

source of natural gas, a very clean commodity that can be distributed from basically all corners of the United States. 

The gas that we produce from the Rocky Mountain region supplies about 62 million households throughout the United States. So 

it is providing fuel to a lot of consumers throughout the United 

States. It is unique also in the fact that it is the only geographic 

area in the United States that has shown any production growth 

over the past 10 years. Production from the Rocky Mountain region 

has grown 45 percent. This is in the wake of other more mature 

basins that we are familiar with that have shown significant declines. So it is a very key source of natural gas, and I can assure 

you the producing community is poised and prepared to do more. 

Adequate funding for the Government’s energy development programs—and I am not talking just specifically BLM. Unfortunately, 

we do not have a full, diverse representation. We really need the 

Forest Service at the table and we need the BIA. Oil and gas are 

derived from all sources of lands that are controlled by the Federal 

Government. Kathleen Clarke’s group is certainly in the sights of 

everyone, but you have got the Forest Service and you have got the 

BIA and I really encourage you to maybe host another hearing 

similar to this and challenge the Forest Service and the BIA. I will 

cite a couple of examples in just a few minutes. 

But we are talking about we desperately need to increase the 

supply from non-park, non-wilderness Intermountain West lands 

and it can be accomplished with a process improvement and appropriate funding. 

An analysis done for the Domestic Petroleum Council, which we 

believe to be similar to that of the Department of the Interior’s, 

demonstrates that adequate funding to process backlogged pending 

applications for permits—and that is APD—which I understand is 

greater than 3,000 at this time, can unleash about 105 billion cubic 

feet of gas. That is significant. 
18 

Two years ago I prepared for one of your hearings and I recall 

that our consumption only increased a half a percent, a very, very 

small margin, but natural gas prices doubled. We were talking 

about natural gas prices going to $6 at that time, as you will recall. 

Today we are looking at $12 to $13. This 105 billion cubic feet a 

day is about that same amount, about a half a percent. It can have 

an impact on pricing. So that is directly related to a Federal process and making sure that it has adequate funding. 

Is it wise for the Federal Government to appropriate sufficient funds? Someone said earlier you were going to make $100 million 

available. I do not know how that compares to what we did this 

past year, but I certainly would expect they need much more than 

what they have available to them right now. So maybe during the 

course of this hearing, I can try to understand the significance of 

the $100 million that was mentioned earlier. But they desperately 

need more. 

Many people will question whether or not you can actually execute with the rig availability issue, with take-away capacity in the 

Rocky Mountain region. All these things are excellent questions 

and we are prepared to answer some of those questions, and I will 

not go through those right now. 

Based on 2004 numbers, each dollar invested through the BLM for oil and gas management yielded $19. That is in 2004 numbers. 

We have not really run the numbers in today’s dollars, but I would 

imagine that there is probably twice that amount today. So tremendous leveraging for every dollar spent within this process. 

Positive results out of the Buffalo, Wyoming office, along with an 

industry hosted worker program piloted in Vernal, Utah this past 

year, are testaments to what can be accomplished with adequate 

funding. There seems to be a real disconnect at times, which I do 

not understand. For example, funding of the BIA office in Fort 

Duchesne, which processes one well for each three wells processed 

at the BLM office. Their budget is being cut by 10 percent. It is 

going to be a critical path item in the process. We cannot drill on 

Indian tribal lands without the BIA being in sync with the BLM. 

So earlier I mentioned the Forest Service, the BIA, the BLM. They 

are all attached at the hip and we have to have some type of consensus across the board. So it does not make sense to cut 10 percent out of the Fort Duchesne office, and the Uintah Basin is probably arguably the busiest BLM office in the country. 

Buffalo, Wyoming gets the credit because of the sheer numbers, 

a lot of the numbers you will see on these charts, but you get multiple wells approved with each APD or POD process. In Vernal, 

Utah, those gentlemen and ladies are faced with approving individual well permits. That could be a process improvement if we 

were able to alter that process a little bit. 

The APD backlog increased dramatically from 2004 to 2005. We 

have approximately 3,700 pending APD’s in the system today. 

Ninty-eight percent of those pending APD’s lie in the Intermountain West region. The industry is motivated to drill more 

wells but is limited by regulatory constraints. 

The decisions made by this committee can have real impacts on 

natural gas consumers across the Nation. Ensuring adequate funding for approval and oversight of energy projects through appro-
19 

priations will help encourage further development to meet the Nation’s energy demand. My company, Berry Petroleum—I can assure 

you we can do much more given leeway on the Federal permitting 

process side. 

The energy pilot program created in the energy bill. We have all 

mentioned that, and I am glad to see that that is on each one of 

your radar screens. I think if you look through our 300 member 

companies within IPAMS, that is the number one issue. What is 

the deliverable out of the energy bill? What do we really get? It all 

sounds great, but we really have not seen anything put in motion 

yet. We understand a lot of things have been teed up and we may 

see some action at the field level, but that is really key. I would 

encourage you. You talk about quarterly oversight. Hold them accountable. Find out what progress we have made over the past 

quarter. The next quarter find out what progress we have made. 

It is very high on everybody’s expectations list right now. That is 

the number one item in the energy bill that we were expecting to 

see some type of improvement in the overall process. 

I think the Buffalo office is a testament. Kathleen can tell you 

how much effort went into that, and it does not happen overnight. 

I personally worked through that process in early 2000. It takes a 

long time to tee these things up through the appropriations process. But it does have measurable results, and that is a good pilot 

for you analyze. 

I think if you dip into the Vernal, Utah office and see what was 

accomplished with just the addition of five people this past year, 

it had measurable results. You really need to talk to those individuals to see what type of impact. 

I understand the Vernal office is in the process of hiring approximately 20 people. The Rock Springs office is in the process of hiring 

about 20 people. It is all in discussion. The I’s have not been dotted 

and the T’s have not been crossed. But there is a real concern that 

if they hire these people, they will not have the resources to actually function. That is in the way of office space, vehicles, computers, everything it takes to exist in today’s environment. We just 

need to make sure that these offices have adequate funding. If you 

go back to the 19-to-1 leverage ratio I mentioned earlier, which I 

suspect is probably double now, it is a tremendous investment, and 

you know the benefits and we have all said it before. So the additional personnel and the additional supporting equipment is really 

key for these people to sustain over the next 5 years to handle 

what the industry is prepared to do. 

Increased activity adds pressure for each field office to monitor 

development taking place, and that should not be overlooked. We 

can increase supply without sacrificing environmental standards, 

and I think we have proven that time and time again. In my 

project area in Utah, we submitted over 200 APD’s, and to this 

day, there has not been a measurable change in the initial submission of the process. 

I might add early in my career, we used to be able to do this over 

telephone, essentially request permission to drill a well, and today 

it is a very large document that requires us going through this 

process. I will spare you and I will not drag you through that, but 

that is really the ideal scenario. I did not pad that. That is just the 
20 

process starting from point A to point B, to drilling a well. That 

is what a typical operator has to go through right now, bring all 

these together. It is a confusing process, and we have tried to clear 

it up and condense it within our own worlds. We have these megaspreadsheets to make sure that we try to run these things concurrently. So it is a very complicated process, but we are able to get 

it done. My hat is off to those in the BLM office that can put up 

with this mine damage. So we get it done. 

In closing, I would like to say natural gas prices are not set by 

a cartel refusing to produce more natural gas. They are the direct 

result of a continuous neglect of the regulatory process that governs oil and gas on American soil. The Intermountain West offers 

a near-term solution that we have all mentioned and is also part 

of a longer-term solution because of the long-term nature of that 

production profile. 

PREPARED STATEMENT

I encourage policymakers to provide adequate resources to the 

Federal agencies—and that includes the BLM, the BIA, the Forest 

Service—to develop natural gas resources that are owned by Americans, produced by Americans, and consumed by Americans. 

Thank you for the opportunity to testify today, and I welcome 

any questions you may have. 

[The statement follows:] 

PREPARED STATEMENT OF LOGAN MAGRUDER

Mr. Chairman and members of the subcommittee, my name is Logan Magruder 

and I am the President of the Independent Petroleum Association of Mountain 

States (IPAMS). Today, I am testifying on behalf of IPAMS as well as the following 

cooperating trade associations: the Domestic Petroleum Council, Independent Petroleum Association of America, U.S. Oil and Gas Association, American Petroleum Institute, International Association of Drilling Contractors and the Natural Gas Supply Association. We want to thank this subcommittee for holding a hearing about 

the resource needs of the BLM in the upcoming year. The decisions made by this 

subcommittee can have very real impacts on natural gas consumers across the nation. 

The main points I would like to make today are that: 

—Adequately funding the government’s energy development programs (Bureau of 

Land Management (BLM), Forest Service (FS) and Bureau of Indian Affairs 

(BIA) and improving the regulatory processes can increase the development of 

federally owned energy resources for the benefit of consumers. 

—An analysis done for the Domestic Petroleum Council—and we believe a similar 

analysis done for the Department of the Interior that may be released later this 

week—demonstrates that adequate funding and resources to process backlogged 

pending Applications for Permits to Drill (APDs) (estimated to be greater than 

3,000), can lead to as much as 105 Billion Cubic Feet of additional natural gas 

supply in the first year alone—with higher additional production increases in 

subsequent years. That’s enough natural gas to supply one and a quarter million additional households in that first year alone. 

—The revenues generated by additional oil and gas development will more than 

offset the government’s investment needed to ensure that public land energy development receives proper compliance and environmental attention, both before 

and after a permit—plus return significant additional dollars to the Treasury. 

In fiscal year 2004, oil and gas development on BLM and FS lands generated 

$1,648,896,000 in royalty revenues. This translates into almost $19 of revenue for 

every dollar spent to manage the program (Source: BLM). Ensuring adequate funding for approval and oversight of energy projects through appropriations will help 

encourage further development to meet the nation’s growing energy demand. Under 

the existing regulatory structure, the backlog of permits (both applications for permits to drill (APDs) and rights of way) and the current price environment underscore the need for a comprehensive oil and gas program with the proper resources. 
21 

The backlog of permits in field offices across the Intermountain West represents, 

most importantly, natural gas and oil supplies that could be helping consumers by 

making energy more affordable. 

The importance of adequate funding.—The charts above show the backlog of APDs 

in the BLM field offices that are part of the pilot program created by the Energy 

Policy Act. While it illustrates overall progress on the backlog, it doesn’t tell the entire story. The Buffalo field office received focused appropriations the past and has 

successfully addressed part of its backlog. However, isolating the backlog at other 

field offices reveals the mounting backlog needing attention. 

As of September 17, 2005 there were more than 3,700 permits pending at BLM 

in the Intermountain West. Ninety-eight percent (98 percent) of BLM’s pending permits are in the Intermountain West. Each permit represents an opportunity to in-
22 

1Source: America’s Energy for America’s Future, The Department of the Interior. 

2Source: Energy Information Administration. 

3Source: America’s Energy for America’s Future, The Department of the Interior. 

crease natural gas supplies heading toward consumers. Approximately seventy percent (70 percent) of all permits waiting for approval have been pending for more 

than 35 days even though they’re considered complete by the agency. In some cases, 

the FS process can take longer. While the process—including unnecessary and duplicative pre drilling studies and unnecessary permit restrictions—are the main 

causes of the backlog, the resource agencies are stretched too thin and need more 

people with proper training and that means adequately funding the agency. 

Federal natural gas resources play a significant role in supplying natural gas to 

the public. In 2004, the Intermountain West provided 22 percent of the Nation’s natural gas.1 The Energy Information Administration predicts natural gas production 

in the Intermountain West will increase 26 percent by 2025.2 With nearly 201 trillion cubic feet of natural gas beneath onshore federal lands this is the only region 

capable of providing significant near-term production increases.3 Achieving this goal 

requires a comprehensive effort by the Federal Agencies to promote natural gas development backed by adequate funding to ensure these resources are developed in 

compliance with the laws. Eliminating delays within the regulatory system won’t reduce environmental protections, but it will help deliver more natural gas to the 62 

million households that rely on natural gas. Doesn’t it make sense that natural gas 

resources owned by the American public should be developed to benefit the American public? 

Looking to the future.—The Rocky Mountains are projected to be one of the top 

areas contributing to our Nation’s natural gas supply. More than half of the production from this region currently comes from public lands. In the future, production 

from public lands will become more critical for our Nation’s natural gas supply. 

Proper funding for BlM to eliminate the backlog and improve the process will ensure that public lands can continue supplying their share of domestic production. 
23 

Because the government also plays such a critical role in our nation’s energy development—through its ownership and control over development—it’s important to 

ensure that the programs impacting consumer’s energy prices are adequately funded. Hurricanes Katrina and Rita clearly illustrated the importance this nation 

places on the government for its energy. These hurricanes also show the nation how 

supply disruptions create real impacts for consumers. Indeed, because of the price 

environment we’re experiencing now, funding these programs is especially critical 

so these supplies—owned by Americans, produced by Americans and consumed by 

Americans—can be developed for the consumer’s benefit. 

In order to help consumers, the Federal Government must increase production 

from public lands. Today’s natural gas market is tightly balanced with supply struggling to keep pace with demand. In such volatile markets, it is particularly important for all market participants to be attuned to, and able to react to, market signals. Increasing supplies from public lands requires a thorough examination of public land energy development to improve the existing regulatory processes allowing 

the government and industry to adapt to changes in the market for natural gas. It 

takes time to react to changes and operators in every basin in the Intermountain 

West are ready to commit the necessary resources to increase production. However, 

Congress must do its part through funding the agencies responsible for developing 

federal resources to address the corresponding increase in permit applications. 

In places like the San Juan Basin of New Mexico and Colorado, a robust drilling 

program is needed to maintain production levels. Each day this basin produces approximately 4 billion cubic feet of natural gas to meet consumer energy needs in 

California to the west and to a number of markets to the east. The drilling program 

needed in the Basin means dealing with tight supply of drilling rigs, trained people 

and pipeline infrastructure issues. Industry is willing and able to do so, but such 

action depends on acceleration of APD approvals. 

The Energy Policy Act of 2005 contains positive policy changes that provide an 

opportunity for the Bureau of Land Management to improve its permitting practices. This opportunity was backed up by a direct funding source to ensure that 

America’s natural gas resources are developed for the benefit of the nation. Ensuring these dollars reach their intended source should be a primary consideration of 

this subcommittee in order to forestall anticipated offsets in the upcoming budget. 

The Energy Pilot Program created in the Energy Policy Act of 2005 will yield benefits to consumers if BLM takes this opportunity to comprehensively review the 

process for approving permits. To estimate resource needs in the future for this program, BLM should examine the current production coming from federal lands then 

determine how much natural gas needs to come from public lands in order to supply 

the demands of the nation. After the agencies understand their role, then they can 

begin planning for that level of natural gas production in terms of process and manpower needed to reach this goal. The result should be a program ready to fulfill the 

permitting obligations of the agency. 

In the Uintah Basin of northeast Utah, the Vernal Field Office is now the second 

busiest field office in terms of permit volume. The field office manager in that office 

does a fantastic job within the system and manpower available. However, good management can only take us so far. Industry had to temporarily fund 5 hosted workers 

to help eliminate the backlog in that office. Recognizing the value of these workers, 

the Field Office Manager eventually found the resources to continue paying for 

these workers under its budget. But 5 workers still falls short of the staff needed 

to process permits and perform the necessary on-site inspections throughout the 

area. 

While emphasis is placed on applications for permits to drill (APDs), there also 

exists a large delay in receiving other approvals for natural gas development. Delays 

in processing rights of way to transport natural gas from the lease to the market 

pipeline leaves natural gas stranded. In some offices, natural gas producers are 

waiting to drill approved APDs because the associated right of way has not been 

approved. 

In addition, BLM needs adequate resources to monitor the development taking 

place to ensure operators are complying with conditions of approval and lease stipulations—and to monitor and adjust these as justified. An improved process would 

free up manpower for these functions which are arguably more important than the 

procedural requirements. However, increasing resources and improving the process 

will yield more benefits to consumers. 

In closing, let me remind this committee that high natural gas prices are not the 

result of a cartel refusing to produce more natural gas. They are the direct result 

of a continuous neglect of the regulatory process that governs oil and natural gas 

development on federal lands and of restrictions on access to key energy resources. 

The Intermountain West offers a near-term solution and is also part of a longer- 
24 

term solution for the supply-side of the equation. However, in order to develop these 

supplies in a sustainable manner, Congress must provide adequate resources to the 

federal agencies to reach a defined goal—supplying the public demand with natural 

gas. The Federal Government, as owner of the largest reserves of natural gas, has 

the responsibility to ensure that adequate supplies of this domestic resource—owned 

by Americans, produced by Americans, and consumed by Americans—is developed 

for the benefit of the public. Thank you for the opportunity to testify and I look forward to answering any questions you have. 

RECOMMENDATIONS

Increased Funding to Improve the Process.—Funding for oil and natural gas programs (both BLM and FS) should be increased across the board. This allows the 

agency to use the momentum from the Energy Policy Act of 2005 to improve the 

permitting process. Top down reviews of the process will provide the information 

needed for the agency to improve the overall development process that has become 

too cumbersome. 

Prevent Offsets.—With the Administration’s budget due out soon, this subcommittee should look for offsets of new funding sources from the Energy Policy Act 

of 2005. Offsets will set the program back by preventing BLM from eliminating the 

backlog of permits. 

Eliminate the Backlog of Rights of Ways.—Drilling the well is the first step, getting the product to the consumer is the next step. Funding should help address 

eliminating the mounting backlog for rights of way. 

Provide Resources for Follow Up Surface Compliance.—BLM needs the resources 

to ensure that operators are complying with their lease terms and conditions of approval. 

Encourage Concurrent Reviews of Exploration and Development Proposals.—E&P 

proposals are frequently reviewed in a consecutive fashion where the paper moves 

from one desk to the next. The process is cumbersome and inefficient. Where possible proposals should be distributed to the proper personnel for concurrent reviews. 

ATTACHMENT 1: THE IMPACT ON THE FEDERAL TREASURY

As you see here, in one project area of Wyoming alone, increased permitting could 

lead to an increase in average annual natural gas production of more than 11 billion 

cubic feet, or enough to supply 138,000 households. That also means an additional 

$11 million in Federal royalty receipts. 
25 

ATTACHMENT 2: THE PERMITTING PROCESS

Senator BURNS. Mr. Magruder, do you have a handout with that 

schematic? 

Mr. MAGRUDER. I am going to leave this. I brought three of them. 

It is in the testimony as well. 

Senator BURNS. We have been joined by the ranking member 

here this morning, Senator Dorgan. If you have an opening statement, we would welcome it at this time. 

Senator DORGAN. Mr. Chairman, I am sorry for the delay, but I 

have read the testimony and appreciate your calling this hearing. 

I will wait until after you question. I will ask a couple of questions. 
26 

Senator BURNS. We have the President pro tempore of the U.S. 

Senate here, Senator Stevens. Do you have anything, any statement you want to put in the record? 

Senator STEVENS. I merely want to ask Ms. Clarke one question, 

if I can, and that is the Energy Policy and Conservation Act directed Interior, Agriculture, and Energy to inventory oil and gas resources. But Interior only opened a study on five basins, Montana, 

Wyoming, Utah, Colorado, and New Mexico. Now, we have almost 

half of the public lands of the country. Why was Alaska not included? 

Ms. CLARKE. Sir, I know that we have inventoried in different 

phases, and I know that that first phase was looking at the lower 

48, basically the Rockies, to determine what opportunities existed 

there. The second phase was really looking at conditions of approval and obstacles to the development. 

I confess I will have to get back and find out why Alaska was 

not included in that original inventory, but I know we have a very 

good inventory of the resources in Alaska. 

[The information follows:] 

OIL AND GAS INVENTORY

Alaska was included in the second phase of the EPCA assessments. The contract 

for the EPCA phase II inventory for six more basins was issued in 2004, maintaining BLM’s planned schedule of inventories of technically recoverable oil and gas resources. The basins covered include Northern Alaska (NPRA and ANWR 1002 only), 

the Wyoming Thrust Belt, the Denver, Black Warrior and Appalachian Basins, and 

the Florida Peninsula. The Phase II inventory is scheduled for release in January 

2006. 

ALASKA APPLICATIONS FOR PERMITS TO DRILL

The requested information on APDs in Alaska is presented in the table below. 

ALASKA APDs 

Fiscal year 

TOTAL APDs 

pending at 

beginning of 

fiscal year 

APDs received 

during fiscal 

year 

TOTAL APDs 

processed 

during fiscal 

year 

1994 ....................................................................................................................... 14 .................... 1 

1995 ....................................................................................................................... 13 1 3 

1996 ....................................................................................................................... 11 .................... 5 

1997 ....................................................................................................................... 6 1 1 

1998 ....................................................................................................................... 6 2 3 

1999 ....................................................................................................................... 5 14 7 

2000 ....................................................................................................................... 12 11 9 

2001 ....................................................................................................................... 14 23 13 

2002 ....................................................................................................................... 24 12 33 

2003 ....................................................................................................................... 3 6 9 

2004 ....................................................................................................................... .................... 18 15 

2005 ....................................................................................................................... 1 2 8 8 

1 One of the APDs was withdrawn in 2005. 

Senator STEVENS. I think if Mr. Magruder prepared a chart like 

that for Alaska, it would take two charts. 

Ms. CLARKE. I am sure it would. We have many positive activities going on on BLM resources in Alaska that I think are contributing to the well-being of the lower 48. 

Senator STEVENS. Have any oil and gas applications been granted since the 2000 act? 
27 

Ms. CLARKE. Pardon? 

Senator STEVENS. Have any applications to drill on Federal lands 

in Alaska been—— 

Ms. CLARKE. Yes, there have been some. The numbers are not as 

significant. There have and I will get that number for you. It is 

very small. 

Senator STEVENS. I do not know of. Since 2000 I am talking 

about. 

Ms. CLARKE. I was told there was a very small number and I will 

double check and get back to you on that. 

Senator STEVENS. Thank you very much, Mr. Chairman. 

Senator BURNS. We have been joined also by the chairman of the 

Energy Committee. Senator Domenici, do you have a statement you 

want to make? 

Senator DOMENICI. No. I know everybody has raised the issue of 

the pilot projects that had to be established, and I will inquire of 

those when my time comes. 

Thank you for holding the hearing. 

Senator BURNS. Well, thank you. 

Mr. Ford West, who represents the ag community and The Fertilizer Institute. We are looking forward to your testimony today. 

STATEMENT OF FORD B. WEST, PRESIDENT, THE FERTILIZER INSTITUTE 

Mr. WEST. Thank you, Mr. Chairman. I appreciate the opportunity to be here, and I will be brief. 

Our reality is real simple. I guess the reason I am here to represent agriculture is we use natural gas as a feedstock to make nitrogen fertilizer. It takes about 33,000 cubic feet to make a ton of 

ammonia. We think natural gas is too valuable a feedstock to use 

it to make electricity, especially when we have a lot of coal available for that purpose. 

The use of fertilizer accounts for about 4 percent of the world’s 

food production. It is a vital component of any nation’s production 

agriculture, and it is a vital component of the Nation’s food security 

and certainly national security. 

Fertilizer is traded worldwide, and the current rise in natural 

gas prices—and today it is around $13.50—means that we are not 

competitive in world markets. Our hard reality is that we have 

shut down 21 nitrogen fertilizer production plants in the United 

States, 16 of them permanently closed. Five plants are currently 

idle. Many plants that are remaining are running at about 50 percent of production, and that is just kind of the reality we have to 

deal with, looking at $14 natural gas prices. 

That is not just us. Any chemical company that is using natural 

gas as a feedstock has to deal with those numbers. Seventy chemical plants have closed in the United States, according to the American Chemical Council, and about 40 more are destined to be shut 

down. 

Currently right now, because of these high natural gas prices, 

farmers are paying the highest prices ever recorded by USDA for 

nitrogen fertilizer. 

Imports are trying to replace our lost production, and wholesalers and retailers are moving as quickly as possible and strug-
28 

gling with new logistics that imports bring into the marketplace. 

But nitrogen imports now account for about 45 percent of our use. 

Our reality is being transferred over to the farmers’ reality because, as we finish this fall harvest season and look to the spring 

planting, there is a really big cloud of uncertainty hanging over 

American agriculture. The uncertainty is, is nitrogen going to be 

available. There is uncertainty over what the cost is going to be, 

the uncertainty of how to explain this to the bankers so they can 

get a production loan, the uncertainty of lease agreements, should 

I enter into new lease agreements and try to pencil out the cost of 

production, and the uncertainty of commodity prices, and the uncertainty of what is the Government going to do about it, if anything. 

I think all this uncertainty certainly is due to the cost of energy 

and natural gas. Certainly in the United States the demand for 

natural gas exceeds the supply, and that is creating this high energy crisis and the high prices. Even though Congress deregulated 

natural gas in the late 1970’s, Government policy is certainly manipulating the price of natural gas, and it has created a demand 

that is artificially high due to policies like the Clean Air Act that 

forced the utilities into producing electricity from natural gas and 

moving away from coal because of the emission standards. The supply of natural gas is artificially low due to Federal policies that 

prevent certain moratoria in certain States and where you can 

drill. The supply/demand balance is really having an impact in our 

industry and on energy policy in the United States. 

Like I said, we use natural gas as a feedstock. We think it is too 

valuable to use it to produce electricity, especially when we have 

this abundance of coal or nuclear that we have in America that we 

could be using to produce electricity. Using natural gas as a feedstock, you can produce anything from fertilizer to face cream, and 

we think it is very valuable. If you look at some of the statistics, 

it is only going to get worse because 95 percent of all the new electric power capacity coming on stream is going to be using natural 

gas. Now, these plans may change because $14 gas has an impact 

on that decision. 

The hard realities that we are facing in fertilizer in ag is going 

to go on to the American consumer this winter, if you look at what 

the suggestions of what natural gas prices are going to do, up 60 

to 90 percent. 

We have to realize that Government policy kind of got us into 

this, in our opinion. There is no silver bullet here, as you said, Mr. 

Chairman, and we are going to have to change some Government 

policy to get us out of this. Certainly we need more supply of natural gas. As an industry and a user of natural gas, we hope that 

increase in supply comes from onshore, offshore, wherever we can 

get LNG. 

But we understand that this is not going to be tomorrow. It is 

going to take some time, and probably the challenges that we have 

in our industry are going to stay there, and we may not see any 

action that could be taken today to bring back those ammonia 

plants that have closed. 

What we can suggest, certainly 12 percent of our natural gas production is still offline because of the hurricanes. Anything we can 
29 

do to help bring that capacity on stream as quickly as possible, certainly looking at bringing on as many onshore permits as possible. 

We also are looking for 181 offshore, whatever we can do there. 

PREPARED STATMENT

I think another thing is the energy bill created a lot of incentives 

for coal gasification that is in that legislation. Anything that we 

can do with the Department of Energy to move quickly to bring 

those loan guarantees on. We have plants that want to use that 

technology, if we can get a loan guarantee. I appreciate that, and 

look forward to your questions. 

[The statement follows:] 

PREPARED STATEMENT OF FORD B. WEST

INTRODUCTION

Mr. Chairman and members of the subcommittee, I am Ford B. West, president 

of The Fertilizer Institute (TFI). On behalf of TFI, I appreciate the opportunity to 

testify before the Senate Appropriations Interior and Related Agencies Subcommittee regarding ‘‘The High Price of Natural Gas and its Impact on the U.S. fertilizer industry.’’ Furthermore, I would like to thank you Mr. Chairman for scheduling this important hearing and for your leadership in addressing this critical issue 

impacting the U.S. plant food industry, its many local retail agribusiness outlets 

and the farmers and livestock producers they serve. 

TFI is the leading voice of the nation’s fertilizer industry, representing the public 

policy, communication and statistical needs of fertilizer producers, retailers and 

transporters. In addition to energy policy, issues of interest to TFI members include 

the environment, international trade, security, transportation and worker health 

and safety. 

FERTILIZER AND ENERGY

The United States needs reliable and plentiful supplies of natural gas to produce 

nitrogen and meet critical agriculture and food production needs. Natural gas is the 

fundamental feedstock ingredient for the production of nitrogen fertilizer and represents 70 to 90 percent of the production cost of one ton of anhydrous ammonia— 

the building block for most other forms of commercial nitrogen plant nutrients. The 

nitrogen fertilizer industry accounts for approximately three percent of the total 

natural gas consumed in the nation. 

THE NATIONAL IMPACT

The current U.S. natural gas crisis is exacting a heavy toll on America’s nitrogen 

fertilizer producers and the farmer customers they supply. The resulting negative 

financial impact on the North American fertilizer industry is unprecedented and 

threatens to irreversibly cripple the U.S. nitrogen fertilizer manufacturing industry, 

which supplies approximately one-half of U.S. farmers’ nitrogen fertilizer needs. 

America’s food security, and by extension, our national security will be jeopardized 

if action is not taken to address our country’s current natural gas crisis. 

IMPACT OF HIGH NATURAL GAS PRICES

Due to the U.S. natural gas crisis, the cost of nitrogen fertilizer production has 

reached an all-time high forcing many U.S. plants to shut down. Jobs are being exported to China, Russia, the Middle East and the Caribbean, as U.S. farmers are 

becoming increasingly dependent on foreign sources of fertilizers. 

As a world market commodity, fertilizer prices are determined much like the 

prices of most agricultural commodities. The fact that fertilizer is a commodity 

means that supply and demand factors in major markets around the world impact 

the price U.S. farmers pay for fertilizer. The prices paid by farmers for the major 

fertilizer materials reached the highest level on record during the spring of 2005. 

NITROGEN

Anhydrous ammonia is the source of nearly all the nitrogen fertilizer produced in 

the world. Ammonia is produced by combining nitrogen with hydrogen. The nitrogen 

is obtained from the atmosphere, while the hydrogen is obtained from natural gas. 
30 

At today’s gas prices, the cost of natural gas accounts for 70–90 percent of the production cost of ammonia. Thus, when U.S. natural gas prices increased significantly 

beginning in the year 2000, the cost of domestically produced ammonia also rose significantly. Average U.S. ammonia production costs doubled from 1999 to 2003, the 

latest year for which data are available, and are sure to have increased again in 

2004 as natural gas prices have continued to rise. 

While fertilizer producers can try to pass along these cost increases, the commodity nature of the business and competition from producers in nitrogen exporting 

countries, with access to lower priced gas, limits this option. As a result, a rise in 

U.S. natural gas prices causes producer margins to shrink. Eventually, margins 

turn negative as gas prices continue to increase. Consequently, companies are forced 

to reduce production, temporarily idle, or even permanently close plants depending 

on the specific economic situation they face. 

As a result of the ongoing natural gas crisis in America, 21 nitrogen fertilizer (ammonia) production facilities have closed since fiscal year 1998/99 (July 1998-June 

1999). Sixteen of those plants have closed permanently, representing a 20 percent 

drop in total production capacity, while five plants remain idle. Operating rates for 

the U.S. ammonia industry have also declined significantly from historical levels. 

The permanent and temporary closures in combination with the drop in operating 

rates have resulted in a 35 percent decline in U.S. ammonia production from 17.85 

million tons of material in fiscal year 1998/99 to 11.70 million tons in fiscal year 

2003/04. U.S. nitrogen imports have increased from 6.11 million tons in fiscal year 

1998/99 to 10.36 million tons in fiscal year 2003/04. As a result, U.S. ammonia production fell by over six million tons or 34 percent in only five years. Consequently, 

the U.S. fertilizer industry, which typically supplied 85 percent of its domestic needs 

from U.S. based production during the 1990s, now relies on imports for nearly 45 

percent of nitrogen supplies. 

In the past few weeks alone, three of the largest remaining U.S. nitrogen fertilizer 

producers have announced they are again shutting in or idling a significant portion 

of their facilities and reducing production by as much as 50 percent or more. Last 

week, TFI and a number of its nitrogen producing member company CEOs met with 

U.S. Department of Energy Secretary Samuel W. Bodman, as well as a number of 

key farm-state senators and congressmen. After describing agriculture’s natural gas 

crisis situation, in all honesty I cannot say that we left any of those meetings encouraged about the short or long term energy future for our producers, retailers, 

farm customers or our nation. Energy conservation, renewable fuels and increased 

imports of Liquefied Natural Gas (LNG), while important, will not save this nation’s 

nitrogen fertilizer industry from being forced to idle remaining U.S. production capacity because of cost pressures from high natural gas prices. Increasing U.S. supplies of natural gas in a significant manner and as soon as possible is the only way 

to avoid the further decline of the U.S. fertilizer industry and a nationwide economic 

disaster in farm country. 

THE CURRENT CRISIS THREATENS OTHER FERTILIZERS

Phosphate production is natural resource based and begins with the mining of 

phosphate rock. The United States is the world’s largest producer and exporter of 

phosphate fertilizer. Thus increased global demand has been the driving factor behind the recent rise in phosphate fertilizer prices. However, significantly higher 

costs for major production inputs like ammonia produced with natural gas, and sulfur have also placed upward pressure on the prices of the major phosphate fertilizers. Average U.S. production costs for ammonium phosphates increased by 20 

percent from 1999 to 2003, the latest year for which data are available, and are expected to have increased again in 2004 as ammonia prices have continued to rise. 

CONCLUSION

Mr. Chairman, allow me to relay recommendations, which we believe should be 

immediately included in federal energy legislation and policy. These recommendations include: opening additional federal lands and off-shore areas to oil and gas exploration and production, especially the lease/sale area 181 in the Gulf of Mexico 

and other coastal areas on the Outer Continental Shelf (OCS). 

Currently, 85 to 90 percent of the OCS is off-limits to natural gas exploration due 

to a combination of congressional and state moratoria. Industry estimates suggest 

that the OCS contains gas reserves large enough to supply all current U.S. industrial and commercial needs for 40 years. Regarding ‘‘Lease Sale 181,’’ the U.S. Interior Department estimates that the 6 million acre area contains natural gas reserves of 1.3 trillion cubic feet. TFI strongly believes that opening these areas to 
31 

natural gas drilling is the fastest way to bring new natural gas to market and bring 

much needed relief to our industry and our nation’s food producers. 

Also, any federal policies that can be implemented to make it easier to get permitting and to build new LNG terminals in the United States as quickly as possible 

are vital. We believe these federal policy initiatives are critically important to the 

energy security, food security and national security of this nation. 

Finally, TFI urges members of this subcommittee and all members of Congress 

concerned about the ongoing U.S. natural gas crisis, to contact Secretary Bodman 

and request the U.S. Department of Energy move quickly to promulgate rules and 

regulations for loan guarantees and investment tax credits for construction of coal 

gasification facilities as authorized by Congress in the recently enacted federal energy bill. 

To conclude, allow me to again thank you Mr. Chairman and members of the subcommittee for your leadership in addressing the critically important issue of the 

high natural gas price in this country and its impact on the U.S. fertilizer industry 

and its farmer customers. Thank you for the opportunity to testify today. 
32 
33 
34 

Senator BURNS. Thank you very much, Mr. West. 

I am going to ask for the testimony of Mr. Cicio, and then after 

that testimony, then we will go vote and come back. Yes, sir? 

Senator BENNETT. Mr. Chairman, just a note. Senator Frist notified us that he is going to be cutting the vote off at 20 minutes. 

Yesterday, for the first time in recent memory, two Senators were 

denied the right to vote and they showed up 1 minute after the cutoff. I think we better be careful, lest this entire subcommittee—— 

Senator BURNS. How much time do we have left? 

Senator BENNETT. It started at 10:45. 

Senator BURNS. Let us go vote and we will come back for Mr. 

Cicio. I do not want anybody to miss a vote. 

We will call the committee back to order. Sorry about the vote, 

but we made it as fast as we could make it. I do not know how 

many reporters are allowed on the Hill, but they are everywhere. 

How you make it through that maze is beyond me. 

Mr. Cicio, thank you for coming this morning. He is the Executive Director of the Industrial Energy Consumers of America. We 

look forward to your testimony. 

STATEMENT OF PAUL N. CICIO, EXECUTIVE DIRECTOR, INDUSTRIAL 

ENERGY CONSUMERS OF AMERICA 

Mr. CICIO. Thank you, Chairman Burns, members of the subcommittee. Good morning. I am Paul Cicio. We are the only crosssector, nonprofit trade association in the country that is dedicated 

exclusively to development of sound energy and environmental policy whose membership is exclusively energy consumers. 

The natural gas crisis and the resulting record-high prices that 

are more than twice that of Europe, three times that of the Far 

East and China, are not market or hurricane induced. It is Government induced. There is no shortage of natural gas in the United 

States. It is an access issue and Congress and the administration 

are accountable. 

Over 5 years, the price has increased more than 400 percent, 

which is far higher than crude oil or gasoline, and the situation 

continues to worsen. 

Even before hurricane Katrina, the price of U.S. natural gas was 

the highest and the most volatile in the world. Should we have a 

cold winter, prices promise to go higher. 

Almost without an exception, there has not been a single 

grassroot manufacturing facility built in this country in 5 years. 

The United States is no longer an attractive place to invest manufacturing capital because of the comparatively high prices and uncertain reliability of energy. High natural gas prices have resulted 

in significant industrial demand destruction. According to the Energy Information Administration, industrial demand for natural 

gas has decreased 9.1 percent in the time period of 2000 to 2004. 

In that time period, 3 million manufacturing jobs were lost. 

In October 2005, this month, IECA conducted a random survey 

of 31 large manufacturing companies from diverse sectors that indicates demand destruction is accelerating. The survey indicates 

that 55 percent of those surveyed would decrease their natural gas 

demand this winter anywhere from 5 to 40 percent. If this survey 

is reflective of the U.S. industrial demand profile, natural gas de-
35 

mand by manufacturing is falling significantly, along with good 

jobs. 

In this regard, we believe this subcommittee could help increase 

natural gas supply. Eliminating the backlog of applications for permits to drill is our best near-term supply option over the next 1 to 

2 years. We are very concerned that the BLM and the Forest Service are not adequately funded and thus lack the capacity to process 

the growing number of applications for drilling permits. 

We do know that the Bureau of Land Management has successfully increased the number of drilling permits it has processed year 

over year, and they are to be congratulated for that. However, we 

continue to hear from a significant number of natural gas producers that the backlog of unprocessed drilling permits continues 

to grow and is delaying their ability to produce natural gas. 

We also encourage this subcommittee to increase accountability 

of BLM by requiring quarterly progress reports and quarterly congressional hearings that would allow this committee and consumers to monitor and ensure that significant progress is being 

made until the entire drilling permit backlog is removed. 

PREPARED STATEMENT

In closing, to solve our natural gas crisis, we need access to areas 

currently off limits to natural gas production and, most importantly 

for this committee, we need increased capacity to process drilling 

permits in areas where we can produce today. 

Mr. Chairman, we ask for your assurances that the drilling permit backlog matter will be resolved very quickly. 

Thank you. We look forward to your questions. 

[The statement follows:] 

PREPARED STATEMENT OF PAUL N. CICIO

The Industrial Energy Consumers of America (IECA) is grateful for the opportunity to provide testimony on this important topic that impacts the well-being of 

every home owner; determines the competitiveness and the future of the manufacturing sector in this country; and is critical to ensuring national security and economic growth. 

IECA is a nonprofit organization created to promote the interests of manufacturing companies for which the availability, use and cost of energy, power or hydrocarbon feedstock play a significant role in their ability to compete in domestic and 

world markets. IECA is the only cross sector non-profit trade association in the 

country dedicated exclusively to the development of sound energy and environmental policy and whose membership are exclusively consumers of energy. 

ELIMINATING THE BACKLOG OF APPLICATIONS FOR PERMITS TO DRILL (APDS) IS OUR

BEST NEAR-TERM SUPPLY OPTION OVER THE NEXT 1–2 YEARS

We are very concerned that the BLM and Forest Service are not adequately funded to process the growing number of applications for permit to drill (APDs). We do 

know that the BLM has successfully increased the number of drilling permits it has 

processed year over year and they are to be congratulated for it. However, we continue to hear from a significant number of natural gas producers that the backlog 

of unprocessed drilling permits continues to grow and are delaying their ability to 

produce natural gas. 

We understand that these agencies lack the necessary funding of $10 million each 

to hire and train the needed personnel to keep up with the additional volume of 

APD’s. If these permits were already processed we would be enjoying the impact of 

greater supply and lower price. 

This being the case, the most important action this subcommittee can take to increase short-term natural gas supply is by accelerating the capacity of the BLM and 

the Forest Service to process drilling permits. From our perspective, action by this 
36 

subcommittee to ensure that these agencies receive this very small amount of increased funding is an important insurance policy to the American public that we 

may not run out of natural gas in the near term. 

We also encourage this subcommittee to increase accountability of the BLM by requiring quarterly progress reports and quarterly Congressional hearings that would 

allow this committee and consumers to monitor and ensure that significant progress 

is being made until the entire drilling permit backlog is removed. 

OTHER KEY POINTS ABOUT THE NATURAL GAS CRISIS

1. The natural gas crisis is government induced and is caused by the failure of 

the Congress and the Administration to remove barriers to access over 400 trillion 

cubic feet of natural gas reserves under federal control and particularly the area 

recognized as Lease 181 in the Gulf of Mexico. 

2. IECA recommends swift action on the part of Congress and the Administration 

to prevent potential supply disruptions this winter. These actions may also reduce 

the price of natural gas. 

—Increase natural gas supply by removing barriers to areas currently off-limits; 

—Optimize use of non-natural gas energy sources for power generation; 

—Work with State officials to dispatch natural gas fired power generation only 

as needed and on a economic and energy efficiency basis; 

—Encourage the public to conserve energy and improve energy efficiency across 

the entire economy. 

THE NATURAL GAS CRISIS IS GOVERNMENT INDUCED

The natural gas crisis and the resulting record high prices that are more than 

twice that of Europe and three times that of the Far East and China are not market 

or hurricane induced. It is government induced. There is no shortage of natural gas 

in the United States. It is an ‘‘access’’ issue and Congress and the Administration 

are accountable. 

The natural gas crisis has been in full swing for five years and neither the Congress nor the Administration has acted appropriately to deal with the access issue. 

For five years manufacturers, homeowners, farmers and other consumers have been 

adversely affected by the significant impact of high natural gas prices. During that 

time the price has increased more than 400 percent, which is far higher than crude 

oil or gasoline, and the situation continues to worsen. Even before Hurricane 

Katrina, the price of U.S. natural gas was the highest and most volatile in the 

world—and should we have a cold winter—prices promise to go even higher. 

HIGH NATURAL GAS PRICES HAVE SEVERE IMPACTS ON THE MANUFACTURING SECTOR

While gasoline prices hurt consumers by increasing the cost of transportation and 

reducing disposable income, high natural gas prices have a much larger and lasting 

impact because they not only increase the cost of heating and cooling, but also affect 

the competitiveness of industry and the retention of good jobs. Since 2001, natural 

gas prices have significantly contributed to the loss of 3.0 million manufacturing 

jobs and the shifting of future investment overseas. 

Almost without an exception, there has not been a single grass-root manufacturing facility built in this country in five years! The United States is no longer an 

attractive place to invest manufacturing capital because of the comparatively high 

energy prices and uncertain reliability. Low-cost reliable energy has historically 

been one of our country’s real strengths that fostered growth in our once powerful, 

but now dwindling manufacturing sector. 

OCTOBER, 2005 IECA SURVEY INDICATES THAT INDUSTRIAL DEMAND DESTRUCTION IS

ACCELERATING

High natural gas prices have resulted in significant industrial demand destruction. According to the Energy Information Administration, industrial demand for 

natural gas has decreased 9.1 percent from 8,142,240 mmcf in year 2000 to 

7,398,630 mmcf in year 2004. The decreased demand by the industrial sector is the 

primary reason the United States does not have shortages of natural gas at this 

time. As the price goes up, manufacturing loses competitiveness and shuts facilities 

down, freeing up natural gas for other sectors. 

An October 2005 IECA random survey of 31 large manufacturing companies from 

diverse sectors indicates that demand destruction is accelerating. Each company 

was asked whether their natural gas demand would increase or decrease this winter 

versus last. The profile of the manufacturing sectors and the number of partici-
37 

pating companies are as follows: chemical/plastics (11); glass (3); steel (6); paper (5); 

fertilizer (1); brick (1); food processing (3); cement (1). 

42 percent said their demand would not change. 

22.6 percent said their demand would decrease by 5 percent 

16.1 percent said their demand would decrease by 10 percent 

6.5 percent said their demand would decrease by 15 percent 

3.2 percent said their demand would decrease by 20 percent 

3.2 percent said their demand would decrease by 25 percent 

3.2 percent said their demand would decrease by 40 percent 

3.2 percent said their demand would increase by 5 percent 

The survey indicates that 54.8 percent of those surveyed would decrease their natural gas demand this winter anywhere from 5 to 40 percent ! If this survey is reflective of the US industrial demand profile, natural gas demand by manufacturing is 

significantly falling along with good jobs. 

‘‘LET MARKETS WORK’’ STATEMENTS ... FAILS TO RECOGNIZE THE FEDERAL

GOVERNMENT IS CONSTRAINING SUPPLY

Too often we hear members of Congress say we should ‘‘Let markets work.’’ This 

statement is not an ‘‘energy policy’’ and fails to recognize the federal government 

is constraining supply by preventing access to areas that are under federal control 

that contains some 400 TCF of natural gas. United States annual consumption is 

only 22 TCF and even a small portion of that supply would have a dramatic impact 

on reducing record high prices. At the same time, the federal government has enacted numerous environmental laws that lead to increased demand for natural gas. 

How can ‘‘the markets work’’ when government increases demand and restricts supply? 

The statement also does not reflect the reality that we have stringent government 

environmental regulations in place that control the regulatory process by which natural gas production companies receive approval to drill. And, if these government 

agencies are not adequately funded or well managed, slow the process of drilling 

permit approvals. 

In closing, we need access to areas currently off-limits to natural gas production 

and increased capacity to process drilling permits. Mr. Chairman, we ask for your 

assurances that the drilling permit backlog matter will be resolved. 

Thank you for the opportunity to provide this testimony. 

Senator BURNS. Thank you. 

I will start the questioning here. I would ask Director Clarke. 

You have had a little time, but not maybe ample time to set up 

these pilot projects to increase your ability to issue these APDs. I 

would like some sort of a report on that on how you are doing. 

Where are you in the process? 

Ms. CLARKE. Senator, we are very grateful for the authority 

granted to the BLM under the Energy Policy Act to establish these 

pilot offices. I think that they hold great promise for us in being 

able to deal with the backlog. 

Immediately upon passage of the act, I identified a team and a 

single individual that we asked to lead this effort. We are ahead 

of schedule in getting the MOU between all of the Federal participants in place and have already contacted many of the States and 

are working on outreach to them to bring those partners along. 

We anticipate hiring 10 Fish and Wildlife individuals. The 

recruitments are already out to fill those slots, I believe about four 

Forest Service slots, and we are working well with the EPA and 

other partners to make sure that staff is dedicated to the processing of APDs. Clearly, that does hold the opportunity for us to 

most swiftly get natural gas to the marketplace. So we are ahead 

of schedule on this. We anticipate hiring 130 individuals under the 

authorities of the pilot program. 

The additional funds that will come to us from rental receipts 

put about $19 million into the program, of which nearly $11 million 
38 

is going to go directly to APD processing in the BLM ranks. An additional $6 million or $7 million will be funding the Federal partners’ participation. Some of that money will be dedicated to inspection and enforcement to make sure that we are managing our program in balance. 

Senator BURNS. Thank you very much. 

Ms. CLARKE. Could I just tell you we expect to have these offices 

operational in January? The legislation gives us until March. So we 

recognize there are urgencies and we are seeking to expedite implementation of the pilot offices. 

Senator BURNS. It has been claimed by the industry that there 

is a lack of communication. I will fill that in. The industry contends 

the problem is that the BLM is not identifying incomplete applications—in other words, you will have applications that have been 

laying around that are marked incomplete—and has guidelines 

that do not allow a standardization application process to prevent 

incomplete APDs. But also, there is a problem that once an APD 

is discovered to be incomplete, the applicants are not notified immediately upon that. Can you clear that up for us? 

Ms. CLARKE. Senator, we have been working diligently throughout my tenure as Director of the BLM to deal with the challenge 

of APDs and to improve our processes. In July 2002, I pulled together all of the field managers and petroleum technicians, State 

directors, and others to talk about the problems with APD processing. 

At that time, we put into place numerous actions to improve our 

responsiveness to requests for permits to drill. One of the things 

we did was to create quality assurance teams, which have been 

routinely going out to field offices, to make sure that we are consistently applying our rules and our program to each of those offices and to also improve the way we approach processing. 

We have begun accepting applications in packages where they 

cover an area or a plan of development. That allows us to go in and 

do one NEPA process and approve all of the applications at once. 

We are also working to make sure that we do improve our procedures in dealing with industry. We have done a lot of outreach to 

improve communication. There are directions given to us in the Energy Policy Act which give us very clear guidance on the Congress’ 

expectation in regards to timing and communications, what constitutes a complete package. 

As you know and as the pilot programs identify, we have other 

participants, other Federal and State players, that need to partner 

with us, and I do believe that by coalescing all of those in some 

one-stop shopping kind of locations, we will have the full attention 

of those players that need to assist us in moving these permits forward. 

So we are committed to being on time and on deadline, and guidance has already gone out to the field identifying the new expectations for time lines on the APD processing. 

Senator BURNS. Well, Mr. Magruder has indicated that there are 

two players in this that are not here today, the Forest Service and, 

of course, on Indian lands. Indian lands have jumped 50 percent 

in their production in the last 3 years. Why would that show such 

an increase and yet we seem to be lagging off reservation? 
39 

Ms. CLARKE. I think we are doing well across the board in increasing production. Senator, that is not to say there is not opportunity for continued improvement and expansion of energy production. I believe that we have been given some great new tools, authorities, and certainly we all have the incentive. 

Senator Craig asked if we were managing the situation as a priority. Let me assure you that it absolutely is a priority. We have 

a daily meeting on all things to do with energy and energy development at the BLM. It is front and center on my screen. We recognize 

the needs of the Nation for reliable energy sources and we recognize the capability BLM has to contribute to the supply. We want 

to be part of the solution, not part of this problem. 

Senator BURNS. At one time we tried to work out a one-stop shop 

that would work for the Forest Service and the BLM and Indian 

country. I do not know where that is right now, but I will think 

about that. 

So, I have got a question. Mr. Magruder, would you agree that 

a 50 percent increase on Indian lands, even though they are not 

here, is a bit better than off-reservation production? 

Mr. MAGRUDER. There is a huge resource that needs to be tapped 

on Indian lands. I was fortunate to participate in a program sponsored by the DOE just last week. We brought in—I will be there 

were—30 tribes represented in Denver and a good communication, 

good exchange between industry, referred to as developers from a 

tribal perspective, and the tribal nations, and trying to find out 

what business expectations are acceptable. I think it was a good exchange. But there is a large, large resource there. 

That is where I picked up on the fact that Fort Duchesne office 

is being cut in the wake of all these increases, and they are coupled 

at the hip. One-third of the permits have to go through the Fort 

Duchesne office for us to put the bit in the ground. 

It seems to me like there needs to be some integrated team, committee, call it what you want, but there needs to be an integration 

of people that truly understand oil and gas. There is a difference, 

and you need that integrated team right now. Otherwise, I do not 

know if we are really changing the process much. 

Senator BURNS. Even on these pilot programs, Ms. Clarke, when 

you hire new people, how long does it take to train them and can 

you get people qualified that, like Mr. Magruder says, are acutely 

aware and know a little bit about the oil and gas business? 

Ms. CLARKE. We are recruiting to all sources to fill the positions 

that are going to be available in those pilot offices, and we will be 

looking for the most qualified individuals. Once they get in those 

offices, they will have some time learning what they need to know 

about the local area, the geography, the resource that they are 

going to be overseeing. But we are absolutely committed and confident that we can pull this together and make it work and make 

those pilot offices produce success and results. 

Senator BURNS. Senator Craig. 

Senator CRAIG. Thank you, Mr. Chairman. 

Kathleen, in my opening statement, I said tell me it ain’t so, and 

in part, you have done that. Obviously, there has been a tremendous effort on the part of you and the BLM to get this underway. 

Your record of improvement is impressive. Is it good enough in re-
40 

lation to the marketplace? No, it is not. The pilot projects are underway, and I think it is important we monitor them with you to 

make sure that we stay on that course. 

I guess my question to you, in looking at the demand that is currently out there, the APD’s that are current, do you have enough 

resource today to get the work done in a timely fashion? We all 

measure time in different ways. Or do you need our help in getting 

greater resource? If you do, should that come in direct appropriation, or can that come with giving you some authority, as we do 

other agencies, to reprogram within the agency to say that for the 

next 2 years, it will be our high priority to do the following things 

and we will lessen priorities in other areas? 

Ms. CLARKE. Senator, with the additional funding that is going 

to be coming to the BLM, specifically to those pilot offices, I do believe we are going to have the capability of dealing with what has 

been referred to as the backlog or the pending applications. Those 

clearly provide the opportunity for us to most readily respond to 

the needs of this Nation for energy right now. 

I think there are always opportunities for us to address the 

prioritization of activities within the bureau, and we are going 

through a very robust exercise right now to take a look at internal 

policies, as well as program priorities and funding allocation, to 

make sure that we are pooling resources where they are available 

to the highest priorities, which, as I have indicated, are the production of energy. 

We would look forward to working with your committee, if we 

identify opportunities for legislative action to assist us in that effort, or to reprogram dollars that we have to meet those higher priority needs. 

Senator CRAIG. Clearly for us I think and for you, while there are 

many efforts underway to increase overall availability of supply in 

the United States, being able to produce it domestically and get it 

into the current system is the easier response, the quicker way of 

getting part of this overall supply issue down a little bit. We have 

got what is known as demand destruction going on at this moment. 

It has been spoken to. With the increased demand, we have lost 

about 9 percent of the use. That is all jobs. It may be gas being 

delivered, but it is jobs lost that is really very significant in all of 

the industries associated. 

If you meet the targets that are out there and we stay on course 

toward moving these applications in a more timely way, then my 

question may not be to you but may be to any one of these three 

gentlemen. Do we have the delivery system in place, or is that the 

next problem? Are we working as robustly on that with FERC and 

other agencies as we are working with Kathleen on the wellhead 

issue, if you will? So we increase our capability at the wellhead, 

but we have not delivered it or we have no capacity to deliver it. 

Does anyone wish to respond to that particular side of the equation? 

Mr. MAGRUDER. I will be glad to take a shot at it just to start 

with, and I am not professing to be a natural gas expert in any 

way other than the fact I live within the framework. 

Senator CRAIG. Well, you are our current expert. 

Mr. MAGRUDER. That is right. 
41 

The take-away capacity going to the west coast out of the Rocky 

Mountain region is approximately 85 percent utilized. The takeaway capacity going out east of the Rocky Mountain region is about 

85 percent utilized. So they are approaching that point. 

But in the last 2 weeks, two significant things have occurred. 

Encana has announced the pipeline and the commitment of that 

gas which is half a bcf. So our take-away capacity in the Rocky 

Mountain region has stayed ahead of the production growth for the 

first time in a long time. Three years ago, producers were faced 

with a $2.50 differential. Natural gas prices at the city gate here 

on the east coast may have appeared high, but I can guarantee you 

a producer like myself—we were receiving 62 cents for natural gas 

in July. So talk about destruction. There was a lot of destruction 

because of lack of take-away. That has reversed. 

Kinder Morgan has announced a major pipeline system that will 

source in the center of the Rocky Mountain region and deliver natural gas into Ohio. That is going to be a straight ticket, $1.10, 

whatever the fee is. Nobody is really certain right now, but that is 

going to be a huge value-add and will provide additional take-away 

that has not been available in the Rocky Mountain region. So that 

is a 30-month project that is out on the horizon that is going to be 

a major artery of natural gas out of the Intermountain West area 

directly into the east coast. So that is significant. 

You probably need to get the right individuals in here to talk 

about the dynamics associated with take-away. My position is it is 

there, and the developers like myself are doing everything possible 

to get wells drilled and add supply into the marketplace. 

Senator CRAIG. Does anyone else wish to comment on that? 

Mr. WEST. I would just add this. Running an ammonia plant, we 

have about a 12-inch gas line going into an ammonia plant because 

we use so much natural gas. As far as I know, we have not had 

anyone who has been turned down gas that we cannot get it to you 

if you are going to pay for it. 

I have had phone calls from utility companies in the east saying, 

could you tell us how many more ammonia plants are going to go 

down? So we want you to ease up. We are planning how much gas 

that will bring into the marketplace that will be available for us. 

So that is kind of the change in the distribution I think that is 

going on as people are trying to fill up their pipeline capacity going 

in their direction. 

Mr. MAGRUDER. I need to reinforce one item. When we talk about 

pipeline, it requires right-of-way procurement to be able to do that. 

Some of that will be across Federal lands, which is a much 

lengthier process than across private or State lands. As we talk 

about the APD process and we look to Kathleen’s group to create 

process improvement, we really need to address right-of-way too. It 

is just as critical and as important as the ability to drill a well. It 

does not make sense to drill a well—you are talking about getting 

it to the market. If you cannot get the resource from point A to 

point B, it does not make a lot of sense. So we need to make sure 

that, when we are talking about the APD and the permitting process, we are addressing right-of-way needs too. 

That requires a different skill set. I think Kathleen will tell you 

that the people that address the right-of-ways are slightly different 
42 

than those that address the mechanical integrity of a well or whatever may be their role in the APD approval process. 

Senator CRAIG. If I could, Mr. Chairman, let me come back to 

Kathleen to address that right-of-way issue because out West, as 

you well know, a lot of that land is Federal land and BLM land 

predominantly in many instances. 

Ms. CLARKE. We have been working with the western governments to identify appropriate energy corridors for some time. However, it has been most helpful that the Energy Policy Act in section 

368 pulls together the Department of Energy, the Department of 

Agriculture, and the Department of the Interior to do an EIS and 

get those corridors identified and in place. I am pleased to report 

that the scoping period started with the formal notice on September 28. So we are moving ahead. There will be public meetings 

beginning October 25. So we are right in the middle of it today just 

getting started, and we will be working very diligently to make 

that happen as quickly as possible. 

I think some of the frustration in the past has been that BLM 

would identify a corridor that would not match up with the corridor 

the Forest Service had identified, and we certainly are not going 

to be helpful to one another if we do not get our corridors and our 

vision for development of energy resources into alignment. 

Senator BURNS. We had a road like that that came out of Canada 

and did not hook up with the road in Montana one time and had 

a little argument about that. 

Senator CRAIG. Thank you, Mr. Chairman. Thank you all. 

Senator BURNS. Senator Allard. 

Senator ALLARD. Thank you, Mr. Chairman. 

I would just associate myself with many of the questions that 

have already been asked. I am going to change over to oil shale and 

then come back, time permitting. 

But on the oil shale, how are you moving along as far as implementing the provisions that are in the energy bill, and are you 

doing anything beyond the energy bill to facilitate the development 

of that potentially very generous resource? 

Ms. CLARKE. Senator Allard, as I am sure you are aware, we put 

out a request for proposals to come forward for our research and 

development proposals for oil shale. We have received 20 proposals. 

As a matter of fact, today we have the committees that we have 

put in place to review and assess those to make sure that they 

meet the criteria of our solicitation and to really come up with a 

quality set for further review. So we will be authorizing and granting permits for several of those high quality proposals to move forward. 

In the meantime, we are taking the direction from the Energy 

Policy Act, have identified a project manager, and are beginning an 

EIS so that we can have appropriate NEPA work to oversee commercial development of this resource. So we are on target and 

being very aggressive in trying to tap into that to date unutilized 

resource. 

Senator ALLARD. Well, I am pleased with what you have done up 

to this point. 

When do you think you will have these demonstration projects 

identified? 
43 

Ms. CLARKE. Identified and authorized? 

Senator ALLARD. Yes. 

Ms. CLARKE. Spring is our date. Like I say, we are doing an initial analysis. We will sort of do a first cutoff to determine those 

that are responsive to the request and then going through a little 

more in-depth review to make sure that we are moving forward 

those nominations which we believe have opportunity to really 

make a difference and that are feasible in terms of their science 

and technology. 

Senator ALLARD. Very good. Thank you. 

I would like to go back to the permit drilling. You say 130 days, 

Mr. Magruder, is an average, or is it a minimal time? 

Mr. MAGRUDER. Well, they really range anywhere from—I would 

say it is a good average. 

Senator ALLARD. Of that permitting process, if you are a small 

driller and want to go in and put a bit in the ground, what is the 

most frustrating part of that permitting process? 

Mr. MAGRUDER. I was just telling someone during the break. 

Really it is a combination of three things. It is the NEPA process 

that has grown to what it is today, and that is what is demonstrated right here. That is adhering to NEPA, the Historic Preservation Act, and the Endangered Species Act. Those three things 

are what create the guidelines that we have to adhere to in the 

permitting process. So I think that certainly all the preliminary 

NEPA work that goes into the botanical study, the visual impact, 

all those sorts of things that have to be performed—and you have 

to go through it for each site, every one that we submit. So it is 

a very onerous process. 

Unfortunately, it seems like just exercising good judgment is not 

allowed anymore, but in reality that is what we do. Every permit 

that we have submitted is really exercising best management practices that are essentially approved by the BLM, the BIA, or the 

tribe or the Forest Service, whichever agency you are working with. 

All we do is just cut that template over and over and over, but we 

have to go through the physical effort of recreating those documents and that study each time. 

So in my opinion—you know, the comment I made earlier—in 

given areas, I think that the field managers who have a balanced 

view of how to develop these resources and all the multiple use activities they have to adhere to—I am not an expert in those fields. 

My job is to try to drill wells and produce them as efficiently and 

as environmentally as possible. Those people know the answers. 

What takes us 2 years to do an EIS, I would venture to say that 

there are people who can do it in a matter of 6 hours in an afternoon if they close the door. They know the area. They know the botanical conditions, and they know the historic conditions. 

Senator ALLARD. That is because they have already made applications before and gone through the process. 

Mr. MAGRUDER. Yes, they have already been through it over and 

over and over. They go through a lot of this that appears to me to 

be a real waste of time. 

Senator ALLARD. From your view, what would be an appropriate 

distance between wells and areas to make these kind of studies? 
44 

Mr. MAGRUDER. It is all a function of technology. The resource 

is not the same. Natural gas resources in the Rocky Mountains 

change depending on the reservoir type. Oil resources change depending on the reservoir type. Oil shales. The Department is going 

to have to come up with a new skill set to be able to handle that. 

But just developing oil and gas, you want to focus on natural gas. 

That is why we are here today. Technology has allowed us to drill 

many more wells. Colorado is an example. Piceance Basin. We 

started off drilling one well per section there. Now we are able to 

drill 64 wells per section because of completion technologies, drilling techniques, everything has changed. But we really have not 

changed in lock step with the Federal process. 

I challenge. As an example, what is so sacred about a 30-day 

public notice? That was put in the regs many, many years ago before the Internet, before mobile phones, before our whole 

connectivity that we have today. Why would not 5 days be acceptable for public notice? That would compress the cycle time. If you 

made that one decision, that would compress the whole permitting 

cycle time tremendously. It is just questions like that that have to 

be addressed and have to be asked. How can we take this entire 

cycle, not sacrifice the environmental and all the other deliverables 

that should come out of this process? Can we end up with the same 

pristine location in the process but do it in half the amount of 

time? That is the question we need to ask. 

Senator ALLARD. Now, Ms. Clarke, you have heard his concerns. 

What can you do, if anything, or what are you doing, and what suggestions would you make to this committee to meet some of his 

concerns? 

Ms. CLARKE. I think he is absolutely correct, that our response 

to the mandates of NEPA have grown over the years. We are accustomed to being challenged in court or through protests or—— 

Senator ALLARD. This is not new legislation. It is lawsuits that 

has driven this. 

Ms. CLARKE. Yes. Well, we have so many different things that 

play on us. For example, since I have been here, there is an over 

600 percent increase in the leases that are protested. In the State 

of Utah, my home State, 100 percent of leases issued by BLM are 

protested. It is approaching 80 percent in Colorado, and on average 

it is—— 

Senator BURNS. Who is protesting them? 

Ms. CLARKE. It is being protested by various interests. Environmental groups, others do not want the oil and gas activity there. 

We have challenges to the issuance of APD’s. It is a lengthy process to get a land management plan in place that really provides the 

framework for development. In our collaboration with partners, you 

get many differing voices and views together, and it is not easy to 

manage lands for multiple use. So I think a lot of the process predicament that we are in is real. 

We would welcome the opportunity to sit down with the committee and examine what some opportunities might be to simplify. 

I think we are all committed to good environmental stewardship. 

We all want to leave the land that we enjoy to the next generation. 

But clearly there are opportunities for us to improve the develop-
45 

ment of oil and gas and energy resources while being good stewards of the land. 

Senator ALLARD. So you think there is an opportunity for us to 

improve that permitting process. 

Ms. CLARKE. I think there probably are some opportunities. I 

think we are doing everything that we can within the legal framework, or at least everything we have seen. Let me suggest that I 

do not pretend that all wisdom resides at the BLM. We work with 

industry. We invite their suggestions. We appreciate the guidance 

of this committee and others and remain open to ideas and opportunities to improve. I think there are also opportunities for the 

Congress to consider streamlining some of the processes that we 

find ourselves committed to. 

Senator ALLARD. Well, Mr. Chairman, I would just suggest I 

think there might be some staff time that could be spent both on 

the committees and maybe on our individual staff to kind of sit 

down with BLM and see what kind of opportunities there might be 

out there. 

Senator BURNS. Well, we did put one thing in the energy bill, 

Senator Allard, that has not been mentioned here today, and that 

was the categorical exclusions, and if they will be used. 

I want to recognize Senator Domenici. 

Senator DOMENICI. Well, I sit here, Mr. Chairman, in total frustration. I just do not know where to start. 

It looks to me like that idea of categorical exclusions that we put 

in the energy bill is a good one. It also looks to me like the idea 

of the pilot project offices is a good one. But all of these are going 

to take time. The problem we have is we are being asked by the 

American people and by our fellow Senators to come up with something that will give some relief now and cause some production of 

new large quantities of natural gas quickly. I have not heard anybody suggest any yet, which disturbs me greatly. Whoever it was 

that said we really got off base when we decided, at one point in 

our history, that we apparently had plenty of natural gas and we 

just let natural gas be used for everything which is a good free 

market concept. But what happened is that nobody did anything 

innovative with reference to the production of power for electricity 

by any other means. They just all floated to the softest spot, and 

98 percent of the powerplants in the last 15 years are all natural 

gas and I assume there are more coming on. 

I was going to ask Mr. Cicio. You represent the industrial users. 

Does that mean that you can speak a little bit about powerplants, 

or is that out of your area? 

Mr. CICIO. Possibly. 

Senator DOMENICI. Well, I am just wondering. I know that there 

are going to be proposals around soon to put caps on natural gas, 

to freeze the price, and most of us do not think those kinds of 

things will work, but they are going to sound good. 

But I wonder what you would think about a law that would 

gradually reduce, by a percentage, the natural gas that utilities 

could use to produce electricity. 

Mr. CICIO. That is a very good question, Senator. I believe my 

membership, which are exclusively large consumers, would—— 
46 

Senator DOMENICI. Large consumers but not necessarily powerplants? 

Mr. CICIO. Large consumers of energy. We use large amounts of 

natural gas as fuel and feedstock, large amounts of electricity. My 

membership represent all the industries that cogenerate their own 

electricity too. 

I would suspect that as much as they would like to support something like that, they would not because it is a mandate. The reason 

that the electric utility industry used natural gas is buried in Government regulation. 

Senator DOMENICI. I understand. 

Mr. CICIO. We would want to fix that problem rather than put 

a band aid on it which may cause other problems that we cannot 

foresee. 

Senator DOMENICI. So if we did not allow some change in the 

standards for which they could use alternatives, they would state 

that they were being put in a bind where they just would not have 

energy. Right? 

Mr. CICIO. That is correct. 

Senator DOMENICI. But I am just feeling around. We have got to 

try something. 

With reference to the EIS’s that are site-specific, Mr. Magruder, 

aren’t there some areas where the BLM is trying to pool and do 

more than one well site, by doing an area including more than one 

well site? 

Mr. MAGRUDER. That is correct. I think in the Powder River 

basin, it has been proven that that is an acceptable practice, areas 

on the western slope of Colorado where you have high density drilling now from central pads, which seem to appeal to everyone because we are able to concentrate a lot of equipment in one location 

as opposed to the leopard spots that some people complain about. 

But that is done there. It is done in the Green River basin. So, yes, 

it is a practice that can be applied in other areas. 

Senator DOMENICI. Is there anything, Ms. Clarke, that we could 

do to help you so that process would be more broadly used? 

Ms. CLARKE. Senator, we have sent directions, guidance, if you 

will, to all of our field offices to instruct them to employ some of 

these tools such as areas of development and processing them as 

one. I believe I also indicated that we have quality assurance 

teams that are going out and visiting field offices to make sure that 

they are paying attention to the guidance and that they are incorporating those. 

We do have opportunities for improvement, and I have learned 

anecdotally that some of those offices still have not moved into 

these new opportunities. 

I am having a meeting with all of the primary field offices that 

manage oil and gas production and State directors the first week 

in November, and we will sort of drill down on what these tools are 

and insist that they start overseeing them. 

We are also building into our management reviews and performance plans elements that will hold our managers accountable for 

assisting us in getting the best management practices employed. 

Senator DOMENICI. When you look at that chart, is there more 

than one EIS that occurs in that chart? 
47 

Mr. MAGRUDER. Really I think you are referring to the term EA, 

environmental assessment. EIS is an overarching or large impact 

study area. An EA is typically a site-specific situation. 

Senator DOMENICI. I understand. You are correct. 

Mr. MAGRUDER. That is just for one well right there, but I could, 

off the record, tell you all sorts of stories of multiple EA’s that take 

place on the same given study area. 

The Forest Service is a great example. We have not really addressed the Forest Service, but there is a tremendous amount of resource in areas. I am not talking about your typical redwood 

stands. I am talking about areas that are common and similar to 

areas that are being developed just across lease lines that have the 

ability to be leased. My company, as an example, drilled the first 

well in 25 years on a forest in Utah, but it took us hiring the individual that wrote the initial NEPA document to basically get everybody in the same room and explain the intent of that initial language because after 25 years, you have nobody in the Forest Service who has ever seen a well drilled. They do not know how to process paperwork. They do not understand the terminology. They do 

not understand the impact. You have got people that are almost retired without seeing a well drilled on their property. 

I do not know if that answers your question. 

Senator DOMENICI. Yes, sir, that is fine. 

Did anybody ask the question about winter drilling restrictions? 

Was that asked? What about that, Ms. Clarke? 

Ms. CLARKE. As we work with State and local governments, we 

are often asked, during the course of developing a land use plan, 

to accommodate the presence of wildlife that may need to have 

their habitat protected during certain seasons. So we do have situations where either in the environmental impact statement or as a 

condition of approval to a permit to drill, there are limitations that 

are placed there to deal with either sensitive species or typically 

big game species. 

Senator DOMENICI. Well, I guess the question is, are winter limitations a significant limitation on producing in your jurisdictional 

areas? 

Ms. CLARKE. It probably is different from office to office and 

State to State. 

Senator DOMENICI. Well, but just tell me is it an important 

issue? 

Ms. CLARKE. In some locations, it is an issue; in others, it is not 

at all. 

Senator DOMENICI. Could you give the committee some indication 

later about winter limitations? We might want to look at that. It 

was certainly done in an era when we were not as concerned about 

this as now, and maybe it ought to be looked at again. 

Ms. CLARKE. I would be happy to work with the committee to 

better understand what those stipulations are and what opportunities there are to mobilize and get energy produced. Thank you. 

Senator DOMENICI. Mr. Magruder, did we identify the right offices when we identified the pilot project offices? 

Mr. MAGRUDER. Yes, you did. 

Senator DOMENICI. We will try to monitor BLM’s implementation, but you all will know whether they are putting something to-
48 

gether that will work. I mean, you will be able to tell us, will you 

not? 

Mr. MAGRUDER. We will. 

Senator DOMENICI. Because it does not do any good to put an office together if, within the office, they do not do something to accelerate the process. 

Mr. MAGRUDER. That is correct. 

Senator DOMENICI. I am interested in hearing a little bit more 

about the additional 100 billion cubic feet of new natural gas supply that you spoke of. What is it going to take to access that? Does 

industry have the rigs and capacity to do that? 

Mr. MAGRUDER. I need to clarify one point. I do not know if it 

was very clear, but that 105 bcf incremental impact is in the first 

year alone. So that is just in the initial year. So in the out-years, 

that number gets much larger. But I was just referring to a nearterm impact. 

With respect to the rigs, that is always a big question, and I am 

glad we are addressing that in public right now. I would like to just 

say that in 1980, when I got out of school, there were about 4,000 

rigs running and the infrastructure was there. But over time, because of the cyclic nature of our industry, it has declined down to 

as low as 500 to 600 rigs active. But today there are about 2,000 

rigs that are active in the United States. In 2005, 211 new rigs are 

scheduled to move into the market. Now, they can be in the form 

of a refurbishment or a new rig. 

In my company, as an example, last April I woke up about 3 

o’clock in the morning and I realized I was not going to get a rig 

and I needed one. So we went as far as El Salvador, Singapore, and 

Greece, and we found rigs. We have two refurbished rigs coming 

into the market right now. It takes about 120 days to get them 

here and refurbished and crewed. Roughnecks are making anywhere from $65,000 to $95,000. So the argument that they are not 

making enough money and we cannot attract them, at that age I 

would work for those wages. 

Senator BURNS. It sounds better than cowboying, I will tell you. 

Mr. MAGRUDER. So anyway, in 2006, 270 rigs are scheduled to 

enter the market again. Somebody asked me at the break, what 

about this rig situation? In the Rocky Mountain region, I can tell 

you there are a lot of mid-continent and gulf coast drillers that will 

not come up here because of the winter stipulation. The rigs are 

in the air and then they are down 5 months out of the year. They 

are not going to do that. They cannot mobilize all their people in 

here and do that. 

So, they have got to work with companies like ourselves that 

have a balanced portfolio on Federal fee and State lands, and you 

drill in those periods where the winter stips do not affect you. But 

you can do the math. If it takes, let us say, 130 days or if it takes 

8 months to get a drilling permit, that takes anywhere from, in the 

Powder, 2 days to drill, in Uintah basin, anywhere from 5 days to 

20 days, the same as the Piceance, you have to have an inventory 

of permits. Drilling contractors are not stupid. They are going to 

align with those people that have the drilling inventory in front of 

them. 
49 

Now, the days of just picking up the phone and calling a drilling 

contractor and saying, hey, can we go out next week and drill a 

well together, are long gone. There is a huge supply chain effort 

behind all of these drilling programs from the standpoint of steel. 

They are rationing cement now. Drilling contractors, crews, the list 

goes on. It is not just the NEPA game. We are having to balance 

everything when we do a project management program. 

So the ideal scenario is to have a continuous drilling program. 

Some will argue that the BLM issues more permits than you actually drill. Well, I would say they are right. In the past year or 2, 

we have exercised at least 60 percent of those permits granted, but 

because of the process itself, if it takes 5 to 20 days to drill a well 

and it takes 6 months to get a permit, you have to have an inventory in the event that you are successful because you have got an 

annual commitment on the rig in a lot of cases. It can range anywhere from $5 million to $20 million as far as your annual commitment. You use it and you pay for it. If you do not use it, you still 

pay for it. 

So the issue on not having enough permits, we have exercised at 

least on 60 percent of those permits. The drilling rigs, it is just a 

function of the market. Once we define the demand, our market always seems to respond to it, and we are doing everything possible 

to be able to execute within our portfolio. We have taken our own 

destiny in control by acquiring and buying our own rigs in some 

cases or making arrangements to buy those rigs. 

Senator BURNS. Can I follow up with a question? 

Senator DOMENICI. I am finished, Senator. 

Senator BURNS. Mr. Magruder, we hear about the rent that you 

pay on your leases and how long. We hear of instances where a rig 

has to be moved before completed in order to maintain your rental 

or your lease or whatever. Bring us up to date on that, would you 

please? 

Mr. MAGRUDER. I just had an example a couple weeks ago in the 

Utah area where we had to be out for winter stips by October 1. 

Each area applies different stipulations, and generally, we can 

work with—you know, elk hunting season only lasts a couple of 

weeks out of each year. And we are very sensitive. Most of the people—— 

Senator BURNS. We are sitting here and I am missing mine. 

Mr. MAGRUDER. That is right. I am going Friday. 

But most people are very sensitive to that and we work around 

those conditions. I just feel that a total lockout of 5 months in winter stips, you are shutting down the methane manufacturing business for 5 months, and that is a period in time where we can continue to develop. A prime example just took place last week where 

we had to rush and get a rig down a mountain and over to another 

location because the lockout period was being imposed. 

A lot of operators deal with those situations. Kathleen can comment as to what happens in the Pinedale and Jonah areas when 

the winter stips hit. There is just an influx of rigs. All the drilling 

contractors are trying to figure out what to do with all those drilling rigs that are going to be locked out for a period of time. 

Senator BURNS. It was about 10 years ago on the Energy Committee—and I think Senator Craig will remember this—and also a 
50 

follow-up hearing that was held in Commerce where Senator 

Hutchison of Texas said if we do not do something about stripper 

wells and a lot of other issues out there, we are going to lose the 

entire infrastructure in order to explore and develop. She was 

right. 

It just sounds like that this winter restriction, Director Clarke, 

is maybe a bigger issue than we have thought before prior to this. 

Is that correct? 

Ms. CLARKE. I think that there are some significant reductions 

to potential for development with winter stips. Those are put in 

place as we cooperate very closely with fish and game in the various States and with other partners to really identify how to balance the competing interests and multiple uses that come under 

the charge of the BLM. So Senator Domenici suggested perhaps we 

ought to have a discussion about how significant those issues are. 

We have invited a pilot program in the Pinedale area where we 

are testing the impact on some of those wildlife species from having 

winter activity. We are not yet through the studies on that to determine how significant or acceptable or unacceptable those impacts are, but I think we are open to examining possibilities. 

There are also waivers available or exceptions. We have had 

some companies come in this year, and we are working with them 

to determine if it is appropriate to except some of those restrictions 

so that they can proceed to develop through the winter. So we are 

willing to work with the Congress and with companies to improve 

production of energy resources on BLM lands. 

Senator BURNS. Well, to the untrained eye, such as I am, but I 

can give it from a practical standpoint where—and I never thought 

about these restrictions. I am glad it came up. I will be a little 

more attentive to that now, I would imagine. But where they have 

shut down drilling before—I have been out across that country, and 

I have never seen any wildlife out there in the dead of winter to 

be right honest with you. You have got frozen roads. It seems like 

the only time that you really have environmental damage—and 

most of it is surface—is in the spring of the year, spring breakup, 

and we know how to deal with those. 

Mr. Cicio, I just want to ask a question. We had testimony from 

a lot of the chemical companies in Energy the other day that said 

this issue is so vital that the loss of our commercial chemical production in this country is on the edge right now. That is the reason 

that you and Mr. West are here because of the vital interest in this 

thing and what we are talking about as far as the economy of the 

country is concerned and how important Ms. Clarke and her responsibilities and the representative of the companies that can get 

us more production. That is why this whole discussion is being held 

this morning at that table. That testimony was very, very revealing 

and I thought very important. 

Mr. CICIO. Senator Burns, I cannot impress upon this committee 

enough the critical nature of this issue. The comment you made 

earlier by the chemical industry is right on target. What is very interesting is the recent survey we did. It was informal and it was 

random, but what it does do is cover every major sector of natural 

gas consumers in the country. It was frightening because we found 

out, if this is a representative sample, that demand destruction is 
51 

happening in a relatively short period of time at better than twice 

the rate that occurred over a 4-year period of time. Of course, we 

are at over $13 gas. 

But on an anecdotal basis, the stories that I received from all of 

these different manufacturers talks about companies being on the 

fringe of shutting down plants. A very important point. At high 

prices, everyone says, well, look that is great. We are going to do 

a lot of energy efficiency. Without question, energy efficiency 

projects are occurring, but this survey taught me that there are a 

lot of energy efficiency projects that have gone on hold because a 

lot of manufacturing plants have been designated as potential shutdown units, and companies will not do energy efficiency projects on 

plants that may be shut down permanently. We are on the fringe 

of another significant turndown. 

A key point is that this 105 bcf that was mentioned—it is actually in the grand scheme, compared to our national consumption of 

22 tcf of gas, 105 bcf is not a lot. But this amount relatively is a 

significant psychological improvement. There is a lot of fear built 

into this marketplace. If you look at the NYMEX natural gas contract strip, the prices of natural gas are high and stay high for 18 

months and beyond. That means that there are expectations for 

continued high prices. The CEO’s look at that strip and those continued high relative prices, relative to anywhere in the world. They 

are making decisions today about what they are going to do with 

these existing plants and what they are going to do with their new 

capital. As I have already said, there are no new plants here. There 

are just plant shutdowns. So the urgency of this committee—and 

we are so happy that you decided to hold this hearing. Small 

amounts of additional gas mean a great deal to the fierce psychology of the marketplace to begin to bring that NYMEX natural 

gas futures strip price down and bring some confidence back into 

this marketplace. 

Senator BURNS. Well, that fear has not been reflected in the wellhead prices, though, as much as it has in the end user. We have 

figures to show that. So in order to get these fellows in production, 

they are going to have to see some reflective work in their efforts 

in order to spur that production. 

The American taxpayer has got to understand that schematic up 

there. All of America is paying for that through the prices of their 

energy, of delay, of a lot of things, the winter exemptions. All of 

this is costing everybody in the United States, and the end user 

prices are the reflection of it. 

So we are going to have to take a good look at this thing. I just 

wish more cooperation between the BLM and the Forest Service, 

and we will talk to the Forest Service. We will have the chief in 

and talk to him. We will do that kind of privately, Mr. Magruder. 

You made some very good points here today on the challenges that 

we have in front of us and with the response of Ms. Clarke and 

these pilot projects. 

We do not have a lot of time. This is time-sensitive. The American public has got to understand that. Sometimes with the grant 

of waivers—do you plan to use those categorical exclusions that 

were given the BLM with regard to energy production? That is a 
52 

small step. What are your plans with regard to how you use those 

categorical exclusions? 

Senator CRAIG. Kathleen, before you answer that, would you answer it also in context of the judge’s decision as it relates to categorical exclusions and his constant enhancement of his decision. 

Does that impact BLM? 

Ms. CLARKE. We are still trying to sort out how the impact of the 

judge’s decision relative to the Forest Service categorical exclusions 

affects us. But we are proceeding as though it has no effect, and 

we have sent direction to the field that they should immediately 

start utilizing the categorical exclusions. I am aware of at least one 

company that is coming in with some request for winter activity 

and utilizing those categorical exclusions. We are anxious to put 

them to use and demonstrate to others that they are an effective 

tool for us to help facilitate increased production. 

Senator CRAIG. Good. 

Senator BURNS. Well, I would ask the BLM—of course, I have yet 

to ever see a compassionate bureaucracy, and they have got rules 

and regulations. They have got stacks of books. But I think we as 

the Government who have responsibility to oversee those lands, we 

also have a responsibility to the taxpayer. We have a responsibility 

to the consumer, to all Americans. We should be in a mind set at 

all of these offices of facilitating and looking for ways to provide 

faster—the 30-day comment, Mr. Magruder, I have mixed feelings 

on that. But it would not take me a half hour, but it takes other 

folks. But nonetheless, it is in the law. Maybe we should take a 

look at that, Ms. Clarke, and maybe speed that process up. 

But we in the Government ought to be in the business of aiding 

and facilitating more production any place that we can find a way 

to streamline the process and to get these folks in the business of 

production because, I will tell you, nobody can produce it faster 

than we can if we have gotten the incentives. Well, the incentive 

is already out there. Right now it just appears to me that the rules 

and regulations—we have a hard time cutting through that red 

tape. Is that a good assumption? 

Ms. CLARKE. That is a fair assumption, absolutely. 

Senator BURNS. Well, let us get a mind set within the BLM that 

we are going to help these folks wherever we can. 

Do you have any more questions? 

There are some Senators that did not make it back. There is so 

much going on up here it is unbelievable. But they will have some 

questions for this panel, something that we probably forgot to cover 

or whatever. 

We are going to take a look at another—I am going to sit down 

and talk with some people about the difference between the wellhead and the delivered price. We will talk about that one of these 

days, but that is different. What we wanted to talk about today is 

to identify and tell the American people that all these rules and 

regulations cost money and it costs them when they pay their bill 

to heat their houses, when they drive their cars. 

We have coalbed methane in Montana. We just have a terrible 

time, it seems like, getting those permits and the ability to recover 

that energy resource. I will tell you, we have been blessed with 

some pretty good BLM administrators in the State of Montana, and 
53 

they have worked hard. But they have got their rules to go by. We 

have got to find a way to facilitate that and to make it work. 

Mr. Magruder, thank you for your figures and facts this morning. 

I appreciate that very much. 

Just make sure that the American people have got to understand 

most of these rules and regulations—and some of them do not 

mean a darned thing. If this is a correct assumption, we are stirring old soup here. We already know what is in it. We just have 

to stir it again, and it takes time to do that. Is that a correct assumption? 

Mr. MAGRUDER. I think you are right on the mark and everybody 

is expecting LNG to facilitate some of the gap by 2008 to 2010, but 

we cannot sit and do nothing during that time period. When we 

talk about a near-term solution, I think the Rockies offers a nearterm solution and we can do it. 

Senator BURNS. Well, I say that because the infrastructure is 

there. It does not take us very long to react. We do not have to 

build a platform or worry about a hurricane. 

Mr. MAGRUDER. Exactly. 

Senator CRAIG. I have got one more question. We should not 

stay, you see. 

Kathleen, in existing right-of-ways that cross public lands, i.e., 

BLM lands, how much greater flexibility do you have in an existing 

right-of-way, or do you know if there is language within the existing right-of-way permits to allow additional pipeline? I know there 

is a distance relationship between one pipeline and another. Can 

you facilitate more pipelines in an existing right-of-way, or can you 

reduce the overall time it takes to permit in existing right-of-ways? 

Ms. CLARKE. In general, I would say the answer is yes. Where 

we have an existing right-of-way or a utility corridor or a pipeline, 

we do not have nearly the environmental hoops to jump through. 

Senator DOMENICI. Because you have already jumped through 

them primarily. 

Ms. CLARKE. Yes, right. 

The categorical exclusions talk about disturbances of small areas. 

So I think we are in better shape there, and certainly doing our 

energy corridor effort with our Federal partners is going to further 

facilitate movement forward without so much process and so much 

environmental review. 

Senator CRAIG. Thank you. Thank you, Mr. Chairman. 

ADDITIONAL MATERIAL FOR THE RECORD

Senator BURNS. We have received additional material that will 

be inserted at this time. 

[The letter and statement follows:] 

AMERICAN PETROLEUM INSTITUTE, 

Washington, DC, October 26, 2005. 

Hon. CONRAD BURNS, 

Chairman, Senate Committee on Appropriations, Subcommittee on Interior and Related Agencies, Dirksen Senate Office Building. 

DEAR MR. CHAIRMAN: The American Petroleum Institute (API) is pleased to have 

this opportunity to comment on the permitting process for energy projects on federal 

lands. API represents more than 400 companies involved in all aspects of the oil 

and natural gas industry. We are committed to continuing to supply the energy that 

American consumers and businesses rely on to keep our economy growing. However, 
54 

permitting difficulties and process impediments can delay and discourage the responsible development of these energy supplies. Now, more than ever, we should be 

encouraging the growth in domestic energy supplies. We applaud your own and this 

committee’s interest in this vital matter and hope our policy suggestions prove helpful. 

For too long, we have encouraged the use of energy, such as clean-burning natural 

gas, while discouraging the responsible development of new supplies. Potential supplies from our offshore areas have been placed ‘‘off limits’’ through moratoria in the 

Atlantic, Pacific, most of the Eastern Gulf of Mexico and off Alaska’s coasts. It has 

been estimated that these areas contain 420 trillion cubic feet (Tcf) of natural gas— 

enough to heat more than 100 million homes for more than 60 years. For additional 

perspective, this is three times the natural gas resources of Canada and Mexico 

combined. 

In addition, in the Mountain West, vast areas of multiple use federal lands have 

been withdrawn from development either directly or indirectly through restrictions 

and constraints on operations that delay development and/or make it uneconomic. 

These non-park, non-wilderness federal lands are resource-rich. The 2003 natural 

gas study by the National Petroleum Council (NPC) for the Secretary of Energy indicated that: ‘‘. . . the trend toward increasing leasing and regulatory land restrictions in the Rocky Mountain region . . . is occurring in precisely the areas that 

hold significant potential for natural gas production.’’ The NPC study concluded that 

125 Tcf of natural gas was effectively off limits and/or significantly affected by access-related regulatory requirements. 

Regulatory improvements are needed to enhance our domestic supplies to meet 

America’s growing demand. The Bureau of Land Management has taken a number 

of important steps to clarify requirements and reduce permit approval backlogs, but 

more needs to be done. Adequate funding is essential for adequate staffing levels 

to increase permit review performance, revise and streamline processes as well as 

address the provisions of the recently enacted energy bill, while continuing strong 

oversight and enforcement of requirements on operators. 

We look forward to working with this committee on these important issues. Please 

let us know if you have any questions or need additional information on the issues 

addressed in our attached comments. 

Sincerely, 

BETTY ANTHONY. 

PREPARED STATEMENT OF THE AMERICAN PETROLEUM INSTITUTE

The Energy Policy Act of 2005 was an important first step in addressing our national energy policy. However, there is much more to be done. Demand for oil and 

natural gas has been growing, while energy policy has discouraged the development 

of new domestic supplies of these critically important fuels. As a result, even before 

the recent hurricanes and their impact on production, there was a very tight supply/ 

demand balance, resulting in higher prices for consumers, greater market volatility 

and concerns about the impact on economic growth. 

We did not arrive at this juncture overnight. For far too long, barriers to development have been erected and maintained and process impediments have slowed efforts to bring new domestic supplies to consumers and a wide array of businesses, 

both large and small. 

Government policies have largely limited offshore exploration and production to 

the Central and Western Gulf that was so heavily affected by Hurricanes Katrina 

and Rita. At the same time, development was prohibited elsewhere—including the 

eastern half of the Gulf of Mexico and the Atlantic and Pacific Coasts and off Alaska’s coasts. These moratoria should be removed so that the substantial oil and gas 

resources can be developed using advanced technology that ensures they will be developed in an environmentally responsible manner. 

There are also vast onshore oil and gas resources. However, in one of the most 

resource-rich regions, the Mountain West, development has been severely restricted 

by permitting delays, process impediments and not-in-my-backyard (NIMBY) sentiments that often lead to litigation for the sole purpose of delaying or deterring development. 

Federal lands hold the promise for obtaining these much needed domestic supplies. According to the latest published estimates, there are more than 131 billion 

barrels of oil and more than 1000 TCF of natural gas remaining to be discovered 

in the United States. However, 78 percent of this oil and 62 percent of this gas are 

expected to be found beneath non-park, non-wilderness federal lands and coastal 

waters. 
55 

In order to increase supply, API’s policy suggestions start with the urgent need 

to implement the policy recommendations in the National Petroleum Council’s 

(NPC) study, ‘‘Balancing Natural Gas Policy: Fueling the Demands of a Growing 

Economy’’ (2003). Key NPC recommendations include: 

—Increasing access to non-park, non-wilderness onshore areas and reducing permitting costs and delays.—More than half the technically recoverable resources 

in the Mountain West are either off limits or highly restricted—that is enough 

natural gas [about 125 trillion cubic feet (Tcf)] to heat the 60 million homes currently using natural gas for 30 years. And, the resources in the Arctic National 

Wildlife Refuge could provide the equivalent of current imports from Saudi Arabia for 20 years. 

—Lifting constraints on key offshore areas with high-resource potential.—Only 11 

percent of the offshore submerged lands under U.S. jurisdiction are available for 

leasing. Administrative moratoria preclude exploration and development in 

many Outer Continental Shelf (OCS) areas until 2012—at least 79 Tcf is off 

limits off the East and West Coasts and in the Eastern Gulf of Mexico plus 

about 120 Tcf in federal waters off Alaska’s coasts. (It is important to note that 

these estimates may be low as they are based on older and limited data). 

However, perhaps of more direct interest for this hearing, the NPC also highlighted the federal restrictions on leasing that have put significant volumes of U.S. 

resources off limits, as well as post-lease restrictions on operations that effectively 

preclude development of domestic energy resources. The NPC study, which is the 

most comprehensive study of the effects of such constraints, included an analysis 

of federal constraints on U.S. gas supply in the Mountain West. The study found 

that in key areas of greatest supply potential, federal policy precludes or seriously 

constrains development. For instance, of the 209 TCF of estimated undiscovered gas 

in the Mountain West, 69 TCF is completely off limits, while another 56 TCF is seriously constrained by federal policy. Not only are there lease stipulations prescribed, 

but additionally there are conditions of approval (COAs) that can, for example, restrict access during certain times of the year or impose other constraints that can 

add substantial costs and delay the development of new energy supplies. And, when 

the moratoria on development on the Outer Continental Shelf (OCS) are included, 

the NPC found that sustaining these constraints over the next 20 years would cost 

U.S. consumers more than $300 billion in increased energy costs. 

The Bureau of Land Management has been working hard to reduce the backlog 

of Applications for Permits to Drill (APDs) and they have made considerable 

progress. BLM has also tried to improve its own management processes and apply 

new and innovative approaches. For instance, by creating a hosted worker program, 

they have thought outside the box in trying to address the problem of APD backlogs. 

This program allows for technically competent people to efficiently process permits 

and may free up BLM staff to focus on the other issues of importance such as updating resource management plans. However, BLM remains constrained by staff availability and is facing increased demands due to increased energy development activity. Adequate funding that recognizes their increased needs is essential if we are 

to develop sorely needed domestic oil and natural gas supplies in the future. 

Congress by enacting the Energy Policy Act of 2005 also has taken several positive steps to streamline the permitting of onshore oil and gas projects. However, it 

will be critical to follow up and ensure that federal land management agencies are 

funded adequately to enable them to implement these key provisions. For example 

focusing on the onshore permitting process, BLM currently faces a backlog of APDs 

which is a necessary regulatory requirement before development can commence. 

Prompt review and approval is especially important in areas with a short seasonal 

operating ‘‘window.’’ The new law requires that the BLM improve the process significantly by requiring drilling permits to be issued within 30 days. This is a positive step in the right direction, but unless BLM has the staff allocated to focus on 

this increased workload, oil and natural gas operators may continue to see slowed 

response time from the agency. 

One area of concern is the volume of comments that BLM must assess. Public 

comment and debate should be encouraged but, in some cases, the comments are 

not substantive and are directed at slowing down or canceling energy projects even 

those that were already approved. The BLM, in some cases, has received over 

60,000 comments on development projects which because of the overwhelming volume can result in diversion of BLM staff from other projects in order to address 

these comments. 

Polices related to onshore energy development that we recommend that the Department of the Interior address fall into several categories: 

—Opening lands to responsible development; 
56 

—Providing adequate funding for agencies to update land use plans and administer lands as well as ensure compliance with environmental and other regulatory requirements; 

—Streamlining permitting and approval processes for development; and 

—Removing unnecessary impediments to development. 

Overall in the Mountain West, the NPC indicated there is either no access to, or 

high cost regulatory requirements imposed on, more one-half of the region’s technically recoverable resources (Table S6–3, NPC Volume 4). Such restrictions come 

in many forms—requirements (‘‘stipulations’’) imposed when leases are granted, as 

well as the conditions of approval later imposed through the environmental analysis 

process associated with approval of a permit to drill. It is in this area of work, 

where BLM can make additional strides in addressing the supply issue. 

The attached flowchart shows the ‘‘Federal Onshore Oil and Gas Leasing and Permitting Process. This process outlines the requirements of an operator by either the 

BLM or the Forest Service if the operator wishes to lease and/or develop resources 

on federal lands. Industry and government have reached the same conclusion: the 

process is complicated and duplicative and constitutes an impediment to production 

of the nation’s energy resources. These steps are intended to protect the environment and historical and cultural properties but, while we support this goal, the 

process itself could and should be streamlined. Some specific ways to streamline this 

process include: 

—Joint filing of Right of Way and drilling permits for federal lands to expedite 

the permitting process. 

—Expanded use of categorical exclusions or sundry notices for minimal disturbance activities, including categorical exclusions for wells and rights of way with 

minimal surface disturbance in existing fields and sundry notices instead of 

APDs for successive wells on multi-well drill pads. 

—Implementation of BLM’s 2003 Process Improvement Memoranda. 

—Independent review of agency practice and interpretation of criteria for determining site significance, including establishment of standards for cultural resource report standards and elimination of duplicate survey requirements. 

—Monitoring by BLM of lease stipulations and conditions of approval to determine their effectiveness and their removal as appropriate. 

However, BLM must have the necessary funding to improve this process. 

Other steps that could be taken to improve government land use planning include: 

—Adequate funding for agency personnel to update resource management plans 

(RMPs). All activity on BLM lands is managed through RMPs and an activity 

not anticipated in an RMP cannot occur until the plan is updated or amended. 

—Use of reasonably foreseeable development scenarios as planning tools not to establish caps on the number of wells or other limits on surface activities. 

—Improvements in data sharing by federal and state land management agencies. 

—Encouraging the use of joint APD/Right-of-Way applications for wells. 

—Use of sundry notices instead of APDs for successive wells on multi-well drill 

pads. 

Additionally, adequate agency funding is needed to: 

—Administer the National Environmental Protection Act (NEPA) process effectively; and 

—Provide timely resolution of appeals and protests. 

BLM recently issued guidance to its field offices on implementing the requirements of the Energy Policy Act of 2005 including the NEPA related provisions of 

the law. One of these was direction on the use of categorical exclusions. These categorical exclusions are important to prompt development of domestic energy resources. Categorical exclusions do not remove the required environmental protections but rather apply to those minimal surface operations where an impact is negligible. 

The above policy suggestions, if backed with proper funding, will help produce additional future oil and natural gas supplies essential to our energy security and economic growth. However, with significant amounts of oil and gas production still shut 

down in the Gulf of Mexico in the aftermath of the recent hurricanes, there are additional measures that could be taken by BLM expedite onshore production. These 

include: 

—Exercising existing authority to allow year-round drilling and completions to 

proceed; 

—Issuing permits immediately for all applications in areas where existing NEPA 

requirements have been met; 

—Proposing new fast track, emergency response rules when there is a national 

energy emergency in order to significantly reduce permit review and approval 

times. 
57 

If pursued, these would be added responsibilities and so would require resources 

and budget flexibility to implement. 

In order to have a sound national energy policy that enhances domestic energy 

supplies, federal land management agencies need to have the necessary funding and 

appropriate staffing levels. We urge this committee to assess the Department of Interior’s current funding status and compare it to the important task of administering government oversight of the development of America’s most vital energy resources on federal lands. Thank you for the opportunity to comment on this and we 

look forward to working with this subcommittee and answering any questions about 

this submission. 

CONCLUSION OF HEARING

Senator BURNS. Thank you and we thank the witnesses. These 

hearings are closed. 

[Whereupon, at 12:05 p.m., Tuesday, October 25, the hearing was 

concluded, and the subcommittee was recessed, to reconvene subject to the call of the Chair.] 

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