```

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

 
  EXAMINING SPENDING PRIORITIES AND MISSIONS OF THE BUREAU OF OCEAN 
 ENERGY MANAGEMENT, REGULATION AND ENFORCEMENT AND THE PRESIDENT'S FY 
                         2012 BUDGET PROPOSAL

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

                           OVERSIGHT HEARING

                               before the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                       Wednesday, March 30, 2011

                               __________

                           Serial No. 112-13

                               __________

       Printed for the use of the Committee on Natural Resources

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

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65-460                    WASHINGTON : 2011
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                     COMMITTEE ON NATURAL RESOURCES

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

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

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

      

                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Wednesday, March 30, 2011........................     1

Statement of Members:
    Hastings, Hon. Doc, a Representative in Congress from the 
      State of Washington........................................     1
        Prepared statement of....................................     3
    Markey, Hon. Edward J., a Representative in Congress from the 
      State of Massachusetts.....................................     4
        Prepared statement of....................................     5

Statement of Witnesses:
    Bromwich, Hon. Michael R., Director, Bureau of Energy 
      Management, Regulation and Enforcement (BOEMRE), U.S. 
      Department of the Interior.................................     6
        Prepared statement of....................................     9

                                     

   OVERSIGHT HEARING ON ``EXAMINING THE SPENDING PRIORITIES AND THE 
   MISSIONS OF THE BUREAU OF OCEAN ENERGY MANAGEMENT, REGULATION AND 
  ENFORCEMENT (BOEMRE) AND THE PRESIDENT'S FY 2012 BUDGET PROPOSAL.''

                              ----------                              

                       Wednesday, March 30, 2011

                     U.S. House of Representatives

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

    The Committee met, pursuant to call, at 10:04 a.m. in Room 
1324, Longworth House Office Building, Hon. Doc Hastings, 
[Chairman of the Committee] presiding.
    Present: Representatives Hastings, Lamborn, Wittman, 
Fleming, Thompson, Rivera, Duncan, Tipton, Labrador, 
Southerland, Flores, Landry, Johnson, Markey, Kildee, Grijalva, 
Boren, Sarbanes, Tsongas, and Garamendi.

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

    The Chairman. The Committee will come to order and the 
Chairman notes the presence of a quorum.
    The Committee on Natural Resources is meeting today to 
examine the spending priorities and missions of the Bureau of 
Ocean Energy Management, Regulation and Enforcement and the 
President's Fiscal Year 2012 Budget Proposal.
    Under Committee Rule 4[f], opening statements are limited 
to the Chairman and Ranking Member of the Committee so that we 
can hear from our witnesses more quickly. However, I do ask 
unanimous consent that if any Member wishes to submit a 
statement for the record, they will be included in the record. 
Without objection, so ordered.
    The Chair now recognizes himself for an opening statement.
    The Bureau of Ocean Energy Management, Regulation and 
Enforcement is tasked with the very important role of ensuring 
the safety and responsible development of our offshore energy 
resources.
    Given what is at stake, it is vital that this agency 
operate efficiently and aggressively to both encourage American 
energy production and ensure that it is done in the safest way 
possible. Although it took far too long, the Administration has 
started issuing a very small number of deepwater drilling 
permits, and after months and months of no permits, they are 
now coming at a slow pace.
    Clearly, key questions at this hearing will include the 
pace of permitting and the certainty employers and leaseholders 
need in order to operate. Yet, I want to highlight one 
important point. The fact that Director Bromwich, Secretary 
Salazar, and the Obama Administration have approved the few 
recent permits to drill very clearly demonstrates, in my mind, 
that they believe offshore development drilling can go forward 
safely.
    This is a clear declaration that the Obama Administration 
has confidence that drilling can and will be conducted safely 
and they deserve credit for these actions. Yet, I do believe 
that we must act more swiftly on these permits. The need to act 
will I don't doubt require additional resources and inspectors. 
The question is how much. During times of record debt and 
deficits, Congress cannot and should not simply hand over 
millions of taxpayer dollars without knowing exactly how this 
money will be spent.
    The President's Fiscal Year 2012 budget for BOEM proposes 
$119 million, or a 50 percent increase above the 2010 levels. I 
hope today to hear specific details on how this increase would 
specifically be used to resume offshore drilling.
    As I have stated before, bigger government does not equal 
better government. Extra funding should improve the process, 
not add new layers of bureaucracy. I also believe that enhanced 
funding should come from existing revenues generated from 
energy production. It should not be paid for by imposing new or 
higher taxes on American energy production. This simply leads 
to higher gas prices at the gas pump.
    Yesterday, I introduced three bills to increase American 
offshore energy production. Together these three bills will, 
one, end the de facto moratorium on the Gulf of Mexico by 
requiring the Secretary to act on permits in a timely manner. 
Second, require that lease sales be held in offshore Virginia 
and the Gulf of Mexico, lease sales that were canceled or 
delayed by this Administration. And third, lift the moratorium 
on new offshore drilling by focusing drilling in areas with the 
most known natural gas and oil reserves.
    The Subcommittee on Energy and Mineral Resources will hold 
a legislative hearing on three bills next Wednesday, April 6. 
This is the next step in the Committee's active effort to 
produce more American-made energy.
    Now before concluding, I am compelled to comment on a 
report issued yesterday by the Department of the Interior 
regarding inactive and active leases. To be blunt, this report 
invents the inactive definition used to label two-thirds of 
Gulf leases as inactive. This definition of inactive doesn't 
exist in law or regulation. It contradicts information posted 
March 1 on the Interior Department's own website.
    In fact, the report's definition for inactive offshore 
leases directly contradicts the definition used for onshore 
leases. This inventive definition allows the Administration to 
mischaracterize two-thirds of the Gulf as inactive. It appears 
this inventive definition was used to generate headlines and I 
have to say that disturbs me. But this Committee will continue 
to focus on energy development. We will move forward to take 
positive actions that will unlock America's energy resources to 
create new jobs and strengthen our national security by 
lessening our dependence on foreign energy.
    And with that, I yield back the time and recognize the 
gentleman from Massachusetts, Mr. Markey.
    [The prepared statement of Chairman Hastings follows:]

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

    I believe all Americans understand the importance of energy 
production to our everyday lives. It's critical to our country's 
livelihood, our economic competitiveness and our national security.
    Offshore oil and natural gas production directly supports tens of 
thousands of jobs throughout the country, generates millions in federal 
revenue, and provides us with American energy to lessen our dependence 
on foreign countries.
    The Bureau of Ocean Energy Management, Regulation and Enforcement 
(BOEMRE) is tasked with the very important role of ensuring the safe 
and responsible development of our offshore energy resources.
    Given what's at stake, it's vital that this agency operates 
efficiently and aggressively to both encourage American energy 
production, and ensure it's done in the safest way possible.
    Although it took far too long, the Administration has finally 
started issuing a very small number of deepwater drilling permits. 
After months and months of no permits, they now come at a slow, lagging 
pace.
    To date, only seven deepwater permits have been approved since the 
moratorium was officially lifted last October. To put this into 
context, there were 52 permits in the Gulf of Mexico that were approved 
before the Administration halted all activity in May 2010. It's been 
over 10 months and yet over 40 projects that were already approved and 
underway and still waiting to resume work. Thousands of Americans in 
the Gulf are out of work, and the agency needs to act to get them back 
on the job producing American-made energy.
    Clearly, key questions at this hearing will include the pace of 
permitting and the need to provide certainty for employers and 
leaseholders on how the permit process operates.
    Yet, I want to highlight one very important point. The fact that 
the Director Bromwich, Secretary Salazar and the Obama Administration 
have approved the few, recent permits to drill very clearly 
demonstrates they believe offshore deepwater drilling can safely go 
forward. This is a clear declaration that the Obama Administration has 
confidence that drilling can and will be conducted safely. They deserve 
credit for these actions, yet they must act more swiftly to get the 
Gulf back to work.
    The need to review and act on permits more swiftly will, I don't 
doubt, require additional resources and additional inspectors. The 
question is how much?
    During times of record debt and deficits, Congress cannot and 
should not simply hand over millions of taxpayer dollars without 
knowing exactly how this money will be spent.
    The President's FY 2012 budget proposal includes a $358.4 million 
request for BOEM. This is $119.3 million, or a 50 percent increase, 
above FY 2010 levels.
    I hope to hear today specific details on how the President arrived 
at the $358.4 million figure in the budget request and how specifically 
it will be used to resume offshore drilling.
    As I've stated before, bigger government does not necessarily equal 
better government. This extra funding should improve the process, not 
add new layers of bureaucracy.
    I also believe that enhanced funding should come from existing 
revenues generated from energy production--it should not be paid for by 
imposing new or higher taxes on American energy production. If you make 
energy more expensive to produce, you will make it more expensive to 
purchase. This is the last thing Americans need with gasoline prices 
climbing towards $4 per gallon.
    Addressing high gasoline prices, creating new jobs and reducing our 
dependence on foreign energy are what led me to introduce three bills 
yesterday to increase American offshore energy production. Together, 
these three bills will:
          end the de facto moratorium in the Gulf of Mexico by 
        requiring the Secretary to act on permits in a timely manner,
          require that lease sales be held in offshore Virginia 
        and the Gulf of Mexico that were canceled or delayed by the 
        Obama Administration,
          and lift the moratorium on new offshore drilling by 
        allowing drilling to occur in areas with the most oil and 
        natural gas resources.
    A legislative hearing will be held on these three bills next 
Wednesday, April 6th by the Energy and Mineral Resources Subcommittee.
    These are just the first of what will be an array of bills that 
this Committee will consider and act upon as part of the House 
Republican American Energy Initiative.
    Before concluding, I am compelled to comment on the report issued 
yesterday by the Department of the Interior regarding active and 
inactive leases.
    This report was prepared at the direction of the President at his 
press conference two weeks ago to defend his Administration's policies 
in the face of rising gas prices.
    To be blunt, this report flat-out invents the inactive definition 
used to label two-thirds of Gulf leases as inactive. This definition of 
inactive doesn't exist in law or regulation. It contradicts information 
posted March 1st on the Interior Department's own website. In fact, the 
report's definition for inactive offshore leases directly contradicts 
the definition used for onshore leases.
    This invented definition allows the Administration to 
mischaracterize two-thirds of the Gulf as inactive.
    It also bears stating that under this invented definition, for the 
past 10 months, the Administration has single-handedly prevented any 
lease-holder to become active due to its refusal to issue new 
exploration or development plans.
    It appears this invented definition was used to generate headlines.
    This Committee will continue to be focused on energy development. 
We will move forward to take positive actions that will unlock 
America's energy resources to create new jobs and strengthen our 
national security by lessening our dependence on foreign energy.
                                 ______
                                 

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

    Mr. Markey. Thank you very much, Mr. Chairman.
    For too long the Interior Department agency charged with 
overseeing the offshore oil and gas industry was nothing more 
than a rubber stamp. The former offshore regulator, the 
Minerals Management Service, MMS, came to stand for 
Malfeasance, Mismanagement and Spills. But under the leadership 
of Secretary Salazar and Director Bromwich, this troubled 
agency is being completely reformed from being a lapdog into 
being a watchdog.
    This budget request represents an investment in the safety 
of our workers, our economy, and our environment. We cannot 
afford to have more lives lost and more livelihoods destroyed 
because of lax oversight and regulation of the offshore oil and 
gas industry.
    Just last week, it was uncovered that the ultimate failsafe 
device touted by the industry, the blowout preventer, may be 
that in name only. The independent contractor for the Interior 
Department, Det Norske Veritas, concluded that it was the force 
of the blowout at the Deepwater Horizon that caused the drill 
pipe to buckle and move and kept the blowout preventer from 
sealing the well. In other words, the blowout preventer failed 
because there was an actual blowout. Far from being a failsafe 
device as the oil industry claimed, it appeared that blowout 
preventers may be sure to fail if a blowout is underway.
    However, rather than focusing on the need for reform, today 
we are going to continue to hear the same speed-over-safety 
mantra from the Majority that led to the BP spill.
    Just yesterday, the Majority introduced legislation that 
would not make drilling safer and could put our beaches from 
California to Florida more at risk for another catastrophic 
spill.
    When the American people demanded a ``spill bill'' 
following the BP disaster, they didn't mean legislation that 
could actually increase the chances of another spill occurring. 
And the Majority talking points about a de facto moratorium 
continued to be unsupported by any actual facts. The Interior 
Department has approved seven deepwater drilling permits in the 
last month, exceeding the monthly average in 2009 before the 
spill. The Department has also approved the first deepwater 
drilling plan with new environmental review.
    Because the Majority continues to block spill safety 
legislation I am worried that these new permits have been 
issued, not too late, but perhaps too soon. I believe that in 
light of the questions that now surround the adequacy of 
blowout preventers to do their job and the failure of proper 
oversight and the failure of this Committee and the Congress to 
act, the speed at which we are allowing industry to return to 
``business as usual'' is ``risky business.''
    Thus far, this Committee has not done the job to oversee 
the safety of offshore drilling. We have not held a single 
hearing on legislation to improve safety. We have not heard 
from BP, TransOcean, Haliburton or any of the companies 
involved in the Gulf's spill, despite my request for such a 
hearing.
    We have not heard from Exxon/Mobil, Chevron, Shell, Conoco 
Phillips or other companies that are the leaders of this 
industry on what, if any, safety reforms they are making, 
despite my request that they testify before the Committee. We 
have not heard from DNV on their forensic analysis of the BP 
Deepwater Horizon blowout preventer or from Cameron, the 
company that makes these devices.
    But what we have heard just yesterday is a news report 
issued by the Interior Department that oil companies are just 
sitting on tens of millions of acres of public land which 
contains tens of billions of barrels of oil.
    According to the report, 70 percent of the offshore public 
land held by oil companies is going unused, matching the 
average onshore for the past decade. Oil companies have 
apparently been engaged in a de facto moratorium on new 
drilling until prices climb even higher. That is why 
Representative Holt and I have introduced our bill. It is 
legislation to create incentives for oil companies to drill on 
the public land and water they already have under a lease.
    I commend Director Bromwich and Secretary Salazar on the 
reforms that they have already implemented and I look forward 
to their testimony here today.
    [The prepared statement of Mr. Markey follows:]

     Statement of The Honorable Edward J. Markey, Ranking Member, 
                     Committee on Natural Resources

    For too long, the Interior Department agency charged with 
overseeing the offshore oil and gas industry was nothing more than a 
rubber stamp. The former offshore regulator, the Minerals Management 
Service--MMS--came to stand for Malfeasance, Mismanagement and Spills. 
But under the leadership of Secretary Salazar and Director Bromwich 
this troubled agency is being completely reformed from a lapdog into a 
watchdog.
    This budget request represents an investment in the safety of our 
workers, our economy and our environment. We cannot afford to have more 
lives lost and more livelihoods destroyed because of lax oversight and 
regulation of the offshore oil and gas industry.
    Just last week it was uncovered that the ultimate fail safe device 
touted by the industry--the Blowout Preventer--may be that in name 
only. The independent contractor for the Interior Department, Det 
Norske Veritas, concluded that it was the force of the blowout at the 
Deepwater Horizon that caused the drill pipe to buckle and move and 
kept the blowout preventer from sealing the well. In other words--the 
blowout preventer failed BECAUSE there was an actual blowout. Far from 
being a ``failsafe'' device as the oil industry claims, it appears that 
blowout preventers may be ``sure to fail'' if a blowout is underway.
    However, rather than focusing on the need for reform, today we are 
going to continue to hear the same speed-over-safety mantra from the 
majority that led to the BP spill. Just yesterday, Republicans 
introduced legislation that would not make drilling safer and could put 
our beaches from California to Florida more at risk for another 
catastrophic spill. When the American people demanded a ``spill bill'' 
following the BP disaster, they didn't mean legislation that could 
actually increase the chances of another spill occurring.
    And the Republican talking points about a ``de facto moratorium,'' 
continue to be unsupported by any actual facts. The Interior Department 
has approved 7 deepwater drilling permits in the last month, exceeding 
the monthly average in 2009 before the spill. The Department has also 
approved the first deepwater drilling plan with new environmental 
review.
    Because Republicans continue to block spill safety legislation, I 
am worried these new permits have been issued not too late, but perhaps 
too soon. I believe that in light of the questions that now surround 
the adequacy of blowout preventers to do their job and the failure of 
this committee and this congress to act, the speed at which we are 
allowing industry to return to ``business as usual'' is ``risky 
business.''
    Thus far, this committee has not done its job to oversee the safety 
of offshore drilling. We have not held a single hearing on legislation 
to improve safety. We have not heard from BP, Transocean, Haliburton, 
or any of the companies involved in the Gulf spill, despite my request 
to for such a hearing. We have not heard from Exxon Mobil, Chevron, 
Shell, Conoco Phillips or the other companies that are the leaders of 
this industry on what, if any, safety reforms they are making, despite 
my request that they testify before this Committee. We have not heard 
from DNV on their forensic analysis of the BP Deepwater Horizon blowout 
preventer or from Cameron, the company that makes these devices.
    But what we have heard just yesterday in a new report issued by the 
Interior Department is that oil companies are just sitting on tens of 
millions of acres of public land, which contain tens of billions of 
barrels of oil. According to the report, 70 percent of the offshore 
public land held by oil companies is going unused, matching the average 
onshore for the past decade. Oil companies have apparently been engaged 
in a de facto moratorium on new drilling until prices climb even 
higher. That's why Rep. Holt and I have introduced our USE IT 
legislation to create incentives for oil companies to drill on the 
public land and water they already have under lease.
    I commend Director Bromwich and Secretary Salazar on the reforms 
they have already implemented and I look forward to your testimony 
today.
                                 ______
                                 
    The Chairman. I thank the gentleman for his statement and 
now we are ready to hear from our only witness today, Mr. 
Michael Bromwich, the Director of the Bureau of Ocean Energy 
Management, Regulation and Enforcement.
    And like witnesses that appear in front of the Committee, 
your written statement will appear in its entirety in the 
record. I would ask that you keep your oral remarks to five 
minutes. I know sometimes that is difficult. I will say, 
however, at the last hearing we had, we had a panel of five 
that were just absolutely excellent, Director Bromwich, so the 
pressure is on to keep that record going.
    I will also note that there are timing lights in front of 
you. The green light goes on when you have five minutes. When 
the yellow light goes on, you have 30 seconds. And obviously, 
when the red light goes on, the time is up. So once again, Mr. 
Bromwich, thank you very much for taking the time to be here, 
and you are recognized.

  STATEMENT OF HON. MICHAEL R. BROMWICH, DIRECTOR, BUREAU OF 
 ENERGY MANAGEMENT, REGULATION AND ENFORCEMENT [BOEMRE], U.S. 
                   DEPARTMENT OF THE INTERIOR

    Mr. Bromwich. Thank you, Mr. Chairman, Ranking Member 
Markey, and members of the Committee.
    I very much appreciate the opportunity to testify today on 
the subject of the spending priorities and missions of the 
Bureau of Ocean Energy Management, Regulation and Enforcement.
    Over the past nine months, we have carefully reviewed and 
examined our ongoing operations and responsibilities, as have 
bodies ranging from the President's Commission on the BP Oil 
Spill to DOI's Inspector General to the Department's OCS Safety 
Oversight Board to multiple committees of the House and Senate.
    The President's Fiscal Year 2012 budget request reflects 
the insights of these reviews and examines and supports the 
most aggressive and comprehensive reforms of offshore oil and 
gas regulation and oversight in U.S. history.
    Our Fiscal Year 2012 request is $358.4 million, an 
increase, as the Chairman noted, of $119 million over the 
Fiscal Year 2010 and active budget after making certain 
adjustments. The request is offset by $151 million in offshore 
rental receipts, cost recovery fees, and $65 million in 
inspection fees.
    Now these additional resources are essential to effectively 
protect our nation's natural resources as well as to address 
the need for an efficient, effective, transparent, and stable 
regulatory environment.
    On April 20, 2010, as we all know too well, the Deepwater 
Horizon rig lost control of the Macondo Well. The loss of well 
control resulted in an explosion, fire, and the eventual 
sinking of the rig--a disaster that killed 11 workers, 
seriously injured many others, and ultimately resulted in the 
release of nearly 5 million barrels of oil into the Gulf of 
Mexico, creating the largest oil spill ever in American waters.
    The Deepwater Horizon blowout and oil spill exposed serious 
deficiencies in the regulatory framework for offshore drilling. 
Since that time, we at BOEM have worked hard to address these 
efficiencies and to restore public confidence in oil and gas 
drilling offshore.
    As you know, on January 11 of this year, the President's 
Commission released its full report containing key findings 
from its extensive investigation into various issues relating 
to the blowout of the Macondo Well. The Commission concluded 
that weaknesses have existed for many years in the regulation 
and oversight of offshore drilling, stemming largely from 
conflicting missions, a lack of authority, lack of resources, 
and insufficient technical expertise.
    The reorganization and related reforms that would be funded 
by this budget request are intended to address these shortfalls 
while at the same time allowing for continuity of operations 
and ongoing exploration and production activity.
    The Deepwater Horizon tragedy has shaken government and 
industry out of the complacency and overconfidence that had 
developed over the past several decades and has resulted in 
necessary new regulations. We have promulgated new prescriptive 
regulations to bolster safety and to enhance the evaluation and 
mitigation of environmental risks. We have introduced for the 
first time performance-based standards similar to those used by 
regulators in the North Sea.
    These important steps have been accomplished through two 
new rules announced in the fall of 2010 that raised standards 
for the oil and gas industries' operations on the OCS. The 
first rule is the drilling safety rule, which was an emergency 
rule prompted by Deepwater Horizon that has put in place tough, 
new standards for well design, casting, and cementing and well 
equipment, including blowout preventers. For the first time, 
operators are now required to obtain independent, third-party 
inspection and certification of each stage of the proposed 
drilling process.
    The second rule is the workplace safety rule, which aims to 
reduce the human and organizational errors that lie at the 
heart of many accidents and spills. As a result of these new 
regulations, operators are now required to develop a 
comprehensive safety and environmental management program that 
identifies the potential hazards and risk reduction strategies 
for all phases of activity.
    Now in addition to these new rules, we have issued Notices 
to Lessees that provide additional guidance to operators for 
complying with existing regulations. We issued them in June of 
2010, in December of 2010, and again one earlier this week.
    We think this information will help BOEM evaluate 
operators' compliance with current spill response regulations 
and help operators understand what is expected of them.
    The aim of the reorganization is to create three strong, 
independent entities to carry out the missions of promoting 
energy development, regulating offshore drilling, and 
collecting revenues. In the past, these three conflicting 
functions resided within the same bureau, creating the 
potential for internal conflicts of interest among the 
objectives of the agency. This process began on May 19 when 
Secretary Salazar signed an order which dissolved MMS and 
called for the establishment of three new entities consisting 
of No. 1, the Bureau of Ocean Energy Management, No. 2, the 
Bureau of Safety and Environmental Enforcement, and No. 3, the 
Office of Natural Resources Revenue. I will skip the detailed 
descriptions of those agencies in the interest of time.
    The budget request calls for additional resources for a 
number of critical functions. One is an increase in inspection 
capacity; a second is an investment in permitting; third, it is 
an expansion of NEPA and environmental studies staff; fourth is 
additional support for high priority environmental studies; 
fifth, funding for an environmental and operational oversight 
compliance program for the first time; sixth, an investment in 
engineering studies; and finally, last but not least, an 
increase in oil spill research.
    So, in closing, as I have said, the Deepwater Horizon 
tragedy exposed significant weaknesses in the way this agency 
has historically done business. It had simply not had the 
resource to provide an appropriate level of regulatory 
oversight of offshore oil and gas development. These 
shortcomings have become pronounced as operations have moved 
into deeper and deeper waters.
    We believe the substantial budget increases contained in 
the Fiscal Year 2012 budget is an important step to bridge the 
gap between the resources the agency currently has and the 
resources it needs.
    Mr. Chairman, thank you very much and I look forward to 
taking any questions from you and the other members of the 
Committee.
    [The prepared statement of Mr. Bromwich follows:]

  Statement of Michael R. Bromwich, Director, Bureau of Ocean Energy 
Management, Regulation and Enforcement, United States Department of the 
                                Interior

    Mr. Chairman and members of the Committee, thank you for the 
opportunity to appear here today to discuss the President's Fiscal Year 
(FY) 2012 Budget request for the Bureau of Ocean Energy Management, 
Regulation and Enforcement (BOEMRE) in the Department of the Interior 
(DOI).
    As the 112th United States Congress begins its work, I want to 
discuss a set of issues that we are addressing at the Bureau of Ocean 
Energy Management, Regulation and Enforcement (BOEMRE). Over the past 
nine months, we have been implementing a number of far-reaching reforms 
to strengthen the regulation of offshore oil and gas drilling and 
strike the appropriate balance between resource development and 
regulatory oversight. I thought it might be useful to describe some of 
the initiatives we have pursued during this period and focus on some of 
the issues we have been addressing.
    My staff and I have been aggressively pursuing reforms that 
directly relate to many of the drilling safety, environmental 
protection, and regulatory oversight issues recently identified in the 
final report of the National Commission on the BP Deepwater Horizon Oil 
Spill and Offshore Drilling (Commission). We have been moving forward 
with the fundamental reforms and new regulatory measures necessary to 
improve the safety of offshore drilling, as well as enhance protection 
of the ocean and coastal environments. At the same time, we are working 
every day to allow safe drilling and production operations in the Gulf 
of Mexico to continue in order to keep production flowing and people 
working in an industry that is crucial to our nation's economy and 
energy independence.
    The challenges presented by offshore oil and gas development--for 
both industry and government--are substantial, and so are the changes 
that are necessary. These changes include the reorganization of the 
former Minerals Management Service (MMS) to provide clarity of mission 
and to strengthen oversight. We also have established heightened 
standards for drilling practices, safety equipment, and environmental 
safeguards. These new rules set forth prescriptive standards that 
industry must meet, establish, for the first time in the history of the 
U.S. offshore regulatory system, performance-based standards focused on 
identifying, and establish barriers against, specific risks associated 
with offshore drilling operations.
    These reforms are substantial, and much work is being done to 
ensure that the change we are seeking to implement is both lasting and 
effective. Our ultimate goal is to promote a culture of safety within 
industry and to serve as aggressive but reasonable regulators who have 
the tools and expertise necessary to do the job. The reforms that we 
are pursuing are necessary to allow government oversight and safety 
measures to keep pace with the challenges and risks of offshore 
drilling, particularly as those operations push into deeper water and 
new frontiers, such as the Arctic, and face increased technical 
challenges.
    I would like to briefly summarize the changes that we have made 
since the Deepwater Horizon explosion and resulting oil spill--and that 
we are continuing to implement. I will also describe the work we are 
doing to ensure that safe and environmentally responsible offshore 
drilling operations, in both shallow and deep water, can proceed.
Reform of Offshore Oil and Gas Regulation
Reorganization of the Former Minerals Management Service
    As we announced in January, we are continuing to move forward with 
the fundamental reorganization and reform of the former MMS. In the 
place of MMS, we are establishing three strong, independent agencies, 
each possessing clearly defined roles and missions. As became clear 
immediately after Deepwater Horizon and as discussed in the 
Commission's Report, MMS--with its conflicting missions of 
simultaneously promoting resource development, enforcing safety 
regulations, and maximizing revenues from offshore operations, and due 
to a chronic lack of resources--could not keep pace with the challenges 
of overseeing industry operating in U.S. waters. The reorganization of 
the former MMS is designed to remove those conflicts by segregating 
missions across three new agencies and providing each of the new 
agencies with the clarity of mission and new resources necessary to 
fulfill its regulatory responsibilities. We are designing and 
implementing these organizational changes while respecting the crucial 
need for information-sharing and the other links among the functions of 
the former MMS. Recognizing and addressing these operational issues is 
essential to ensuring that the regulatory processes related to offshore 
leasing, plan approval, and permitting do not come to a grinding halt.
    The first step of the reorganization was completed on October 1 of 
last year, when the revenue collection arm of the former MMS was moved 
to the Office of the Secretary, with reporting responsibilities and a 
chain of command completely separate and distinct from the offshore 
regulator. The establishment of this new agency--the Office of Natural 
Resource Revenue (ONRR)--was a crucial first step that addressed one of 
the fundamental conflicts--between revenue collection and the offshore 
regulator's resource development and safety responsibilities--that 
plagued the former MMS.
    By the end of the current fiscal year, we intend to complete the 
separation of the former MMS resource management and leasing functions 
from the safety and environmental enforcement functions. This change is 
designed to address the remaining fundamental conflict that existed 
within the former MMS--between the promotion of offshore energy 
development through leasing and plan approval decisions and the 
responsibility for ensuring that offshore operations are conducted 
safely and with appropriate protection for the environment. We believe 
that the separation of these missions is essential to reforming the 
government's oversight of energy development in the nation's offshore 
areas. These two new agencies that we have announced are the Bureau of 
Ocean Energy Management (BOEM) and the Bureau of Safety and 
Environmental Enforcement (BSEE).
    BOEM will be responsible for promoting and managing the development 
of the nation's offshore resources, including oil, gas, and renewable 
resources. This mission involves ensuring that the nation's offshore 
energy resources are developed wisely, economically and with 
appropriate protections for the environment. The structure that we have 
developed and that we are implementing ensures that effective reviews 
of the environmental impacts of proposed projects are closely analyzed 
and well-understood; that these impacts are given appropriate weight 
during decision-making related to resource management; and that the 
appropriate balance is struck. These processes must be both rigorous 
and efficient so that operations can go forward in a timely way and 
with confidence that appropriate steps to mitigate potential 
environmental effects are taken. Within BOEM, we are creating the 
senior position of Chief Environmental Officer, who will be responsible 
for ensuring that environmental concerns are appropriately balanced in 
leasing and planning decisions and for coordinating and promoting 
scientific research that facilitates sound stewardship of our marine 
environments.
    By establishing BSEE as the offshore safety agency, we are 
separating resource management from safety oversight. This will provide 
the engineers who review permit applications and the inspectors who 
ensure compliance with our workplace and drilling safety regulations 
with greater independence, more budgetary autonomy, and clearer focus. 
The mission of BSEE will be to enforce safety and environmental 
regulations independently and rigorously. Our goal is to create a 
tough-minded, but fair, regulator that can effectively keep pace with 
the risks of offshore drilling and promote the development of a safety 
culture in offshore operators. We are working now to establish within 
BSEE a new environmental compliance and enforcement function, which 
never existed as an explicit program in the former MMS. Through BSEE, 
we also will establish the review and enforcement of oil spill response 
plans as an area of national-level focus and oversight in order to 
foster better coordination with other federal agencies involved in oil 
spill response.
    The structure and functions of BOEM and BSEE are the result of a 
thorough and rigorous analysis undertaken deliberately but efficiently 
over the past several months. We undertook the process in this way to 
ensure that we address the structural and conflict of interest problems 
that existed in the former MMS and to plan for the orderly 
establishment of the new agencies. We have worked with and received 
advice from leading experts in government transformations. We have also 
examined closely the offshore regulatory regimes of other nations, 
including those of the United Kingdom and Norway. In considering 
various options and making these key structural and organizational 
decisions, we have sought and received the advice and guidance of 
BOEMRE career personnel. We have discussed the reorganization with 
employees throughout BOEMRE and received their input; we collected and 
analyzed data relating to the Bureau's processes, systems and 
regulatory metrics; and we developed a number of alternative models and 
options, which we discussed with BOEMRE career leadership, for 
restructuring and reforming the Bureau. Finally, we also are 
considering, and will continue to bear in mind, the recommendations of 
the President's Commission, which has done its own analysis of these 
issues and recommends organizations that are in overall general 
alignment with BOEM and BSEE.
Implementing Reform and Changing Agency Culture and Practices
    New structures and clear missions are essential to establishing 
agencies that will be effective in managing the environmentally-
responsible development of the Outer Continental Shelf (OCS) resources 
and overseeing the safety of offshore operations. But true reform 
requires a fundamental change in an organization's culture. Therefore, 
in addition to making structural changes by establishing BOEM and BSEE, 
we are working to change the way the former MMS does business. I'll 
describe below several of the changes we already have made.
    Last August, I directed BOEMRE personnel in the Gulf of Mexico 
region to no longer routinely use categorical exclusions under the 
National Environmental Policy Act (NEPA) to approve new projects in 
deepwater. Instead, we are conducting site-specific environmental 
assessments of those exploration and development plans. We are working 
closely with industry to implement this new policy in a balanced and 
fair way. We also are in the midst of a comprehensive review of our 
application of NEPA, including specifically the use of categorical 
exclusions, and we are working closely with the Council on 
Environmental Quality (CEQ) on this evaluation.
    To address another important issue--real and potential conflicts of 
interest involving BOEMRE personnel--last year we issued a tough new 
recusal policy. Employees in our district offices, where our 
inspections and permitting functions reside, must notify their 
supervisors about any potential conflict of interest and request to be 
recused from performing any official duty in which such a potential 
conflict exists. For example, our inspectors now are required to recuse 
themselves from performing inspections of the facilities of former 
employers. Also, our inspectors must report any attempt by industry or 
by other BOEMRE personnel to inappropriately influence or interfere 
with their duties. Soon BOEMRE will be issuing a broader version of the 
policy that applies these ethical standards across the agency. This 
policy presents operational challenges for some of our district offices 
in the Gulf region, which are located in small communities where the 
primary employers are offshore companies. However, the need for tough 
rules defining the boundaries between regulators and the regulated is 
both compelling and necessary. These rules are necessary for us to have 
the confidence we need to assure the public that our inspections and 
enforcement programs are effective, aggressive, and independent.
    We also have established within BOEMRE a new Investigations and 
Review Unit (IRU), which is comprised of a team of professionals with 
investigative and law enforcement backgrounds. The mission of the IRU 
is to promptly and credibly respond to allegations or evidence of 
misconduct and unethical behavior by Bureau employees; pursue 
allegations of misconduct by oil and gas companies involved in offshore 
energy projects; and, provide the Bureau with the ability to respond 
swiftly to emerging issues and crises, including significant incidents 
such as spills and accidents. The IRU took the lead in the report of 
the BP Atlantis investigation, which was released on March 4. The 
investigation included interviews of 29 individuals, analysis of more 
than 3,400 engineering drawings and related documents, and the review 
of hundreds of additional documents. Based on a thorough review of the 
evidence, the investigation found the majority of the allegations to be 
largely unfounded, but did find that there were a number of problems 
with the way that BP organized, stored, and labeled engineering 
drawings and documents.
    As part of our broad and continuing reform efforts, we have created 
11 implementation teams that have been hard at work for several months 
and are the central organizational focus for our efforts to analyze 
critical aspects of BOEMRE's structures, functions, processes, 
policies, and procedures. These teams are important in their own right, 
but they are also integral to our reorganization efforts. These teams 
are considering the various recommendations for improvement that we 
have received from several sources, including the President's 
Commission, the National Academy of Engineering, the Outer Continental 
Shelf (OCS) Safety Oversight Board commissioned by Secretary Salazar, 
and the DOI Inspector General. These teams are laying the foundations 
for lasting change in the way BOEMRE does business.
    The key areas and issues that these teams are working on include:
    Permitting. We have a team devoted to reviewing and improving 
BOEMRE's drilling permit review and approval process, which is central 
to ensuring that proposed drilling operations will be conducted safely 
and that permit applications are reviewed in a timely and efficient 
manner.
    Inspections. We have several teams that are focused on various 
issues associated with developing effective, risk-based approaches to 
our offshore inspections programs. We also are developing the 
infrastructure--and recruiting the expert personnel--necessary to 
conduct real-time monitoring of the highest risk operations, such as 
deepwater drilling operations. Such monitoring of industry performance 
during critical phases of drilling operations is a capacity that we 
feel strongly must be developed, and is consistent with the findings 
and recommendations of the National Academy of Engineers. We are 
developing new training programs and curricula for inspectors, 
supervisory inspectors, and engineers involved in BOEMRE's safety 
compliance and enforcement programs.
    Regulatory Enforcement. We are evaluating the adequacy of the 
enforcement tools we have employed, including the system for 
documenting and tracking incidents of non-compliance with prescriptive 
regulations, the adequacy and use of civil penalties, and the process 
for evaluating operator qualifications and the system for debarring 
unsafe operators. We are reviewing potential gaps in our regulations, 
including a review of the regulatory standards used by other countries, 
and we are exploring more effective use of civil penalties for 
violations of BOEMRE's safety and environmental regulations. We believe 
the current enforcement framework, which limits civil penalties to only 
$35,000 per day, per incident, is simply inadequate to deter violations 
for large operations where an operator may spend $1 million a day on a 
given deepwater lease.
    Environmental Compliance and Enforcement. We are designing new 
inspections and enforcement programs relating to environmental 
compliance, programs that have never previously existed in the agency.
    Incident Investigations. We are evaluating and developing 
investigative procedures relating to specific categories of accidents 
and incidents, including industrial accidents on rigs and platforms, 
fires, and oil spills.
    Oil Spill Response. We are conducting a comprehensive review of oil 
spill response and the adequacy of operators' oil spill response plans 
(OSRPs). This team is working closely with the Coast Guard and other 
federal agencies to develop enhancements to regulations governing OSRPs 
and more effective reviews of those plans in light of lessons learned 
from the Deepwater Horizon oil spill response.
    Safety and Environmental Management Systems (SEMS). We are 
designing an oversight and auditing program for operators' compliance 
with the new requirements of the Workplace Safety rule, which 
represents a significant advance in the promulgation of performance-
based standards for safety and environmental protection.
    Finally, changing the culture of the former MMS and establishing 
BOEM and BSEE as vigorous and effective regulators will require the 
infusion of new blood into the organizations. Although BOEMRE has many 
devoted and competent public servants, we recognize that the former MMS 
lacked expertise in important areas related to safety oversight. 
Moreover, the sweeping reforms in culture and process that we are 
pursuing necessitate, almost by definition, new energy, fresh talent, 
and new ways of thinking. Therefore, we will conduct nationwide 
searches to identify talented personnel to fill many of the key senior 
positions in the new BOEM and BSEE. We also are engaged in an 
aggressive recruitment campaign to hire new engineers, inspectors, 
scientists and other experts into the Bureau.
    All of these measures will help us ensure the rigorous and 
independent oversight of offshore drilling.
Making Reform Work: The Need for Additional Resources
    As described above, we have laid the groundwork for far-reaching 
organizational change. The success of our reforms now depends in large 
part on providing the new agencies with the financial resources, tools, 
training and culture to be effective. Improving the safety of offshore 
drilling and the effectiveness of government oversight of this 
inherently risky activity will require a substantial infusion of 
resources into the offshore regulator.
    As detailed in the Commission's Report, MMS never had the resources 
to provide the rigorous and effective oversight of offshore oil and gas 
activity that is necessary. This weakness became more significant as 
industry continued its pursuit of higher-risk projects in deepwater and 
other frontier areas such as the Arctic. We agree with the Commission's 
strong recommendation for a substantial increase in the resources 
devoted to government oversight of offshore activities because an 
effective regulator is so clearly in the public's--and in industry's--
interests.
    Industry has expressed its support for providing additional 
resources to BOEMRE to the House and Senate Appropriations 
Subcommittees on Interior, Environment, and Related Agencies in a 
letter, dated November 17, 2010 and signed by the American Petroleum 
Institute, the American Exploration & Production Council, the 
International Association of Drilling Contractors, the Independent 
Petroleum Association of America, the National Ocean Industries 
Association, and the US Oil and Gas Association.
FY 2012 Budget Request
    BOEMRE's FY 2012 request is $358.4 million, an increase of $119.3 
million over the FY 2010 enacted budget after adjusting for funds 
transferred to the Office of the Secretary as part of the ongoing 
reorganization of the former MMS. This request excludes funds requested 
for the newly established ONRR which are being requested separately 
within the Office of the Secretary appropriation. The request is offset 
by $151.6 million in eligible OCS rental receipts, $8.6 million in cost 
recovery fees, and $65.0 million in inspection fees resulting in a net 
request of $133.2 million in appropriated funds. These additional 
resources are essential to effectively protect our nation's natural 
resources as well as to address industry's need for an efficient, 
effective, transparent, and stable regulatory environment.
    The budget for the Department includes $506.3 million for the 
components of the former Minerals Management Service to continue the 
reorganization and reform efforts of both offshore energy development 
activities and mineral revenue management.
Summary of Requested Budget Changes
    The Budget proposes the following discretionary funding increases 
and decreases relative to the 2010 enacted level. A portion of the 
requested funding ($10.2 million) for the inspection capability/
monitoring initiative was received under the current FY 2011 continuing 
resolution and was offset by a rescission of prior year BOEMRE 
balances.
    Inspection/Monitoring Capability (+$44,483,000; +116 FTE): 
Additional staff are needed to accelerate implementation of the new 
inspection and oversight regime currently under development. This will 
require additional personnel with diverse backgrounds to conduct varied 
types of inspections and oversee high risk activities, including 
critical drilling activities such as BOP testing and cement/casing 
activities as drilling operations approach production zones, and 
emergency shutdown tests on production platforms. BOEMRE is actively 
evaluating significant process reforms, such as inspecting in teams 
rather than solo, implementing a stronger risk-based inspection 
strategy that will require additional oversight on higher risk 
activities, redesigning training protocols, and incorporating new 
technologies such as real-time monitoring of key drilling activities. 
The request includes funding for increased offshore transportation 
costs. Under the current FY 2011 Continuing Resolution, a net amount of 
$10.2 million is available for this purpose, which BOEMRE is using to 
begin implementation.
    Engineering Studies--TA&R (+$11,360,000; +12 FTE): Deepwater 
Horizon brought to the forefront the need to raise the level of 
resources dedicated to the evaluation of current and proposed oil and 
gas exploration and development technology. Since its inception over 
three decades ago, the TA&R Program budget has not kept pace with the 
increased cost of research and demands for TA&R managed research. In 
its January 2011 report to the President, the Commission identified the 
need for increased safety and containment research both within industry 
and the federal government in order to maintain the capability to 
address emergencies as drilling technology moved operations into deeper 
waters and further from shore. The Commission's findings were 
substantiated by testimony by industry and experts from academia who 
identified the lack of research for the offshore oil and gas sector. 
The Commission determined that neither government nor industry had 
invested sufficiently in research, development, and demonstration to 
improve containment or response technologies. The Commission found 
funding to be inadequate and stated that ``Congress needs to make 
funding the agencies responsible for regulating the oil and gas 
development a priority in order to ensure a safer and more 
environmentally responsible industry in the future'' and that the 
``desire to tap resources in deeper waters should be accompanied by 
equivalent investments in subsea equipment, operator training, research 
and development for containment and response technologies.''
    In addition to further deepwater research, the Commission 
recommended ``an immediate, comprehensive federal research effort to 
provide a foundation of scientific information on the Arctic'' and that 
``a comprehensive interagency research program to address oil-spill 
containment and response issues in the Arctic should be developed, 
funded, and implemented within the federal government.'' Although 
industry has a significant role and responsibility to conduct this 
research to ensure its operations are safe, BOEMRE (and the future 
BSEE), as the government safety regulator needs to have sufficient 
technical capabilities to conduct its own research and verify that the 
information and research provided by industry is accurate.
    Examples of near-term deepwater safety and containment research by 
the TA&R Program include assessment of subsurface blow-out preventer 
design, performance, maintenance, and inspection; well cementing, 
barrier, and containment practices and procedures; remotely operated 
vehicle intervention and capabilities; and wild well control 
technology. The TA&R Program will continue to transfer research results 
to rule writers, investigators, plan reviewers, and others that need 
this information to improve the safety of offshore operations.
    Oil Spill Research (+$8,620,000; +4 FTE): Increased funding for the 
Oil Spill Research Program is needed to address several key knowledge 
gaps brought to light by the Deepwater Horizon oil spill. The program 
leverages its ocean research funding, often providing funds to address 
needed data gathering through support to academics and university 
partners. Agencies including NOAA, the Navy, and the National Science 
Foundation often contribute funds or ship time to these efforts as they 
have ancillary needs for information to support their own missions. The 
program will continue to play a leadership role in both technology 
assessment and spill simulation.
    NEPA and Environmental Studies Staff (+$8,063,000; +52 FTE): The 
need for additional environmental studies also requires staff to manage 
the studies, both scientific staff and coordination staff, including 
Contracting Officer's Representatives (CORs) for the Environmental 
Studies Program (ESP). As planned in FY 2011, BOEM will continue to 
expand its environmental review requirements and capability in FY 2012, 
at both the pre-lease and post-lease stages. At the pre-lease review 
stage, environmental specialists will begin their coordination efforts 
with the environmental compliance activity in BSEE. Coordination with 
BSEE will continue at the post-lease stage.
    The staff will consist of marine archaeologists; social scientists 
and economists; benthic/fisheries biologists; avian and marine mammal 
biologists; protected species biologists, air-quality experts and/or 
meteorologists; physical, biological and chemical oceanographers; 
water-quality/pollution specialists, and other disciplines. Scientific 
staff will conduct environmental and socioeconomic resource impact 
analyses required for the preparation of environmental impact 
statements and for an increased number of site-specific environmental 
assessments. These staff will also serve the ESP as CORs for all phases 
of studies procurement and monitoring.
    Permitting (+$6,945,000; +41 FTE): Additional staff are needed to 
review and process lease management, qualification, bonding and 
unitization requests and issues, as well as requests for development 
activities, such as plan and permit processing and approval. A recently 
published report by the Department of the Interior OCS Oversight Safety 
Board to the Secretary of the Interior states that the ``Gulf of Mexico 
(GOM) district offices are challenged by the volume and complexity of 
permit applications and the lack of a standardized engineering review 
protocol. In addition, the Pacific Region's permitting staff is facing 
significant succession issues.'' It goes on to state that the workforce 
associated with regulating day-to-day activities has not increased 
proportionately to work demands, creating challenges in the need to 
balance an adequate analysis of permit requests with the need to be 
responsive to industry. For instance, Applications for Permits to 
Modify (APMs) have increased by 71 percent from 1,246 in 2005 to 2,136 
in 2009 in the New Orleans District. In the Pacific, 80 percent of 
current permitting employees will be retirement eligible in the next 
2.5 years. The requested funds will enable BOEMRE to ensure that 
staffing levels are commensurate with increasing workloads.
    Environmental Studies (+$6,500,000; +0 FTE): In FY 2011, the ESP 
began studies needed to support high priority information needs related 
to the Deepwater Horizon Oil Spill. Also, renewable energy requirements 
are increasing and will include establishment of baselines and 
monitoring. Many of these studies will be ongoing for several years, 
and the additional funds in FY 2012 are needed to continue these 
studies and to initiate additional studies. This information will be 
critical in order to comply with NEPA regulations and an extensive 
suite of environmental laws (including Marine Mammal Protection Act 
(MMPA), Endangered Species Act (ESA), National Historic Preservation 
Act (NHPA), Coastal Zone Management Act (CZMA), Magnuson-Stevens 
Fishery Conservation and Management Act (MSFCMA), and Migratory Bird 
Treaty Act (MBTA). As it has in the past, the ESP will leverage its 
funds with other interested Federal and private stakeholders, while 
ensuring that it fulfills its mission to acquire applied research 
specific to the oil and gas, marine minerals, and renewable energy 
programs.
    Investigations and Review Unit (+$5,782,000; +20 FTE): Funding is 
requested to staff and equip IRU, a team of professionals with law 
enforcement backgrounds or technical expertise whose mission is to: 
promptly and credibly respond to allegations or evidence of misconduct 
and unethical behavior by bureau employees; pursue allegations of 
misconduct by oil and gas companies involved in offshore energy 
projects; and assure the bureau's ability to respond swiftly to 
emerging issues and crises, including significant incidents such as 
spills and accidents. The IRU will evaluate all information submitted 
and will, where appropriate, conduct further investigation. The IRU 
will be consulting and sharing information with the Department of the 
Interior's Office of Inspector General (OIG), and they will jointly 
determine which office conducts any investigation of those allegations.
    Environmental & Operational Oversight Compliance (+$5,115,000; +33 
FTE): In FY 2012, BSEE will continue to build its compliance 
capabilities, both environmental and operational, and will work closely 
with BOEM to:
          participate in NEPA activities throughout the 
        process, specifically in developing post-lease mitigation 
        measures;
          issue safety and environmental protection related 
        rules and regulations; and
          provide independent safety, engineering and technical 
        authorization before any exploration, development or production 
        plans are implemented.
    Establishing a new environmental enforcement arm and expanding 
operational safety capabilities of BSEE is imperative. Development of 
appropriate regulations and policies, and subsequent industry and 
stakeholder outreach, is necessary to ensure the right mix of safety 
and environmental protection to minimize the risk of accidents. BSEE 
must coordinate closely with BOEM to capitalize on efficiencies related 
to bureau inter-dependencies, while recognizing and avoiding conflicts 
that may otherwise result in bureaucratic delays to safe exploration 
and development. Frequent independent, technical reviews will ensure 
that regulations, policy, and guidance keep pace with the complexities 
of OCS activities, including the use of new exploration and development 
technologies in frontier areas. Environmental mitigation and safety 
measures will need to be tested, verified, and improved in an adaptive 
management framework. Information systems may need to be enhanced to 
better track compliance with new safety and environmental requirements. 
A substantial effort will be required in explaining the new 
requirements to industry and interested stakeholders.
    Management Operations Support (+$2,860,000; +12 FTE): Funds are 
requested to staff leadership and support positions for the new BSEE 
bureau directorate. As the bureau becomes further established, funds 
will be needed to support the increased operating activities of this 
office. While BOEMRE is developing reorganization plans with the goal 
of minimizing administrative redundancy, existing leadership funding 
will be allocated to BOEM. Therefore, funding to support the leadership 
of BSEE is required.
    General Support--Resource Management (+$2,527,000; +0 FTE): The 
ongoing reorganization and enhancement of BOEMRE activities includes 
efforts to attract environmental scientists, engineers, and support 
personnel needed to support the thorough review of offshore energy 
development activities. These funds will provide for general support 
needs such as rent, information technology (IT) and general equipment, 
communications, utilities, supplies, materials, and travel for the 
additional personnel.
    Renewable Energy (+2,050,000; +11 FTE): The requested funds will 
set the stage for BOEMRE to work with applicants for offshore renewable 
energy/alternative use projects, with a focus on specific needs in the 
Atlantic and Pacific OCS. A significant increase in workload is 
expected in both the Atlantic and Pacific OCS for conducting 
environmental reviews, processing commercial leases, coordinating with 
stakeholders, and conducting inspection and enforcement activities.
    The Secretary has announced an offshore wind initiative called 
``Smart from the Start'' to facilitate the rapid and responsible 
development of renewable energy on the OCS. One of the main components 
of this initiative is identifying priority areas up and down the 
Atlantic Coast for appropriate wind development. BOEMRE and the 
Department, in close partnership with states, stakeholders, and tribes 
have been working to identify Wind Energy Areas (WEAs) off the Atlantic 
coast. These WEAs use coordinated environmental studies, large-scale 
planning and expedited approval processes to speed offshore wind energy 
development. Based on stakeholder and public participation, BOEMRE will 
prepare regional environmental assessments in the WEAs to evaluate the 
effects of leasing and site assessment activities in the areas to be 
leased. If no significant impacts are identified, BOEMRE could offer 
leases in these mid-Atlantic areas as early as the end of 2011 or early 
2012. Comprehensive site-specific NEPA review will still need to be 
conducted for the construction of any individual wind power facility, 
and BOEMRE will work directly with project managers to ensure that 
those reviews take place on aggressive schedules.
    Fair Market Value (+$1,930,000; +1 FTE): This initiative will 
support activities to thoroughly assess the oil and gas potential and 
fair market value of OCS tracts offered for lease through purchase of 
critical software, hardware, data, and the hiring of an additional 
analysis staff member. This funding will contribute to ensuring the 
nation receives a fair return for publicly owned energy resources.
    General Support--Safety and Environmental Enforcement (+$1,246,000; 
+0 FTE): The ongoing reorganization and enhancement of BOEMRE 
activities includes efforts to attract additional engineers, 
scientists, and support personnel needed to support the thorough review 
of offshore energy development activities. These funds will provide for 
general needs such as rent, information technology (IT) and general 
equipment, communications, utilities, supplies, materials, and travel 
for the additional personnel.
    Oil Spill Response Compliance (+$1,240,000; +8 FTE): Additional 
staff are needed to ensure an adequate level of oil spill response 
oversight, including review and approval of OSRP and industry 
compliance inspections. OSRP reviews are conducted for new plans, 
biennial updates, amendments and plan revisions, and to confirm that an 
operator has proper equipment, people, and structures in place to 
respond to an oil spill. Compliance inspections, such as unannounced 
oil spill exercises and unannounced response equipment inspections, 
test and evaluate an operator's preparedness level. Staff also verify 
training for response personnel and participate in table top exercises 
in which response team members simulate response actions using their 
OSRP. The experience with the Deepwater Horizon oil spill highlighted 
the need for increased oversight of company OSRPs.
    Independent Advisory Board (+$1,200,000; +4 FTE): The Board was 
conceived by the Reorganization Team and would be charged with 
reviewing BOEM internal policies, procedures, rules, and regulations. 
It would also provide peer review through participation of BSEE staff 
who would serve as informal advisors. Requested funds would also cover 
operating costs such as travel and space.
    Fixed Costs (+$1,192,000; 0 FTE): Fixed costs of $1.2 million are 
fully funded within this request.
    Reorganization Efficiencies and Budget Changes (+$1,058,000; + 1 
FTE): A total increase of $3.5 million is required to maintain existing 
administrative staff and meet non-variable costs because funding from 
revenue management sources will no longer be available. An amount of 
$150,000 and one FTE is requested to meet increased administrative 
workload resulting from the expansion of the BOEMRE workforce. These 
adjustments are offset by anticipated reorganization efficiencies 
totaling $2.6 million that will be achieved through more efficient use 
of existing facilities and consolidation during the reorganization.
    Marine Spatial Planning (+$1,000,000; +4 FTE): The requested funds 
will enable BOEMRE to coordinate Coastal and Marine Spatial Planning 
(CMSP) efforts with other federal and state agencies, determine 
information and data needs, make sure these needs are met to 
effectively implement CMSP policy, and fulfill the requirement under 
Executive Order 13547 Stewardship of the Ocean, Our Coasts, and the 
Great Lakes. BOEMRE has been designated as the lead bureau in DOI for 
CMSP and will significantly participate in its implementation. With oil 
and natural gas, renewable energy, shipping/navigation, military uses, 
recreational and commercial fishing, and others activities competing 
for space on the OCS, it is becoming more important to coordinate the 
growing demand for multiple uses. This function is critical to the 
integrity of the 5-Year Oil and Gas Leasing Program that balances these 
various competing interests and contributes to determining the size, 
timing, and location of leasing activity on the OCS. This initiative 
will complement the FY 2010 Multipurpose Marine Cadastre initiative, a 
marine information system that brings together data layers about 
environmental, physical, political, and social aspects of the OCS. In a 
single, interactively generated map, users can see all official 
boundaries, rights, restrictions, and responsibilities in State and 
Federal waters. In FY 2012, support for Gulf of Mexico, Atlantic, and 
Arctic CMSP activities will be a significant focus of this initiative.
    Bid Evaluation (+$310,000; +2 FTE): Additional staff are needed to 
interpret data and information in order to complete bid adequacy 
determinations, estimate discovered volumes of oil and gas, develop 
lease sale analogs for new discoveries, and revise assessments of 
undiscovered resource potential. These activities contribute to 
ensuring that fair market value is received for public resources.
    Inspection Fee (-$55,000,000; 0 FTE): The funding increases 
requested in this budget would be partially offset by $65 million in 
collections from OCS inspection fees, a $55 million increase in revenue 
relative to the 2010 enacted level. New fees would be charged on 
drilling rigs (+$17 million) and the existing fees on fixed OCS 
structures subject to inspection would be increased (+$48 million). 
This proposal will transfer a portion of the cost of offshore 
inspections from the taxpayers to the offshore oil and gas industry. 
The proposal is consistent with the recommendations of the Commission's 
report. In its report, the Commission specifically notes that 
regulation of the oil and gas industry should ``no longer be funded by 
taxpayers but instead by the industry that is being permitted to have 
access to a publicly-owned resource.''
    Offsetting Collections (-$5,273,000; 0 FTE): In FY 2012, BOEMRE 
requests to retain $160.2 million from eligible offsetting rental 
receipts and cost recovery fees to defray the costs of bureau 
operations. This is a $5.3 million increase in collections compared to 
the FY 2011 level. This net increase is composed of an $8.2 million 
increase in projected offsetting rental collections and a $2.9 million 
reduction in anticipated revenue from cost recovery fees.
    Marine Minerals (-$2,000,000; 0 FTE): This reduction is being 
offered to offset priority budget increases and will eliminate funding 
for BOEMRE's marine minerals program. Under this program, BOEMRE works 
with federal, state and local entities to issue leases for sand and 
gravel in the OCS. BOEMRE receives eight to 10 requests per year. 
BOEMRE retains the authority to process individual lease requests for 
sand and gravel on a case-by-case basis, funds permitting.
    Administrative Cost Savings: (-$1,432,000; +0 FTE): In support of 
the President's commitment to fiscal discipline and spending 
constraints, BOEMRE is participating in an aggressive Department-wide 
effort to curb non-essential administrative spending. In accordance 
with this initiative, BOEMRE's justification assumes $447,000 in 
savings in FY 2012 against actual FY 2010 expenditures. The activities 
where savings will be realized include: advisory contracts; travel and 
transportation of people and things; printing; and supplies. There will 
be no programmatic impact as a result of implementing these savings 
initiatives; instead, functions will be performed in a more efficient 
and more effective manner. Actions to address the Accountable 
Government Initiative and reduce expenses builds upon the management 
efficiency efforts in travel, relocation, and strategic sourcing 
proposed in the FY 2011 budget request resulting in total savings of 
$1.4 million.
    Center for Marine Resources and Environmental Technology (CMRET) (-
$900,000; -0 FTE): BOEMRE proposes to eliminate the earmarked funding 
for the CMRET in order to redirect the funding to higher priorities.
    These resources discussed above are essential to creating an 
efficient, effective, transparent and stable energy development process 
and regulatory environment. Without them, we will be significantly 
limited in our ability to adequately achieve the goals of the 
reorganization, follow through on the many reforms we have launched 
over the past several months, and implement many of the recommendations 
from the Commission's Report and other reviews of this agency. In 
addition to these important limitations, we would be unable to devote 
sufficient resources to facilitate new exploration and resource 
development. That result is unacceptable. It is our collective 
responsibility to ensure that we have the resources to carry out the 
major changes that are necessary to improve and transform this agency.
Mandatory Proposals and Other Reforms in the FY 2012 Budget:
    The Budget includes several mandatory proposals that directly 
relate to BOEMRE's programs:
    Fee on Nonproducing Oil and Gas Leases: The budget includes a 
proposal for a $4/acre fee (indexed annually for inflation) on all new 
non-producing federal oil and gas leases (onshore and offshore). This 
fee provides a financial incentive for oil and gas companies to either 
place leases into production or relinquish them so that the tracts can 
be re-leased and developed by new parties. The fee is expected to 
generate revenues of $25 million in 2012 and $874 million over 10 
years.
    Repeal of Deep Gas Royalty Incentives: The budget proposes to 
repeal Section 344 of the Energy Policy Act of 2005, which extended and 
expanded existing deep gas royalty relief. Based on current natural gas 
price projections, the Budget does not assume savings from this change; 
however, the proposal could generate savings to the Treasury if future 
natural gas prices end up below current projections.
Industry Reform
    As the foregoing discussion suggests, we have much work to do 
internally to improve the effectiveness of government oversight of 
offshore energy development and drilling. These changes are both 
substantial and necessary. However, industry must change as well, and 
we have an important role in helping to spur that change. We are doing 
so through the promulgation of new prescriptive regulations to bolster 
safety, evaluate and mitigate environmental risks, and introduce 
performance-based standards similar to those used by regulators in the 
North Sea. We have heightened the standards for equipment, safety and 
environmental safeguards in the drilling and production stages of 
offshore operations--and we will continue to do so in open and 
transparent ways in the coming months and years.
    We promulgated two new rules last fall that raise standards for the 
oil and gas industry's operations on the OCS. One of these rules 
strengthens requirements for safety equipment and drilling procedures; 
the other improves workplace safety by addressing the performance of 
personnel and systems on drilling rigs and production platforms.
    The first rule, the Drilling Safety Rule, was an emergency 
rulemaking that put in place heightened new standards for well design, 
casing and cementing, pressure testing, and well control equipment, 
including blowout preventers. For the first time, operators are now 
required to obtain independent third-party inspection and certification 
of each stage of the proposed drilling process. In addition, an 
engineer must certify that blowout preventers meet new standards for 
testing and maintenance and are capable of severing the drill pipe 
under anticipated well pressures.
    The second rule we implemented is the Workplace Safety Rule, or the 
SEMS Rule, which aims to reduce the human and organizational errors 
that lie at the heart of many accidents and oil spills. The development 
of this rule was in process well before Deepwater Horizon, but the 
promulgation of these performance-based standards was frustrated for a 
variety of reasons. Unfortunately, as was the case in other countries 
such as the United Kingdom and Norway, it took a major accident to 
provide the impetus necessary for these standards to be imposed.
    Under the Workplace Safety Rule, operators now are required to 
develop a comprehensive safety and environmental management program 
that identifies the potential hazards and risk-reduction strategies for 
all phases of drilling and production activities, from well design and 
construction, to operation and maintenance, and finally to the 
decommissioning of platforms. Although many companies had developed 
such SEMS systems on a voluntary basis in the past, many had not. And 
our reviews had demonstrated that the percentage of offshore operators 
that had adopted such programs voluntarily was declining.
    In addition to the new rules, we have issued important guidance, in 
the form of Notices to Lessees (NTLs), which provides operators 
additional direction with respect to compliance with BOEMRE's existing 
regulations.
    For example, NTL-06 (the Environmental NTL) requires that operators 
submit well-specific blowout scenarios and worst case discharge 
calculations--and that operators also provide the assumptions and 
calculations behind these scenarios. My staff and I are working closely 
with operators to ensure that they have the information necessary to 
perform their worst case discharge calculations accurately and in 
accordance with the guidance set forth in NTL-06.
    Following the lifting of the suspension of deepwater drilling 
operations, we issued NTL-10, which provides operators with guidance 
related to regulatory compliance and subsea containment. First, each 
operator is directed to submit a corporate statement that it will 
conduct proposed drilling operations in compliance with all BOEMRE 
regulations, including the new Drilling Safety Rule. The NTL also 
provides that BOEMRE will be evaluating whether each operator has 
submitted adequate information to demonstrate that it has access to, 
and can deploy, subsea containment resources that would be sufficient 
to promptly respond to a deepwater blowout or other loss of well 
control. In light of the Macondo well blowout, it is essential that 
deepwater operators demonstrate that they have access to vital source 
control and subsea containment systems in the event of a loss of well 
control.
    Finally, in January we announced the formation of the Ocean Energy 
Safety Advisory Committee, which will be comprised of representatives 
from federal agencies--including BOEMRE, the Department of Energy, the 
NOAA, the United States Geological Survey, the Environmental Protection 
Agency, and the Coast Guard--as well as the offshore oil and gas 
industry, academic institutions, and other non-governmental 
organizations. Secretary Salazar has selected Dr. Tom Hunter, the 
former head of the Sandia National Laboratory who was central to the 
Macondo well control effort, to chair this committee. The Advisory 
Committee will be a center of excellence charged with driving research 
and development and technical innovation across government and industry 
in the areas of drilling safety, well control and subsea containment, 
and oil spill response.
Returning Industry to Work Safely
    Regulatory and industry reform in the wake of a significant 
offshore disaster has happened before. The United Kingdom and Norway 
substantially changed their oversight of offshore drilling and 
production following the Piper Alpha and Alexander Kielland incidents, 
respectively. Australia is currently facing many of the same issues we 
are confronting following the Montara well blowout, which occurred only 
eight months before the Deepwater Horizon disaster.
    The specific challenges facing us, however, are unique in many 
significant respects. The scale of the offshore oil and gas operations 
in U.S. waters, particularly in the GOM, is vastly greater than those 
in the North Sea. The economies of many of the Gulf Coast states, 
particularly Louisiana, are closely tied to the offshore industry. The 
Gulf accounts for more than 25 percent of domestic oil production and 
over 10 percent of domestic gas production. One of the key challenges 
that we are addressing--and that cannot be avoided--is for government 
and industry to make the fundamental reforms necessary to improve the 
safety and environmental protection in this massive industry, while at 
the same time allowing operations to continue.
    The major challenge facing the country is to dramatically improve 
the safety of drilling in the GOM, particularly in deepwater, while 
continuing with operations, keeping production flowing and keeping 
people working. Drilling in shallow water is moving forward. Since our 
first post-Deepwater Horizon safety standards were introduced in June 
2010, BOEMRE has approved 38 permits to drill new wells for operations 
that have complied with the new requirements. More work remains to be 
done in order to keep safe operations working, and we will continue 
working with industry and devoting our resources to processing plans 
and permits for shallow water drilling. For many months, we were told 
that our reforms were too sweeping and that they inappropriately lumped 
low-risk shallow water operations with more risky deepwater operations. 
The recent loss of well control in the Gulf in connection with a 
shallow-water platform operated by Apache substantially weakens this 
argument. Offshore operations are inherently risky activities--whether 
they take place in shallow or deep water--and safety needs to be 
enhanced across the board.
    Resuming drilling in deepwater--under conditions that are safe and 
environmentally responsible--poses even greater challenges. The 
heightened standards and regulatory changes applicable to deepwater 
drilling are substantial and have been made rapidly. There have been, 
understandably, a number of questions from industry and others about 
our new regulations, the NTLs, and how we will apply NEPA going forward 
with respect to deepwater drilling operations. We have held dozens of 
meetings, both in the Gulf region and in Washington, DC, with federal 
and state representatives, industry groups, non-governmental 
organizations, and individual operators to answer questions about the 
new rules and to provide clarity about the post-Deepwater Horizon 
regulatory environment. In December, we also issued a guidance 
document, which provides a comprehensive description of the way forward 
for permitting in deepwater. We have discussed the contents of the 
guidance with a number of companies and have received input from them 
and others from industry. While it probably is not realistic that this 
guidance will resolve every question that an operator may have about 
the deepwater permitting process, we intended for the guidance to 
address the significant questions that we have heard and to provide 
answers to help operators move forward with the resumption of work in 
deepwater.
    One of the major issues that must be addressed so that deepwater 
drilling can resume in significant measure is subsea containment. 
Federal regulations require operators to be prepared to address a loss 
of well control in deepwater, and the Deepwater Horizon event quite 
dramatically demonstrated the need to have viable subsea containment 
measures on hand for every deepwater operation. NTL-10, as discussed 
above, asks operators to describe the equipment and systems they can 
deploy to shut in a well if necessary.
    Industry has formed two subsea containment groups--the Marine Well 
Containment Company (MWCC) and a program sponsored by Helix Energy 
Solutions Group (Helix)--to provide operators with access to source 
control and flow management systems in the event of a loss of well 
control in deepwater.
    It took longer than we anticipated for these industry groups to 
make their subsea containment systems available to individual companies 
seeking to drill in deepwater. In fact, the testing of key components 
of each of these groups' containment systems, including their capping 
stacks, was not completed until very recently. This testing was 
witnessed and reviewed by BOEMRE engineers, and both capping stacks 
performed according to their specifications.
    Until the MWCC and Helix were able to establish the effectiveness 
of their containment systems, it was not possible for operators to rely 
on these subsea containment systems to demonstrate their ability to 
respond promptly and effectively to a loss of well control in 
deepwater. We believe industry recognized this, which is why so few 
deepwater drilling permit applications have been filed. Now that the 
capping stacks have been tested and other components of these systems 
reviewed, we will be in a position to review individual drilling permit 
applications that designate MWCC or Helix resources. This information 
will assist us in determining whether sufficient subsea containment 
resources are available to individual operations in light of the 
particular well design proposed, reservoir pressures, worst-case 
discharge estimates, and other aspects of the operation. As you know, 
we approved two deepwater permits since the Deepwater Horizon incident, 
and we anticipate that additional deepwater permits will follow.
    I hope that the above information provides you confidence that 
there is a way forward for drilling on the nation's OCS, and that we 
are working very hard to ensure that this activity is conducted in a 
manner that is safe for both workers and the environment. The lessons 
of the Deepwater Horizon event, as discussed so vividly in the report 
of the Commission, cannot be quickly forgotten. It has been less than 
one year since the blowout and the spill, and already substantial and 
sweeping reforms have been made. Much additional work remains to be 
done, for both government and industry, to ensure that offshore 
operations are safe, to provide rigorous government oversight, and to 
keep people working in this vital industry.
    I very much appreciate the opportunity to share with you the 
reforms we are implementing and our hopes and expectations for the 
future. Mr. Chairman this concludes my statement. Please allow me to 
express my sincere appreciation for your support and we look forward to 
working with you on these and related issues in the months ahead. It 
would now be my pleasure to answer any questions you or other Members 
of the Subcommittee may have at this time.
                                 ______
                                 
    The Chairman. Thank you, Mr. Bromwich. I appreciate your 
statement.
    I just want to make an observation. There has been some 
concern about the length time by people on permitting, but I 
have noticed a coincidence. And every time that we schedule a 
hearing or have a press conference new permits are issued. And 
I just wonder if we should maybe have more Committee meetings 
and more press conferences if that will help, but you don't 
have answer.
    Mr. Bromwich. I would love to answer that question. The 
fact is, Mr. Chairman, that deepwater permits really were not 
eligible to be granted until industry had demonstrated subsea 
containment abilities. That did not happen until February 17 of 
this year. So people who count from the lifting of the 
moratorium on October 12 are counting from the wrong date. And 
so within 11 days of that capability having been demonstrated, 
we granted the first permit. And I know that Secretary Salazar 
testified shortly thereafter, but the fact was that industry 
was not ready until February 17.
    I exercise no control. Secretary Salazar exercises no 
control over permitting. Those are done by our drilling 
engineers in our Gulf of Mexico regional office. We receive the 
information so that we are ready for it, but we don't direct 
them when to issue permits.
    The Chairman. Well, I was being facetious, but thank you 
very much for your response.
    I know that Members here will have questions for you on the 
permitting. I don't think that is going to end, and I am sure 
that they will explore more deeply. But I want to ask you can 
you tell this Committee--you alluded to this in your opening 
statements. Can you tell this Committee that this 
Administration has confidence that the changes implemented by 
your bureau are making offshore drilling safer, that the bureau 
has approved the use of new technology to both prevent and 
respond to a Deepwater Horizon-like event, and that this bureau 
is capable of adapting to future challenges of drilling in both 
deep and shallow water?
    Mr. Bromwich. Let me answer the different parts of that 
question.
    The Chairman. Sure.
    Mr. Bromwich. Yes, we have confidence that offshore 
drilling can be conducted now more safely than it had been 
before and that we would be better able to deal with a blowout 
than we were before.
    The third question you asked is harder because our ability 
to adapt to new challenges as industry goes into deeper and 
deeper water with higher and higher pressures depend largely on 
whether we have the resources.
    As I said in my opening statement, and as you know, we have 
not had those resources. Historically, for 30 years this agency 
has been a stepchild of not only the Interior Department, but 
the Federal Government as a whole and has been neglected and 
has been starved. So we will be able to keep up. We will be 
able to speed up the permitting process. We will be able to 
keep up with advances in technology if, but only if we get the 
recourse to do the job.
    The Chairman. I will note that the CR that we passed has 
increased funding for your agency in response to your request. 
Obviously, the Senate hasn't acted on that and so you are 
stymied. But I just want to note that those at least on this 
side of the aisle voted for that CR had increased funding for 
what you wanted.
    Mr. Bromwich. I understand that, Mr. Chairman and I very 
much appreciate it. It is very frustrating for our people 
following the proposal by the President last summer for a 
hundred million dollars supplemental budget request for us to 
have received only to date $10 million and we are midway 
through the fiscal year.
    The Chairman. I just want to make a note that there has 
been a response by the Majority here in the House.
    Final question I want to ask you. The President later today 
I guess in about a half an hour will talk about a new energy 
plan, and I alluded to this in my opening remarks. So can you 
tell the Committee where the definition of inactive lease comes 
from, from the Department of the Interior that the President is 
using?
    Mr. Bromwich. My understanding is that the definitions have 
been used internally with the Interior Department and I think 
with external audiences for a very long time.
    You pointed out that there may be inconsistencies between 
what is defined as an inactive lease for onshore and offshore. 
The explanation would be that they are two different agencies 
that are not always synced up as much as you would like within 
a single cabinet agency. I frankly don't know that much about 
the operations of BLM and don't know what all may have gone 
into their definition of inactive leases.
    I saw that you issued a statement. I will do my best, if 
you want, to answer those questions down the road. I obviously 
haven't had a chance to examine the statements in the press 
release carefully.
    The Chairman. If you would do that I would very much 
appreciate that because as I mentioned in my opening statement 
it disturbs me that a new definition appears out of nowhere to 
make what one hopes, although we are in political world, a 
political point and that disturbs me because we need to become 
energy independent or less dependent on foreign energy. And 
when we have that sort of rhetoric out there, I think it clouds 
the issues. So I would very much appreciate your getting back 
to me.
    Mr. Bromwich. I don't think the definition comes out of 
nowhere, but I will supply you with the additional information.
    The Chairman. OK. Very good. Thank you very much.
    The Chair recognizes the gentleman from Massachusetts.
    Mr. Markey. Thank you, Mr. Chairman.
    Director Bromwich, the Department's contractor released the 
results of its forensics investigation into the failure of the 
blowout preventer in the Deepwater Horizon oil spill, which 
concluded that it failed because the force of the blowout 
caused the drill pipe to move and that is why it couldn't be 
sealed and cut.
    Now the industry has long maintained that blowout 
preventers are a failsafe device of last resort. Do you believe 
right now that blowout preventers can be treated as they 
presently are designed as a failsafe device, going forward?
    Mr. Bromwich. No, I don't.
    Mr. Markey. The report also recommended that there be a 
full examination of whether blowout preventers can actually 
prevent blowouts the way they are supposed to and that design 
modifications be required to address any findings. Do you 
believe that such examination is necessary in order for us to 
ensure that blowout preventers are, in fact, effective?
    Mr. Bromwich. Congressman Markey, certainly based on the 
DNV forensic report I think the answer would be yes. I would 
like to point out that there is a hearing being conducted by 
joint investigation team in New Orleans on April 4 that is 
designed to get a lot more information surrounding the BOP 
report done by the contractor. So I think we will have a better 
idea of what the specific lines of inquiry need to be in the 
future once that hearing is concluded. But I certainly agree 
that a substantial amount of additional work by industry and by 
government needs to be done. Yes.
    Mr. Markey. Thank you.
    The independent BP Spill Commission concluded that the root 
causes of the disaster were systemic. We have already learned 
that the other major oil companies had spill response plans 
that protected walruses in the Gulf of Mexico, even though 
walruses hadn't lived there for three million years. We have 
learned that the other major oil companies thought the chances 
of ail from a spill reaching shore was negligible. We learned 
that an actual deepwater blowout could not be contained in 
under 87 days.
    Now we learn that blowout preventers themselves may not be 
able to prevent actual blowout. Doesn't this report add to the 
conclusion that the safety systems surrounding deepwater 
drilling are systemic across the industry.
    Mr. Bromwich. I think there are certainly more questions 
now than ever before about blowout preventers, but there were 
questions before. We have known since Deepwater Horizon that 
the blowout preventer didn't work as anticipated. What we now 
know more specifically from the forensic examination that the 
specific mechanism by which it didn't work. But we have been 
proceeding, certainly since I came on board in June, on the 
premise that blowout preventers are not failsafes and we need 
to do everything we possibly can to make offshore drilling 
safer in other ways.
    Mr. Markey. Of the 11 shallow-water permits that are 
currently pending, 7 were submitted in March. Similarly, in 
deep water, of the 12 pending application, 8 have been 
submitted since March. Doesn't all of this show that industry 
has confidence that activity is resuming under the new safety 
regulations your agency has issued?
    Mr. Bromwich. The short answer is yes. They clearly do have 
more confidence now. I think they were waiting for the first 
deepwater permit to be granted and they were waiting for 
further clarity on some of the issues associated with all 
drilling, whether in deep water or shallow water. So I think 
the surge in permit applications that you just alluded to in 
March definitely reflects that industry is gaining confidence 
that they are going to be able to move forward.
    Mr. Markey. Thank you.
    Now there are currently more rigs in the Gulf than there 
were one year ago before the spill. There are 124 rigs in the 
Gulf now compared to 122 rigs a year ago before the spill. 
Would oil companies be moving rigs back into the Gulf if they 
thought that drilling was not going to continue and to 
increase?
    Mr. Bromwich. One would think not.
    Mr. Markey. Director Bromwich, the current continuing 
resolution expires on April 8, and the possibility still 
remains that the Republicans who run the House of 
Representatives will force a shutdown of the Federal Government 
this spring. A government shutdown could have significant 
implications for our production of oil and gas and our ability 
to ensure that drill operations on public lands are safe.
    Now while I understand that no decisions have been made, 
looking at the impacts of the government shutdown in 1995, can 
you give us an idea as to what you and Secretary Salazar might 
be forced to do if there is a government shutdown?
    Mr. Bromwich. Well, as you said no decisions have been 
made. I know Secretary Salazar had said publicly that he 
doubted permitting would continue. And if you go back to the 
historical examples you just referred to in 1995 and 1996, I 
believe somewhere between 27 and 40 agency personnel continued 
to work, none of them permitting personnel. So that was the 
system that we had back then.
    Mr. Markey. Thank you. Thank you, Mr. Chairman.
    The Chairman. Thank you, Mr. Markey. The gentleman from 
Colorado, Mr. Lamborn.
    Mr. Lamborn. Thank you, Mr. Chairman. Thanks for being here 
today.
    According to API, the President's 2012 budget proposal 
includes almost $90 billion in tax increases on the U.S. oil 
and natural gas industry. What would be the impacts on domestic 
energy production, jobs, and future reserves from these tax 
increases?
    Mr. Bromwich. Mr. Lamborn, I have not myself done the 
analysis of that. The Administration obviously did when it put 
forward the budget proposal.
    Given the current price of oil, and the opportunities that 
exist out there, but in shallow and deep water I don't think 
the imposition of taxes would have much of a deterrent effect 
on industries determination to move forward.
    Mr. Lamborn. OK. Interesting. Second, let me ask you this. 
As you know three years ago Congress deliberately refused to 
extend the outer continental shelf drilling moratorium, despite 
that this Administration has reimposed a de facto moratorium in 
the Atlantic and eastern Gulf of Mexico. If we could somehow 
reverse this Administration's action, wouldn't increased 
production and exploration in these areas created jobs, bring 
revenue to both state and Federal Governments, allow domestic 
energy to be used instead of foreign energy, and lower energy 
prices because of more supply in the market?
    Mr. Bromwich. You are asking me to speculate. I think 
clearly if you develop more areas that would tend to do all of 
the things that you suggested. But let me underscore the 
reasons why the Administration and Secretary Salazar, in 
particular, made the decisions that he did with respect to the 
next five-year plan.
    Those decisions were made still in the shadow of Deepwater 
Horizon with continuing concerns about the safety of offshore 
drilling. I think as each day passes, as our rules are fully 
implemented, as industry both understands and complies with 
them, we are all gaining greater confidence in the ability of 
offshore drilling to be done safely.
    It is certainly possible that decisions that have been made 
could be revised. Plans have been revised before. and in fact, 
they were revised a couple of times just within the last couple 
of years.
    Mr. Lamborn. And let me just ask--thank you. Let me ask you 
this. If an industry is applying for something and the same 
conditions apply for permit after permit, shouldn't we 
reconsider the continued use, as we had in the past, of 
categorical exclusions for environmental study purposes?
    Mr. Bromwich. Well, as you know Congressman, we were widely 
criticized for using categorical exclusions by the Council on 
Environmental Quality, by the President's Commission and others 
with the claim that those reviews were simply insufficient to 
explore all of the environmental issues that needed to be 
explored.
    We are moving forward, as you know, with respect to 
deepwater in doing site-specific environmental assessments 
while we undergo a comprehensive review of our NEPA policy. It 
is possible that at the end of that review process we could 
reinstate categorical exclusions for deepwater, although I 
would tend to doubt that. But we are moving forward with the 
review and analytic process. And it is in the face of 
widespread, almost unanimous criticism that categorical 
exclusion reviews did not go deeply enough into the potential 
environmental effects of drilling.
    Mr. Lamborn. Well, I would like to say something in favor 
of categorical exclusions. If you have the same conditions in 
Area A as you have in Area B 20 miles away, I think that you 
don't have to reinvent the wheel if the exact same conditions 
apply.
    Mr. Bromwich. But they generally don't, even if they are 
relatively close. Geological formations are not consistent 
between areas 20 miles away necessarily and therefore you can't 
make that assumption that these essentially are cookie cutter 
kinds of reviews that you can knock off. If you have seen one 
plan, you have seen them all. So I would caution certainly that 
just because you have a certain review that you have done in 
one area of proposed drilling that that same analysis is 
applicable to a nearby area. I don't think that is necessarily 
the case and I think we should be careful about making that 
assumption.
    Mr. Lamborn. OK. We are going to have to agree to disagree 
on that. I hope that you would be open-minded that, in some 
cases, there is so much overlap that we should reconsider 
category exclusions. Otherwise, we are hindering jobs. We are 
hindering energy supplies and prices to the consumer and the 
economy.
    Mr. Bromwich. I would point out that the first site-
specific environmental assessment that we just completed was 
done in less than 30 days. So it is not clear that the 
environmental assessments will necessarily take much longer 
than the categorical exclusion reviews that we did before.
    And a point that I have made a number of times recently in 
front of industry people is now that we have done the first 
site-specific environmental assessment I suspect that they will 
take even shorter than the first one did. So let us wait and 
see. I don't think the conclusion that they will take much 
longer than categorical exclusion reviews is necessarily 
justified. And again here, as in so many other areas, the 
answer to a quicker process is more resources.
    And in fact, in our Fiscal Year 2012 budget request there 
is a substantial additional request for people to do the kind 
of NEPA analysis, whether it is categorical exclusion reviews 
or whether it is environmental assessments. We have a limited 
number of people now to do the work. We need more.
    Mr. Lamborn. Thank you.
    The Chairman. The gentleman from Michigan, Mr. Kildee.
    Mr. Kildee. Thank you, Mr. Chairman.
    Mr. Bromwich, after the Deepwater Horizon disaster and with 
all the knowledge that we have reaped in hearings pursuant to 
that, we have learned a lot from testimony at previous hearings 
that the Administration is not issuing permits for deepwater 
drilling quickly enough. But I believe that speed should not 
get in the way of proper safety measures to protect workers and 
our environment.
    In your testimony you said that subsea containment systems 
took longer than expected, but are now available to companies. 
With these new safety measures available, do you expect more 
companies now will file for and receive permits?
    Mr. Bromwich. Yes, I think that is the reason we have seen 
a surge in permit applications in recent weeks.
    Mr. Kildee. So you expect the number then to grow as time 
goes on.
    Mr. Bromwich. Yes, I do.
    Mr. Kildee. What level of assurance do we have that these 
measures are sufficient? I hope we don't have to wait for 
another disaster to determine that that is the final test on 
the sufficiency of these safety measures?
    Mr. Bromwich. No, I don't think it is the only test. I 
think everyone, and by that I include people in our agency and 
people in industry, got a wake-up call with Deepwater Horizon. 
I think the assumptions about the safety of drilling of all 
kinds, but particularly deepwater drilling were shaken by that 
event.
    And so in the wake of that, as I have described on multiple 
occasions, we have dramatically enhanced the safety 
requirements that exist and that must be followed by all 
operators when they apply for drilling permits. So that they 
have to have very well-defined plans certified by engineers on 
how they will do casting and how they will do their cementing 
operations.
    There are also a lot of requirements relating to the 
blowout preventers that Congressman Markey referred to. And we 
are requiring for the first time the kind of subsea containment 
capabilities that were never required before and in which 
require on an application-by-application basis an operator to 
demonstrate that it has access to the resources necessary to 
deal with a subsea blowout.
    So we have much higher level of confidence than we did 
before that, first of all, we have driven down the risk of 
blowouts to begin with. And second of all, if God forbid, there 
were a blowout that there are the resources available to deal 
with it.
    Mr. Kildee. How do you actually test these subsea 
containment systems?
    Mr. Bromwich. There is a testing protocol that both of the 
two groups, the Helix Well Containment Group and the Marine 
Well Containment Company went through. It was a protocol 
defined in advance. And then the testing was done with our 
personnel present, which then also reviewed the test results 
separate from their having witnessed it. And so that was the 
process that was used before we were satisfied that these 
containment systems were capable of responding in the way that 
the groups had suggested.
    Mr. Kildee. Is there any way you can try to replicate the 
possibilities in order to test these subset containment 
systems?
    Mr. Bromwich. I think what you are suggesting is there a 
possibility of sort of dynamic testing in the water under spill 
conditions. We are exploring that right now. We think that 
would add an added measure of confidence to it, and so we are 
exploring with both groups what kind of testing of that kind 
could be conducted.
    I have directed both groups to meet with me on a quarterly 
basis to discuss those kinds of issues as well as to discuss 
the expansion of their capabilities because as you probably 
know right now there are significant limitations to what their 
systems can handle, both in terms of water depth and in terms 
of pressure.
    So hopefully we will continue to learn more as we go 
forward, but certainly Secretary Salazar and I felt that we had 
seen enough and there had been enough of a demonstration for us 
to say, OK, we think that is sufficient. We are now going to 
look at individual permit applications that designate those 
containment capabilities.
    Mr. Kildee. Thank you very much, Mr. Bromwich. I appreciate 
all your good work. Thank you.
    Mr. Bromwich. You are welcome. Thank you.
    The Chairman. I thank the gentleman. The gentleman from 
Louisiana, Mr. Fleming.
    Mr. Fleming. Thank you Mr. Bromwich for being with us 
today.
    As I understand it that in your budget request you want a 
plus of $6,945,000 for an additional 41 full-time employees for 
permitting only, which is about a 50 percent increase in the 
funding overall. In fact, in January of this year you were 
asked when the pace of permitting would return to pre-April 20, 
2010 levels and you responded probably never.
    Given the fact that you are requesting a significant 
increase in funding and personnel, and assuming that we provide 
that, would that still be the case? That we will still see 
really permitting levels never attaining what we did before?
    Mr. Bromwich. I think you have to understand, as I am sure 
you do, that there are now a lot more requirements that our 
people who review permits have to confirm. There is a lot more 
work the companies have to do on the front end in order to 
satisfy those requirements. So there are simply a larger number 
of steps that have to be gone through that didn't exist before. 
So even if we dramatically increased our permitting personnel, 
which is what the budget requests ask for, I don't think we 
would fully return to the pace of permits that existed before. 
But we would come a whole lot closer than we will without the 
budget increases.
    Mr. Fleming. Could you candidate it? Would it say be 80 
percent of the previous level?
    Mr. Bromwich. I would just be guessing. If we get those 
people on board or if we get a fraction of those people on 
board and then we measure how much more quickly we can do it 
with those personnel, I think we would be able to figure it out 
more specifically. But right now I would just be guessing.
    Mr. Fleming. OK. So you feel like you will be able to give 
an estimate at some later date then as to what you think the 
steady rate of permit production will be?
    Mr. Bromwich. Right, once we have the new people on board 
and we train them and we see what rate settles in at. Yes, I 
would be able to project based on that. Sure.
    Mr. Fleming. OK. Thank you.
    You know we are approaching $4 a gallon this summer in 
gasoline. Some say it may go higher than that. Federal Reserve 
Chairman Ben Bernanke testified on March 1 that--and he said 
that ``sustained rises and the prices of oil or other 
commodities would represent a threat both to the economic 
growth and to overall price stability.''
    And yet in still we have supported and encouraged and even 
help fund and then sent a rig to Brazil to produce oil there. 
So that has obviously created a lot of concern, especially 
considering that current estimates of recoverable energy 
reserves to the United States if you combine oil, natural gas, 
and coal as one 1.3 trillion barrels oil equivalent, which is 
the largest in the world.
    And then we hear talk about, well, to bring down the prices 
we are going to go into the strategic oil reserve, which has 
never proven to be any solution to that problem.
    So it seems to me if truly oil, certainly hydrocarbons in 
general is a commodity. It is price is determined by market 
forces that we should move forward and do what we can to 
increase production instead of being 30 percent dependent on 
foreign oil as we were in the seventies we are now 60 percent. 
And so you add on top of that the new technologies that allow 
us to explore resources we haven't before more and more oil and 
gas reserves that we are finding every day and yet we have 
declining producing offshore from 1.7 million barrels a day to 
1.59.
    Help me with that because it seems to me that we are 
falling behind and that is just making the prices go up. That 
is hurting Americans at the pump.
    Mr. Bromwich. Just a few points. Number one, I think that 
your data on our dependency on imports is not correct. I think 
our dependency has declined in recent years from approximately 
60 percent to approximately 50 percent. So I think that is 
point one.
    Point two is there is not declining production. Production 
is at its highest historical level in the Gulf of Mexico.
    Mr. Fleming. Well, there must be tremendous disagreement 
over that because we have had testimonies--EIA has said very 
clearly that--and it is going down further by as much as 
250,000 barrels a day in the next year or so.
    Mr. Bromwich. My understanding is that the projection is 
that it may go down, but that right now it has not gone down 
and that it is at its highest levels ever. That is my 
understanding.
    Third, what we do now in terms of approving plans and 
permits doesn't have an immediate impact. And so even if we 
granted every permit that is pending and scores of permits that 
are not pending today, it wouldn't have an influence on the 
price of gasoline. The process, as I think you and others know, 
is a long one. From the time a permit is granted until the time 
that an operator can actually begin producing can be two, five, 
even ten years.
    And so I think we need to be somewhat careful about cross-
walking a slower permitting time we have experienced over the 
last few months to the price of gasoline right now. I don't 
think it is that simple.
    Mr. Fleming. Well, if I could just follow up, Mr. Chairman, 
just with a quick statement. And that is that we have had a 
number of folks from the Administration continue to claim that 
production is not gone down, yet our data shows very clearly 
that it does. And yet, the Administration never shows us any 
data otherwise. Thank you.
    The Chairman. The time for the gentleman has expired. The 
gentleman from Arizona, Mr. Grijalva.
    Mr. Grijalva. Thank you, Mr. Chairman.
    Welcome Mr. Director. Good to see you again.
    Mr. Bromwich. Thank you.
    Mr. Grijalva. Director, the report issued yesterday by the 
Department showed that oil companies are, in essence, squatting 
on tens of millions of acres of public land, onshore and 
offshore, on which they are not producing oil. Do you believe 
that establishing a fee on non-production leases will 
incentivize timely oil and gas production and increase the 
revenue for the Federal Government?
    Mr. Bromwich. Yes, I think it will, and I know that is the 
Administration's position. And we are also exploring--one of 
the points of doing the report and one of the reasons I think 
the President asked for it was to explore a variety of 
potential incentives to get oil and gas companies to push 
forward with exploration and development.
    Mr. Grijalva. Use it or lose it would be one of those 
incentives?
    Mr. Bromwich. Would be one of them. Yes.
    Mr. Grijalva. And the anticipated, hopefully congressional 
action to establish such a fee I am assuming you support that 
as well?
    Mr. Bromwich. Yes.
    Mr. Grijalva. Thank you. My colleagues on the other side of 
the aisle, and we have heard today, are very concerned about 
the slow issue rate of offshore drilling permits by your 
agency.
    And I think your response to my colleague's question at the 
end is not magically going to create this volume of oil and 
gas. But it is my understanding that the agency is attempting 
to reform this process to prevent the tragedy of last year's 
spill. Can you describe your agency's new onsite permitting 
process and how it correlates in the long run to lower energy 
costs in the long run.
    Mr. Bromwich. I think that what we have done through the 
development implementation of new safety regulations and new 
containment requirements is to make drilling safer than it has 
ever been before. There is no doubt that it has imposed new 
requirements, obligations, responsibilities on industry.
    It has also, as I mentioned in response to your colleague's 
question, imposed new responsibilities and obligations on our 
permitting personnel to review those applications and make sure 
that all the required information has been supplied.
    There have been issues over the last many months about 
permits being turned in with facially inadequate information. 
And our permitting personnel know that they are not to approve 
those kinds of permits. They are instead to send them back to 
the operator with as clearly as we can a request for the 
missing information to fill out the application.
    One would hope and think that it just happens one time. We 
specify what is missing and it is supplied. Sometimes it has 
taken more iterations than that. And one of the things we are 
doing is to explore ways to streamline that process so it sort 
of quickens the back and forth without for a moment sacrificing 
the need for getting complete information and ensuring that we 
have everything we need to feel comfortable in approving a 
permit.
    Mr. Grijalva. Thank you. And I appreciate the answer. I 
hope it is not a dilemma for Congress, but the resources being 
requested in this budget request are exactly what is needed for 
expediting permitting process and more importantly to prevent 
the tragedy that everyone dealt with last year. And that 
prevention is about regulatory issues in terms of safety, that 
prevention is assuring the right containment mechanisms, and I 
think that we shouldn't cut our nose to spite our face in this 
process.
    We can rattle the sword about gas prices, but if we don't 
put in the regulatory, environmental, and safety resources 
necessary to make this agency run correctly we are going to be 
stepping back into the past and we are going to retreat from 
the commitment we made the American people that this would not 
occur again. And for your effort I want to thank you Mr. 
Director and I appreciate all the work that you are done. Yield 
back.
    Mr. Bromwich. Thank you. Thank you very much. I appreciate 
it. And you are exactly right. We need to strengthen all 
aspects of our system. We need to have more inspectors out 
there looking at rigs and platforms. We need more personnel to 
do the important environmental work that needs to be done, and 
we need more permitting personnel. So this is one of those 
issues, as I have said, that there seems to be consensus in 
terms our need for more resources. But as the Chairman and I 
discussed before, it simply hasn't happened for us.
    The Chairman. The gentleman has yielded back. The gentleman 
from Pennsylvania, Mr. Thompson.
    Mr. Thompson. Thank you Chairman.
    Director Bromwich, thank you so much for your testimony. I 
want to revisit the issue that has been talked about a number 
of times and has to do with the proposed use it or lose it fee 
on non-producing leases.
    The Administration claims that it will provide an added 
incentive for the industry to either start producing or 
relinquish leases so that others can bid on them. Now can you 
explain to me what your agency defines as a non-producing 
lease? Is it considered inactive or active lease?
    Mr. Bromwich. A non-producing lease would be an inactive 
lease, unless it is under an exploration plan.
    Mr. Thompson. OK, so a non-producing lease is an active 
lease?
    Mr. Bromwich. No, a non-producing lease is an inactive 
lease.
    Mr. Thompson. OK, because your website actually which was 
updated recently is March 1, 2010 states that a non-producing 
lease is an active lease that has not produced.
    Mr. Bromwich. Yes, don't have that in front of me.
    Mr. Thompson. Well, I just bring that to your attention, 
the discrepancy. And I want to explore that further. Now this 
is--as you know, the Department of the Interior also deals with 
the issue of non-producing leases on Federal lands. And are you 
aware of what the Interior Department defines as a non-
producing lease? Does the Department of the Interior consider 
this an inactive or active lease?
    Mr. Bromwich. You are asking about onshore?
    Mr. Thompson. No, this--well, on Federal lands.
    Mr. Bromwich. OK, I think there are--as I said at the 
beginning there are different definitions that are used onshore 
and offshore for what is considered an inactive lease. Should 
that be the case? No. But there are two separate agencies that 
have been running these programs for decades and so I think 
that explains what is an inconsistency.
    Mr. Thompson. It certainly may explain it, but I think it 
also certainly contributes to some obvious issues of--the 
Department of the Interior actually, taking off of their 
information, inactive leases are leased areas that are not 
producing nor currently covered by an approved exploration or 
development plan. So obviously, there is a lot of inconsistency 
in terms of your interpretation of it, what your website says 
for your agency, what the Interior Department says.
    Director Bromwich, it appears to me that these two agencies 
run by the same Administration in which both have jurisdiction 
over one of the most important issues facing us today, 
obviously, our national energy security have polar opposite 
definitions of an extremely simple, yet major concept in the 
energy industry.
    You know what exactly a non-producing lease is--you know, 
fundamental in terms of what--within the President's proposal 
the definitions are so inconsistent. I mean you provided an 
explanation of this in terms of there are two different 
agencies, although within the same Administration.
    Any other thoughts why these inconsistencies exist? Do you 
agree that it would be wise for the Administration to be on the 
same page to provide regulatory certainty for the industry?
    Mr. Bromwich. Well, these agencies have looked at these 
issues differently, not just during this Administration. These 
agencies weren't created by this Administration, so the 
inconsistency that you are identifying between the definitions 
have existed for decades. Is it something that in a perfect 
world ought not to exist? Of course.
    I don't know all the complications of what goes into the 
BLM definition and so I am not sure why they define things in a 
way that is different from ours. Obviously, in putting together 
this report we defined the inconsistency and I think that the 
report attempts to simply note that there is an inconsistency. 
We obviously weren't going to change the definitions for the 
purpose of this report. We wanted to keep the definitions as 
they have existed historically.
    Mr. Thompson. I would suggest that, recognizing that there 
are lots of folks and administrations that have ownership on 
this problem, but I think the Administration--now that the 
problem is this clear and this simple--this is the sitting 
Administration. I think I would certainly suggest that this is 
something that be immediately looked at. It is all under the 
same Administration. Now is the time to correct this problem no 
matter how far back it goes I think for the industry and 
frankly for the future of our energy security that would be a 
very good thing to do.
    Mr. Bromwich. I am not sure that industry is confused, 
frankly. I haven't seen the evidence that they are confused 
about the definitions.
    Mr. Thompson. Sir, do they get to pick and choose which 
definition to go with?
    Mr. Bromwich. I am not sure that the definitions have much 
direct impact on their operations.
    Mr. Thompson. In terms of you are talking about use it or 
lose it, and if that is imposed it would seem to me you would 
want to know what the definition of an inactive lease is.
    Mr. Bromwich. Just because the definitions are different 
offshore and onshore, operators who operate in both areas 
certainly would have a mature understanding that the 
definitions are different and therefore they will act 
accordingly. So just because there is an inconsistency in the 
definitions between the two agencies doesn't mean that industry 
is confused.
    Mr. Thompson. Actually, I would suggest that it is 
something that the Administration should look at.
    Mr. Bromwich. OK.
    Mr. Thompson. Thank you, Mr. Chairman.
    The Chairman. The time for the gentleman has expired. Ms. 
Tsongas from Massachusetts is recognized.
    Ms. Tsongas. Thank you, Mr. Chairman. And thank you 
Director Bromwich for being here with us.
    Director, last summer like much of the country I was so 
concerned by the disorganized and inadequate response to the BP 
oil spill. And furthermore, I was shocked to learn that oil 
companies and the MMS had created nor required plans for a 
worse-case scenario oil spill like the BP spill. And we saw the 
results.
    As you have been testifying today, you have talking about 
the efforts that you put in to prevent such spills from 
occurring and the kind of efforts around containment and the 
technologies that need to be put in place, but what has your 
agency been doing to create and put in place realistic, worse-
case scenario oil spill response plans, either from within the 
Department or as a requirement of granting a permit?
    Mr. Bromwich. We actually have done a lot. We now require 
worse-case discharge scenarios to be outlined and calculated by 
industry. And we don't just rely on what industry calculates. 
We do our own calculations. And so our whole permitting process 
depends on an individual operator, in fact, complying with a 
very detailed set of requirements in a document called NTL6 or 
Notice to Lessees 6 in which they are required to walk through 
a worse-case discharge and a scenario for a worse-case 
discharge. And then to demonstrate before we will even consider 
granting a permit that they have the containment capabilities 
that would cover such a worse-case discharge.
    So there has been a tremendous amount of work that has gone 
in that area. NTL6 actually came out in June of 2010. So within 
two months of the spill, and we have worked it through with 
industry over the course of many months. There were a number of 
questions about it and how the computations worked and so 
forth. But we are now at a point that we are now seeing 
operators comply fully with the requirements of NTL6 and to 
specify their blowout scenarios and to specify their 
containment resources. So that is why at the end of March of 
2011 we are in a very different place in a good way than we 
were on April 20 of 2010.
    Ms. Tsongas. And does this also include, for example, how 
you would coordinate with the Coast Guard or other entities 
that might have to deal with the impact on local communities 
and shorelines and all of that as well?
    Mr. Bromwich. It doesn't directly connect with that. That 
is a longer-term project and that relates to how we are going 
to reconfigure the whole oil spill response program. That is 
not something we can do by ourselves because of the number of 
participants involved, namely, the Coast Guard. We have 
initiated an interagency process by which the entire regulatory 
structure for oil spill response will be reconfigured. It 
hasn't been done yet because that is not something that can be 
done overnight or really even in a few months. But it is a 
project that has been commenced. And I agree with you it is an 
important project.
    Ms. Tsongas. I hope you would bring it to us so that we and 
the American people can be reassured because on almost every 
level we saw an inadequate planning put in place to deal with 
this. And I think as we watched this unfold over many, many 
months it was quite dismaying and I think to have a plan in 
place that can respond more quickly and more effectively would 
be reassuring to all of us.
    Mr. Bromwich. I understand. Absolutely.
    Ms. Tsongas. But also I wanted to ask now that the 
deepwater moratorium has been lifted, can you give me any 
examples of drilling companies that have made changes to their 
drilling procedures and particularly around worst-case 
scenarios. You have said you have made them put in place plans, 
but can you talk about anything more particular than that.
    Mr. Bromwich. For all of the operators for whom we have 
granted deepwater permits since February 28, they have all had 
to do that kind of work. They have all had to fully comply with 
NTL6, the worse-case discharge guidance. They have had to 
comply with the new safety regulations that we put out in 
October that requires certifications by professional engineers 
at various stages of the process, both with respect to well 
casting, with respect to cementing.
    So you go down the list of the permits that we have 
granted--Noble Energy, BHP Billiton, Exxon, Chevron. You go 
through the list--ATP. They have all complied with not only the 
requirements of NTL6, but all of our safety regulations as 
well. And that is what gives me confidence that it is not just 
those operators, which obviously represent a significant slug 
of the industry doing business in the Gulf, but that other 
operators as well are capable of meeting all of those 
requirements. It wasn't easy. Didn't happen overnight because 
these were tough, new requirements, as they needed to be. But 
we are now seeing that operators can comply with them and I 
think that there will continue to be a surge in new 
applications that, in fact, comply with our new regulations.
    Ms. Tsongas. Thank you. And I yield back.
    The Chairman. I thank the gentle lady. The gentleman from 
South Carolina, Mr. Duncan.
    Mr. Duncan. Thank you, Mr. Chairman. And thank you Director 
Bromwich for being here.
    I have had a fair amount of experience with MMS in the 
past, served on the OCS five-year planning subcommittee for 
about 18 months. And one question I wanted to ask you is have 
you been out to a deepwater production oil drilling platform in 
the Gulf of Mexico?
    Mr. Bromwich. Yes.
    Mr. Duncan. OK. During this de facto moratorium that we 
have since the Deepwater Horizon, how many--I know you all have 
issued five out of the existing--excuse me, 7 out of the 
existing 52 permits that were approved prior to Horizon. How 
many of those have been in deep water?
    Mr. Bromwich. We have approved seven permits for six unique 
wells. In other words, one had to reapply, so we granted that 
one twice. So six unique wells, seven permits and that is since 
February 28. We only have 12 applications that are pending 
currently.
    Mr. Duncan. How many were in deep water?
    Mr. Bromwich. Those are only deepwater statistics that I 
have given you.
    Mr. Duncan. There was one deepwater issued on March 18, do 
you know who that was issued to?
    Mr. Bromwich. I would have to go back. There are six 
different operators and I think with Congresswoman Tsongas I 
went through virtually all of them. I don't remember which one 
it was.
    Mr. Duncan. My information shows it was Petrobras.
    Mr. Bromwich. No, that is not right.
    Mr. Duncan. And 8,200 feet of water, 165 miles----
    Mr. Bromwich. No. I think you are confusing two different 
things. That was a permit for what is called an FPSO.
    Mr. Duncan. OK. Mr. Bromwich. It is not a deepwater 
drilling permit. It is something completely different. It 
relates to production, not deep water.
    Mr. Duncan. Had they been issued a deepwater permit before?
    Mr. Bromwich. Pardon?
    Mr. Duncan. Are they drilling in that location?
    Mr. Bromwich. No. No.
    Mr. Duncan. Just offloading? OK.
    Mr. Bromwich. They are preparing for production is my 
understanding.
    Mr. Duncan. I am sorry?
    Mr. Bromwich. They are preparing for production is my 
understanding.
    Mr. Duncan. OK. Last week we saw the President go to Brazil 
and applaud the same company for drilling offshore. And he said 
this that we want to work with you. We want to help with 
technology and support to develop these oil reserves safely and 
when you are ready to start selling we want to be one of your 
best customers at a time when we have been reminded how easily 
instability in other parts of the world can affect the price of 
oil and the Unites Stated could not be happier with a potential 
for a new stable source of energy.
    We have stable sources of energy in this country in shallow 
water and deep water, western GOM off the Atlantic Coast with 
the Virginia--the permits that have been working toward with 
natural gas. Supposedly lands in this country that have been 
off the table for energy exploration. And so it concerns me 
that the Administration seems to have a drill there and not 
here philosophy.
    And so when I look at what is going on very closely to the 
United States waters based on the chart that I see beside me I 
have been looking at all morning, concerns me that other people 
are drilling for oil in the Gulf of Mexico that could have an 
impact on U.S. waters as well.
    And so we want to do it here. We have the resources. We 
have the technology. We have issued permits in the past. There 
has been over 40,000 wells drilled and oil produced from in the 
Gulf of Mexico and we have had one instance, although it was a 
terrible instance and I appreciate the ongoing look at safety. 
But I am astonished when I hear the Ranking Member say that now 
we are pushing for deepwater drilling. Sure we are because it 
has been successful in this country.
    Being involved with the MMS in the past, I know there are 
leases that are expiring. Is there any talk within the 
Administration of extending those expiring leases? Those guys 
have invested hundreds of millions of dollars in these leases 
that they may not ever get to produce from.
    Is there any talk about extending those leases? And then if 
we are going to meet the American energy independence in this 
country, we are going to need new lease sales. And I know the 
process is long and convoluted so we don't need to be five or 
seven years out with new sales. So I would like to you address 
upcoming leases, if you don't mind.
    Mr. Bromwich. Yes, let me take a couple of things you said 
before. The Administration and I take a drill here position as 
well. That is why we are granting these permits. That is why we 
have asked for additional budgetary resources so that we can 
push forward with granting permits for drilling here.
    You point out very importantly that we did have the 
horrific accident in April. And I am sure you have studied what 
happened in UK and Norway after they had enormous incidents. 
Things shut down for much longer than they have here as 
regulators and industry reevaluated what had happened and tried 
to figure out what additional safety enhancement needed to take 
place.
    Mr. Duncan. We are out of time. Are you going to extend any 
of the existing leases? Are you going to look at that?
    Mr. Bromwich. It depends. We are going to do it on a case-
by-case basis. We have had requests for leases expiring in 2020 
to extend their leases. That strikes me an outrageous request. 
If they have a least that expires in the next year or so, and 
they have clearly not been able to move forward because of the 
moratorium and the slowdown in permitting, we will grant those 
lease extensions.
    Mr. Duncan. Thank you.
    Mr. Bromwich. But we have had a free rider problem with 
people coming in with leases that don't expire for eight, nine, 
ten years and saying we want more time on our lease. That 
strikes me as inappropriate.
    The Chairman. The time for the gentleman has expired. The 
gentleman from Maryland, Mr. Sarbanes.
    Mr. Sarbanes. Thank you, Mr. Chairman. Thank you Director 
for being here. Thank you for I think really putting to bed the 
notion that there is a de facto moratorium--I mean that there 
isn't a de facto moratorium on drilling. There isn't a de eura 
moratorium. There is de nothing out there. I mean you are 
issuing permits from what I can gather from what you are 
telling us the industry would recognize that the agency is 
acting in a responsible way, that the requirements being sought 
are appropriate, that the process that they need to go through 
to demonstrate that they can handle these projects in a safe 
manner makes sense.
    So this notion that there is a de facto moratorium in place 
I think really it is a dog that won't hunt.
    Mr. Bromwich. You are right about that, Mr. Sarbanes. And 
it is insulting to our people who are working hard to process 
permits, but in deep and shallow water as rapidly as possible. 
A de facto moratorium would not require them to work. They 
could go home and they haven't done that.
    Mr. Sarbanes. I appreciate that.
    Now I wanted to ask you--you alluded in responding to a 
question from Congressman Kildee and Congressman Grijalva as 
well that you feel like the industry has been chastened by this 
experience and is ready to step up and be more attentive to its 
responsibilities in terms of safety. Obviously, they can see 
and the average American can figure out that the cost 
associated with a spill happening and the shutdown that that 
creates within the industry greatly exceed--exponentially 
exceeds any costs associated with putting good safety measures 
in place and making sure that that is paid attention to.
    So it goes to this question of what the culture is like in 
these companies. And there was a sense prior to the spill that 
the culture was lax when it came to safety. And we have talked 
about the kinds of spill response plans that were developed in 
a cookie cutter manner.
    We got the impression--I think clear impression from the 
research that was done by the BP Commission that the President 
set up that corners were being cut and so forth. and it 
reflected a culture that just wasn't paying attention to these 
things.
    I would like you to speak to whether you think that culture 
is changing. I would like you to speak to whether you may 
remember from the last time at one of the hearings where you 
came before this Committee that I broached the idea to you and 
Secretary Salazar of requiring that the CEOs of these companies 
personally certify as to the adequacy of their oil spill 
response plans to make sure that right at the top there was 
that commitment to safety.
    Now that provision is not in place, but I would like you to 
speak to whether you think that could be helpful. And in 
addition, speak to whether you think beyond what you can do 
from a regulatory standpoint there is still a need and 
usefulness to having the Congress act to provide more authority 
to enact some of the recommendations of the Commission that was 
put forward.
    Mr. Bromwich. Let me go first to whether the culture is 
changing question. I think it is changing. I think it was, in 
your words, a chastening experience for the industry. I don't 
want to generalize some of the companies that we dealt with, 
including some of the major companies clearly took a lot of 
pride over the years in their safety culture and they sometimes 
will refer pejoratively to some of the other operators as not 
having that culture.
    But I think for the industry as a whole Deepwater Horizon 
was a massive wake-up call. And I saw that, not only in the 
boards and groups that industry formed to look at these issues, 
but really in the passion that some of the industry folks 
expressed. They had acknowledged that they had been complacent. 
They had acknowledged that they had too much discounted the 
possibility of a catastrophic spill. So I think that has caused 
a reevaluation of those issues in part stimulated by the new 
regulations that we have put out there. But part of it is self-
generated by a simple recognition that it can't happen again.
    I think Co-Chairman Riley of the President's Commission has 
told the industry that if something else like this happens 
forget about it. Game over. No more offshore drilling. And I 
think industry at some level understands that, that the stakes 
are incredibly high.
    My concern is how do you sustain that commitment to a 
safety culture once the memory of Deepwater Horizon begins to 
fade? And one of the things I have been concerned about with 
all of the push to grant permits more quickly is it is fading 
all to quickly less on the part of the companies themselves and 
more on the part of trade associations and frankly some public 
officials. It is important to keep in mind that this event was 
less than a year ago. Eleven people died and there was a 
dramatic need to reevaluate the safety regime that exists and 
the requirements that exist.
    Moving to one of your other questions, I think personal and 
executive accountability is an extremely important principle 
and that is why we now have a requirement, not with respect to 
oil spill response specifically, but with respect to whether 
applications are compliant with all of our new regulations. It 
is not a CEO requirement, but an authorized official must 
certify it. I apologize.
    The Chairman. The time for the gentleman has expired. The 
gentlemen from Colorado, Mr. Tipton.
    Mr. Tipton. Thank you, Mr. Chairman and thank you Director 
for being here.
    I just have a couple of quick questions that I wanted some 
clarification on. Refer back to the question by colleague from 
New Mexico in regards to the use it or lose it fee for non-use. 
There is a difference, isn't there, between having a lease and 
then a permit to be able to develop the lease, is that correct?
    Mr. Bromwich. Yes. The actual steps are is there a lease 
and then there is an exploration plan and then there is a 
development plan. So you get permits, both with respect to an 
exploration plan and with respect to a development plan.
    Mr. Tipton. But developed resource to be able to make money 
you have to be able to have a permit.
    Mr. Bromwich. Yes.
    Mr. Tipton. Is your plan to have a fee before we are 
allowing people to be able to actually produce?
    Mr. Bromwich. I am not sure that is actually the 
requirement.
    Mr. Tipton. You are not sure? Could you check up on that?
    Mr. Bromwich. Sure.
    Mr. Tipton. I would like to be able to know that.
    Mr. Bromwich. Sure.
    Mr. Tipton. And then just going back a little bit to the 
Deepwater Horizon in terms of the response of government and 
agencies, how many violations did BP have?
    Mr. Bromwich. We still have an ongoing investigation, as 
you know, that will help to determine----
    Mr. Tipton. How does that relate to other companies, do 
they have less violations?
    Mr. Bromwich. Did they have fewer violations than what?
    Mr. Tipton. Than BP.
    Mr. Bromwich. I haven't looked at.
    Mr. Tipton. We don't have any idea? We might want to check 
on that, whether or not it was a failure to address one company 
rather than the entire industry as well.
    Mr. Bromwich. But as the President's Commission has pointed 
out, they were using a TransOcean rig. which is a large 
supplier of rigs. And they were using Haliburton cement, which 
apparently failed. And so simply pointing at the operator, in 
this case BP, really misses the full picture and I think that 
is what led the Commission to suggest it was a systemic problem 
and not a single operator problem.
    Mr. Tipton. I also want to go back to the Ranking Member's 
question in regards to the continuing resolution. In the event 
that Senator Reid and the President fail to come up with any 
ideas of their own and they want to shut down the Federal 
Government, since they haven't responded to the House of 
Representatives, will that impact the process of permitting?
    Mr. Bromwich. Yes.
    Mr. Tipton. That will?
    Mr. Bromwich. Yes.
    Mr. Tipton. We would certainly all like to encourage the 
President and the Senate to finally step to the plate.
    One other question that I have as well, you are 
establishing in your request with $119-million increase in 
appropriations two new agencies. As I read through your 
testimony in regard to the BOEM it says, ``Develop wisely, 
economically, and with appropriate protection for the 
environment. Another agency, the BSEE, enforce safety and 
environmental regulations.''
    Personally, I am going to read into it a little bit more, 
but it looks to me like there is a distinction without a 
difference.
    Mr. Bromwich. That is not true.
    Mr. Tipton. We will look into that a bit more.
    Mr. Bromwich. You want me to answer your question? Can I 
answer your question?
    Mr. Tipton. I will tell you, if we could, I would like to 
because he has a few specific questions. I would like to yield 
the balance of my time to Representative Boren.
    Mr. Bromwich. Yes, but I would like to answer that point 
because there is not duplication. There are completely 
different functions. One is for doing the up-front 
environmental work associated with leases and plans.
    The other, in BSEE, is relating to environmental compliance 
to make sure that the environmental commitments and mitigations 
that the companies have committed to in their plans and in 
their permit applications are actually followed through on. 
That is a capacity that has never existed in the agency that 
will exist in BSEE and it is utterly distinct from the kind of 
environmental NEPA analysis that would go on in the Bureau of 
Ocean Energy Management.
    Mr. Tipton. Thanks for the clarification. I yield the 
balance of my time, with the Chair's approval.
    The Chairman. Thank you. Mr. Bromwich, prior to you getting 
appointed to this position, did you have any oil and gas 
experience?
    Mr. Bromwich. I was a lawyer in private practice and I had 
represented some energy clients. But if you are asking whether 
I had a specialty in offshore drilling, the answer is no.
    The Chairman. OK. Do you know what a half-truth is?
    Mr. Bromwich. I think so.
    The Chairman. Is a half-truth a lie or is a 
misrepresentation of the truth?
    Mr. Bromwich. Well, I am not sure I can answer that in the 
abstract. Can you give me a specific example.
    Mr. Landry. I am trying to figure out if you and the 
Administration are just outright lying to the American people 
or if you all just want to misrepresent the truth because again 
today you pointed to how production is at its highest, yet 
your--the Administration--the Energy Information Agency clearly 
points out that under the current policy domes to production or 
production in the Gulf of Mexico is slated to decline.
    Mr. Bromwich. The question was about current production, 
not about projected production.
    Mr. Landry. But no, you all like to make the assumption. 
You like to tell the American people that you all are 
responsible for a peak in domestic production.
    Mr. Bromwich. I haven't told anybody that I am responsible 
for a peak in domestic production.
    Mr. Landry. OK, but do you don't you agree that under the 
current policy production in the Gulf of Mexico will decline?
    Mr. Bromwich. Yes.
    The Chairman. OK, and will that have an impact on our 
domestic supply?
    Mr. Bromwich. Our domestic supply? Yes, in the short term.
    Mr. Landry. All right. Thank you, Mr. Chairman.
    Mr. Bromwich. I don't think any of that was a lie or a 
misrepresentation by me, Congressman.
    Mr. Landry. OK, I just wanted to make sure because I needed 
to clarify that for my colleague. I didn't want him going out 
there and you making that because the Administration continues 
to want to pound that at the podium when that is clearly not 
factual.
    Mr. Bromwich. OK, but his question was about current 
production.
    Mr. Landry. Current production.
    Mr. Bromwich. Just to be clear.
    Mr. Landry. OK.
    Mr. Bromwich. OK?
    The Chairman. The time for the gentleman has expired. The 
gentleman from Idaho, Mr. Labrador.
    Mr. Labrador. Mr. Chairman, if I could just get a follow up 
on these questions. You say that there is not a de facto 
moratorium, correct?
    Mr. Bromwich. There is definitely has not and has never 
been.
    Mr. Labrador. OK. So when did energy production actually 
peak in the Gulf Coast?
    Mr. Bromwich. When did it peak?
    Mr. Labrador. Yes.
    Mr. Bromwich. I think it is nearly at its peak now.
    Mr. Labrador. It is at its peak right now.
    Mr. Bromwich. I think or close to it. Yes.
    Mr. Labrador. So what is our current level of production 
right now?
    Mr. Bromwich. In terms of barrels of oil?
    Mr. Labrador. Yes.
    Mr. Bromwich. I don't have that figure.
    Mr. Labrador. OK, when were you told that you were going to 
testify at this Committee?
    Mr. Bromwich. A couple of weeks ago.
    Mr. Labrador. And you don't have that information, which is 
what that hearing is about?
    Mr. Bromwich. No, this hearing was about our budget 
request.
    Mr. Labrador. But your budget as so we can actually figure 
out----
    Mr. Bromwich. If you had asked me in advance to supply 
production data, I would have been happy to do that.
    Mr. Labrador. No, but you are the one who is saying there 
is not a de facto moratorium.
    Mr. Bromwich. The de facto moratorium relates to permitting 
activities.
    Mr. Labrador. OK.
    Mr. Bromwich. And I have answered a number of questions 
about permitting activities. I am happy to answer any of your 
questions about permitting activities.
    Mr. Labrador. So you are saying at this point we are at a 
peak, but according to information I have in production----
    Mr. Bromwich. In production.
    Mr. Labrador.--that it peaked in May of 2010.
    Mr. Bromwich. OK.
    Mr. Labrador. OK, so production at Gulf peaked and then 
continued to decline. What is our current--compared to 2010, 
which was the highest producing year ever, and I agree with the 
Administration there.
    Mr. Bromwich. OK.
    Mr. Labrador. That it was the highest producing year ever. 
Your permitting is proceeding according to plan and would you 
expect 2011 to have equal to or greater production than 2010?
    Mr. Bromwich. I think it is going to be less.
    Mr. Labrador. It is going to be less?
    Mr. Bromwich. Yes.
    Mr. Labrador. So we are actually reducing. We are actually 
going down in the level of production in this year?
    Mr. Bromwich. That is my understanding of what the 
projections are. Yes.
    Mr. Labrador. OK, so we are curious because you know I 
don't have any gas companies in my state. I am just worried 
about the consumer. I am worried about the people in my 
district, in my state who are paying higher gas prices. What do 
you expect 2012 to be, according to the current projections?
    Mr. Bromwich. I haven't seen a projection for 2012.
    Mr. Labrador. Do you expect it to be higher than 2011 or 
2010?
    Mr. Bromwich. I don't know.
    Mr. Labrador. Do you expect it to peak?
    Mr. Bromwich. You are asking me questions--I don't do 
projections. I run an agency that is responsible for a whole, 
large range of activities, but not for making future estimates.
    Mr. Labrador. Yes, but it seems like you keep telling us 
that we are at the highest levels ever, and the highest levels 
ever were at 2010.
    Mr. Bromwich. OK.
    Mr. Labrador. And the 2010 was because of things that 
happened before 2010--was because of Administration decisions 
that were made before?
    Mr. Bromwich. Yes.
    Mr. Labrador. Not because of your Administration's 
decision. It was because of what happened before your 
Administration was in place, wouldn't you agree with that?
    Mr. Bromwich. I never claimed that I am responsible for 
high levels of production.
    Mr. Labrador. And no one in your Administration is claiming 
that?
    Mr. Bromwich. I don't know what people in the 
Administration may have claimed.
    Mr. Labrador. OK. Now when we talk about the oil spill, you 
are telling us that we need higher standards, and I can 
probably agree with that. But don't you think--I think it was 
the Ranking Member who said that there was a lot of rubber-
stamping happening in your office before you came into place, 
would you agree with that?
    Mr. Bromwich. People have used that description. I think 
permits were being processed at a rapid rate in large part 
because the number of requirements was far fewer than they are 
now.
    Mr. Labrador. OK, so you are asking for a 50 percent 
increase of your inspectors, was that the right number that I 
heard.
    Mr. Bromwich. No, somebody else used the number 50 increase 
in permitting personnel. It is actually a larger increase than 
that.
    Mr. Labrador. It is a larger----
    Mr. Bromwich. In terms of the number of inspectors, we are 
actually asking for a much larger percentage increase. It would 
go from a current number of about 55 to--we are asking for an 
increase of 116.
    Mr. Labrador. So I am still not sure. If you are going to 
have that many more inspectors why you are not going to be able 
to approve more permits.
    Mr. Bromwich. Inspectors don't approve permits. They go out 
on rigs to ensure the safety of the rigs and the platforms.
    Mr. Labrador. Yes, but why aren't you going to be able to--
with all the extra funding that you are going to have why 
aren't you able to approve more permits?
    Mr. Bromwich. We are. That is why we requested sufficient 
funding for 41 additional permitting personnel.
    Mr. Labrador. But according to your something you said to a 
newspaper you said that we are not going to have permits than 
pre-spill oil.
    Mr. Bromwich. I said the pace of permitting will likely not 
return to where it was previously because of all the additional 
steps that our permitting personnel need to go through to 
confirm that operators when they submit their permit 
applications are in full compliance with all the rules.
    Mr. Labrador. So I want to be clear. What that means to you 
then is that the pace--so each permit will take longer, but it 
doesn't mean that we are not going to have as many permits?
    Mr. Bromwich. Yes.
    Mr. Labrador. Is that what you mean?
    Mr. Bromwich. Yes.
    Mr. Labrador. OK. Thank you.
    The Chairman. The time for the gentleman has expired. The 
gentleman from Louisiana, Mr. Landry.
    Mr. Landry. Mr. Bromwich, I was somewhat pleased to see 
that you approved Shell's first, new deport exploration plan. I 
understand that there are several environmental groups that are 
considering filing challenges to that.
    Our Chairman has introduced some legislation that helps to 
streamline the judicial process. You are a very bright lawyer. 
I will recognize that. Do you support that legislation?
    Mr. Bromwich. Is this one of the bills that the Chairman 
introduced yesterday?
    Mr. Landry. Yes.
    Mr. Bromwich. I haven't had enough time to really study it 
to give you an informed opinion.
    Mr. Landry. OK, I would like you to supplement an answer to 
that question once you have an opportunity to review. If you 
wouldn't mind, if you could take a look at that map. That is a 
map of Cuba. That is Cuba's lease blocks. I don't guess that 
you have any jurisdiction over how they drill in Cuba.
    Mr. Bromwich. Not that I am aware of.
    Mr. Landry. OK, one of those lease blocks has been leased 
to Petrobras and did you recommend to the President that maybe 
we should require Brazil to meet the same standards you are 
inflicting on our oil and gas industry as they drill in Brazil?
    Mr. Bromwich. There is a lot of discussion and activity 
within the Department about trying to internationalize 
standards.
    Mr. Landry. No, no, no. I mean the money is already lent. I 
mean when they lent Brazil some money to drill off our coast. 
Does Brazil meet the--could under your requirements could 
people drill in Brazil--would they meet your requirements in 
Brazil? Are they doing the IS's and duplicative environmental 
studies?
    Mr. Bromwich. I don't know very much about Brazil's 
regulatory system, so I can't answer that.
    Mr. Landry. That is a great answer because me neither, but 
I don't know why we are spending all that money increasing 
their offshore capacity and we are strangling our industry 
here.
    You know we have been talking a lot about irresponsibility 
on behalf of the industry and I would like to get back to that. 
But you have indicated that a government shutdown would impair 
your ability to issue permits. Would you say that a government 
shutdown is an irresponsible act?
    Mr. Bromwich. I think that is a rhetorical question, isn't 
it?
    Mr. Landry. I don't know. I mean would you say that 
shutting the government would be irresponsible?
    Mr. Bromwich. I think shutting down the government and 
sending the bulk of our employees home is an irresponsible act.
    Mr. Landry. OK. Well, then would you agree that it was 
irresponsible for the Democrats not to pass a budget last year.
    Mr. Bromwich. I am not going to answer that question.
    Mr. Landry. Well, now wait a minute. I mean come on now. I 
mean you can't just----
    Mr. Bromwich. I am here to supply information. Congressman, 
I am here to supply information about things that is within my 
jurisdiction, not to opine political questions.
    The Chairman. If I may, Mr. Landry.
    Mr. Landry. Yes, sir.
    The Chairman. The gentleman is here on his--listen, I am 
very interested in that answer too.
    Mr. Landry. But it gets to it, Mr. Chairman. It does.
    The Chairman. OK. He has declined to answer it and I think 
we need to respect that.
    Mr. Landry. Let me ask you a question. If we were to shut 
the government down, how much money would you need to continue 
your permitting process?
    Mr. Bromwich. The answer is I don't know. And the second 
answer is I am not able to pick and choose which operations I 
can select. The shutdowns that took place I don't know if you 
were here at the time. I was in 1995 and 1996.
    Mr. Landry. I was a taxpayer at that time.
    Mr. Bromwich. Well, sir, I have been a taxpayer all alone. 
So in----
    Mr. Landry. In the government? You were in the government.
    Mr. Bromwich. I was in the government in 1995.
    Mr. Landry. Getting a government check. I was getting a 
private check back then.
    Mr. Bromwich. OK. I have had some private checks, too.
    Mr. Landry. OK.
    Mr. Bromwich. So in 1995 and 1996, there was--most of the 
government was shut down. There was a very skeletal crew in 
most agencies. That was true with the Justice Department where 
I served and----
    Mr. Landry. OK, so how much money----
    Mr. Bromwich.--and I----
    Mr. Landry. How much money do you need--if you have all 
that experience you should then be able to tell me relatively 
how much money you would need to continue to the permitting 
process under a government shutdown.
    Mr. Bromwich. I don't know.
    Mr. Landry. I mean you just told me about the vast 
experience that you have and that you were here when the shut 
the government down.
    Mr. Bromwich. I was not in the Interior Department and I 
wasn't running this agency.
    Mr. Landry. Yes, but you evidently have some experience. 
Could you give me a roundabout park? Would it be 10 million, 15 
million, 20 million.
    Mr. Bromwich. I don't know.
    Mr. Landry. OK, by your own admission earlier, you agree 
that there is adequate spill response capabilities in the Gulf 
of Mexico.
    Mr. Bromwich. No, what I said was in the context of 
individual permitting application we are satisfied that with 
respect to each of those applications that we approved that 
each of them has demonstrated adequate access to containment 
resources.
    Mr. Landry. Does the government have access to adequate 
spill response capabilities in the Gulf of Mexico today--the 
government. Do you have the ability to go and if you needed it 
and you had the budgetary ability could you go and access 
adequate spill response capabilities in the Gulf of Mexico 
today?
    Mr. Bromwich. That is not a government responsibility under 
our current laws.
    Mr. Landry. I am just asking you if you did have it, could 
you?
    Mr. Bromwich. We could perhaps commandeer the resources of 
the various private groups, but that is not the way the system 
works.
    Mr. Landry. I am going to respect my time. If I had some 
more we could finish up.
    The Chairman. The time for the gentleman has expired.
    Mr. Kildee. Mr. Chairman, point of personal privilege.
    The Chairman. The gentleman is recognized and will state 
his point of personal privilege.
    Mr. Kildee. I came over here to get answers to questions 
relevant to the purpose of this hearing. I think we are 
straying a bit from that and I appreciate the fact that you 
have tried to bring it back into the direction in which this 
hearing was called.
    Let the record show that I was in government when the 
government was closed down and I was drawing a government 
paycheck and still am.
    The Chairman. Let me just simply respond and I know that 
the Director was asked to come here and talk about the budget. 
There are many, many facets to the budget. I would just say to 
my friend from Michigan that the gentleman from Louisiana has 
constituents that are badly impacted by this. What has happened 
in the BP and he is trying to get answers on behalf of his 
constituents by his line of questioning.
    I interrupted him because I respect the fact that Director 
Bromwich was asked probably a rhetorical question, but I 
understand the passion. And frankly, there is passion on both 
sides of the aisle and that is the reason for these hearings. 
But I think we do need to conduct it in as civil way as we 
possibly can. And certainly that is my intent as Chairman and I 
know Members want to respect that. But we need to understand 
sometimes why the passion arises of all of our Members in their 
effort to represent their constituents.
    Mr. Kildee. And I appreciate Mr. Chairman. That is one of 
the reasons you are considered to be one of the most decent 
Chairmen in this House and I have been in this House for 34 
years. And I can't find anyone who surpasses you in decency. 
And I want to work with my colleague from Louisiana. Live in 
the State of Michigan. That is surrounded by the largest body 
of fresh water in the world. So while you have the Gulf of 
Mexico, which is, of course, the sea water I can understand 
your passion. And we all get passionate at time, and don't ever 
lose your passion. That can be a positive thing.
    The Chairman. I think the gentleman. The Chair recognizes 
the gentleman from Ohio, Mr. Johnson.
    Mr. Johnson. Thank you, Mr. Chairman. Director Bromwich, I 
am a little bit confused. I would like to go a little deeper 
into your budget request. It is my understanding that your 
department has requested an increase of almost $120 million in 
funding compared to 2010 levels. Can you tell me real briefly 
what was your funding level for your permitting process in 
2006?
    Mr. Bromwich. I don't have that number. I can supply it to 
you, but I don't have it right now.
    Mr. Johnson. OK. But is it safe to say that it is probably 
a lot lower than the 120 million that you are requesting for 
increase in 2010?
    Mr. Bromwich. Certainly, the part of the budget request for 
Fiscal Year '12 that goes to permitting would put us at a level 
of personnel that I would imagine would be significantly in 
excess of what existed in 2006, although I don't know those 
numbers.
    Mr. Johnson. All right, I appreciate that. In 2006, 
according to the records that I have, your department approved 
381 permits. In '09, 171 permits. In 2010, 104. And this year 
so far 20. Can you please explain to my colleague and I why 
your department needs 120 million more dollars in the budget to 
do what you were doing for a lot less in 2006? Why do you need 
$120 million to improve a process that, at least according to 
current statistics today was working pretty good back in 2006 
because we getting a lot more permits through the system?
    Mr. Bromwich. Well, it depending on what you consider doing 
pretty good. If by that you mean proceeding at a level of 
safety requirements and regulations that are now largely viewed 
as completely insufficient.
    Mr. Johnson. Well, let us get to that. Let us talk about 
safety and regulation.
    Mr. Johnson. Are you considering in your evaluation the 
fact that some 40,000 wells have been drills in the coastal 
waters of America?
    Mr. Bromwich. Yes, I am.
    Mr. Johnson. Before the Deepwater Horizon incident, right?
    Mr. Bromwich. Right, with 79 loss of well control incidents 
in the period of----
    Mr. Johnson. Out of 40,000, correct?
    Mr. Bromwich. Yes, but that is 79 almost Deepwater 
Horizons.
    Mr. Johnson. Almost. Almost.
    Mr. Bromwich. Yes.
    Mr. Johnson. They did not occur.
    Mr. Bromwich. They did not occur.
    Mr. Johnson. We have had one deepwater incident out of 
40,000 plus.
    Mr. Bromwich. Right.
    Mr. Johnson. We were implementing 381 in '06. We have done 
20 this year. And it takes the acts of Federal judges finding 
the Department is in contempt to get our oil drilling process 
moving. All the while we are sitting here while America is 
paying $4 plus for gasoline at the tank. We have a President 
who goes to Brazil and encourages the Brazilians to drill so 
that America can become one of their best customers. Mr. 
Bromwich, is this your idea or the Department's idea of an 
adequate energy policy for America?
    Mr. Bromwich. First of all, your numbers in terms of 
permits for this year is very low. You said 20. The actual 
number is 73.
    Mr. Johnson. Seventy-three? OK. Compare that to 381. I will 
give you that.
    Mr. Bromwich. Well, we are only about a quarter of the way 
through the year. So if you trick that out for about 280. I am 
not saying that is what it will be, but it shouldn't take a 
quarter of a year and match it up against a full year. I think 
you will agree with that.
    Mr. Johnson. I certainly agree we are not all the way 
through the year. So back to the question, do you consider the 
President's urging Brazil to drill while we have pretty much a 
de facto moratorium on our drilling here in America an adequate 
energy policy for the American taxpayer.
    Mr. Bromwich. Sir, we don't have a de facto moratorium. If 
we had a de facto moratorium, we wouldn't have 73 permits this 
year. I understand that that is the phrase that is being used 
and used repeatedly. So has the phrase ``permitorium.'' They 
are meaningless phrases in the face of permits being granted. 
Even the industry in the last few weeks has welcomed our 
issuance of both deepwater and shallow-water permits.
    So I would suggest that the phrase de facto moratorium has 
outlived its usefulness and we ought to talk about real numbers 
rather than a phrase that is now meaningless.
    Mr. Johnson. Well, I would encourage you--I don't 
understand the 120 million to do something that is going to 
cost a lot more now that you were spending a lot less on in 
2006. And I think the American taxpayers want answers and they 
are not getting them.
    Mr. Bromwich. To finish the chances of another Deepwater 
Horizon.
    Mr. Johnson. I yield back my time, Mr. Chairman.
    The Chairman. The time for the gentleman has expired. The 
gentleman from Oklahoma, Mr. Boren.
    Mr. Boren. Thank you, Mr. Chairman. Thank you Director 
Bromwich. I think we have had several different meetings over 
the past few months and I think you know I am obviously a big 
supporter of the oil and gas industry, but at the same time I 
do want to take the tone down a little bit and thank you for 
your service.
    I know this is a tough job that you have got. You have to 
balance--we all want safety. We all want a clean environment. 
You have to balance a lot of different things. You answer to a 
lot of different bosses, including the President of the United 
States and all of us. So I do want to say thank you for doing 
this, at least for undertaking this job.
    But I do want to advocate for some of the things that the 
other Members were talking about. I think we do need to get 
drilling underway. I do think we need to encourage resource 
development.
    Now according to your website, you all have so many permits 
kind of in the queue. I think there are like 12. It may be 
different. And then you also you have what I call a different 
category and I want to go into that.
    I visited with some of the industry folks and they say the 
number in the queue is misleading. I have gotten here late and 
so may I may be restating some things. But there are other 
permits that are waiting that are what they called deemed 
submitted which are needed before they are officially pending 
on the website. And they say this process takes about 60 days. 
Am I right on that or wrong? Could you inform me or educate me 
a little bit better on how that works?
    Mr. Bromwich. Sure. I am not sure what the industry folks 
have exactly told you because what you said doesn't completely 
make sense to be. But let me just tell you where we are.
    Mr. Boren. OK.
    Mr. Bromwich. And hopefully that will be a good start. We 
have seven permits for six unique wells in deep water that we 
have granted, all since February 17 when industry demonstrated 
that it had subsea containment capabilities. There are 
currently 12 applications pending.
    Now that does not include applications that may have been 
submitted that have been sent back to the operator because they 
did not contain all of the required information. Now we haven't 
talked a lot about this issue at the hearing, but one thing 
that we did talk about a little bit is we would like to try to 
reduce the number of times that permit applications get kicked 
back. And so we are working to figuring out, along with 
industry, ways to streamline the process.
    Mr. Boren. Are these large--I mean are they like didn't dot 
the I's and cross the T's or are these big things that are 
being left out, are they small things?
    Mr. Bromwich. These are most frequently large things.
    Mr. Boren. What would they be?
    Mr. Bromwich. For example, failure to supply a description 
of what their containment plan is. We have had a number, 
despite all of the publicity associated with the need to supply 
a plan that designates the containment resources for a deep sea 
blowout we have operators who have put in applications that 
don't have a containment plan.
    Mr. Boren. Just kind of blank or is it just not a 
sufficient plan.
    Mr. Bromwich. Not sufficient--it is not a sufficient plan.
    Mr. Boren. OK.
    Mr. Bromwich. There are other instances in which, for 
example, there is not a certification by a responsible 
corporate official that all of the new regulations have been 
complied with. It really is an assortment of deficiencies and 
gaps in the applications. Most of them fairly significant. Some 
of them less significant. But all of them ones that our people 
in the field feel that they must return the application to the 
operation.
    And I know that at times that has been frustrating. We have 
worked with industry every day. I have had more than a hundred 
meetings with groups of operators and individual operators in 
which I invite them to describe for me problems that they are 
having with our process. And I take those suggestions and I go 
back to our folks in the Gulf and we try to fix things. And 
that is a continuing process.
    Mr. Boren. I am running out of time. I just want to end on 
this. So we have still got some work to be done on some of 
these applications. The staffing level, and that was mentioned 
a little bit before. I think it is a good thing that we staff 
up, that we have more staff.
    Do you need--I think there were a number of 41 drilling 
permit personnel that you are wanting, but why is that not 
happening right now or what is going on with that 41? And then 
how many total? You have 500 people involved in inspections. 
What is the level that you actually need? I mean can you give 
us some figures on that?
    Mr. Bromwich. Yes, let me give you very quickly. The 
request in this budget is for 41 additional permitting 
personnel. That will almost double the number of people that we 
have assigned to permitting-related responsibilities and 
therefore would quite significantly accelerate and expedite the 
process by which we review permits.
    On the inspection side we currently have in the mid-
fifties, believe it or not in terms of inspectors nationwide. 
The bulk of those are obviously in the Gulf of Mexico. The 
budget request asks for an additional 116, so it would 
effectively triple our inspections corps, which is something 
that is decades overdue.
    Mr. Boren. Thank you so much, Mr. Chairman and I want to 
end by saying the faster we can get these things out the better 
for good, hardworking people in the oil and gas industry who 
contribute so much to our economy.
    Mr. Bromwich. I completely agree with you.
    The Chairman. The time for the gentleman has expired. The 
gentleman from Florida, Mr. Southerland.
    Mr. Southerland. Thank you, sir, for being here today. I 
wanted to ask regarding the blowout preventer. You had stated 
that we need to do more to make oil drilling safer and that is 
a statement I think people agree with. And that the blowout 
preventers were not failsafe.
    Define for me, and I am not in the oil drilling industry, 
so I will just throw that out there. I mean what is failsafe? 
Define that for me.
    Mr. Bromwich. Failsafe I think means in just a lay sense 
that if all else fails that will prevent something very bad 
from happening. And it is true that people in the industry have 
used that as a descriptor for blowout preventers. I never have.
    Mr. Southerland. What would be the word you would use, 
though?
    Mr. Bromwich. I would use it as a very important backup 
system that if all else fails would be able the large 
percentage of the time to stop a catastrophic blowout.
    Mr. Southerland. But a large percent of the time. I mean is 
there in your efforts, in your desires to have, and again not 
to use the word that has been used before ``failsafe.'' If that 
is not your word----
    Mr. Bromwich. No.
    Mr. Southerland.--that you would use I am trying to see how 
you are pursuing an effort to guarantee, 100 percent prevention 
of any accident.
    Mr. Bromwich. It can't happen. And something this highly 
technical, offshore drilling in deepwater with extraordinary 
pressures there is no guarantee.
    Mr. Southerland. Right. So with that being said, then your 
pursuit, OK, and this Administration's pursuit, which I believe 
is very clear to the American people. I mean we can haggle and 
we can talk about things here on this Hill and talk about 
things. But the brilliance of the American people to be able to 
connect the dots your pursuit then to have something that is, 
and again I know this is not your word, failsafe or 100 percent 
guarantee or safer you would have to say is an illusive pursuit 
that will never truly be accomplished if 100 percent prevention 
is the goal?
    Mr. Bromwich. Yes, I agree with that. But that is having no 
impact on the way we are currently reviewing and approving 
exploration plans or permits. If we were waiting for the 
perfect, and you are absolutely right, unattainable blowout 
preventer we wouldn't have approved all these permits and have 
others that are getting ready to be approved.
    Mr. Southerland. Let me ask you this. The budget request, 
this $750 million increase----
    Mr. Bromwich. No, that is not right. It is a $118 million 
increase, $750 million if you would like to give that to us, 
but we will take it. But that is double what we are asking for.
    Mr. Southerland. If I am wrong, then I apologize. I am 
looking at the--I am sorry, the 2010 enacted I guess compared 
to the President's 2012 request.
    Mr. Bromwich. The request is about I think 118 or $119 
million in excess of Fiscal Year 2010. It is a very substantial 
increase. That is true.
    Mr. Southerland. And obviously, I am interested in your 
thoughts that if the American people are having to learn--the 
American family is having to survive on 2008 levels, do you 
feel that the government, both state and Federal, should be a 
reflection of the challenges and the pains that the American 
people and small businesses are going through?
    Mr. Bromwich. I think on the whole yes. But I think you 
have to be alive to the complexities of the real world. The 
real world for our agency is that this agency has been starved 
for decades when other agencies have not. And I that is why----
    Mr. Southerland. With all due respect, I think that is a 
hard sell to tell the American people that the Federal 
Government and the $14 trillion debt we now face has come from 
starvation.
    Mr. Bromwich. My agency. I didn't say the Federal 
Government.
    Mr. Southerland. So last question. Do you feel at all--
because I asked this, and I want to be fair, do you feel that 
the Federal Government should share any of the blame in 
oversight failures leading up to the oil spill.
    Mr. Bromwich. Absolutely.
    Mr. Southerland. A percentage. I am curious, 5 percent.
    Mr. Bromwich. I can't estimate it. I will say that in the 
wake of the explosion and the sinking and the deaths the media 
and some public officials put a lot of the blame on the agency, 
which was deeply unfair.
    Mr. Southerland. I missed those news reports.
    Mr. Bromwich. There were a lot of them.
    Mr. Southerland. Well, thank you. Let me say this. I have 
asked a lot of people from the top that have come and testified 
before and you are the first individual as a representative of 
government that has stated that the government bore any 
responsibility and I commend you for your statement. Thank you 
very much. Mr. Chairman, I yield back.
    The Chairman. The time the gentleman had expired. The 
gentleman from California, Mr. Garamendi.
    Mr. Garamendi. We are not going to get 100 percent on 
anything. However, I think your effort is to maximize the 
opportunity to avoid a spill and loss of life and accident, is 
that correct?
    Mr. Bromwich. That is absolutely correct.
    Mr. Garamendi. OK. And the program that you have undertaken 
with your committee process, much of which has been discussed 
here, but I don't think understood yet is designed to do that, 
as I understand it, not to achieve 100 percent. The only way 
you will achieve 100 percent is not to do it.
    Mr. Bromwich. Correct. And we do feel, not to take your 
time, but we do feel that the new regulations that we put in 
place has dramatically reduced the risk.
    Mr. Garamendi. Just listening to the back and forth 
questions here, there is a great deal of confusion about what 
is being done with regard to permitting. I would appreciate a 
detailed exposition of the permits prior to the blowout, where 
they were in the queue, and then the permits afterwards and a 
time line associated with that. My sense of this is that there 
was an extraordinary and powerful need to stop, take a look, 
and then move forward with appropriate procedures, which I 
think is what you did. But back and forth here, there seems to 
be a confusion as to exactly what is and where it is.
    Mr. Bromwich. You are absolutely right, Congressman. In the 
wake of Deepwater Horizon, Secretary Salazar imposed a 
moratorium on deepwater drilling that was lifted on October 12. 
During that process, he asked me to go around the country and 
hold a series of forums, which I did, including in your state 
to gather information on whether developments since Deepwater 
Horizon in terms of drilling safety, spill containment, and 
spill response had changed things such that the deepwater 
drilling moratorium could be lifted early.
    Originally, it was set to expire on November 30. Because of 
the information that we gathered during those public forums the 
moratorium as lifted on October 12.
    But the major gap that existed was the lack of subsea 
containment resources. And that wasn't filled until February 
17.
    Mr. Garamendi. And that was the industry's responsibility.
    Mr. Bromwich. Correct.
    Mr. Garamendi. Unless we didn't care about containment, 
which I think is not the case.
    Mr. Bromwich. Exactly right.
    Mr. Garamendi. OK. It would be very, very useful for you to 
present to this Committee a detailed exposition of exactly 
where the permits are and the process, those that have been 
returned back. Incidentally, I spent eight years of my life as 
a regulator and I know exactly what you are going through. And 
when some consulting company comes in with a half-baked 
proposal and then blames you for their half-baked work, and I 
suspect that is what is happening to you. I will talk to you 
offline about how you might get around that problem.
    The other thing has to do with this budget increase of 118. 
My friend Mr. Southerland seems to have left, but I suppose we 
could just stay with the old and then spend how many billions 
of dollars of both government and BP and other money cleaning 
up a mess. I think that would be a bad idea, would you agree?
    Mr. Bromwich. I totally agree with that. And the other 
thing, and I am also sorry he is not here, is that the goal 
that he wants to achieve, which is expedited permitting would 
be defeated if we don't get more money, which includes 41 
additional people for permitting.
    Mr. Garamendi. Unless you just issue a permit without 
caring what is they are doing.
    Mr. Bromwich. That is right.
    Mr. Garamendi. Which I think the American public would have 
a problem with.
    Mr. Bromwich. I think so too.
    Mr. Garamendi. The next question has to do with the 
question of the 118, plus the existing budget. Where does that 
come from?
    Mr. Bromwich. The money right now comes largely from 
appropriates.
    Mr. Garamendi. So that is the general fund. That is the 
taxpayers of America.
    Mr. Bromwich. It is the general fund, but that is offset to 
some extent right now by inspections fees and cost recoveries 
and rental fees. And so I have in my prepared testimony what 
the net figure out of the Treasury is. I think it is something 
on the order of 130 million.
    Mr. Garamendi. Why is the oil industry not paying for 100 
percent of the cost of regulating their problem?
    Mr. Bromwich. That is the statutory system that currently 
exists.
    Mr. Garamendi. I think it is wrong. I think if they want a 
permit to drill--the second thing I would ask you to do is to 
present to this Committee a detailed description of the leases 
that are under production, that are under exploration, and then 
those that are not either under exploration or production.
    Mr. Bromwich. OK.
    Mr. Garamendi. So that we get passed the confusion, which I 
have heard back and forth here. And that is for all parts of 
the American waters.
    And then finally with regard to definitions. We had a 
discussion here about definitions from Mr. Thompson about 
whatever it was and I went back and just looked here and I have 
on this piece of paper, let us see, House of Representatives, 
Congress, Senate. There seems not to be a clear definition, one 
word that would describe this body. There is a House of 
Representatives. There is a Congress. I suspect that causes 
confusion.
    I do know as a person that worked in the Department of the 
Interior that the BLM operates on the land and you operate on 
the water. And yes there are definitions, but your people know 
what it is. Thank you, Mr. Chairman.
    Mr. Bromwich. Thank you.
    The Chairman. The time of the gentleman has expired. The 
gentleman from Florida, Mr. Rivera.
    Mr. Rivera. Thank you very much, Mr. Chairman.
    During our last hearing two weeks ago, I mentioned how on 
average gas prices in my home state of Florida were $3.56. 
Today, the average price in Florida stands at $3.60. And while 
a four cent increase in two weeks may seem insignificant to 
some, the ramifications are felt across the economy when you 
take into account hidden costs associated with these increases 
and when you especially consider it was $2.80 just a year ago.
    Consumers see the affects, as you well know of rising fuel 
costs in their daily lives from the increased price of 
transportation cost, the increased cost of moving goods for 
producers, moving those goods to store fronts, to the market, 
the increased cost of utilities, the increased cost of feeding 
their families and so on.
    My constituents are being squeezed by these increased costs 
and it seems the Administration does not have a coherent plan 
to expand supplies and help ease the price pressures. Without 
these additional supplies, the tight market conditions that 
have put pressure on our constituents are going to persist, I 
believe.
    To address our current situation, we need to increase 
capacity and explore for new domestic sources of oil and 
natural gas. I think we can all agree that this issue has now 
gone to be one of both an economic security and a national 
security issue.
    Mr. Bromwich. I agree.
    Mr. Rivera. Since the Deepwater Horizon accident, my 
understanding is production in the Outer Centennial Shelf has 
fallen by 270,000 barrels per day. Can you please comment for 
us on the impact that the Administration's policies, 
specifically related to whether it be drilling, previous 
moratoria, drilling generally and the permitting process have 
had on this domestic production?
    Mr. Bromwich. I think, as I have discussed before, there is 
a very substantial lag between the permitting process and 
production coming online. So if there is a decline right now or 
projected over the next six months, it is hard to point back to 
the Deepwater Moratorium as the immediate or proximate cause of 
that. It may have impacts down the road, but because of the 
time lag between the granting of permits, particularly for 
exploration it doesn't have an immediate impact.
    Let me just make one point that I think is sometimes missed 
in this discussion. There was never any interruption of 
production. There was no moratorium on production. Production 
continued uninterrupted and unabated from the time of Deepwater 
Horizon up until today. And so the fact that production was at 
high levels and now is projected to lag the second half of this 
year really has comparatively little to do with what happened 
in the immediate wake of Deepwater Horizon in terms of the 
moratorium.
    As the Congressman suggested a couple of minutes ago, the 
moratorium was in the Secretary's judgment made before I ever 
got to Interior necessary to take stock of what the risks were 
in offshore drilling and to try to figure out ways that safety 
and environmental protection could be enhanced. And that has 
been done. And that is why we are now on a trajectory of 
approving deepwater permits and have continued to approve 
shallow-water permits.
    And so both I and the Administration and the President 
agree that we do need to push forward with domestic production, 
both onshore and offshore.
    Mr. Rivera. Then let me follow up on that last statement. 
As I understand it, the Energy Information Administration 
expects Gulf of Mexico production to fall by 250,000 barrels 
per day each year over the next two years. And I also 
understand the EIA lowered their annual energy outlook because 
of a--and this is a quote from their report--``expected delays 
in near-term projects, in part, as a result of the drilling 
moratoria.'' Do you agree with this assessment? Have you 
considered any of the projected declines from the EIA as you 
consider where we are going strategically?
    Mr. Bromwich. I think we are all concerned about projected 
declined. We were also very concerned about moving forward with 
a drilling regime that wasn't premised on tighter standards for 
offshore drilling. We now have those. And we are now in a 
position, and industry is in a position to move forward with 
deepwater permit applications and deepwater exploration plans.
    One of the Members earlier commented that we had approved 
the first, new deepwater exploration plan. And that is right. 
And there will be others in the near future. So we are moving 
ahead. And one of the reasons that our budget request is so 
critical is that will allow us to move ahead even more swiftly 
than we currently are. But our personnel in the Gulf of Mexico 
have never been told to slow down or not issue permits or only 
issue a few permits at a time.
    Their understanding is that if a permit application meets 
all of the requirements they are to approve it without delay. 
And I have confidence that that is exactly what they are doing.
    Mr. Rivera. Thank you, Mr. Chairman.
    The Chairman. The gentleman from Texas under our system, 
even though it looks like he came in late, he was here when the 
gavel started. And so I know Director Bromwich you don't have 
to comment on that at all, but Mr. Flores is recognized for 
five minutes.
    Mr. Flores. Thank you, Mr. Chairman. I was in a Budget 
Committee meeting. And if we don't fix the budget, then this is 
going to be irrelevant, to be candid.
    One of the things that--and I apologize if I am asking a 
question that has already been answered. But can you explain to 
me the dramatic slowdown in shallow-water drilling. I mean the 
Macondo Well accident was a deepwater accident and there are 
huge differences in the risk profiles of deepwater drilling 
versus shallow-water drilling. Can you explain to me just, and 
I need short answers because I have to move on to other 
questions, why we had to slow down the shallow-water side when 
it has been proven to be relatively safe?
    Mr. Bromwich. Two quick points. Number one, it is not 
riskless. And there was a loss of well control recently on an 
Apache project, as I am sure you are aware of. So the risks are 
less, but they are not zero.
    Second of all, there has really not been much of a slowdown 
in shallow-water permits if measure particularly since October. 
We have granted permits roughly at the rate of six shallow-
water permits per month. Historical average is eight shallow-
water permits per month, so that is a decline but not much of a 
decline.
    The main reason there is a decline is that even shallow-
water drillers are required to comply with our new safety 
requirements, which we think are equally applicable to shallow-
water drillers as they are to deepwater drillers, and we think 
it would be irresponsible to not apply them to shallow-water 
drillers.
    Mr. Flores. I would say that a 25 percent decline is not an 
insignificant number, not an insignificant decline.
    Moving on, there has been a lot of discussion now in terms 
of the definition of active leases verus inactive leases. If 
you have a lease, whether you classify it as active or 
inactive, does the classification of inactive, no matter what 
definition you are using--your definition, the Department of 
the Interior's definition, the President's definition--all 
these new definitions that have come up in the last 24 hours or 
so, does the fact that it is classified as inactive mean that 
the leaseholder is not complying with the terms of the lease?
    Mr. Bromwich. No.
    Mr. Flores. OK, it means the leaseholder has paid his bonus 
payment. He has paid his delay payments, if he had any. He is 
fully complying with the lease--the company is fully complying 
with the lease.
    Mr. Bromwich. Right. The mere fact that it is inactive 
doesn't mean they are noncompliant. That is exactly right.
    Mr. Flores. Right. And what is it that determines when 
hydrocarbons exists on a lease?
    Mr. Bromwich. What determines when they exist?
    Mr. Flores. Right.
    Mr. Bromwich. I am not sure I understand the question.
    Mr. Flores. I mean what we have heard some of our 
colleagues on the other side of the aisle say is that companies 
are not using these resources and leaving them undiscovered. 
Some of these leases, in fact, do not have hydrocarbons on 
them, right? And the way you find that out is when you drill 
it.
    Mr. Bromwich. Right.
    Mr. Flores. OK.
    Mr. Bromwich. But my understanding of the most widely used 
definition of inactive is that kind of exploration, exploratory 
drilling, for example, has not taken place.
    Mr. Flores. Right. But the implication from the other side 
is that all leases have hydrocarbons on them and not all leases 
have hydrocarbons on them.
    Mr. Bromwich. That is right.
    Mr. Flores. That is where I was trying to go. I am going to 
yield back the rest of my time for now. We will see if there is 
another round.
    The Chairman. Gentleman from Virginia, Mr. Wittman.
    Mr. Wittman. Thank you, Mr. Chairman. Thank you, Mr. 
Bromwich for joining us today. We appreciate your efforts.
    I wanted to talk a little bit about your testimony. You had 
said that the bureau had established some heightened standards 
for drilling practices, safety equipment, and environmental 
standards with the effort to improve safety and essentially 
mitigate some of the risks that have been associated with what 
we have learned from the Macondo accident, disaster or however 
you want to term it.
    In looking at that going forward then, you would think that 
that would frame public policy decisions going forward. And my 
question is this is as you know off the Virginia coast the 
leases there were canceled. They were a part of the five-year 
plan, the 2007 to 2012 five-year plan. Those leases were 
canceled. And I was wondering with what the Administration has 
learned, with what the bureau has learned with this in putting 
these new standards in to increase the safety of drilling, 
hopefully mitigating those risks is there any plan to go back 
on schedule with the five-year plan to open up the leasing 
process for lease 2020 of Virginia.
    Mr. Bromwich. There is not a plan that I am aware of. But 
as I am sure you know, there have been changes to five-year 
plans in mid-course, many such changes in the past and one 
would not be precluded in the future.
    Mr. Wittman. Do you think that it is reasonable to put off 
until as early as 2017 for any lease sale off of Virginia in 
relation to what we have learned about the Macondo accident and 
where we should go with developing what are known sources of 
hydrocarbons, especially off Virginia, which is one of the 
first leases that was going to be pursued five years----
    Mr. Bromwich. Let me answer the question this way. I know I 
have a higher level of confidence in offshore drilling wherever 
it takes place from this point forward than I had previously. 
The decision on the five-year plan was obviously made by 
Secretary Salazar for good and sufficient reasons. I think he 
was concerned that we didn't have enough experience yet with 
the new regulatory regime. He wanted to focus attention on the 
central and western Gulf where we had had the most experience 
and see how that went.
    Mr. Wittman. I would certainly hope in context--it appears 
the Administration is making decisions about deepwater drilling 
leases and starting that process in the Gulf. I would hope that 
that would set the precedent to reconsider the leasing 
cancellation decision there for Virginia. That delay I think 
has lots of ramifications about this nation's future energy 
needs, and especially being able to learn how we can do that 
safely. And with the instances off of Virginia where we know at 
least the initial geologic survey showed the preponderance of 
resource there to be natural gas.
    To me, that is a great opportunity to say let us take what 
we have learned in the Gulf, let us apply those new public 
policy principles in drilling procedures, in environmental 
practices, in safety standards and show that not only can we do 
it in the Gulf, but that we can do it in other areas in 
Virginia where you have a state that is interested in wanting 
to go forward with that. I would hope that the Administration 
would look very carefully at that and do everything they can to 
reinstate the leasing process there. And in any way, shape, or 
form to not delay the lease process there off the Virginia 
offshore water. So I would like to get your comment on where 
you think this could possibly go as far as what the 
restrictions will be.
    Mr. Bromwich. I don't know where it will go. I will 
certainly take your comments and your sentiments back to the 
Department.
    Mr. Wittman. OK. Very good. Thank you, Mr. Chairman. I 
yield back.
    The Chairman. I thank the gentleman. There has been a 
request for Members to have a second round. We just completed a 
first round and Director Bromwich was courteous enough to say 
that he could say that he stay here I think until 1:00.
    Mr. Bromwich. That is right.
    The Chairman. And so we want to take advantage of that. And 
I do want to say I really do appreciate your willingness to 
give us that much time because you can tell by the questioning 
there is a huge interest here.
    So let me start then on the second round. You testified in 
front of the House Appropriations Committee. I don't know if it 
was the Subcommittee or the full Committee. I am sure you have 
testified elsewhere to. But you were quoted as saying, and let 
me read the quote, ``That if companies find oil or gas on one 
out of three offshore leases they are doing well.'' Do you 
recall making that statement?
    Mr. Bromwich. I recall quoting an industry person who told 
me that. Yes.
    The Chairman. Would you agree with that then?
    Mr. Bromwich. I don't have much of an independent basis for 
knowledge, but certainly based on what operators have told me 
that seems to be their view.
    The Chairman. And was that reference just to the Gulf of 
Mexico, do you know?
    Mr. Bromwich. As I recall it, it was a general reference 
made by a CEO of an oil company in the last month.
    The Chairman. All right, they would apply to all offshore, 
presumably, whether you are talking West or East Coast or 
Alaska, for that matter.
    Mr. Bromwich. That was my understanding of what was said. 
Yes.
    The Chairman. That being the case does it not seem logical 
since we--I think Mr. Wittman alluded to seismic efforts that I 
know the Department of the Interior has and we know that there 
are huge resources elsewhere that our efforts needs to be 
trying--if one out of three works that means two out of three 
don't.
    Mr. Bromwich. Right.
    The Chairman. Wouldn't it be as a matter of policy smarter 
to try to focus where we think there are more resources than 
not more resources just to kind of up the ante, if you will, up 
the percentage? Does that seem like a logical result?
    Mr. Bromwich. It does seem like a logical suggestion and I 
understand that that is one of the proposals that is in one of 
your bills. The truth is that I don't know all of the factors 
that have historically gone into prescribing what is contained 
in a particular lease sale and the extent to which the kinds of 
considerations that you are advocating have been included. I 
don't know. I am going to find out. But I just don't know at 
this point.
    The Chairman. Listen, I appreciate that. I mean there is a 
lot of discussion about energy. And because of the unrest 
obviously in northern Africa and the Middle East and the fact 
that energy is such an integral part of our economy, it just 
seems common sense. And I think the American people probably 
are way ahead of us on this, that we should be less dependent 
as possible.
    And when we are sitting on known reserves, and I think Mr. 
Fleming made the observation that there are potential resources 
in excess of a trillion barrels equivalent. You know when we 
use roughly 20 million barrels a day, obviously that is a lot. 
And if we can focus on pinpointing where we can get it at a 
higher percentage it just seems to me from just pure economics 
the costs go down and the American people are better served. So 
I just wanted to focus because Mr. Flores alluded to that fact 
that not every well produces and I think that is something that 
is not understood by a lot of people in this whole debate.
    Mr. Bromwich. Yes.
    The Chairman. If you have any more comments, you are 
welcome.
    Mr. Bromwich. No, I don't. I think it is something I need 
to learn more about again in terms of understanding what all 
the factors historically that have gone into lease sales. As 
you know, they are projected out many years in advance and I am 
not sure the different kinds of data that are used to configure 
specific lease sales. But I think your bill will cause me to 
look at that and I would be happy to do that.
    The Chairman. I appreciate that. Thank you very much. And 
we will have a hearing on that. I might next week--now I know 
the witness list is being put together, but anything that yo 
could add on that we would certainly appreciate that.
    Mr. Bromwich. We will try to get that to. I am not going to 
be here. And I am not sure you were inviting me to appear next 
week, but I am not going to be here.
    The Chairman. I am not sure I was either. I was just making 
an observation.
    [Laughter.]
    The Chairman. All right, I will yield back my time and 
recognize the gentleman from Michigan, Mr. Kildee.
    Mr. Kildee. Thank you, Mr. Chairman. Mr. Bromwich, earlier 
it was suggested that the Deepwater Horizon disaster was an 
isolated event because there have been 40,000 wells drilled in 
the Gulf. But isn't drilling in shallow water, which is what 
the vast majority of these wells were, very different from 
drilling in ultra-deep water where the Deepwater Horizon was 
operating?
    Mr. Bromwich. It is different, which is not to say that 
shallow-water drilling, as a mentioned before is riskless. But 
certainly, shallow-water drilling has fewer associated risks, a 
lower risk profile generally than deep water. And you are quite 
right the vast majority of 40,000 have been in shallow water.
    Mr. Kildee. Thank you. And in fact, there have been only 
407 wells drilled in more than 500,000 feet of water. The 
Deepwater Horizon was operating in water depths of roughly 
500,000 feet. So it is really 1 out of 400, not 1 out of 
40,000, isn't it?
    Mr. Bromwich. I think that is a more accurate way to look 
at it. Yes.
    Mr. Kildee. Thank you. And as you pointed out earlier, 
there have been 79 loss of well control events. Each of these 
could have been a Deepwater Horizon-type disaster had it been 
in a different location.
    Mr. Bromwich. That is the concern. That is right.
    Mr. Kildee. And I appreciate your testimony. That is why I 
think we need better safety standards and I appreciate the work 
you are doing on that.
    Mr. Bromwich. Thank you.
    Mr. Kildee. And I yield back.
    The Chairman. The gentleman yields back. The gentleman from 
Colorado, Mr. Lamborn.
    Mr. Lamborn. Thank you, Mr. Chairman.
    Mr. Bromwich, and thank you for staying as long as you can 
here today. We all appreciate that.
    Mr. Bromwich. Sure.
    Mr. Lamborn. Recently, your agency approved a new 
exploration plan. And my understanding is that this plan was 
done within the 30-day time frame required by law, is that 
correct?
    Mr. Bromwich. Yes, with this amendment. It was resubmitted 
by the operator, Shell. It was sent back to them. They 
recognized that there was additional information they needed to 
furnish. And under our rules that restarted the clock, OK.
    Mr. Lamborn. OK.
    Mr. Bromwich. So once the clock restarted, it was then 
within 30 days of that.
    Mr. Lamborn. OK. Thanks for that clarification. And your 
agency was able to approve that without sacrificing the 
responsibility you have to do so appropriately and correctly. 
You were not so rushed that you couldn't do it correctly.
    Mr. Bromwich. I have a high level of confidence that the 
work that was done was of high quality. Yes.
    Mr. Lamborn. OK. That is great. And now backing off and 
looking at a more general question, which is more complicated 
an exploration plan or the actual permit?
    Mr. Bromwich. It really depends. An exploration plan is 
more high level. It outlines the full set of activities that 
may be envisioned, but individual permit applications can 
themselves be very complex. I was told the other day that one 
permit application recently was 3,600 pages long.
    And now I think a large part of that is the containment 
package that operators submit, which is in excess of a thousand 
pages. But I just wanted to try to accurately convey to you 
that they are very substantial submissions and therefore they 
are submissions that could in certain instances take a 
significant amount of time to review.
    Mr. Lamborn. Now the containment package portion of that 
that you just referred to when industry realizes that there are 
best practices out there that will best do the containment in 
that plan isn't there going to be a lot of agreement from one 
application to another and from one company to another?
    Mr. Bromwich. Let me clarify the terminology. The 
containment issue comes with the permit, not the plan.
    Mr. Lamborn. Right.
    Mr. Bromwich. So it comes with the permit application.
    Mr. Lamborn. Exactly.
    Mr. Bromwich. OK. So I am sorry. What was your question?
    Mr. Lamborn. But isn't there going to be a lot of agreement 
on the best practices in a containment plan so that there is 
going to be a lot of similarity from one containment plan to 
the next for deepwater drilling?
    Mr. Bromwich. There in the sense that operators are 
designating, generally, one of the two existing industry 
containment systems, either the Marine Well Containment Company 
or the Helix Well Containment Group. But each permit review 
requires on a well-by-well basis analysis of whether the 
containment resources that have been designated are adequate to 
deal with a subsea spill. And that depends entirely on 
characteristics of the specific well.
    So yes the containment packages are now understood. The 
equipment that the two groups have has been tested and 
understood by our people. But that doesn't mean you can just 
flip a switch when a permit to drill application comes in 
designating one of those groups. You have to do the analysis.
    Now it has been actually a great example of cooperation 
between our agency and industry in developing a software tool 
that facilitates that analysis. The idea for the software tool, 
again, to expedite the process came from our agency. We then 
worked with operators who were very interested in moving 
forward. And through back and forth we now have developed this 
tool that is, in fact, used in the context of reviewing 
specific permit applications, but on a well-by-well basis.
    Mr. Lamborn. I guess what I am getting at is looking at how 
you are able to do a good and proper and thorough job in 30 
days on an exploration plan and knowing that those are in 
general more complicated than the actual permit decision I am 
hoping that you would be able to apply that same diligence and 
competence to the permitting also and be able to do those 
routinely within a 30-day time frame.
    Mr. Bromwich. One, I think there are number of issues with 
that that I would be happy to discuss with you and the 
Chairman. I am sure aware that when exploration plans are 
submitted frequently permit applications are submitted at the 
same time. So if you had a 30-day clock running, which is a 
clock now under law with an exploration plan you could have the 
clock for the permit starting at the exact same time. And so 
you would, in fact, instead of having 30 days for the 
exploration plan and that gets approved and then you move to 
the permit you would actually have zero days rather than 30.
    Mr. Lamborn. OK, but apart from that.
    Mr. Bromwich. But that may be a big ``apart from.'' You may 
have a lot of plans that come in at the same time as permits, 
in which case our permitting personnel would not have any time 
under the proposal to review the proposal separate from the 
exploration plan. And I want emphasize there are different 
groups of people who look at plans versus permits.
    Mr. Labrador. To be continued.
    The Chairman. Yes. The time for the gentleman has expired. 
The gentleman from California, Mr. Garamendi.
    Mr. Garamendi. I would like to continue on that line of 
questioning. It explored I think a very important area, which 
is personnel and the need for the additional personnel. It 
seems as though, just to carry on from the gentleman's 
questions, that without adequate personnel the permit cannot 
be--either exploration or a drilling permit cannot be 
adequately reviewed, is that the case?
    Mr. Bromwich. That is exactly right.
    Mr. Garamendi. And that is why you are asking for this 
additional amount of money.
    Mr. Bromwich. Both on the plan side and on the permitting 
side. Absolutely right.
    Mr. Garamendi. And then you have broken that down in detail 
for the budget and the appropriations, as I recall.
    Mr. Bromwich. Yes.
    Mr. Garamendi. So now back at it, and a question was raised 
earlier, is, oh, My God, we are spending all this money in the 
Federal Government. Yes, but what for? Now I guess we don't 
have to spend it. We can have a blowout every year, in which 
case we are spending billions either directly by the government 
or indirectly through the production company. So I think we 
ought to be clear about this.
    The Chairman. Will the gentleman yield?
    Mr. Garamendi. Yes.
    The Chairman. The gentleman wasn't here when I made my 
opening statement. And in my opening statement I made the 
observation that there may be a need for more people. I am 
certainly willing to look at that. And I also made the 
observation that in our CR there is more money for this agency 
to do what they want to do.
    So that is certainly acknowledged, but I want to make the 
point that that has been acknowledged obviously by Members of 
our side and we are willing to work. Since you are pursuing 
that part, don't leave the implication that this side is not in 
favor of that. We just want to make sure that we get the right 
part.
    And I appreciate the gentleman yielding, but to follow up 
the line of questioning of the gentleman Colorado, if there is 
an adequate number of people, and I should probable ask this to 
Mr. Bromwich. If there is an adequate number of people, could 
you comply with the 30-day line of questioning that Mr. 
Labrador was suggesting?
    Mr. Bromwich. The answer is I don't know. We could 
obviously do better than we will be able to do now. But this 
simultaneous filing of exploration plans and APDs or permits to 
drill is quite troubling to me.
    The Chairman. OK. Well, I just wanted to point it out. And 
I thank the gentleman for yielding.
    Mr. Kildee. No, I am not at all surprised, Mr. Chairman, 
that you were on top of this issue. You are on top of most 
issues and you are headed down the right track. I think we need 
to be very careful and understand the implications of the 
various ways in which the permits and requests for exploration 
come in and so that we provide adequate personnel and money to 
properly analyze the permits.
    And once again, I have had eight years of experience from 
industry. It is a completely different industry, insurance 
industry, presenting permits, licenses and the like to the 
Department of Insurance. And all too often they come in 
incomplete. And you go back and forth. It is the back and forth 
that is really troublesome. And there are things that can be 
done in the regulatory process to reduce the back and forth. 
And I will take that up with Mr. Bromwich and share my 
experience with it. He is probably already ahead of it, but 
that is a real serious problem, back and forth. And I would 
blame the insurance industry. They would blame me. But 
nonetheless, it was time-consuming.
    I think the other point is, and I just want to drive this 
one home is that you did issue a report in this month of March 
about the number of leases that are out there that are simply 
not being pursued. However you define it, they are not being 
pursued.
    Mr. Bromwich. Right.
    Mr. Garamendi. There is a very interesting and, I think, a 
very, very necessary thing to understand here. And that is when 
an oil company acquire a lease how do they book that as an 
asset. Do they book that as an asset that is unexplored but 
potential resource? Is it as an actual resource that has been 
proven?
    There are different words that are used by the industry in 
their accounting and in their reporting. I don't know if this 
is your turf, but I think we need to understand that. And it is 
one of the reasons from my history in this is that many of 
these leases are not pursued because they can still book it as 
an asset, even though they are not actively pursuing it, giving 
the appearance that the company may be worth a lot of money 
because it has a lease.
    Mr. Bromwich. It is not my field, unfortunately, so I can't 
help you very much with that. But I understand the point.
    Mr. Garamendi. I think I will just let it hang out there 
and see what comes my way on this question.
    The Chairman. The time for the gentleman has expired. The 
gentleman from Louisiana, Mr. Fleming.
    Mr. Fleming. Thank you, Mr. Chairman.
    Mr. Bromwich, you said earlier, I am quoting you now, and 
correct me if this is incorrect. We were talking about the 
drilling in the Gulf of Mexico. You said, ``Right now it has 
not gone down,'' talking about production. ``And it is at its 
highest levels ever.'' Secretary Salazar said something very 
similar, ``When you look at the production within the Gulf of 
Mexico, even within the midst of the national crisis of the 
Deepwater Horizon, the production has remained at an all-time 
high and we expect that it will continue as we bring new 
production online.''
    So I want to draw your attention to this blue line here. 
You see where you see kind of a zigzag coming in my direction. 
Is that line, sir, going down or up?
    Mr. Bromwich. The blue line?
    Mr. Fleming. Yes, sir.
    Mr. Bromwich. The blue line looks like it is flat right 
now.
    Mr. Fleming. From the peak.
    Mr. Bromwich. From the peak? I am sorry. It is down from 
the peak.
    Mr. Fleming. OK. And what about the red line?
    Mr. Bromwich. The red line is down from the peak, although 
up from the low point.
    Mr. Fleming. Quite sharply. Now this is done by EIA. Are 
they a flim-flam organization in the pockets of big oil, the 
Energy Information Administration?
    Mr. Bromwich. No.
    Mr. Fleming. So they are legit.
    Mr. Bromwich. Right.
    Mr. Fleming. Would you say?
    Mr. Bromwich. Yes.
    Mr. Fleming. What you are telling me is totally different 
than this. Where do you get your data and what is your data? 
What are the numbers and who do you get that from?
    Mr. Bromwich. Well, what I was telling you was based on my 
understanding of the fact that--of what the level of production 
was. If I was in error, I inadvertently made an error. I know 
that the projections for the second half of 2011 are supposed 
to go down.
    My understanding, again perhaps incorrect, was that we were 
now at the highest levels we have been. If you are telling me 
that the highest levels based on data you have in front of me--
I don't have data in front of me--was reached in 2010 I am not 
going to reject that.
    Mr. Fleming. Yes, sir. It was 1.7 million barrels a day in 
2010. So it is down substantially as of the last quarter of 
2010, 1.59. The red line shows that based on the rate that we 
are putting rigs back online and drilling that it is going to 
continue to drop off. And right here 2012, fourth quarter we 
are looking at 1.18.
    Mr. Bromwich. When was that estimate developed, do you 
know?
    Mr. Fleming. March 8, 2011.
    Mr. Bromwich. OK. I would just point out that the bulk of 
our deepwater permits have been issued since then.
    Mr. Fleming. OK. Now I would also like to point out that 
the peak that hit at 1.7, the EIA tells us that that is from 
leases issued from 1996 to 2000. So we are talking about there 
is lag, so in a certain sense the Obama Adminstration got the 
benefit of previous leases and previous permits in terms of 
showing high levels of production because they were going up. 
That line was going up before, but that was based on activity 
years ago.
    Mr. Bromwich. In the Clinton Adminstration.
    Mr. Fleming. In the Clinton Adminstration.
    Mr. Bromwich. Right.
    Mr. Fleming. Yes, sir. And maybe some in the Bush 
Administration as well. And what you are talking about, and you 
have described very well.
    And I understand there is going to be a lag time for these, 
so my concern is that we have passed a peak. And even though, 
again, we have 1.3 trillion barrels of oil equivalent in our 
country, not just in the Gulf of Mexico that while we are 
finding more and more out there and more and more ways to get 
to it, we are actually seeing the production go down while we 
are encouraging other countries like Brazil to produce and then 
we buy from them.
    And I think you are right. We did peak at 60 percent 
foreign oil dependency and it has come down but I think it is 
going to go right back up and maybe higher based on that. And I 
will let you summarize any other comments.
    Mr. Bromwich. No, I appreciate that. We are pushing ahead 
with offshore, both exploration and production. I would simply 
say, as I have said before, that production was never 
interrupted. No moratorium affected production. It did 
obviously affect exploratory drilling and other kinds of 
development drilling.
    I think that that was a necessary byproduct of this tragedy 
that shook the industry, shook the country, shook the 
Department of the Interior, shook the Administration, and shook 
the Congress. And so I think without periodically pointing out 
what the causes of the permitting slowdown are is not a 
complete picture.
    Now we have, as I have said, addressed the most dramatic 
deficiencies in the regulatory regime. I am comfortable that we 
have done that. For a time, industry was concerned that we 
would continue to roll out new rules and requirements and that 
we were moving the goal posts, in their phrase.
    I think they know that is not true anymore because there 
haven't been new regulations issued since October. And I have 
been very open about what the future trajectory of additional 
rules will be. And none of those will be emergency rules. They 
will go through the normal notice and comment process and will 
take significant amounts of time to be developed and then 
implemented with full input by industries and other interested 
stakeholder.
    Mr. Fleming. Thank you very much.
    The Chairman. The time for the gentleman has expired. The 
gentleman from Louisiana, Mr. Landry.
    Mr. Landry. Mr. Bromwich, I know it is unfortunate that you 
get caught up sometimes because you are sitting there. And I 
would like the record to reflect that it was the Ranking Member 
who opened up the issue of a government shutdown in his 
remarks, which brought me to those questions.
    And I also want to tell you that I really appreciate the 
comments you made earlier that you feel that the industry is 
much safer today wherever it drills than it was prior to the 
Macondo because I believe that too. And I think that is a fair 
assessment. I think the industry is safer today, not because of 
government intervention, but because of the fact that there is 
no oil and gas company out there that wants to lose the amount 
of money that BP lost or had to expend in that accident. So 
that is a very fair statement.
    I also appreciate the fact that when you realize you made a 
misstatement not try to do the same, that you could recognize 
that.
    I do want to talk about the systemic failure, but I want to 
also point a comment you made just a minute ago that production 
was never in jeopardy. But isn't it true that during the 
moratorium even work over permits would be denied as well in 
deep water.
    Mr. Bromwich. I don't believe that is right.
    Mr. Landry. So in other words, if someone wanted to do work 
in deep water, well, you all would have been able----
    Mr. Bromwich. There were a series of activities even in 
deep water that were permitted, that is, allowed to go forward 
under the moratorium and I believe those included work over. I 
can confirm that, but I know, for example, water injection 
wells were permitted in deep water during the moratorium as 
were another set of activities. So I think work overs and 
completions were permitted. Let me double-check that and I will 
let you know.
    Mr. Landry. OK. And real quickly, I know that there is a 
continual statement about how illogical it was that there were 
walruses involved in spill response plans in the Gulf of 
Mexico, and I agree with that. But I also want to bring to your 
attention that I know an oil and gas company that, during the 
process after the moratorium in shallow water, they applied for 
a construction permit to provide a flow line between a wellhead 
and a production facility and BOEM--and it was a gas line.
    And they wanted to know what their spill response plan was. 
So that is almost as bad as a walrus because if there is a 
release on a natural gas line there is not a whole lot to 
spill. It just kind of dissipates or comes out of the water.
    On the systemic failure, when you go back and you look at 
it and you say--I think it is unfair that you categorize 
Transocean and Haliburton and say that every process that 
Transocean and Haliburton uses to drill a particular well is 
all the same.
    Mr. Bromwich. I didn't say that.
    Mr. Landry. But then how to you come to a systemic failure 
because what you all like to utilize is the fact that 
Transocean and Haliburton do so much work in the Gulf of 
Mexico?
    Mr. Bromwich. The question I believe suggested that it was 
all BP's fault and therefore how could I say that it was--how 
could I agree with the President's Commission and say that it 
was a systemic failure? And I simply was repeating what the 
President's Commission report found, which was one of the bases 
for their finding that it was a systemic problem is that 
Transocean and Haliburton participated in the failure to some 
degree, according to the analysis that the President's 
Commission did, and that Transocean and Haliburton were widely 
active in the Gulf. Very different from suggesting that 
everything they are involved in is flawed, which they do and I 
certainly didn't do.
    Mr. Landry. Right. Because if another major oil and gas 
company who designs a deepwater well differently than BP 
designs it, then they would instruct Transocean and Haliburton 
to use different processes and meet their specifications, 
wouldn't you agree?
    Mr. Bromwich. Yes. But my understanding is that there is a 
lot of interaction in the drilling process between multiple 
companies, not just the operator in terms of going forward with 
the drilling of the well, which is why laying responsibility on 
a single company is not really faithful to the facts.
    Mr. Landry. But the company, at the end of the day, designs 
the well according to their specifications. And there are 
companies out there, and it has been shown, it has been 
published in not only oil and gas journals, but the Wall Street 
Journal did a great article on it to show the difference of 
well designs between some oil and gas companies.
    And I guess to me it is an unfair statement to think that 
Transocean and Haliburton could convince say another oil and 
gas company to do something that would be in their opinion not 
as safe of a process than they believed.
    Mr. Bromwich. But you are not suggesting, are you, that if 
an oil company specified that they wanted to do things a 
certain way that other participating companies like a 
Transocean or Haliburton wouldn't have a duty to say, well, no 
I don't think that would work safely? So they are involved, 
right?
    Mr. Landry. Well, no. I would say that the oil and gas 
company would issue their well design and their engineering 
specs and then have Transocean and Haliburton bid that 
particular job based upon those specifications.
    Mr. Bromwich. I understand that.
    Mr. Landry. They should follow those specifications. And so 
there certainly exists different specifications in the industry 
that are much different than the well design that occurred in 
Macondo.
    Mr. Bromwich. Sure. Yes. That is right.
    Mr. Landry. I yield.
    The Chairman. I allowed that question to go because I know 
there was continuity to it. The gentleman from Texas, Mr. 
Flores.
    Mr. Flores. Thank you, Mr. Chairman.
    In light of the ``Use It or Lose It'' mantra that is being 
bandied about these days, what would your recommendation be for 
current leaseholders in terms of how to comply--in terms of 
what they should do that they are not doing today?
    Mr. Bromwich. I think the paper that Interior delivered to 
the President at his request was laying out data that we have 
for onshore and offshore. There are no specific recommendations 
in there about other ways to incentive oil and gas companies to 
move forward aggressively with exploiting the natural resources 
on their leases. We have been actually experimenting with some 
of those in some of our most recent sales by shortening some of 
the lease periods, by providing extensions if wells are spud 
within that period by varying, graduating some of their rental 
rates. So we think that there are range of potential ways to 
incentive the industry and to produce more hydrocarbons, oil 
and gas that will benefit the American people.
    Mr. Flores. I mean we previously discussed that today 
leaseholders are completely complying with their leases, even 
though they may be in an inactive status and so one of the 
things you talked about is ways to incentive people to do 
things. We don't really have the legal right to do it on an 
existing lease, right? We cannot, as the Federal Government, 
unilaterally change the terms of the lease.
    Mr. Bromwich. I think that is right almost across the 
board. Yes.
    Mr. Flores. We would be breaching the contract that we have 
with the leaseholder.
    Mr. Bromwich. Right.
    Mr. Flores. The only thing I have heard about is charging a 
per-acre fee while leases are not being drilled. This would be 
over and above the delay rentals that companies pay today, 
right?
    Mr. Bromwich. Yes.
    Mr. Flores. So we are just increasing the cost of doing 
business in the offshore lease environment, is that right?
    Mr. Bromwich. That would be the result. Yes.
    Mr. Flores. Thank you. At this point there is really 
nothing we can do to get them to do more, to get a leaseholder 
to do more unless you would come up with a better incentive 
that you talked about, and I will be curious to see what those 
turn out to be later on.
    Going back to Mr. Fleming's production graph for a minute, 
if that blue line had stayed flat across versus the drop that 
we see in the red line, what is your estimate on what would 
have happened to gasoline prices? Would they have gone--would 
they be higher than they are today or lower than they are 
today?
    Mr. Bromwich. I have been persuaded, and I am sure you 
have, that we are talking about a world market for oil and gas 
where there are multiple producers and deliverers of oil and 
gas. And so while pursuing aggressively, but safely development 
and production in this country is very important, and that is 
what we are doing, it is not going to move the needle very 
much. And in fact, the needle is affected a lot by external 
forces that we can't control.
    Mr. Flores. Correct. But more is always better than less 
when it comes to providing supply in order to meet the demand.
    Mr. Bromwich. Yes, more is better than less, but we ought 
to be realistic about how much more we are talking about and 
how much that would really impact gas prices because to 
suggest, for example, as many people have that our slowdown in 
permitting is the cause of high gas prices, as I think you will 
agree, is ridiculous.
    Mr. Fleming. Well, it is a contributing factor.
    Mr. Bromwich. Well, I don't even think it is a contributing 
factor, but you and I can disagree about that.
    Mr. Fleming. I suggest that it is a contributing factor 
because if you look at the price of supply and demand it is the 
incremental shortfall barrel, the incremental barrel that you 
are along that makes the needle move the most with respect to 
the price of oil or the underlying price of gasoline.
    Mr. Bromwich. I would suggest that it is more turmoil in 
the Middle East that is raising current gas prices than moving 
the needle the marginal amounts you are talking about.
    Mr. Flores. There is some to the turmoil, but it is also 
that last barrel. When you are a barrel short, the price of oil 
is going to rise dramatically versus when you are just adding a 
barrel down here when you have plenty of oil. I yield back. 
Thank you.
    The Chairman. Will the gentleman yield? In that context, 
when we had the spike in gas prices in 2008 and when the 
moratoria went off, the congressional and Presidential 
moratoria went off the gas price dropped. And I think part of 
the reasons why, and I think it is applicable here and I think 
Mr. Flores was onto something in that regard and that was 
sending a message to the world market because I agree crude is 
a worldwide commodity. And with the known resources we have 
here, if we send a signal to the markets that we are serious 
about utilizing these resources in the long term that would 
have the effect, in my view, of moving the needle. I think that 
is what Mr. Flores was getting to. Would you agree with that?
    Mr. Bromwich. Yes, I would agree with that. And that is why 
we are pursuing things as aggressively as we are and that is 
why we need the money from the Congress to do more.
    The Chairman. Well, that is a good place I suppose to stop. 
And I could stop over with my opening remarks in that regard. 
But Mr. Bromwich, thank you very much for taking the time. And 
I want to thank all of the Members. There may be a possibility, 
as happens from time to time, where an issue comes up and more 
information is needed. We ask that if a request is sent to you, 
you respond back as quickly as possible. We would certainly 
appreciate that.
    Mr. Bromwich. Absolutely, will do that.
    The Chairman. Thank you very much for being here. And 
without objection, the meeting will adjourn.
    [Whereupon, at 12:48 p.m., the Committee was adjourned.]

                                 
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