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71-208 PS 2001

DOMESTIC NATURAL GAS SUPPLY AND DEMAND: THE CONTRIBUTION OF PUBLIC LANDS

AND THE OCS

OVERSIGHT HEARING

BEFORE THE

SUBCOMMITTEE ON ENERGY AND

MINERAL RESOURCES

OF THE

COMMITTEE ON RESOURCES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

March 15, 2001

Serial No. 107-6

Printed for the use of the Committee on Resources

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

or

Committee address: http://resourcescommittee.house.gov

(II)

COMMITTEE ON RESOURCES

JAMES V. HANSEN, Utah, Chairman

NICK J. RAHALL II, West Virginia, Ranking Democrat Member

Don Young, Alaska,

Vice Chairman

W.J. ‘‘Billy’’ Tauzin, Louisiana

Jim Saxton, New Jersey

Elton Gallegly, California

John J. Duncan, Jr., Tennessee

Joel Hefley, Colorado

Wayne T. Gilchrest, Maryland

Ken Calvert, California

Scott McInnis, Colorado

Richard W. Pombo, California

Barbara Cubin, Wyoming

George Radanovich, California

Walter B. Jones, Jr., North Carolina

Mac Thornberry, Texas

Chris Cannon, Utah

John E. Peterson, Pennsylvania

Bob Schaffer, Colorado

Jim Gibbons, Nevada

Mark E. Souder, Indiana

Greg Walden, Oregon

Michael K. Simpson, Idaho

Thomas G. Tancredo, Colorado

J.D. Hayworth, Arizona

C.L. ‘‘Butch’’ Otter, Idaho

Tom Osborne, Nebraska

Jeff Flake, Arizona

Dennis R. Rehberg, Montana

George Miller, California

Edward J. Markey, Massachusetts

Dale E. Kildee, Michigan

Peter A. DeFazio, Oregon

Eni F.H. Faleomavaega, American Samoa

Neil Abercrombie, Hawaii

Solomon P. Ortiz, Texas

Frank Pallone, Jr., New Jersey

Calvin M. Dooley, California

Robert A. Underwood, Guam

Adam Smith, Washington

Donna M. Christensen, Virgin Islands

Ron Kind, Wisconsin

Jay Inslee, Washington

Grace F. Napolitano, California

Tom Udall, New Mexico

Mark Udall, Colorado

Rush D. Holt, New Jersey

James P. McGovern, Massachusetts

Anibal Acevedo-Vila, Puerto Rico

Hilda L. Solis, California

Brad Carson, Oklahoma

Betty McCollum, Minnesota

Allen D. Freemyer, Chief of Staff

Lisa Pittman, Chief Counsel

Michael S. Twinchek, Chief Clerk

James H. Zoia, Democrat Staff Director

Jeff Petrich, Democrat Chief Counsel

SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

BARBARA CUBIN, Wyoming, Chairman

RON KIND, Wisconsin, Ranking Democrat Member

W.J. ‘‘Billy’’ Tauzin, Louisiana

Mac Thornberry, Texas

Chris Cannon, Utah

Jim Gibbons, Nevada,

Vice Chairman

Thomas G. Tancredo, Colorado

C.L. ‘‘Butch’’ Otter, Idaho

Jeff Flake, Arizona

Dennis R. Rehberg, Montana

Nick J. Rahall II, West Virginia

Edward J. Markey, Massachusetts

Solomon P. Ortiz, Texas

Calvin M. Dooley, California

Jay Inslee, Washington

Grace F. Napolitano, California

Brad Carson, Oklahoma

(III)

C O N T E N T S

Page

Hearing held on March 15, 2001 ............................................................................ 1

Statement of Members:

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

Wyoming ........................................................................................................ 1

Prepared statement of ............................................................................... 3

Kind, Hon. Ron, a Representative in Congress from the State of

Wisconsin ....................................................................................................... 4

Prepared statement of ............................................................................... 5

Markey, Hon. Edward J., a Representative in Congress from the State

of Massachusetts ........................................................................................... 6

Otter, Hon. C.L. ‘‘Butch’’, a Representative in Congress from the State

of Idaho, Prepared statement of .................................................................. 63

Statement of Witnesses:

Alberswerth, David, Director, Bureau of Land Management Program,

The Wilderness Society ................................................................................ 91

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

Downey, Marlan W., President, American Association of Petroleum

Geologists ....................................................................................................... 75

Prepared statement of ............................................................................... 77

Fisher, Robert W., President, Montana Petroleum Association, and Senior

Vice President/Managing Partner, Ballard Petroleum Holdings, LLC ..... 83

Prepared statement of ............................................................................... 85

Hackett, James T., Chairman/President/Chief Executive Officer,

Ocean Energy, Inc. ....................................................................................... 12

Prepared statement of ............................................................................... 14

Papa, Mark, Chairman & CEO, EOG Resources ........................................... 29

Prepared statement of ............................................................................... 32

Simmons, Matthew R., President, Simmons & Company International ..... 8

Prepared statement of ............................................................................... 10

Speer, Lisa, Senior Policy Analyst, Natural Resources Defense Council ..... 45

Prepared statement of ............................................................................... 47

Additional materials supplied:

Cavaney, Red, President and CEO, The American Petroleum Institute,

Statement submitted for the record ............................................................ 114

Powder River Basin Resource Council, Statement submitted for the

record ............................................................................................................. 50

(1)

DOMESTIC NATURAL GAS SUPPLY AND

DEMAND: THE CONTRIBUTION OF PUBLIC

LANDS AND THE OCS

Thursday, March 15, 2001

House of Representatives

Subcommittee on Energy and Mineral Resources

Committee on Resources

Washington, DC

The Subcommittee met, pursuant to call, at 2:00 p.m., in Room

1334, Longworth House Office Building, Hon. Barbara Cubin

[Chairman of the Subcommittee] presiding.

STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF WYOMING

Mrs. CUBIN. The oversight hearing by the Subcommittee on

Energy and Mineral Resources is meeting today to hear testimony

on domestic natural gas supply and demand and the contribution

of the public lands and the OCS.

Under rule 4(g) the Chairman and the Ranking Minority Member can make opening statements. If any other Members—and you

can see there are so many up here, we really need to worry about

it—have statements, we will include them in the record.

So, with that, our first hearing for the 107th Congress, we meet

today in our oversight function for issues concerning public lands

and mineral resources. Last week the full Resources Committee

began this inquiry by looking at the role of our public lands and

power marketing administrations to provide a broad spectrum of

energy supplies. Our hearing today will focus upon the natural gas

availability issues, both from onshore Federal mineral estate and

from the outer continental shelf.

Fifteen months ago an advisory body to the Secretary of Energy

completed a report entitled ‘‘Meeting the Challenges of the Nation’s

Growing Natural Gas Demand.’’ This study examined demand-side

projections and supply-side forecasts and concluded that coordinated action by the Federal Government will be necessary to stave

off an impending imbalance. That was 15 months ago. That is, gas

producers and pipelines may not be able to meet consumers’ expectations for this fuel if we don’t get our act together soon.

Perhaps the key recommendation of this panel was for the President to establish an interagency working group within the White

House to bring industry representatives and various Executive

2

Branch agencies together to discuss the place for natural gas and

an energy strategy for the Nation. The panel believed that interagency squabbles were inhibiting supply, particularly from Federal

mineral estate in the West and on the outer continental shelves.

A primary finding of the supply-side team was that while sufficient

resources exist to meet growing demand well into the 21st century,

many access restrictions are denying significant volumes of gas

today, and will continue to do so unless administrative and/or legislative action to reduce permitting delays occurs.

I don’t need to tell everyone what happened this winter, but the

NPC guys look like they were pretty good forecasters, better than

the local TV weathermen actually anyway, the ones that said that

the 50-year storm was headed our way a week or two ago, and then

we had a half an inch of snow here. So, the NPC did a good job.

They warned of this problem by the end of this decade, and it is

here now.

One of the President’s first initiatives was to ask Vice President

Cheney to lead an energy policy development group at the White

House level. He will report on the current state of the Nation’s

energy situation and make recommendations for a national energy

strategy. The Vice President’s report is expected next month.

But, today I would like our Subcommittee to listen to the views

of industry and economists and the environmental community

about the role for natural gas. This energy source, nicknamed ‘‘the

fuel of the future’’ by some of the past administrations, is an increasingly important fraction of our domestic demand. But unlike

crude oil and refined petroleum products that we import by the

tankerload, natural gas is a commodity that we must get from

North American supplies by way of pipeline. Yes, there are a few

mothballed LNG port facilities in this country, but even if they

were refurbished and operating, it would still represent a small

fraction of the demand. And the proposed reopening of just such a

facility on the western shore of the Chesapeake Bay, right now, is

causing concerns among Maryland officials because of the proximity to a nuclear power plant.

So, we are talking about getting our gas from the United States

and Canadian sources, as Mexico is currently a net importer of natural gas. So far our neighbors to the north have been willing to sell

us their gas from Western Canada and more recently from offshore

of Nova Scotia. Still, this is not enough. Perhaps stranded gas from

the North Slope of Alaska is finally becoming economic to transport

to the lower 48 markets, but that gas won’t make it here for several years to come at best.

But, significant amounts of the estimated natural gas resource

base is on Federal land or the submerged lands beneath the Federal waters of the outer continental shelf. However, it seems more

and more potentially resource-rich land and submerged lands in

the United States are closed, both to assessment and/or development. Land withdrawals, development moratoria and regulatory

restrictions on land use prohibit development of significant gas

resources in areas like the eastern front of the Rocky Mountains,

the eastern front of the Gulf of Mexico and almost all of the Atlantic and Pacific submerged lands. Likewise, many promising OCS

3

lands are off limits by an Executive Order and congressional moratoria or both.

Our charge is to learn what, if anything, we might do to foster

exploration for natural gas in prospectively valuable areas of the

public lands. Can we do it while we are still protecting the environment? Are trade-offs worth it to boost the usage of favored energy

sources? What will happen to our national economy if we don’t

change the culture that has hamstrung permitting of resource

extraction activities over the next decade?

These are the types of questions that we have to begin to

address, and we will do that today at this hearing.

[The prepared statement of Mrs. Cubin follows:]

Statement of The Honorable Barbara Cubin, Chairman,

Subcommittee on Energy and Mineral Resources

The Subcommittee meets today, in our inaugural hearing of the 107th Congress,

in our oversight function for issues concerning public lands energy and mineral

resources. Last week the full resources Committee began this inquiry by looking at

the role of our public lands and power marketing administrations to provide a broad

spectrum of energy supplies. Our hearing today will focus upon natural gas availability issues, both from onshore Federal mineral estate and from the outer continental shelf.

Fifteen months ago an advisory body to the Secretary of Energy completed a report entitled ‘‘Meeting the Challenges of the Nation’s Growing Natural Gas Demand.’’ This study examined demand-side projections and supply-side forecasts and

concluded that coordinated action by the Federal Government will be necessary to

stave off an impending imbalance. That is, gas producers and pipelines may not be

able to meet consumers expectations for this fuel if we don’t get our act together

soon.

Perhaps the key recommendation of this panel was for the President to establish

an Interagency Working Group within the White House to bring industry representatives and various Executive Branch agencies together to discuss the place for natural gas in an energy strategy for the nation. The panel believed that inter- agency

squabbles were inhibiting supply, particularly from Federal mineral estate in the

West and on the Outer Continental Shelves. A primary finding of the supply-side

team was that while sufficient resources exist to meet growing demand well into the

twenty-first century, many access restrictions are denying significant volumes of gas

today, and will continue to do so unless administrative and/or legislative action to

reduce permitting delays occurs.

I don’t need to tell everyone what happened this winter, but the NPC guys look

like pretty good forecasters. Better than the local TV weathermen anyway who said

the 50-year storm was headed our way ten days ago and Washington got a quarterinch of snow. The NPC warned of a problem by the end of this decade, and it is

here now.

One of President Bush’s first initiatives was to ask Vice President Cheney to lead

an Energy Policy Development Group at the White House level. He will report on

the current state of the nation’s energy situation and to make recommendations for

a national energy strategy. The Vice President’s report is expected next month.

But, today I’d like our Subcommittee to listen to the views of industry and economists, and the environmental community about the role for natural gas. This energy

source, nicknamed ‘‘the fuel of the future’’ by some in the past Administration, is

an increasingly important fraction of our domestic demand. But, unlike crude oil

and refined petroleum products we import by the tanker load, natural gas is a commodity we must get from North American supplies transported by pipeline. Yes,

there are a few moth-balled liquefied natural gas (LNG) port facilities in this country, but even if they were refurbished and operating it would represent a small fraction of demand. And the proposed reopening of just such a facility on the western

shore of the Chesapeake Bay is causing concerns among Maryland officials because

of proximity to a nuclear power plant.

So, we are talking about getting our gas from U.S. and Canadian sources, as Mexico is currently a net importer of natural gas. So far our neighbors to the north have

been willing to sell us their gas from western Canada and more recently from offshore of Nova Scotia. Still this is not enough. Perhaps stranded gas from the North

4

Slope of Alaska is finally becoming economic to transport to lower-48 markets, but

that gas won’t make it here for several years to come, at best.

But, significant amounts of the estimated natural gas resource base is on Federal

land or the submerged lands beneath Federal waters of the outer continental shelf.

However, it seems more and more potentially resource rich land and submerged

lands in the United States, are closed to both assessment and/or development. Land

withdrawals, development moratoria, and regulatory restrictions on land use prohibit development of significant gas resources in areas like the eastern front of the

Rocky Mountains, the eastern Gulf of Mexico and almost all of the Atlantic and Pacific submerged lands. Likewise, many promising OCS areas are off-limits by Executive Order and Congressional moratoria both.

Our charge is to learn what, if anything, we might do to foster exploration for

natural gas in prospectively valuable areas of the public lands. Can we do it while

still protecting the environment? Are trade-offs worth it to boost the usage of this

favored energy resource? What will happen to our national economy if we don’t

‘‘change the culture’’ that has hamstrung permitting of resource extraction activities

over the past decade? These are the types of questions we must begin to address

at this hearing.

Mrs. CUBIN. The Chair would now like to recognize the Ranking

Member, Mr. Kind.

STATEMENT OF HON. RON KIND, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF WISCONSIN

Mr. KIND. Thank you, Madam Chair, and distinguished guests,

and I am looking forward to what will hopefully prove to be a very

productive Subcommittee in this session of Congress as we have a

much needed and long overdue energy policy debate for our longterm energy needs in this country. And I think it is certainly timely, in light of the President’s recent announcements regarding carbon dioxide emissions and allowing oil and gas exploration on all

public lands, for the Subcommittee to take a closer look at the

question of supply and demand of natural gas, and one of the

cleaner and more abundant energy resources that we have available.

It is also disappointing to find the President reversing himself so

early in his tenure on a campaign promise that he made to the

American people to have power plants reduce carbon dioxide emissions in order to meet clean air standards. The President has acknowledged that global warming is one of the most important environmental challenges that we face, but instead of addressing that

issue, he has turned his back on it.

It is equally disheartening to learn that he has stated that all

public lands, even lands that have been set aside as national monuments, can be made available to oil and gas exploration.

This is not a good beginning for a rational and productive debate

on national energy policy, I believe. The solution to this problem

is not simply more supply at any cost, as the President’s recent actions seem to imply. Instead, we need a comprehensive and coordinated strategic plan that incorporates conservation measures and

wise use of our resources. The best interests of the American people and the oil and gas industry will be better served by a balanced

policy that consists of promoting exploration and development

where it is appropriate, while also protecting our natural heritage

and biodiversity, and fostering conservation and developing alternative and renewable energy sources.

5

Certainly, natural gas will be a critical component of meeting

those needs, and Federal lands have historically played a very

large role in helping meet our needs, producing about 11 percent

of the natural gas produced onshore in the United States, while the

outer continental shelf currently accounts for more than 26 percent

of the domestic natural gas production, with the Gulf of Mexico

OCS producing on average over 5.1 trillion cubic feet of natural gas

per year.

Further there has been, according to the Department, a nearly

60 percent increase in the production of natural gas on Federal onshore lands over the last 7 years, but I am concerned that some

people believe that much of the Rocky Mountain area containing

significant gas reserves are off limits or unreasonably restricted

and therefore prevent oil and gas exploration and production. However, the vast majority of the restricted lands they cite are off limits only seasonally, to provide wildlife protection, for example. That

is just not accurate to say there is no access to those lands or that

somehow such restrictions prohibit production in the long run.

Moreover, this line of reasoning appears to suggest that the oil and

gas producers are in a better position than wildlife managers, for

instance, many of whom are State fish and game professionals, to

determine when exploration, drilling and production should occur

in an environmentally sensitive manner.

If we are to continue America’s economic growth and continue

creating jobs and wealth across the country, we need the affordable, reliable energy that fuels our economy and supports our way

of life. If necessary, Congress can develop cost-effective, environmentally sound mechanisms for increasing domestic supply, but increasing supply, especially by opening up protected areas such as

national monuments or ANWR, is neither the only nor primary answer, I feel. Environmental concerns have to be addressed. We will

not solve our energy problems by opening up currently protected

areas or ignoring wildlife needs.

I thank the panelists for your testimony here today. I look forward to constructive engagement on these very important issues,

and I thank the Chair for yielding me the time.

Mrs. CUBIN. Thank you, Mr. Kind.

[The prepared statement of Mr. Kind follows:]

Statement of The Honorable Ron Kind, Ranking Democrat,

Subcommittee on Energy and Mineral Resources

Madame Chair, distinguished guests, it is certainly timely, in light of the President’s recent announcements regarding carbon dioxide emissions and allowing oil

and gas exploration on all public lands, for the Subcommittee to take a closer look

at the question of supply and demand of natural gas, one of the cleaner and more

abundant energy sources.

It is disappointing to find the President reversing himself so early in his tenure

on a campaign promise he made to the American people to have power plants

reduce carbon dioxide emissions in order to meet clean air standards. The President

has acknowledged that global warming is one of the most important environmental

challenges we face, but instead of addressing that issue; he has turned his back on

it.

It is equally disheartening to learn that he has stated that all public lands—-

even lands that have been set aside as national monuments—-can be made available

to the oil and gas industry.

This is not a good beginning for a rational and productive debate on national

energy policy. The solution to this problem is not simply more supply at any cost

as the President’s recent actions seem to imply. Instead, we need a comprehensive

6

and coordinated strategic plan that incorporates conservation, and wise use of our

resources. The best interest of the American people and the oil and gas industry will be better served by a balanced policy that consists of promoting exploration and development where appropriate, while also protecting our natural heritage and bio- diversity, and fostering conservation and developing alternative energy sources.

Certainly natural gas will be a critical component of meeting those needs. Presently natural gas provides nearly a quarter of the Nation’s energy needs. The Energy Information Agency, National Petroleum Council, Gas Research Institute, and

others forecast significant increases in future domestic gas demand to as much as

29 trillion cubic feet by 2010.

According to the Department of the Interior, the U.S. is mostly self-sufficient in

meeting an annual domestic demand for 22 trillion cubic feet of natural gas, of

which the United States imports 3.4 trillion cubic feet almost exclusively from Canada.

Federal lands have historically played a large role in helping meet our needs, producing about 11 percent of the natural gas produced onshore in the United States

while the Outer Continental Shelf currently accounts for more than 26 percent of

domestic natural gas production, with the Gulf of Mexico OCS producing, on average, over 5.1 trillion cubic feet of natural gas per year. Further, there has been, according to the Department, a nearly 60 percent increase in the production of natural

gas on Federal onshore lands over the past 7 years.

Within the North Slope of Alaska, the Minerals Management Service estimates

that there is more than 26 trillion cubic feet of stranded natural gas reserves. This

equals nearly 21 percent of the total proven onshore and offshore reserves of the

Lower 48 States. The entire gas endowment of Prudhoe Bay has been cycled

through the oil field infrastructure since 1977 to enhance oil recovery. Gross gas

production on the North Slope in 1999 averaged 8.7 billion cubic feet per day that

is just 1 billion cubic feet less than total net imports to the US in 1999. Until we

can transport this gas to the Lower 48, it is premature to even discuss exploration

in ANWR.

But I am concerned that some of our witnesses today believe that much of the

Rocky Mountain area containing significant gas reserves are off-limits or unreasonably restricted and therefore prevent oil and gas production. However, the vast majority of the ‘‘restricted’’ lands they cite are off-limits seasonally, for example, to provide wildlife protection.

It is not accurate to say that there is no access to those lands, or that somehow

such restrictions prohibit production in the long run. Moreover, this line of reasoning appears to suggest that oil and gas producers are in a better position than

wildlife managers—many of who are state fish and game professionals—to determine when exploration, drilling and production should occur in an environmentally

sensitive manner.

If we are to continue America’s economic growth and continue creating jobs and

wealth across the country, we need the affordable, reliable energy that fuels our

economy and supports our way of life. If necessary Congress can develop cost-effective, environmentally sound mechanisms for increasing domestic supply. But, increasing supply—-especially by opening up protected areas, such as national monuments or ANWR—-is neither the only nor the primary answer. Environmental concerns must be addressed; we will not solve our energy problems by opening up currently protected areas or ignoring wildlife needs.

Mrs. CUBIN. As the Committee knows, the rules are that only the

Chair and the Ranking Member give opening statements, but since

there are so few of us here, if any other Members would like to give

an opening statement, I would like to welcome them to do that.

Mr. Markey.

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

Mr. MARKEY. Thank you, Madam Chair, very much. I see from

press reports just two days ago that President Bush called for allowing drilling for oil and gas on all public lands, including some

areas presently designated as national monuments. So I suppose

we soon may have to rename some of our national monuments to

7

reflect their new status. The Statue of Liberty National Monument,

for example, could become the Statue of Fossil Fuels Production

National Monument, with an actual flame burning on the top of

the torch. What an inspiring symbol that would be of the Bush Administration’s public lands policy. Of course, we would have to

change the inscription to read, give me your drill bits, your rigs,

your huddled oil companies yearning to drill free, to dump their

wretched refuse on our pristine shores. Send your well-heeled executives to me. I lift their lamps besides their golden doors.

Mrs. CUBIN. He means well.

Mr. MARKEY. Now I am told in looking at this great threat that

exists in the lower 48 that we have 1,466 trillion cubic feet of natural gas that unfortunately cannot be exploited, which is really a

shame when you hear about it, you know. Sounds like a great tragedy and a loss, and we probably would become completely energydependent on OPEC. But the closer you look at the numbers,

Madam Chair, you find out that 1,361 of the 1,466 are now accessible, but the obsession, of course, is with the 105 that are not accessible, and I guess the question is, why don’t they go after the

1,361 trillion cubic feet first which have yet to be exploited before

we have the debate over the 105? And I think that those are the

issues, that is, the sequencing of the drilling, that have to be dealt

with first.

We know that this 30- to 40 trillion cubic feet of natural gas in

Prudhoe Bay in Alaska that we all agree should be exploited. There

is between 60- and 100 trillion cubic feet of natural gas off of Nova

Scotia. There are scores of trillions of cubic feet down in Trinidad

that we could create a policy for liquefying to bring into the East

and gulf coast of the United States to deal with that issue.

And I think these hearings are going to help us put together a

comprehensive policy where we are looking at all of these sources

in a way that I think is going to minimize this final 100- or 150

trillion cubic feet and realize that we can solve the problem if we

use our heads in working together in a bipartisan fashion as we did

in Alaska where the environmental impact statement was actually

approved 18 years ago to bring down the natural gas from Alaska,

but yet the industry hasn’t built the pipeline yet. And I think the

first set of questions have to go to them so they can tell us why

they haven’t built the pipelines where it is already approved before

we open up the most sacred lands in our country.

I thank you, Madam Chair.

Mrs. CUBIN. Certainly welcome your comments, Mr. Markey,

anytime.

Mrs. CUBIN. The Chair now would like to introduce the first

panel: Matthew Simmons, the President of Simmons and Company

International; Mr. James Hackett, Chairman, President and Chief

Executive Officer of Ocean Energy, Inc.; Mark Papa, Chairman and

CEO of EOG Resources; and Lisa Speer, Staff Attorney for Natural

Resources Defense Council. I will first call on Mr. Simmons.

The Chair would like to remind you that your entire statement

will be included in the record, and if you would please limit your

oral presentation to five minutes.

8

STATEMENT OF MATTHEW R. SIMMONS, PRESIDENT,

SIMMONS & COMPANY INTERNATIONAL

Mr. SIMMONS. I commend this Committee for having this hearing

today. The current supply-demand balance for North American natural gas is precarious. Supply has now fallen behind demand, and

to make up this shortfall the country has withdrawn record

amounts of natural gas storage, leaving us already at record low

levels of gas storage with still weeks of cold weather still probably

to come before the industry begins an arduous task of trying to refill its storage system before the summer air conditioning gas needs

kick in.

Drilling for natural gas is at the highest level since the drilling

collapse of 1982, yet thus far there has been no supply response.

Canada is a year ahead of the U.S. in setting new records for gas

drilling, but has also yet to see any significant supply response.

There is a widespread hope that this supply response is just

around the corner, but a growing number of industry experts, particularly those actually drilling these record number of wells, are

beginning to question whether the current rig fleet and acreage

available for drilling are adequate to create significant supply additions beyond the current base.

There is a distinct possibility that five years hence North American natural gas supply base will be less than what we enjoy today.

A week ago the Department of Energy held a 2-day workshop to

review the natural gas industry today pursuant to the various assumptions that went into creating the NPC report on natural gas’s

long-term outlook. The findings were grim. Demand is outpacing

the NPC estimates, while supply lags. A rig shortage has emerged

some five to seven years earlier than the NPC report envisioned.

People shortages are now becoming severe. Access to potential

added gas reserves have been even more restricted. More troublesome is the fact that more new natural gas-fired power plants are

now on order to be online by 2002 than the NPC model assumed

would be onstream by 2010. Few have any plants or facilities for

any fuel-switching capability.

This adds up to a possible need for up to 30 TCF of natural gas

by as early as 2005. Adding so much supply is impossible. Reaching

the 30 TCF market even in 2010 is a question. There is a risk that

many parts of our country could be short of electricity capacity for

up to a decade. Nothing highlights the urgency of finding fresh

supplies of natural gas more than the prospect of long-term electricity rationing.

The natural gas supply is particularly threatened by increasing

evidence that the current supply base is now declining at a rate

where half the current supply will be consumed by 2005. This

means that 50 percent or 25 BCF of gas per day of new gas production needs to be added merely to keep the current supply base flat.

In this context it is hard to exaggerate the importance of OCS

energy resources.

Natural gas from our continental shelf makes up 25 percent of

domestic supply; 85 percent of this comes from the Gulf of Mexico

shelf, the balance from deep water, but the shelf supply has one

of the country’s highest decline rates. What is now 11 BCF a day

will likely decline to only 3 BCF a day by 2005. Whether this can

9

realistically be replaced by ever higher drilling activity in this mature area is questionable for two reasons.

First, the number of offshore rigs is now near a 100 percent utilization. Second, the finds each year are diminishing. Deepwater gas

is growing from almost nothing at the start of the 1990s to over

2 BCF a day and projected to grow as high as 5 by 2005. If these

aggressive targets were met, they would still only account for 10

percent of the U.S. Supply base.

But complex technical issues to develop these deepwater

resources still remain unsolved. Leading this list is an ability to

strip associated gas from deepwater oil and how to transport this

dry gas from water depths up to 10,000 feet. This highlights and

underscores the importance of developing natural gas reserves in

the highly gas-prone part, eastern part of the Gulf, an area that

has been off limits to any hydrocarbon exploration for over a decade.

The Clinton Administration placed a moratorium on any lease

sales in the eastern portion of the Gulf through 2012 with the exception of a block of acreage planned for leasing this December.

Lease Sale 181 is critical to help resolve America’s pending natural

gas crisis. It is extremely important to prevent Florida and Georgia

from experiencing the awful energy problems now facing California.

The Rocky Mountain States are another critically important

area, but 40 percent of their reserves lie in Federal lands currently

unavailable for any development. Much of these remaining reserves

are burdened by cumbersome and lengthy permitting delays and

other restrictions.

Alaskan natural gas has suddenly become another critical portion of our fragile energy equation. For the past 30 years Alaskan

energy just simply meant oil. Now Arctic gas could become invaluable.

The Department of the Interior is about to begin a careful and

detailed inventory of onshore natural gas potential. This inventory

needs to be extended to the entire offshore waters of the U.S.

Whether or not any of the potential reserves get developed is another issue, but unless an effort is made to test the potential, the

country will never know how much natural gas we might have.

Despite record levels of the drilling and remarkable technology

advances and safer and more efficient drilling, the amount of exploration wells has fallen to less than 10 percent of wells drilled, and

the exploration success is still less than 35 percent. The cost to

drill new wells is rising even though drilling economics are not

good enough to justify contractors building new rigs.

Unless these problems are tackled quickly, America faces a genuine energy crisis that could last for over a decade. As natural gas

becomes even more scarce, energy wars could erupt between various States reminiscent of the water wars between the Western

States when the Colorado River dam system was created. These

are unpleasant comments to make at such an important congressional hearing, but they are real issues, and they are serious

issues. I appreciate the opportunity of sharing these concerns with

this Committee.

Mrs. CUBIN. Thank you, Mr. Simmons.

[The prepared statement of Mr. Simmons follows:]

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Statement of Matthew R. Simmons, President, Simmons & Company

International

I am Matthew Simmons, President of Simmons & Company International, a specialized energy investment bank. I have spent the past 28 years focusing exclusively

on energy related investment banking and research. I am a member of the National

Petroleum Council and was a member of the Bush-Cheney Energy Transition Advisory Committee. I also am a past Chairman of the National Ocean Industry Association. I served as the Demand Task Force Chairman on the National Petroleum

Council’s extremely important review of natural gas and the challenges we face in

addressing a future market likely to exceed 30 TCF per year.

I commend this Committee for holding these hearings today. The current supply

demand balance for North American natural gas is precarious. Over the course of

the past year, supply has fallen behind demand despite a significant number of natural gas users abandoning this precious fuel source because its price has soared. To

make up this shortfall, the country has withdrawn record amounts from natural gas

storage facilities. The country now has the lowest amount of gas storage in modern

history with weeks of cold weather probably still to come before the industry begins

the arduous task of trying to re-fill its storage system before the summer air-conditioning gas needs kick in.

Drilling for natural gas is at the highest levels since drilling collapsed in 1982.

Yet, thus far, there has been no supply response. Canada is a year ahead of the

United States in setting new records for gas drilling, but has also yet to see any

supply response.

There is a widespread belief, or at least a hope, that such a supply response will

arrive shortly. But a growing number of industry experts, particularly those actually

drilling these record number of wells, are beginning to question whether the current

rig fleet and acreage available for drilling are adequate to create significant supply

additions beyond the current production base. There is a distinct possibility that five

years hence, North America’s natural gas supply base will be less than what we

enjoy today.

A week ago, the Department of Energy held a two-day workshop to review the

natural gas industry today, pursuant to the various assumptions that went into creating the NPC report on natural gas long term outlook which was published just

over a year ago. The findings were grim. Demand is outpacing the NPC estimates

while supplies lag. A rig shortage is emerging some five to 7 years earlier than the

NPC reported envisioned. People shortages are now becoming severe. Access to potential added gas reserves has been even more restricted, particularly with the new

roadless policies and the potential challenge to the important upcoming lease sale

in the Eastern portion of the Gulf of Mexico.

More troublesome is the fact that more new natural gas-fired power plants are

now on order to be on-line by 2002 than the NPC model assumed would be onstream by 2010! Few have any plans or facilities for any fuel-switching capability.

There is growing evidence, or at least strong suspicion, that many of these new gasfired plants were originally built as merely peaking plants but now will be forced

to become defacto quasi-base load plants in an electricity generation scarcity world.

This adds up to a possible need for up to 30 TCF of natural gas by as early as

2005. Unless a supply miracle soon arrives, the Nation’s ability to increase its use

of electricity is severely threatened. There is a risk that many parts of our country

could be short of electricity capacity for up to a decade. Nothing highlights the urgency of finding fresh supplies of natural gas more than the prospect of long term

electricity rationing.

The natural gas supply is particularly threatened by increasing evidence that the

current supply base is now declining at a rate where half of the current supply will

be consumed by 2005. This means that 50 percent, or 25 BCF per day of new gas

production needs to be added merely to keep the current base flat.

THE IMPORTANCE OF OCS RESOURCES

Natural gas from our Outer Continental Shelf remains the backbone of our domestic supply. Over 13 BCF per day come from these waters, making up about 25

percent of total domestic supply. 85 percent of this supply comes from the Gulf of

Mexico’s shelf. The balance comes from deep water gas. The supply from the shelf

has one of the country’s highest decline rates. What is now 11 BCF per day will

likely decline to only three BCF per day by 2005. Whether this can realistically be

replaced by ever higher drilling activity in this mature area is questionable for two

reasons. First, the number of offshore rigs is now at near 100 percent utilization.

Second, the finds each year are diminishing.

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Deepwater gas has grown from almost nothing at the start of the 1990’s to over

two BCF per day today and is projected to grow to as high as five BCF per day

by 2005. If these aggressive targets were met, they would still only account for 10

percent of the U.S. base in 2000. Furthermore, some complex technical issues still

remain unsolved. Leading this list is an ability to strip associated gas from deepwater oil and how to transport this dry gas from water depths up to 10,000 feet.

This highlights and underscores the importance of developing the natural gas reserves in the eastern part of the Gulf, an area that has been off-limits to any hydrocarbon exploration for over a decade. The Clinton Administration placed a moratorium on any lease sales in the eastern portion of the Gulf through 2012 with the

exception of a block of acreage planned for leasing this December. Lease Sale 181

is critical to help resolve America’s pending natural gas crisis. It is extremely important to prevent Florida and Georgia from also experiencing the awful energy problems now facing California.

FEDERAL LANDS ARE ALSO CRITICALLY IMPORTANT

The Rocky Mountain states represent another critically important gas prone area.

But, 40 percent of their potential gas reserves lie in Federal Lands currently unavailable for any development. Much of the remaining reserves are burdened by

cumbersome and lengthy permitting delays and other restrictions.

Alaskan natural gas has suddenly become another critical part of our fragile

energy equation. For the past 30 years, Alaskan energy meant simply oil. Now, its

potentially vast gas resources are an important resource. But to get this gas out of

the ground, wells need to be drilled in areas beyond the Prudhoe Bay region because

much of this area’s gas may need to be re-injected to prop up a sagging, old oil production. This puts added emphasis on the importance of opening up ANWR and

promptly resolving the pipeline route and considering the possibility of constructing

two pipelines so both Alaskan and Beaufort Sea gas can be transported to a gas

hungry USA.

The Department of Interior is about to begin a careful and detailed inventory of

onshore natural gas reserve potential. This exercise is extremely important but it

also needs to be extended to the entire offshore waters of the U.S. Whether any of

the potential reserves this inventory might uncover get developed is another issue,

but unless an effort is made to test the potential, the country will never know how

much natural gas we might have available to curtail a terrible risk to our economy’s

well being.

Natural gas is the most precious energy source in North America. It is the most

environmentally friendly real energy source we have. There is no geo-political risk

to this energy supply. But getting it produced is a difficult task, even if all access

problems are quickly resolved.

Despite record levels of drilling and remarkable technology advances in safer and

more efficient drilling, the amount of exploration wells has fallen to less than 10

percent of all wells drilled, and the exploration success rate is still less than 35 percent. This means that 65 of every 100 exploratory wells drilled fail. The cost to drill

new wells is rising even though drilling economics are not good enough to justify

contractors building new rigs or paying wages high enough to attract a new generation of people to operate the rigs and develop the prospects.

Unless these problems are tackled quickly, America faces a genuine energy crisis

that could last for over a decade. Even if the problems of access are resolved, it

might be too late to avoid a crisis for the next several years. But, any delay in resolving all the obstacles to growing fresh gas supplies merely extend and increase

the crisis.

As natural gas supply becomes ever more scarce, energy wars could erupt between

various states reminiscent of the water wars between western states as the Colorado river dam system was created. Texas, for instance, has done a remarkably good

job in building ample new gas-fired power plants to safely supply its growing electricity needs. But as these plants come on-line, more and more of Texas natural gas

supply needs to stay within Texas. This will cutoff supplies which other states now

take for granted.

These are unpleasant comments to make at such an important congressional

hearing but they are real issues and serious issues. I appreciate the opportunity to

share my concerns with this Committee and urge all of you to help resolve this

crisis.

Mrs. CUBIN. The Chair now recognizes Mr. Hackett to testify.

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STATEMENT OF JAMES T. HACKETT, CHAIRMAN/PRESIDENT/

CHIEF EXECUTIVE OFFICER, OCEAN ENERGY, INC.

Mr. HACKETT. Thank you, Madam Chairman. On behalf of the 22

companies that are part of the Domestic Petroleum Council, independent oil and gas companies, I want to give some comments

about the situation we are facing, and I am going to skip around

a little bit, given Matt’s summary at the beginning.

On page 4, if you would, the Department of Energy-sponsored

NPC study concluded that the North American natural gas

resource base is sufficient to meet the projected growth and demand for natural gas, which Congressman Markey remarked as

well. However, this ability is very dependent on industry and government positively addressing seven key challenges, which are in

front of you on the slide on top. Access to resources tops this list.

Page 5 shows that access to the resource base and to rights of

way for infrastructure is critical for sustainable supply. Of the

lower 48 resource base cited in the NPC study, approximately 47

percent is owned by the Federal Government. But the resource

base under Federal Government lands is far more critical than that

percentage might imply.

The map illustrates the total lower 48 natural gas resource base

and the percentages of it that are either completely off limits or importantly is access-restricted according to the NPC study. As can

be seen on the map on page 6, a significant portion of the Rocky

Mountain area, including some 76 percent of the natural gas

resources, is owned by the Federal Government.

Let me give you some examples of restrictions that we believe

can and must be dealt with.

Last year Bureau of Land Management officials in New Mexico

announced new criteria for approval of applications for permits to

drill in the San Juan Basin, while the BLM conducted a new environmental impact statement in preparation for updating its

resource management plan. Had the criteria, including announced

moratoria on some applications, been put into effect as announced,

critical California gas supply from this mature producing area

would have been lost in the recent crisis.

Another prime example of this type of regulatory problem is illustrated by the time line chart you see on page 7 for BLM lands

in southwest Wyoming. With the layering of wildlife protection and

other environmental restrictions, you can see that there are only

limited periods in which necessary gas exploration and production

drilling by the industry can occur.

Much of the land we are discussing is like that shown on page

8 at the top in Wyoming. With our current technology we can explore and produce gas on these lands with much smaller drilling

locations. Also improved geoscience technology allows us to better

target promising geologic formations below ground so we drill fewer

wells to develop larger producing fields, but we still must drill to

find and produce gas. Then we must and do reclaim the land back

to its original condition.

Now, an important word about the offshore appears on page 9.

As the NPC study pointed out and Matt referred to, as we in our

industry know, with two of our three coasts completely off limits

to exploration and production, the Gulf of Mexico, including its

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deep waters, will be crucial in meeting gas demand. Lease Sale 181

in the eastern Gulf of Mexico scheduled for December of this year

provides a good example of what we need to be doing. It alone can

make a significant contribution to providing natural gas to the Nation and the surrounding region to meet increasing electricity generation needs with a more clean-burning and environmentally safe

fuel than any other alternative.

The chart on page 10 illustrates the NPC’s projection of the impact of access restrictions in the eastern Gulf of Mexico. Shown

here on the bottom red line is the impact if Sale 181 does not happen. Our Nation will suffer if the sale doesn’t proceed as planned.

Page 11 shows that over the past decade production from the

wells we have drilled every year has declined more sharply. This

means that the number of wells to be drilled will have to increase

even beyond current high levels to meet projected demand. This

can only be achieved through billions of dollars of investments by

companies such as ours, but it will be a limited exercise without

greater access to the U.S. resource base.

As shown on page 13, producers are responding to market signals by spending billions of dollars putting additional gas rigs to

work to meet consumer demand, but this pace will decelerate without more access to new inventory.

On page 14 appear our recommendations to the administration

about several steps to be taken to seek better coordination of

energy permitting.

In addition, on page 15 we support the ongoing congressionally

mandated inventory of energy resources on Federal Government

lands, but it needs to be expedited. Even more importantly, Congress and the administration should use the time during which the

inventory is being undertaken to consider whether there should be

a simplified process to allow States and their congressional delegations to seek removal of the access restrictions where there is little

or no other benefit from the restriction, but the very real detriment

of not producing critically needed energy supplies. The U.S. Government also needs to improve permitting processes and coordination.

I appreciate the opportunity to be with you to discuss the Nation’s energy challenges. All of us that are producers care as much

about consumers as we do about producers. We are one of both.

Thank you.

Mrs. CUBIN. Thank you, Mr. Hackett.

[The prepared statement of Mr. Hackett follows:]

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Mrs. CUBIN. The Chair now recognizes Mr. Papa to testify.

STATEMENT OF MARK PAPA, CHAIRMAN & CEO,

EOG RESOURCES

Mr. PAPA. Madam Chairman, members of the Committee, I am

Mark Papa, Chairman of the EOG Resources of Houston Texas.

Today I am testifying on behalf of the Independent Petroleum Association of America, IPAA, National Stripper Well Association and

32 cooperating State and regional oil and gas associations. These

organizations represent the thousands of independent petroleum

and natural gas producers that drill 85 percent of the wells,

produce 40 percent of the oil and 65 percent of the natural gas in

the United States.

This issue is particularly important to my company, EOG Resources, because we are at the forefront of the effort to develop new

domestic gas reserves. During the past three years, EOG has

ranked either number one or number two of all companies in terms

of footage drilled in the U.S. looking for new gas reserves.

Today’s hearing addresses the impediments to developing domestic natural gas supply because access to the national resource base

is prohibited or constrained. Much of the Nation’s gas underlies

Federal-controlled land both offshore and onshore. Policies in these

areas have constrained or prohibited access largely based on fears

of environmental harm.

But these resources can be developed in an environmentally

sound and sensitive manner. The Department of Energy recently

released a comprehensive report, Environmental Benefits of Advanced Oil and Gas Exploration and Production Technology, demonstrating that the technology is available to preclude environmental damage. This technology is currently being employed when

exploration is allowed. However, without policy changes the Nation

may face a gas supply challenge.

The National Petroleum Council’s natural gas study projects demand increasing by over 30 percent during the next 15 years. This

will require not only finding and developing resources to meet this

higher demand, but also to replace the current depleting resource.

While many analysts are focusing on how much natural gas demand will grow, it is equally important to recognize what is happening to supply. All natural gas wells begin to deplete as soon as

they come on production. In fact, depletion rates for all U.S. production have increased from 16 percent in 1990 to 23 percent

today. In simple terms, this means that the domestic natural gas

industry is on an ever-increasing depletion treadmill, and the reserves underlying Federal lands become that much more important.

Let me address both offshore and onshore land use issues, and

I will start with offshore. Currently over 75 trillion cubic feet, TCF,

of natural gas in the offshore is off limits to development because

of moratoria that are based on technologies that have been replaced decades ago. It is essential that those areas of the offshore

that are scheduled for leasing remain accessible.

Specifically, Lease Sale 181 lying off the Alabama coast must be

undertaken. Unfortunately after years of negotiation to allow this

lease sale, uncertainty remains as to regarding the political efforts

30

that may be made to halt this sale. Lease Sale 181 is projected to

be a significant natural gas area with estimated reserves of about

8 trillion cubic feet, enough natural gas to fuel Florida’s 5.9 million

households for 16 years. To prevent the sale in view of the extraordinary environmental safety record of the Gulf of Mexico operations

would be a tragic energy policy decision.

Onshore the NPC natural gas study estimates the development

of over 137 trillion cubic feet of natural gas under government-controlled land in the Rockies is restricted or prohibited. It is important to understand that access to these resources is limited by

more than just one moratoria. The constraints differ. Monument

and wilderness designations clearly prohibit access to some areas.

Regulations like the Forest Service roadless policy and prohibitions

in the Lewis and Clark National Forest are equally absolute.

Let me discuss the Lewis and Clark National Forest for a moment as a specific example. The Rocky Mountain Division of the

Lewis and Clark National Forest is estimated to contain large

amounts of natural gas. The 1986 forest management plan anticipated development of this resource and made it an objective. In

1996, the Forest Service published a draft EIS with a preferred alternative that would allowed limited environmentally sensitive

leasing. In 1997, the Forest Service published the final EIS, adding

additional environmental protections to the preferred alternative.

Notwithstanding these additional restrictions, the Lewis and

Clark National Forest supervisor decided that no oil and gas leasing in this area would be permitted. The Forest Service amended

the forest management plan without further public comment,

deeming the decision to exempt the Rocky Mountain Division from

leasing insignificant.

These types of decisions obviously generate adverse energy supply consequences.

Regarding onshore Federal lands, we offer both the short- and

long-term recommendations. In the short term, additional BLM

personnel are needed to process the increased number of permits

that are being generated as the industry responds to supply challenges, and regarding our company, I can specifically mention the

Rawlins and Pinedale offices in your home State, Madam Chairman, and also the Vernal, Utah, offices as areas where we have a

potential backlog of getting permits done.

Long term there are several policy decisions that need to be dealt

with. We need a commitment to assure that government actions

are developed with full recognition of the consequences to natural

gas and other energy supplies. IPAA believes that all Federal decisions, regulatory guidance, environmental impact statements, Federal land management plans should identify at the outset the implications of the actions on energy supply. These implications

should be clear to the decision-maker. Such an approach does not

alter the mandates of the underlying law compelling the Federal

action, but it would likely result in developing options that would

minimize adverse energy consequences.

In conclusion, it is time for this county to develop a sound future

policy. Certainly there is room in such a policy for sound energy

conservation measures and protection of the environment, but

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energy production, particularly petroleum and natural gas, is an

essential component that must be included and addressed.

Thank you for considering these comments.

Mrs. CUBIN. Thank you, Mr. Papa.

[The prepared statement of Mr. Papa follows:]

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Mrs. CUBIN. The Chair now recognizes Ms. Speer for her testimony.

STATEMENT OF LISA SPEER, STAFF ATTORNEY,

NATURAL RESOURCES DEFENSE COUNCIL

Ms. SPEER. Thank you. My name is Lisa Speer. I am Senior

Policy Analyst with the Natural Resources Defense Council. NRDC

is a national nonprofit organization dedicated to protecting the environment and public health. My testimony today is on the environmental impacts and other environmental issues related to oil and

gas or gas exploration and development on the outer continental

shelf. My colleague, Dave Alberswerth, will deal with gas development onshore.

Our Nation faces important challenges in the coming year. With

California dealing with an energy crisis and natural gas prices

shooting up for many, many people, it is time for this country to

come together and develop a comprehensive national energy strategy.

Two distinct visions of what that strategy should look like have

emerged. One vision focuses on extracting as much energy as possible, principally in the form of fossil fuels, in the hope that we can

somehow drill our way out of our energy woes. An alternative

vision calls for encouraging innovative and new technologies to

meet our energy needs in an environmentally responsible manner.

NRDC believes that U.S. energy policy must rely on the application of readily available, currently available technology as a way to

reduce consumption. Such an approach will decrease America’s reliance on foreign sources of energy, protect the environment, provide

for our energy needs and buffer the economy against short-term

swings in the market.

NRDC recently published a report called ‘‘A Responsible Energy

Policy for the 21st Century,’’ which discusses these issues in detail.

I would like to submit it for the record, if I might. (NOTE: This

report is available for viewing in the Committee’s official files.)

Turning to natural gas development on the OCS, some people

argue that we should move ahead to open protected areas of the

OCS to natural gas development. They argue that natural gas—the

risk of oil spills when developing natural gas is negligible, and,

therefore, natural gas development can proceed in an environmentally benign fashion. This argument ignores the fact that oil

spills are not the only concern with respect to natural gas development on the outer continental shelf.

OCS gas development, like oil development, can have substantial

environmental impacts. For example, offshore activity, be it for oil

or for gas, frequently entails extensive onshore infrastructure in

the form of roads, pipelines, processing facilities, waste-handling

facilities and other industrial infrastructure. This infrastructure

can cause significant harm to the coastal zone. For example, OCS

pipelines crossing wetlands in the Gulf of Mexico are estimated to

have destroyed more coastal salt marsh than exists from New

Jersey to Maine.

Moreover, the industrial character of offshore oil and gas development is often at odds with the existing economic base of affected

46

coastal communities, many of which rely on coastal tourism, fishing

and recreation.

Air and water pollution is a second issue. Offshore operations for

oil or gas generates tremendous amount of waste, some of which

contains a variety of pollutants, including toxic pollutants. Air pollution is also generated in significant amounts by offshore oil and

gas drilling rigs as well as production platforms.

And then there is the possibility of an oil spill. There is always

the possibility of finding oil when searching for gas. We know of

no instance where a lease has prohibited the development of oil in

a gas-prone region, and we are not aware of any company ever

agreeing to such a restriction in the history of the OCS program.

If oil is found, the possibility of spills exists. According to the Department of the Interior, some 3 million gallons of oil have spilled

from OCS oil and gas operations between 1980 and 1999.

Concerns over these impacts have led many States and their congressional delegations to oppose OCS development off their coasts.

Since 1981, Congress and two Presidents have imposed restrictions

on OCS leasing in sensitive areas off of our coasts. These moratoria

now protect the eastern and western coast of United States, much

of the eastern Gulf of Mexico and Bristol Bay, Alaska. They represent a clearly established consensus on where OCS development

should take place in this country. They have been endorsed by a

broad array of elected officials from former President George Bush

to Governor Jeb Bush, from Governor Knowles of Alaska to Governor King of Maine and from Governor Davis in California and

Governor Bush in Florida.

We strongly oppose any attempt to lift the moratoria to promote

gas development or to promote gas development in other sensitive

areas off of Florida and Alaska. Fortunately, we don’t need to drill

these areas for natural gas. That is because some 80 percent of the

Nation’s untapped economically recoverable OCS gas is located in

areas already open to leasing.

The idea that most of America’s OCS gas is locked up is simply

not supported by the facts. It is also not supported by this report.

If you add up, as Mr. Markey indicated, the amount of gas that is

in OCS areas that are under restriction, it amounts to less than

5 percent of the total amount of gas the Nation has outside of Alaska as identified in this report.

Large untapped efficiency resources exist that can provide more

gas more cheaply and faster than drilling public lands. For example, providing tax incentives for the construction of energy-efficient

buildings and manufacturing of energy-efficient heating and waterheating equipment could save some 300 trillion cubic feet of gas

over 50 years. That is more than twice the amount of gas the Interior Department estimates is economically recoverable from the entire OCS.

These strategies will do far more to increase our Nation’s energy

security than a ‘‘drain America first’’ approach of exploiting onshore and offshore Federal lands.

Thank you, Madam Chairman.

Mrs. CUBIN. Thank you very much for your testimony.

[The prepared statement of Ms. Speer follows:]

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1 Boesch and Rabalais, eds., The Long-term Effects of Offshore Oil and Gas Development: An

Assessment and a Research Strategy. A Report to NOAA, National Marine Pollution Program

Office at 13–11. 2 MMS, 2000. Gulf of Mexico OCS Oil and Gas Lease Sale 181, Draft Environmental Impact

Statement (DEIS), p. IV–50. 3 Id.

Statement of Lisa Speer, Senior Policy Analyst, Natural Resources Defense

Council

My name is Lisa Speer. I am Senior Policy Analyst with the Natural Resources

Defense Council (NRDC) in New York. NRDC is a national nonprofit organization

of scientists, lawyers, and environmental specialists, dedicated to protecting public

health and the environment. Founded in 1970, NRDC serves more than 400,000

members from offices in New York, Washington, Los Angeles, and San Francisco.

My testimony today addresses environmental issues surrounding natural gas exploration, development and production from submerged Federal lands on the Outer

Continental Shelf (OCS).

1. Background: Energy Policy in the 21st Century

At the dawn of a new century, America finds itself once again wrestling with a

problem that has, off and on, been at the forefront of U.S. politics for several decades: energy. The United States has 5 percent of the world’s population, but consumes nearly a quarter of the world’s energy supply. We use energy to heat our

homes and our businesses, power our computers and telephone systems, run our

automobiles and aircraft, and drive our manufacturing plants and hospitals. In

short, we have constructed an economy and a way of life that depends on the ready

availability of energy.

Two distinct visions of an energy policy for the United States have emerged to

meet these demands. One vision focuses chiefly on extracting as much energy as

possible, mostly in fossil fuel form (oil, coal and natural gas), in hopes that supply

can catch up with demand. The alternative vision, however, calls for encouraging

innovation and new technology to meet our energy needs in an environmentally responsible manner. This vision emphasizes efficient use of energy, and places priority

on using energy resources that are least damaging to our environment. It promotes

economic growth and American industrial competitiveness. This energy path would

not force consumers to make sacrifices. Instead it relies on improved technologies

that will eliminate waste while increasing productivity and comfort.

Therefore, NRDC believes that U.S. energy policy must rely on the application of

technological advances already in place and readily available as a way to reduce

consumption. Such an approach will decrease America’s reliance on foreign sources

of energy in the near- and long-term, protect the environment, provide for America’s

energy needs, and buffer the economy against short-term swings in the market.

NRDC’s recently published report, A Responsible Energy Policy for the 21st Century

examines these issues in detail. I ask that the report be included in the record.

2. Natural Gas Resources of the Outer Continental Shelf

As the cleanest burning fuel, natural gas makes an important contribution to the

Nation’s energy supply. Some argue that natural gas development on the Outer

Continental Shelf should be promoted. They argue that the risk of oil spills is negligible, and that environmentally sound development can take place. This argument

ignores the reality that oil spills are not the only environmental concern related to

OCS development. Offshore gas development, like oil development, causes substantial environmental impacts, including the following.

Onshore damage: The onshore infrastructure associated with offshore oil or gas

cause significant harm to the coastal zone. For example, OCS pipelines crossing

coastal wetlands in the Gulf of Mexico are estimated to have destroyed more coastal

salt marsh than can be found in the stretch of land running from New Jersey

through Maine. 1 Moreover, the industrial character of offshore oil and gas development is often at odds with the existing economic base of the affected coastal communities, many of which rely on tourism, coastal recreation and fishing.

Water pollution: Drilling muds are used to lubricate drill bits, maintain downhole

pressure, and serve other functions. Drill cuttings are pieces of rock ground by the

bit and brought up from the well along with used mud. Massive amounts of waste

muds and cuttings are generated by drilling operations an average of 180,000 gallons per well. 2 Most of this waste is dumped untreated into surrounding waters.

Drilling muds contain toxic metals, including mercury, lead and cadmium. Significant concentrations of these metals have been observed around drilling sites. 3

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4 Id., p. IV–32. 5 Id., p. IV–32–33. 6 Id., p. IV–40. 7 MMS, 2000. Gulf of Mexico OCS Oil and Gas Lease Sale 181, Draft Environmental Impact

Statement (DEIS), pp. IV–50. 8 U.S. Department of the Interior, Minerals Management Service (MMS), 2000. Outer Continental Shelf Petroleum Assessment, 2000, page 5 and Gulf of Mexico Assessment Update. 9 NRDC, 2001. A Responsible Energy Policy for the 21st Century, p. 32. 10 U.S. Department of the Interior, Minerals Management Service (MMS), 2000. OCS Petroleum Assessment, 2000, p. 5 and Gulf of Mexico Assessment Update.

A second major polluting discharge is produced water, the water brought up from

a well along with oil and gas. Offshore operations generate large amounts of produced water. The Minerals Management Service estimates that each platform discharges hundreds of thousands of gallons of produced water every day. 4 Produced

water typically contains a variety of toxic pollutants, including benzene, arsenic,

lead, naphthalene, zinc and toluene, and can contain varying amounts of radioactive

pollutants. All major field research programs investigating the fate and effects of

produced water discharges have detected petroleum hydrocarbons, toxic metals and

radium in the water column down-current from the discharge. 5

Air pollution: Drilling an average exploration well generates some 50 tons of nitrogen oxides (NOx), 13 tons of carbon monoxide, 6 tons of sulfur dioxide, and 5 tons

of volatile organic hydrocarbons. Each OCS platform generates more than 50 tons

per year of NOx, 11 tons of carbon monoxide, 8 tons of sulfur dioxide and 38 tons

of volatile organic hydrocarbons every year. 6

Oil spills: If offshore areas are leased for gas exploration there is always the possibility that oil also will be found. We no of no instance where a lease prohibits an

oil company from developing oil if oil is found in a gas prone region. We are not

aware of any company ever agreeing to such a condition in the history of the OCS

program. Without such a restriction included in a lease there would be no assurances that oil in fact would not be developed, raising the possibility of an oil spill.

According to statistics compiled by the Department of the Interior, some 3 million

gallons of oil spilled from OCS oil and gas operations in 73 incidents between 1980

and 1999. 7 Oil is extremely toxic to a wide variety of marine species, including marine birds, mammals and commercially important species of fish.

3. The OCS Moratoria

Beginning in 1981 and every year since then, Congress has imposed restrictions

on OCS leasing in sensitive areas off the Nation’s coasts. These moratoria now protect the east and west coasts of the U.S. and most of the Eastern Gulf of Mexico.

The moratoria reflect a clearly established consensus on the appropriateness of OCS

activities in most areas of the country, and have been endorsed by an array of elected officials from all levels of government and diverse political persuasions, from

former President George H.W. Bush to Governor Jeb Bush of Florida, and from Governor Tony Knowles of Alaska to Governor Gray Davis of California.

We strongly oppose any attempt to lift the moratorium, or to promote gas development in other sensitive OCS areas, including the Sale 181 area off the west coast

of Florida and areas off Alaska. We have called on the Interior Department to remove these areas from the new Five Year OCS Program currently under development.

4. Drilling in the Moratoria Areas, the Sale 181 Area and the Alaskan OCS is Not

Necessary

Despite assertions from industry and their supporters on Capitol Hill, it is not

necessary to drill in sensitive areas to meet America’s energy needs. For example,

industry is pressing to drill in the moratorium areas, the Eastern Gulf of Mexico,

and off Alaska. But such drilling is unnecessary because seventy per cent of the nation’s undiscovered, economically recoverable OCS oil and gas, and 80 percent of the

Nation’s undiscovered, economically recoverable OCS gas, is located in the Central

and Western Gulf of Mexico. 8 Thus, removing the moratorium areas, the OCS off

Alaska, and the Eastern Gulf of Mexico from the five-year program will leave the

vast majority of the nation’s OCS oil and gas available to the industry.

Large untapped energy efficiency resources provide a much better choice. Congress can help by providing tax incentives for the construction of energy efficient

buildings, manufacturing energy-efficient heating and water heating equipment.

These measures could save 300 Tcf of natural gas over 50 years. 9 This is more than

twelve times the Interior Department’s mean estimates of economically recoverable

gas located outside the Central and Western Gulf of Mexico. 10 These strategies will

49

do far more to increase our nation’s energy security than a drain America first policy of exploiting sensitive offshore and onshore Federal lands.

Thank you for the opportunity to testify.

Mrs. CUBIN. I thank all of the Members of the panel.

Before I forget it, I would like to ask the Committee’s unanimous

consent to submit for the record statements that are being made

by a couple of constituents of mine, who live in the Powder River

Basin, where there is a huge coal bed methane play. They have

some concerns about the water and the environment and what is

going on up there. So with unanimous consent, I will offer this for

the record.

[Letters from the Powder River Basin Resource Council submitted for the record follow:]

50

51

52

53

54

55

56

57

58

Mrs. NAPOLITANO. Madam Chairman, can we also introduce into

the record the report she handed to be introduced? I don’t think

you accepted it.

Mrs. CUBIN. Certainly, we accept that to be put on the record.

[The aforementioned report has been retained in the Committee’s

official files.]

Mrs. NAPOLITANO. Thank you, ma’am.

Mrs. CUBIN. You bet. I will start off with my five minutes really

with a statement. No one argues that we are having an energy

shortage or that there is some sort of a crisis. There certainly is.

Many of us have known that for a long time. What has been disturbing to me is—I am glad that Vice President Cheney is the head

of the task force that the President has appointed to come up with

a national energy policy. I would like to give you my view of what

a national energy policy should include.

First of all, I think we have to estimate—not estimate, we have

to figure out what our national consumption is and how much we

actually need to be safe as a Nation, and how much we need to consume or how much we do consume. Then, we need to predict or estimate future growth in consumption or reduction in consumption,

whichever that might be. At that point, we need to apply the forces

of conservation, better technology, efficiencies in the technology

that we have and try to reduce our consumption of energy as much

as we possibly can. At that point, we need to—when we know what

our energy consumption needs are, then we have to decide what

percentage of that should be produced domestically.

After we decide that, we need to decide what sources—what percentage of that domestic production should come from coal, oil, gas,

wind, solar, geothermal, hydro, whatever, and that way we would

have an idea.

This document or this policy could certainly change, and there

would be times when one fuel would be contributing more to the

energy supply than others, but at least we wouldn’t find ourselves

in a situation where we don’t—a boom-and-bust situation which

the minerals industries usually find themselves in.

I think if we all work together as Congressmen, and we work

with industry, and we work with agencies so that we can have access to produce the energy that we need, we will be far better off

than politicizing this issue. To say or to think that President Bush

would want to put every acre of public land open for drilling is simply nonsense.

I wish Mr. Markey were still here. The statement he made about

the 1,466 trillion cubic feet available for production are total and

1,361 are available, well, they may be available to be permitted,

but they aren’t ever going to get the permit because we have the

Endangered Species Act that affects access. We have wilderness

areas, wilderness study areas, national parks, national forests, on

and on and on and on.

So the information is truly slanted, and that isn’t going to help

us get to a national energy policy, and it is not going to help us

solve the problems that we have.

So I hope that this Subcommittee will work together to put forward honest pictures of what the situation is like out there. What

59

I see so far has been very distorted, and I certainly hope the Committee can do a better job of being realistic with the facts.

Having said that, I will now recognize Mr. Kind for any questions he might have of the panel.

Mr. KIND. Well, I want to thank the witnesses for your testimony

here today. I think as we embark upon this, what will hopefully be

a national discussion in regards to our long-term energy needs,

that we will be able to approach it in a bipartisan and balanced

fashion.

One of the disturbing things that I have witnessed thus far in

the early stages of this next session of Congress is there has been

a lot of focus, a lot of attention on the supply equation, and that

is the business that you gentlemen are in, and we recognize that,

and it is going to have to play an important role in regards to our

energy needs. But I think we need to be careful that it doesn’t become too one-sided, because obviously we need to focus on the demand aspect. And I appreciate Ms. Speer’s testimony today in regards to various ideas and proposals to deal with the demand, and

I would hope that all of us here would be in agreement that there

is a lot of work that we can do, a lot of progress we can make in

regards to sound conservation practices and trying to reduce the

demand side of the equation, things we may be able to pursue in

the Tax Code to encourage greater energy-saving devices and development of higher efficient buildings, for instance. And I think we

also need to take a serious look at the CAFE standards when it

comes to oil production and the needs of oil in this country.

And I agree with the Madam Chair’s assessment in regards to

what data and what information we are going to need, and that is

where I think you all can be of invaluable assistance in trying to

project out what the energy consumption needs are going to be in

light of the economic fluctuations that we are in right now. But

hopefully we are going to be able to bring some balance to this and

take a serious look at developing a long-term energy conservation

policy, which I believe this country sorely lacks, an honest assessment of the type of alternative and renewable sources that we can

honestly and cost-effectively pursue today.

But one of the questions that I have for you gentlemen here

today is it appears as if you do have a political problem. I mean,

Ms. Speer testified in regards to the congressional moratorium on

OCS exploration and drilling off the east and west coast and the

eastern part of the Gulf, for instance. Even Governor Bush in Florida, for instance, has come out on record opposed to drilling in 181,

for instance; Governor Knowles up in Alaska. In light of that, how

do you make the case to the American people when you have community leaders and Governors of the very States who are on record

as saying—some of them actually saying that we believe in drilling,

just not in our backyard. I mean, how do you overcome that type

of political resistance that you may be facing? And I would open

it up to anyone.

Mr. HACKETT. I might just try to clarify what my view of that

situation is, is that while Governor Bush may be against the OCS

sale that has been announced for December, it has been some five

years in the making. The other four Governors of the States that

it touches are in support of it. So four out of five are actually in

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support of it, and the onshore facilities that were referred to earlier

are not anticipated to be in Florida. So States who will be most impacted by this who actually welcome offshore rigs for fishing purposes in the States that I work in, Louisiana and Texas, because

they attract fish, they may have a very different view than Governor Bush about that particular sale.

And more importantly, I think there are a lot of answers, and I

think you are absolutely right, Congressman Kind, in the long term

in terms of demand reduction, more efficiency, LNG, frankly nuclear energy, a number of different alternatives for supplies of

energy that we need to look very hard at. The problem is they don’t

get here for five years, and neither does the pipeline from Alaska.

So we all sit here as citizens of this country worried about our global competitiveness and how we are going to make it over the next

five years, and we need to take very seriously getting the facts out

in front of us about what we are facing and the question about

whether there really is a lot of free property out there that we are

somehow not taking advantage of.

I promise you in a competitive market-based economy people

tend to take advantage of what is given to them. If that was truly

there, I promise you we wouldn’t be spending our energy up here

talking to you. We would be out there trying to drill it up. Thank

you.

Mr. KIND. Ms. Speer, let me throw it at you for a second. In light

of what Mr. Hackett just testified to, given our short-term energy

needs, do you believe it is possible through conservation and development of alternatives and renewables to pivot in a short period of

time, given the demand that already exists in the marketplace and

what will inevitably be there in the very near future?

Ms. SPEER. That is a very good question, and the short-term

needs are very pressing right now. There are some ramping-up activities that we can take. But the reality is my understanding is

that for most offshore gas fields, as well as onshore gas fields, that

it takes a good five or six years, according to Chevron, to bring

those on, too. So this is going to take time to solve, and there are

a lot of issues that have to be addressed, including things like pipeline availability in some areas.

But I just want to emphasize with respect to the eastern Gulf

that you know this is not just a few people here and there. Every

single member of the Florida delegation with one exception has

supported the moratorium and supported the position that we have

articulated and Governor Bush has articulated. These are very

deeply held views on the part of very many people, and fortunately,

there is not that much gas there by the Interior Department’s estimates. The Interior Department again says there is about 6.9 trillion cubic feet in the entire eastern Gulf of Mexico, and again, that

is only about 5 percent of Interior Department’s estimates of the

total OCS undiscovered resources.

Mrs. CUBIN. The gentleman’s time has expired.

The Chair now recognizes Mr. Flake from—oh, he is gone. So Mr.

Otter.

Mr. OTTER. Thank you very much, Madam Chairman. I wasn’t

quite ready. Being the bottom of the political food chain here, I exVerDate 11-MAY-2000 15:44 Jan 09, 2002 Jkt 000000 PO 00000 Frm 00064 Fmt 6633 Sfmt 6602 71208.TXT HRESOUR1 PsN: HRESOUR1
61

pected some of the more senior Members to get their opportunity

in the box first, but thank you very much.

Mrs. CUBIN. If you would like, I could recognize somebody else.

Generally on the Committee we can recognize people in the order

that they show up.

Mr. OTTER. I shall show up very early from now on.

Mrs. CUBIN. If you would like to take a few minutes.

Mr. OTTER. No, no, I am ready. Having got this position, I am

not giving that up for anything, and now that I have used 2-1/2

minutes of my time getting the floor—you know, much is said

about who is and who isn’t supporting this thing, and I think it is

important—in fact, I think it ought to be the direction that we always look to first rather than looking to an organization from New

York or an organization from San Francisco or Dallas, Texas, or

someplace else about where we ought to be drilling and where we

ought to be exploring or where we ought to be looking for energy

needs, I think we ought to look to the States first, and if Governor

Jeb Bush doesn’t want his State to develop, that ought to be so.

But would you then agree—would you all then agree that if Governor Kempthorne of Idaho or all the other Governors said, yes, we

want to build dams, yes—because I don’t, Madam Chairman and

members of the Committee, I don’t think that we can talk about

this subject in a vacuum. I think it is going to have to be part of

the entire piece for energy, and so I think we have got to talk about

dams and coal-fired plants. I think we have talk to about FERC.

I think we have got to talk about additional potential; heaven forbid, even nuclear plants. I think we need to talk about all these

things as part of our national energy policy.

And so I want to know, I want to hear from each of the Members

that—would you be equally enthusiastic about extolling the statements if a Governor said, yes, come and drill in my State; yes,

come and build a dam; yes, we want a coal-fired plant from clean

coal?

I will start with you, Mr. Simmons.

Mr. SIMMONS. I spent this morning at the Department of Energy

workshop on the power situation of the United States and heartily

endorsed clean coal, nuclear. Natural gas will not get to 30 TCF,

in my opinion, and it is going to basically cause severe risk of electricity problems for a decade. So I think the time has come that

we need to embrace every form of energy, including conservation,

but the conservation numbers, unless the conservation people can

do some very quick education, do not add up to enough reduced demand to basically conserve us out of a problem.

Let me give you one example. If we could create tomorrow morning 100,000 80-mile-per-gallon cars, we would save 4960 barrels a

day. That is a single well in the Gulf of Mexico. Those are real economic reality numbers. So I think it is going to be very important

as we go into these very serious energy debates that we have some

real genuine intellectual honesty about how we deal with some

numbers very precisely, because this could be the greatest risk to

our economy since World War II.

Mr. HACKETT. Thank you, Congressman. I agree with Matt that

we are a very spoiled Nation, this Nation doesn’t like to conserve,

generally speaking. You look at the demand for oil products, even

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with the crunch that you had in the late 1970’s, early 1980’s, and

you see it has gone up over that whole period. I was not pointing

to governors’ support of individual States as a reason to necessarily

approve or disapprove of anything. It was just to straighten the

record out, so we are not biased in one direction. This is a national

issue, it is a national issue on environment and energy. The biggest

risk to us is the economy against a global competition that will

have much lower natural gas costs.

There is plenty of natural gas in the world we just, can’t get it

in here because we don’t want to allow degasification facilities to

be sited in our country. We have four of them. We are refurbishing

two of them. They do not make a big enough dent. They costs hundreds of millions of dollars just like the ships that are required to

get them here, and the facilities overseas that you have to make

it from, but there is plenty of it at the right price over time. It

doesn’t happen for five years. So what do we do in the meantime?

That is where you look at all the alternatives, you mention and I

applaud you for your thought process.

Mr. PAPA. Congressman, we agree that we need a national

energy policy that embraces not only natural gas, but also clean

coal, consideration of nuclear, certainly renewables, wind, solar,

some of those items, and I think none of us disagree with that. To

me, I think you can frame the debate on access for natural gas is

very simply, I believe, that if, the Nation is willing to tolerate a

higher average natural gas price over the next 10 or 20 years, then

we can continue to withhold lands from drilling. If however we

open up these lands for drilling, the consequence will be you have

more supply, you will have an average lower natural gas price over

the next 10 years or so. And I guess the Nation has to weigh what

are the economic consequences of those two items?

Ms. SPEER. Thank you. I want to agree with Mr. Hackett that

we are a spoiled Nation, and we really do have to get our house

in order on this question if we are going to continue to prosper in

the way we have. In our view, the way to proceed, though, is a different way. And I think that the record of energy efficiency improvement really speaks for itself. For example, from 1975 to 2000,

new generations of energy efficient refrigerators has reduced their

electricity consumption by 75 percent saving some 60,000

megawatts of electricity. And standards that have been adopted by

the Energy Department since 1997 for clothes dryers and air conditioners and other appliances will eliminate the need to build 120

new power plants. These are real figures, and we think this is the

direction people should go. With respect to the discussion of governors—.

Mrs. CUBIN. The gentleman’s time has expired. If you could

make it quick.

Mr. OTTER. I think she answered the question. Madam Chairman, I reserved my opening statement and I would like it submitted for the record.

Mrs. CUBIN. Yes.

Mr. OTTER. Thank you.

[The prepared statement of Mr. Otter follows:]

63

Statement of The Honorable C.L. ‘‘Butch’’ Otter, A Representative in

Congress from the State of Idaho

Madam Chairwoman, thank you for holding this hearing today on the important

role that public lands play in the development of a comprehensive domestic energy

policy. I am pleased to join you and my colleagues in support of proposals to increase our natural gas supply.

At first look, you might ask, why would Idaho be interested in this? There are

no natural gas plants in Idaho. Almost 87 percent of Idaho’s electricity-generating

capability comes from hydroelectric power. However, while Idaho does not produce

natural gas, it now imports nearly 64 trillion cubic feet of gas that is used to provide

energy for homes, businesses, and industrial operations in Idaho—almost all of it

in my District.

Additionally, over 914 trillion cubic feet of gas is transported across Northern

Idaho from Canada into the United States to serve the demand for natural gas in

California, Washington, Oregon, and other western states. This trend is growing

dramatically. The U.S. Energy Information Agency forecasts that within 20 years,

demand for natural gas will increase 62 percent—much faster than it is being produced.

Madam Chairwoman, we need to develop an energy policy now—one that will utilize resources we know are already available right here in the United States—on public lands and submerged offshore in methane deposits.

Under the previous Administration, U.S. imports of foreign oil increased to 56 percent—7 percent of it from Saddam Hussein. Last summer, gas prices skyrocketed,

and the only answer from the previous Administration was to beg foreigners for

more oil, tap into our Strategic Petroleum Reserve, and actually cut off efforts to

create new sources of energy in the United States. Because of stringent regulations,

relicensing existing hydro, nuclear, or natural gas facilities has become costly and

time consuming. We should be seeking ways to bolster our national security by developing domestic energy sources and decreasing our dependence on foreign oil

The crisis is at near-critical mass in Idaho and the West. Record-low water levels

will severely harm hydroelectric dams’ ability to produce sufficient power to meet

Idaho’s needs—let alone increasing demands of Californians and other western

power users. The previous Administration’s forest roadless restrictions on Forest

Service and Bureau of Land Management lands is blocking access to 9 million acres

of Idaho public lands—land that most certainly would yield to the development of

new sources of natural gas supply and rich mineral resources. These rules were imposed contrary to BLM’s statutory duty to manage public lands for multiple use and

sustained yield.

Recent estimates reveal that 1,300 trillion cubic feet of natural gas and some 204

billion barrels of oil could be made available on American soil. That energy that

could fuel American industries, businesses, homes—and help offset the millions of

dollars that taxpayers are now paying for years of poor maintenance by the Federal

agencies in our national forests.

Madam Chairwoman, we also need to block efforts that would tear out existing

clean, renewable sources of hydroelectric power. Environmentalists have proposed

tearing out hydroelectric dams that produce up to 3,000 megawatts of power at their

peak—enough to power the City of Seattle three times over. Replacing the clean

electricity generated by the dams with the next cheapest source—natural gas—

would take years to implement, cost millions of dollars per year, and would further

exacerbate the growing demand for natural gas that is already there. Instead, we

should support efforts to swiftly relicense these dams, and authorize access to public

lands to increase transmission capability.

I look forward to working with you, Madam Chairwoman, and the rest of the

members of this Committee, to explore common sense proposals to unlock the abundant natural gas supply on the millions of acres of public lands and to review unwise directives such as the roadless regulations, that prevent access to those who

could untap resources, reduce the risk of forest fires, and to ease our nation’s energy

crisis.

Mrs. CUBIN. The Chair recognizes Mr. Markey.

Mr. MARKEY. Thank you, Madam Chair. Let me go to you, Mr.

Papa, the 1999 report of the National Petroleum Council (NPC).

The report estimates that the total of natural gas resource base in

the lower 48 States, including offshore, equals 1,466 trillion cubic

feet. Much of this resource base resides on Federal lands or Federal

64

waters. The NPC study asserts that a large portion of this resource

base is not open to either assessment or development.

So I would like to ask you some questions, if I may, about this

assertion, which I believe to be a total exaggeration. First of all,

I see that the NPC asserts that approximately 40 percent, or 137

TCF of the Rocky Mountain States resources is either closed to exploration or is under restrictive provisions. Isn’t it true that the

fine print in this report states that only 29 TCF of the Rocky’s gas

resources are actually closed to development, that is, in a natural

park or wilderness area, while the remaining 108 TCF are available for oil, gas or leasing under certain stipulations, such as seasonal limitations during calving periods.

So wouldn’t you agree that this 108 TCF is, in fact, accessible in

the same way the industry is arguing that in the Arctic Refuge,

that they can drill in a way that doesn’t disturb the caribou? Isn’t

it true that you are also permitted to right now drill in these areas

under the same conditions that you are requesting to be able to

drill in Arctic Refuge?

Mr. PAPA. Congressman Markey, I believe that a study is underway, as has been initiated by Madam Chairman, to take a look at

these numbers and see if we can get to some numbers that everyone can agree on. The issue that you bring up here is a very viable

one. The problem with the reasoning, in my opinion, that you just

generated, is that a lot of these areas that are accessible to drilling

and leasing have very severe restrictions on them. For example,

there may be a very narrow window such as a two month window

that you can access it.

Mr. MARKEY. I am looking at the chart here that Mr. Hackett,

the Chairman and President/CEO of Ocean Energy has provided,

and I am looking at Wyoming, and a lot of these look like they are

State restrictions for the NRA and fishermen that have been put

on the books by the State government, big game winter range, sage

grouse nesting, raptor nesting, prairie dog avoidance. I don’t know

how hard it is to avoid a prairie dog. I can move over here a little

bit, but just don’t disturb that nest. They do not seem like they are

the most restrictive. Most of them are State restrictions. Are we

supposed to preempt the governors in all these western States from

putting on these relatively modest seasonal restrictions?

Mr. PAPA. It is good we are having the debate on this because

it has opened up—in my opinion, the numbers are really misleading. As someone who tries to access these lands to drill, I can

tell you a lot of this land is not accessible.

Mr. MARKEY. When we are talking about seasonal here, aren’t we

really talking about what the NRA wants? They just want a season, but the rest of the year would be fine. Do you have a problem

with that? Does the NRA support your position on drilling?

Mr. PAPA. I am not aware of the NRA’s position on this .

Mr. MARKEY. I look at your own chart here and it looks to me

like only 3.5 percent of all public lands are off base, and it goes up

to 10 percent, but then you have to include the Department of Defense and Department of Energy lands as well, which are public

lands, obviously.

But I don’t know that we really want to move on to the Department of Defense reservations for drilling. But it is only 3.5 percent

65

if you eliminate the Department of Defense and Energy. And these

are under the—this is the Independent Petroleum Association of

America study that I am reading that was provided to me here

today, which seems like a pretty low percentage. Let me move on

quickly. The NPC report also asserts that 76 trillion cubic feet are

closed to development in offshore areas, that is, California, Florida

and Atlantic coastal moratoria imposed by Congress with the full

support of the affected States.

Are you calling for a repeal of the moratoria on offshore drilling

along the Atlantic and Pacific coasts?

Mr. PAPA. At this time, no. We are designating it as resources.

Mr. MARKEY. So you are not calling for repeal? Okay. So as I look

at the numbers, it seems there is only 105 TCF—29 in the Rocky

mountain States and 76 on the OCS—of the natural gas resource

base that are not accessible. That means there are 1361 TCF, of

the 1466 TCF natural gas resource base which are available for development, and I am told at a 31 TCF per year consumption rate,

that is enough to meet America’s anticipated needs for over 40

years. Does that number square with you? Do you disagree with

this number that 1361 TCF would be available, at least for part of

the area for drilling?

Mr. PAPA. That is the potential that is out there. That is not

proven reserve. In a competitive marketplace, I can assure you that

if that were readily available—.

Mr. MARKEY. So even that number is speculative, is that what

you are saying? Even that you don’t know. It could be lower.

Mr. PAPA. It could be lower. That is exactly right.

Mrs. CUBIN. The gentleman’s time has expired. I would like to

answer one of the requests that you brought up, Mr. Markey, if you

do not mind. You were talking about the chart where the seasonal

use restrictions. I wanted to point out that they are not really State

laws or State regulations. The State manages the wildlife, but the

habitat is managed under the Federal Government, so that is the

answer to that.

Mr. MARKEY. If you would yield. I am told that many of these

restrictions are put in place by the BLM at the request of the State

gaming officials, and that it is only the Federal Government responding to the State requests in almost all of these restrictions.

Although they don’t have the legal authority to impose them requested by Wyoming or Arizona or other States.

Mrs. CUBIN. Based on managing the animals, that would be correct.

Mr. MARKEY. So that is a State action.

Mrs. CUBIN. But I can’t say that all or most of them are. I don’t

know the answers to that but fortunately we do not need to know

the answer to that because we were smart enough as a Congress

last year, Mr. Skeen, and I, as you recall, offered the amendment

to have the USGS do an inventory of all of the mineral wealth underground in the United States, and then do an overlay of any

rules, regulations, laws designations that restrict the possibility for

exploration or introduction. And this is a priority of Secretary Norton. I have talked to her yesterday. So, soon we will have the facts

that we need, so that we can do something. The Chair now—.

66

Mr. MARKEY. Can I just? I await that report. But pending that

we have the Independent Petroleum Association’s report, which

makes it clear in their own study that 95 percent of it is available.

Mrs. CUBIN. One last thing, he and I need to do this off the

record. Believe it or not, it is okay to mine coal in the Black Hills

National Forest, but it is only okay to mine it where it isn’t. So the

point is, it is not okay to mine coal in the Black Hills Forest where

it is, but it is okay to mine it where it doesn’t occur. So that is my

point.

Mr. MARKEY. So, I don’t care honestly, as you can appreciate,

whether your constituents can kill animals or not, but your constituents might care. So I think these are primarily restrictions imposed by the States for your constituents.

Mrs. CUBIN. We appreciate your concern. The Chair recognizes

Mr. Gibbons.

Mr. GIBBONS. Thank you, Mr. Chairman. To follow up on what

you were just mentioning. The State of Nevada is nearly 90 percent

owned by the Federal Government. Yet in the State of Nevada,

probably 1000 of 1 percent has either oil or gas deposits located on

it. Oil and gas is not located under every square inch of available

land to determine whether or not it is there for production. And it

is found where you find it, which makes many of these large leases

that you have out there literally valueless when it shows that you

have entered a dry well and not found what you thought you had

found in the beginning.

So speculation, of course, as to what might be under there at this

point in time is, as a geologist would say, only as good as as far

as you can stick your finger in the ground to see what is there. You

have to spend that money. You have to invest in those drilling operations to make that determination. Nonetheless, let me say that

I do support the effort to increase our resources, energy resources

in this country.

There is, no doubt, in my mind, even though we are spoiled, we

are a Nation that has 5 percent of the world’s population using 25

percent of the world’s energy, but I guarantee you that not one person in this room is ready to reduce the quality of life. They will not

reduce the quality of their health care and the benefits that have

come from the development of resources in this Nation. And I dare

say that once the rest of the world begins to catch up with us in

the quality of life and things that we have enjoyed because of our

resources, that the consumption rate will pretty much level out in

those countries at about our per capita rate of consumption of

energy.

My point being in all of this is that in this support for your effort

to supply this Nation, which has seen in recent months some great

challenges to its energy consumption, what single issue, what is

the biggest impediment that if we were to go at it legislatively, taking a bite of the apple, not being able to take the whole thing at

one time, but one bite of the apple, what impediment would you

like to see us address first? And I will begin, and let you go right

down the aisle just as Mr. Otter did.

Mr. Simmons.

Mr. SIMMONS. Unfortunately, I think the magnitude of the problem is such that we don’t have the luxury of prioritizing and doing

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one thing at a time. If, for instance, we decided to waive every access issue, which I know will not happen, we open the door to the

next problem, which is an unbelievable limitation in people and

rigs. So it goes on one problem after another. So I think one of the

critical needs in getting the proper national energy strategy together is to recognize how fragile our energy supplies are right

across the face of energy. We can’t make the mistake of saying

there is one area we can solve, and then we are out of our energy

problems. Unfortunately we have a thousand things to simultaneously solve.

Mr. HACKETT. It is hard to disagree with that assessment, and

I think that, as with many things in a free market economy, we

tend to realize too late when we find ourselves in the situation, and

oftentimes we tend to ignore that we are heading into it as well

politically, in particular, and I think California is a great example

of that. I think Matt is absolutely right. I think we need to be absolutely committed to the notion that we have to develop the

resources we can environmentally safely develop as quickly as we

possibly can to bridge us into the period when we can have the

very serious debate about things like nuclear energy and improving

our ability to import LNG and bringing a pipeline down from Alaska.

Whatever it takes from government and industry hand in hand

to make that happen, we need to get serious about it. We needed

to get serious about it probably five years ago. The industry itself

probably started to get serious about it two or three years ago in

terms of making pronouncements up here, but it is upon us.

Mr. PAPA. Congressman Gibbons, in response to your question, I

give you two answers. One, I think we need a pragmatic review of

surface access in the lower 48 States and the outer continental

shelf in terms of availability to drill and balancing all considerations including environmental. At the same time I would recommend that you look very hard at fast tracking the permitting for

an Alaskan gas pipeline. I think that is a longer-term solution to

the problem.

Ms. SPEER. Thank you. I think that is an excellent question. And

I would say corporate average fuel economy standards are the

number one priority. They have been frozen by a congressional

rider since 1994 at 27.5 miles per gallon for cars and 20.7 for SUVs

and trucks. By increasing that to an average for both of about 30.9

miles per gallon we could save over 1.6 billion barrels of oil annually by 2020. That is more oil than the government estimates

would be produced from under Arctic Refuge, the entire outer continental shelf, plus the amount we import from Saudi Arabia, Kuwait, Qatar, Bahrain and the United Arab Emirates. That is the

kind of step we ought to be taking to help our Nation reduce its

dependence on oil.

Mrs. CUBIN. The gentleman’s time has expired. The Chair recognize Mrs. Napolitano.

Mrs. NAPOLITANO. Thank you, Madam Chair. May I defer to Mr.

Inslee? He has to leave.

Mr. INSLEE. Thank you very much. I do have a flight. I appreciate that, so do my children. My name is Jay Inslee. I represent

the First District. It is located in the suburbs north of Seattle. I

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am sure you are aware of it. The folks in the State of Washington

are seeing their electrical prices go up five-, tenfold or at least the

wholesale prices to date, which are already resulting in astronomical retail price increases. We have an emergency situation up in

the Pacific northwest right now. I say that because a lot of people

think it is just California. It is felt in the Pacific north as well. And

a lot of the things we have been talking about potentially have

some resolution five to 10 years from now.

But I want to focus on today and tomorrow with my constituents,

because the fact of the matter is, this year, to prevent us from tripping into a recession, we need some relief led by this administration today on two things: Really, the only two things we can do

right now, today, this week, which are conservation and a realistic

wholesale price cap on electricity. And frankly, neither one are we

seeing leadership too much on getting those immediate help for the

Pacific northwest and whole west of the United States.

I want to ask you gentlemen your thoughts in that regard. First,

Mr. Simmons, I noted you were in the Bush-Cheney transition

team. I think I read that in your testimony. What did you advise

the administration and what is their position on immediate conservation efforts to try to reduce the demand in the next five to six

months in the western United States on how to help us give incentives for conservation? Can you tell us what you advised the administration and what their position is as far as you understand

it?

Mr. SIMMONS. My advice has been that conservation is a very important thing to take seriously. But I do not honestly believe in any

stretch of the way that we can do anything in the next 6 to 12

months to even make a dent on these terrible problems. I am originally from Utah. I am afraid Utah will get sucked into the California problems, too. I would love to think we can conserve our way

out, but I think we are actually talking about Draconian life-style

changes, as was said earlier, none of us in this room are probably

emotionally prepared to do.

I think one of the dangerous things we could do is hold conservation out as a silver bullet. That has nothing to do with not being

a really strong believer that we have to find ways to start conserving energy, but I just do not believe we will all turn in our

Suburbans. I think we need to hunker down for a possible decadelong solution to a really massive energy problem. I have described

this in a Senate hearing a month ago as a Marshall plan of energy

that will literally take us a decade to do, and I think the bad news

is there is no solution in the next 6 months.

Mr. INSLEE. Well, thanks for the optimistic note. I frankly think

you are dead wrong, just flat dead wrong. It is that kind of thinking that got us behind the eight ball. I tell you, if we achieve 10

percent conservation of electrical usage in a retail and commercial

basis in the State of Washington, we will relieve enormous pressure on our utilities during peak demands. As you well know, it is

the peak pricing in the electrical market that kills utility. If we

look at this and if we hit 10 percent conservation, we will dramatically reduce the pricing benefits that the generators have in a moment.

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And so, I guess I will reiterate the question, Mr. Simmons, for

instance, did you encourage the administration to get behind an effort to increase our CAFE standards and if so, what was their response?

Mr. SIMMONS. No, I didn’t. I actually do not believe that CAFE— that we mandate people to do things they are not prepared to do.

I think the evidence is you can enact CAFE standards and Americans will buy sport utility vehicles and suburbans, so that wasn’t

any of my recommendations.

Mr. INSLEE. You understand the goal is to close the loophole in

the CAFE standards so that if you close the loophole, you do away

with that loophole. You understand that can be done, I am sure.

So what you are telling me is you are here to advocate drilling in

national monuments before the United States of America closes a

major loophole in their CAFE standards, and simply gains gasoline

by conserving it. Is that what you are telling us?

Mr. SIMMONS. No, I am saying we need a very carefully designed

and very balanced energy policy that does a little bit of everything,

because not one thing will get the job done.

Mr. INSLEE. I agree with you. Are you telling this panel that we

should allow drilling in national monuments, crown jewels of the

west before we increase CAFE standards? Is that your testimony?

Mr. SIMMONS. No, not at all.

Mrs. CUBIN. Mr. Inslee, he answered your question.

Mr. SIMMONS. I don’t know that anybody here is proposing drilling in national monuments.

Mr. INSLEE. Just so you know, President Bush yesterday said we

should drill on national monuments.

Mrs. CUBIN. The gentlemen’s time has expired. The Chair recognizes Mr. Rehberg.

Mr. REHBERG. No questions.

Mrs. CUBIN. You have no questions. Mr. Inslee, I believe it is

your turn now.

Mr. INSLEE. Thank you, Madam Chair, for your courtesy.

Mrs. NAPOLITANO. I am sitting here shaking my head in disbelief

because we in California are going through the energy crisis, and

now we are faced with the increase in gas prices because of its ability to create energy, and we are now facing, supposedly, a crisis in

supply of gas.

I am not quite sure that I totally agree with some of what I have

been presented with in that for years, we have been saying we

have more than ample supply of gas. We have heard it for years

when I was in a State assembly. I have heard it in dialogue, I have

heard it in testimony, and now we are saying that we need to go

and drill in areas because we must find—to make sure that we

have enough, and if I heard you, Mr. Papa, you stated that you did

not know how much there was.

Our chair has indicated they have done an assessment and evaluation, and they have an idea why most of these precious resources

are. Just recently there was a statement made by me that I am

very concerned about continuing to not necessarily explore but dig

out our resources, because in the end, we may not leave that much

for our successors, the children, grandchildren and future generations.

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While we need to know what we have and be able to tell our constituents, our friends and our neighbors that conservation is going

to have to be a fiber and not just a side line. It is a major portion

for me in the State of California that they, to be able to tell my

constituents that they need to understand that the future rests on

every one of us, not just the industry, not just government, but everyone.

That said, I am concerned because of the implications of not necessarily wrongdoing, but the gouging by the providers of energy

that are driving up the prices because they control the abilities for

us to be able to get it. We no longer produce it, so we have to pay

the price. And my understanding that that is a problem, that we

are now looking at in the CPUC, looking at the three contracts of

marketers that have brought capacity through the El Paso natural

gas and others, that they may have controlled, that they were

able—my entities in California bought, were unable to use, sold

back and this particular entity held on to it driving the price up.

To me that is unconscionable, because people that are mostly

hurt when they can’t pay the price of this energy are people on

fixed income. The poor people. And I just can’t see why we can not

come to other meeting of the ways to provide energy and be able,

especially now that we are beginning to feel a downturn in the

economy. We are just keeping fueling while somebody is making an

inordinate amount of money for their investors. And I am going to

look at some of this material.

I have just found most of it as I came in. I would like to see a

lot more dialogue going on. I would like to see more people who can

give the other sides of it, so we can better understand and have

some clarity to where we are and what we can do about it. I thank

the Chairwoman for bringing this session, at least, to light so we

can make some of our frustrations known and maybe have you talk

to us about what is it that you can help us clarify in our minds

when we talk to our constituents to say look, this is what needs

to happen. But so far I haven’t seen that I haven’t heard that, and

I would like to see how you gentlemen can somehow clarify a little

bit of that mystery behind what is happening, and now can we

work together so that we may be able to do our job and help you

do yours.

Mr. PAPA. Congresswoman, thank you. I think that is a very germane comment that comes up when you have got an upset condition in California, and most everywhere else, and your constituents

are saying why is this upset? It hasn’t happened in the past.

Speaking for natural gas producers in the U.S., and, as part of

IPAA, I will say that one thing we will welcome the opportunity

to discuss with you, one on one or as a group, more details on this,

but the one thing that hopefully will bring some light to it is if you

think about it, that every single gas well in the United States for

the last several years has been producing at maximum rates 365

days a year, and yet we still don’t have enough gas to really meet

the demand requirements there.

I can tell you that there has been no curtailment by any producers or anything along those lines. We as an industry are racing

as hard as we can. We have increased the level of drilling activity,

and we are trying to grow supply as fast as we can. We are facing

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a higher depletion rate, a treadmill every year. If we stop drilling

as a Nation for one year, we would lose 23 percent of our productive capacity in one year, and we have to make up that 23 percent

to just stay even. So I do think that more dialogue is absolutely

necessary on this subject, and we would certainly welcome it.

Mrs. NAPOLITANO. I appreciate your comments and thank you,

Madam Chair. There will be a hearing at next week at the State

legislature in California to deal with the specific comment I made

on the overpricing or the holding back of the supply. Thank you.

Mrs. CUBIN. One comment I would like to make is with retail

prices capped as the California electric dereg did, it gives the consumer no incentive whatsoever to conserve, so that could be something that ought to be brought up too, maybe.

Mrs. NAPOLITANO. Madam Chair, I couldn’t agree with you more,

but I think it is inherent upon the leadership to begin espousing

down to the local conservation, the methodology and do concerted

efforts through the media, it is the highest authority. They have

every right and every ability to get it across. It happened when we

did water conservation some 10 years ago and we met it and were

able to survive, and I think we will survive this one. But you are

right. I think we need to do a concerted effort for teaching people

when, where and how to do it, because we take it for granted we

know, people may not.

Mrs. CUBIN. Right. The Chair now recognize Mr.Rehberg. He has

a question.

Mr. REHBERG. Thank you, Madam Chair. It is often said that life

kind of repeats itself, and I found myself remembering exactly 20

years ago when I first came to Washington D.C., it was May of

1979 in the middle of a gas crisis. Sitting in back of me where my

staff is sitting today, I sat behind Congressman Marlenee staffing

this Committee. And at that time we were talking about energy

shortages and how we were going to conserve our way out of this

problem. We funded, over the course of the next three years, a lot

of solar energy policy, a lot of wind energy policy a lot of alternative energy policy and that seems to have fallen by the wayside.

Mr. Simmons I totally agree with you, with all due respect to my

colleague from the State of Washington. I fear that we are creating

a debt even more serious than the financial debt that we were creating for the next generations, the energy debt we are creating because a day will come where we will not be able to dig one more

shovel full of coal or one more gas well can be punched, whether

it be in Alaska or Montana. So I would not feel good about my representation for my State if we didn’t seriously address the issue of

production aside from conservation.

We will do the best we can with conservation. One of the things

I remember from 20 years ago was a stupid policy called the windfall profits tax, and here we are again talking about the same thing

in the State of Montana. I see in the legislature they just introduced the windfall profits tax on the electric companies out there

because of the wholesale price of energy.

My question to you, and I apologize I looked through the materials and I didn’t see if you touched on it. If you had, I apologize.

I was looking for your resume and I don’t have that as well. I see

you are from the investment arena. Do you feel that the Federal

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taxation policy and the policies such as another quick example,

CARA, where are we going to take off shore drilling revenues and

put it into something called purchases of additional properties as

opposed to taking that revenue and turning it into a solution for

the energy crisis, keeping it in the same arena. Do you think our

taxation policies in many of the things we talk about, capping of

electrical costs and such, give a true picture? Has it made it more

difficult for your clientele or your group to be able to fund people

in the production of energy that this country needs?

Mr. SIMMONS. I think the thing that has been the real inhibitor

more than anything else is energy prices that were just simply too

low. Unfortunately, America got to thinking they were real, but

they virtually devastated the petroleum industry. They almost

wiped out the country’s spare energy fuel reserves. The industry

spent 30, 20 years trying to cope with low energy price by

downsizing, and we became a shadow of ourselves. It was not the

tax policy. I think there are some creative things we can do on tax

policy, particularly in some areas that won’t work unless there is

some extra stimulus.

This is a personal view, but I don’t believe the current energy

prices are probably yet high enough to actually pay for an energy

Marshall plan. And someone has got to foot that bill. I think that

we have an enormous education ahead of us to educate Americans

on the proper relationship of energy costs. The natural gas consumers last year, commercial and residential spent about $31 billion on natural gas. They spent $7.7 billion on movie receipts. Now

I don’t think that necessarily means they should not have done that. We spent $135 billion on residential energy last year and we

spent $205 billion last year on advertising, most of which doesn’t

ever get seen and all of which is embedded in costs.

So I think in this complicated energy relook we have to basically

come back and know an awful lot more about energy costs, and if

we are crazy enough, reckless enough to go back and try to windfall profit, we will never get the energy Marshall plan built because

it will not be built by the government. It has got to be the private

sector and they have to have money or they will not be able to afford it. It will be costly. We are talking trillions of dollars.

Mr. REHBERG. Would you say also because of the cost of regulations it has inhibited the companies’ ability to get out and find the

additional resource that is available to us.

Mr. SIMMONS. Absolutely. It has not helped anything, but it has

been one of a whole long laundry list of problems.

Mr. REHBERG. Certainly it is not one issue this is, it is the cumulative effect.

Mr. SIMMONS. Yes, the buildup over 30 years.

Mr. REHBERG. Thank you, Madam Chair.

Mrs. CUBIN. Thank you.

The Chair recognizes Mr. Carson.

Mr. CARSON. Just a couple questions for you. I thank you for

being here today. Ms. Speer brought up the point that was not addressed in the testimony I heard, the testimony is quite eloquent

and the evidence quite well that the actual footprint of new exploration platforms is actually quite low . She talked about the coastal

development, the infrastructure needs to back that up. I want the

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three panelists from the energy industry to talk about their experience with that.

And Ms. Speer, if you might respond to what their concerns are

that it is not so much of the exploration equipment itself, but in

fact, the roads in infrastructure to back that exploration up.

Mr. SIMMONS. There was a terrific article in The New York

Times in the last couple of months on the wildlife refuges of Louisiana, and I wasn’t aware that Louisiana had wildlife refuges, and

the data was remarkable because they have been doing the spoiling

of the coastal plains in Louisiana for over 50 years now, and the

numbers in The New York Times, I have never known The New

York Times to be proenergy, were really stunning.

And so I would encourage you to have one of your staff dig out

that article and look at it and just see that—you know, some stuff

built 50 years ago was really built sloppily. But anything in the

last 20 years has really been done in an unbelievable—I am not in

the energy business. I am in the investment banking business. But

I have worked with these energy companies for 30 years. They are

very responsible corporate citizens. Most executives are passionate

outdoorsmen. I have never known an outdoorsman that doesn’t love

the environment. So I think the reality turns out to be quite different than the rhetoric.

Mr. HACKETT. I might add the last five years are dramatically

different than the first 15-, 20-year period that was referred to earlier in the testimony. As with most statistics they can tell you what

you want them to tell you, depending on what period you choose.

I do not know the actual details behind the comments that either

of the witnesses have given you on the shoreline, but I will tell you

that when you look at alternate fuels, which we thought might be

the holy grail back in the late 1970’s, early 1980’s, we need to be

very careful to know what we are getting into in terms of cost, in

terms of damage to the environment.

You talk about substituting for an offshore platform that has a

one block imprint, granted, with affiliated structures on shore, and

you look at an equivalent power generating capacity of a wind

farm, some of which are out in California, and you are talking

about sizes that are 320 times the size, 45 square miles to have a

wind farm with comparable capacity. Ten square miles for a

photovotaic farm to be able to produce solar energy. We were not

talking about always environmentally friendly alternate technologies. We have got to use whatever we can the best way we can,

but we have to keep in mind that no solution is perfect. There is

always a balancing act that has to occur.

Mr. PAPA. Congressman Carson, I would echo those comments. I

would recommend that you might want to take a look at this DOE

report entitled ‘‘Environmental Benefits of Advanced Oil and Gas

Exploration and Production.’’ I can tell you that technologies today

are much different than they were 20 or 30 years ago. Horizontal

drilling, ability to drill multiple wells from a single location. Lots

of activities. And I think the oil industry is unfortunately stereotyped by things that may have occurred 30 or 40 years ago, certain

specific upset cases that may have occurred. But I think a look at

the last five years particularly shows that we can be very responsible environmental citizens.

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Mr. CARSON. Ms. Speer do you have a comment about those?

Ms. SPEER. Yes. First of all, I think that we all agree that the

industry has done a tremendous job in improving its record of environmentally sound development. Things have improved dramatically in the last 20 years. That said, there are still very significant

impacts that accompany offshore oil and gas development. Spills

happen routinely. They happen in great magnitude.

You need roads, you need processing facilities, you need storage

tanks, you need an infrastructure that can have very significant

impacts in the coastal areas. I was reading the comments of the

State of Louisiana yesterday on the 5-year program, and they talk

about continuing impacts that they are experiencing, particularly

with respect to their coastal wetlands.

Also, you know, you have air pollution that generates over 100

tons per platform per year. Nearly 70 tons per exploratory well per

year. You have water pollution, enormous amounts of waste are

generated by those operations, and a lot of it is not handled by a

closed loop system. Most of it is not on the OCS. Right now most

of it is discharged over the side after minimal treatment.

Mr. CARSON. Great. Let me ask you a different question about

that. The testimony of the IPAA was helpful about some of the tax

policies that might be beneficial. Being from Oklahoma, I have a

lot of friends in the oil and gas industry, and they talk often about

tax policies that would encourage stripper wells and things like

that from being kept up. I would like the comments of Mr. Simmons, Hackett and Papa about now that the emphasis seems to be

access, if we have different tax treatment in the oil and gas industry, whether the deductibility of certain costs or changing the AMT,

the very things you proposed in your testimony, to what extent will

that get us to the holy grail of increased sustainable natural gas

production?

Mr. SIMMONS. I would repeat a comment that probably sounds

like a broken record, but there are no silver bullets. Every one of

them are important, and unfortunately, they all have to be done at

the same time. And to the extent we don’t do ten of the thousand,

we are basically whatever the percentage that is behind. And

again, it is the best thing you can do in conservation to the best

thing you can do on access. And if we don’t do them all at the same

time, then the awful problems of California are going to be all over

the United States for the next decade.

Mrs. CUBIN. The gentleman’s time has expired. I would like to

thank the witnesses for their valuable testimony and thank the

members for their questions. This Subcommittee may have additional questions. And we will ask that you respond to them in writing if you would not mind doing that.

I would like to thank the panel, and you are free to go. I would

like to recognize now the second panel of witnesses, Marlan W.

Downey, President of the American Association of Petroleum Geologists; Robert Fisher, President of the Montana Petroleum Association and Vice President of Ballard Petroleum; and Mr. David

Alberswerth, Director of the BLM Program for The Wilderness Society. If you would please take your places at the table.

Mrs. CUBIN. Thank you. First I would like to recognize Marlan

W. Downey.

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STATEMENT OF MARLAN W. DOWNEY, PRESIDENT, AMERICAN

ASSOCIATION OF PETROLEUM GEOLOGISTS

Mr. DOWNEY. Thank you, Madam Chairman. I am President of

the American Association of Petroleum Geologists, which is an

international association that represents the energy professionals

in geology, geophysics, and engineering worldwide. I was greatly

impressed by the testimony and the questions coming before us,

and I am going to skip over the testimony that I have provided in

written form. And I am going to attempt to talk very briefly about

some elements of the questions that have been brought up previously.

I would like to start with just the simple description of what the

scale of the problem is. I think from all estimates, we are going to

need about 10 trillion cubic feet of new gas every year for the new

demand. That is a tough thing to do. The good thing is that we do

have enormous resources undiscovered, unproduced, but estimated

in the United States. That is the good news. The bad news is that

we do not get to go to Saudi Arabia or Qatar or Mexico or Venezuela for any of those supplies, as we can do for oil. America has

to solve its gas problems all by itself, within its own boundaries,

with possibly a little help from Canada.

Gas is very difficult, very expensive, to transport, so forget about

any significant help on our 10 trillion cubic feet of gas increase in

demand every year from any other place than internal. It is our

problem. Fortunately we do have a very large resource and I would

say that, especially for that part that is located, appears to be located in the Rocky Mountains; I think it is vastly underestimated

in the Rocky Mountains. We are going to need all of that, and we

are going to need all the help we can get from conservation while

we are at it.

Now, the good news is that once upon a time not too long ago,

in fact, for 25 years running, we found an extra 10 trillion cubic

feet of gas every year. Well, folks, we had 2000 rigs running. Right

now we have got a thousand. And we are barely able to stay ahead

of the game and to find each year what we burn up last year. Natural gas is important in the United States for two reasons: One is

that it emits a lot less carbon dioxide than any other fossil fuel

when converted to electricity; that is good; the second one is that

it provides much more nearly a quick fix for local energy problems,

because given the equipment, you can start up a large gas turbine

electric generating plant, in probably under a year, as opposed to

four or five years for a coal-fired plant and an infinity currently for

a nuclear plant.

So that is a powerful reason why we were interested in being

able to handle that natural gas. When we put those additional one

thousand rigs to work for us to add that ten trillion cubic feet of

gas, we have another subtlety in the problem. Shell won’t help us,

Exxon won’t help us, ARCO and Amoco won’t help us. All the majors have left the domestic onshore. The problem, and the solution,

is going to be almost entirely with the small mom-and-pop operators, the independent producers that are drilling with most of those

thousand rigs— using those thousand rigs currently.

And I heard a mention of the taxation problems. Is there

anything that can be done to help? Well, I will say that since the

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solution for this problem, if it is going to be attacked from a supply

standpoint, is going to be the mom-and-pop independent operators,

that there is a world of difference in how they need to operate in

a tax system than the large companies. The small companies are

capital short. They need to get their money back from each well

they drill before they can drill another one. Currently you have to

wait 7 years to fully recover your expenses, your general expenses

from drilling a well.

That doesn’t bother Shell or Exxon, but it does bother small companies. Something that allows small companies to recover their

cost, the same year they start recovering revenue, would make a

world of difference for little companies. No less tax to the government, no greater benefit to the small company, but cash flow, little

companies live on cash flow.

At the end I have to agree, I would love to have the problem

solved with conservation, but there isn’t a chance in hell in the

short term that can be anything but a partial help. I would love

to have gas brought in from Alaska, but you are talking a decade

from now. Short term, to keep our head above water, we better be

encouraging domestic drilling by small companies in the United

States. And if we do not, well, then, our national planners better

be looking at a new energy future for the United States, one that

doesn’t count on natural gas.

Thank you, Madam Chairman.

[The prepared statement of Mr. Downey follows:]

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Mrs. CUBIN. Thank you, Mr. Downey. The Chair now recognizes

Mr. Rehberg for an introduction.

Mr. REHBERG. Madam Chair, it gives me a great deal of pleasure

to introduce the next gentlemen to you, Bob Fisher from my home

State, the State of Montana is president of the Montana Petroleum

Organization, an organization I have had a real close association

with since my dad was the executive director of the Montana Petroleum Association for many years. He is the senior vice president

and managing partner of Ballard Petroleum holdings, a big name

for a little company, and to tell you how much I have appreciated

and honor the Ballard family, when I became lieutenant governor

in 1991, I immediately appointed Dave Ballard to the Oil and Gas

Commission in Montana, a position he still holds at the age of 44

and is chairman of that commission.

The most recent governor has reappointed him. And we just look

to this family and to this company for their leadership within this

arena that we are talking about today. Ballard Petroleum employs

28 people and produces 1100 barrels of oil per day. Bob is a professional geologist who, despite his youthful appearance, has spent 25

years in Montana’s oil and gas business.

Bob, welcome to the Energy and Minerals Resources Subcommittee. I really appreciate your taking the time. I know how

many barrels of oil it took to fly you out here.

STATEMENT OF ROBERT FISHER, PRESIDENT, MONTANA

PETROLEUM ASSOCIATION, VICE PRESIDENT, BALLARD

PETROLEUM

Mr. FISHER. Thank you very much, Congressman Rehberg, thank

you for your introduction. Madam Chair, members of the Committee, thank you for the introduction. I am here on behalf of Montana Petroleum Association and some of the mom-and-pop operations that Mr. Downey has just referred to. Independent producers supply over half of the Nation’s natural gas needs. The company I helped establish, Ballard Petroleum is one of the few independent producers remaining in Montana. Since there has been so

much addressed of the National Petroleum Council findings, I

think I will address a few other concerns and some of the National

Petroleum Council findings. Secretary Pena noted in 1998 that for

a secure energy future, government and private sector decision

makers need to be confident that industry has the capability to

meet potential significant increases in future natural gas demand.

That is a fairly prophetic outlook by Mr. Pena.

It is important to note that at the same time, the Clinton Administration was restricting air emissions from coal-fired generation facilities, and we are restricting access to government lands and access to the basic resources. These are various forces that are put

in motion, along with hundreds of other small things we have done

over 30 years that have combined to create a very bad recipe for

the long-term supply problems.

In Montana, to give you an idea where we have been for the last

decade or so, we have had three major forest service decisions, and

I want to focus in on the forest service and BLM. Those three

major decisions started with the Beaverhead National Forest in

southwestern Montana. We started with about a million six, 2.1

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million acres of land, a million six of it legally available. The games

of explaining what is available for lease. No surface occupancy was

almost a half a million acres. When they came out with their final

EIS, a half a million acres is put into NSO; 741,000 acres is put

into controlled surface use with timing limitations; and we had

415,000 acres, bless their heart, that were standard lease terms,

and it goes downhill from there.

The next forest service decision has 997,000 acres available. Of

that, 185,000 is put off discretionary unavailable, legally unavailable is 144,000 for wilderness areas. No surface occupancy takes up

384,000 or 45 percent of the forest remaining. Controlled surface

use and timing limitations takes up another 25 percent, and bless

their heart, they gave us 24,000 acres out of a million acres as

standard lease terms. It gets worse. Lewis and Clark came along.

The decision there in 1997, we had 1.8 million acres of land available to start with. 614,000 were the Bob Marshall wilderness areas

and I love them. They are a great wilderness, but then the remaining 1.2 million acres, 356,000 no lease, the entire Rocky Mountain

area of the Lewis and Clark Forest. 363,000 acres, no surface occupancy. Controlled surface use and timing limitations takes up another 400,000, and bless their heart, standard lease terms, zero

acres.

I am here to tell you that access in Montana has been severely

restricted and that the lands that were allowed to explore on and

to help this country meet its energy needs have been severely restricted in Montana. As far as moving forward I think there have

been a lot of good comments today, conservation being a very important issue, but I also think attitudes need to change, across the

country, we need to work with the conservation groups, with environmentalists, with preservationists, industry and State, local and

Federal governments. NIMBY has to leave. NOPE has to leave.

And NOPE means ‘‘not on planet earth,’’ ‘‘not in my backyard.’’ .

This whole attitude that this country needs energy, it is important to our economy, it is important to our way of life and our quality of life. And we all need to come to the table and work together.

And there are some very successful cooperative efforts out there

that we could look at and model going forward. Some of these are

known as the petroleum showcase models that are out there in the

Forest Service presently.

I am a small operator and I can tell you this: these are personal

experiences, when you go to do business on Federal lands, it takes

30 to 45 days to permit a well in Wyoming. I can drill it in 8 days.

Okay. That is a 9,000 foot materials test. If I drill the same well

which I did on Forest Service administered grasslands in Wyoming,

it took me 6-1/2 months to get a permit. This country drills 24,000

wells a year. We have need to go to a pace of approximately 40,000

wells a year. We are short drilling rigs, but we also have to increase the pace. Streamlining the permitting process, bringing all

the factions to the table when we are developing areas, is really

critical for our country to meet, just to arrest the decline of production, let alone find new reserves.

So I know my time is short, but there are a lot of acres that the

Federal lands cover, 200— over 252 million acres in the west. Not

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all those acres are in productive areas. The geologic basins that

hold oil and gas are unique.

So are some of the environmental concerns cover very unique

areas, and sometimes we clash, but because we clash does not

mean that the oil and gas sector has to be locked out of those

areas. There are enough technologies out there now that we can

mitigate environmental concerns, and I would just as soon have the

Wilderness Society at the table with me, or the Nature Conservancy at the table with me so I know what to protect when I go

into an area so I can develop those resources, because it does nobody any good to be issued an APD, an approved permit for drill,

and then be served with a lawsuit and we begin the litigation.

And there are enough examples throughout the Rockies where

litigation can last up to a decade for a well to be drilled. And that

serves nobody any good. I thank you for your time.

Mrs. CUBIN. Thank you.

[The prepared statement of Mr. Fisher follows:]

Statement of Robert W. Fisher, President, Montana Petroleum Association,

and Senior Vice President/Managing Partner, Ballard Petroleum Holdings, LLC

Madam Chairman, Members of the Committee, for the record my name is Robert

Fisher and I am the President of the Montana Petroleum Association (MPA) and

Managing Partner in a small independent exploration and production company

headquartered in Billings, Montana. It is a distinct honor to be here today at the

invitation of Congressman Rehberg to represent the MPA and independent oil and

gas business at work in the Rocky Mountain States.

Independent producers supply over half of the Nation’s natural gas needs. The

company I helped establish, Ballard Petroleum, is one of the few independent producers remaining in the state of Montana. I am here today to attempt to convey

to this Committee the challenges facing all exploration companies in their quest to

help this Nation meet its energy needs. Specifically, I would like to address some

of the findings of the 1999 National Petroleum Council report on natural gas, entitled Meeting the Challenges of the Nation’s Growing Natural Gas Demand .

The 1999 NPC report was prepared at the request of then Secretary of Energy,

Federico Pena. Secretary Pena noted that, For a secure energy future, government

and private sector decisions makers need to be confident that industry has the capability to meet potential significant increases in future natural gas demand. A very

prophetic outlook indeed.

It is important to note that in 1998 the Clinton Administration was restricting

air emissions from coal-fired generation facilities forcing this sector toward increased natural gas usage to meet new air quality standards and at the same time

fostering an environment in our Federal land management agencies that continued

to restrict access to government lands and access to the basic resource. To put these

various forces in motion without consideration of the impact on the commodity of

natural gas was poor policy decisionmaking at best, and a recipe for long term supply problems.

The 1999 NPC report identified several key factors influencing natural gas supply

and deliverability to this nation. These factors include:

• Acess to resources and rights-of-way

• Continued technological advancements

• Financial requirements for developing new supply and infrastructure

• Availability of skilled workers

• Expansion of the U.S. drilling fleet

• Lead times for development

• Changing customer needs

In regards to the National Petroleum Council’s report, I would like to relate my

company’s specific interactions with various government agencies and other examples of Montana’s attempts to help meet this Nation’s energy needs.

First, a history of various Federal agency actions was prepared to give this Committee a reference point from which to evaluate the ability of the industry in Montana to help assist this Nation in the development of energy resources and power

generation.

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In January 1994 the Beaverhead National Forest began scoping for a new Environmental Impact Statement (EIS) for oil and gas leasing. In February 1996 a

Record of Decision (ROD) was issued concerning the original 2,149,300 acres. • Legally Unavailable 503,400 acres (23 percent)

• Administratively Unavailable 9000 acres (<1 percent)

• Administratively Available 1,636,900 acres (76 percent)

Of the Administratively Available acreage the following designations were enacted: • No Surface Occupancy (NSO) 479,300 acres (22 percent)

• Controlled Surface Use (CSU)/Timing Limitations (TL) 741,700 acres (35 percent)

• Standard Terms (STD)* 415,900 acres (19 percent)

*Bureau of Land Management (BLM) standard lease terms are applicable.

In February 1996 a Record of Decision was issued by the Helena National Forest

covering approximately 997,700 acres. In July 1996 the Forest Service promptly

withdrew their 2/96 ROD because of other reasonably foreseeable projects that had

arisen since the EIS was prepared. Subsequently, a new ROD was issued in May

1998 with the following leasing availability designations: • Legally Unavailable 144,500 acres (14.48 percent)

• Administratively Available 853,200 acres (85.52 percent)

Of the Administratively Available acreage the following designations were enacted: • Discretionary Unavailable 185,100 acres (18.55 percent)

• No Surface Occupancy 384,700 acres (38.56 percent)

• Controlled Surface Use and or Timing Limitations 258,700 acres (25.93 percent)

• Standard Terms Only 24,700 acres (2.48 percent)

Finally, in September 1997 a Record of Decision was issued for 1,862,453 acres

in the Rocky Mountain Division and the Jefferson Division of the Lewis and Clark

National Forest with the following leasing availability designations: • Legally Unavailable 614,458 acres (33 percent)

• Administratively Available 1,247,995 acres (67 percent)

Of the Administratively Available lands the following designations were enacted:

• No Lease 356,111 acres (19.12 percent)

• No Surface Occupancy 363,033 acres (19.49 percent)

• Controlled Surface use 393,793 acres (21.14 percent)

• Controlled Surface Use and or Timing Limitations 135,058 acres (7.25 percent)

• Standard Lease Terms 0 acres (0 percent)

It is important to note that for the Rocky Mountain Division no lands were offered

for lease. Only certain lands will be offered for lease in Central Montana in the Jefferson Division of the Lewis and Clark National Forest.

The summary of these three combined Forest Service decisions is as follows:

• Total Forest Service Acres 5,009,453 acres

• Legally Unavailable 1,262,358 acres (25.2 percent)

• Legally Available 3,747,095 acres (74.8 percent)

• Administratively/Discretionary Unavailable 194,100 acres (3.87 percent)

• No Lease 356,111 acres (7.10 percent)

• No Surface Occupancy 1,227,033 acres (24.15 percent)

• Controlled Surface Use and or Timing Limitations 1,529,251 acres

(30.53 percent)

• Standard Lease Terms 440,600 acres* (8.80 percent)

*94 percent of these available acres are in the Beaverhead National Forest

These combined decisions have potentially cost the State of Montana 10 to 30 TCF

in natural gas reserves. This equates to tens of billions in revenues for local and

state government.

In October 1997 Mike Dombeck, Head of the U.S. Forest Service, issued a memo

to all employees of the USFS stating the following:

Recently, Forest Supervisor Gloria Flora and the staff of the Lewis and Clark National Forest made a decision to not allow any further exploration for oil and gas

on the Rocky Mountain Front. The decision was widely and positively covered by

the media, including several national outlets. This decision was based primarily on

the will of the people who responded to the draft EIS and preferred alternative. If

collaborative stewardship is to be a cornerstone of our working relationship with the

American people, we must, as the Lewis and Clark National Forest has done, demonstrate that the will of all people will be one of our key bases for decisions, along

with sound science and resource objectives. This is true conservation leadership.

When you have people in the highest positions of government praising their employees for eliminating access and locking up the resource base then you create an

environment that fosters opposition to Congressionally mandated Multiple-Use land

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policies. The greatest concern of our industry following these decisions was the copycat phenomenon that would ensue following, in particular, the No-Lease Decision of

the Lewis and Clark Forest. This perceived threat to responsible resource development and to basic access is now coming to fruition in the State of Wyoming in the

recently released Preferred Alternative for the Bridger-Teton Forest. The Forest

Service decision to adopt a No Lease policy even after a 10-year process to prepare

the Bridger-Teton Land and Resource Management Plan is in total disregard for the

science and detailed planning that went into the document. This latest decision by

the Forest Service bypasses Congressional directives for multiple-use and places another 370,000 acres in a de-facto wilderness classification and more resources off

limits.

Following these decisions, of course, was the designation of Monument status for

almost one-half million acres along the Upper Missouri River and the Clinton Administration’s Roadless Initiative that locked up over 6 million acres of Forest Service land in Montana.

Attitudes must change!

• NIMBY: Not in my back yard

• BANANA: Build Absolutely Nothing Anywhere Near Anyone

• NOPE: Not On Planet Earth

Our country cannot afford the radical swings of policy that can adversely effect

our environment or our national security. Responsible development with utmost

care for the environment is not mutually exclusive!

The problem facing this industry and this Nation is reasonable access to

resources! The National Petroleum Council went further in its recommendations by

stating that The Council believes that unprecedented and cooperative effort among

industry, government, and other stakeholders will be required to develop production

from new and existing fields and build infrastructure at sufficient rates to meet the

high level of demand indicated in this study.

Specific examples of the regulatory burden and inefficiencies are everywhere. As

an independent exploration company Ballard Petroleum (BPL) has dealt with many

of the Regional BLM and Forest Service offices throughout the western U.S.

In the Manti-LaSal Forest of Utah it took BPL 10 months to receive a permit to

drill a single well. The well was drilled in two weeks time on Forest Service lands

and subsequently plugged. We then left the area for the winter months and came

back to reclaim the well pad per USFS regulations. The USFS intervened and requested changes to the previously approved USFS reclamation plan. These changes

then had to be re-submitted and re-approved. This process took the entire summer

and early fall period. The USFS instructed reclamation to begin just prior to the

fall snow period. BPL began reclamation knowing that there was a significant

chance of snow and that operations would be forced to stop due to heavy snows. The

snow came, we were forced to leave and then subsequently served with a non-compliance letter for not reclaiming the well pad in a timely manner. If BPL had been

left alone, BPL would have properly reclaimed the location in June and July of

2000. Instead, the USFS bureaucracy cost BPL the entire summer period of decent

working weather due to the USFS mandated changes to a previously approved

USFS reclamation plan!

Another example of stifling regulatory oversight experienced by BPL was in the

Powder River Basin of Wyoming in 1999/2000. In order to permit a single well on

the USFS administered Thunder Basin Grasslands it took BPL 6 months to receive

an approved permit to drill. It took 8 days to drill the well.

Generally speaking, when operating in the Powder River Basin of Wyoming, it

takes one week to two weeks to drill 5000 to 12000 feet in depth. It takes the Forest

Service a minimum of 6 months to permit a single well as opposed to 30–45 days

for the BLM to permit the same. The industry in the United States needs to drill

thousands of new wells every year to arrest the natural decline of known resources

and to develop new reserves to meet this Nation’s energy needs. If you examine production volumes in this country you will find that all producing areas are declining

in production except for one area in Wyoming, the Powder River Basin.

In the Rocky Mountain States of Montana, Wyoming, Colorado and Utah there

are 44,655,799 acres of Forest Service lands and 45,771,563 available acres of BLM

lands. (1995 statistics) The National Petroleum Council report identifies additional

resources by region in excess of 300 TCF in the Rocky Mountain Foreland Basins

and Overthrust Province. Continued restriction of access to these resource areas will

only drive investment away. Our Federal, state and local economies will continue

to lose revenues. Our nation will continue to lose good paying natural resource jobs

and will become even more dependent on imports of all resources, not just natural

gas and oil.

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Montana and the Western States have a wealth of natural resources that can be

responsibly developed. Eastern Montana can supply the Nation with super-compliant low sulphur coal. Coalbed Natural Gas is just beginning to be developed in Montana and could supply several TCF for future energy needs. Montana’s Overthrust

province may hold in excess of 20 TCF but is currently out of reach because of recent USFS decisions. The representatives for the western States need to take a

much more aggressive role in Federal lands decisions or their state economies will

suffer!

The Oil and Gas Industry can address the concerns voiced by the National Petroleum Council pertaining to investment, drilling fleet expansion, technological advancement, training skilled workers and contracting lead times for development.

Our industry cannot solve government lands access issues without unprecedented

cooperation from our government! Federal surface ownership in the western U.S. totals more than 252 million acres. The Forest Service needs to have a specific mandate from Congress that directs that prudent, environmentally sound resource development needs to be considered on an equal footing with current environmental

and sense of place issues that are dominating the decision processes. Public land

managers of the Forest Service are ignoring Congressional mandate that directs the

Forest Service to support, facilitate, and administer the orderly exploration, development, and production of mineral and energy resources on National Forest System

lands to help meet the present and future needs of the nation.

There are those in the government and the press that are very quick to point the

accusatory finger of blame at industry, but please examine the facts and your sacrosanct positions. The government, in aggregate, is the largest natural gas producer

in our country and therefore benefits enormously from this resource base. At the

same time the government is further restricting access to the resource base at an

alarming pace, both onshore and offshore through moratorium, No Surface Occupancy, No Lease declarations and regulatory overlap of Timing Limitations and

Controlled Surface Use stipulations.

The greatest impediment to securing our Nation’s natural gas resources for

energy generation is our own Federal Government! Since the early 1980’s there has

been an enormous amount of discussion/reporting on the ever-increasing volumes of

imports and potential energy shortages. Well, the energy shortages are here (California and the Northwest United States), imports are at all time highs and government continues to reduce access to oil and gas minerals on public lands. Our country has just experienced something that many of us only thought happened in Third

World nations and portions of the Former Soviet Union rolling black outs and power

shortages. With snow pack and moisture levels at record lows in the Northwest and

low levels of natural gas in storage the individual consumer and all of business has

not seen the end of the energy shortages and high power bills!

As a Nation it is easy to sit back and enjoy low inflation and a vibrant economy

while putting off the nagging question of energy policy when the raw commodity is

cheap. Now that energy has everyone’s attention our Nation rushes to govern, as

more often than naught, by crisis. My brother served in Desert Storm, for cheap oil.

He came home—others did not! Leadership demands that this Nation describe a

course that best meets the demand for energy, in high or low commodity price environments, that protects our citizenry and arguably the strongest economy on earth.

If you can’t access the basic resources don’t be surprised when you reach for the

light switch and there is no light!

[Attachments to Mr. Fisher’s statement follow:]

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Mrs. CUBIN. The Chair now recognizes Mr. David Alberswerth.

STATEMENT OF DAVID ALBERSWERTH, DIRECTOR, BUREAU

OF LAND MANAGEMENT PROGRAM, THE WILDERNESS

SOCIETY

Mr. ALBERSWERTH. Thank you, Madam Chairman. Before I start,

I couldn’t help but notice that the staff has identified me that I am

with the BLM. And I can assure you that the current management

at the BLM would be dismayed to hear this. Thank you very much

for the opportunity to testify on behalf of the Wilderness Society

today on this important topic of the public lands’ contribution to

domestic natural gas supplies.

My name is David Alberswerth and I am the director of the Wilderness Society’s Bureau of Land Management Program. Prior to

joining the Wilderness Society staff last year, I served the Clinton

Administration within the Department of Interior as special assistant and senior advisor to the Assistant Secretary for Land and

Minerals Management. It is the Wilderness Society’s hope that in

exercising its oversight role regarding this important matter, the

Subcommittee will seek to be as objective as possible in reviewing

the extent of natural resources on our public lands and the environmental values that also reside on those lands that can be placed

at risk by natural gas exploration and development activities.

For although natural gas extracted from our public lands is an

important component of our Nation’s well being, the environmental, wildlife, watershed, and wilderness values of those lands

are also vitally important to Americans. Some suggest that these

two interests are incompatible, or that we cannot meet our energy

needs without sacrificing some of our most precious lands. The Wilderness Society believes that we can meet our energy needs without sacrificing our most treasured natural landscapes. In fact,

America has a proud tradition of combining a strong economy with

strong environmental values, and we urge the Subcommittee to be

guided by both goals. A review of some pertinent facts, which I will

set forth below, demonstrates clearly that this is possible.

One fact of central importance that I wish to draw to the Subcommittee’s attention is that the vast majority of public lands managed by the BLM in the overthrust belt States are presently open

to leasing exploration and development by the oil and gas industry.

In fact, information presented to the Assistant Secretary for Land

and Minerals Management by the BLM in 1995 indicated that over

95 percent of BLM lands in those states, including split estate

State lands, were available for oil and gas leasing.

Although there have been some changes in the land status of

some of the lands indicated on the attachment to my testimony, the

data here is still essentially valid, and I would suggest it would be

in the Subcommittee’s interest to request an update of that data

from the BLM for the Subcommittee’s consideration of next week’s

hearing on the same topic. In addition, the Subcommittee should

ask the Interior Department for its report to Vice President

Cheney’s energy policy task force, which I understand is being finalized this week and will be submitted to the task force.

I think, given the Subcommittee’s charter here for oversight of

Federal land policies and their relationship to energy development,

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that the direction that the Vice President’s task force is headed is

of vital importance to this Committee. It is also relevant to any discussion of our public land energy policies to understand that the

BLM has been carrying out a robust onshore oil and gas leasing

program for the past decade. For example, the Clinton Administration issued oil and gas leases on more than 26 million acres of public lands during the last 8 years.

Mr. ALBERSWERTH. There are nearly 50,000 producing oil and

gas wells on the public lands. Thousands of new drilling permits

have been issued during the past 8 years, 3,400 by the BLM in fiscal year 2000 alone. Production of natural gas from onshore and

offshore Federal lands has steadily increased from 1991 to the

present.

Now, criticism by some that in recent years too much public land

has been made unavailable for oil and gas activities is simply not

supported by the facts. Upon close examination, industry criticism

of lack of access to onshore public lands really falls into two categories: Lands that are off limits entirely to oil and gas development and lands available for development if the industry takes special care of the environment. The former areas include wilderness

areas, wilderness study areas and areas such as steep slopes or

areas where other mineral activities are taking place; in other

words, places where oil and gas activities could pose extreme environmental or safety hazards or be incompatible with other values.

Currently such areas comprise roughly 5 percent of BLM managed

lands in the five States.

The latter category often encompasses areas where evidence indicates the presence of sensitive wildlife habitat such as elk calving

areas or sage grouse leks where operations at certain times of the

year could pose severe threats to wildlife. The basic types of stipulations imposed by the BLM are described in more detail in my

written statement.

Although industry public relations campaigns frequently emphasize the benign nature of contemporary exploration and development practices and technologies, when required by the BLM to utilize these technologies to minimize environmental impacts the industry is reluctant to do so, as we have been hearing here today.

In fact, in testimony delivered before the Full Committee last week,

the Independent Petroleum Association of the Mountain States specifically singled out protection of elk habitat as an example of an

unnecessary environmental precaution. The witness’ candor was refreshing. Clearly the oil and gas industry cares little for the concerns shared by most Americans that environmental values on our

public lands be protected. However, the purpose of these stipulations which the industry disdains is simply to ensure that these advanced technologies touted elsewhere are used to minimize the impact of energy production on environmentally sensitive public

lands.

In conclusion, I had planned to talk about everybody’s favorite

natural gas report here today. I hope everybody would agree on the

basic data in there. Our conclusion from reviewing that report is

that there is about a 40-year supply of natural gas without having

to go into the sensitive areas that the industry is complaining

about that they would like to go into.

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In any event, in conclusion, if we are careful we can pursue

energy policies that allow and even encourage increased natural

gas use while protecting sensitive public lands and the environmental values that all Americans have a right to have protected,

but our policies must also recognize that there are adverse impacts

to natural gas development and valid safety concerns with natural

gas distribution issues that should not be swept under the carpet

in a headlong drilling and development frenzy.

Thank you very much.

[The prepared statement of Mr. Alberswerth follows:]

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Mrs. CUBIN. Thank you, Mr. Alberswerth, and thank all of you

for your testimony.

My first question will be of Mr. Downey. I understand that you

have some geologic experience on the North Slope of Alaska. Can

you describe for me, please, how much gas Prudhoe Bay and satellite fields could provide to the lower 48 States and how long it

would take to get that down?

Mr. DOWNEY. Sure, I think the key thing is that in Prudhoe Bay,

the 30 or 40 trillion cubic feet that are there are not available at

all for going to a pipeline, not for many years, and the reason is

simple physics. It is the gas at Prudhoe Bay that moves the oil out

so that it flows to the pipeline. As soon as you take the gas out,

the oil stops flowing. So the only time that any reasonable person

would start tapping into the gas at Prudhoe Bay is long down the

road when we run out of oil in Prudhoe Bay. All the rest is wishful

thinking.

Mrs. CUBIN. Can you identify for me some of the high gas potential areas in the United States, the lower 48, that have serious access problems?

Mr. DOWNEY. I would defer to some of the other people who have

had firsthand experience as to access, as I have never myself permitted a well in those areas. I would say that I think the Rocky

Mountains is going to be one of the great gas provinces of the

United States. We had a wonderful technical conference a few

months ago in which people were pointing out an entirely new development of gas, and of a gas accumulation that is largely restricted to the Rocky Mountains, and I think you all are going to

be a major exporter of gas to save California in the years to come.

Mrs. CUBIN. Could you explain to me why Mexico isn’t a potential source of natural gas?

Mr. DOWNEY. They are a user. We supply gas to them, about, I

think, 140 million cubic feet of gas per day. They need all they can

get, and they are buying from us. Not much of a chance they will

turn around and stop buying and start exporting.

Mrs. CUBIN. One last question, Mr. Downey, if you don’t mind.

Is there any gas potential in the OCS off our northeastern United

States that are akin to the Sable Island discovery and project off

of Nova Scotia that Mr. Markey referred to?

Mr. DOWNEY. Sure, there is potential, because we haven’t been

allowed to explore there, but all you have to do is go across the

State line into Canada. They are finding all sorts of gas in that

same setting and, thanks to Canada, they are keeping northeast

United States warm with offshore Canadian gas while northeastern states refuse to allow it to be drilled and produced from

their own offshore. I hope Canada stays friendly.

Mrs. CUBIN. Isn’t that the truth? It really makes you wonder,

doesn’t it?

My next question, I guess, will be for Mr. Alberswerth. You talk

about the 95 percent of BLM land that is available for oil and gas

leasing. Does that include land that has no prospects at all for oil

and gas production?

Mr. ALBERSWERTH. That 95 percent, Madam Chairman, is within

the overthrust belt States of Montana, New Mexico, Colorado, Utah

and Wyoming, and the information that I presented was based on

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information developed by the BLM in response to a question as to

what the potential availability of oil and gas resources were in

those States. It is probably not as precise as one might want. I am

sure that there are lands, you know, incorporated in that analysis

by the BLM that may not have oil and gas potential, but I couldn’t

tell you where they are. It would be a good question to perhaps ask

the BLM, you know, if they could do a better job of disaggregating

that information.

Mrs. CUBIN. Well, hopefully in the study that is being done by

the USGS, or will be soon done by the USGS, they can get that information. I think all of the information that we need is really out

there. It is just a matter of someone bringing it all together, focusing on it and applying it to reality.

Mr. ALBERSWERTH. That is right, and I want to make clear,

though, it doesn’t include States like Idaho and Nevada, for example.

Mrs. CUBIN. It did not?

Mr. ALBERSWERTH. No, ma’am, it does not include those States

which are generally considered to not have a great deal of oil and

gas potential. So we had asked information from States where

there was an ongoing oil and gas program.

Mrs. CUBIN. As you know, the subsurface of the U.S. Forest Service land is managed by the BLM, but BLM will not lease any Forest Service land for oil and gas without Forest Service approval, is

that correct?

Mr. ALBERSWERTH. That is correct, and that 95 percent figure, I

just want to be very clear about this, does not include Federal oil

and gas on national forest lands. It is only BLM-managed surface

and subsurface State or Federal minerals under privately owned

lands. As you know, in your State of Wyoming there is a lot of split

estate land, so it does not include minerals on national forests.

Mrs. CUBIN. Is the 95 percent adjusted for areas like the BLM

lands in southwest Wyoming where layering of multiple overlapping restrictions of wildlife protection leaves such a small window

of availability of time and so for all practical purposes they can’t

drill because the time is too short?

Mr. ALBERSWERTH. Well, see that is a dispute here. I mean—. Mrs. CUBIN. Pardon me.

Mr. ALBERSWERTH. That is a dispute.

Mrs. CUBIN. Okay.

Mr. ALBERSWERTH. The 95 percent are lands that are available

for oil and gas leasing and development, much of which is in fact

subject to the sorts of environmental protections that members of

the previous panel and others have objected to. For example, the

seasonal elk habitat, no surface occupancy stipulation there is correct. In our view, those are appropriate protections that have been

proposed.

Mrs. CUBIN. Sure.

Mr. ALBERSWERTH. In an attempt by the BLM to try to reach

this balance, you know, where you allow oil and gas activities but

they are trying to protect seasonal elk habitat or other types of

wildlife habitat.

Mrs. CUBIN. I want to look at that language again just a second.

95 percent of BLM land is available for oil and gas leasing, and you

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are saying that doesn’t count any of the BLM land in Idaho. Is that

what you said?

Mr. ALBERSWERTH. Yes, the 95 percent figure, if you look carefully at the attachments, is in the States of Montana, Wyoming,

New Mexico, Utah and—. Mrs. CUBIN. And another one.

Mr. ALBERSWERTH. Colorado, excuse me. That is right. It does

not include any other Western State and I should add, too, you

know, there is an oil and gas program that is fairly significant in

the State of California, but this whole debate about restrictions

seems to be centered in overthrust belt States. So that is where

that information is concentrated.

Mrs. CUBIN. But all of those nine, that 95 percent that you are

talking about has restrictions, I don’t mean every single square foot

has restrictions but across the 95 percent there are other restrictions in place due to regulations, rules, things other than land designations, right?

Mr. ALBERSWERTH. I would assume so.

Mrs. CUBIN. And land designations, wilderness study areas, for

example, would be included in that or not?

Mr. ALBERSWERTH. No, ma’am. My understanding is, and it may

be worth asking the BLM about this, that the 95 percent excludes

wilderness study areas. In other words, wilderness study areas are

in the 5 percent where oil and gas leasing is not allowed.

Mrs. CUBIN. And you know, I think that the 95 percent figure

can be very misleading because it is like I said with the coal in

Black Hills National Forest, if you do drill on 95 percent of it or

you can mine in 95 percent of it but you can’t mine where the coal

is, it doesn’t do you much good, and I think that is the claim a lot

of people have made in a lot of the objections I have personally

heard.

Now a question for Mr. Fisher. Can you tell me your comparative

experiences in permitting wells between the Forest Service, BLM

and various State Oil and Gas Conservation Commissions? And the

reason I ask this is because I am curious about a bill—not curious

about, obviously I think it is a good idea or I wouldn’t be writing

a bill about it, but allowing the State Conservation Commissions

to administer programs permitting wells. So just give me an idea

of your experiences in dealing with those regulatory agencies.

Mr. FISHER. From a standpoint of the Forest Service, generally

the rules that are in place right now prohibit obtaining a drilling

permit in less than 6 months. They can take upwards, I believe,

to 10 months and my personal experience is, drilling a 9,000 foot

well in the Powder River Basin on grasslands administered by the

Forest Service, 6-1/2 months to get a permit.

Drilling a 3,500-foot overthrust test in the Manti-La Sal Forest

in Utah, 10 months for a two-acre disturbance.

Mrs. CUBIN. Forest Service.

Mr. FISHER. Forest Service, Manti-La Sal. I spent $700,000 on a rig and the well cost me $400,000 to drill. I drilled the well in two

weeks. There are some very disproportionate costs associated with

conducting business on the Forest Service. When we get to the

BLM, the BLM usually takes 30 to 45 days to process an APD.

They are quite efficient, I think. They do a good job at it. When

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they have concerns, you have longer periods of time to get an APD,

specific wildlife concerns or something that is special to or unique

to an area, and those are understandable and you have to mitigate

them.

Mrs. CUBIN. Is that in the Powder River Basin that you are

speaking of?

Mr. FISHER. I have permitted BLM in the Powder and down in

Colorado, Utah, Montana. All four States I have done business in.

Mrs. CUBIN. Okay.

Mr. FISHER. The BLM is fairly efficient at it and you have more

personnel within that agency that have, or are ex-oil field if you

will. They have some knowledge of the oil and gas industry. What

I find, there is a very large gap between the knowledge base in the

Forest Service in oil and gas operations and in the BLM, and that

large gap I think has served the industry very poorly in the last

decade on a lot of decisions that have been made concerning Forest

Service lands. We have done a lot of effort to try to educate the

Forest Service and, to put it bluntly, I think we are wholly ignored

in the State of Montana when it comes to current technologies and

smaller footprint technologies.

Mrs. CUBIN. What do you mean by wholly ignored?

Mr. FISHER. We bring the data to them from service companies,

from drilling contractors, from our known experience, explaining

closed mud systems, explaining directional drilling multiple wells

from a single pad, what our limitations are. In overthrust provinces

you are not going to reach out much more than a mile. There are

technologies now that could reach up to five miles, but you are in

soft sediment, you are in offshore type situations. Alaska is different, but they can reach upwards of five miles in Alaska. Not in

the lower 48. We do not have the tools, we do not have the technology, and it is much more complex geology.

To the extent that I gave a lot of testimony on the Lewis and

Clark, that I participated in the Helena National Forest debate and

the results of those, I think when we talk about pendulums swinging one way or the other, whether or not the environment is the

driving force in the decision process or the resource is the driving

force, if the pendulum swings in either direction it is bad because

something is ignored, and I am here to tell you in the State of Montana the resource development on Forest Service lands was wholly

ignored in favor of environment exclusively, and those are the results of the decisions. So—.

Mrs. CUBIN. Do you think there is a significant difference in the

environmental protection outcomes between those different agencies, including the State ConservationCommission?

Mr. FISHER. I don’t think the State does as good a job, if you will.

If I permit on fee minerals, if I permit on State, the State of Montana has some fairly strict application of environmental laws

through NEPA standards which are much like NEPA and so that

permitting on State lands can be quite difficult if there are environmental concerns, but generally State lands are not in uniquely sensitive environments. Now there some along the Rocky Mountain

front and other areas without a doubt.

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Mrs. CUBIN. So between Forest Service and BLM, is there a significant difference between them in the resulting environmental

protection that comes from those, you know, that they put out?

Mr. FISHER. I don’t believe so. The standards are relatively the

same. I think the Forest Service a lot of times has different environments to deal with than the BLM. But then the BLM comes in

after the Forest Service makes the decision and then administers

the APD and you go through an entire other round of environmental analysis through the APD process.

Mrs. CUBIN. Does one or the other have a higher standard, I

guess is what I am trying to say.

Mr. FISHER. I would say that the Forest Service without a doubt

has a higher standard to meet for environmental protection.

Mrs. CUBIN. Yes, that was the question, the way I should have

put it in the first place. Well, I would like to thank you gentlemen

for being here, taking your time today and would ask that you

would respond to any questions that the Subcommittee members

would like to ask but weren’t able to do that. So thank you very

much.

The Subcommittee on Minerals and Energy is now adjourned.

[Whereupon, at 4:17 p.m., the Subcommittee was adjourned.]

[Additional material supplied for the record follows:]

[A statement submitted for the record by Red Cavaney, President

and CEO, The American Petroleum Institute, follows:]

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