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76–464 2012

POWERING DOWN: ARE GOVERNMENT REGULATIONS IMPEDING SMALL ENERGY PRODUCERS 

AND HARMING ENERGY SECURITY? 

HEARING 

BEFORE THE

SUBCOMMITTEE ON INVESTIGATIONS, OVERSIGHT 

AND REGULATIONS 

OF THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

HEARING HELD 

MARCH 8, 2012 

Small Business Committee Document Number 112–057 

Available via the GPO Website: www.fdsys.gov 


srobinson on DSK4SPTVN1PROD with E:\Seals\Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

SAM GRAVES, Missouri, Chairman 

ROSCOE BARTLETT, Maryland 

STEVE CHABOT, Ohio 

STEVE KING, Iowa 

MIKE COFFMAN, Colorado 

MICK MULVANEY, South Carolina 

SCOTT TIPTON, Colorado 

CHUCK FLEISCHMANN, Tennessee 

JEFF LANDRY, Louisiana 

JAIME HERRERA BEUTLER, Washington 

ALLEN WEST, Florida 

RENEE ELLMERS, North Carolina 

JOE WALSH, Illinois 

LOU BARLETTA, Pennsylvania 

RICHARD HANNA, New York 

NYDIA VE ́ LAZQUEZ, New York, Ranking Member 

KURT SCHRADER, Oregon 

MARK CRITZ, Pennsylvania 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

JUDY CHU, California 

DAVID CICILLINE, Rhode Island 

CEDRIC RICHMOND, Louisiana 

GARY PETERS, Michigan 

BILL OWENS, New York 

BILL KEATING, Massachusetts 

LORI SALLEY, Staff Director 

PAUL SASS, Deputy Staff Director 

BARRY PINELES, General Counsel 

MICHAEL DAY, Minority Staff Director 


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C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Mike Coffman .................................................................................................. 1 

WITNESSES 

Tim Barber, Environmental/Federal Regulatory Supervisor, Yates Petroleum 

Corporation, Gillette, WY .................................................................................... 2 

David Ewing, President, Ewing Exploration Company, Sugar Land, TX ........... 4 

Kimberly J. Rodell, Regulatory Project Manager, Banko Petroleum Management Inc., Englewood, CO ................................................................................... 6 

Mark Squillace, Professor of Law and Director of the Natural Resources 

Law Center, University of Colorado Law School, Boulder, CO ........................ 7 

APPENDIX 

Prepared Statements: 

Tim Barber, Environmental/Federal Regulatory Supervisor, Yates Petroleum Corporation, Gillette, WY ................................................................... 25 

David Ewing, President, Ewing Exploration Company, Sugar Land, TX .... 28 

Kimberly J. Rodell, Regulatory Project Manager, Banko Petroleum Management Inc., Englewood, CO ...................................................................... 30 

Mark Squillace, Professor of Law and Director of the Natural Resources 

Law Center, University of Colorado Law School, Boulder, CO ................. 44 

Additional Materials for the Record: 

Supplemental Statement of Mark Squillace .................................................. 52 

Coatings Engineered for Ultimate Performance Cerenzie Engineering 

Consulting Letter for the Record ................................................................. 56 


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POWERING DOWN: ARE GOVERNMENT REGULATIONS IMPEDING SMALL ENERGY PRODUCERS AND HARMING ENERGY SECURITY? 

THURSDAY, MARCH 8, 2012 

HOUSE OF REPRESENTATIVES,

COMMITTEE ON SMALL BUSINESS, 

SUBCOMMITTEE ON INVESTIGATIONS, 

OVERSIGHT AND REGULATIONS, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10 a.m., in room 

2360, Rayburn House Office Building. Hon. Mike Coffman (chairman of the subcommittee) presiding. 

Present: Representatives Coffman, Tipton, West. 

Chairman COFFMAN. The hearing is called to order. 

I appreciate the witnesses for appearing today. 

The point of today’s hearing is to hear directly from small oil and 

gas producers regarding the barriers the federal government has 

enacted and the frustrations they face in producing oil and gas on 

federal lands. I doubt that there is a member on this Committee 

who does not receive a call from a constituent every day regarding 

high energy prices, the poor state of the economy, the lack of jobs, 

or the federal government’s enormously high budget deficit. 

President Obama claims that the solutions to these problems are 

complex and that there are no easy answers or solutions. However, 

I believe we will hear today there are things the government can 

do to address all of these concerns in party by producing more energy at home. Expanding domestic energy production will bring 

more oil and gas to market, helping ease rising gas prices. Expanding domestic energy production will create jobs both with the firms 

drilling for oil and gas and those that support these activities. 

Finally, expanding domestic energy production will bring new 

revenue to the federal government without raising taxes through 

the payments of rents and royalties on lands leased and those put 

into production. The ability to produce more domestic energy exists. 

Unfortunately, what is non-existent is the will on the part of this 

administration to utilize the oil and natural gas we have. 

In the past few years, the number of new federal lands available 

for oil and gas production has dropped significantly along with approval of permits to drill. While the administration likes to claim 

oil production has increased under its watch, the U.S. Energy Information Agency has found that overall production is below previous estimates and are projected to fall further. Addressing these 

declines has been a priority of this Congress and a number of legisVerDate Mar 15 2010 22:17 Nov 09, 2012 Jkt 076464 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 E:\HR\OC\A464.XXX A464

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lative proposals have been introduced and voted out of the House 

to open up America’s energy potential and expand business opportunities for small firms. Unfortunately, these are still awaiting action in the U.S. Senate. 

At the same time, an oil or gas lease is worthless unless the company can obtain a permit to drill. This is why I have introduced 

legislation that would require BLM to annually inventory and report the 200 nonproducing lands with permits to drill pending that 

have the highest potential for oil and gas development and requires 

the BLM to issue these permits within 180 days of issuing its report. I will agree with the president that expanding domestic production of energy is no panacea to our nation’s ills, but it offers 

part of the solution. And a solution that releases the entrepreneurial spirit of small businesses is preferable to policies that impose excessive regulations and new taxes on the very small firms 

we all look at to help rescue us from our current predicament. 

Chairman COFFMAN. Let me go over the hearing rules just for a 

second. If Committee members have an opening statement prepared, I ask that they be submitted for the record. I would like to 

take a moment to explain the timing lights for you. You will each 

have five minutes to deliver your testimony. The light will start out 

as green. When you have one minute remaining the light will turn 

yellow. Finally, it will turn red at the end of your five minutes. So 

I ask that you try to keep to the time limit but I will be a little 

lenient as you finish. And keep in mind we can put your written 

statements in the record as well. So you are free to talk in a more 

informal manner. 

STATEMENTS OF TIM BARBER, ENVIRONMENTAL/FEDERAL 

REGULATORY SUPERVISOR, YATES PETROLEUM CORPORATION; DAVE EWING, PRESIDENT, EWING EXPLORATION COMPANY; KIM RODELL, SENIOR PROJECT MANAGER, BANKO 

PETROLEUM; MARK SQUILLACE, PROFESSOR OF LAW AND 

DIRECTOR OF THE NATIONAL RESOURCES LAW CENTER AT 

THE UNIVERSITY OF COLORADO LAW SCHOOL 

Chairman COFFMAN. Let me introduce first Tim Barber from 

Yates Petroleum Corporation. Our first witness today is Tim Barber of Yates Petroleum Corporation. Yates Petroleum is a 425-employee oil and gas production company with operations in New 

Mexico, Wyoming, and Colorado. Mr. Barber works in the company’s Gillette, Wyoming office where he currently serves as manager of regulatory affairs. Mr. Barber, you may deliver your testimony. 

STATEMENT OF TIM BARBER 

Mr. BARBER. Good morning, Mr. Chairman and members. Thank 

you for the introduction. 

My comments here today are based on direct experience with 

Wyoming BLM and I think there are two foundational problems 

with how BLM is conducting itself that I believe you are interested 

in. 

Number one, BLM and Interior are daily adding unneeded and 

duplicated regulation through policymaking, guidance documents, 

instructional memorandum, and individual staff interpretation, 


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none of which go through a rulemaking process or are approved by 

Congress but are treated as if they were actual rule or regulation. 

I call this entrepreneurial regulation. 

Number two, BLM is not following its foundational actual rule 

and actual law that it is required to. Ironically, the reason many 

times that they give for not following the foundational regulation 

is that they are too busy working on number one. 

Let me provide some specifics. Onshore number one spells out an 

orderly process for the approval of APDs, which we may know as 

application for permit to drill that binds BLM and the applicant to 

processing timelines. The onshore order process should not take 

any more than 90 to 120 days for BLM to approve an APD. At the 

BLM office in Buffalo, Wyoming, applicants regularly wait two 

years after their application, and some applications have been in 

that field office for five and six years awaiting approval. Some of 

the lengthier APDs have been hostage to the Resource Management Plan Amendment Process, which has delayed the working of 

those APDs. 

The Buffalo BLM office was interestingly funded with additional 

monies by Congress to be able to be capable of approving 3,000 

APDS per year. I have included in your packet a BLM spreadsheet 

of their APDs that they have approved this fiscal year. They have 

approved only 80 wells since October 1, 2011, and during the period between December 7, 2011, and February 29, 2012, though 

over 940 drilling permits were awaiting approval, no APDs were 

approved. 

Included in your handout information is an overview of the 

timelines that are in the actual regulation for your review. When 

an affected party has a problem with a BLM decision, their only 

path available to pursue an appeal is to go through a process called 

a State Director Review, and that is provided for in Onshore Order 

No. 1. State Director Review decisions are required by regulation 

to be issued in 10 days. In Wyoming, these appeal decisions are 

taking nine months or more. 

BLM’s duplicated and conflicting efforts are very concerning to 

me. Some examples are BLM’s working currently on a policy for 

hydraulic fracturing for federal mineral wells. States all over the 

place, like Wyoming, already have an agency that regulates all 

wells, not just federal mineral wells. There is no need for BLM to 

embark on this effort. In Wyoming, BLM has recently come up 

with an instructional memorandum on the use of drilling pits for 

federal mineral wells. Same situation exists here. There is a state 

agency that has regulation in place that covers all wells. There is 

no need for BLM to add another layer of regulation. 

On a local level, BLM officers are coming up with their own preferences on things like how to build roads, reclamation of closed locations, requirements for well control, and even how to apply for 

a drilling permit, even though actual regulation already exists for 

each of these situations. The net effect of these non-rule regulations is that the agency accomplishes less at a higher cost to the 

agency, a higher cost to the taxpayers, and the regulated community. Longer APD processing times, arbitrary decisions not based 

on actual regulation, and less viable oil and gas projects, and less 

potential for drilling and production are the reality. 


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It is my opinion that there are two primary paths to resolution 

here. (A) Congress should strongly consider auditing offices like the 

Buffalo BLM office to find out what has been accomplished with 

the additional budget resources that has been provided to them. 

And I am sorry to say that I do not think that you will like what 

you find. The audit process should be ongoing with weekly or 

monthly updates provided as to things like APD processing. I think 

the privilege of an increased budget should come with a responsibility of demonstrating that that budget is bearing fruit. 

Secondly, Congress may want to provide direction to the agency, 

its director, and Interior regarding what I have called entrepreneurial regulation. The direction can come in several forms, including defunding the agency when it heads in the wrong direction. 

BLM’s resources and strength is best focused on managing lands 

for multiple use, not building layers of personal interpretation 

dressed up to look like actual regulation. 

I wish to thank you for your time and for your attention, and I 

would consider it a great opportunity to answer any questions that 

you might have for me. 

Chairman COFFMAN. Thank you, Mr. Barber. 

Our next witness is Dave Ewing, president of Ewing Exploration 

Company, a small prospecting company based in Sugar Land, 

Texas. Mr. Ewing has been involved in the oil exploration business 

for several decades working for both independent as well as major 

oil production companies before starting his own firm. He will testify today regarding the problems his company has experienced in 

developing a project in Wyoming. 

Mr. Ewing, you may deliver your testimony, please. 

STATEMENT OF DAVE EWING 

Mr. EWING. Good morning, members of the Small Business Committee. 

My experience in North America spans better than a couple of 

decades. I have been 60 years with emphasis on the Rocky Mountain states, Gulf Coast, and Western Canada. I am here today to 

discuss BLM’s decisions which are causing the possible loss or 

probable loss of a high quality, high reserve potential oil prospect 

in the southwestern portion of the Bighorn Basin in Northern Wyoming. 

In 2005, our company initiated an exploration program to locate 

drillable prospects in that southwestern Bighorn Basin, looking for 

folded anticlinal structures which there in that basin are critical to 

entrapment of oil. To date, in excess of 3 billion barrels of oil have 

been produced in the basin from structures and every known structure has been drilled with almost every one being productive. The 

only remaining area in the basin where a structure could have 

eluded the drill is in the area where my company is exploring. In 

the southwestern portion of the basin you have geologic structures 

formed at the same time as all the other productive structures 

were formed. When Yellowstone Park erupted 800,000 years ago, 

ash in the air moved to the east. There was a lake in the Bighorn 

Basin at that point in time. That ash dropped out in horizontal layers, sedimentary volcanic on top of those structures causing you not 


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to be able to map those structures like you had in the balance of 

the basin just looking at surface data. 

To develop a structural picture under those flat lying sediments 

we first purchased 70 miles of existing seismic data and then based 

on that interpretation we bought over 4,500 acres of federal, state, 

and fee lands and of the 28, almost 3,000 acres we purchased from 

the BLM, they evaluated them under the old RMP using NEPA 

regulations. 

In June 2008, we shot two new red seismic lines. They are—that 

is me. Okay. Could we put that map up, please? I am going to keep 

going. 

We shot two additional red lines to develop a better structural 

picture. Again, to do that seismic we had to go to the BLM and get 

them to approve everything to do with those lines, including all the 

NEPA analysis that was required. In September of ’09, the BLM 

issued to us a permit for a 6,500-foot exploratory well. The permit 

approval took better than a year to get but when we drilled the 

well we got a dry hole but got information that said we should be 

considering additional exploration in there. 

Additional fee and state leases still not showing up on the map 

in green and purple. The blue leases on the right are the nominated leases that we put up for sale in 2010 November. I flew into 

Cheyenne the day before the sale. They pulled those parcels down; 

said they needed additional NEPA analysis. Amongst that blue you 

will see a purple lease. That is a state lease, five-year lease which 

is in its second year, close to being in its third year. And we are 

going to get five years on them. The red, the yellow, the buff to the 

west are leases that we bought from 2006 through ’07, ’08, and ’09, 

which put us in a position to drill that first well I talked about. 

When we drilled the well we tried to post against that one little 

160 acres in purple and it turned out that they did not issue the 

lease until after we drilled the well offset to the lease, which fortunately I guess you would say, it was a dry hole. 

After we did that then I posted—they told us that they would 

post the acreage again in ’12. They pulled it down a month ago in 

February ’12. At this point they have told me that now those leases 

will not come up again until the earliest in 2014. That all is contingent on approval of the consolidation of the RMPs currently underway in the Bighorn Basin. 

To conclude, I would just simply say there are several questions 

that need to be addressed by your Committee or to your Committee. One, why did the partial withdrawals occur without any regard for EEC’s ongoing activities? Two, what was the BLM’s motive 

for obstructing EEC’s opportunity to acquire these leases? Three, 

was there a reasonable alternative available to the BLM? Four, 

why was the RMP consolidation undertaken in the first place? And 

five, why did the BLM not consider or give any consideration to the 

county commissioners who were part of the co-operators in the approval of the RMP consolidation? They are frightfully mad and I 

am through, Your Honor. 

Chairman COFFMAN. Thank you very much. 

Our next witness is Ms. Kim Rodell. She serves as senior project 

manager for Banko Petroleum, a nine-person engineering consulting firm headquartered in Englewood, Colorado. In her capacity 


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as senior project manager, Ms. Rodell assists small, independent oil 

and gas producers with federal regulatory compliance. She will be 

testifying regarding the inconsistent limitation and policies she and 

her small firms’ customers experienced in complying with federal 

regulations. 

Ms. Rodell, please deliver your testimony. 

STATEMENT OF KIM RODELL 

Ms. RODELL. Hello, Mr. Chairman and members. 

Again, my name is Kim Rodell, and I am with Banko Petroleum. 

We assist companies in navigating the federal regulatory maze. 

The oil and natural gas development in the west is critical to our 

economies and our growth. These critical jobs branch out directly 

and indirectly in a variety of different directions from those working directly from the operators to those service companies to restaurants to retail. The growth in the economies is from people who 

have stable, well paying jobs, and who are willing to put money 

into their communities. 

Independent energy companies, often comprised of 12 or less, develop 95 percent of the oil and gas wells within our country. These 

businesses produce 54 percent of American oil and 85 percent of 

American natural gas. Though oil and gas developments occur on 

both federal, state, and fee surface—and minerals, I apologize. 

However, because of the uncertainty of operating on federal lands, 

many of those who are willing to invest in these developments turn 

to the state and fee minerals, cutting out any potential royalty payments to the federal government. 

We encounter a lot of challenges like everybody else. Our biggest 

is the inability to plan and the uncertainty as to when approvals 

may be issued. Along with approvals, conditions of approvals are 

attached to these permits and sometimes, although we may know 

what might be attached, these are never finalized until the final 

permit is issued. Conditions of approval oftentimes include timing 

limitations due to wildlife. These timing limitations can place very 

tight drilling windows on operators, sometimes as tight as 45 days. 

In the Rocky Mountain region, we drill in complex geologic zones 

with the average well taking 90 to 120 days to drill and complete, 

if not longer, if the geologic structure is more complex or down hole 

issues are encountered. 

Our biggest concern right now is the sage grouse which is a nonthreatened and endangered species. This bird has been creating 

devastating uncertainty in the West. The protections put in place 

on this bird resemble those close to a true threatened and endangered species. The protections put on these hunted birds give us, 

you know, it does not allow us to play because there can be so 

many limitations along with areas that we have to avoid completely—no surface occupancy and restricted surface occupancy 

areas, sometimes never listed on the initial leases. The birds live 

in sage brush habitat throughout the West, basically everywhere 

where oil and natural gas development occurs. 

While BLM is trying to protect both the numbers and contiguous 

habitat, those of us who operate understand the need for those protections; however, getting restrictive limitations with regards to the 

BLM and the Divisions of Wildlife make it very cumbersome. While 


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trying to plan a drilling schedule, small operators are more limited 

than their larger cousins, who sometimes have areas in different 

geographic areas and under different timing limitations, so they 

can move rigs, staff, and equipment while those smaller independents often area in one geographic area and are often restricted to 

wading through those timing limitations and the inability to plan 

in such an uncertain regulatory environment. 

Again, the small operators are affected. They have invested 

money and time, equipment, and they are put on hold. Onshore 

independents employ 2.1 million people, and this figure is anticipated to rise to 2.6 by 2020. Approximately 63,000 man-hours are 

needed for every individual well drilled. The federal government receives $40 in royalty and leasing bonus payments to the federal 

government for every one dollar invested in the natural gas and oil 

onshore program. 

Just to give you an example, I am currently working a project 

in a federal unit that has 37,000 acres. We have been working on 

an access issue for over two years now. This basically locks up 

37,000 acres of mostly federal minerals and the inability for these 

companies to hire in these areas. After several meetings with the 

BLM prior to the submission of the permits, we were given one option. We did everything necessary, including with the BLM and all 

the agencies who were involved in the project, and approximately 

six months later the permit was returned unapprovable and denied. 

At this point there are 37,000 acres of federal minerals locked up 

along with jobs and royalties. We work and live in these communities. We pay our taxes and send our children to school in these 

communities. We enjoy a healthy outdoor environment and are 

proud of the West. We also strive to ensure that future generations 

enjoy both the beauty and strong economies that we have experienced. 

We would like to do our part to promote the production of responsible energy and build a secure energy future. 

I appreciate your time and thank you. 

Chairman COFFMAN. Thank you, Ms. Rodell. 

Our next witness is Mark Squillace. Did I say it right? 

Mr. SQUILLACE. Correct. 

Chairman COFFMAN. All right. I got it right. Mr. Squillace is a 

professor of law and director of the National Resources Law Center 

at the University of Colorado Law School. 

Mr. Squillace, you may now deliver your testimony, please. 

STATEMENT OF MARK SQUILLACE 

Mr. SQUILLACE. Thank you, Mr. Chairman. And good morning. 

I am delighted to be here to offer my views about some of the 

opportunities and some of the obstacles that are facing small oil 

and gas operators on our public lands. As the chairman noted, I am 

a professor of law at the University of Colorado Law School. I want 

to emphasize, however, I appear here today on my own behalf and 

not on behalf of the university. 

I want to note first that my written testimony emphasizes five 

key points. Those are that planning and environmental assessment 

are important to sound decision-making; that the BLM’s process for 


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administering leasing is problematic to the extent that it protects 

existing leases at the expense of lessees, like small operators who 

might come on our public lands. In the written statement I highlight some of the innovations and best management practices that 

oil and gas developers have used, and some of these developments 

have really been spurred, I think, by some of the small operators 

and they deserve praise for that. 

There are, however, some concerns that some of the innovations 

are expensive to implement and the agencies do need to be careful 

to make sure that companies are not undercapitalized and have the 

finances to complete the work on their oil and gas leases. And finally, I do want to give a shout out, if you will, to the Environmental Protection Agency for what are likely to be forthcoming air 

emissions regulations. I know they are somewhat controversial, but 

I think they are long overdue and necessary to protect public 

health and to protect our environment. 

This morning I would like to emphasize the first two points. I am 

happy, of course, to answer questions about any of these five 

points. So let me turn first to the question about the BLM’s planning and environmental assessment procedures. 

I understand the concerns that have been expressed by some of 

the witnesses, today, and I certainly do not defend unreasonable 

delay on the part of the agencies in issuing permits and giving approvals. But we should understand some of the context here. I 

would note, for example, a recent reporter noting that there are 

7,000 approved APDs that have never been drilled upon. It is also 

true that there are many leases, thousands of leases that have 

been issued by the BLM that have not been developed and there 

are no pending APDs on those leases. Moreover, it is important to 

note that environmental assessment cannot be blamed for all of the 

problems that we are seeing with APDs as a result of the Energy 

Policy Act of 2005. Many of the APDs are categorically excluded 

under NEPA, meaning there is no NEPA analysis that is done. The 

GAO did a study at the end of 2009 suggesting that many of these 

categorical exclusions were unlawful, and I do not want to debate 

the merits of the study on this but just to note that environmental 

assessment cannot be blamed for many of these problems. 

There is another important point to emphasize here regarding 

drilling, which is that it is very difficult right now to get a rig because of the demand for oil and gas development, particularly oil 

development. There are just under 2,000 rigs operating in the 

United States today. My understanding is it takes at least six 

months to get a rig onto a site. In many cases it takes sometime 

longer than that. 

I want to be clear that I do not think the process always works 

as well as it should. It is one thing to say that processes are good, 

and another thing to say that it works well. I am not sure it works 

well; in particular I have been critical of the agencies for their 

planning processes because I think they are far too complex. They 

could be simplified. I think one of the unfortunate consequences of 

complex planning is that it takes resources away from site specific 

analysis and oftentimes that site specific analysis becomes very 

rote. It is boilerplate; it does not really help promote better decisions. And so I think that is problematic. 


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Nonetheless, there are, I think, good things to be learned from 

the environmental assessment process, and I want to respond, I 

think, to the comment that Ms. Rodell made about the sage grouse 

which is, I think, a really critical issue and she rightly points out 

the controversy regarding the sage grouse. It is true that the sage 

grouse has not been listed under the Endangered Species Act. It is 

also true that in 2010 the U.S. Fish and Wildlife Service issued a 

ruling that said that the sage grouse listing was warranted but 

precluded. Kind of a technical, legal term that suggested that indeed there was evidence to list the sage grouse; it is just that there 

are other priorities that are of a higher priority for the agency. 

And the important point here is that it is in no one’s interest to 

see the sage grouse listed, and if we are to avoid listing of the sage 

grouse we have to engage in robust planning to ensure that proper 

controls are put into place. This is particularly true today where 

we have horizontal drilling and multiple well development on pads 

where you can move the pad around to avoid some of the conflicts 

that exist. 

I see I am running out of time but I would like to just briefly 

address the second issue regarding overprotection of existing leases 

by the BLM. This is a huge problem, and to understand it you have 

to understand some things about the Mineral Leasing Act. Its purpose was to discourage speculation, to avoid monopolization of federal resources, and to assure a fair return to the government for 

its resources. And a lot of that has been undermined by the government’s policy of allowing existing lessees to get into units. This allows them to avoid the 10-year primary term that exists under the 

Mineral Leasing Act. Under the law you get 10 years, and if you 

are not developing at the end of that 10 years, the lease is supposed to expire. The problem is you can avoid that expiration if you 

go into a unit. 

The other, I think, significant problem here is that there are 

acreage limitations under the Mineral Leasing Act. No individual 

company can own more than 246,080 acres in a single state, and 

that is to avoid the monopoly problem. But if you go into a unit 

as a result of the Energy Policy Act of 2005 it does not count 

against your state limit. I think it is somewhat shocking to note 

that in January of 2011 there was a story in the oil and gas journal 

about Encana Energy Company and the fact that Encana was bragging about the fact that it holds 869,000 acres of leases in the 

Piceance Basin in Colorado. Now, that is more than three times the 

federal limit. I want to note that those are not necessarily all federal leases but the Piceance is 80 percent federally owned. And the 

only way they can do that is if many of these leases are in the 

units so that they can avoid the acreage limitations. They brag that 

they owned the basin, and this is one of the most productive basins 

in the country. 

Something really needs to be done here. I would urge the Committee to get the General Accounting Office to do a study of some 

of the problems that exist with this practice. This really harms 

small operators because if those leases had terminated, they would 

go back into the pool and small operators would have a chance to 

bid on them and they would be developed. They are now languishing. They are not being developed. The article in the Oil and 


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Gas Journal suggested that it would take 35 years or more for 

Encana to develop all of its oil and gas resources. This is a real 

problem and I want to encourage the Committee to look at ways 

in which we can increase transparency, and have BLM rules that 

promote unitization in ways that are better for the small oil and 

gas operators. 

I am sorry for going over my time but thanks for your indulgence. 

Chairman COFFMAN. Thank you so much. 

Let me ask the first question and then I am going to defer to 

Congressman Allen West of Florida and then we will probably, obviously since there are two of us we will do a second round if necessary. 

In Colorado, and this is maybe anecdotal, but in talking to the 

oil and gas companies it seems that there is very limited interest 

in public lands at this point in time and I think across this country. And I think the movement is to fee lands. And so when we see 

reports of increased drilling or development in the United States 

it seems to be off of public lands onto fee lands. And I wonder if, 

number one, is that true? And number two, how do you account for 

that? I mean, I do not see any appetite whatsoever right now in 

terms of new development on public lands. Mr. Barber. 

Mr. BARBER. That is a very good question, Mr. Chairman. 

Certainly there is more quick opportunities and a smoother planning ability when state and fee lands minerals are pursued. In 

some areas like the Powder River Basin where I work, two-thirds 

of the minerals are owned by the federal government, so you really 

have to be in the federal mineral game in order to develop. One of 

the things that worries me is that in basins, in formations where 

porosity is high and minerals can flow, whether it is natural gas 

or oil, the federal mineral estate, because it is not being developed 

as quickly as the state and fee minerals can actually change ownership by moving from one leasehold area across through a well bore 

that is actually producing. 

So if I am here in section one with a federal lease that I am waiting for a permit on and surrounding me there are privately owned 

or state owned minerals, those minerals under the right geologic 

circumstances can actually change hands. And so those minerals 

that could have been produced and paid royalties to the federal 

government and ultimately to the state are not producing. That is 

very concerning. I wonder if the public in the U.S. knows that potentially their minerals may be produced up somebody else’s well 

bore. 

Chairman COFFMAN. Any other comments on that? Yes, Ms. 

Rodell. 

Ms. RODELL. I often see the overarching regulatory agencies and 

the uncertainties in which the smaller operators, the environment 

which the smaller operators are looking at and operating in definitely turns them away from operating on federal lands. And although some of these federal lands are, you know, they are 10–year 

terms, sometimes it takes us eight years to get to even the process 

of submitting some APDs. Leases can be nominated, they can be 

paid for, and they cannot be issued. So there are times when we 

are waiting for leases to be issued or we are going through some 


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environmental—and again I stress, the environment is important 

to all of us but we can have so many different layers. And currently 

we have got 11 federal agencies that are trying to take aim at the 

oil and gas companies. These oil and gas companies cannot—they 

cannot plan in such an uncertain environment and so they do; they 

move to fee and state minerals because the process takes a fraction 

of the time. Although, oftentimes the same parts of the operations 

are put in place, the permitting can take, you know, it usually can 

take less than 30 to 60 days. 

Chairman COFFMAN. Mr. Squillace. 

Mr. SQUILLACE. Yes. I do not want to dismiss certainly the points 

that have been made about the problems with overregulation and 

the difficulties that some of the companies have been having, but 

it is important to keep in mind that natural gas is at a historically 

low price right now. The general counsel for one of the major companies told me recently that they are not even looking at gas plays 

at this point in time because of that low price. She told me that 

they cannot make a profit on gas plays. And I think that is certainly having an effect on lower demand. 

Again, it is not the only thing that is going on. If you look in Wyoming, most of the plays are gas plays. There is interest up in the 

Niobrara because those are liquid hydrocarbon plays and I think 

there is a lot more profit to be made in the liquid sector. 

Chairman COFFMAN. Mr. Ewing. 

Mr. EWING. I would like to comment on those remarks. My experience with Amoco for 15 years, I, number one, I would like to comment about the unitization. I thought that the entire time I was 

with Amoco. We spent millions and millions of dollars. We had a 

huge staff. We explored everywhere in Wyoming and other states. 

Whenever you find a prospect area you have to get seismic, you 

have to spend a lot of money putting the leases together and everything, and you get to a point where very quickly you are up to the 

246,000 acres and the only way that you are going to, once you buy 

that acreage, the only way you are going to get it off your books 

and make yourself legal is to form a unit. Now, when you form that 

unit you are told you will drill wells by such and such a point in 

time, and if you do not, the unit will be terminated. So that is the 

manner in which people will go in. And Professor says they are 

bragging about how much acreage they hold. They have got obligations in every one of those units down there that you are talking 

about. 

As far as fee versus federal, I ran smack into that. Fifty percent 

of the well we drilled up in the Bighorn was people down in the 

Houston area that I brought into the prospect, and when they were 

still with me, when we nominated those lands to drill a second 

well, when they found out that the BLM had pulled down those 

leases they just all called and said, sorry, we are out. So in effect 

I lost half of my investors at that point. And a small operator lives 

on what he has and the investors that he can bring in because 

there are not many small operators who have the production 

wherewithal that will allow them to go out and take all the risk 

of the drilling themselves. So I wanted to make that point. 

I have a question myself. Will I have an opportunity to give you 

any testimony after the questioning is completed? I would like to. 


srobinson on DSK4SPTVN1PROD with 
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Chairman COFFMAN. Sure. Absolutely. 

Mr. SQUILLACE. Thank you. 

Chairman COFFMAN. Let me do one more question and then I 

will defer to Congressman West for some questions. And that is on 

the deadlines that BLM has, and I think that Mr. Barber, you 

mentioned one specific deadline that was ignored. What are the 

most salient examples of deadlines that BLM has that they ignore 

and that hurt small operators? 

Mr. BARBER. I am referring to this printout slide that says ‘‘APD 

processing: What does the regulation say?’’ 

When an operator comes into BLM with an application for permit to drill, the first thing they have to do is provide a $6,500 application fee. Keep in mind this is an application fee. It is not refundable and it does not guarantee a processing time or a permit. 

BLM is required by Onshore Order No. 1 to follow these steps. 

Number one, they have to post the APD for 30 days prior to a 

decision. I think that is typically met by most field offices. BLM 

has 10 days to notify the operator if the application is complete. 

Some offices meet that and some offices do not but it is specifically 

required in the regulation. BLM then has 10 days to schedule an 

onsite inspection. That is rarely met in the offices I work with. If 

deficiencies are identified, the operator has 45 days to respond to 

those deficiencies. Typically those are met because the operator 

wants to keep the project going. And then once the deficiencies are 

addressed, if there are any, BLM has 30 days to reach a decision. 

That, in my experience, is almost never met currently. And when 

BLM does not meet these timeframes stretches out the process. 

I talked earlier about when an operator has an issue with a BLM 

decision they go to an appeal at a state director review and that 

process was set up to deliver a quick answer from the state office 

of BLM to the field office as to whether that field office’s decision 

was correct or incorrect. Those are regularly now in Wyoming taking 90 days or far more, many times close to nine months. And 

when an operator does not get an answer on that, not only (a) are 

they sort of robbed of their due process, but (b) BLM keeps making 

that decision over and over and over and it causes actually more 

of those appeals to happen. 

Chairman COFFMAN. Ms. Rodell. 

Ms. RODELL. I agree with Mr. Barber. We understand that 

onsites cannot be scheduled until there is no snow on the ground, 

so in the West—that is my primary area of operation—sometimes 

we do have to wait. However, I have seen the onsite process take 

over a year just to schedule an onsite. In addition, with regards to 

the 45-day deficiency response, I recently have run into that area 

where you do receive an official letter from the BLM, you respond 

to the deficiencies. However, I had three additional e-mail deficiency responses come, all with very different deficiencies. These 

are not because the original deficiencies were not addressed; these 

were different deficiencies. And, you know, the consensus of the industry, of the oil and natural gas industry, are these are just obstructionist moves to keep these permits locked up for years. 

Chairman COFFMAN. Any other comments? 

Mr. West from Florida. 


srobinson on DSK4SPTVN1PROD with 
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Mr. WEST. Thank you, Mr. Chairman, and thanks to the panel 

for the long distances that you traveled to be here. And this is obviously one of the most important conversations we could be having 

in our country right now. 

Dr. Squillace, you made a comment about the 7,000 approved 

APDs that have not yet been drilled upon. Out of those 7,000, is 

it proven that all of them have resources that are there? I mean, 

these are not dry holes? 

Mr. SQUILLACE. The point is that they have not been drilled upon 

at all so we do not know whether they might find something or not. 

I mean, I do not want to suggest that because the APDs were not 

drilled upon that there is necessarily a problem. The industry 

needs to make choices and decisions about timing of development. 

If the price of gas, for example, goes down and it is not profitable 

for them to develop at that particular point in time, it may be a 

perfectly rational decision not to develop that particular well even 

if they have an approved APD. 

The point is that from the agency’s perspective there is a lot of 

work that they are doing that essentially does not go into helping 

companies like these that we have heard from today get the permits that they need. And I do not know what the answer to this 

is. I mean, it would be nice if we could figure out a way to make 

sure that the agency’s resources are used for those permits where 

development is actually going to take place. It does not always happen and maybe there is no simple solution to it, but I do want to 

point out that from the agency’s perspective there are these sort of 

dislocations in terms of their allocation of resources as well. 

Mr. WEST. Mr. Barber. 

Mr. BARBER. Thank you, Mr. West. 

I think it is important to understand that when an oil and gas 

operator shows up at a BLM office with an application for permit 

to drill that they have to be very serious about that prospect at 

least as they know it at that time. They might bring a 50 well 

project in and they would need to cut a check for over $300,000 in 

order to just apply for those. They conduct archaeological surveys, 

wildlife work, many processes to help the NEPA process move forward. What they sometimes do not know that I referred to a little 

bit in my testimony is what that project will look like when it 

comes back from BLM finally approved. And many times those 

projects can come back so regulated and so gutted, if you will, that 

it is difficult to make an economical project out of them. We also 

have to look at the market conditions that were referred to earlier. 

Things like pricing at that point in time, rig availability, et cetera. 

Mr. WEST. Yes, Ms. Rodell. 

Ms. RODELL. Due to the uncertainty that these smaller operators 

try to operate in with the overarching regulatory structure there is 

no planning. And sometimes a smaller operator—and these fees are 

$6,500—sometimse a small operator might have to put in 20 APDs 

hoping that they can get two through the permit process to the 

time when they need to look at scheduling rigs. No rig company 

will sign a contract with an operator that does not have an approved permit. So sometimes these operators put in multiple permit applications hoping to pull a handful of permits that have a 


srobinson on DSK4SPTVN1PROD with 
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drilling window that they can reasonably drill in and outside of 

timing limitations. 

Mr. WEST. Next question, and I am a pretty simple, I am sorry, 

Mr. Ewing. 

Mr. EWING. In discussing this situation with these APDs, because of the recent bust in the price of gas, that also has had an 

influence on some of the attempts to go ahead and develop acreage. 

You know, you went from four in the last year—you went from $4 

down to what, $2.25, whatever it is now. And when that shale gas 

play got going, many small operators, many small land people even 

jumped in, grabbed leases, sold those leases to small companies. 

Small companies ultimately found out they had bitten off way more 

than they could chew because of the BLM restrictions on regulations and the ultimate cost of drilling and deviating a hole outward. So a lot of the APDs that are still sitting there undoubtedly 

are not only related to what Mr. Barber said but are people that 

got stuck with a situation that was not economic any further. 

Mr. WEST. Mr. Chairman, if you would be so kind if I could. 

Chairman COFFMAN. Go ahead. 

Mr. WEST. The second question I would like to ask and I am a 

very simple guy, on inauguration day in the United States of America, the average price of gasoline was $1.84. I spent 22 years in the 

military. When I hear people talk about there is nothing you can 

do about it, in the military the maximum effective range of an excuse is zero meters. So in that time from inauguration day to now 

where we have gasoline prices at $3.77 almost per gallon across the 

country, I would like to get from each one of you what is the one 

golden nugget thing that you think can be done from Washington, 

DC’s perspective, from a federal perspective? Let us not talk about 

Iran. I mean, that will take care of itself in due time. And speculators, because we have horrible monetary policy that is devaluating our dollar as opposed to the rising cost per barrel of oil. But 

from your perspective in the domestic energy production side, what 

is the one thing that we can do to rectify this situation? Mr. Barber, starting with you. 

Mr. BARBER. Thank you, Mr. West. I am a simple guy, too. 

What I think happens out there, and I do not want to represent 

myself as an oil and gas marketer; I am not. But markets seem to 

respond to nervousness and our markets are nervous about oil. 

They are. Things happen. The price of oil goes up. Other things 

happen. The price of oil goes down. From my simple perspective 

what we need to do is put companies in a position so that they can 

explore for oil and gas on the leases that they have acquired so 

that that nervousness is reduced. I think right now with a tremendous supply of natural gas on hand, something could happen and 

I do not picture the price of natural gas tripling or going in half. 

I think there is plenty of supply out there. I think there is reasonable presumption that we can drill for more gas and acquire that. 

We need to be in that position on oil on liquids. 

Mr. EWING. Insofar as oil is concerned, I avoid gas plays like the 

plague. I am not big enough to be involved in that. But the thing 

that needs to be done is to cut loose, get rid of some of the regulation so that people can explore for oil on these western lands. And 

there are still things to find but they are very difficult to find. 


srobinson on DSK4SPTVN1PROD with 
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And I was wanting to get into this historical perspective if I 

could a little bit on this. In 1946, the Grazing Service was merged 

with the General Land Office to form the Bureau of Land Management. They did not really have any teeth to work with until the 

Federal Land Policy and Management Act—FLPMA that I always 

forget what it stands for unless I read it—came about in 1976. The 

State of Wyoming set up the Wyoming Loan Gas Commission in 

1951 and until 1971, just after in the Nixon administration when 

NEPA had been authorized, they administered all of the drilling. 

Ninety percent of the three billion barrels of oil that has been 

found in the Bighorn Basin came out of fields discovered before the 

BLM even got in the picture. The state administered all of these 

lands. The state had 45 people on staff and not only did they approve any well, whether it is federal, state, or fee in the state of 

Wyoming, they had to do all the work. Suddenly, in ’71, after the 

horses had gone out of the barn so to speak, the BLM comes in and 

immediately had to start setting up an agency with a tremendous 

number of people with all sorts of regulations and it happened at 

a time when instead of doing that it should have just gone the 

other direction because in the case of the Bighorn which is all I am 

really talking about today and I have had experience on all the basins, but that area in the southwest that I described where you 

have flat lying beds obscuring the structure that still may lie—we 

know there is some structure there; we just do not know the definition of it well enough. But there is probably some more production 

there. Other than that, I have no interest in looking for a structure 

elsewhere in the Bighorn Basin because they are all exposed on the 

surface. They have all been surface mapped. They have all had 

seismic work done on them. They have all been drilled. And 98, 99 

percent of them have been productive. So what has happened is the 

BLM has come in and developed into a real monster after all of the 

major drilling in the Bighorn Basin took place. So if you look at 

that objectively, the rational mind would say let us make it easier 

with what little bit we have got left. 

Now, I have given you letters from my congressmen, Pete Olson 

and Rob Bishop, who strongly are objecting to what the BLM did 

to me. I also have letters from all the commissioners in your packet, most of them in there. They are jumping up and down. They 

are, as I mentioned earlier, co-operators with the BLM in the RMP 

consolidation. 

And I want to say even further, that consolidation is one of the 

biggest rip-offs that has taken off in the United States in years. 

They are doing this after all the drilling basically has been done 

and there is hardly any exploration still to be done. There was an 

18,000 foot hole drilled right out in the flat, deepest part of the 

Bighorn Basin by Barrett Energy. They got 100 MCF a day. That 

is not a keeper. They have abandoned thousands of acres they took 

out there. I am probably the only company I know of other than 

development that some people are going around old fields just 

plunking little development wells they can still find. I am the only 

one that I know of up in that basin that is actually trying to explore for a virgin field, and I thought I had the opportunity to come 

up with a field that could be 5 million to 10 million barrel potential 

but they are just stopping me dead and actually they are putting 


srobinson on DSK4SPTVN1PROD with 
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my company out of business in the Bighorn Basin. I operate on a 

low cash flow myself and I have to have outside investors. And 

when I lose people like I told you about a minute ago, I am going 

to have a terrible time now. 

On top of that, because they told me those leases—— 

Mr. WEST. I need to move on. 

Mr. EWING. Time out? 

Mr. WEST. I need to move. 

Mr. EWING. Keep going. 

Mr. WEST. All right. Ms. Rodell. 

Ms. RODELL. Unfortunately, I am not a world economist. 

Mr. WEST. Me either. 

Ms. RODELL. Shoot, and there are two of us in the room. 

However, oil is traded as a commodity on the worldwide market. 

A resolution to that, I am not sure I have one. I agree with Mr. 

Barber that so much of this is based on fear and worldwide unrest. 

However, I do think that if we can responsibly produce energy domestically it might take some of the pressure off of those imports 

that we get from those countries that are maybe not our best 

friends. In addition though, we can import or we can domestically 

produce as much, to an extent, a whole lot of oil. However, then 

we get into a refining process. 

So it is a much broader problem than just what can we as small 

producers do. The answer is I am not sure we can do anything. 

Mr. SQUILLACE. So I am also not a world economist but this is 

an important question that we all care about as citizens and as 

consumers of oil and gas. And so I appreciate the opportunity to 

weigh in on this important issue. 

I would like to point out a couple things, and I agree with much 

of what Ms. Rodell just said. But it is also true that domestic oil 

production is actually up in the United States over the past several 

years and consumption is down. And one would think that under 

basic economic rules that if the supply goes up and the consumption goes down that the price would come down. But as was pointed out, I mean, we are dealing with some global kinds of issues 

that are difficult to reconcile with what is happening with prices. 

There is one interesting data point that I would like to share 

with the Committee regarding this and that is a chart—I believe 

it has been published by the Energy Information Administration— 

that shows the price of oil along with the price of natural gas. And 

it shows sort of a trend of the two commodities. And it is very interesting to see how they have diverged radically in the past several years. I mean, it emphasizes what Mr. Ewing said a moment 

ago about why he is not interested in gas plays. The price is so low 

you cannot do it. 

And what is interesting about that divergence is that the price 

of natural gas is really much more controlled by domestic forces 

than is the price of oil. The price of oil is much more of a global 

kind of commodity. If we produce a lot more there is at least a danger that it will be sold internationally if that is where the better 

price can be had because it is more easily transportable than gas. 

But gas is much more problematic in terms of that. And because 

of all these significant shale plays, the supply of domestic gas loVerDate Mar 15 2010 22:17 Nov 09, 2012 Jkt 076464 PO 00000 Frm 00020 Fmt 6633 Sfmt 6602 E:\HR\OC\A464.XXX A464

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cally has gone up fairly dramatically. And I think that is why we 

are seeing this significant decrease in the price. 

So I do not think there is any silver bullet here to deal with the 

problem. The one thing I would say that is critically important is 

that we continue the trend towards reduced consumption. And I 

think one of the best things we have done in recent years was to 

increase the miles per gallon of our vehicle fleets. I think that is 

a really important step toward achieving energy and dependence. 

It is the one thing we really can, I think, do to affect global prices. 

Mr. WEST. Thank you, Mr. Chairman. I will not have a second 

round. 

Mr. EWING. Mr. West, I did not answer your question as a matter 

of fact. 

Mr. WEST. I do not think the chairman is going to give me any 

more time. 

Mr. EWING. Just give me two seconds to answer his question. 

There is probably not a real silver bullet but the truth is that if 

we were exploring up in Alaska where we will undoubtedly find 

some billion barrel fields. If we pushed exploration for oil in the 

United States, all over the United States, we would soon dispel all 

the nervousness that these folks have all referred to. And that 

nervousness is what the speculators thrive on. And I do not know 

what the Congress could do in terms of any regulation for the speculation but that is the name of the game as far as I am concerned. 

Thank you. 

Chairman COFFMAN. Thank you, Mr. Ewing. 

Mr. Tipton in Colorado. 

Mr. TIPTON. Thank you, Mr. Chairman. I apologize to you and to 

our panel members for being late coming in. 

Just listening to you, Ms. Rodell, when you were talking about 

a little bit of the international component when we are looking over 

into the Middle East, the threat of Iran developing a nuclear weapon, the threat obviously that concerns many of us that that place 

is to Israel and then to world stability in terms of oil supply. You 

are commenting accurately that this is a world market, the commodity for oil. Is it your estimation, given the challenges we see in 

the Middle East, that even if the price is driven by an international 

market, that it is in the best interest of the United States of America to be developing our own energy resources right here rather 

than relying on foreign markets to be able to delivery our oil? And 

part of the reason I say that is I was a little disturbed when the 

president, through the World Import-Export Bank guaranteed a $2 

billion loan to Brazil to be able to drill off of their shores and say 

we want to be one of their best customers. Would it be more sensible for us to be drilling on American soil, creating American jobs 

and developing American energy certainty? 

Ms. RODELL. I absolutely agree that domestic energy production 

is a huge component to not only our national security but also our 

jobs. As Mr. Squillace said, the natural gas production is more of 

a domestic commodity. I do think that there is a lot of opportunity 

to make that transfer, that transition from such an oil-dependent 

nation to start moving into different areas, i.e., natural gas, where 

we have trillions of cubic feet of undeveloped natural gas in this 

country. Unfortunately, when the divergence of the oil and gas 


srobinson on DSK4SPTVN1PROD with 
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prices happened, not a lot of folks—you cannot drill economically. 

So unless oil companies would like to volunteer their time and 

money, you are not going to see as much natural gas production. 

However, I think there is a huge opportunity for us to transition 

a lot of our base load power to natural gas. Some of our fleets to 

natural gas. And eventually, maybe some of our own cars to natural gas. But every time you do that transition, you do fight higher 

prices. And for the average American, buying a car is expensive 

enough, but if you have to make a decision as to buy an oil-based 

car or a natural gas-based car and the price difference is $15,000, 

it is not a hard decision for most Americans to make. 

So I do absolutely think it is important. I think we can make a 

huge transition. I also think we can start to ensure more of our security if we responsibly develop these resources domestically. 

Mr. TIPTON. I appreciate that. And I think one thing we need to 

keep a focus on is American jobs. In your testimony you were talking about over in Garfield County. And this past weekend I happened to be in Rifle, Silt, and Glenwood, an area that has lower 

unemployment typically, but if you drive a little bit further west 

into Mesa County we see effectively double digit unemployment 

that is there. So when we are talking about creating American energy certainty for our future and our security, and all of you may 

want to chime in on this, when it gets down to actually being able 

to create jobs, good paying jobs. 

And I can speak with confidence. I have dealt with and had folks 

that I have talked to that actually have dirt under their fingernails 

that love the area. They want to make sure that it is done responsibly. But what kind of a role can this positive development actually play in terms of getting America back to work? 

Mr. Barber. 

Mr. BARBER. Mr. Tipton, thank you. It is a great question that 

sets up a thought, I think. There are some that think that the market for oil will be what it will be regardless of what we produce 

here in these United States. And although I do not know that that 

is true, let us say for a moment that it is. We have an opportunity 

to produce federally-owned minerals that, by the way, one dollar 

out of every eight that is produced, the value of those minerals goes 

back to the federal government. So right away there is a one-eighth 

partner in those wells, if you will, that is the federal government. 

They split those royalties with the states that it is produced in; 52– 

48 percent I think is the split. 

But if we are going to get $100 a barrel for oil, we are going to 

pay $100 a barrel for oil regardless of who we buy it from if that 

is the situation. It seems tremendously valuable to me to do it in 

a fashion that, first of all, one-eighth of those dollars go back to the 

federal government. If we buy it somewhere else none of those dollars go to the federal government. And then we can look at what 

does the rest of that $100 come from? Well, it comes from things 

like the money that goes to the local drilling company, the local 

roustabout crew, the local permitting company, the roustabout employees, hotels, retail. Just a vast, vast group of folks that when 

$9 or $10 million is spent drilling a horizontal shale well that 

share in those prices that are out there for those services. If we 

give that up, all of those monies that are paid for those services 


srobinson on DSK4SPTVN1PROD with 
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go elsewhere. And I also worry that the other thing that can go 

elsewhere is the investment dollars of the companies that are willing to drill here but cannot. 

Mr. TIPTON. Thank you. Mr. Chairman, were you going to have 

a second round? Okay. 

You know, one thing I think that would be a little interesting 

here, and Mr. Squillace, sorry on that, that I would kind of like to 

have you comment on, the Colorado state legislature recently 

passed a resolution—it was 12–10–04—that they passed onto the 

Bureau—to the BLM. In the resolution, it called on the BLM to revise its current restrictive resource plan in Colorado in order to increase oil and natural gas production in Colorado. Was state legislature wrong to be able to put that sort of a resolution forward 

with bipartisan support? 

Mr. SQUILLACE. You know, of course, the nature of the resolution 

is such that it is a question of degree and what is too restrictive 

or what is not restrictive enough I think is a matter that people 

can have differing opinions about. I think it is certainly true that 

we need to encourage domestic energy development. I am not opposed to doing that. The concern I think, and one of the concerns 

relating to your earlier question, is just that we not get into a situation which we have seen so often in the western United States of 

boom and bust kind of development cycles. We need a steady kind 

of process for development, and too often the exuberance of higher 

prices at one moment leads us to go beyond perhaps where we 

should go with development and that leads to a bust cycle which 

is, I think, more detrimental than if we are able to do these things 

in a steady way. So I think that is the sort of difficult balance to 

try to find here. How can we have sort of steady development that 

achieves growth in jobs, that employs people, that is good for our 

local economy, and for our national economy as well, without 

overdoing it? And that is the temptation. It is a very difficult thing. 

There is a lot of pressure to move towards overdevelopment, but I 

think if we learn from the past we will know that there are limits 

to how far we ought to go in this direction. 

Mr. TIPTON. You know, I am concerned about that very thing as 

well, and when we are looking at—you are a Coloradoan as well. 

Mr. SQUILLACE. Yes. 

Mr. TIPTON. When we look in Colorado, federal leases dropped, 

which I find shocking because the president is talking about putting Americans back to work and we are not creating the opportunity. We turned down the Keystone Pipeline, 20-plus thousand 

jobs directly, 100,000 indirectly that we could have created here in 

America. We look at our state. My congressional district, we have 

people that are suffering right now, not only with high gas prices 

but just worried about being able to keep a roof over their head 

right now. Colorado federal leases dropped, contrary to what the 

president is trying to purport right now that we are increasing production, but leases dropped from 320 in 2008 to 11 in 2011. 

So are we seeing restrictive policies out of this administration 

when it comes to some of our public lands? And again, let us underscore, we want to be able to do it responsibly. But we also want 

to be able to feed our children. We want our people to be able to 

work. 


srobinson on DSK4SPTVN1PROD with 
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Mr. SQUILLACE. I think that is a very fair question. And we have 

discussed this a little bit before about how the drop in the price of 

natural gas has really affected interest in federal leasing. Now, it 

is not the only factor and I do not want to suggest to you that that 

is the only thing that is going on here, but there is no doubt that 

when natural gas drops below $3 a thousand cubic feet, there are 

significant economic reasons why the industry is not particularly 

interested in developing those leases and bidding on them. It is a 

very cyclical kind of thing. Natural gas in the United States is actually up significantly, largely because of some of the domestic supplies that are being found in the eastern part of the United States 

from the big shale plays out there. 

So I am not suggesting that there is nothing to the point that 

you are making. I would note that I believe the director of the BLM 

recently testified that about a quarter of the leases that the BLM 

has offered in the past few years have gone without any bids on 

them. So parcels have been nominated by industry and they are offered for lease and they are not bid upon. And so it may just be 

what is happening with the market. I do not think we should read 

too much into the fact that the current level of leasing is down. 

Mr. TIPTON. Okay. And I will be happy—we ought to certainly 

talk about this because I am talking to companies that are having 

leases held up. You know, it is up to 10 years. Well nine years, I 

think, is the high mark to be able to actually develop and be able 

to go to production, which I think greatly creates that boom and 

bust cycle that you are talking about because time is money when 

it gets down to business and development and the tremendous capital investment that it takes to be able to develop some of these resources that are out there. 

I would just kind of like to open this up a little bit. I do not want 

to overstretch, Mr. Chairman, in terms of time here. 

Chairman COFFMAN. Mr. West, do you have any additional questions? 

Mr. WEST. I am good. Go ahead. 

Mr. TIPTON. Great. Well, I will just kind of wrap it up. 

Can you give us any examples, and this may be open to the 

whole panel here, where the president’s domestic or foreign policies 

have contributed to really what we are seeing at the pump? You 

know, we are seeing increased costs that are going on. The president talks about an ‘‘all of the above’’ energy policy but it is a matter really in terms of the tax code of picking winners and losers 

which he abhors on one hand and embraces on the other. I think 

our colleagues at least on the republican side, we need to have tax 

reform. It needs to be flatter, fairer, and simpler, but right now we 

are seeing an administration policy that seems to be pretty convoluted in terms of the real impacts on the American people. Just 

give me some of your comments, if you would, in terms of the administration policies. 

Yes, sir. Mr. Barber. 

Mr. BARBER. Thank you, Mr. Tipton. 

When one considers the size of the companies that are sort of 

represented and being discussed here, they are generally smaller 

production companies. And we, like someone else who sells their 

product on a market, we could be just like a wheat farmer. The inVerDate Mar 15 2010 22:17 Nov 09, 2012 Jkt 076464 PO 00000 Frm 00024 Fmt 6633 Sfmt 6602 E:\HR\OC\A464.XXX A464

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dividual wheat farmer does not get to determine what it is that 

they receive for their commodity. They grow it and choose to sell 

it or put it in a grainery and sell it maybe when markets are different. 

So one of the things that maybe we do not have the ability to 

do in our positions is to determine what it is we get for that product because if we could I am sure we would want to get more for 

the price of natural gas right now. Natural gas is being—there is 

certainly plenty of supply and in some cases operators are out 

there shutting in wells to not produce at the current pricing. I 

think in terms of liquids there may be situations where it would 

be better to have a predictable price of some number that is survivable for companies but certainly that type of marketing is beyond 

the scope of smaller companies. 

Mr. EWING. I would just like to make a comment on that. I think, 

as I said, I do not get involved in the gas play but I am certainly 

conversant with it. I watched the oil plays in Texas in similar types 

of environments and it turned out that many of those, the operator 

was the guy that owned, controlled the acreage initially and turned 

it to somebody was the only guy that made a lot of money on it. 

In the Austin Chalk plate down there you were lucky if you were 

getting a two-to-one return on the investment. If you had a dry 

hole on the way, your investors were very fortunate if they ever got 

their money back. What I think is going to happen in the gas play 

is that there is so—it is a similar type of play in that the return 

on investment is not very big. Yes, you can get a well every time, 

so from a promoter standpoint it is great. But what is going to happen is that all of these little guys that jumped in, and I mentioned 

a while ago they got burned, they will turn their acreage. It is all 

going to be bought up by the majors, at which point the majors will 

have the option of slowing down drilling so that they can get the 

price back up. 

Now, why would they do that? Right now when you bring in one 

of those wells they look great on initial potential. But very quickly 

those things dive. And in order to keep the investors happy you 

have to start drilling another well very quickly to get another good 

well that will also dive. It is what I have called the black hole of 

drilling. I know that is putting a bad slant on it because I am not 

interested in it in the first place. I cannot afford it but that is what 

is going to happen at the point in time when the majors get sufficient control of all of those acres, they will then just gradually slow 

down on their drilling and the price of gas—they will get the price 

of gas to edge up again. Prediction. 

Ms. RODELL. Thank you, Mr. Tipton. I think for most of us we 

are looking forward to simpler tax reform. However, I do know that 

the president is currently talking about removing the intangible 

drilling cost deduction that the oil and natural gas industry can 

take in addition to not allowing the deduction on depletion rates. 

And these are very frightening to smaller independents. These are 

not give-mes. These are standard manufacturing deductions that 

any manufacturing company would be able to get. These are costs. 

This is the cost of doing business. If he takes away these deductions from the oil and natural gas industry it could cause a 25 percent loss in capital reinvestment which then just basically turns 


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around into loss of jobs and loss of domestic energy production because smaller companies will not be able to operate under these 

stipulations. 

In addition, we hear a lot about the billion dollars that the majors make, and although these profits may sound excessive, sometimes these are only a 6 percent rate of return for even the larger 

companies. So these are not—what needs to be looked at is not the 

overall figure because these are large international companies but 

what really needs to be looked at is the individual rate of return, 

sometimes as low as 6 percent. So some of the proposed tax reforms 

will and can put a lot of the smaller independents just completely 

out of business. 

Mr. SQUILLACE. I think we can all agree that a simpler tax code 

would be a good thing. I doubt that many people, many Americans 

would disagree with that point. The devil, of course, is in the details. But I would like to focus more specifically on the relevance 

of your comment to energy policy. And here I hope that we can 

agree that we need to take the long view. Now, where our energy 

policy will be or where our mix of energy will be in 2050 may be 

a subject of disagreement, but the key point here is that we ought 

not try to have an energy policy just for the moment. I mean, we 

know that the economy is down right now, people need jobs, and 

in the short term we need to deal with those kinds of issues. But 

we also need, as a matter of planning, to think about where we 

want our energy policy to go. And I hope as the Congress is thinking about these broad issues about energy policy that they will look 

at the big picture and look at the long term and try to adopt policies that will get us where we need to be in 30, 40, and even 50 

years from now. I think that is really key. And if we can reach 

some kind of agreement about where we need to go, I think we can 

see a clearer path for us to get there. 

Mr. TIPTON. Thank you. And thank you, Mr. Chairman. 

Chairman COFFMAN. Thank you, Mr. Tipton. 

I would like to ask one more question of all of you individually 

and that is to the smaller producers, if you were going to look at 

a single regulatory burden that would make the biggest difference 

in terms of reform, and I know some of you just talked about deadlines and deadlines passing but yet having to pay permitting fees 

anyway irrespective of whether BLM does its role, but if you are 

going to look at one simple thing or one specific thing, what would 

it be? And we will start with you, Mr. Barber, and we will go to 

the left then. 

Mr. BARBER. Thank you, Mr. Coffman. 

The singular issue that I would say from my perspective that we 

could do is actually fortunately already in place in regulation. If we 

could get BLM back to the point where federal mineral wells, APDs 

are processed in the timeline that is called for in the regulation 

and is handled that way by some good BLM offices, if we could do 

that one single thing, that would make more APDs available for 

drilling and we would have better drilling prospects because they 

are directly following their own regulations rather than individual, 

personal entrepreneurial interpretation regulation. 

Chairman COFFMAN. Mr. Ewing. 


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Mr. EWING. Mr. Coffman, my whole pitch today relative to Ewing 

Exploration has been applied to the Bighorn Basin so my comment 

is going to be related to that. 

The BLM changed the rules that we were using to determine 

whether or not leases should be issued. They were, for the first five 

years, using the old RMP to do their adjudication as far as environmental NEPA examinations were concerned. Then suddenly, in 

2010, when they pulled those parcels that I had on that map down 

from the sale, they pulled them down because a new information 

memorandum had been issued by Director Salazar back in the middle of 2010, well before that sale, telling his people that they had 

to start looking at wild lands characteristics up there in the Bighorn and throughout, I think, throughout the system. Once they 

did that it put them in a position to simply use the stroke of the 

pen they have to go ahead, and in spite of the fact that I had acquired all those acres under the old rules, in spite of the fact I 

drilled a well under those old rules, in spite of the fact we spent 

$250,000 getting new seismic under those rules and $70,000 to buy 

old seismic, they suddenly said you have got to operate under the 

new rules and we are going to pull these down. And since they will 

not have them up again, based on the letter I got less than two 

months ago, until the earliest in 2014, that will be 51 months from 

the time I first nominated those blue parcels for sale. And it will 

be after they have rejected them. They had them on the first sale 

and I flew into Cheyenne and found out the next day they had all 

been removed from the sale. 

So my complaint is that they changed the rules. If we could get 

them to go back to the original RMP rules, which are what Congressman Olson recommended they do along with Bishop, along 

with the Western Energy Alliance, and just use those rules because 

that IM that they changed allowed them to change the way they 

dealt with me, was simply called to be illegal by Judge 

Freudenthal’s decision. So everybody says let us go back and use 

those. They just will not do it. 

Chairman COFFMAN. Ms. Rodell, if there were one thing that you 

could change in terms of regulatory reform for smaller operators, 

what would it be? 

Ms. RODELL. Because the BLM offices, although they all operate 

under the Department of the Interior, they often operate as very 

individual entities. You know, I do think consolidating some of 

those processes in a single office within a single group might not 

be a bad idea and allowing the BLM representatives in the field 

to do their part to supply those common offices with maybe some 

of the information to get these approvals through in a timely manner or to write the NEPA documents that are necessary for the approvals of the rights of ways and the ABDs. 

So I agree with Mr. Barber that there needs to be some timelines 

that need to be followed, and I think maybe a consolidation rather 

than individuals and individual offices might be a start to the solution. 

Chairman COFFMAN. Okay. Mr. Squillace. 

Mr. SQUILLACE. Sure. And again here, I think that there are no 

simple answers to the question. There is no simple rule change 

that will relieve some of the burdens. But I agree that if we can 


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provide more certainty to the industry, particularly the small operators, that would be a good thing and we ought to try to find ways 

to do that. 

One issue that I focused on over the past few years is my concern 

about the complexity of the land use planning process, both with 

the Forest Service and with the BLM. 

As an example, in the resource management planning process 

that the BLM uses, they get into sufficient detail that they are actually deciding on stipulations that belong in oil and gas leases 

that might be issued on particular lands. But that is not the end 

of the matter because then when they go through the APD process 

they may be imposing more restrictions and additions. It seems to 

me that while you can make an argument for that, we ought to 

simplify land use planning and avoid getting into the details when 

we have not studied the particular lands where the operations are 

going in anyway. Let us use land use planning as kind of a zoning 

exercise. Decide what we are going to do on particular lands and 

what we are not going to do on particular lands. And that creates 

a kind of certainty about where opportunities for the oil and gas 

industry are available. And then when development is going to 

take place we can look at it comprehensively. Hopefully we have 

saved some resources that are now being employed in the planning 

process and we can use them to help meet the deadlines that some 

of the folk are talking about here and then receive a quicker action 

and more certainty for the industry. 

Mr. EWING. Can I make one more comment? One of the items, 

exhibits that I put in your packet up there looks like this. It is a 

comparison between the number of employees that the WOGCC, 

Wyoming Oil and Gas Commission has in Wyoming, and the employees that the BLM has. And if you look at that it tells you, I 

think, pretty much the story of why we are overregulated. As I 

pointed out earlier, I think before Mr. Tipton came in, the WOGCC 

had 44 employees. The BLM has 898 employees adjudicating just 

the BLM lands in the state of Wyoming, not all of those lands that 

the state deals with. The annual budget for the WOGCC is 

$2,640,000. The budget for the BLM is estimated to be $54 million 

a year. I mean, what you all have to start to do if you are going 

to change the way this exploration goes on BLM lands, you have 

got to get into their budget and cut their funding and cut them 

down to size because we do not need all of their help. All they do 

is hold back exploration; they do not help it proceed forward. 

Mr. WEST. Mr. Ewing, that is what we call up here a jobs program. 

Chairman COFFMAN. Mr. Tipton, any other comments? 

Well, I want to thank you all so much for your testimony today 

and I think, Mr. Ewing, you raised the question about submitting 

additional testimony. And you and the other witnesses, all of the 

witnesses will have 14 legislative days to submit additional comments and materials into the record. 

Thank you very much for your testimony today. 

[Whereupon, at 11:35 a.m., the Subcommittee was adjourned.] 


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