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70-719 PDF 2012

ONE YEAR AFTER PRESIDENT OBAMA’S 

GULF OF MEXICO 6-MONTH MORATORIUM OFFICIALLY LIFTED: EXAMINING 

THE LINGERING IMPACTS ON JOBS, 

ENERGY PRODUCTION AND LOCAL 

ECONOMIES 

OVERSIGHT HEARING 

BEFORE THE

COMMITTEE ON NATURAL RESOURCES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

Wednesday, October 12, 2011 

Serial No. 112-69 

Printed for the use of the Committee on Natural Resources 

( 

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

or 

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

(II) 

COMMITTEE ON NATURAL RESOURCES 

DOC HASTINGS, WA, Chairman 

EDWARD J. MARKEY, MA, Ranking Democrat Member 

Don Young, AK 

John J. Duncan, Jr., TN 

Louie Gohmert, TX 

Rob Bishop, UT 

Doug Lamborn, CO 

Robert J. Wittman, VA 

Paul C. Broun, GA 

John Fleming, LA 

Mike Coffman, CO 

Tom McClintock, CA 

Glenn Thompson, PA 

Jeff Denham, CA 

Dan Benishek, MI 

David Rivera, FL 

Jeff Duncan, SC 

Scott R. Tipton, CO 

Paul A. Gosar, AZ 

Rau ́l R. Labrador, ID 

Kristi L. Noem, SD 

Steve Southerland II, FL 

Bill Flores, TX 

Andy Harris, MD 

Jeffrey M. Landry, LA 

Charles J. ‘‘Chuck’’ Fleischmann, TN 

Jon Runyan, NJ 

Bill Johnson, OH 

Dale E. Kildee, MI 

Peter A. DeFazio, OR 

Eni F.H. Faleomavaega, AS 

Frank Pallone, Jr., NJ 

Grace F. Napolitano, CA 

Rush D. Holt, NJ 

Rau ́l M. Grijalva, AZ 

Madeleine Z. Bordallo, GU 

Jim Costa, CA 

Dan Boren, OK 

Gregorio Kilili Camacho Sablan, CNMI 

Martin Heinrich, NM 

Ben Ray Luja ́n, NM 

John P. Sarbanes, MD 

Betty Sutton, OH 

Niki Tsongas, MA 

Pedro R. Pierluisi, PR 

John Garamendi, CA 

Colleen W. Hanabusa, HI 

Vacancy 

Todd Young, Chief of Staff 

Lisa Pittman, Chief Counsel 

Jeffrey Duncan, Democrat Staff Director 

David Watkins, Democrat Chief Counsel 

(III) 

CONTENTS 

Page 

Hearing held on Wednesday, October 12, 2011 ..................................................... 1 

Statement of Members: 

Hastings, Hon. Doc, a Representative in Congress from the State of 

Washington .................................................................................................... 1 

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

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

of Massachusetts ........................................................................................... 4 

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

Statement of Witnesses: 

Auer, Chris, Principal, Crevalle Management Services ................................ 15 

Prepared statement of ............................................................................... 16 

Craul, Bruce W., Chief Operating Officer, Legendary Hospitality, and 

Chairman-Elect, Florida Restaurant and Lodging Association ................ 26 

Prepared statement of ............................................................................... 27 

Galvez, Fernando, Ph.D., Assistant Professor, Department of Biological 

Sciences, Louisiana State University .......................................................... 29 

Prepared statement of ............................................................................... 31 

Kief, Cory, President, Offshore Towing, Inc., Larose, Louisiana .................. 18 

Prepared statement of ............................................................................... 19 

Reese, Albert L., Jr., Chief Financial Officer and Treasurer, ATP Oil 

& Gas Corporation ........................................................................................ 10 

Prepared statement of ............................................................................... 12 

Shafer, Sean, Manager of Consulting/Senior Market Analyst, Quest 

Offshore Resources, Inc. ............................................................................... 6 

Prepared statement of ............................................................................... 8 

Zales, Captain Robert F., II, President, National Association of 

Charterboat Operators ................................................................................. 20 

Prepared statement of ............................................................................... 23 

Additional materials supplied: 

Mason, Joseph R., Louisiana State University, Statement submitted for 

the record ....................................................................................................... 62 

(1) 

OVERSIGHT HEARING ENTITLED ‘‘ONE YEAR 

AFTER PRESIDENT OBAMA’S GULF OF MEXICO 6-MONTH MORATORIUM OFFICIALLY 

LIFTED: EXAMINING THE LINGERING 

IMPACTS ON JOBS, ENERGY PRODUCTION 

AND LOCAL ECONOMIES.’’ 

Wednesday, October 12, 2011 

U.S. House of Representatives 

Committee on Natural Resources 

Washington, D.C. 

The Committee met, pursuant to call, at 10:07 a.m., in Room 

1324, Longworth House Office Building, Hon. Doc Hastings [Chairman of the Committee] presiding. 

Present: Representatives Hastings, Gohmert, Lamborn, Fleming, 

McClintock, Thompson, Duncan of South Carolina, Labrador, 

Southerland, Landry, Markey, and Holt. 

Also present: Representative Palazzo. 

The CHAIRMAN. The Committee will come to order. And the 

Chair notes the presence of a quorum, which under our rules, two 

Members, and we have greatly exceeded that this morning. Thank 

you very much. 

The Committee on Natural Resources is meeting today to hear 

testimony on an oversight hearing on ‘‘One Year after President 

Obama’s Gulf of Mexico 6-Month Moratorium Officially Lifted: 

Examining the Lingering Impacts on Jobs, Energy Production, and 

Local Economies.’’ 

Under Rule 4[f], the opening statements are limited to the Chairman and the Ranking Member. However, I will ask unanimous 

consent to include any Members’ opening statements on the hearing if those statements are submitted to the Committee before the 

close of business today. And without objection, so ordered. 

I further ask unanimous consent that the gentleman from Mississippi, Mr. Palazzo, be allowed to sit on the dais and participate 

in the hearing today. He expressed an interest to do so, and hopefully he is on his way. And without objection, so ordered. 

I will now recognize myself for five minutes. 

STATEMENT OF HON. DOC HASTINGS, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF WASHINGTON 

Mr. HASTINGS. On May 2010, shortly after the tragic Deepwater 

Horizon explosion and oil spill, the Obama Administration placed 

a moratorium on all deepwater drilling in the Gulf of Mexico. This 

official moratorium lasted for nearly six months, and was lifted on 

October 12th, 2010, exactly one year ago today. 

The official moratorium, unfortunately, was followed by a de 

facto moratorium that still did not allow businesses and their emVerDate Nov 24 2008 11:07 Nov 20, 2012 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 L:\DOCS\70719.TXT Hresour1 PsN: KATHY
2 

ployees to return to work until the first permits were issued in 

February of this year. The Obama Administration’s inability or refusal to issue permits in a timely and efficient manner after the official moratorium was lifted resulted in lost jobs and significant 

economic pain. 

Since the moratorium was imposed, this Committee has heard directly from businesses and local community groups about the economic impacts. Today, one year later, this hearing is an opportunity to follow up again and listen to those from the Gulf about 

what economic conditions are like there today. While I recognize 

that some permits indeed are being issued, there are facts and data 

that demonstrate recovery is moving at a pace that continues to 

hamper job creation and the economy. 

First, permitting activity in the Gulf has dramatically declined 

under the Obama Administration, as shown by this chart, and has 

operated at lows that equate to hurricane-induced shutdowns. You 

can see the bottom spike there is Katrina. The next spike is Gustav. And you can see where we are now in real time, and it equals 

those areas. 

Additionally, permitting activity has not returned to pre-Deepwater Horizon levels. The average number of permits issued in the 

six months prior to the Deepwater Horizon incident was 71 per 

month. The average number for the last six months was 52 per 

month. That is a 20 percent decrease. 

Second, instead of looking at the number of permits issued, we 

should look at the production levels. This chart shows how production has declined. The top line is what production in the Gulf was 

projected to be before the spill and the President’s moratorium. The 

bottom line represents the actual production. As you can see, there 

is a difference between the two. 

Third, the time it takes to get approval for permits and exploration plans is much longer today. Director Michael Bromwich has 

frequently stated that there is not a backup of offshore drilling permits waiting for approval and that this proves that there is no de 

facto moratorium. And this chart actually helps highlight what Director Bromwich is referring to. It shows the number of days it 

took for specific explorations. And by the way, the bottom line 

there is the specific explorations to be accepted and approved in 

order to receive the permit to drill. 

By the way, the horizontal line is the number of days. So as you 

can see from these charts, these plans are being approved in a relatively short-term time frame, and credit should be given where it 

is due. But that is only part of the story. 

This next chart shows exactly how long it took companies to get 

their plans approved, sometimes nearly 300 days. What this chart 

does is take the last chart and insert below that the process to declare it deemed submitted. So companies are submitting plans and 

getting stuck in a back and forth limbo through the Department of 

the Interior that can drag on for months. 

This is the step in the whole process that this Administration 

does not talk about. Now, keep in mind, companies can’t apply for 

permits until its exploration plan has been submitted and approved. That is why it is disingenuous to only refer to pending permits and approved permits as the Department of the Interior likes 

3 

to do, because the logjams occur before the companies even get to 

that point. So it is a sleight of hand that actually makes the process look more efficient, when in fact it isn’t. 

And finally, fourth, 11 deepwater rigs have left the Gulf of Mexico for foreign countries, such as Egypt and Brazil. Every time one 

of these rigs leaves, it takes away good American jobs. And in addition to that, 84 offshore support vessels have also left and departed 

the Gulf. The livelihood of communities and businesses throughout 

the Gulf depend on safe and responsible offshore energy production. 

It has been a year and a half since the Deepwater Horizon incident, and a year since the President’s moratorium was officially 

lifted. It is time to get people back to work and get the economy 

rolling again in the Gulf. And with that, I will yield to the Ranking 

Member for his opening remarks. The gentleman is recognized for 

five minutes. 

[The prepared statement of Mr. Hastings follows:] 

Statement of The Honorable Doc Hastings, Chairman, 

Committee on Natural Resources 

In May 2010, shortly after the tragic Deepwater Horizon explosion and oil spill, 

the Obama Administration placed a moratorium on all deepwater drilling in the 

Gulf of Mexico. This official moratorium lasted for nearly six months and was lifted 

on October 12, 2010—exactly one year ago today. 

This official moratorium, unfortunately, was followed by a de facto moratorium 

that still did not allow businesses and their employees to return to work until the 

first permits were issued in February of this year. The Obama Administration’s inability, or refusal, to issue permits in a timely and efficient manner after the official 

moratorium was lifted resulted in lost jobs and significant economic pain. 

Since the moratorium was imposed, this Committee has heard directly from businesses and local community groups about the economic impacts. Today, one year 

later, this hearing is an opportunity to follow-up and listen to those from the Gulf 

about what economic conditions are like there today. 

While I recognize that some permits indeed are being issued, there are facts and 

data that demonstrate recovery is moving at a pace that continues to hamper job 

creation and the economy. 

First, permitting activity in the Gulf has dramatically declined under the Obama 

Administration and has operated at lows that equate to hurricane-induced slowdowns. 

Additionally, permitting activity has not returned to pre-Deepwater Horizon levels. The average number of permits issued in the six-months prior to the Deepwater 

Horizon incident was 71 per month. The average number for the past six months 

is 52 per month. That’s a 27% decrease, which directly affects jobs and the local 

economy. 

Second, instead of looking at the number of permits issued, we should also look 

at production levels. This chart shows how production has declined. The top line is 

what production in the Gulf was projected to be before the spill and the President’s 

moratorium. The bottom line represents actual production. 

Third, the time it takes to get approval for permits and exploration plans is much 

longer today. Director Michael Bromwich has frequently stated that there is not a 

backup of offshore drilling permits waiting for approval. . .and that this proves 

there is no de facto moratorium. This chart actually helps highlight what Director 

Bromwich is referring to. It shows the number of days it took specific explorations 

plans to be accepted and approved in order to receive a permit to drill. As you can 

see from this chart, these plans are being approved in a relatively short time-frame. 

But that is only part of the story. 

This next chart shows how long it actually took companies to get their plans approved–sometimes nearly 300 days. The biggest delay in the process, as shown here, 

is getting the Interior Department to accept the exploration plan and declare it 

‘deemed submitted.’ Companies are submitting plans and getting stuck in a back 

and forth limbo with the Interior Department that can drag on for months. This is 

the step the Obama Administration doesn’t talk about. 

4 

Keep in mind, companies can’t apply for permits until its exploration plan has 

been submitted and approved. That’s why it’s disingenuous to only refer to pending 

permits and approved permits—as the Interior Department likes to do—because the 

log jams occurs before companies even get to that point. It’s a slight of hand to make 

the process look much more efficient. 

Fourth, 11 deepwater rigs have left the Gulf of Mexico for foreign countries such 

as Egypt and Brazil. Every time one of these rigs leaves, it takes away good-paying 

American jobs. In addition, 84 offshore support vessels have also departed the Gulf. 

The livelihood of communities and businesses throughout the Gulf depend on safe 

and responsible offshore energy production. It’s been a year and a half since the 

Deepwater Horizon incident, and a year since the President’s moratorium was officially lifted. It’s time to get people back to work and get the Gulf’s economy growing 

again. 

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

MASSACHUSETTS 

Mr. MARKEY. Thank you, Mr. Chairman, very much. Most Americans likely remember the date April 20th, 2010, as the day the 

Deepwater Horizon exploded and the BP oil spill began. But October 12th, 2010, would likely only trigger blank stares. And that is 

the essential problem with this hearing. The Republican majority 

is holding a hearing on the one year anniversary of the end of a 

temporary pause for a couple dozen of the riskiest deepwater drilling rigs in the Gulf of Mexico. 

Those few months were important to ensure that rigs were safe 

and that workers and our environment were protected. But today, 

we are having a hearing on that temporary pause as though it and 

not the BP spill itself were the cause of all of the problems. Holding a hearing on the impact of a safety check following an unimaginable oil spill is a little like holding a hearing on the impact of 

wearing a cast after shattering your leg without looking at the accident that required the cast. 

But the Republican majority and the oil industry aren’t holding 

hearings to examine the lingering effects from the actual oil spill. 

They are not talking about how the oil spill could cost the Gulf region $22 billion over three years and lost tourism, according to one 

study. They are not holding a hearing to demand answers about 

why there have been recurrent oil sheens showing up near the site 

of the Macondo well site a year after the accident, or reports of 

mutations in some fish species in the region. And they are not talking about what we do to ensure we never have a spill like this 

occur again. 

So today, let us talk about some of the real lasting impacts from 

the spill itself. Just a few weeks into the BP spill, I successfully 

called on BP to create a $500 million scientific research fund. One 

of the first studies from this fund was released just a few weeks 

ago. That study, conducted by a team of researchers from Louisiana State, Texas State, and Clemson Universities, shows that 

fish living in the marshes affected by the spill have undergone 

changes at the cellular level that could lead to developmental and 

reproductive problems in these fish. 

The researchers focused on the killifish, which is the most abundant fish in the marshes of the Gulf, and an indicator of the health 

of that ecosystem. The researchers found that there have been potentially dangerous changes in this one species that may indicate 

5 

the presence of a much larger problem. In fact, the researchers concluded that these may be some of the same significant early warning signs that we saw in the years following the Exxon Valdez oil 

spill in Alaska, before species like the Pacific herring and pink 

salmon suffered population declines. 

We may be seeing the first indications that there are lasting effects of the oil spill below the surface of the water. There may in 

fact be a host of ticking environmental time bombs in the Gulf 

whose impact we are only beginning to understand. But the most 

important species impacted by the spill has been the resilient people of the Gulf of Mexico. They were the ones who lost jobs because 

of the spill. They lost tourism dollars and fishing dollars, and endured the priceless impacts on the environment of the Gulf. And 

families lost husbands and sons and brothers on the Deepwater 

Horizon. 

This Congress should finally end its moratorium on common 

sense and pass legislation to prevent similar spills in the future. 

We should ensure that there is proper monitoring of the Gulf ecosystem so that we are ready to adapt to possible impacts of the 

spill on fish and other species. Each time this Committee holds another hearing that avoids these responsibilities, it does a disservice 

to the people of the Gulf. I yield back. 

[The prepared statement of Mr. Markey follows:] 

Statement of The Honorable Edward J. Markey, Ranking Member, 

Committee on Natural Resources 

Most Americans likely remember the date April 20, 2010 as the day the Deepwater Horizon exploded and the BP oil spill began. 

But October 12, 2010 would likely only trigger blank stares. 

And that is the essential problem with this hearing. The Republican Majority is 

holding a hearing on the one year anniversary of the end of a temporary pause for 

a couple dozen of the riskiest deepwater drilling rigs in the Gulf of Mexico. 

Those few months were important to ensure that rigs were safe and that workers 

and our environment were protected. But today we are having a hearing on that 

temporary pause as though it, and not the BP spill itself, were the cause of all problems. 

Holding a hearing on the impact of a safety check following an unimaginable oil 

spill is a little like holding a hearing on the impact of wearing a cast after shattering your leg, without looking at the accident that required the cast. 

But the Republican Majority and the oil industry aren’t holding hearings to examine the lingering effects from the actual oil spill. 

They’re not talking about how the oil spill could cost the Gulf region $22.7 billion 

over three years in lost tourism, according to one study. 

They’re not holding a hearing to demand answers about why there have been recurrent oil sheens showing up near the site of the Macondo well site a year after 

the accident, or reports of mutations in some fish species in the region. 

And they’re not talking about what we do to ensure we never have a spill like 

this again. 

So today, let’s talk about some of the real lasting impacts from the spill itself. 

Just a few weeks into the BP spill, I successfully called on BP to create a $500 

million scientific research fund. One of the first studies from this fund was released 

just a few weeks ago. 

That study, conducted by a team of researchers from Louisiana State, Texas State 

and Clemson Universities, shows that fish living in the marshes affected by the spill 

have undergone changes at the cellular level that could lead to developmental and 

reproductive problems in these fish. The researchers focused on the killifish [KILL– 

EE–FISH], which is the most abundant fish in the marshes of the Gulf and an indicator of the health of that ecosystem. 

The researchers found that there have been potentially dangerous changes in this 

one species that may indicate the presence of a much larger problem. In fact, the 

researchers concluded that these may be some of the same significant early warning 

6 

signs that we saw in the years following the Exxon Valdez oil spill in Alaska before 

species like the pacific herring and pink salmon suffered population declines. We 

may be seeing the first indications that there are lasting effects of the oil spill below 

the surface of the water. There may in fact be a host of ticking environmental time 

bombs in the Gulf whose impacts we are only beginning to understand. 

But the most important species impacted by the spill has been the resilient people 

of the Gulf of Mexico. They were the ones who lost jobs because of the spill. They 

lost tourism dollars and fishing dollars and endured the priceless impacts on the 

environment of the Gulf. 

And families lost husbands, sons and brothers on the Deepwater Horizon. 

This Congress should finally end its moratorium on common sense and pass legislation to prevent similar spills in the future. We should ensure that there is proper 

monitoring of the Gulf ecosystem so that we are ready to adapt to possible impacts 

of the spill on fish and other species. Each time this Committee holds another hearing that avoids these responsibilities, it does a disservice to the people of the Gulf. 

I yield back. 

Mr. HASTINGS. I thank the gentleman for his opening statement, 

and want to welcome our panel here today. We have Mr. Sean 

Shafer, Manager of Consulting and Senior Marketing Analyst of 

Quest Offshore Resources; Mr. Al Reese, Jr., Chief Financial Officer of ATP Oil & Gas Corporation; Mr. Chris Auer, Principal of 

Crevalle Management Services—did I say that correctly? 

Mr. AUER. You did. 

Mr. HASTINGS. Mr. Cory Kief, President of Offshore Towing; Captain Bob Zales, President of the National Association of 

Charterboat Operators; Mr. Bruce Craul, Chief Operating Officer, 

Legendary, Inc.; and Dr. Fernando Galvez, Assistant Professor, Department of Biological Sciences, Louisiana State University. 

For those of you that aren’t familiar with our timing lights, your 

full statement will appear in the record, and many times your full 

statement is longer than what you can speak orally for five minutes, and we recognize that. That is why your full statement is in 

the record. But we would like you to confine your oral statements 

to five minutes, and the light in front of you, when the green light 

is on, it means you are doing fine. When the yellow light comes on, 

it means you are down to one minute. And then when the red light 

comes on, it means that your five minutes have expired. I would 

ask you to try to confine your remarks within that time frame so 

that we can get onto hearing from all of you, and then have followup questions from the Committee. 

So with that, Mr. Shafer, we will start with you, and you are recognized for five minutes. 

STATEMENT OF SEAN SHAFER, MANAGER OF CONSULTING/ 

SENIOR MARKET ANALYST, QUEST OFFSHORE RESOURCES 

Mr. SHAFER. Thank you, Mr. Chairman, and I appreciate the opportunity. Despite the official end of the drilling moratorium in October 2010, the offshore Gulf of Mexico oil and natural gas industry 

is still feeling the lingering effects of the official moratorium. These 

effects, combined with the impact of the subsequent regulatory 

slowdown are being felt throughout the Gulf Coast region—— 

Mr. HASTINGS. Mr. Shafer, could you move that microphone closer to you so we can hear? 

Mr. SHAFER. Of course. Sorry about that. 

Mr. HASTINGS. Thank you very much. 

7 

Mr. SHAFER. Excuse me. While the offshore Gulf of Mexico oil 

and industry has seen some signs of recovery from the low state 

it was in during the drilling moratorium, activity levels are still 

well below the levels seen before the Macondo incident, and well 

below the levels of the Quest baseline forecast before the incident. 

From a permitting rig and drilling activity perspective, the industry is at best flat compared to where it was before the drilling 

moratorium, with the growth that had been previously expected 

both delayed and diminished. The only industry sector seeing 

healthy growth is in the development of projects not dependent on 

further near-term drilling. While this is positive, the majority of 

these projects were already well in the works before the incident, 

and are thus seeing these major equipment orders despite the moratorium. 

As of the end of September 2011, 21 floating rigs, which are defined as those with subsea blowout preventers, are operating in the 

Gulf of Mexico, of which only 18 are currently drilling wells. Premoratorium, 33 floating rigs were operating in the Gulf of Mexico, 

with 29 drilling wells at that time. This indicates a roughly 37 percent drop in both the number of rigs operating and drilling. Since 

the moratorium began, 11 rigs have left the Gulf of Mexico. Only 

one of these has returned with three rigs currently sitting idle. 

Seven of these rigs have left for African countries, including 

Egypt, Nigeria, Liberia, and the Republic of Congo. Three of these 

rigs have left to South America, including Brazil and French Guinea, and the remaining rig recently mobilized to Vietnam. 

As of today, none of these operators have announced plans to return these rigs to the Gulf of Mexico this year. Two rigs are 

planned for return in early 2012, but neither operator has a permit 

to drill with these rigs yet, casting doubt on the likelihood of this 

happening. This translates to approximately 60 wells lost based on 

the original contract terms of these rigs. The loss of these rigs 

amounts to lost spending of $6.3 billion annual loss of direct employment of 11,500 jobs over two years. 

While the number of rigs operating the Gulf of Mexico is expected to recover to pre-moratorium levels by the middle of 2012, 

this fails to take into account the number of rigs which were expected to be operating in the region in 2012 based on previously 

stated operator schedules. While rig counts are forecast to return 

to pre-moratorium levels of 35 floating rigs by mid-2012, prior to 

the incident and subsequent regulatory slowdown, operating numbers were expected to have reached 44 rigs by this point. 

In addition, drilling activity is not expected to return to pre-moratorium levels before 2014 due to currently low permitting rates 

and operators not relocated rigs back to the Gulf of Mexico. While 

the Gulf of Mexico is currently seeing an uptick in certain types of 

development activity due to projects that were delayed by the credit crunch and economic slowdown, overall capital expenditures are 

down 10 percent from 2009, which was already considered a down 

year for the industry owing to macroeconomic conditions. 

Compared with 2008, which would be a better indicator, capital 

spending levels are roughly down by roughly 25 percent. Continued 

regulatory uncertainty will only exacerbate this trend, as operators 

reallocate resources to other major offshore provinces. The longVerDate Nov 24 2008 11:07 Nov 20, 2012 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6602 L:\DOCS\70719.TXT Hresour1 PsN: KATHY
8 

term effects of the moratorium and subsequent regulatory slowdown will lead to lower development levels in the Gulf of Mexico, 

which will lower oil and gas production levels and associated employment and economic activity. 

In fact, the most pronounced effects of the moratorium and continued regulatory issues may not be seen until later years, due to 

the long time frames associated with developing offshore oil and 

gas products. With the length of time from first drill date to project 

sanctioning averaging over four years, and the length of time from 

project sanctioning to first production averaging over four years as 

well for major projects, the most pronounced effects of the moratorium and subsequent slowdown will begin to be seen in the middle 

of the decade. 

Due to low levels of drilling beginning with the moratorium, the 

number of actionable projects in the Gulf of Mexico will begin to 

decline, which will lead to lower levels of development activity. 

Since the vast majority of spending associated with these large capital projects occurs within the United States, a wide array of industry sectors will be negatively impacted, including such sectors as oil 

and gas machinery, air transportation services, and financial services. 

The offshore oil and gas industry is a key contributor to the 

energy supply of the United States. Additionally, the industry contributes both to the gross national product and overall employment. 

The offshore Gulf of Mexico contributed 14 percent of the oil and 

gas produced in the United States in 2010. Additionally, capital investment operational spending by the Gulf of Mexico oil and natural gas industry supports hundreds of thousands of jobs across 

multiple sectors and regions, supports economic growth, and generates significant tax revenues at all levels of government. 

It is therefore critical that permitting return to historical rates 

and that development and production are allowed to reach their potential in an environmentally responsible manner under a balanced 

regulatory regime. Thank you. 

[The prepared statement of Mr. Shafer follows:] 

Statement of Sean Shafer, Manager of Consulting, 

Quest Offshore Resources, Inc. 

Despite the official end of the drilling moratorium in October, 2010 the offshore 

Gulf of Mexico oil and natural gas industry is still feeling the lingering effects of 

the official moratorium. These effects combined with the impact of the subsequent 

regulatory slow down are being felt throughout the Gulf coast region as well as nationwide. 

While the offshore Gulf of Mexico oil and gas industry has seen some signs of recovery from the low state it was in during the drilling moratorium, activity levels 

are still well below the levels seen before the Macondo incident and well below the 

levels of the Quest baseline forecast before the incident. From a permitting, rig, and 

drilling activity perspective the industry is at best flat compared to where it was 

before the drilling moratorium, with the growth that had been previously expected 

both delayed and diminished. The only industry sector seeing healthy growth is in 

the development of projects not dependent on further near term drilling. While this 

is a positive, the majority of these projects were already well in the works before 

the incident and are thus seeing these major equipment orders despite the moratorium. 

As of the end of September 2011, 21 floating rigs (those with subsea blow out preventers) are operating in the Gulf of Mexico, of which only 18 are currently drilling 

wells. Pre-moratorium 33 floating rigs were operating the Gulf of Mexico with 29 

drilling wells at that time. This indicates a roughly 37 percent drop in both the 

9 

number of rigs operating and drilling. Since the moratorium began, 11 rigs have left 

the Gulf of Mexico. Only one of these has returned, 3 rigs are currently sitting idle. 

Seven of these rigs have left to African countries including Egypt, Nigeria, Liberia, and The Republic of Congo. Three of these rigs have left to South America, including Brazil and French Guiana. The remaining rig recently mobilized to Vietnam. 

As of today, none of the operators of these rigs have announced plans to return 

these rigs to the Gulf of Mexico. Two rigs are planned for return in early 2012 but 

neither operator has a permit to drill with these rigs yet, casting doubt on the likelihood of this happening 

This translates to approximately 60 wells lost based on the original contract terms 

of these rigs. The loss of these rigs amounts to lost spending of $6.3 billion and annual lost direct employment of 11,500 jobs over two years. 

While the number of rigs operating in the Gulf of Mexico is expected to recover 

to pre-moratorium levels by the middle of 2012, this fails to take into account the 

number of rigs which were expected to be operating in the region (based on stated 

operator schedules) in 2012. 

While rig counts are forecast to return to pre-moratorium levels of 35 floating rigs 

operating by mid 2012, prior to the incident and regulatory slow-down, operating 

numbers were expected to have reached 44 rigs by this point. In Addition, drilling 

activity is not expected to return to pre-moratorium levels before 2014 due to low 

permitting rates and operators not relocating rigs back to the Gulf of Mexico. 

While the Gulf of Mexico is currently seeing an uptick in certain types of development activity due to projects that were delayed by the credit crunch and economic 

slowdown, overall capital expenditures are around 10% lower than in 2009 which 

was considered a down year for the industry owing to macroeconomic conditions. 

Compared with 2008, which would be better indicator, capital spending levels are 

down by roughly 25%. 

Continued regulatory uncertainty will only exacerbate this trend as operators reallocate resources to other major offshore provinces. The long term the effects of the 

moratorium and subsequent regulatory slow down will lead to lower development 

levels in the Gulf of Mexico which will lower oil and gas production levels and associated employment and economic activity levels in the economy. 

In fact the most pronounced effects of the moratorium and continued regulatory 

issues may not be seen until later years, due to the long time frame associated with 

developing offshore oil and gas projects. With the length of time from first drill date 

to project sanctioning averaging over 4 years, and the length of time from project 

sanctioning to first production averaging over 4 years for major projects, the most 

pronounced effects of the moratorium and subsequent regulatory slow down will 

begin to be seen in the middle of the decade. Due to low levels of drilling beginning 

with the moratorium, the number of actionable projects in the Gulf of Mexico will 

begin to decline which will lead to lower levels of development activity. Since the 

vast majority of the spending associated with these large capital projects occur within the United States, a wide array on industry sectors will be negatively impacted 

including oil and gas machinery, air transport services and financial services to 

name a few. 

The offshore oil and natural gas industry is a key contributor to the energy supply 

of the United States; additionally the industry contributes both to the gross national 

product and overall employment of the country. The offshore GoM industry contributed 14 percent of the oil and natural gas produced in the United States in 2010. 

Additionally, capital investment and operational spending by the Gulf of Mexico oil 

and natural gas industry supports hundreds of thousands of jobs across multiple 

sectors and regions, spurs economic growth, and generates significant tax revenue 

at all levels of government. 

It is therefore critical that permitting return to historical rates, and that development and production are allowed to reach their potential in an environmentally responsible manner under a balanced regulatory regime. 

10 

Mr. HASTINGS. Thank you very much, Mr. Shafer. Mr. Reese, you 

are recognized for five minutes. 

STATEMENT OF AL REESE, JR., CHIEF FINANCIAL OFFICER, 

ATP OIL & GAS CORPORATION 

Mr. REESE. Good morning, Mr. Chairman and Ranking Member 

Markey, and Members of the Committee. I appreciate the opportunity to testify here this morning. 

We have seen a lack of understanding of the special role that 

small and mid-sized oil and gas companies like ATP play in the 

safe and efficient development of the Nation’s energy resources, 

and the role we play in the creation of jobs and other economic benefits. 

ATP’s business model is unique: to acquire and develop properties which have previously discovered but as yet undeveloped oil 

and gas reserves. This model allows us to acquire a lease, often 

very late in the lease term, and bring it to production quickly when 

it might otherwise not have been. 


70719.001.eps 70719.002.eps
11 

Over the past 20 years, ATP has brought to production 98 percent of the properties that we placed in a development program. 

We have invested $5.4 billion, with a large majority of that in the 

Gulf of Mexico. These properties have produced over 28 million barrels of oil and 276 billion cubic feet of gas. If ATP had not acquired 

and developed these properties, most, if not all, would still be undeveloped today. 

Despite the relatively small size of our company, ATP is the 

fourth most active operator in the deepwater Gulf of Mexico, behind Shell, BP, and Anadarko. We have fewer than 100 employees, 

but we regularly use the services of independent consultants and 

contractors, all of which are substantial sources of jobs and economic benefits. ATP makes payments to royalty owners, vendors, 

and contractors in 34 different states throughout the country. 

ATP incurred acquisition and development costs in the Gulf of Mexico of $554 million in 2010, down substantially from the $713 

million we incurred in 2009, and $747 million in 2008. Our flagship, the ATP Titan, was built in shipyards in Texas and in Louisiana. The ATP Titan was the first multi-column, deep draft floating, drilling, and production structure built in the United States. 

It surpassed all regulatory requirements, and is the only floating 

platform in the Gulf of Mexico with a surface blowout preventer on 

its platform deck, and a second subsea shut-in isolation device with 

blind sheer rams at the mud level. 

More than 268 U.S. service and supply companies were involved 

in the construction and installation. Construction involved 31 countries, 30 U.S. States. More than 1,100 suppliers received payment 

from ATP, and more than 3.9 million man hours were expended in 

its construction. 

ATP is an independent, a small and mid-sized energy company 

which is involved in the Gulf of Mexico operations. The independents are important and indeed necessary to the effective accomplishment of this Nation’s overall energy objective. Independents 

hold a majority interest in most of the producing leases in the Gulf 

of Mexico. 

In 2009, independents were responsible for more than 200,000 

jobs. Before the Macondo incident, that number was expected to 

grow to 300,000 by 2020 and result in $38 billion in economic benefit. The impact occurs not only in the Gulf of Mexico States, but 

also in Massachusetts, California, New York, Georgia, Illinois, 

Pennsylvania, and many, many States. 

The efficiency which independents provide requires an efficient 

and predictable regulatory system. This can be accomplished without compromising effective regulatory oversight, safety, and environmental protection. A recent EIA report stated that the Deepwater Gulf of Mexico is the single largest contributor of U.S. production growth for the foreseeable future. 

Once the moratorium was lifted October 12th, a year ago today, 

it took 139 days for that first permit to be issued. ATP was the 

only company to receive 2 of the first 11 permits. Since then, ATP 

has received six drilling and completion permits. While we are employing people today as a result of these permits being issued, overall the process has been unduly difficult, time consuming, and in 

our view, an unnecessary, contentious process. 

12 

Based on recent history, there is uncertainty that future permits 

and approvals will be issued in a timely manner. We see a clear 

need for continued improvement by the Federal Government in expediting the processing plans and permit applications and priority 

consideration of the job creation. 

In conclusion, what has been lost among all the discussion is consideration of long-term implications of reduced activity in the Gulf 

of Mexico. According to the 2001 Annual Energy Outlook published 

by the EIA, and I quote, ‘‘Consumption of all fuels increases in the 

2011 reference case, but the aggregate fossil fuel share of total 

energy use falls from 83 percent in 2009 to 78 percent in 2035, as 

renewable fuel use grows rapidly. The renewable share of total 

energy use increases from 8 percent in 2009 to 13 percent in 2035.’’ 

What this report says is there a tremendous push for renewables. 

In fact, in this 25-year period, renewable usage rises by 62 percent. 

But 25 years from now, more than three-quarters of our country’s 

energy will still come from fossil fuels: coal, natural gas, and oil. 

There is a vast resource, the deepwater Gulf of Mexico. We can regulate and legislate, increase and decrease rules and constraints, 

but cannot regulate or legislate energy into existence. Thank you. 

[The prepared statement of Mr. Reese follows:] 

Statement of Albert L. Reese, Jr., Chief Financial Officer and Treasurer, 

ATP Oil & Gas Corporation 

Introduction 

My name is Albert L. Reese, Jr. and I am the Chief Financial Officer of ATP Oil 

& Gas Corporation. I have been with ATP since its inception in 1991, having served 

as its Chief Financial Officer for eleven years and prior to that, in a consulting capacity as Director of Finance. I have worked in the field of finance and management 

for over 40 years. 

Background 

ATP Oil & Gas Corporation is an international offshore oil and gas company focused in the Gulf of Mexico and North Sea. In August 2010, we expanded our interest to offshore Israel in the Mediterranean Sea. ATP acquires and develops properties, many of which have proved undeveloped reserves at the time of acquisition 

that are economically attractive to ATP, but not strategic to exploration-oriented oil 

and gas companies. Since its inception in 1991, the company has had an exceptionally strong development success record of 98% of converting non-producing properties to commercial production. Recently ATP became the 4thmost productive offshore deepwater operator in the Gulf of Mexico, as a company that emphasizes critical elements of technology, safety, and infrastructure assets. ATP’s business model 

is particularly efficient in accelerating production from leases which are nearing 

their expiration date and which, in the absence of ATP’s involvement, would go back 

into the lease pool and be developed, if ever, near the end of the next ten year lease 

period. While particularly effective in meeting the objectives of promoting jobs and 

enhancing energy independence, our model is also particularly dependent on an efficient and reliable permitting and plan approval process, and particularly vulnerable 

to harm from unpredictability and delays. 

ATP’s Investment in the Gulf of Mexico 

Currently ATP has 55 full-time employees in its Houston office, 7 full-time employees in its U.K. office, and 2 full-time employees in its Netherlands office. ATP 

regularly uses the services of independent consultants and contractors to perform 

various professional services, particularly in the areas of construction, design, wellsite supervision, permitting and environmental assessment. Independent contractors 

usually perform field and on-site production operation services, including gauging, 

maintenance, dispatching, inspection and well testing. All of these contractors and 

consultants are substantial sources of jobs and economic benefits to the industry in 

which ATP operates. In fact, through its normal course of business in any given 

year, ATP makes payments to vendors and other contractors in 42 states throughout 

the country. Thus, though ATP is a ‘‘small’ company by oil industry standards, it 

13 

serves a critical role in energy production in the Gulf, and provides substantial jobs 

and economic activity on the Gulf Coast and throughout the country. 

At December 31, 2010, ATP had estimated net proved reserves of 126.4 MMBoe, 

of which approximately 83.9 MMboe (66%) were in the Gulf of Mexico and 42.5 

MMBoe (34%) were in the North Sea. ATP’s proved reserves in the deepwater area 

of the Gulf of Mexico account for 62% of its total proved reserves, and proved reserves on the Outer Continental Shelf account for 4% of its total proved reserves. 

The estimated PV–10 of its proved reserves at December 31, 2010 was $2.6 billion. 

At December 31, 2010, ATP owned leasehold and other interests in 51 offshore 

blocks and 88 wells, including 24 subsea wells, in the Gulf of Mexico. ATP operates 

82 (93%) of these wells, including 100% of the subsea wells. 

ATP owns an interest in 29 platforms, including two floating production facilities 

in the Gulf of Mexico, the ATP Innovator at its Gomez Hub and the ATP Titan at 

its Telemark Hub. A third floating production facility called an Octabuoy is under 

construction for initial deployment at its Cheviot Hub in the U.K North Sea, which 

is expected in 2014. ATP operates the ATP Innovator and the ATP Titan, and also 

expects to operate the Octabuoy when it is placed in service. The floating production 

facilities have longer useful lives than the underlying reserves, and thus are capable 

of redeployment to new producing locations upon depletion of the reserves. Accordingly, they are expected eventually to be moved several times over their useful lives. 

Of particular interest is the U.S. construction of the ATP Titan in 2008–2009. The 

ATP Titan was the first multi-column, deep-draft, floating drilling and production 

platform structure built in the U.S. More than 268 U.S. service and supply companies were involved in the construction and installation. Of those companies, 147 

were Texas companies and 68 were located in Louisiana. Construction involved the 

efforts of 31 countries and 30 U.S. states. More than 1,100 U.S. suppliers received 

payment from ATP. During construction of the hull, 3.3 million man-hours were expended and there were 600+ jobs created onsite at peak manning levels. The topside 

platform decks required 600,000+ man hours. Total investment in the ATP Titan 

is to date close to $1 billion. 

During 2010, ATP’s cash expended in the Gulf of Mexico for additions to oil and 

gas properties was approximately $534.3 million. During 2009, cash expended in the 

Gulf of Mexico for additions to oil and gas properties was approximately $551.4 million. During 2008, cash expended in the Gulf of Mexico for additions to oil and gas 

properties was approximately $751 million. 

Implications and ramifications 

The Macondo event that occurred in 2010 and subsequent government response 

that has been taken in 2010 and 2011 have had a major impact on ATP’s operations 

and ability to move forward with development plans. ATP has been severely affected 

since May 6, 2010, when the Department of Interior instructed the predecessor of 

BOEM to stop issuing drilling permits for OCS wells, and to suspend existing OCS 

drilling permits issued after April 20, 2010, and subsequently by the July 12, 2010, 

issuance of a second moratorium, originally scheduled to end on November 30, 2010. 

This second moratorium suspended all existing operations in the Gulf of Mexico and 

other regions of the OCS utilizing a subsea blowout preventer (‘‘BOP’’) or a surface 

BOP on a floating facility, and suspended pending and future permits to drill wells 

involving the use of a subsurface BOP or a surface BOP on a floating facility. Although the second moratorium was lifted on October 12, 2010, ATP has been and 

continues to be negatively impacted by the drilling moratorium and subsequent related regulatory delays and uncertainties. 

Industry Implications 

An Energy Information Administration Annual Energy Outlook 2009 report stated 

that the Gulf of Mexico, especially the deepwater, is the single largest contributor 

to U.S. production growth for the foreseeable future. In 2009, the Gulf of Mexico 

provided 29% of the U.S. daily crude oil production, a 347% increase since 1981. According to a recent Quest Offshore Resources study, since the moratorium began, 

11 rigs have left the Gulf of Mexico. Only one of these has returned, and 3 rigs are 

currently sitting idle. Seven of these rigs have left to African countries including 

Egypt, Nigeria, Liberia, and The Republic of Congo. Three of these rigs have left 

to South America, including Brazil and French Guiana. The remaining rig recently 

mobilized to Vietnam. That translates to approximately 60 wells lost, based on the 

original contract terms of these rigs. The loss of these rigs amounts to lost spending 

of $6.3 billion, and annual lost direct employment of 11,500 jobs over two years. 

Even as rig counts begin to recover, the rate of permitting for wells in the Gulf of 

Mexico, unless it recovers to historical levels, will continue to hinder the pace of 

drilling in the Gulf of Mexico. From September 2009 to September 2010, 59% more 

14 

permits (114) were issued than the period of September 2010 to September 2011 

(50). 

Role of the Independents 

There are currently 114 operators of producing leases in the Gulf of Mexico. A 

July 2010 IHS Global Insight report noted that Independents hold a majority interest in 81% of producing leases, 66% of all Gulf of Mexico leases and 52% of deepwater leases. The study also noted that Independents have drilled 50%+ of the exploration wells in the deepwater. In 2009, Independents were responsible for 

200,000+ jobs, which were expected to grow to 300,000+ by 2020, and $38 billion 

in economic benefit, anticipated to grow each year thereafter. Additionally, Independents would create $10 billion in Federal and state tax revenues, also expected 

to grow each year thereafter. 

Current ATP Activities 

ATP was the only company to receive two of the first eleven deepwater permits 

since the moratorium was lifted, due to its reputation for safety, environmental responsibility, skillful use of advanced technology and a steadfast drive for quality. 

The ATP Titan in 2007, built three years prior to the Macondo disaster, was designed and built with tens of millions of dollars of redundant safety equipment. It 

surpassed all regulatory requirements, and is the only platform in the Gulf of Mexico with a surface blowout preventer (BOP) on the platform deck and a subsea shut 

in isolation device (SID) with blind shear rams, which is controlled independently 

of the rig’s surface BOP. 

ATP’s near-term operating and development plans in the Gulf of Mexico, as well 

as its longer-term business plan, are dependent on receiving additional approvals 

for deepwater drilling and other permits under applications, which have been and 

will continue to be submitted to the Bureau of Ocean Energy Management (BOEM). 

In the first quarter of 2011, ATP received permits to complete the drilling of the 

third well at Mississippi Canyon Block 941 at its Telemark Hub, and to complete 

a well at Green Canyon Block 300. While ATP can satisfy the permitting requirements for the additional planned 2011 development wells, there is still uncertainty 

that the permits will be issued or, if issued, that they will be received in a timely 

manner. 

ATP incurred additional costs in 2010 caused by the deepwater drilling moratoriums and subsequent drilling permit delays. Some of these additional costs are continuing into 2011, and are expected to continue. During the second quarter of 2011 

throughout 2010, ATP recognized impairment of proved Gulf of Mexico oil and gas 

properties of $45.7 million and $3.9 million of unproved Gulf of Mexico properties, 

respectively. The majority of the expense was associated with leases which were approaching their expiration dates, and became unlikely to be drilled primarily due 

to the moratorium on drilling in the Gulf of Mexico. Drilling interruption costs were 

$1.2 million and $8.7 million in the second quarter of 2011 and 2010, respectively. 

They consist of stand-by costs for drilling operations at ATP’s Telemark and Gomez 

Hubs, resulting from the deepwater drilling moratoriums and subsequent drilling 

permit delays. 

We at ATP realize that the Department of Interior and its agencies required time 

to review their programs to make certain that they were doing an adequate job of 

assuring that the operations on its leases were safe and adequately protective of the 

environment. At the same time, however, it is difficult for us to understand why 

some priority is not being given to actions that BOEM might do to help our industry 

and the Gulf economy recover from the grave injuries which it suffered as a result 

of the Macondo event and the regulatory response to it. Although President Obama 

has said that jobs and the economy are his Administration’s number one priority, 

our experience suggests that the priorities at the Department of Interior are solely 

limited to safety, environmental protection and enhancement of government royalty 

revenues. We agree that those are important and serve as the foundation of BOEM’s 

mission. However, there is a critical need to correct the harm which has been done 

by the spill and subsequent regulatory backlog, and put the Gulf back to work. Jobs 

created in the offshore oil and gas industry cross the gamut of blue-collar jobs requiring a high school education coupled with in-house training, to those requiring 

post-graduate degrees. With an efficient, predictable and properly motivated regulatory structure, ATP and companies like it can continue to make a significant contribution to job creation, revenue generation for the federal, state and local governments, and our nation’s oil independence. 

15 

Mr. HASTINGS. Thank you very much, Mr. Reese. Mr. Auer, you 

are recognized for five minutes. 

STATEMENT OF CHRIS AUER, PRINCIPAL, 

CREVALLE MANAGEMENT SERVICES 

Mr. AUER. Thank you. My core business deals with reclamation 

operations associated with offshore oil and gas production, specifically the abandonment of pipelines, the removal of platforms, and 

site clearance. Operators are required to perform reclamation after 

reserves have been depleted. It is all covered until Title 30 CFR 

250. 

At any given time during late April to early October, there is an 

average of six to ten heavy-lift vessels working in the Gulf of Mexico. Most of these are working in an abandonment capacity. The average crew complement of these heavy-lift vessels is 100. These 

vessels are supported by crew boats, tugboats, dive boats, helicopters, shore-based facilities, and numerous engineering and administrative personnel. In effect, an entire micro-economy is developed around abandonment activities and these vessels. 

If you shut down just the abandonment work in the Gulf of Mexico, it affects thousands of jobs. There are several factors that dictate when and how the Gulf of Mexico reclamation work is performed, and they are reserve depletion, availability of vessels, 

weather, and permitting. Of these four factors, weather and permitting are the two wildcards. The best weather working window 

in the Gulf of Mexico is between late April and early October, barring any hurricanes. 

Once weather fronts begin arriving from the north, the seas and 

winds become unpredictable and extreme. Abandonment operations 

conducted in these environments present a higher risk to human 

life and equipment loss or damage. Typical permits required for 

abandonment are: we have an APM, which is A Permit to Modify 

a well bore with pipeline abandonment permit, a platform removal 

permit, a reefing permit, and a site clearance permit. 

Since the Macondo accident, the review and approval process as 

related to pipeline and platform abandonment permits, not well 

permits, have become lengthy. I have had platform permits take as 

long as 510 days to reach the approved status, with the average 

processing time post-Macondo being 129 days, as compared to a 

pre-Macondo average of 42 days. 

Such lengthy processing times push work into bad weather 

months or delay it altogether for the work season. These delays in 

turn idle the vessels, render crew and supporting crew unemployed. 

Anything that can be done to streamline the permitting process 

will help, and my recommendations are to hire more regional 

BSEE staff, standardize the permitting forms, automate the permitting process, and establish a better avenue for variance response. 

The BSEE employees in the New Orleans regional office perform 

a thankless job with a high level of professionalism and much diligence. These folks are some of the hardest working in the Gulf of 

Mexico. But as we know, there are capacity limits. The BSEE regional staff approving abandonment permits needs to be expanded. 

The first step in lowering approval time is to staff the process with 

16 

the appropriate number to handle the workload. That number 

should be recommended by the regional head and honored by the 

Department of the Interior. 

With the exception of the APM form MMS-124—this is the form 

that you file to plug a well—no other abandonment permit application is standardized. For years, there has been talk about standardizing these forms, but it just hasn’t been done. 

A system similar to eWell should be set up to handle the submission of applications, any questions BSEE might have concerning 

the application, quick access to the application status, and delivery 

of the final approval. Sometimes meeting the letter of the permit 

is impossible when we get in the field. In these cases, we have to 

get with BSEE, and we have to get a variance. We need some sort 

of 24/7 quick response force set up with these guys so that they can 

handle these variances in a timely manner so that we are not waiting for days for an answer. 

Again, the BSEE employees in New Orleans do everything they 

can to make themselves available to us 24/7, but there is not 

enough of them. I mean, we are asking way too much out of way 

too few. 

In closing, I just want to say that the people of the Gulf Coast 

are highly skilled and extremely efficient workers. They aren’t asking for a handout from their government. They are asking for the 

handcuffs to be removed so that they can do their part in keeping 

the United States rolling. What I am suggesting here is not a remarketing campaign, which is what we have seen. It is a streamlining campaign. 

I appreciate the opportunity to address the Committee, and I am 

available for any questions. Thank you. 

[The prepared statement of Mr. Auer follows:] 

Statement of Chris Auer, Principal, Crevalle Management Services 

The tragedy of Macondo sent the first shock wave throughout the offshore oil & 

gas industry as it should have. The moratorium imposed by President Obama sent 

the second shockwave. The effects of these events are still being felt today. 

My core business deals with reclamation operations associated with offshore oil 

and gas production, specifically the abandonment of pipelines, the removal of platforms and site clearance. Operators are required to perform reclamation after reserves have been depleted. Title 30 CFR § 250 defines the requirements for abandonment as covered in this testimony. 

At any given time during late April to early October there is an average of six 

to ten heavy lift vessels working in the Gulf of Mexico. Most of these are working 

in an abandonment capacity. The average crew complement of these vessels is one 

hundred. These heavy lift vessels are supported by crew boats, dive boats, helicopters, shore base facilities and numerous engineering and administrative personnel. In effect an entire micro economy has developed around the activities of 

these vessels and abandonment. Shut down just the abandonment work in the gulf 

and you shut down 1000’s of jobs. 

There are several factors that dictate when and how Gulf of Mexico reclamation 

work is performed. They are: • Reserve depletion • Availability of vessels 

• Weather 

• Permitting 

Of these four factors weather and permitting are the two wild cards. 

The best weather window for working in the Gulf of Mexico is between late April 

and early October barring any hurricanes. During this period, seas are small and 

weather trends are more predictable. Once weather fronts begin arriving from the 

north, seas and winds become unpredictable and extreme. Abandonment operations 

conducted in such environments present a higher risk to human life and equipment 

17 

loss or damage. It also exponentially increases the overall cost and time associated 

with abandonment. 

No abandonment activities may take place without the proper approved permits 

in hand (Ref Title 30 CFR § 250.1703). Typical permits required for abandonment 

are: 

• Application for Permit to Modify Form MMS–124 (APM) permit to modify a 

well bore 

• Pipeline abandonment permit 

• Platform Removal permit 

• Reefing permit 

Æ Issued by the U.S. Army Corp of Engineers (COE) and the state in which 

the reefing will take place 

• Site clearance permit 

These permits must be submitted to different entities within Bureau of Safety and 

Environmental Enforcement (BSEE) along with accompanying support documents 

for review and comment. Once BSEE has completed their review and any additional 

concerns have been addressed and documented an approved permit is issued. 

Since the Macondo accident, the review and approval process as related to pipeline and platform abandonment permits has become lengthy. I have had permits 

take as long as 510 days to reach the approved status with the average processing 

time post Macondo being 129 days as compared to a pre-Macondo average of 42 

days. Such lengthy processing times push work into bad weather months or delay 

it for the work season all together. These delays in turn idle vessels and render 

crew and supporting crew unemployed. Anything that can be done to stream line 

the permitting process will help. My recommendations are: 

• Hire more BSEE staff 

• Standardize permitting forms 

• Automate the permitting process 

• Establish a better avenue for variance response 

The BSEE employees in the New Orleans regional office perform a thankless job 

with a high level of professionalism and much diligence. These folks are some of the 

hardest working in the Gulf of Mexico but as we all know there are capacity limits. 

The BSEE regional staff approving abandonment permits needs to be expanded. The 

first step in lowering approval times is to staff the process with the appropriate 

number to handle the work load. That number should be recommended by the regional head and honored by Department of Interior (DOI). 

Standardization of permit applications is the second step. With the exception of 

the APM Form MMS–124 required to plug and abandon a well bore, no other abandonment permit applications exist. For years there has been talk of such standardized forms but no action has been taken. Currently most of us who submit permit 

applications for abandonment use our own format. While these formats are consistent in the data they contain they differ in its location and format. This further 

adds to the time it takes a BSEE employee to review and approve the permit. It 

would also seem to make training essential new hires difficult. It’s no secret that 

large groups tend to operate better when things are standardized. 

The aforementioned, standardized forms should be automated as well. A system 

similar to eWell should be set up to handle the submission of applications, any questions BSEE might have concerning the application, quick access to the application’s 

status and delivery of the final approval. Currently meetings, email, traditional mail 

and telephone are the communication methods used for application submission, review, comment and approval. Again these methods take time away from the processing of the application. These methods should be reserved for special cases requiring closer investigation. This is step three. 

My fourth and final recommendation pertains to abandonment work as it is being 

performed in the field. Sometimes meeting the letter of the permit is impossible 

when field work is underway. In these cases the operator must notify BSEE regional, explain the issue and ask for a variance. As with most critical issues these 

always seem to happen on a weekend at 0200 hrs. If there were some sort of regional Quick Response Force (QRF) on duty 24/7 these issues could be handled in 

a timelier manner. Offshore oil and gas operations don’t stop for holidays, weekends 

or business hours. Again it is important for me to restate that the current BSEE 

regional employees do everything they can to make themselves available to industry 

24/7 but there are just not enough of them. 

The people of the Gulf Coast are highly skilled and extremely efficient workers. 

They aren’t asking for a hand out from the government they’re asking for the handcuffs to be removed so that they can do their part in keeping the United Sates rolling. What I am suggesting here is not a remarketing campaign; it’s a stream lining 

18 

campaign. I appreciate the opportunity to address the Committee and am available 

for questions and or comments. 

Mr. HASTINGS. Thank you very much, Mr. Auer. Next, we will go 

to Mr. Kief. You are recognized for five minutes. 

STATEMENT OF CORY KIEF, PRESIDENT, 

OFFSHORE TOWING 

Mr. KIEF. Good morning, Chairman Hastings, Ranking Member 

Markey, and all Committee Members. Thank you for the opportunity to testify on behalf of Offshore Towing, and how we have 

been impacted in the Gulf of Mexico as a result of the drilling moratorium and related issues. 

Offshore Towing is a partnership of three small marine towing 

companies who collectively operate a fleet of seagoing tugboats in 

the Gulf of Mexico, providing services in the oil and gas sector, primarily towing drilling rigs to and from various locations in shallow 

water. We are located along the Gulf Coast in Larose, Louisiana, 

and collectively employ about 110 people. 

Although the moratorium has been lifted, substantial negative 

economic impacts have been felt, and economic conditions continue 

to deteriorate. Challenges with issuance of drilling permits from 

the BOEM to operators are still prevalent, causing delays in drilling programs. As we understand, at times, the BOEM claims that 

operators are submitting incomplete or flawed drilling plans and 

other data, and the operators claim that the BOEM is dragging 

their feet approving drilling plans and permits. 

Either way, or a combination of the both, drilling contractors are 

leaving the Gulf to go work in other countries that have the ability 

to obtain steady financial commitments. These drilling contractors 

have already demonstrated that they will not stay in the U.S. waiting for the government and the operators to get their act together 

and iron out the wrinkles in this new regulatory environment. 

Service companies such as ours who depend on the system are 

now facing severe economic decline due to the lack of efficiency. 

Every day, we are seeing more and more equipment being taken 

out of service, which sends more people home jobless, which leads 

to my remarks on the proposed jobs bill that is receiving so much 

attention these days. 

As I understand, one of the elements of the jobs bill would grant 

payroll tax relief to the employer if an employer would hire someone who has been jobless for six months or more. For my company, 

this does not create jobs. It is a hiring incentive, and that is all. 

There are no jobs to offer. We would not be inclined to hire people 

simply to get payroll tax relief when we don’t have enough work 

for them to do as it stands now. 

Further, there is no relief to hire people who were just discharged a couple of months ago. I would prefer to hire back the 

people that were discharged a couple of months ago who are adequately trained to do their jobs without having to retrain new people who don’t know what they are doing at my expense. I don’t 

think that you folks realize how much time, energy, and resources 

are put into training people to effectively work in this industry. 

The six-month issue is hard to understand. 

19 

On another note, there is no relief or benefits for a company like 

ours, who have had minimal layoffs because we don’t want to lose 

our trained workers. Instead, we have reduced wages, used our 

capital, lines of credit, and blends of these resources to retain our 

workers, trained workers. We are fighting to survive and keep our 

employees because economically and morally, it is the right thing 

to do. And all of this discussion of underfunded infrastructure 

spending or tax breaks or tax hikes, illegal immigrants in the 

workplace, I do not hear any talk of economic benefits of the Federal Government being more efficient or being an advocate for job 

creation with what they have to work with now. 

From my company’s perspective, an increased rate of Federal 

permitting in the Gulf of Mexico will bring my employees back to 

a level of security to earn a good living and produce an economic 

environment with the potential to train and hire more workers. 

That is economic stimulus. 

IHS Global Insight and IHS CERA recently conducted a study 

that described a return to regular permitting would result in 

230,000 new or retained American jobs, $44-plus billion in U.S. 

gross domestic product, and about $12 billion in tax revenue, a reduction of $15 billion in America’s bill for imported oil in 2012 

alone. One-third of these jobs created would be outside of the Gulf 

region in States like California, Illinois, and New York. These results prove that the Gulf of Mexico energy activity is a national 

economic generator. 

This country is more in the world than what is being given credit 

for. Americans all over this country depend on each other for a variety of different resources. Our leaders need to focus on that. This 

Administration, government, and the media need to stop separating American people by creating political boundaries to satisfy 

political agendas. As one businessman speaking to his country’s 

leaders, there are more jobs and additional State revenues to be realized in this offshore energy sector of the Gulf of Mexico. It is your 

duty as stewards of the people to address this. 

Thank you again for your opportunity to speak before you today. 

[The prepared statement of Mr. Kief follows:] 

Statement of Cory Kief, President, 

Offshore Towing, Inc.,, Larose, Louisiana 

Good morning Chairman Hasting, Ranking Member Markey and all committee 

members. Thank you for the opportunity to testify on behalf of Offshore Towing, and 

how we have been impacted in the Gulf of Mexico as the result of the drilling moratorium, and related issues. Offshore Towing is a partnership of three smaller marine 

towing companies who collectively operate a fleet of sea going tug boats in the Gulf 

of Mexico, providing services in the Oil and Gas sector, primarily towing drilling 

rigs to and from various locations in shallower water. We are located along the Gulf 

Coast in Larose, Louisiana, and collectively employ approximately 110 people. 

Although the moratorium has been lifted, substantial negative economic impacts 

have been felt, and economic conditions continue to deteriorate. Challenges with 

issuance of drilling permits from the BOEM to operators are still prevalent, causing 

delays in drilling programs. As we understand, at times, the BOEM claims that Operators are submitting incomplete or flawed Drilling Plans and other data, and the 

Operators claim that the BOEM is dragging their feet approving drilling plans and 

permits. Either way, or a combination of both, Drilling Contractors are leaving the 

gulf to go to work in other countries that have the ability to obtain steady financial 

commitments. These drilling contractors have already demonstrated that they will 

not stay in the U.S. waiting for the government and the Operators to ‘‘get their act 

together’’ and iron out the wrinkles in this new regulatory environment. Service 

20 

companies, such as ours, who depend on this system, are now facing severe economic decline due to this lack of efficiency. Every day we are seeing more and more 

equipment being taken out of service, which sends more people home, jobless! 

Which leads to my remarks on the proposed ‘‘Jobs Bill’’ that is receiving so much 

attention these days? As I understand, one of the elements of the Jobs Bill would 

grant payroll tax relief to an employer, if an employer would hire someone who has 

been jobless for 6 months or more. For my company, this does not create new jobs, 

it is a hiring incentive and that is all! There are no jobs to offer. I would not be 

inclined to hire people simply to get payroll tax relief when we don’t have enough 

work for them to do as it stands now. Further, there is no relief to hire people who 

were just discharged two months ago. I would prefer to hire back the people that 

were discharged a couple of months ago, who are adequately trained to do their jobs, 

without having to re-train new people who don’t know what they doing, at my expense. I don’t think that you folks realize how much time, energy and resources are 

put into training people to effectively work in this industry. The six month issue 

is hard to understand. 

On another note, there is no relief or benefits for companies, like ours, who have 

had minimal layoffs, because we don’t want to lose our trained workers. Instead, 

we have reduced wages, used our capital, lines of credit, and blends of these resources to retain our workers. . .. . .trained workers. We’re fighting to survive, and 

keep our employees because economically and morally it is the right thing to do. 

In all of this discussion of underfunded infrastructure spending, or tax breaks or 

tax hikes, Illegal Immigrants in the work place, I do not hear any talk of economic 

benefits of the federal government being more efficient, or being an advocate for job 

creation with what they have to work with now. From my company’s perspective, 

an increased rate of federal permitting in the Gulf of Mexico will bring my employees back to a level of security to earn a good living, and produce an economic environment with the potential to train and hire more workers. THAT is economic stimulus. 

IHS Global Insight and IHS CERA recently conducted a study that described that 

a return to regular permitting would result in: 

• 230,000 new or retained American jobs 

• $44+ billion in US Gross Domestic Product 

• About $12 billion in tax and royalty revenue 

• A reduction of $15 billion in America’s bill for imported oil in 2012 alone 

One third of these jobs created would be outside of the Gulf region, in states like 

California, Illinois and New York. These results prove that the Gulf of Mexico’s energy activity is a national economic generator! 

This country is more interwoven than what it is being given credit for. Americans 

all over this country depend on each other for a variety of different resources. Our 

leaders need to focus on that. This administration, government, and the media need 

to stop separating the American people by creating political boundaries to satisfy 

political agendas. As one business man speaking to his Country’s leaders, there are 

more jobs, and additional and state revenues to be realized in the offshore energy 

sector of the Gulf of Mexico. It is your duty, as stewards of the people, to address 

this. 

Thank you again for the opportunity to speak before you today. 

Mr. HASTINGS. Thank you very much, Mr. Kief, for your testimony. Next, we will recognize Mr. Captain Bob Zales. You are recognized for five minutes, Captain. 

STATEMENT OF CAPTAIN BOB ZALES, II, PRESIDENT, 

NATIONAL ASSOCIATION OF CHARTERBOAT OPERATORS 

Mr. ZALES. Mr. Chairman and Members of the Committee, my 

name is Robert F. Zales II, and I am appearing today on behalf of 

the National Association of Charterboat Operators. NACO thanks 

you and the Members of the Committee for your kind invitation to 

present testimony on this issue today. 

Congress faces many difficult choices, but also has many opportunities. NACO is a non-profit 501[c][6] association representing 

charterboat owners and operators across the United States with a 

substantial number operating in the Gulf of Mexico. Sadly, we are 

21 

acutely aware of the devastating impact of the Deepwater Horizon 

oil spill in the Gulf of Mexico and how it has affected the 

charterboat and commercial fishing industries. 

Charter, commercial, and saltwater recreational fishing is extremely important to the Gulf of Mexico, both economically and socially. According to the recently released preliminary report, ‘‘The 

Gulf of Mexico Regional Ecosystem Restoration Strategy,’’ by the 

Gulf Coast Ecosystem Restoration Task Force, the Gulf Coast and 

its natural resources are important to the U.S. economy, producing 

30 percent of the Nation’s gross domestic product in 2009. 

The region provides more than 90 percent of the Nation’s offshore oil and gas, natural gas, production; 33 percent of the Nation’s seafood; and significant recreation and tourism benefits. The 

five U.S. Gulf Coast States, if considered an individual country, 

would rank seventh in global gross domestic product. The Gulf 

Coast regional economy is highly intertwined with its natural resource base, including oil and gas deposits, commercial and recreational fisheries, and tourism. 

Incomplete data presented in this report shows a conservative 

number of 535,498 jobs either directly or indirectly created by the 

fishing and charter, commercial, and private recreational industries 

of the Gulf of Mexico, making a significant economic input to the 

Gulf Coast communities and the Nation. All of these industries depend on a healthy and resilient Gulf. 

In Florida alone, the commercial fishing industry ranks seventh 

in total landings at $169 million annually, and produces 10 percent 

of the Gulf’s oyster catch, a $4.5 million annual dockside value. 

Florida leads all States in economic return for its marine recreational fisheries. Recreational saltwater fishing generates over $5 

billion. In 2008 and 2009, more than 1 million people bought marine recreational fishing licenses, a third from out of state. More 

than 3,400 for-hire charter boat fishing licenses were purchases, 

generating more than $1 million and giving Florida one of the largest charter fishing fleets in the world. 

The future health of our Gulf resources is unknown. The impact 

on several key fish species, such as red snapper, vital to all fishermen in the Gulf, will not be fully known for several years. Little 

is known about the 2010 recruitment class, and will not be fully 

known for at least three to five years. 

We live in fear of the future. Millions of gallons of oil are still 

unaccounted for, and certainly is located somewhere. The fish we 

see in harvest are from year classes prior to the blowout. The timing and location of the blowout could not have been worse, as the 

time of year and location of the oil and chemicals used were in the 

bull’s-eye to do the most harm. 

BP, through Mr. Feinberg’s Gulf Coast Claims Facility, guaranteed funds to provided those affected by the impacts of the spill, 

compensation for their economic losses. There is no mechanism to 

provide any financial assistance after 2012, as Mr. Feinberg and 

BP assert the Gulf will be back to normal next year, contrary to 

a report produced from Mr. Feinberg released on January 31st, 

2011, that state of harvest levels will return to normal by the end 

of 2012. Several renowned fishery biologists say it will be a minVerDate Nov 24 2008 11:07 Nov 20, 2012 Jkt 000000 PO 00000 Frm 00025 Fmt 6633 Sfmt 6602 L:\DOCS\70719.TXT Hresour1 PsN: KATHY
22 

imum of three years, and could be five before we have any real 

knowledge of the impact of the spill. 

Too many of us, the GCCF has been a massive failure, as our 

claims are either still in review or ridiculous offers have been 

made. And now that the Federal court action will begin in February 2012, GCCF is dramatically slowing down remaining claims 

efforts. 

In addition to fish species we see, the marine mammals, total 

seabirds, natural and artificial reefs, sand and mud-bottom and 

complete ecosystems have been affected. It has been reported that 

the spill still has impacts on sea turtles and marine mammals, 

which can ultimately negatively impact fishermen as these protected species interact with various fishing gears. So increased time 

and area closures are another concern. 

Another issue affecting our natural resources is the increased efforts by the Bureau of Ocean and Energy Management Regulation 

and Enforcement to remove deactivated oil and gas platforms from 

the Gulf. The fishing and oil and gas industries have coexisted in 

the Gulf since the first well was drilled. These platforms provide 

artificial habitat for a wide array of fish and coral species. Over 

time, they have become essential fish habitat and house great numbers of fish. NMFS regulations require species to have sustainable 

levels of biomass, and in many cases species such as red snapper 

are now at biomass levels never before seen. 

Since January 2010, over 362 platforms have been removed from 

the Gulf, with over 200 more scheduled for removal over the next 

12 months, just from Federal waters. The number removed from 

state waters was not available, but assumed to be over 150. Each 

platform is home to hundreds of various fish species. In most cases, 

explosives are used to disengage the platform from the bottom, 

which result in massive fish kills and also the deaths of protected 

species such as turtles and marine mammals. 

Not only are these species killed and the resource wasted, the 

habitat is permanently removed, reducing critical habitat to sustain the resource. These platforms should be allowed to remain or 

at least placed on the bottom to continue to provide essential habitat for the resource. 

In closing, I wish to state the charter and commercial fleets were 

once viable, productive, and a sustainable group of small business 

owners. We provide a necessary service to individuals who want to 

fish, consume healthy seafood, enjoy our natural resources. Over 

the last six years, fleets have struggled, and yet continued to survive. The impact from Deepwater Horizon was almost the last nail 

in the coffin. 

It is imperative that the health and safety of our Gulf be assured. The charter and commercial fleet owners and operators—— 

Mr. HASTINGS. Captain Zales, if you could close up, I would appreciate it. 

Mr. ZALES. OK. Just about five more seconds. The charter and 

commercial fleet owner and operators and crews are the first responders to any issue on the water. We are on the water daily. We 

see the conditions of our resource and are first to report any problem. We beg to provide information to fisheries, to an agency, 

NMFS, who routinely tells us they know our resource better. 

23 

Thank you very much, Mr. Chairman. I will be glad to answer any 

questions. 

[The prepared statement of Mr. Zales follows:] 

Statement of Capt. Robert F. Zales, Ii, President, 

National Association of Charterboat Operators 

Mr. Chairman and members of the committee, my name is Robert F. Zales, II and 

I am appearing today on behalf of the National Association of Charterboat Operators (NACO). NACO thanks you and the Members of the Committee for your kind 

invitation to present testimony on the impact of The Lifting of President Obama’s 

Gulf of Mexico Moratorium and to Examine the Lingering Impacts on Jobs, Energy 

Production and Local Economies. Congress faces many difficult choices but also has 

many opportunities. 

NACO is a non-profit 501 (c) (6) association representing charter boat owners and 

operators across the United States with a substantial number operating in the Gulf 

of Mexico. Sadly, we are acutely aware of the devastating impact of the Deepwater 

Horizon Oil Spill in the Gulf of Mexico and how it has affected the charter boat and 

commercial fishing industries. I am actively involved in working with Federal, 

States, BP, and local representatives on the impacts to charter boat and commercial 

fishing fleets and their involvement in cleanup, economic recovery, and resource 

damage assessment efforts. 

Charter, commercial, and saltwater recreational fishing is extremely important to 

the Gulf of Mexico, both economically and socially. According to the recently released preliminary report Gulf of Mexico Regional Ecosystem Restoration Strategy by 

the Gulf Coast Ecosystem Restoration Task Force the Gulf Coast and its natural resources are important to the U.S. economy producing 30 percent of the nation’s 

gross domestic product in 2009. The region provides: more than 90 percent of the 

nation’s offshore oil and natural gas production; 33 percent of the nation’s seafood; 

13 of the top 20 ports by tonnage in the United States; and significant recreation 

and tourism benefits. The five U.S. Gulf Coast states, if considered an individual 

country, would rank 7th in global gross domestic product. The Gulf Coast region’s 

economy is highly intertwined with its natural resource base, including oil and gas 

deposits, commercial and recreational fisheries, coastal beaches, and waterways for 

ports, waterborne commerce, and tourism. Incomplete data presented in this report 

shows a conservative number of 535,498 JOBS, either directly or indirectly created 

by the fishing (charter, commercial, and private recreational) industries of the Gulf 

of Mexico, making a significant economic input to Gulf communities and the nation. 

All of these industries depend on a healthy and resilient Gulf. 

In Florida alone, the commercial fishing industry ranks 7th in total landings at 

$169 Million annually and produces 10% of the Gulf’s oyster catch, a $4.5 Million 

annual dockside value. Florida also leads all states in economic return for its marine 

recreational fisheries. Recreational saltwater fishing generates over $5 Billion. In 

2008–09, more than 1 Million people bought marine recreational fishing licenses, a 

third from out of state. More than 3,400 for-hire (charter boat) fishing licenses were 

purchased, generating more than $1 Million and giving Florida one of the largest 

charter fishing fleets in the world. 

As a result of the oil spill, the National Marine Fisheries Service (NMFS) closed 

up to 36.6% of all Gulf waters to fishing and harvest of fish as of June 2, 2010 with 

varying degrees of percentage before and after with the last reported closure of 0.4% 

as of November, 2010. While these closures were activated to ensure the health to 

consumers from eating possible tainted fish, the impact on the charter and commercial fishing fleets and communities was enormous. 

The future health of our Gulf resources is unknown. The impact on several key 

fish species vital to all fishermen in the Gulf will not be fully known for several 

years. Prior to the oil spill key species such as red snapper, king mackerel, and 

many other reef and pelagic species were dramatically improving and stock abundance was at levels never before seen. Little is known about the 2010 recruitment 

class and will not be fully known for several years. 

We live in fear of the future. Millions of gallons of oil are still unaccounted for 

and certainly is located somewhere. The fish we see and harvest are from year classes prior to the blow out. The timing and location of the blow out could not have 

been worse as the time of year and location of the oil and chemicals used were in 

the bull’s eye to do the most harm. 

BP, through Mr. Feinberg’s Gulf Coast Claims Facility (GCCF), guaranteed funds 

to provide those affected by the impacts of the spill compensation for their economic 

losses. There is no mechanism to provide any financial assistance after 2012 as Mr. 

24 

Feinberg and BP assert the Gulf will be back to normal next year. Contrary to a 

report produced for Mr. Kenneth Fienberg (An expert opinion of when the Gulf of 

Mexico will return to pre-spill harvest status following the BP Deepwater Horizon 

MC 252 oil spill) released on January 31, 2011 that states that harvest levels will 

return to normal by the end of 2012, several renown fishery biologists, say it will 

be a minimum of 3 years and could be 5 before we have any real knowledge of the 

impact of the spill. To many of us, the GCCF has been a massive failure as our 

claims are either still in review or ridiculous offers have been made and now that 

the Federal Court action will begin in February 2012 GCCF is dramatically slowing 

down remaining claims efforts. 

From the beginning of this disaster, various Government (Federal and State) 

agencies were active in obtaining information and working with all parties to ensure 

that our marine resources were unaffected as much as possible. Fish sampling by 

various federal, state, and higher educational facilities, began shortly after the blow 

out. Critical testing of fish tissues to determine any health issues was done and according to reports by all agencies involved, no health issues were determined and 

all fish from the Gulf were declared safe to consume. 

Over the past several months, there are now reports from some fishermen (commercial and recreational) of harvested fish being seen with severe lesions, fin rot, 

damaged internal organs, and according to the NMFS possibly infected with Vibrio 

vulnificus and Photobacterium damselae, both very harmful to humans. More 

studies are now underway to determine the extent of these issues and to attempt 

to discover the cause. In some areas of the Gulf, state agencies have issued Special 

Activity Permits to select charter and commercial boats to legally harvest any fish 

that appear to have health issues. These fish are then provided to the proper officials to be studied. 

In addition to the fish species we seek, the marine mammals, turtles, sea birds, 

natural and artificial reefs, sand and mud bottom, and complete ecosystem has been 

affected. It has been reported that the spill has impacts on sea turtles and marine 

mammals which can ultimately negatively impact fishermen as these protected species interact with various fishing gears so increased time and area closures are another concern. 

Another issue affecting our natural resources is the increased efforts by the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) to remove deactivated oil and gas platforms from the Gulf. The fishing and oil and gas 

industries have coexisted in the Gulf since the first well was drilled. These platforms provide artificial habitat for a wide array of fish and coral species. Over time 

they become essential fish habitat and house great numbers of fish. NMFS regulations require species to have sustainable levels of biomass and in many cases species such as red snapper are now at biomass levels never before seen. Since January 

2010, over 362 platforms have been removed from the Gulf with over 200 more 

scheduled for removal over the next 12 months just from Federal waters. The number removed from state waters was not available but is assumed to be over 150. 

Each platform is home to hundreds of various fish species. In most cases explosives 

are used to disengage the platform from the bottom which results in massive fish 

kills and also the deaths of protected species such as turtles and marine mammals. 

Not only are these species killed and the resource wasted, the habitat is permanently removed reducing critical habitat to sustain the resources. These platforms 

should be allowed to remain or at least placed on the bottom to continue to provide 

the essential habitat for the resources. 

While the impacts to the resources are extremely important, the impact to humans will be substantial. There is currently a study (GuLF Study conducted by the 

National Institute of Environmental Health Sciences (NEIHS)) which will be done 

over a 10 year period and involve over 55,000 people who worked in the cleanup 

process to determine any health impact on humans. This includes psychological as 

well as physical issues. 

FUTURE NEEDS 

I have attempted to provide the impacts of the blow out above. I will try to provide the needs we have for the future. IT IS IMPARATIVE THAT THE FINES 

THAT WILL BE ASSESSED AS PER THE CLEAN WATER ACT (CWA) FOR THIS 

DISASTER IN THE GULF ARE DEDICATED TO THE GULF! The damage was 

sustained in the Gulf so the resulting fines should remain in the Gulf. You will hear 

from many organizations, communities, states, and others all with their respective 

hands out for funding. Charter boat owners, operators, and crews and other commercial and recreational fishermen do not have organizations with the infrastructure to seek some of this funding so we ask for your assistance to help us. We do 

not seek individual economic help from the CWA fines, although should we find in 

25 

3 to 5 years that the fish species we seek are in dire straits we will most certainly 

need financial assistance to survive. 

Our needs are all resource oriented. We must have an ecosystem that is capable 

of sustaining our fishery resources. We must have expanded funding for cooperative 

independent research of our fisheries which will utilize vessels from the charter and 

commercial fishing fleets. Cooperative independent research is providing much needed real world data on our fisheries and this effort needs to be expanded. The data 

collected under cooperative research grants involves real fishermen in areas where 

they have knowledge of their fisheries. This type data is recommended by the NMFS 

and can be done through grants to non profits in conjunction with Universities and 

state wildlife agencies. 

As a result of the damage and uncertain future of fisheries due to the blow out, 

funding for improved and yearly stock assessments should be provided. In the Gulf, 

most fish stock assessments are conducted only every 5 to 7 years. Under the current circumstances 5 to 7 years is grossly inadequate as we must know the status 

of our stocks on a more frequent basis to fully understand any impact from the spill. 

We will need adequate funding to ensure our natural and artificial reefs are clean 

and intact. Enhancing our artificial reef system is a priority and can start with the 

immediate cease and desist by the BOEMRE of their required removal of deactivated offshore oil platforms. 

Economic and social impact studies of the Gulf charter fleet should be fully funded so we know the real impact of the fleet to local fishing communities and the Gulf. 

To date, these studies provide little relevant information. This is one area where 

the GCCF claims issue could be improved. There is little information that provides 

the type of economics on the charter fleet that can be used to fully understand the 

impact from lost business. Charter boat owners, operators, and crews are unique in 

how they operate. The charter fleet is a seasonal business where the majority of 

their income is derived in a few months and then spread out over the year. When 

the season begins in April and runs through September the money is made in 6 

months and then utilized over 12. Generally income is not collected per month or 

week although expenses are year round. 

Research funding to further study fish health must also be a priority. Our prime 

interest is to ensure that the fish we harvest are safe to handle and to consume. 

We must know, with reasonable certainty, that any fish that appears to be 

unhealthy is properly handled and tested so that consumers can have confidence 

they are catching and eating quality Gulf seafood. Many of the fish health issues 

have never been observed before the blow out so it is a must that the cause of any 

health issues be identified as soon as possible. 

Funding from the CWA should also be used to advertise that the charter and commercial fishing fleets are alive, well, and ready to serve the public. Funds must be 

provided to obtain new customers and to notify those who left that we are still here 

and ready to fish in clean water, catch quality fish, and provide a healthy product 

to the consumer. 

In closing I wish to state that the Gulf charter and commercial fleets were once 

viable, productive, and a sustainable group of small business owners. We provide 

a necessary service to individuals who want to fish, consume healthy seafood, and 

enjoy our natural resources. Over the last 6 years the fleets have struggled and yet 

continue to survive. The impact from the Deepwater Horizon oil spill was almost 

the last nail in the coffin. It is imperative that the health and safety of our Gulf 

be assured. The charter and commercial fleet owners, operators, and crews are the 

first responders to any issue on the water. We are on the water daily, we see the 

condition of our resource and are first to report any problem. We beg to provide information on fisheries to an agency, NMFS, who routinely tells us they know our 

resource better. We hold a wealth of information and want to be actively involved. 

We care for our Gulf and all things within and around. 

Mr. Chairman, this concludes my testimony. Again, I truly appreciate the invitation and opportunity to provide you and the committee with this information. I will 

be pleased to respond to any questions. 

Mr. HASTINGS. Thank you, Captain Zales. As I said, your full 

statement will appear in the record. Mr. Bruce Craul, you are recognized for five minutes. 

26 

STATEMENT OF BRUCE CRAUL, CHIEF OPERATING OFFICER, 

LEGENDARY HOSPITALITY, INC., INCOMING CHAIRMAN OF 

THE BOARD, FLORIDA RESTAURANT AND LODGING 

ASSOCIATION 

Mr. CRAUL. Yes. Good morning, Mr. Chairman, and thank you 

for the opportunity to speak before yourself and the Committee. My 

name is Bruce Craul. I am the Chief Operating Officer of a company called Legendary Hospitality, located in Destin, Florida, 

which is in Northwest Florida, between Panama City and Pensacola. I am also the Chairman-Elect of the Florida Restaurant and 

Lodging Association. 

Legendary Hospitality is the operations arm of a company that 

designs, develops, sells, builds, owns, and operates hospitality-related industries in Destin, Florida. Our businesses include the Emerald Grande, a 780-bedroom resort condominium hotel with four 

star amenities, two festival shopping centers, and the Emerald 

Grande and these are all in Destin and in other—Destin Commons 

is located in the town’s center. 

We also own and operate Regatta Bay Golf and Country Club; 

Legendary Marine and Marina, an indoor dry stack storage for over 

700 boats, and the Southeast’s largest indoor boat showroom; 

Harborwalk Marina, located on the mouth of the harbor at 

Harborwalk Village, which has 75 wet boat slips for much of 

Destin’s charter fishing fleet; and of course, fuel and supplies for 

much of the area’s leisure boating community. Harborwalk Charters, a booking service, together with three charter fishing boats, 

with all of the ancillary businesses, round out our presence in an 

area that is very dependent on tourism in the Panhandle. 

Our real estate development and sales arm has been instrumental in progressing Destin’s infrastructure and product offering 

to what it is today by developing large parcels of land and playing 

an important role, together with city, county, and State in land development code and associated developmental needs, rules and 

regs. 

The Florida Restaurant and Lodging Association, headquartered 

in our State capital in Tallahassee, has over 10,000 members 

whose industry employs over a million people in the State of Florida, a business which is Florida’s largest employer. Tourism represents 20 percent of Florida’s economy, and is the largest industry 

in Florida with a $57 billion economic impact. It also represents 

$3.4 billion that is paid in sales tax revenue. 

The Panhandle of Florida has a 100-day season representing 70 

percent of the business. The rest of the business primarily transpires during the spring and fall, which we affectionately call our 

shoulder seasons. The Deepwater Horizon incident devastated our 

businesses last year, and although this summer much of our business has returned, thanks to millions of dollars being spent on the 

promotion of tourism derived from the BP funds, we are still affected by the lasting effects of the Deepwater Horizon incident, including the offshore moratorium, since much of our feeder market 

businesses come from our drive markets, many of which are to the 

west of Florida, including Louisiana, Mississippi, and Texas. 

So when jobs are lost in our feeder states, then so is our business. When people are thinking about how to pay for groceries, a 

27 

mortgage, or a car payment, going on vacation is not even on their 

radar. While the Florida Restaurant and Lodging Association has 

taken a position over the years not to support offshore drilling in 

Florida, for numerous reasons, its board members know that many 

of our tourists, visitors, and convention and conference attendees 

come from energy-related business in the States to our west. 

Many of the condominium and second-home buyers also are from 

Alabama, Mississippi, Louisiana, and Texas. In short, while the 

moratorium cost some jobs, the moratorium was caused by the BP 

Deepwater Horizon disaster. Given the magnitude of the spill, it 

was appropriate to take some time out from drilling. The Deepwater Horizon disaster has shown the devastating impact that unsafe oil and gas drilling can have an effect on coastal communities. 

The Florida Restaurant and Lodging Association has long opposed 

drilling off Florida’s coast, and the spill last summer showed us 

that all of the Gulf can be impacted by what happens off another 

State’s coast. 

We also see firsthand that it is slow to rebound, considering all 

that had been affected. A healthy Gulf economy needs a healthy 

Gulf ecosystem. Oil production has a long history in the Gulf of 

Mexico, and so do the hundreds of thousands of jobs in fisheries, 

tourism, and recreation directly tied to the health of the coastal 

and marine environment. 

The lessons of the BP disaster must be fully understood and remembered. If there is a place for oil drilling in the Gulf of Mexico, 

then it should be governed by a set of rules that exist because of, 

not in spite of, the BP oil disaster. That includes a full assessment 

of the environment and economic damage. 

[The prepared statement of Mr. Craul follows:] 

Statement of Bruce W Craul, Chief Operating Officer, Legendary 

Hospitality, and Chairman Elect, Florida Restaurant and Lodging 

Association 

Good Morning, my name is Bruce Craul, and I am the Chief Operating Officer 

of a company called Legendary Hospitality, located in Destin, Florida, which is in 

Northwest Florida between Panama City and Pensacola. I am also the Chairman 

Elect of the Florida Restaurant and Lodging Association. 

Legendary Hospitality is the operations arm of a company that designs, develops, 

sells, builds, owns and operates Hospitality related industries in Destin, Florida. 

Our businesses include The Emerald Grande; a 780 bedroom resort condominium 

hotel with four star hotel amenities; two festival shopping centers; one called 

HarborWalk Village, where the Emerald Grande is located on the Destin Harbor 

and the other is Destin Commons located in the town’s center. 

We also own and operate Regatta Bay Golf and Country Club, Legendary Marine 

and Marina; an indoor dry stack storage for over 700 boats, and the southeast’s 

largest indoor boat showroom. HarborWalk Marina located at the mouth of the harbor at HarborWalk Village which has seventy five wet boat slips for much of 

Destin’s Charter fishing fleet, and of course fuel and supplies for much of the area’s 

leisure boating community. HarborWalk Charters, a booking service, together with 

our three Charter fishing boats along with other ancillary businesses round out our 

presence that is very dependent on tourism in the Panhandle. 

Our real estate development and sales arm has been instrumental in progressing 

Destin’s infrastructure and product offering to what it is today by developing large 

parcels of land and playing an important role together with the city, county and 

state with its land development code and associated development codes, rules and 

regulations. 

The Florida Restaurant and Lodging Association, headquartered in our State Capital in Tallahassee, has over 10,000 members who employ over a million people in 

the State of Florida, a business which is Florida’s largest employer. Tourism repVerDate Nov 24 2008 11:07 Nov 20, 2012 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6621 L:\DOCS\70719.TXT Hresour1 PsN: KATHY
28 

resents 20% of Florida’s economy and is the largest industry in Florida with a 57 

billion dollar economic impact. 

The Panhandle of Florida has a 100 day season representing 70% of the year’s 

business. The rest of the business primarily transpires during the spring and fall 

shoulder seasons. The Deepwater Horizon incident devastated our businesses last 

year and although this summer much of our business has returned, thanks to millions of dollars being spent on the promotion of tourism derived from BP funds, we 

are still affected by lasting effects of the Deepwater Horizon incident, including the 

offshore moratorium, since much of our feeder market business comes from our 

drive markets, many of which are to the west of Florida. Louisiana for example is 

our number two feeder market barely trailing the Atlanta metro area. So, when 

there are jobs lost or affected in our feeder states, then our business is affected. 

When people are thinking about how to pay for the groceries, the mortgage or car 

payment, going on vacation is not even on their radar. 

While the Florida Restaurant and Lodging Association has taken the position over 

the years to not support offshore drilling in Florida, for numerous reasons, its board 

members know that many of our tourists, visitors, and convention and conference 

attendees are from energy related businesses in the states to our west. Many of our 

condominium second home buyers collectively are from Alabama, Mississippi, Louisiana, and Texas. Since many of the energy related businesses employees are not 

even vacationing, you can surmise that they are not buying second homes either. 

When the moratorium was put in place, one of our partner’s sons, Shane Guidry, 

the President and CEO of Harvey Gulf International in Louisiana, one of the largest 

companies that move rigs, informed us that they would be moving a lot of the rigs 

from the Gulf. They said that the owners of the rigs could not afford to stay and 

wait out the moratorium and that most certainly the same rigs could be used in 

other parts of the world. Harvey Gulf International whose task is to tow and or 

carry rigs from one place to another moved the following rigs; The Clyde Boudreaux, 

a Shell rig to Brazil, the Transocean Armante an EL rig to Africa, Shell’s Paul Romano rig to Egypt, Noble Energy’s Ensco 7500 to Israel, the Ocean Monarch to Vietnam, the Transocean Marianas to Africa, two jack rigs, the Rowland Gorilla II and 

Rowland Gorilla III to the Middle East, and Shell’s Ensco 8501 to the Middle East. 

The rigs are gone and of course no one really knows when or if they will be coming 

back since rigs are in demand all over the world. 

All of the jobs associated with these rigs left our Gulf area. The electricians, the 

crew boat operators, painters, plumbers, caterers, managers and supervisors, etc. 

are still unemployed or have left the area to go to where they can find work. Harvey’s CEO, Shane Guidry told me this past Saturday that the permitting process 

still is lengthy so it will be a long time before we see the economic benefits of returning vessels and rigs to Louisiana which ultimately benefits Northwest Florida 

and overall Florida tourism. 

Federal Regulations are not all new when it comes to ‘‘managing’’ the Gulf and 

certainly not less impactful to the Gulf coast economies. Permitting processes for 

maintaining our navigable water ways are long, cumbersome, expensive and restrictive. Two additional examples that we deal with every day involve the Army corps 

of engineers and the Gulf of Mexico Fishing Management Council. 

Tropical storms or even just sustained winds over the course of several days can 

have a huge impact on the Destin’s Pass connecting the Destin Harbor to the Gulf 

of Mexico. One would think that the home of Florida’s largest charter fishing fleet 

would be at the top of the list when it comes to maintaining our waterways. Our 

Gulf Coast economies are very dependent on the Gulf and even more so this year 

since last year our Charter and Commercial fishing fleet were out of business due 

to the Deep Water Horizon incident. 

The Gulf of Mexico Fishing Management Council which determines which species 

of fish can be caught as well as how much can be caught are restrictive to our economies since recreational fisherman want to keep the fish that they catch instead of 

throwing them back because they are out of season. Our local and state Charter 

Boat Associations attend all of the Federal and State Hearings concerning the fisheries management but it is rare that they don’t compromise to the point that it is 

detrimental to our economies. 

According to estimates in a 2000 study by the University of West Florida’s Haas 

Center for Business Research and Economic Development, Destin’s charter fishing 

industry injects approximately $175 million in direct spending to the local economy 

and supports 7,242 jobs either directly or indirectly. These numbers represent a significant portion of Florida’s $5.5 billion fishing industry and the 75,000 jobs statewide that the industry supports. According to the Haas study, the majority of the 

economic impact of the charter fishing industry comes from the spending of tourists 

who are attracted to the area by the fishing industry. The study shows that tourist 

29 

spending on lodging, restaurants, transportation, retail merchandise, entertainment, 

and other goods and services results in an overall economic activity totaling approximately $317 million and supports approximately 6,775 jobs in the area. Tourism 

spending represents 90.8% of the total economic activity that is generated by the 

fishing industry and 93.5% of the jobs that the industry supports according to the 

Haas study. 

In summary, I would like to thank the committee for providing me the opportunity as a representative of many to come before you to speak. I welcome any questions that you may have regarding the aforementioned or any related questions regarding tourism, jobs, and how the public and private sector can work more closely 

together to create jobs and stimulate the economy along the Gulf Coast. 

Thank you. 

Mr. HASTINGS. Thank you very much for your testimony, and Dr. 

Galvez, you are recognized—before you are recognized, Dr. Galvez, 

I understand that your oral testimony will include ten slides instead of the two that you submitted prior to. Would you commit to 

seeing that all ten slides are available to all the Committee Members ASAP 

Dr. GALVEZ. Yes, I will. Thank you. 

Mr. HASTINGS. OK. You are recognized for five minutes. 

STATEMENT OF FERNANDO GALVEZ, ASSISTANT PROFESSOR, 

DEPARTMENT OF BIOLOGICAL SCIENCES, LOUISIANA STATE 

UNIVERSITY 

Dr. GALVEZ. Good morning, Mr. Chairman, Mr. Ranking Member, and the distinguished Members of the House Committee on 

Natural Resources. My name is Fernando Galvez. I am an Assistant Professor in the Department of Biological Sciences at Louisiana 

State University. My team, in collaboration with Dr. Andrew 

Whitehead at LSU, is leading a collaborative research endeavor to 

study the effects of the BP Deepwater Horizon oil spill on marsh 

fish in the northern Gulf of Mexico. 

I would like to discuss some of the recent findings of our research 

published on August 26, 2011, in the proceedings of the National 

Academy of Sciences. To my knowledge, this is the first report in 

the scientific literature on the biological effects of the Deepwater 

Horizon oil spill in fish. The close proximity of Louisiana State 

University to the northern Gulf of Mexico, and our capacity to mobilize quickly in the first few days following the explosion of the 

Deepwater Horizon oil platform provide us the unique opportunity 

to study the biological effects of this unprecedented and tragic 

event. 

We chose the Gulf killifish as our test organism because it is the 

most abundant fish in the coastal marsh of the Gulf of Mexico, and 

thus an excellent environmental sentinel. Indeed, it is our canary 

in the coal mine. Tissues were collected from fish at six different 

sites from Louisiana to Alabama, and sampling was performed in 

early May 2010, before oil made its landfall in September 2010, 

when much of the oil had disappeared from the water surface. 

We also sampled the water and sediments from each site for hydrocarbon analyses, and satellite imaging provided an estimate of 

proximity of the oil spill to each site. Now, without going into too 

many specifics, we found dramatic cellular effects in fish collected 

from coastal Louisiana, coinciding with the timing and location of 

oil contamination. Cellular effects were predictive of adverse health 

30 

consequences, including developmental and reproductive impairment, toxicity, and even death. 

Fish scale cells, which are important for maintaining critical fish 

body function, appear damaged and showed cellular changes, diagnostic exposure to the toxic components of hydrocarbons. What was 

equally striking was that these biological effects persisted, even 

though chemical testing found only low to non-detectable concentrations of hydrocarbons in fish tissues. 

In other words, although chemistry suggested that these fish 

were safe for human consumption, it was unable to detect any of 

the sublethal, biological effects in Louisiana fish we observed. The 

magnitude of tissue, cellular, and genetic effects seen in fish from 

our oil site in Louisiana suggests impacts on fish growth, reproduction, development, and performance, all highlighting the potential 

ecological consequences of exposure. 

We also found that most of the oil in the marsh is not in the 

water, but rather tied up in the sediment, where it is found in extremely high concentrations. A big lesson from the Exxon Valdez 

is that sediments can act as a long-term reservoir of oil that can 

persist to expose animals to toxic concentrations over long periods 

of time. 

In current studies, we are finding that embryos exposed to these 

oil sediments are hatching at lower frequencies and are showing 

developmental abnormalities in that embryos that do not go on to 

hatch successfully are smaller and listless. Additionally, sediments 

from oil sites appear to be almost as toxic today as they were during the peak of oil in the summer of 2010. 

What our data describe are the early warning signs that have 

been shown in the past to correlate well with population level declines, as seen with Pacific herring, pink salmon, and the sea otter 

in the years that followed the Exxon Valdez oil spill. What we don’t 

know is how widespread these effects are going to be over space in 

time, and whether the responses we see in killifish also exist in 

other ecologic and important species or in fish of commercial importance. We need to be measuring these endpoints in many species 

to know the full extent of the problem. We can wave our hands all 

we want, but unless we collect these biological data, it will be difficult to link the oil spill to future population declines. 

Another important point is that we need to be making these 

measurements over the long-term to get a better handle on 

multigenerational effects, which although time-consuming are the 

most predictive of population and community-level effects. 

I would like to conclude by making one brief statement regarding 

research funding. Emergency funding for scientific research was 

virtually nonexistent for several months following the Deepwater 

Horizon oil spill. In fact, Dr. Whitehead and I paid for the initial 

funding of this research with our own credit cards before our Dean 

of Science graciously pitched in for expenditures. 

With time, we were able to secure funding through the invaluable NSF rapid program and through the Gulf of Mexico research 

initiative. However, in my opinion, the Federal Government needs 

to do a better job of providing a reliable source of emergency funding to support transparent, cutting edge, and unbiased academic 

31 

research following natural and manmade environmental disasters, 

especially since early event data are the most critical to obtain. 

Thank you for your attention, and I would be pleased to answer 

your questions. 

[The prepared statement of Dr. Galvez follows:] 

Statement of Fernando Galvez, Ph.D., Assistant Professor, 

Department of Biological Sciences, Louisiana State University 

Good morning Mr. Chairman, Mr. Ranking Member, and the distinguished members of the House Committee on Natural Resources. I thank you for the opportunity 

to testify today. My name is Fernando Galvez. I am an Assistant Professor in the 

Department of Biological Sciences at Louisiana State University. My team, in collaboration with Dr. Andrew Whitehead at LSU, is leading a collaborative research 

endeavor to study the effects of the BP Deepwater Horizon oil spill on marsh fish 

in the northern Gulf of Mexico. I would like to discuss some of the recent findings 

of our research published on August 26, 2011 in The Proceedings of the National 

Academy of Sciences (www.pnas.org/cgi/doi/10.1073/pnas.1109545108; see Abstract of publication below). To my knowledge, this is the first report in the scientific 

literature on the biological effects of the DWH oil spill in fish. In my written testimony, I will also discuss some of the difficulties we encountered in doing this research, and some of the remaining issues that impede the ability of academic institutions to conduct similar work. 

Following the Deepwater Horizon (DWH) drilling disaster on April 20, 2010, in 

the Gulf of Mexico, acute oiling and the resulting mortality of marine wildlife were 

evident. The close proximity of Louisiana State University to the northern Gulf of 

Mexico and our capacity to mobilize quickly in the first few days following the explosion of the DWH oil platform, provided us the unique opportunity to study the biological effects of this unprecedented and tragic event. In contrast, the sublethal effects, critically important for predicting long-term population-level impacts of oil pollution have not been well described following the DWH disaster. Here we report effects of oil exposure on fish resident in Gulf of Mexico coastal habitats. 

We chose the gulf killifish as our test organism because it is the most abundant 

fish in the coastal marsh of the Gulf of Mexico and thus an excellent environmental 

sentinel. Indeed, we are using it as our canary in the coal mine. Unlike other fish 

species in the Gulf, we understand a lot about their ecology, physiology, biochemistry, and genetics, and have excellent experimental tools at our disposal to 

use. Tissues were collected from fish at six different sites from Louisiana to Alabama (Figure 1), and sampling was performed in early May 2010, before oil made 

its landfall, in July 2010, during the peak of oil landfall, and in early September 

2010, when much of the oil had disappeared from the water surface. We also sampled the water and sediments from each site for hydrocarbon analyses, and satellite 

imaging provided an estimate of the proximity of surface oil to each site. An important and unique feature of this study is that we have data collected from fish before 

oiling. These pre-event data are extremely rare in toxicological studies, and add to 

the strength of our conclusions. To collect these early-event data required the ability 

to mobilize our research programs quickly. 

Without going into too much detail, we found dramatic cellular effects in fish collected from coastal Louisiana coincident with the timing and location of oil contamination. Cellular effects were predictive of adverse health consequences, including developmental and reproductive impairment, toxicity, and death. Fish gill tissues, 

which are important for maintaining critical fish body functions, appeared damaged 

and showed cellular changes diagnostic of exposure to the toxic components of hydrocarbons (Figure 2). What was equally striking was that these biological effects 

persisted even though chemical testing found only low to non-detectable concentrations of hydrocarbons in fish tissues. In other words, although chemistry suggested 

these fish were safe for human consumption, it was insufficient to predict or detect 

any of the sublethal biological effects in Louisiana killifish we observed. The magnitude of tissue, cellular, and genetic effects seen in fish from our oiled site in Louisiana suggest impacts on fish growth, reproduction, development, and performance, 

all highlighting the potential ecological consequences of exposure. 

We also found that most of the oil in the marsh is not in the water, but rather 

tied up in sediment, where it is found in extremely high concentrations. A big lesson 

from the Exxon Valdez is that sediments can act as a long-term reservoir of oil that 

can persist to expose animals to toxic concentrations over long periods of time. In 

current studies, we are finding that embryos exposed to oiled Louisiana sediments 

are hatching at lower frequencies and are showing developmental abnormalities, 

32 

and that embryos that do go on to hatch successfully are smaller and listless. Additionally, sediments from oiled sites appear to be almost as toxic today as they were 

during the peak of oiling in the summer of 2010. 

What our data describe are the early-warning signs that have been shown in the 

past to correlate well with population-level declines as seen with Pacific herring, 

pink salmon, and the sea otter, in the years that followed the Exxon Valdez oil spill. 

What we don’t know is how wide spread these effects are going to be over space 

and time, nor whether the responses we see in killifish also exist in other ecologically-important species, or in fish of commercial importance. We need to be 

measuring these end points in many species to know the full extent of the problem. 

We can wave our hands all we want, but unless we collect these biological data, it 

will be difficult to link the oil spill to future population declines. Another important 

point is, that we need to be making these measurements over the long-term to get 

a better handle on multi-generational effects, which although time-consuming and 

resource-intensive, are the most predictive of population and community level effects. 

Research on the DWH oil spill has provided several important insights I would 

like to conclude by making brief statements regarding research funding, access to 

sample sites during the peak of oiling, and access to Mississippi Canyon 252 oil. 

Reliable Sources of Federal Funding Are Required to Promote EarlyResponse Research Following Natural and Man-Made Natural Disasters. 

Emergency funding for scientific research was virtually non-existent for several 

months following the DWH spill. In fact, Dr. Whitehead and I paid for the initial 

funding of this research with our own credit cards before our Dean of Science graciously pitched in for expenditures. With time, we were able to secure funding 

through the invaluable, NSF RAPID program and through the Gulf of Mexico Research Initiative (GRI). Unfortunately, the National Science Foundation was faced 

with budgetary constraints at the end of the fiscal year that limited their ability 

to provide extensive funding. Furthermore, GRI money took up to 4 months to disseminate, making it difficult to pay for early time point sampling. Although these 

funds were well received, they consisted of small amounts of funding over short durations. Both factors precluded hiring additional staff to conduct the work. Instead, 

we were forced to divert existing students and postdoctoral fellows from existing 

projects due to the time-sensitive nature of the DWH work. In my opinion, the federal government needs to do a better job of providing a reliable source of emergency 

funding to support transparent, cutting-edge, and unbiased academic research following natural and man-made environmental disasters—especially since early-event 

data are the most important. 

For the past 20 years the Department of Interior has directed funds through the 

BOEM (formerly MMS) to LSU for the purpose of conducting environmental research that is directly relevant to oil and gas exploration in the Gulf of Mexico. The 

funding has been administered through LSU’s Coastal Marine Institute (CMI). Ironically, at a time when the importance of such ongoing research has never been more 

apparent, this funding is at risk of being eliminated or significantly reduced. We 

urge congress to take action to insure that this important funding is at least maintained and hopefully increased. This funding has allowed for sustained long-term 

environmental research and could be a good vehicle for providing rapid-response 

funding that was so desperately needed in the early stages of the Macondo disaster. 

Further, it would also be helpful to urge BOEM to modify its long-standing policy 

of requiring 1:1 institutional match. Especially during this period of dramatically reduced funding for higher education, this matching requirement is a substantial impediment for innovative research. 

Access to Sample Sites Should be Available to University Researchers. 

It is understandable the need to regulate the movement in and out of coastal 

habitats following oiling, however far too many researchers found it difficult or impossible to gain access to critical sample sites along the northern Gulf of Mexico. 

Private security companies and local police were used to keep people at bay, while 

citizens became increasingly cynical of BP and federal agencies for the complete lack 

of transparency. University researchers who did manage to obtain funding were 

finding it difficult to complete projects due to the inability to gain access to field 

sites. Fortunately, our research group managed to obtain a BP Access Pass, which 

allowed us uninterrupted access to sample sites. Ironically, had we not obtained this 

permission, we likely may never have had the opportunity to sample the Grande 

Terre, Louisiana site during the height of oiling when sublethal biological effects 

were most pronounced. 

33 

Access to South Louisiana Sweet Crude from Mississippi Canyon 252 

It has been exceedingly difficult for researchers to obtain Louisiana sweet crude 

from Mississippi Canyon 252 (MC252), or even comparable surrogate oil, for toxicity 

testing under controlled, laboratory conditions. Early on, researchers were provided 

with standard letters from BP stating that oil was not available for distribution. 

Some laboratories did manage to obtain limited quantities of MC252 oil, but its distribution was once again disrupted when a federal judge issued a preservation order 

requiring its storage. With that said, a formal request process to obtain small quantities of MC252 does exist, although researchers need to complete an application 

process ensuring that the oil is absolutely necessary. Regardless, BP does not appear to have made any significant shipments of the oil to academic researchers capable of conducting independent and transparent research. Recently, a surrogate 

well was drilled capable of producing oil of similar chemical composition to that of 

MC252. Like the case for MC252, its distribution has been slow to transpire and 

subject to the same application process. As an example, my colleague, Dr. Andrew 

Whitehead, received a letter from BP confirming that shipment of a surrogate crude 

had been approved, and would be arriving soon. Seven months later, his group still 

has no oil, putting this federally-funded research in serious jeopardy. 

Importance of Basic Science Research Funding: 

It should be clearly noted that much of the tools, techniques, and paradigms applied in our oil spill research was facilitated by advances in basic sciences research 

(as distinguished from applied science research). For example, incredible recent advances in comparative physiology, cell biology, molecular biology, and genome biology, facilitated through basic science sources of support such as the National 

Science Foundation, were critically important for enabling the discoveries that we 

have made about the effects of this oil spill. Basic science has been, and will remain, 

the foundation upon which applied science discovers solutions to immediately practical problems for example in health and environmental sciences. However, funding 

for basic science in the United States, for example through the National Science 

Foundation, has remained flat or declined in recent years, whereas support for applied sciences, such as through the National Institutes of Health, has remained relatively robust. We think that this is short-sighted. Funding for basic sciences in the 

United States must be considerably increased as an investment for remaining internationally competitive. 

Thank-you for your attention. I would be pleased to answer your questions. 

Abstract from Recent PNAS publication: 

The biological consequences of the Deepwater Horizon oil spill are unknown, especially for resident organisms. Here, we report results from a field study tracking the 

effects of contaminating oil across space and time in resident killifish during the 

first 4 months of the spill event. Remote sensing and analytical chemistry identified 

exposures, which were linked to effects in fish characterized by genome expression 

and associated gill immunohistochemistry, despite very low concentrations of hydrocarbons remaining in water and tissues. Divergence in genome expression coincides 

with contaminating oil and is consistent with genome responses that are predictive 

of exposure to hydrocarbon-like chemicals and indicative of physiological and reproductive impairment. Oil-contaminated waters are also associated with aberrant protein expression in gill tissues of larval and adult fish. These data suggest that heavily weathered crude oil from the spill imparts significant biological impacts in sensitive Louisiana marshes, some of which remain for over 2 months following initial 

exposures. 

34 


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Mr. HASTINGS. Thank you very much for your testimony, and I 

thank all of you for your testimony. I very much appreciate your 

being here today. As I mentioned at the outset, this was one year 

since the moratorium was lifted, and we wanted to hear from you. 


70719.008.eps
40 

I should note that the Committee did have a hearing down in 

Houma, Louisiana, to hear firsthand from people on the ground. 

I have a question for Mr. Reese. I am sure that you have noticed 

that this Committee has gone back and forth with Director 

Bromwich as to whether permitting and plan approvals are returning to the pre-moratorium pace. And I am not asking you to comment on that because you are here to present your findings and so 

forth. 

That said, one area that I think we could all benefit from a little 

bit more clarification is something that I alluded to in my opening 

statement that is represented in this slide, and that is the ‘‘deemed 

submitted’’ issue which shows up on this bar graph as the red bars. 

In the data that we see of the exploration plans that have been approved so far this year, some took hundreds of days just to be 

‘‘deemed submitted.’’ 

We all know that you need an approved plan to even get to the 

permit stage. And I am not sure if you have direct experience with 

this process. But if you could walk us through the difference between when a company first sends their exploration plan and how 

that is different from being ‘‘deemed submitted.’’ 

Before the Macondo exploration, I guess really the underlying 

question, if you could address that, did it take nearly a year, as 

some of these ‘‘deemed submitted’’ plans do, to get the exploration 

plan? I mean, it seems to me that seems to be a long time frame. 

So if you could elaborate on that, I would appreciate it. 

Mr. REESE. Thank you, Mr. Chairman. I will do my best. I think 

our Chairman and President, our CEO, Paul Bulmahn, at our annual meeting used an object, and I think it begins to explain what 

you are seeing with your lines up here. Prior to the Macondo incident, a typical application, permit application, would be somewhere 

between 30 and 40 pages long. 

The most recent permit application that we submitted—and my 

numbers are a little vague, but in the neighborhood of about 3,600 

pages. So we went from having a 30- to 40-page document for submittal to 3,600 pages. And I can assure you, someone at the 

BOEM, MMS, whichever organization it was, was responsible for 

reading all of that. 

Prior to the incident, there was a very good relationship between 

the application process, and it was interactive. It was not cozy, as 

it has been said before. I can assure you of that. We have nothing 

but the greatest things to say about the people in the field at the 

BOEM. 

So at that particular point, when you are dealing with 3,600 

pages, you automatically have a lot more time constraints, versus 

in the past, there was a normal process in working back and forth, 

and you ultimately got a ‘‘deemed submitted.’’ A company couldn’t 

just hand something to the former MMS, today the BOEM, and 

have them say, OK, you now have 30 days. No. There was a process, but everyone knew what that process was. 

Today, there are still unknowns as to what is in the process. Part 

of it is nothing more than new rules and regulations. So what is 

happening, and I appreciate this slide. If there is a way I could get 

a copy of this slide, I would love to be able to use this. Intuitively, 

41 

we knew this was going on. I have never seen it presented, and I 

compliment you and your staff for putting this together. 

But, yes, today what you have is ‘‘deemed submitted’’ starts the 

time running. And if the BOEM does not have to start their clock 

running until it is, quote, ‘‘deemed submitted,’’ there is an initiative on their part to get it ‘‘deemed submitted.’’ 

Mr. HASTINGS. And so what you are saying is that prior to this, 

before the Macondo incident, while the 30 or 40 pages, there may 

be some give and take, like you said, it wasn’t cozy, I mean, not 

to say—— 

Mr. REESE. No, it was not. 

Mr. HASTINGS. It wasn’t necessarily adversarial, but it was at 

least working together to try to get an outcome. The mere fact that 

that is 3,000 pages—I think that is what you said. 

Mr. REESE. 3,600 is the number I remember. 

Mr. HASTINGS. Is bound to slow the whole process down, and 

that—to oversimplify, is that the reason why that red bar is probably much higher, simply because of that mere fact of the quantity? 

Mr. REESE. I think there are two things here. One, I will stick 

with the facts, and that is the fact, if you have a 3,600-page document, it is going to take a longer period of time. The other is, is 

it a tone coming from the top? What is causing the delay? If there 

is a desire to get something approved, and approved safely, to get 

it approved now, you will have the tone at the top say this is what 

we want to do, and the people that are in charge of that will get 

it done. 

On the other hand, if the tone at the top is we want to slow-walk 

this, we don’t want to encourage drilling in the Gulf of Mexico, we 

want to have a longer period of time for this to happen, then you 

are going to have that. That is editorial, I will admit. The facts are 

you are dealing with a lot more pages. The editorial part is what 

is the tone at the top to get the new energy out of the ground. 

Mr. HASTINGS. Well, that is one of the reasons we are having this 

hearing, to try to ascertain that, and we will make sure that you 

get a copy of that slide. 

Mr. REESE. Thank you very much. 

Mr. HASTINGS. And with that, I recognize the gentleman from 

Massachusetts, Mr. Markey. 

Mr. MARKEY. I thank the Chair very much. First of all, I just 

want to say that the Majority’s Interior Appropriations bill has cut 

$35 million of the Administration’s request, which will lead to 20 

fewer engineers to review these applications. So you can’t have it 

both ways. You can’t kill the program that the Administration 

wants in order to expedite the handling of it, and then complain 

that it is not being handled fast enough, OK? And that is again the 

duality of everything that is happening here. 

You have another thing happening on the House Floor on an ongoing basis that makes it very difficult to in any way square up 

with the Republicans say they want to have happen, and then what 

the Administration says they are willing to do in order to speed up 

the process, and then the Republicans kill that, OK? So that $35 

million, I hope, is going to be restored. But I think the chances of 

that are zero, OK, because they do want to dramatically underfund 

what Director Bromwich can do. 

42 

Dr. Galvez, over 6,100 birds, 600 sea turtles, and 150 mammals, 

including dolphins, were collected dead in the Gulf of Mexico region 

during the Deepwater Horizon disaster. But your study is one of 

the first to examine the sublethal impacts of the spill on fish in the 

Gulf. Your research has found that there are cellular changes in 

the most abundant species of fish in the marshes of the Gulf that 

are the same types of early warning signs we saw following the 

Exxon Valdez spill. 

Could we potentially be headed for a similar population decline 

in fish or other species in the Gulf as we saw following the Exxon 

Valdez? 

Dr. GALVEZ. Well, it is certainly a little early to tell. But some 

of the warning signs are clearly there. In the Exxon Valdez, it took 

several years, approximately four years, before some of the true 

population level effects were really seen. And in those cases, some 

of the same things that we are starting to pick up were also happening in those animals. 

Interestingly, in some of the work that is not published, we are 

finding that when we are exposing animals to the sediments, that 

these animals are essentially not doing very well in the sediments, 

and they continue not to do well. These animals are dying. They 

are not absorbing their yolk, which is normally what an embryo before it hatches, become a larva, what it would do in order to grow. 

These animals are smaller, and so these animals will not do well 

in the environment. 

And so potentially, any organism that spends a good portion of 

its time, especially during early development, in the marsh, which 

is where we are finding the vast majority of the oil, potentially will 

be affected. 

Mr. MARKEY. Thank you, Dr. Galvez. And last week, by the way, 

in this Committee, the Majority was so concerned about sea lions 

eating salmon—they ate 3,000 salmon last year off the entire West 

Coast—that they put a license to kill sea lions if any of them would 

get caught eating fish. So here we have the entire Gulf of Mexico 

and all these species down there—— 

Dr. GALVEZ. Yes. 

Mr. MARKEY.—and just tremendous impacts that they can have, 

not upon 3,000, but almost uncountable numbers of fish, and we 

are not seeing the same attention being paid to that as we saw to 

the sea lion issue with 3,000 salmon total on the West Coast. 

Dr. Galvez, in your study, you noted the chronic, sublethal impacts of the oil spill continued to be detected 22 years after the 

Exxon Valdez. Following the BP spill, do you expect that we could 

see negative impacts to fish and other species in the Gulf for many 

years, as we did in Alaska? 

Dr. GALVEZ. Well, certainly there is the potential. They are vastly different spills in terms of geology, in terms of climate. However, 

what is of most concern is that the oil is in the sediment, and if 

you dig down into the sediment, you see that this oil is still relatively fresh. We still have oil coming into these marshes. And the 

concern is that marsh is habitat for so many organisms. It is really 

the fertile crescent. So much of the fisheries rely at some point in 

their life on that marsh environment to collect their prey. 

43 

And so there is the potential—as I said in my testimony, we need 

to be doing the research to really monitor the recovery. 

Mr. MARKEY. Well, let me ask you this again, Doctor. In your testimony, you explained that BP is not providing researchers like 

yourself similar Louisiana sweet crude to what spilled from the 

nearby wells for controlled toxicity testing so that we can better 

understand how this oil might impact the Gulf ecosystem. Can you 

talk about why it is so important for researchers like yourself to 

be able to test similar oil? 

Dr. GALVEZ. Well, every crude oil is vastly different in terms of 

its molecular characterizations and the types of compounds that 

make up that crude oil. And each of these compounds is vastly different toxicities. And so we want to be able to match as closely as 

possible, preferably with the MC252 oil, so that we can study how 

those specific components are acting on there because some components are going to act in different biological pathways. And so it 

is important to do those studies. 

Mr. MARKEY. So again, what we have learned over and over 

again is that BP has been more concerned with its own bottom line 

than it has been with what is going on in the bottom of the ocean. 

And their unwillingness to provide you and other scientists with 

the information you need in order to do these kinds of studies is 

just a further indication of BP’s unwillingness to cooperate in what 

should be an historic investigation to find out what is going on 

right now in the Gulf of Mexico. I thank you, Doctor. 

Dr. FLEMING [presiding]. I thank the gentleman, and I now recognize myself for five minutes for questions. I listened very carefully to a lot of the comments made today. By the way, I am from 

Louisiana, as is my good friend, Mr. Landry, and obviously we have 

been following this whole issue very closely. We appreciate the 

work from LSU also on these studies, but we hear discussions 

about oil sheens that have been observed. Of course, we know most 

of the oil in the ocean today leaks organically from its bottom so 

that is not an unusual occurrence to see oil sheens. 

Fish mutations, we know fish mutate constantly, as do most of 

the lower species. Cellular-level changes, I don’t know, that all 

seems a bit of a stretch to most of us in Louisiana. Commissioner 

Mike Strain of Agriculture tells us that the sampling of our fish, 

particularly those that we are using for consumption, shows virtually no hydrocarbon evidence. In fact, he assures us that we have 

the most tested and the safest seafood that is being consumed 

today. 

And I think even, Mr. Galvez, or Dr. Galvez, I am not sure, that 

you said that there was little or no hydrocarbon evidence in the tissues that you are seeing. I will get to you in a moment. I will give 

you a chance. Just we are pressed for time here. 

But the point is that what really, in the view of the people of 

Louisiana, the problem has been with this incident has been, number one, the perception that there has been damage to the fish population and to the beaches, and this has been true of Florida, 

where people are not coming when in fact everything is pristine. 

So there has been a perception problem that we have had to overcome, not an actual ecological disaster. 

44 

Number two, perception problem about the safety of the seafood, 

and we are able to prove that we have the safest seafood in the 

world. But third, and most importantly, is what is happening offshore with drilling. And if you look again, if you will glance up to 

the slide, you see that the red bar is by far the largest portion in 

terms of days, which adds perhaps on average of 200 days to the 

process. The Obama Administration gives us a similar graph, except that their days are compressed to something in the average of 

25 to 30. 

So the difference that we see here, and what we are observing, 

what the industry is observing, is around 200 days of slow-walking 

permits before we actually get to the real activity that is going on. 

That is what I would like to focus on, and I will open this up to 

the gentlemen who are in the industry. Is this in fact what you are 

seeing, that it is sort of the pre-permit process, where you are actually filling out forms, and nothing is happening for a number of 

weeks and months before you actually get to it, something that is 

very difficult for us to bear down on and really change? 

I will open that up and be happy to hear different impressions 

on that. 

Mr. REESE. Yes. I am from the E&P industry, and I will continue 

to answer that question. Yes, it has been very difficult, and I think 

the most frustrating aspect has been what rules and regulations 

are being imposed to get to the ‘‘deemed submitted’’ point. We have 

submitted applications. Time goes by. We ask, and we are very active, I do not want to say that we are just sitting back waiting for 

the phone to ring. We are constantly in BOEM’s office working 

with them to try to understand, and many times it is just a level 

of frustration. 

Dr. FLEMING. I think what I am understanding is that there is 

no certainty in the process. 

Mr. REESE. Exactly. 

Dr. FLEMING. That somehow something out of your control, somebody could be shuffling papers deliberately. Somebody could be ignoring applications deliberately, or it could be there is just not 

enough staff. It could be that somebody from above is given orders 

to sit on something for a minimum of three months before you send 

it on. You really don’t know what is going on. 

Mr. REESE. That is the real, real issue. It is the level of uncertainty associated with getting to the ‘‘deemed submitted’’ process. 

There are certain items of permits that I will compliment BOEM 

on. Typically, the completion element, you need a—normally, you 

will need anywhere from four to six permits for every well that you 

drill, but a completion permit is normally obtained within a few 

days. That they seem to be pretty good on. But trying to get to the 

exploration plan, the DOCD, or the ultimate drilling permit to 

allow you to start drilling, that has been very frustrating. 

We have already taken two permits that we had hoped to do in 

early 2012, and we recognize at this point those will in all probability be late 2012 or early 2013 permits. 

Dr. FLEMING. OK. Well, thank you for that because that is really 

what I am hearing, is uncertainty. I am also understanding that 

there is a certain cycle, and there are certain times of the year that 

you can go out and take rigs down, plug the drilling sites, or perVerDate Nov 24 2008 11:07 Nov 20, 2012 Jkt 000000 PO 00000 Frm 00048 Fmt 6633 Sfmt 6602 L:\DOCS\70719.TXT Hresour1 PsN: KATHY
45 

haps start them back up again. And so if you don’t get that permit 

approved within a certain window, then you may have to wait another six months or a year before you can go back again. Is that 

also the case? 

Mr. REESE. That is correct. Essentially what you have—and 

these are rules that have come in since Katrina and Rita—you are 

not allowed to moor up, put a rig in place within, I believe, five 

miles of another fixed structure or floating structure in the Gulf of 

Mexico during hurricane season, recognizing that most deepwater 

wells will take you 45 days, if it is a side track, and it could easily 

be over 100 days if it is a brand new well. Do the math, from June 

1st to roughly the middle of October, and what you find, unless you 

are on location, moored up and ready to go, by sometime in the 

March to April, maybe as late as May, standpoint, if you don’t 

make that window, you might as well forget any new deepwater 

drilling that is within five miles of a fixed or floating structure 

until some time in October-November. 

Dr. FLEMING. OK. Thank you. And I apologize to my colleagues. 

I went a little further over than I intended to. So next, I will recognize Mr. Holt for five minutes. Mr. Holt? 

Mr. HOLT. Yes. 

Dr. FLEMING. You are recognized, sir, for five minutes. 

Mr. HOLT. Thank you, Mr. Chairman. I would like to follow up 

on one point. And first of all, thanks to all the witnesses. Mr. 

Galvez, we were talking about the effects on the fisheries and the 

ecological balance of the Gulf. When someone mentioned recently 

that, well, fish mutate, it just happens, are the changes that you 

have detected, the cellular changes in the fish, is this abnormal, or 

is this normal mutation? 

Dr. GALVEZ. Well, the mutation—yes, it happens over the course 

of thousands of years, many, many generations. You will get evolution. But some of the changes that we are observing, some of the 

cellular changes in the gill are completely abnormal. I am a fish 

physiologist by training, and I will tell you firsthand that the level 

of damage that we are seeing on those gills are going to impair the 

ability of those organisms to take up the oxygen from the environment. 

Mr. HOLT. And let me go back now to the oil spill. Is the oil still 

in the environment? 

Dr. GALVEZ. Yes, it is. 

Mr. HOLT. Now, in the marshes and areas, some of it I guess is 

still in the sediment, and probably will be for some time. 

Dr. GALVEZ. Yes, it is. 

Mr. HOLT. Is that sediment important to the fisheries, or is it 

only the open waters that are important to the fisheries? 

Dr. GALVEZ. Well, certainly in that environment where killifish 

and other organisms, they use that environment, that habitat as 

safety, so they hide amongst the marsh grasses. Some organisms, 

some flat fish, for instance, utilize that sediment. Other organisms 

bury within the sediment. Killifish is in such shallow water that 

it is exposed continually to that sediment. 

Mr. HOLT. So obviously what we are trying to get at is whether 

it is important to stop and think or whether we should be charging 

full speed ahead. Do you think we have done all the thinking that 

46 

should be done to understand the effects of what we have experienced and what the fishermen have experienced and what the 

other people who depend on the life of the Gulf have experienced? 

Dr. GALVEZ. If history is a lesson, and it should be, I think that 

the potential ecological effects are yet to become apparent, my concern. I would like to add that Louisiana seafood, in my opinion, is 

still safe to eat because we are not seeing the accumulation of the 

hydrocarbons in those animals. 

But what we are seeing are these subtle cellular effects that are 

going to make it more difficult for organisms to survive in an everchanging environment. 

Mr. HOLT. OK. Mr. Kief, you in your testimony, and a number 

of my colleagues and others, have talked about delays in this 

issuing of permits. Now, the Majority of the House here in the Appropriations bill for the Interior has underfunded the agency that 

is responsible for issuing the permits, to the tune of about $35 million. The Director of BOEMRE has told this Committee it could 

mean a shortfall of perhaps 20 permitting engineers, which means 

that permits will not be issued as quickly as the department would 

otherwise issue them. 

Do you think this underfunding is wise in light of the concern 

you have raised? Or what would 20 additional permitting engineers 

do to help expedite the permitting? 

Mr. KIEF. Well, either that, or how about a permitting process 

that was less than 50 pages turning to 3,600. That is part of the 

problem. 

Mr. HOLT. OK. So you are happy with fewer permitting engineers? 

Mr. KIEF. Oh, no. I wish the permitting process was—— 

Mr. HOLT. Mr. Auer, what do you think about that? 

Mr. AUER. Can we afford to lose—— 

Mr. HOLT. Should we be laying off permitting engineers? Would 

that make it better for permitting? 

Mr. AUER. The engineers that would help for my permits, if I 

have one guy, and he is taking 120 days, give me another one, and 

maybe it is cut in half, OK? I don’t need $35 million to get my permits approved. They need some help. 

Mr. HOLT. Are you the only person out there seeking permits? 

Mr. AUER. No, I am not. But we all seek the standard form. 

Mr. HOLT. Mr. Reese, do you think it is wise to cut back on those 

who would issue the permits? 

Mr. REESE. I think if we are looking for a reason to not issue permits, and the determination is the reason we are not issuing them 

is there are not enough people, then no, that is not a wise decision. 

However, if the fault is the fact that the process is flawed, and you 

can throw 35 people or 135 people, but you are still going to have 

a flawed process, I think the focus has to be on the process, not 

the number of people. 

Mr. HOLT. OK. So one well-intentioned permitter with a good 

process will do it, I suppose. Mr. Chairman, my time has expired. 

Thanks. 

Dr. FLEMING. Mr. Holt yields his time back, and I now recognize 

the gentleman from South Carolina. 

47 

Mr. DUNCAN OF SC. Thank you, Mr. Chairman. As important as 

this issue is to me, I am in markup in Homeland Security, so I 

would like to yield my entire five minutes to the gentleman that 

understands drilling equals jobs, Mr. Landry from Louisiana. 

Mr. LANDRY. Thank you, Mr. Duncan. I certainly appreciate the 

time, and the people from South Louisiana appreciate that as well. 

Chris, your area of expertise is primarily in the plugging abandonment consulting business. Is that correct? 

Mr. AUER. That is correct. 

Mr. LANDRY. OK. And so you are the guy who is responsible for 

obtaining the permits that help oil and gas companies properly 

abandon and seal off wells and reserves that have been depleted. 

Mr. AUER. That is correct. 

Mr. LANDRY. And then you also aid in the removing of idle iron. 

Mr. AUER. I do. 

Mr. LANDRY. OK. And I would suspect that you work for multiple 

operators. 

Mr. AUER. I do. 

Mr. LANDRY. OK. And again, you are the person who is responsible for getting those permits. 

Mr. AUER. I am, yes. 

Mr. LANDRY. Are you sitting on any of those permits? 

Mr. AUER. I absolutely don’t sit on any of the permits. They are 

written and submitted as fast as possible. 

Mr. LANDRY. And so as soon as you get them, you get to work. 

Mr. AUER. Absolutely. 

Mr. LANDRY. Are you having any problems once you get your 

permit, are you having any problems procuring the equipment and 

the services necessary to do that work? 

Mr. AUER. Absolutely not. And where we are at right now is the 

permitting is so slow, and it has pushed so much work, there are 

dye boats and heavy-lift vessels stacked at the beach. The rates we 

are seeing, I don’t know how the companies are making any money. 

The assets are there. 

Mr. LANDRY. So, if I asked you if you thought that there are operators out there who actually have a PNA permit at their office 

that they are not acting upon, would you believe me? 

Mr. AUER. Actually, I would. And the only reason I think that 

they would not act on it is if it ran into a bad weather window. 

And there is a safety issue then, if we run further into the year. 

That would be the only reason to not act on a PNA permit. 

Mr. LANDRY. Mr. Reese? 

Mr. REESE. Yes, sir. 

Mr. LANDRY. Are you sitting on any PNA permits? 

Mr. REESE. I am sorry. Say again? 

Mr. LANDRY. Do you all have any PNA permits at ATP that you 

all are not acting upon? 

Mr. REESE. Not other than because of a weather window or 

scheduling equipment and things of that nature, no. We would be 

acting on everything that we would have. 

Mr. LANDRY. On the PNA side, do you know if there is a lack of 

equipment or services available for you to do your work? 

48 

Mr. REESE. I am not aware of that. It is not my area of expertise, 

but I am not aware of there being lack of ability to get equipment 

for that. 

Mr. LANDRY. Mr. Shafer. 

Mr. SHAFER. Relative to PNA and really any types of permits, I 

think what we are seeing right now is historically in the Gulf of 

Mexico, there has always been a small backlog, I guess you would 

say, of permits, which once you finish one job and move on to the 

next job, and not have your assets, whether it be PNA, equipment, 

and heavy-lift barges, drilling rigs, you know, normally you would 

like to move them immediately. A lot of this equipment is very expensive. The crews are very expensive. And so historically, you 

have always had a small backlog of permits, just enough to move 

the equipment around. And right now, it is quite the opposite. 

As Chris had mentioned, what we are seeing now is equipment 

on the beach, in the ports, sitting there, not working, and available 

for work. 

Mr. LANDRY. Now, Chris, let me ask you, you have had some difficulty, as everyone else, but on the PNA permitting side and removing idle iron that the Administration, Secretary Salazar, Director Bromwich have gone on record as early as two months after the 

Macondo incident, saying that it is something that they want to see 

happen in the Gulf of Mexico. What do you think the biggest obstacle is? If you said to this Committee, I would suggest that 

BOEMRE or BSEE does this now, what would it be that you would 

suggest? 

Mr. AUER. They need to staff appropriately. They need to standardize the forms. We don’t have standardized forms for abandonment. Everybody does it a different way. And they need to automate it, just the same way they do with wells. And there needs to 

be more focus. The fish are important, and I appreciate Dr. 

Galvez’s research and everything. But the most important animal 

that is affected by this is the human animal. And we need to turn 

our focus to that, and that needs to be their focus as well. Keep 

seeing what the effect is on the environment, but we are the environment. And nobody seems to understand that. 

Mr. LANDRY. Well, and so, let me ask you this. It was my understanding that each well is different in the PNA permitting process. 

So how would you standardize that? 

Mr. AUER. Well, the wells have a standard form called an APM 

form. That is real simple. That has been in play forever. Any time 

you want to modify a well bore, you file an APM form. The platform removal application, 30 CFR 250, has a list of questions that 

you answer, as most government regulations do. Build a form 

where you can fill in the blank because when you hire new people 

at BOEM, this is kind of specialized. But when you hire new people, it is easier to train them. Same thing we did in the Army when 

we were all in the Army. Easy forms, learn how to use it. Automate 

it so that I can get online and see, just like I can with the well permits, and see where it is at, what questions have been asked. 

Currently, I have to pick the phone up, and I have to call the 

one or two approving personnel at BSEE and ask them, hey, where 

is this permit at. What is the status? That takes time from them. 

49 

It takes time from me. We shouldn’t be there, not in today’s world. 

Real simple. 

Mr. LANDRY. Thank you. 

Mr. HASTINGS [presiding]. Thank you very much. Next we will 

recognize the gentleman from Florida, Mr. Southerland. 

Mr. SOUTHERLAND. Thank you, Mr. Chairman. First of all, I 

would like to thank everyone for coming to testify. And I know I 

have a constituent here, Captain Bob Zales. Thank you for making 

the 1,000-mile trip up to Washington. And also Mr. Craul. Thank 

you for coming. 

I want to ask Mr. Craul, I am familiar with your company, even 

though Destin is not in my district, but I am familiar with your 

company. You kind of outlined your business interests, which are 

varied along the Gulf Coast. You have a reputation of being a class 

organization, and you invest in the communities that you are in. 

With all the holdings you have, you create jobs, OK? We do a lot 

of things up here. A lot of proposals come forth by individuals who 

have never created a job in their life. And I am just asking, though, 

what is the single greatest factor that Legendary Hospitality looks 

at in making a business investment? 

Mr. CRAUL. Supply and demand. As demand goes up, meaning 

the increase in business to our area, is what creates jobs. So if 

there is more people coming, more people buying, more people renting, more people purchasing fuel, so on and so forth, then we are 

ready to build more, which creates jobs to take care of that demand. 

Mr. SOUTHERLAND. I know that some of the questioning is trying 

to get us off of the topic that we actually asked you to come 1,000 

miles to participate in. Does the moratorium that we have been 

dealing with, does it help or hurt demand? 

Mr. CRAUL. Well, it is difficult to determine exactly how much of 

our business was affected by the moratorium because it is a part 

of our business. Not all of our business is from Louisiana and so 

forth, but certainly if you have a reduction in jobs and a feeder 

market, there is going to be an effect to the businesses in Florida. 

Mr. SOUTHERLAND. You know, I noticed some of the other witnesses, Mr. Reese, you had made a very good presentation, and you 

talked about being in other countries as well. How challenging is 

it for this moratorium, compared to other countries, in the permitting process that you go through in other markets? 

Mr. REESE. The uncertainty that we have been dealing with for 

the past year is unprecedented anywhere else. You do not have this 

uncertainty associated with it. We are in the UK. We are in the 

Netherlands. We are also in offshore Israel. In each of those, the 

permitting is challenging. But the rules and regulations have far 

more clarity, and the time frames there are much more definitive. 

Mr. SOUTHERLAND. So certainty, obviously, kind of off of what 

Mr. Craul was mentioning, I know that investors do want certainty. And so the moratorium has injected more uncertainty for 

you. And I would expect it has done so for any other business interest. 

One of the things I would like to ask, Doctor, I know it has been 

touted on the other side of the aisle that we are not interested in 

research. I am very proud to be a co-sponsor of the Restore Act that 

50 

deals with research. And so I just want to go ahead and put that 

claim to rest. Inside that bill, it deals with a lot of research because 

we do want to know. 

I will say this, though, that if BOEMRE doesn’t want to issue 

permits, budgeting them $35 million more is not going to change 

that, OK? This thing that you just throw money at departments, 

and all of a sudden they just start changing their view of the world 

is kind of looking through glass houses. 

But, Dr. Galvez, I want to thank you for the research that you 

are doing. I do believe in research. I do believe we need to know, 

especially in the area of our fisheries. Mr. Zales knows the importance of good research and not making fisheries decisions based on 

ten-year old data that is inconclusive. 

In your own testimony, you stated that it is too early to tell. You 

mentioned the words ‘‘speculation’’ and ‘‘unknown.’’ There are 

things that are yet to become apparent. You know, I think that 

does validate the need for more research. But one of the things I 

wanted to state, you talked about not having the sweet crude that 

you needed to do your investigation. You said that you sent a letter, and that you still haven’t received it, seven months in. That 

has got to be aggravating, to need something and not be able to get 

it for months in and months out. 

Dr. GALVEZ. Well, what is particularly aggravating is that the 

approval for the oil was obtained over seven months ago. So 

you—— 

Mr. SOUTHERLAND. Here is what I want you to do, though, because my time is running out. I want you to welcome you to the 

world that these guys all live in, needing something badly and 

never, ever getting it. Welcome to the wonderful world of small 

business and private enterprise. I wish you didn’t have to deal with 

that. But I am glad that other people see the aggravation that industry has to deal with on a day-in, day-out basis. 

Dr. GALVEZ. If I can comment briefly. 

Mr. HASTINGS. Briefly. 

Dr. GALVEZ. The university is like a small business in that I 

have 14 staff that I feed by them the dollars. 

Mr. SOUTHERLAND. I hear you, man. 

Dr. GALVEZ.—my research dollars. And in this uncertainty, it is 

difficult. 

Mr. SOUTHERLAND. Absolutely. We all agree. 

Mr. HASTINGS. The time of the gentleman has expired. And the 

Chair recognizes the gentleman from Louisiana, Mr. Landry. 

Mr. LANDRY. Thank you, Mr. Chairman. Mr. Reese. 

Mr. REESE. Yes, sir. 

Mr. LANDRY. You have been with ATP since its inception, correct? 

Mr. REESE. 1991, yes, sir. 

Mr. LANDRY. When ATP started out, were you all a deepwater 

player or a shallow-water player? 

Mr. REESE. We were exclusively a shallow-water player. It was 

formed by Paul Bulmahn, as he says, on the floor of his living 

room, and I helped him along with a couple of other gentlemen, 

and we basically took two projects in 1993-94, put them on producVerDate Nov 24 2008 11:07 Nov 20, 2012 Jkt 000000 PO 00000 Frm 00054 Fmt 6633 Sfmt 6602 L:\DOCS\70719.TXT Hresour1 PsN: KATHY
51 

tion. It cost about $7 million or $8 million for our first two 

projects. And January of 1995, we were on production. 

Mr. LANDRY. So two projects, living room, a couple of guys. It is 

the American dream. 

Mr. REESE. Absolutely, it is. 

Mr. LANDRY. Taking a risk. You could have drilled some dry 

holes. 

Mr. REESE. Yes, sir, we could have, and we did. 

Mr. LANDRY. And then today, you are— 

Mr. REESE. We are the fourth most active operator in the Deepwater Gulf of Mexico, behind BP, Shell, and Anadarko. 

Mr. LANDRY. Amazing, amazing. Now, here is the question. If 

you all had to go back in that living room today, under the current 

regulatory environment, in 11 years, could you be what you are 

today? 

Mr. REESE. No. 

Mr. LANDRY. One more time. 

Mr. REESE. No. I can give you a longer answer, but the answer—— 

Mr. LANDRY. No, no. I know. Look, I believe you. I am sitting 

here because I believed that last year when I ran. See, in 1995, I 

started a business with a friend of mine, $10,000. I didn’t have $7 

million. I wish I had had it. 

Mr. REESE. We didn’t have $7 million. We had to go find it. 

Mr. LANDRY. But you see, that is what I did. And then I sold 

some of those businesses, and we employed a lot of people, a lot of 

people who have gone on to do a lot better things. Some of them 

make more money than me now, guys that worked for me. And I 

recognize that this Federal Government is destroying that American dream. It is destroying the ability for guys like you all to get 

back in that living room 11 years ago and do what they are doing 

today. 

Mr. REESE. To have a group of true entrepreneurs like Paul was, 

like I was, and joining him, and doing what we did, I hate to say 

it. I think that is a thing of the past. The rules, the regulations, 

the costs associated, whether it is shallow-water drilling or deepwater or the like. Our first deepwater project, we took a project 

from Texaco. Unocal was our partner. That was about an $80 million project. And our most recent project, Telemark, is about $1.5 

billion. 

Mr. LANDRY. And in those 11 years—— 

Mr. REESE. It has been 20 years. 

Mr. LANDRY. Did you have any Macondo-like accidents in the 

Gulf of Mexico? 

Mr. REESE. No. There has been 58,000 wells drilled in the Gulf 

of Mexico, more than 58,000. One had a real problem, one out of 

58,000. 

Mr. LANDRY. All right. And I am guessing that your safety record 

is a great record. I mean, I think you care about your employees. 

Mr. REESE. Yes. I mean, no one has a totally unblemished record 

in this industry, I will admit that. You can’t be in this industry and 

have total—— 

Mr. LANDRY. Well, my driving record is not unblemished. I want 

you to know that. 

52 

Mr. REESE. You shoot par every time you go out to play golf? No. 

That is not going to happen. 

Mr. LANDRY. And a lot of it is my fault. 

Mr. REESE. I know. Sometimes things happen. But no. We have 

an impeccable safety record. When we designed the Titan, we put 

a blowout preventer on the surface of the Titan. We also have a 

shut-in device—it is called a SID—on the mudline. Effectively, we 

have two blowout preventers on a deepwater platform, one at the 

surface and one in the mudline. 

Mr. LANDRY. And I would imagine that if the government had 

not done a thing but check its own self in what caused the 

Macondo well and investigated BP for the accident on that rig, is 

it safe to say that the industry—would you have been looking at 

that accident and trying to determine what you could do to ensure 

that you company wouldn’t have that same type of accident? 

Mr. REESE. Two quick things. The first answer is absolutely yes. 

Any time there is an accident, you want to know what happened. 

What should have happened, and what would have kept us all from 

being here today, is when the incident occurred—we have seen airplanes fall out of the sky. Toyota had problems, things of that nature. What should have happened was an immediate cease for anyone using the equipment that the Macondo well was using, to find 

out was the problem with the equipment, was it operator error, or 

what, immediately shut that down, and you would not have heard 

a peep out of the Gulf of Mexico, independents or majors, because 

that is what we would have done to find out—we are using—I am 

not saying we did. We are using the same piece of equipment they 

did. Is that a problem? 

Unfortunately, it was a let us punish and let us put this entire 

industry out of business for awhile. And that is the reason we are 

sitting here today. It was an inappropriate response to an accident. 

Mr. LANDRY. Thank you. 

Mr. HASTINGS. The time of the gentleman has expired. The Chair 

recognizes the gentleman from California, Mr. McClintock. 

Mr. MCCLINTOCK. Well, to follow up on that, the blowout in the 

Gulf was basically a mechanical failure of a blowout preventer 

stack. Is that correct? 

Mr. REESE. I am not going to answer that directly because I am 

not informed, and I think that gets into litigation. If you don’t 

mind, I think, yes, that was clearly part of the problem. Was that 

the cause of the problem? Was it operator error? Was it something 

else? I am going to let other people—— 

Mr. MCCLINTOCK. Well, it seems to me when there is an airplane 

crash, the NTSB goes to work to determine what was the cause of 

that crash, and then adds additional protections to assure that that 

doesn’t occur again. 

Mr. REESE. That is correct. 

Mr. MCCLINTOCK. In the case of a mechanical malfunction, you 

identify what was the mechanism that malfunctioned, and how do 

we build them in the future so that that doesn’t happen again. The 

government didn’t do that as far as I can tell, at least didn’t give 

priority to that. Instead, as you point out, it vastly expanded the 

bureaucracy that oversees this activity without any kind of focused 

attention on the actual problem. 

53 

Mr. REESE. I would agree with that. 

Mr. MCCLINTOCK. And what we are being told by the Minority 

is, well, we have to add more bureaucrats. But as you pointed out, 

you have gone from permits that were 40 pages to permits that are 

now 3,600 pages. 

Mr. REESE. The typical permit was about 30 to 40 pages. The one 

that Paul used at our annual meeting was 3,600. 

Mr. MCCLINTOCK. So that is roughly a 9,000 percent increase in 

bureaucracy. Maybe instead of more bureaucrats, what we need is 

a little less bureaucracy. That is obviously rhetorical. I am trying 

to get a handle on the economic damage that was done by the blowout itself, and the economic damage that was done by the government in its response to the blowout. Do you have figures that 

would help me on either, anyone on the panel? 

Mr. SHAFER. The one figure that I quoted in my testimony was 

11,500 jobs. And that is actually a very conservative figure. That 

figure is really related only to the Deepwater drilling rigs that have 

left the Gulf of Mexico. And so that figure would include the actual 

crews of the rigs, the people working on the vessels that supply the 

rigs with various things like fuel, food. I am sure you can imagine 

the logistical difficulties of basically a floating city in 10,000 feet 

of water very high, lots of people onshore working—engineers designing wells, designing that kind of stuff, and just extreme 

logistical difficulties of operating offshore. 

So that is a very conservative figure, 11,500 direct jobs. 

Mr. MCCLINTOCK. Those are direct—— 

Mr. SHAFER. Those are direct jobs, absolutely. 

Mr. MCCLINTOCK. That doesn’t include the spinoff activities. Has 

there been any economic assessment of the damage done by the 

moratorium. 

Mr. SHAFER. Absolutely. My company did a study, and I think it 

was somewhere around 100,000 jobs—I’m trying to include those 

direct jobs, indirect, and induced jobs. I don’t have the exact figure 

in front of me. There is also the effect going forward, which I 

think—— 

Mr. MCCLINTOCK. Any dollar figure in any of the studies that 

has been undertaken so far? 

Mr. SHAFER. I don’t have it in front of me, but again, it is in the tens of billions of dollars. Like I said, just from those rigs, $6.3 billion is the figure we have estimated. 

Mr. MCCLINTOCK. So 100,000 direct and indirect unemployed, 

and obviously billions of dollars of economic damage done by the 

government in response to the blowout. What was the damage of 

the blowout itself? Do we have estimates on that? 

Mr. SHAFER. I don’t, sir. 

Mr. MCCLINTOCK. Anyone on the panel? 

Mr. REESE. I think the only number that has really been used 

is the $20 billion that BP had to basically put into the fund. I think 

they are trying to say that was the total economic damage. But 

clearly, it is not. That was the direct damage. As for indirect damage, we had to let a rig go. That rig is now over in Africa. Those 

are untold numbers at this point. 

Mr. MCCLINTOCK. It would be interesting to get that figure. 

From what I have seen, it appears that the government may have 

54 

done as much damage to the economy as the accidental blowout 

did. 

Mr. SHAFER. Sir, and I think the $20 billion figure, which was 

the amount that BP had to set aside to deal with the ongoing effects of the spill, I am not sure if that has actually all been paid 

out. I think that was more an estimate that was made by the Administration, rather than an actual figure. 

Mr. MCCLINTOCK. And that was compensated. That is compensation for the damage. So that was compensated damage as opposed 

to the economic damage done by the government’s policies, which 

has been uncompensated to the people affected. 

One other quick question. Can you give me a picture of the number of rigs that have left the Gulf as a result of the government’s 

policies, and any chance of getting them back any time soon? 

Mr. SHAFER. Yes, sir. As I said in my testimony, the number of 

rigs that have left the Gulf of Mexico is 11. Relative to them returning, there is currently two of those rigs that are planned to return. One of them is off French Guinea, so it is off South America. 

And actually, the company that is the operator of that rig, Coldwell 

Energy, still does not have a permit to drill, which definitely opens 

up the question of if they will bring the rig back when they don’t 

have a permit to drill. 

And the other company is Murphy Oil and Gas, who actually is 

talking about divesting out of some of their Gulf of Mexico properties. So, again, the possibility of that rig returning seems to be 

declining rapidly every day for both those rigs. And of the rest of 

the rigs, there is no plans for them to return. 

Mr. LAMBORN [presiding]. OK. We will go to our next questioner, 

which happens to be myself. So I will just jump right in. Thank you 

all for being here. At this point, I think we are beyond the fact that 

the length of the shutdown and slowdown in the Gulf was both unwarranted and unnecessary. We are at the point where we are trying to find out the lasting and ongoing impacts on job creation in 

the Gulf, and how to help revive the Gulf. 

One of the problems we hear so often that affects business in uncertainty. With offshore rigs costing as much as half a million dollars per day to lease, uncertainty can be especially lethal for small 

businesses. As they scale down offshore operations and employees, 

all of the secondary and tertiary businesses follow suit. And the 

same is true of the mom and pop businesses in the local port cities, 

and even beyond the Gulf. Al Reese in his testimony noted the vendors and contractors in 42 States that rely on offshore operations. 

So my first question for those of you on the panel who helped run 

a business, how many people do you employ now, roughly, and how 

many have you had to let go? 

Mr. AUER. I have got—I don’t know. I am at 22, and I don’t think 

it is how many I have let go. It is what would be my capacity to 

expand. And I could probably double that, if we had some permitting stuff going the way it should be. 

Mr. LAMBORN. Thanks. 

Mr. KIEF. We have approximately 110 employees, and capacity to 

employ 125. And once again, my question is that there are companies like us that are avoiding layoffs by using capital and lines of 

credit to maintain our workforce. And that threshold is about to be 

55 

met to where we are going to have to discharge more people, and 

we are trying to avoid that, hoping that this system gets straightened in a quick fashion. 

Mr. LAMBORN. OK. 

Mr. KIEF. If not, we are going to have to do that. 

Mr. LAMBORN. OK. Anyone else? 

Mr. REESE. We have less than 100 people in our company, but 

we make use of suppliers, contractors, and people of that nature. 

Any time we drill a well, we estimate somewhere around 1,000 people are going to be impacted, whether it is the caterers, the boat 

owners, the people of that nature. Clearly, in the past year and a 

half, we pushed off three wells that I can think of sometime into 

2013 or beyond. As I said, one of those rigs has left and gone over 

to Africa, and we are just waiting to get permits on two wells. So 

well over 3,000 just in three particular wells. 

Mr. LAMBORN. OK, thanks. I will go on to my next question, and 

this is for Mr. Reese. The exodus of American manufacturing jobs 

is a story no one likes to be reminded about, but the reality is that 

our Nation is competing every day with the growing economies like 

those of China and India to keep jobs here. So when I hear about 

your company investing nearly a billion dollars building the ATP 

Titan, the first multi-column, deep-draft, floating, drilling, and production platform built in the USA, this is truly an American success story. 

The Titan is on the cutting edge of technological innovation. 

From what I understand, it utilizes two blowout preventers, increasing safety through redundancy. Can you tell us more about 

what went into building the Titan, and things Congress might be 

able to do to promote more rigs being constructed right here in the 

United States? 

Mr. REESE. Certainly. And I think part of it has to do with specifics to the industry, and part of it is just an overall working with 

more employment nationwide. We wanted to build the Titan, and 

we wanted it to be homegrown. It was built in Louisiana, and it 

was built in Texas. Those are the two ports. As I said, over 30 

countries were involved in it. We sent checks to over 31 different 

States from employers for that, and that was all told about a billion dollars just for the Titan, the mooring, and the pipelines associated with that. 

I think the main thing that we would like to see that would encourage us to continue to be here would be more general, and that 

is getting people back to work. How can we reduce payroll taxes? 

How can we give encouragement to companies that would hire people. ATP will use and utilize many of the contractors that are sitting here as we get more wells, more production, and the like. The 

main thing we need is the permits to be able to say, we are going 

to drill another well. We are going to build another Titan. 

We have another one in construction right now that will ultimately be another billionish dollar unit. We are looking offshore 

Israel. And as a result of looking offshore Israel, we have already 

been to the groups here in Washington that can help fund that, ExIm Bank, and we believe there is a possibility that they may be 

able to contribute partially to that construction for the American 

component. 

56 

So these are the things that are going to be necessary. The other 

thing—and please don’t take this wrong—I think a lot of things 

that the government can do is to, I will use the term, get out of 

our way. We don’t necessarily need help. Every time there is a 

problem, we don’t need government to solve it for us. If government 

can say this is a problem that belongs to the industry, this is something that we will be able to handle. The independents and the majors have been doing that for quite some time. 

Mr. LAMBORN. Well, thank you for that answer. And I have to 

agree with you on that last point. It is just amazing that some people turn to government first, when I want to turn to the American 

people—the ingenuity, creativity, the hard work that we have seen 

in the hundreds of years of our Nation’s history. It has been proven 

time and time again. So I love that answer. Thank you for being 

here, and thank you all for being here and for your answers. 

And now we will go to our last questioner, Representative 

Thompson of Pennsylvania. 

Mr. THOMPSON. I thank the gentleman. Gentlemen, thanks for 

your testimony. Mr. Reese, I want to follow up on the Titan that 

you just talked about. In your testimony, you noted that the blowout preventer was installed. Was that required by regulation? 

Mr. REESE. The blowout preventer, yes. One blowout preventer 

is required. A second blowout preventer—— 

Mr. THOMPSON. You have two, right? 

Mr. REESE.—is not required. We designed that into the system 

in 2007. Why? Because we felt it was necessary for a permanently 

moored rig to have two types of blowout preventers. It was not required, costs literally tens of millions of dollars extra to do that. 

Mr. THOMPSON. Well, you anticipated my second question. I was 

going to ask why the second one, if only one was required. Thank 

you. 

Mr. Craul, thanks for being here on behalf of the hospitality industry. We are going to a fair amount of natural resource extraction in landlocked Pennsylvania, and our hospitality services is 

booming as a result of it. We can’t build hotels fast enough, and 

so which has been really good. I also understand that the hotel industry can be seasonal. I grew up in a small family sporting goods 

store, and we had a marina on a lake. Trust me, our window of opportunity was a lot less than 100 days, and I know how vulnerable 

that can be. 

The losses that were realized, they were compensated with the 

vendors that were in the industry? 

Mr. CRAUL. The answer was—they were compensated? 

Mr. THOMPSON. Yes, were they compensated? 

Mr. CRAUL. You mean from BP? 

Mr. THOMPSON. Correct. 

Mr. CRAUL. Well, that isn’t over yet. 

Mr. THOMPSON. OK. But progress. 

Mr. CRAUL. There is plenty of litigation and so forth. There were 

some checks in the mail, but there were some businesses—— 

Mr. THOMPSON. That is how progress is put in place. 

Mr. CRAUL. It was slow. 

Mr. THOMPSON. Right. 

Mr. CRAUL. But there is progress. 

57 

Mr. THOMPSON. Well, that defines government, slow, sometimes. 

I understand that, no matter what. Mr. Craul, there was some conversation to that, it is slow and it is ongoing. But since that time, 

frankly, with the moratorium, if the oil and gas industry is reduced 

by 25 percent permanently, not just slowed down now, but permanently due to a slowdown in permitting, I was wondering what the 

impact would have on your industry going forward in the long 

term, given we are talking about higher unemployment. We are 

talking about under-employment for some folks. We are talking 

about less wages, less disposable income, and loss of jobs. 

The one job I just heard about was a toll pusher for over $200,000 a year. Does that have an impact on your industry longterm? 

Mr. CRAUL. Absolutely. Yes, as I said in my testimony, we have 

a lot of States to our west where the people drive in to our market 

in Florida, and not just the Panhandle. They go down to Orlando. 

They go to Miami. They go all over the State. And so if there is 

a reduction in jobs anywhere within our drive market, it is going 

to have an effect. 

Mr. THOMPSON. Right. And I don’t think there is anybody going 

to come with any kind of compensation for that, and that will be 

a permanent pretty negative impact on our hospitality services. 

Just a question for all the panel. Again, back in landlocked Pennsylvania, the Forest Service stopped issuing permits for drilling 

natural gas in my congressional district, and it was the National 

Forest. But that was over a year it lasted, and I got to tell you, 

it drove unemployment up significantly, and we lost not just the direct industry jobs, but the indirect jobs. 

And I have heard a number of you gentlemen talk about the indirect jobs in pretty general terms. I was wondering, what are the 

specific jobs that would be considered indirect jobs? What are the 

kinds of jobs that have been driven out, that have been lost in 

these local communities and economies that your suppliers or resources, obviously the hospitality jobs? Any thoughts? 

Mr. REESE. From the E&P side, I guess we kind of are at the top, 

meaning that we are the ones that do most of the employment 

here. Whether it is a drilling operation or a production operation, 

we have operators that are onsite. We have catering. We have 

boats. We have helicopters. All of that goes into what we do. And 

I will let these gentlemen that we would employ speak. 

Mr. KIEF. We are in that category. We are in the towing business, and we move drilling rigs for the folks like Mr. Reese, and 

so we are being affected by that. Then the trickle-down happens to 

go into our suppliers, the people that supply goods like cable and 

rope and consumables and insurance and stuff like that. They are 

being affected further down the road. 

Mr. THOMPSON. Yes, sir. 

Mr. ZALES. And I would like to add just one thing, and I don’t 

know how you calculate this. But when you get into our businesses, 

into the charter business—and clearly Representative Landry’s 

guys in Louisiana, because, I mean, these oil workers are there. 

His for-hire guys have lost business, and I don’t know how many 

there are that have left the business entirely. It trickles all the way 

down into that, and then it goes further than that into the people 

58 

that supply me, the support businesses, the fuel people, the tackle 

shops, the marinas. If I am hurting, they are hurting. So, it trickles 

all the way down. 

Mr. KIEF. One more thing to add, we had a couple of guide fishermen, charter fishermen that used to work for us that got let go 

because we had to make some cutbacks, and that was one of the 

places where we had to start. 

Mr. THOMPSON. OK. Thank you, Chairman. 

Mr. LAMBORN. OK. Thank you. With the indulgence of the Committee, we will have a very, very brief second round. There is one 

Member in particular burning to ask some more questions, and 

then maybe one or two others. But I would like to recognize Mr. 

Landry of Louisiana. 

Mr. LANDRY. Thank you, Mr. Chairman. I will be brief. I want 

to tell you, Captain Zales, that I remember last year when I was 

running for this office and coming up here to Washington, and sitting down with the head of the Realtors Association in the middle 

of the BP oil spill, and she just didn’t know what she was going 

to do. Oil was on the beach in Florida, and I told her that the bigger problem was going to be the moratorium. I did tell her that, 

and she looked at me like she couldn’t understand. I said, ‘‘I am 

telling you that oil is going to be cleaned up.’’ You are not going 

to have anybody going back to the beach in Louisiana and Mississippi and those areas if you don’t get people to work. 

And so it is all a hand-in-glove industry. It just trickles down 

into every facet of our life, and it shows up at the pump for people 

in the northern part of this country. 

Real quick, Cory, Mr. Kief, I would like to just ask you a few 

questions on SEMS compliance, safety environmental management 

system. Are you familiar with that? 

Mr. KIEF. Yes, sir. 

Mr. LANDRY. I had a discussion with Director Bromwich a couple 

of weeks ago in this Committee, where I talked to him about my 

concern about the scheduled implementation of SEMS, and he told 

me that he has not heard a word about the implementation of 

SEMS being a problem for the industry. Do you believe that? 

Mr. KIEF. No. 

Mr. LANDRY. OK. Well, my concern is that BP had a SEMS in 

place when the accident occurred. So, it is not something that is 

going to prevent another Macondo incident. But who do you think 

the implementation of the SEMS impacts more, the major oil and 

gas companies, or the small operators? 

Mr. KIEF. The smaller operators. 

Mr. LANDRY. Mr. Reese, are you familiar with SEMS? 

Mr. REESE. I am very, very familiar with the concept of it. I do 

not deal with it on a daily basis. But we are going through that 

right now. 

Mr. LANDRY. Do you feel like what Mr. Kief said is accurate? 

Mr. REESE. Yes. It reminds me of Sarbanes-Oxley to a great extent. When we had Sarbanes-Oxley come in place, we came through 

a review that was impeccable. But the one thing we didn’t have, 

we didn’t have a whole lot of documentation. We needed to buy 

hundreds of three-ring notebook binders to make sure we did everything correctly. 

59 

Mr. LANDRY. Now, my suggestion, after talking to the industry, 

because the industry doesn’t—is not opposed to SEMS. 

Mr. REESE. No. 

Mr. LANDRY. But my suggestion to the Director, which I would 

like to just ask all of your opinions—Mr. Shafer, you as well— 

whether you oppose it. And it is OK. You can, believe you me, I 

have no problem if you tell me it is bad and that BOEMRE go 

ahead and implement the audits of SEMS, but work with the industry before we start penalizing the industry, so everyone understands that they are getting into, both them and us. That is one 

idea. Do you all have a—— 

Mr. KIEF. Well, we instituted a SEMS plan starting in 2005, and 

it took us until 2010 to complete it. It took five years, and they are 

trying to compress it into one year, and that is the problem. In a 

nutshell, that is it. 

Mr. LANDRY. You see, he can tell me no because he is a voter as 

well. Mr. Kief, how could we implement SEMS in a manner that 

allows the industry who has embraced it to get it implemented in 

the Gulf Coast without harming smaller operators? 

Mr. KIEF. I think maybe some of the larger companies have the 

resources to do it, and then the smaller companies may not, not in 

as much time as they are being mandated to do it in. It is all about 

time. 

Mr. LANDRY. It is a time issue. 

Mr. KIEF. Yeah. I believe it is necessary, and it really does have 

its benefits, except that the transition pieces are wrong. 

Mr. LANDRY. So long it took you five years instead of one year. 

Mr. KIEF. Five years. 

Mr. LANDRY. OK. Thank you, Mr. Chairman. I yield back. 

Mr. LAMBORN. Thank you. I will recognize myself for one question. Captain Zales, could you fill us in on what your opinion is of 

the program that Mr. Feinberg is operating? 

Mr. ZALES. It is a failure. For some people, it has been great. For 

the majority of them, it has been a time-consuming process. The 

fishing industry, whether it is charter or commercial, is very 

unique, and it depends on the area. There is no standard one-sizefits-all. And the program that was developed has kind of been a 

typical government-type thing that, here it is, and this is the way 

it works. And a lot of people fall through the cracks, and those people are struggling. 

And it is like when they are talking about a small tugboat operation. When you are looking at a charter fishing or a commercial 

operation, my business is a family business. I am an only child. We 

have been in business 46 years and are struggling today to try to 

maintain that business because of the regulatory impacts that we 

have had from the Fisheries Service and everybody else. 

And in this process, we don’t have the resources to go out and 

hire attorneys and do everything that needs to be done to properly 

dot all the Is and cross the Ts. And it is a struggle to try to do 

that. And in that respect, it is a massive failure, and it is where 

they are putting time constraints on the process. Like I say, I 

mean, this GCCF thing is supposed to go through 2012, and they 

are claiming everything is going to be perfect after that, where 

clearly it may not be. And I hope it is, but it may not be. 

60 

And now that the trial is coming into play in February because 

the Federal judge said he is going to trial, now BP is looking back 

and saying, well, we will roll the dice here. We may or may not do 

this. So there is big fear within the fishing sector that this whole 

process may go away. And if we are not part of a lawsuit, then everybody loses out. 

Mr. LAMBORN. OK. Thank you. That concludes our questioning. 

I want to thank all the witnesses for being—— 

Mr. MARKEY. Mr. Chairman, if I may. 

Mr. LAMBORN. Certainly. I would like to recognize, just in the 

nick of time, the Ranking Member of the Committee, Representative Markey of Massachusetts. 

Mr. MARKEY. Thank you very, very much. Again, a few notes 

here. There were 116 rigs in the Gulf right now, and there were 

122 before the spill. So we are getting back to normal. The Wall 

Street Journal has reported last month that drilling has returned 

to near normal levels. There are 23 rigs currently drilling wells in 

water deeper than 3,000 feet, the same number as two years ago. 

So this is a hearing on where are we today. So that is where we 

are today, and that is good news. 

The Gulf of Mexico production, in 2008, when President Bush 

was President in his last year, 2008, there were 1.16 million barrels per day drilled in the Gulf of Mexico. And in 2011, right now 

the estimate is 1.40 million barrels. So right now, under Obama’s 

leadership, and notwithstanding all the problems that we have had 

down there, we are now ahead of what happened in Bush’s last 

year. 

So that is good news, and I think everyone should really be 

praising President Obama for dramatically surpassing President 

Bush in his last year, notwithstanding all of the problems that occurred in the Horizon spill. So that is good news for everyone out 

there as well. And that is 250,000 barrels per day greater than 

Bush in his last year. 

And I might also add that in the crocodile complaints which we 

hear about the delay in the processing of any of these applications, 

again I urge the Majority to remove their block on adding the 20 

additional engineers. OK. If you tie someone’s hands behind their 

back who is asking for the help, which they need in order to get 

the work done, you can’t then really with all sincerity then point 

the finger back at this person and say, you are not getting the 

work done. Bromwich is telling the Majority, I need 20 more engineers. You give me the 20 more engineers, and I will be processing 

stuff like it was chocolates on Lucy Ricardo’s chocolate factory— 

what was that? Conveyor belt in the most famous ‘‘I Love Lucy’’ 

episode, OK? So they are ready to go and start to process these applications, but they need 20 more people. It just can’t be Lucy Ricardo and Ethel Mertz. They need a few more people to help them 

out. And I think that whole chocolate conveyor belt which is the 

oil of the Gulf of Mexico will basically move a lot more quickly in 

terms of the applications process. 

So again, I beg the Majority, give Mr. Bromwich the help that 

he needs in order to process these applications. And please let us 

not continue to have this false accusatory environment, where the 

very agency which has brought us to a point where it is 250,000 

61 

barrels per day in the Gulf of Mexico higher than Bush’s best efforts up to his day in 2008, and then say that you are going to deny 

the success of Obama on the basis of how quickly the applications 

are processed, even as they are saying if you give us 20 more people, we will get it done for you, and at a pace that is consistent 

with what the oil industry wants. 

So I guess I would ask each one of you down there, yes or no, 

would you want the 20 additional engineers to go on the payroll 

who could process these applications more quickly? Yes or no, right 

down the line. 

Mr. SHAFER. I mean, I think—— 

Mr. MARKEY. No. Yes or no. 

Mr. SHAFER. Yes. 

Mr. MARKEY. Yes, yes. Thank you. 

Mr. REESE. Twenty people at $35 million? That is $1.7 or $1.8 

million per person? 

Mr. MARKEY. Do you want the 20 additional engineers? 

Mr. REESE. Not at that amount of money. 

Mr. MARKEY. OK, good. 

Mr. REESE. There is the problem. 

Mr. MARKEY. Yes or no, do you want the additional engineers. 

Let us keep going down there. 

Mr. AUER. I am going to hold my comments. 

Mr. MARKEY. You don’t have a view on it? OK. 

Mr. AUER. No, not for you. 

Mr. KIEF. Under those pretenses, no. 

Mr. MARKEY. Oh, no. Interesting. 

Mr. ZALES. And I am going to relay the National Marine Fisheries Service, absolutely not. 

Mr. MARKEY. OK, great. OK, next? 

Mr. CRAUL. No. 

Mr. MARKEY. No? Yes, sir. 

Dr. GALVEZ. Yes. 

Mr. MARKEY. Yes. OK, thank you. Well, that is interesting to me. 

OK. And it helps to answer a lot of what is going on. You want 

to persecute the agency that is asking for help, and then claim that 

you are persecuted because they are not moving more quickly. And 

so that is kind of the interesting paradoxical situation that you put 

yourself in as witnesses. But I appreciate the difficulty of your dilemma. I yield back the balance of my time. 

Mr. LAMBORN. OK. Thank you, Mr. Ranking Member. I would 

like to remind him that it takes five to ten years to bring a complicated, especially deep well, online. So when you count back five 

or ten years, I think we see where the credit really goes. 

That will conclude our hearing. I want to thank the witnesses for 

being here. Members of the Committee—— 

Mr. MARKEY. If the gentleman would yield, I think you aimed at 

me. I think that you have to give President Obama some credit for 

degree of credibility, and having the worst environmental disaster 

of all time, and trying to give credit for President Bush for the success which President Obama has had after the worst environmental accident of all time, caused in fact by the dereliction of duty 

by the personnel named by President Bush to the MMS—— 

Mr. LAMBORN. OK. Reclaiming my time—— 

62 

Mr. MARKEY. It is a very difficult line of logic to follow. 

Mr. LAMBORN. OK. Reclaiming my time, I would also like to submit for the record testimony of Joseph R. Mason of Louisiana State 

University, dated October 12th. Without objection. 

[The statement of Joseph R. Mason submitted for the record 

follows:] 

Statement submitted for the record by Joseph R. Mason, 

Louisiana State University 

Thank you for this opportunity today to submit a written statement on the lingering impacts of the Obama administration’s six-month moratorium on offshore 

drilling for oil and natural gas. It has been one full year since this moratorium was 

officially lifted. Yet, U.S. federal energy policy today remains woefully out of balance. These policies, or quite frankly lack thereof, have had severe consequences for 

U.S. domestic oil production since the moratorium was lifted. According to the U.S. 

Energy Information Administration (EIA), U.S. domestic production will decrease by 

250,000 barrels per day (bpd) each year going forward under the current production 

policy regime. In particular, EIA estimates that, in the Gulf of Mexico (GOM) alone, 

oil production will decline approximately 14 percent both in 2011 and 2012 due to 

the administration’s unwillingness to grant expedient and sufficient access to U.S. 

reserves. In sum, not very much has changed in the Gulf region—and the country atlarge—since my initial study on this topic in July of last year, ‘‘The Economic Cost 

of a Moratorium on Offshore Oil and Gas Exploration to the Gulf Region.’’ 

I. Continued Regulatory Burdens 

The current regulatory framework charged with overseeing the U.S. oil and natural gas industry has continued to hamper economic growth generally and the oil 

and natural gas sector specifically. Since the offshore moratorium has been lifted, 

executive agencies such as the Bureau of Ocean Energy Management, Regulation 

and Enforcement (BOEMRE) have worked tirelessly to prove their worth and flex 

their muscles. As such, new agencies like these regularly undergo dramatic power 

shifts before settling into anything that could be considered a stable role in the U.S. 

regulatory framework. And these types of power struggles and yearning for approval 

inevitably lead to rampant inefficiencies. 

Jim Noe, senior vice president, general counsel and chief compliance officer of 

Hercules Offshore Inc., the largest shallow-water drilling company in the Gulf of 

Mexico, recently noted that, ‘‘the backlog of permits awaiting decisions within the 

Department of the Interior just reached its highest level since the Gulf spill 1 1/ 

2 years ago.’’ 

The pace at which new permits for new wells are issued has come to an almost 

complete crawl. The current average is 5.2 per month; this level has not been evidenced since energy demand plummeted in 2009. 

But laborious regulations and continued delays are not the only costs threatening 

U.S. oil and natural gas operations. The administration’s continued advocacy of repealing Section 199 of the American Jobs Creation Act and Section 1.901–2 of the 

U.S. Department of the Treasury Regulations (‘‘dual capacity’’) presents the industry 

with additional challlenges. Those changes would eliminate domestic and international tax credits for the U.S. energy sector. Although regulators are hoping to 

raise substantial revenues from the repeals, the fully-scored economic cost of the regressive legislation could further debilitate the oil and natural gas sector and most 

likely result in decreased tax revenues from the industry. 

The Peterson Institute for International Economics detailed the harmful effects of 

the administration’s new proposed taxation schemes. In a new policy brief, US Tax 

Discrimination Against Large Corporations Should Be Discarded, authors Gary 

Clyde Hufbauer and Martin Vieiro argue that, ‘‘If the targets of discrimination are 

the nation’s largest firms, the country will find it harder to compete on a global 

scale in industries that require dedicated research, industries that exhibit huge 

scale economies, and industries that network across national borders.’’ U.S. oil and 

natural gas firms are, by and large, some of the nation’s largest and most internationalized of companies. 

In looking at the political economy of new regulatory arrangements like 

BOEMRE, therefore, we must look with skepticism and concern upon both the political motivations of the regulatory officials charged with enforcing the rules, and the 

economic power that will be concentrated in those regulatory officials as a result of 

63 

their influence over the implementation costs and economic redistribution. Without 

restraint, a toxic mix of politics and power may damage both the industry and the 

environment. 

II. Painful Consequences of Administration’s Negligent Energy Policies 

Using my July 2010 report’s results—but also accounting for delays following the 

official end of the six-month moratorium—is it evident that regional economic losses 

continue to grow. 

Table 1 shows that output losses continue to mount with stalled development in 

the GOM, rising from $2.1 billion regionally and $2.8 billion nationally to $3.3 billion and $4.4 billion, respectively. Job losses are estimated to have increased from 

8,000 regionally and 12,000 nationally to 13,000 regionally and 19,000 nationally. 

Lost wages previously estimated to amount to $500 million regionally and $700 million nationally are now $800 million regionally and $1.1 billion nationally. Finally, 

lost tax revenues estimated to be $100 million on the state and local level and $200 

million on the national level now amount to $155 million and $350 million, respectively. 

With the latest jobs figures released last week from the U.S. Bureau of Labor Statistics (BLS) showing national unemployment remains at 9.1 percent, we simply 

cannot afford to give up any more economic activity. 

III. Conclusion 

IHS Global Insight recently published a study that puts the impacts on jobs, energy production and local economies of the Obama’s administration’s precarious attitude toward conventional energy into clear context. The report states that, next 

year, releasing restrictions on ‘‘the [Gulf oil and gas] industry could create 230,000 

American jobs, generate more than $44 billion of U.S. [gross domestic product], contribute $12 billion in tax and royalty revenues, produce 150 million barrels of domestic oil, and reduce by $15 billion the amount the U.S. sends to foreign governments for imported oil.’’ 

Nonetheless, oil and natural gas production is set to decline in response to higher 

taxes, onerous government regulation and greater political uncertainty. That means 

less jobs, lower wages, and lower gross domestic product (GDP) growth than would 

otherwise occur. Those are indisputable laws of economics, regardless if policymakers agree with them or not. In the spirit of hope, I look forward to the day the 

administration realizes the very real pain that its energy policies are having on U.S. 

job creation, capital allocation and broader economic recovery, as well as the environmental threats, political instability, and market volatility that come from meeting U.S. energy needs from foreign supplies. 

Mr. LAMBORN. And Members of the Committee may have additional questions for each of you possibly, and if so, they will submit 

them to you in writing. We would ask that you respond to those 

in writing as well. If there is no further business, without objection, 

the Committee stands adjourned. 

[Whereupon, at 12:14 p.m., the Committee was adjourned.] 

Æ 


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