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73-674 PS 2002

H.R. 2436

THE ENERGY SECURITY ACT

LEGISLATIVE HEARING

BEFORE THE

COMMITTEE ON RESOURCES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

July 11, 2001

Serial No. 107-48

Printed for the use of the Committee on Resources

(

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

or

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

(II)

COMMITTEE ON RESOURCES

JAMES V. HANSEN, Utah, Chairman

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

Don Young, Alaska,

Vice Chairman

W.J. ‘‘Billy’’ Tauzin, Louisiana

Jim Saxton, New Jersey

Elton Gallegly, California

John J. Duncan, Jr., Tennessee

Joel Hefley, Colorado

Wayne T. Gilchrest, Maryland

Ken Calvert, California

Scott McInnis, Colorado

Richard W. Pombo, California

Barbara Cubin, Wyoming

George Radanovich, California

Walter B. Jones, Jr., North Carolina

Mac Thornberry, Texas

Chris Cannon, Utah

John E. Peterson, Pennsylvania

Bob Schaffer, Colorado

Jim Gibbons, Nevada

Mark E. Souder, Indiana

Greg Walden, Oregon

Michael K. Simpson, Idaho

Thomas G. Tancredo, Colorado

J.D. Hayworth, Arizona

C.L. ‘‘Butch’’ Otter, Idaho

Tom Osborne, Nebraska

Jeff Flake, Arizona

Dennis R. Rehberg, Montana

George Miller, California

Edward J. Markey, Massachusetts

Dale E. Kildee, Michigan

Peter A. DeFazio, Oregon

Eni F.H. Faleomavaega, American Samoa

Neil Abercrombie, Hawaii

Solomon P. Ortiz, Texas

Frank Pallone, Jr., New Jersey

Calvin M. Dooley, California

Robert A. Underwood, Guam

Adam Smith, Washington

Donna M. Christensen, Virgin Islands

Ron Kind, Wisconsin

Jay Inslee, Washington

Grace F. Napolitano, California

Tom Udall, New Mexico

Mark Udall, Colorado

Rush D. Holt, New Jersey

James P. McGovern, Massachusetts

Anibal Acevedo-Vila, Puerto Rico

Hilda L. Solis, California

Brad Carson, Oklahoma

Betty McCollum, Minnesota

Allen D. Freemyer, Chief of Staff

Lisa Pittman, Chief Counsel

Michael S. Twinchek, Chief Clerk

James H. Zoia, Democrat Staff Director

Jeff Petrich, Democrat Chief Counsel

(III)

CONTENTS

Page

Hearing held on July 11, 2001 ............................................................................... 1

Statement of Members:

Hansen, Hon. James V., a Representative in Congress from the State

of Utah ........................................................................................................... 1

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

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

Wisconsin, Prepared statement of ............................................................... 110

Pallone, Hon. Frank, Jr., a Representative in Congress from the State

of New Jersey, Prepared statement of ....................................................... 109

Rahall, Hon. Nick J., II, a Representative in Congress from the State

of West Virginia ........................................................................................... 5

Prepared statement of ............................................................................... 7

Udall, Hon. Tom, a Representative in Congress from the State of

New Mexico, Prepared statement of ........................................................... 111

Statement of Witnesses:

Glenn, Richard, Arctic Slope Regional Corporation, Barrow, Alaska .......... 68

Prepared statement of ............................................................................... 70

Herrera, Roger C., Arctic Power, Washington, DC ........................................ 63

Prepared statement of ............................................................................... 65

Hood, Jerry, International Brotherhood of Teamsters, Washington, DC ... 76

Prepared statement of ............................................................................... 78

Johnston, The Honorable J. Bennett, Former Senator from the State

of Louisiana, Johnston & Associates, Washington, DC ............................ 56

Kolton, Adam Michael, Alaska Wilderness League, Washington, DC ......... 80

Prepared statement of ............................................................................... 82

Lance, Linda, The Wilderness Society, Washington, DC .............................. 90

Prepared statement of ............................................................................... 92

Norton, The Honorable Gale A., Secretary, U.S. Department of the

Interior ........................................................................................................... 8

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

Additional materials supplied:

Ahmaogak, Hon. George, Mayor, North Slope Borough, Statement

submitted for the record ............................................................................... 73

Regelin, Wayne, Director, State of Alaska Department of Fish and Game,

Letter submitted for the record ................................................................... 43

Slutz, James A., Director, Division of Oil and Gas, Indians Department

of Natural Resources, Letter submitted for the record .............................. 32

(1)

H.R. 2436, ENERGY SECURITY ACT

Wednesday, July 11, 2001

U.S. House of Representatives

Committee on Resources

Washington, DC

The Committee met, pursuant to call, at 10 a.m., in Room 1324,

Rayburn House Office Building, Hon. James V. Hansen (Chairman

of the Committee) presiding.

STATEMENT OF THE HONORABLE JAMES V. HANSEN, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF UTAH

The CHAIRMAN. The Committee will come to order.

Good morning. Today the Committee will hear testimony on

H.R. 2436, the Energy Security Act. We welcome the witnesses to

the hearing today, and we look forward to your remarks. I am sure

this could be an interesting and lively discussion.

The Energy Security Act was introduced in response to President

Bush’s call for a long-term energy policy for our nation.

Several months ago, our nation was sent a wakeup call by California and put on notice that we have failed to develop an energy

infrastructure that is capable of supporting a 21st century economy.

We were expecting major power outages throughout the West

and Northeast, and long gas lines and outrageous energy bills.

While the situation has been rectified somewhat, there is still an

urgent need to implement a comprehensive, long-term policy for

the 21st century.

I am afraid that the impacts of the current crisis are now beginning to be felt in places all across the country. While short-term

fluctuations in energy supplies are inconvenient, if we fail to act in

a responsible or a timely manner, our economy will be brought to

a grinding halt.

Our role in Congress should be to clear any unrealistic and overburdensome regulatory obstacles, then get out of the way and allow

the markets to work.

This is not a debate between Big Oil and the working man, nor

is it between the big utilities and the suburban homeowners. This

is a debate about how we as a nation can reach a balance between

responsible development of our known, proven resources and the

environment.

We must take action and do so in an environmentally responsible

way.

2

Unfortunately, there are some who will crowd before the cameras, claiming that any legislation will open up all the public lands

for development and that our national conservation areas, our wilderness areas and national forests and wild and scenic rivers, will

be at risk.

This is false. And I hope that we will have a spirited and honest

discussion today and avoid demagoging the energy issue simply to

score political points in the short term.

During the course of this debate, we must not forget where our

responsibilities lie. We have a responsibility to the small-business

owners, the farmers and ranchers, to those who ship our goods,

teach our kids, and protect our streets, and make sure that their

hard-earned dollars are not eaten up by skyrocketing fuel costs.

We have a responsibility to them to develop a reasonable and realistic energy policy to protect their long-term security. Energy security is as vital as national security to our nation. These two are

inseparable.

American farmers across the country have suffered because of

the lack of an energy policy.

Dairy farmers in the San Joaquin Valley have been forced to

dump hundreds of thousands of pounds of milk because processing

plants did not have power to take delivery of their milk. Dairy cows

don’t seem to want to cooperate when rolling blackouts and power

contracts conflict with milking time.

Poultry farmers are extremely nervous as summer rolls on. They

don’t know if the next rolling blackout will last so long that their

birds die of heat exhaustion because the circulation fans are shut

off in the barns.

Higher natural gas prices have driven up the cost of fertilizers

and diesel. It has become cost prohibitive to irrigate in many areas

of the West. While we can live without radios, TVs and air-conditioning, we can’t live without food. We should remember this as we

discuss the energy policy of this nation.

Small businesses have been hit particularly hard. Utility bills

and transportation costs have soared. Eighty thousand independent

truckers have turned in their trucks because profit margins are too

narrow to make a go of it. Pay raises are being scrapped and benefits reduced as energy prices rise. Many small businesses have put

a freeze on hiring altogether.

Small business is the backbone of this country. By failing to act,

we are telling the small-business owners on Main Street to fend for

themselves. It is that simple.

If we want our economy to keep growing and maintain our standard of living, we have to have an adequate supply of energy.

There is a lot of work to do. However, the jurisdiction of the

Committee on Resources is fairly limited to the energy resources

and activities related to public lands.

Unfortunately, these issues are also oftentimes the most contentious and emotional. Technology tax credits for hybrid engines do

not seem to invoke the spiritual and philosophical fervor among the

different viewpoints that drilling in ANWR does.

While our colleagues on other Committees debate the fun stuff,

we on the Resources Committee have to roll up our sleeves, get

down in the trenches, and figure out a way to ensure a stable supVerDate 11-MAY-2000 10:18 May 16, 2002 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 73674.TXT HRESOUR1 PsN: HRESOUR1
3

ply of fossil fuels until other technologies come on-line, which could

be decades away.

Finally, we must recognize that energy policy is also an issue of

jobs and what type of jobs we want in the future. It is unrealistic

to assume that we can rely solely on a high-tech or service-based

economy without also paying attention to the engine that drives

these sectors.

As in all things, there must be a balance and a little dose of reality. This means that we must admit to ourselves that until the

promise of clean, cheap, abundant energy materializes from whatever source—that may be solar, wind or hydrogen—the engine that

drives the world’s economy will continue to be almost entirely fossil

fuels.

Like it or not, this legislation is a first step in the right direction

toward developing a long-term energy policy that will ensure a stable and abundant energy supply for future generations as well as

a tool for creating good, high-paying jobs in the energy sector at a

time when recession in other sectors such as technology has wiped

out trillions of dollars in wealth.

I hope that my colleagues will remember that as we discuss the

bill today.

The energy challenges we face are complex. They can’t be met by

a single action plan or legislation that comes under a single Committee’s jurisdiction. But I am confident that through conservation,

increased research, and increased production, as well as efficiencies

in delivery of our energy resources from whatever source that may

be, including our public lands, we will meet these challenges.

I want to welcome our witnesses again. I look forward to an interesting and informative debate.

Finally, I request opening statements be restricted to Mr. Rahall

and myself. I would encourage members of the Committee to use

their allotted 5 minutes for statements and questions. If time allows, we will try to have a second round on most of the questions.

[The prepared statement of Mr. Hansen follows:]

Statement of The Honorable James V. Hansen, Chairman, Committee on

Resources

Good morning. Today the Committee will hear testimony on H.R. 2436 the Energy Security Act. We welcome the witnesses to the hearing today and we look forward to your remarks. I am sure that it will be an interesting and lively discussion.

The Energy Security Act was introduced in response the President Bush’s call for

a long-term energy policy for our nation. Several months ago, our nation was sent

a wake-up call by California that we had failed to prepare an energy infrastructure

capable of supporting a 21st century economy. We were expecting major power outages throughout the west and northeast, and long gas lines and outrageous energy

bills. While the situation has been somewhat mitigated, there is still a desperate

need to implement a comprehensive, long term policy for the 21st Century.

I am afraid that the impacts of the current crisis are just now beginning to be

felt in places all across the country. While short-term fluctuations in energy supplies

are inconvenient, if we fail to act in a responsible timely manner, our economy will

be brought to a grinding halt. Our role should be to clear any unrealistic over-burdensome regulatory obstacles, then get out of the way and allow the markets to

work.

This is not a debate between big oil and the working man, nor is it between the

big utilities and the suburban homeowners. This is a debate about how we as a nation can reach a balance between responsible development of our known, proven resources and the environment. We will do so in an environmentally responsible way

even if those opposed to this legislation will crowd before the cameras claiming that

H.R. 2436 opens up all the public lands for development and that our national conVerDate 11-MAY-2000 10:18 May 16, 2002 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6621 73674.TXT HRESOUR1 PsN: HRESOUR1
4

servation areas, our wilderness areas and national forests and wild and scenic rivers

are at risk. This is absolutely false. Instead, I hope that we will have a spirited and

honest discussion today and avoid demagoging the energy issue simply to score political points in the short-term.

During the course of this debate we must not forget where our responsibilities lay

in the first place. We have a responsibility to the small business owners, the farmers and ranchers, to those that ship our goods, teach our kids and protect our

streets to make sure that their hard-earned dollars are not eaten up by skyrocketing

fuel costs. We have a responsibility to them to develop a reasonable and realistic

energy policy to protect their long-term security. Energy security for our nation is

as vital as our national security.

American farmers across the country have suffered because of our lack of an energy policy. Dairy farmers in the San Joaquin Valley have been forced to dump hundreds of thousands of pounds of milk because no cheese plants had the power to

take delivery of their milk. Dairy cows don’t seem to want to cooperate with rolling

blackouts and power contracts at milking time.

Poultry farmers are extremely nervous as summer rolls on. They don’t know if

the next rolling blackout will last so long that their birds die of heat exhaustion

because the circulation fans are shut off.

Higher natural gas prices have driven up the cost of fertilizers and diesel. It has

become cost prohibitive to irrigate in many areas of the west. While we can live

without radios, tv’s and air conditioning, we can’t live without food. We should remember this as we discuss the energy policy of this nation.

Small businesses have been hit particularly hard as utility bills and transportation costs have soared. 80,000 independent truckers have turned in their trucks

because profit margins are too narrow to make a go of it. Pay raises are being

scrapped and benefits reduced as prices rise. Many small businesses have put a

freeze on hiring all together.

Small business is the backbone of this country. By failing to act, we are telling

the small business owners on Main Street to fend for themselves. It is that simple.

If we want our economy to keep growing and maintain our standard of living, we

have to have an adequate supply of energy. We should remember this as we discuss

energy policy today.

There is a lot of work to do. However, I must note that the jurisdiction of the

Committee on Resources is fairly limited to the energy resources and activities related to public lands. However, these issues are also oftentimes the most contentious

and emotional. Technology tax credits for hybrid engines do not seem to invoke the

spiritual and philosophical fervor among the different viewpoints that drilling in

ANWR does. While our colleagues on other Committees debate the fun stuff, we on

the Resources Committee have to roll up our sleeves, get down in the trenches and

figure out a way to ensure a stable supply of fossil fuels until other technologies

come on line, which could be decades away.

Finally, we must recognize that energy policy is also an issue of jobs and what

type of jobs. It is unrealistic to assume that we can rely solely on a high-tech or

service-based economy without also paying attention to the engine that drives those

sectors. As in all things, there must be balance and a dose of reality and that includes admitting to ourselves that until the promises of clean, cheap abundant energy materializes from whatever source that may be, solar, wind or hydrogen, the

engine that drives the world’s economies will continue to rely almost entirely on fossil fuels.

Like it or not, this legislation is a first step in the right direction toward developing a long-term energy policy which will ensure a stable and abundant energy

supply for future generations. Again, we are now witnessing the direct results of relying solely on a high-technology and service-based economy while ignoring other

sectors such as the agricultural and extractive industries which are the true creators of wealth in our society.

Therefore, H.R. 2436 will be a tool for creating good, high paying jobs in the energy sector at a time when recession in other sectors such as technology has wiped

out trillions in wealth. I hope that my colleagues will remember that as we discuss

the bill today.

The energy challenges we face are complex. They can’t be met by a single action

plan or legislation that comes under a single Committee’s jurisdiction. But I am confident that through conservation, increased research and increased production and

efficiencies in delivery of our energy resources from whatever source that may be,

including our public lands, we will meet these challenges.

I want to welcome the witnesses again. I look forward to an interesting and informative hearing today.

5

Mr. CHAIRMAN. Mr. Rahall?

STATEMENT OF THE HONORABLE NICK J. RAHALL II, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF WEST

VIRGINIA

Mr. RAHALL. Thank you, Mr. Chairman.

Mr. Chairman, I want to first express my appreciation to you for

calling this hearing, because we on the Democratic side also recognize the pressing need to fashion a better national energy policy.

We also welcome the debate on what the President has proposed

and what we view as needed in this vital area.

With that noted, I must point out that if we were following the

President’s legislative proposals on energy, the ones that he submitted to this body on June 28th, the only item this Committee

would be considering would be opening the Arctic National Wildlife

Refuge to oil and gas leasing. That is the only area within this

Committee’s jurisdiction included in the President’s legislative initiatives on energy.

But judging by the legislation that has been introduced by the

majority just yesterday, which is the subject of this hearing, that’s

not going to be the case. We are not going to be considering just

the President’s proposals.

So this begs the question: Why is the majority so intent on pursuing a broad array of what, with all due respect to the majority,

could be viewed as unnecessary, uncalled for, and unjust giveaways

that are part and parcel of this legislation?

The effort here, I believe, is to engage in what I call the lightening rod school of legislating. You plop a controversial item like

ANWR on the table, you introduce it in a long bill, and then you

hope everyone focuses on just that item.

Meanwhile, lying below the surface is a whole bevy of equally

contentious items that consequently may escape the same level of

scrutiny.

Others today can butt their heads over whether or not the bit of

tundra in northeastern Alaska should be leased to energy development. My role will be to expose what is in the rest of the package.

And a central feature is this business of providing relief from the

payment of oil and gas royalties to the American people, what I call

a royalty holiday—it’s July; I know there’s a store in Old Town Alexandria that sells Christmas items in July, and we’ve heard of

Christmas in July before. But this is what’s happening in this bill

under the guise of needing to give companies an incentive to drill.

I must say, at a time when Americans are reading in the newspaper that profits for oil companies are soaring—124 percent increase for Exxon and Mobil, for instance—when there is widespread public criticism that collusion and price-fixing has taken

place, and when people still get acid indigestion when they go to

pump their gasoline at the gas pump, providing a royalty holiday

is simply the wrong message that we need to be sending.

It is just plain wrong. The oil companies do not need a royalty

holiday.

And as far as I can tell, the rig count is very robust and the oil

and gas drillers are going full tilt and do not need any type of royalty relief, thank you very much.

6

This is something the market determines in a free-market economy. When demand is there, folks drill. When it is not, they park

their rigs.

You know it, we know it, many on the majority side know it as

well, the American people know it.

We do not need to rob the Federal Treasury, and the states

would share in on-shore royalties, to provide false incentives to

drill, especially when royalty underpayments are already commonplace.

The same goes with the royalty in-kind proposal, which is nothing more than a thinly disguised ruse to reduce royalty payments.

This proposal would have the Federal Government receiving its

royalty in the form of actual crude oil and natural gas.

Federal bureaucrats would then be in the business of marketing

oil and gas, joining the ranks of Exxon, Shell, Mobil, and the rest

of them. I have never heard of such nonsense.

And this surprises me, coming from the majority at a time when

Russia and China are shedding themselves of state-run industries,

why, in effect, is an effort being made here to toss the Communist

Manifesto into our national energy policy?

But I don’t think that is quite the extent of it, if we examine the

rest of the package. It is unfortunate but true that this legislation

strips the ability of the Forest Service to consent over issuing

leases on its lands. It reduces restrictions on drilling in areas protected for critical wildlife habitat, environmental and historical

purposes. And it has the American taxpayer subsidize the costs the

industry incurs in preparing leasing documents.

Mr. Chairman, at some point in the debate, we as Democrats on

this Committee will have an alternative to offer. We do have an alternative energy proposal that we will submit at the proper time.

In my view, our alternative will represent a more balanced contribution on matters within this Committee’s jurisdiction to overall

energy legislation being developed by the House.

We Democrats do not believe we have to short change the American taxpayer and short thrift the environment by doling out royalty holidays to Big Oil and by providing unfettered access to drilling rigs and to environmentally sensitive Federal lands.

Our alternative will recognize the contribution that certain Federal lands can make to our nation’s energy mix—already one-quarter of America’s oil consumption and over one-third of our natural

gas and coal use, while at the same time we recognize that there

are environmental and social costs to energy development, which

also need to be addressed in any national energy policy.

As I said, and as I conclude, Mr. Chairman, we thank you for

this hearing. We welcome the debate energy policy legislation.

And hopefully as a result of this hearing, and perhaps from additional reflection and additional debate on this issue, many of the

provisions in the bill that I have highlighted today will have been

dropped by the final markup next week.

Thank you, Mr. Chairman.

[The prepared statement of Mr. Rahall follows:]

7

Statement of The Honorable Nick J. Rahall, Ranking Democrat,

Committee on Resources

Mr. Chairman, I want to express my appreciation to you for calling this hearing

because House Democrats also recognize the pressing need to fashion a better national energy policy. We also welcome the debate on what the President has proposed and what we view as needed in this area.

With that noted, I must point out that if we were following the President’s legislative proposals on energy, the ones he submitted to Congress on June 28th, the only

item this committee would be considering would be opening the Arctic National

Wildlife Refuge to oil and gas leasing. That is the only area within this committee’s jurisdiction included in the President’s legislative initiatives on energy.

But judging by the legislation introduced by the Majority yesterday—which is the

subject of this hearing—that is not going to be the case. This begs the question.

Why is the Majority so intent on pursuing a broad array of what, with all due respect, could be viewed as unnecessary, uncalled for and unjust giveaways that are

part and parcel of this legislation. The effort here, I believe, is to engage in what

I call the lightning rod school of legislating. You plop a controversial item like

ANWR in a long bill and hope everyone focuses on that. Meanwhile, lying below the

surface is a whole bevy of equally contentious items that consequently may escape

the same level of scrutiny.

Others today can butt heads over whether or not that bit of tundra in northeastern Alaska should be leased to energy development. My role will be to expose

what is in the rest of the package. And a central feature is this business of providing relief from the payment of oil and gas royalties to the American people—a

royalty holiday—under the guise of needing to give companies an incentive to drill.

I must say that at a time when Americans are reading in the newspaper that

profits for oil companies are soaring—an 124% increase for Exxon–Mobil, for instance—when there is widespread public concern that collusion and price fixing has

taken place, and when people still get acid indigestion every time they fill their vehicles up at the pump, providing a royalty holiday is simply the wrong message we

need to be sending. It is just plain wrong.

As far as I can tell, the rig count is very robust and the oil and gas drillers are

going full tilt and do not need any type of royalty relief thank you very much. This

is something the market determines in a free market economy. When demand is

there, folks drill. When it is not, they park their rigs. You know it. I know it. The

American people know it. We do not need to rob the federal treasury, and the States

which share in onshore royalties, to provide false incentives to drill especially when

royalty under payments are already commonplace.

The same goes with the royalty-in-kind proposal, which is nothing more than a

thinly disguised ruse to reduce royalty payments. This proposal would have the federal government receiving its royalty in the form of actual crude oil and natural gas.

Federal bureaucrats would then be in the business of marketing oil and gas, joining

the ranks of Exxon, Shell and the rest of them. I never heard of such nonsense. And

this surprises me coming from the Majority. At a time when Russia and China are

shedding themselves of State run industries, why is an effort being made to toss

the Communist Manifesto into our national energy policy.

But that is not the extent of it. It is unfortunate, but true, that this legislation

strips the ability of the Forest Service to consent over leasing on its lands. it reduces

restrictions on drilling in areas protected for critical wildlife habitat, environmental

and historic purposes; and it has the American taxpayer subsidize the cost industry

incurs in preparing leasing documents.

Mr. Chairman, at some point in this debate Committee Democrats hope to offer

an alternative to this legislation. In my view, our alternative will represent a more

balanced contribution of matters within this committee’s jurisdiction to the overall

energy legislation being developed in the House.

We Democrats do not believe we have to short change the American taxpayer and

short shrift the environment by doling out royalty holidays to Big Oil and by providing unfettered access to drilling rigs into environmentally sensitive federal lands.

Our alternative will recognize the contribution certain federal lands can make to our

Nation’s energy mix—already one-quarter of America’s oil consumption and over

one-third of our natural gas and coal use—while at the same time recognize that

there are environmental and social costs to energy development which also need to

be addressed in any national energy policy.

As I said, Mr. Chairman, we welcome the debate on energy policy legislation.

Hopefully, as a result of this hearing and perhaps with some additional reflection,

many of the provisions I have highlighted in the bill as being troublesome can be

dropped by the time we meet to consider the legislation next week.

8

The CHAIRMAN. I thank the gentleman from West Virginia, the

new Paul Harvey.

[Laughter.]

We are grateful to have as our first witness the Honorable Gale

Norton, the Secretary of Interior.

Madam Secretary, we will turn the time to you.

STATEMENT OF THE HONORABLE GALE A. NORTON,

SECRETARY, U.S. DEPARTMENT OF THE INTERIOR

Secretary NORTON. Good morning, Mr. Chairman, members of

the Committee.

I spoke to you recently about the President’s overall energy plan,

and today I am happy to return and comment on specific legislation

addressing portions of the plan that require legislative changes.

The President’s national energy proposal dedicates more than

half of its recommendations to increasing energy efficiency and conservation, encouraging the development of fuel-efficient vehicles,

and encouraging renewable energy with tax incentives.

The plan provides stability to what might otherwise be an uncertain energy future. It diversifies our energy supplies in the long

run. In the nearer term, it provides assurances that traditional domestic energy sources will be available.

Stabilizing our current energy situation by utilizing American ingenuity and emerging technology, is just one part of our effort to

address energy needs.

There are some aspects of the President’s energy plan that can

be addressed and implemented without legislative changes. And we

are going forward with a number of those.

For example, today the Department of Interior is announcing

that it will bring state and local officials together with industry

leaders and other citizens for a renewable energy summit this fall.

The summit will focus on ways to maximize wind, solar and geothermal energy production on public lands to help stabilize our nation’s energy needs.

Already, Federal lands provide geothermal energy sufficient to

serve 570,000 homes, and wind energy enough for 87,000 homes.

This, we believe, will be a head start on H.R. 2436’s provisions to

improve geothermal leasing. And we look forward to moving forward with the information that we have learned to implement the

provisions of H.R. 2436.

Americans have a core belief in American ingenuity. American

ingenuity is a major factor in everything from our military victories

and status as the only remaining Superpower to our development

of cures for once-deadly diseases and our ability to vastly improve

our air and water quality.

American ingenuity is directly tied to our technological advancements. Nothing puts our nation’s skills to test like a challenge, a

challenge like the one we face today to ensure a comprehensive energy future. This ingenuity is already hard at work.

For example, since 1985, energy producers in the Gulf of Mexico’s

Outer Continental Shelf produced more than 5 billion barrels of oil.

Thanks to American ingenuity and high-tech advances, of that

amount, only .001 percent, just one-one-thousandth of a percent,

9

was released into the ocean. By comparison, naturally occurring oil

seeps in the shelf release 150 times more oil than OCS production.

President Bush addresses the need to keep our economy moving

forward with good jobs and our determination to protect our environment. The underlying basis of this report is that our energy

problem is inextricably tied to each of our lives.

For example, we are concerned that household budgets can be

stretched to the limits by high winter heating and summer air-conditioning bills and increasingly expensive trips to the gas station.

What difficult choices are families forced to make? Whether or not

to maintain the family car? Buy new back-to-school clothes?

Rising energy costs also affect the budgets of our schools and

hospitals. They affect our national prosperity and the availability

of jobs.

Planning for long-term availability from traditional and nontraditional sources can shield America’s families from these impacts.

The administration supports H.R. 2436 and urges the Committee and Congress to act expeditiously on this bill.

We want to address short-term concerns about high energy costs

through the LIHEAP program. The President has directed Interior

to seek authority to redirect oil and natural gas royalties to the

Low-Income Home Energy Assistance Program. This program helps

low-income families heat their homes in the winter. The President

strengthens the LIHEAP program by investing $300 million more

than the fiscal year 2001 appropriation.

H.R. 2436 would allow the use of oil and gas royalty payments

to bolster LIHEAP funding. We appreciate your support of this

very important program.

The President has also directed Interior to work with Congress

to develop legislation that authorizes environmentally safe leasing

of oil and gas in the Arctic National Wildlife Refuge.

The President’s plan emphasizes that Congress should require

the use of the best-available technology and ensure that energy

production activities protect the ANWR environment. This bill accomplishes those goals.

I have visited ANWR again, since my last testimony here. I have

now seen ANWR in both the summer and the winter. There are

high-tech approaches that are being used on the North Slope.

For example, ice roads used in the winter do indeed melt away

in the summer with minimal impact. I was surprised to find out

that one road I had seen in the winter turned out to be on the surface of the Arctic Ocean. So clearly, when that melts way, there is

no impact.

I saw the caribou from the central Arctic herd, which is the one

that is in the Prudhoe Bay area. The Porcupine caribou herds’ caribou were not in ANWR at all. They had calved in Canada.

This is a unique area, and it is appropriate that we use the

standards that are the most stringent in any energy regulatory

statute. And that is exactly what is found in H.R. 2436.

The administration supports tough regulation like that found in

this legislation.

The President’s budget calls for a 50-50 split of lease revenues

from ANWR. The President’s plan provides that the Federal share

of the ANWR receipts would go toward two funds, one for renewVerDate 11-MAY-2000 10:18 May 16, 2002 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6602 73674.TXT HRESOUR1 PsN: HRESOUR1
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able energy research and development, and another dedicated to

the maintenance and improvements of public lands.

Our country faces a national energy problem, but I believe it can

and will be managed. Working with Congress, the Bush administration is committed to finding workable solutions that improve our

national energy problem.

American ingenuity has never let us down in the past. And by

acting wisely today, it will help us provide for future generations.

Thank you.

[The prepared statement of Secretary Norton follows:]

Statement of The Honorable Gale Norton, Secretary, U.S. Department of

the Interior

Mr. Chairman, members of the Committee, it is a pleasure to be here again to

discuss the President’s ‘‘National Energy Policy’’ report, and to present the Administration’s position on H.R. 2436, the proposed Energy Security Act. The Administration supports H.R. 2436, and would like to work with the Congress as it moves

through the legislative process to address a few concerns we have with the bill as

currently drafted. The legislation before the Committee today, while not identical

to the Administration’s’s National Energy Policy, advances these goals, and we

would like to work with the Congress to bring this bill more closely into conformance with the Administration’s Policy.

The need for a national energy policy becomes clear when you look at the numbers. Take clean-burning natural gas, for example. Over the next 20 years, U.S. natural gas consumption has been projected to grow by more than 50 percent while production will grow by only 14 percent if it grows at the rate of the last 10 years.

U.S. energy production is not keeping up with our growing consumption, creating

a rapidly increasing gap between domestic supply and demand.

Energy reserves contained in the lands and offshore areas managed by the Department of the Interior are an important source of potential energy production. The

Department of the Interior manages energy production on all Federal lands, both

onshore and the Outer Continental Shelf (OCS). These Federal lands provide nearly

30 percent of annual national energy production. In the year 2000, 32 percent of

oil and 35 percent of natural gas were produced from Federal lands. In addition,

Federal lands produced 37 percent of domestic coal production and 48 percent of

geothermal energy production in 2000. Federal lands are also estimated to contain

significant undiscovered domestic energy resources. Estimates suggest that these

lands contain approximately 68 percent of all undiscovered U.S. oil resources and

74 percent of undiscovered natural gas resources.

The Department also owns and operates hydro power facilities in the 17 western

states. These facilities produce about 16 percent of all the hydro power in the

United States.

President Bush has developed a balanced plan to produce more reliable, affordable

and environmentally clean energy that is built on three principles:

* It is comprehensive and forward-looking.

* It utilizes 21st Century technology to promote conservation and diversify supply.

* And the plan will increase the quality of life for Americans by providing reliable

energy and protecting our environment.

The President’s plan calls for increasing domestic energy production, seeks to improve the aging energy infrastructure network by creating a new high tech energy

delivery network and promotes energy conservation. It is important to point out that

more than 50 percent of the President’s plan focuses on energy efficiency, encouraging the development of fuel efficient vehicles and encouraging consumer conservation. The President’s plan proposes new tax incentives to help increase the contribution that alternative and renewable energy can make to our nation’s energy supply.

President Bush has directed his Administration to work with the Congress to develop comprehensive legislation that would help those with low-incomes pay higher

energy bills, stabilize our current situation, while seeking those new resources and

technologies to support our energy needs for the future.

The President directed The Department of Interior to seek authority to redirect

a portion of oil and gas royalties to the Low Income Home Energy Assistance Program whenever oil and natural gas prices exceed pre-set trigger prices.

The President also directed us to work with Congress on legislation. authorizing

the leasing of oil and gas in that portion of the Arctic National Wildlife Refuge

(ANWR) defined as the Coastal Plain in section 1002 of the Alaska National InterVerDate 11-MAY-2000 10:18 May 16, 2002 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6621 73674.TXT HRESOUR1 PsN: HRESOUR1
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ests Lands Conservation Act. The President’s plan emphasizes that Congress should

require the use of the best available technology and require that energy production

activities have no significant adverse impact to the environment in the ANWR 1002

area.

The President has also proposed incentives to increase geothermal, coal and hydro

power development that will enhance expeditious production of those resources, and

royalty in kind provisions that will help us with the administration of our royalty

in kind program.

All of these steps are needed to solve the energy problems facing our country, and

to secure our energy supply while protecting the environment.

Please allow me to briefly address several aspects of the President’s Energy Plan.

The Low Income Home Energy Assistance Program

The Low Income Home Energy Assistance Program (LIHEAP) is a federal block

grant program that helps low-income consumers pay their energy bills. It is the nation’s core program for targeting home energy subsidies to low income households

with vulnerable members (the elderly, disabled, or young child) and households with

the lowest incomes and highest energy costs. Last winter, 1.2 million more American families applied for LIHEAP assistance to pay their heating bills, bringing the

total to more than 5 million American families—up by 30 percent over last years’s

3.9 million applicants. As many as 3.6 million families in eighteen states and the

District of Columbia risk being unable to pay their bills and having their energy

cut off because of the effects of rapidly increasing energy costs. The low-income elderly are particularly vulnerable to disruptions in energy supply.

The President’s National Energy Policy includes strengthening LIHEAP by making $1.7 billion available annually, and the Administration has recently proposed a

supplemental request that would increase fiscal year 2001 funding by $150 million.

H.R. 2436 would authorize the Secretary of the Interior to use royalty in kind oil

or gas for providing additional resources to LIHEAP.

As part of its support for LIHEAP, the National Energy Policy recommends that

Congress enact legislation that would allow the use of oil and gas royalty payments

to bolster LIHEAP funding whenever oil and natural gas prices exceed certain

prices. Specifically, a limited portion of royalties should be provided by the Department of the Interior to the Department of HHS’s LIHEAP program as a cash payment, when oil and natural gas prices both exceed a certain trigger price. The Administration wants to work with the Congress to determine the appropriate trigger

prices or the formula for determining them.

The Arctic National Wildlife Refuge

As you know, The President is proposing to open the 1002 area, a small fraction

of the 19 million acres in Arctic National Wildlife Refuge (ANWR) for oil exploration

using the most high-tech, environmentally responsible methods. The President and

I both believe that oil and gas development can successfully coexist with wildlife in

Alaska’s arctic region.

Our support for enactment of authority to lease oil and gas resources in ANWR

is a prime example of the Department’s dual commitment to energy development

and environmental conservation. We recognize that the ecological resources of the

Refuge are unique and precious. We must respect and conserve this wealth for future generations of Americans. However, because of advances in technology and in

our enhanced understanding of the ecology, we are now able to proceed with exploratory work with very little long-term effect.

Further, the President’s proposes that the Federal share of ANWR revenues

should be earmarked for two new permanent funds to promote renewable energy

technology and improve our national parks and public lands. Specifically, the National Energy Policy calls for 50% of the bonus revenues to be dedicated to renewable energy technology research and development, and that the Federal share of the

royalties be dedicated to conservation and elimination of the maintenance and improvements backlog on federal lands. Use of the revenues from ANWR leasing for

these purposes would pay permanent dividends to the American public by lowering

the costs of developing renewable energy resources and identifying new resources,

and by restoring and protecting wildlife habitat on public lands and addressing facility and site maintenance and improvement needs at National Parks, Refuges and

Forests and on other recreation lands managed by the Federal government.

I do want to emphasize that the Administration supports the strong environmental protections provisions that are included in the pending legislation. Section

707 of H.R. 2436, entitled Coastal Plain Environmental Protection, establishes an

environmental standard of no significant adverse effect on fish and wildlife, their

habitat, and the environment. Section 707 also requires the application of the best

12

commercially available technology for oil and gas exploration, development, and production. These would be the most stringent environmental protection requirements

ever applied to Federal energy production.

Section 707(d) of H.R. 2436 requires the leasing program, among other

things,——

• to set seasonal limitations on exploration, development and related activities,

where necessary, to avoid significant adverse effects during periods of concentrated fish and wildlife breeding, denning, nesting, spawning, and migration,

• to limit exploration activities, except for surface geological studies, to the period

during which ice roads, winter trails with adequate snow cover, ice pads, and

ice airstrips could be used,

• to design standards for all pipelines and roads that minimize adverse effects on

passage of migratory species, such as caribou, and on the flow of surface water,

• to require consolidation of facility sitings, and

• to require stringent reclamation and rehabilitation standards.

While this title provides a good, safe and environmentally sound arrangement for

leasing in the 1002 Area of ANWR, it attempts to accomplish this under the structure of the Mineral Leasing Act. Under that Act, 90% of the bonus, rent and royalty

revenues are distributed to the State of Alaska and 10% to the U.S. Treasury. We

recognize the historical antecedents of the 90%–10% distribution. However, the legislation of two decades ago authorizing the oil and gas leasing program in the National Petroleum Reserve–Alaska provides for a 50%–50% split of lease revenues between the State and the Federal government. We believe that the 50%–50%division

of revenues should also apply to leasing in ANWR.

OCS Lease Sale 181

I’d like to take a minute to bring you up to date on the actions we have taken

with respect to Lease Sale 181 in the Eastern Gulf of Mexico. I recognize that this

sale, and the OCS program in general, is of great interest to members of this Committee. The OCS provides more than 26 percent of the natural gas and 25 percent

of the oil produced in the United States. The Minerals Management Service (MMS)

administers about 7,500 active leases on 40 million acres of the OCS. In addition,

the OCS contains about 19 percent of the Nation’s proven natural gas reserves, 18

percent of its proven oil reserves, and is estimated to contain more than 50 percent

of the Nation’s remaining undiscovered oil and natural gas resources.

On July 2, 2001, we proposed a Notice of Sale for oil and natural gas production

in a portion of the Outer Continental Shelf in the Eastern Gulf of Mexico, also

known as Sale 181. This area was first proposed for possible lease sale by Interior

Secretary Babbitt and President Clinton after negotiations with Florida Governor

Lawton Chiles and other coastal governors in 1997.

As part of determining the area to be offered, we listened and worked carefully

with officials and affected citizens around the Sale 181 area. I believe the outcome

is a balanced and common sense proposal consistent with the President’s National

Energy Policy. Our modified 181 area has been adjusted from 5.9 million acres to

1.5 million. The adjusted area is at least 100 miles from any portion of the Florida

coast. For example, it’s northern border is more than 100 miles from Pensacola,

Florida and the eastern edge is 285 miles from the shores of Tampa Bay.

The proposed 181 Area will help expand our domestic sources of oil, and reduce

our dependence on foreign oil. The proposal also works to meet the President’s commitment to develop our nation’s energy needs in an environmentally safe way. The

Department projects the adjusted area contains 1.25 trillion cubic feet of natural

gas--enough to serve one million U.S. families for 15 years. The area also contains

185 million barrels of oil--enough to fuel the automobiles of a million families for

nearly six years.

Other Recommendations

While we believe the Committee has done an excellent job in putting together a

bill that will ensure increased environmentally sound production of energy from our

public lands, we have a few more concerns with the bill as introduced, and want

to work with the Congress to address them as the legislation moves forward.

We have concerns about the potential cost of extending the Deepwater Royalty Relief Act provisions for two years. I understand that the Minerals Management Service has stated that there is no longer any need to provide incentives for production

of oil and gas in water depths of less than 800 meters. I have also heard from industry that those incentives are in fact needed to sustain and increase the production

levels of oil and gas that we have seen since enactment of the Deep Water Royalty

Relief Act in 1995. Whatever is done in the short run, it does appear appropriate

13

to ask the National Academy of Science to look into this issue, so that we can do

what is best for the nation’s long-term energy security.

We have a technical issue to point out as well. Currently, under section 27 of the

OCS Lands Act, the Secretary of the Interior has the authority to transfer royalty

in kind oil without compensation to the Department of Energy for the filling of the

Strategic Petroleum Reserve. In both 1999 and 2000, the Secretary of the Interior

exercised this authority. The exercise of this authority should obviously be limited

to times of extreme national need, recognizing that the cost to the Treasury is usually significant. We recommend that H.R. 2436 be amended to retain our current

section 27 authority.

The bill authorizes the United States Geological Survey to establish and operate

regional technology transfer centers that would conduct oil and natural gas exploration and production research and archive and provide public access to data regarding oil and natural gas reserves and production. I understand that the Department of Energy currently has similar authority, and I ask that this provision make

clear that these centers are not intended to duplicate efforts already underway by

DOE.

We look forward to working with you on these and any other concerns that arise

as the bill moves through the legislative process.

Conclusion

Mr. Chairman, while the challenge facing us is significant, it is not insurmountable. By building on new 21st century technologies, this country can produce ample

domestic resources while enhancing and protecting the environment. I look forward

to working with this Committee and others in Congress to implement Interior’s

pieces of the President’s National Energy Policy.

Mr. Chairman, this concludes my statement. I would be pleased to answer any

questions that you or members of your Committee might have.

The CHAIRMAN. Thank you, Madam Secretary. We appreciate

your comments.

We will now go for questions.

Mr. Rahall?

Mr. RAHALL. Thank you.

The CHAIRMAN. I have to limit everyone to 5 minutes, strictly to

5 minutes. We are going to be here all day unless we do that.

Mr. RAHALL. Thank you, Mr. Chairman.

Madam Secretary, the bill that is the subject of today’s hearing

contains a provision requiring that the development of leases

issued within the Coastal Plain be subject to what is known as

project labor agreements.

What is the administration’s position on this requirement?

Secretary NORTON. This provision was negotiated between Congress and the unions, and so we have not been directly in those discussions. We do not object to those provisions.

Mr. RAHALL. The administration supports the project labor

agreements in this legislation?

Secretary NORTON. We do not object to those. And we believe

that the legislation should be adopted.

Mr. RAHALL. Okay.

The bill contains two royalty relief provisions, one allegedly for

OCS deep water leases and a general provision, which our analysis

shows is not limited to marginal wells, as is being advertised. Your

testimony noted some concern over extending the deep water royalty holiday, and I am looking for something more definitive.

In that regard, on June 28, 2000, then-candidate George Bush attacked Al Gore for his support for extending the deep water providing royalty relief program. And I have that full press release

here in front of me.

14

At the time, candidate Bush stated, and I quote, ‘‘I look forward

to hearing his explanation as to why big gas producers ought to be

given a royalty tax break.’’ So my question to you, Madam Secretary, does the administration still hold that view? Is the administration outright opposed to

the inclusion of deep water royalty relief in this legislation?

Secretary NORTON. Our administration has had the experience of

going forward with leasing in the Gulf of Mexico with reduced royalty provisions that provided royalty relief only in the 800 meter

and deeper water. And we found that we had a higher response to

that lease sale than what we expected and what we had to lease

sales in the past.

And so while we think that this issue in the long run is best resolved by the suggestion to have a study so that we really have a

solid basis for making those decisions, we believe that at the current time our existing authority to allow some royalty relief is sufficient. And so we would like to see changes in the provisions that

are in this legislation that would mandate royalty relief in

shallower water.

Mr. RAHALL. Is it accurate then to say that earlier this year you

rejected—rejected—the need for continuing royalty relief under the

1995 Deep Water Royalty Relief Act?

Secretary NORTON. That is correct. While we do provide some

royalty relief for deeper water, it does not appear to be necessary

for the areas where production is already taking place, where we

understand the technology, and where we are utilizing essentially

routine approaches in going forward with production.

Mr. RAHALL. So today you are saying you do support some royalty relief?

Secretary NORTON. In more than 800 meters’ depth.

Mr. RAHALL. Okay. Thank you.

Mr. Chairman, I have no more questions right now.

The CHAIRMAN. I thank the gentleman.

We are not just going to take everybody for 5 minutes. It is going

to take us all day.

On the Republican side, raise your hand if you have questions for

the Secretary.

Mr. Tancredo is recognized.

Mr. TANCREDO. Thank you, Mr. Chairman.

Thank you, Madam Secretary, for coming today. And I want to

really commend you for your outstanding work on this legislation.

I remind my colleagues that some of these proposals we see

today were on the table during the previous administration. And

rather than taking leadership, we saw only procrastination.

The proposal is about all the issues that our former Secretary of

Interior did not want to approach, even though it is painfully clear

that energy issues needed attention in that administration, the

Clinton administration, which they never received. Just because

something is controversial does not mean it can be ignored.

And now, with new and strong local leadership by the President

and my friend from Colorado, Secretary Norton, these issues have

been brought before the Congress again.

Secretary Norton, I think often taxpayers forget that in addition

to their income tax are gas taxes, estate taxes, et cetera; the FedVerDate 11-MAY-2000 10:18 May 16, 2002 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6602 73674.TXT HRESOUR1 PsN: HRESOUR1
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eral Government draws a significant amount of revenue from oil

and gas royalties and lease payments.

But in addition to the important revenue, this legislation is full

of what appears to me to be some important administrative cost

savings, both on the side of the private companies and within the

Department of Interior. I am thinking specifically of Title II, Subtitle C, which contains the royalty in-kind provisions and the costsharing programs with the state geologic surveys.

Would you expand upon some of the potential cost savings? And

also, do you think this legislation is a net gain for the country fiscally? And if so, at what magnitude?

Secretary NORTON. I do believe that this approach will allow us

to be more efficient in our regulation. It basically will require us

to look at the ways in which we can make our process operate in

a way that is going to make more sense, to look across the board

at what our leasing processes are, at what standards are applied,

and make sure that those really fit the situation that we face.

The royalty in-kind provision is one where I think we can see

some efficiencies. And I think as we learn through time, we can go

to a much more efficient kind of process.

The approach that we use right now is trying to estimate and to

appraise and to hypothesize what the price is on the oil and gas

that is produced from our Federal lands. The royalty in-kind approach basically says, put it on the market, sell it; that’s the way

to find out how much it is worth.

And so we have gone through tremendous efforts trying to decide

what the valuation is of our oil and gas. And I think it would more

efficient and recognizes that we have a much more competitive

marketplace for natural gas marketing especially. And this allows

us to take advantage of the pricing efficiencies that come from having the marketplace set those prices.

Mr. TANCREDO. Thank you, Madam Secretary. I have no other

questions.

The CHAIRMAN. The gentleman from California, Mr. Miller.

Mr. MILLER. Thank you, Mr. Chairman.

And, Madam Secretary, welcome to the Committee.

Madam Secretary, really since the Exxon Valdez oil spill, I have

been involved in really active oversight on the operations of this

system.

As we tragically learned in the Valdez oil spill, this system isn’t

just at Prudhoe Bay. This is a system that really runs from the

Arctic Circle all the way down to southern California or further,

wherever the tankers and the pipelines and others take us.

And I have been involved with Alyeska and the corporations and

others in constant meetings about upgrading and improving this

system. And I don’t want to pretend for a moment that those companies do not take this in a very serious light, because they have

dedicated hundreds of millions of dollars to doing this and have responded to inquiries from myself and Chairman Dingell and others

in an ongoing basis.

But again yesterday, we read in the paper again about a series

of concerns raised by employees on the Arctic Slope, questions of

malfunctions and the readiness of very important valves with respect to blowouts and spill containments.

16

And I just wonder what we can expect from your office in the

way of increased oversight. I don’t think, if we are going to expand

this system—I don’t happen to agree with that—but if you are

going to expand this system for another 20 or 30 years, if there

isn’t something done to increase public confidence in the operations

of this system—because obviously we know when things go bad in

this industry, they can go bad quickly and in a very big way.

And I wondered, can you enlighten us as to what we might expect in terms of oversight from your office under the joint authority?

Secretary NORTON. The approach that we would use would be

having Federal regulators who would oversee any of the production

activities on Federal lands. The discussion in the newspaper was

about the production that is taking place on state lands.

Mr. MILLER. Right.

Secretary NORTON. And we would certainly expect that we would

have stringent standards in place and that those stringent

standards—

Mr. MILLER. With respect to the offshore and national petroleum

reserve and pipeline, I assume you are talking about?

Secretary NORTON. On all of those things, and wherever we

have—the things that we are talking about—

Mr. MILLER. Would you put—

Secretary NORTON. —in terms of the expansion—

Mr. MILLER. Would you put that in the category of increased

oversight by your office or the status quo?

Secretary NORTON. My understanding was you were talking

about—

Mr. MILLER. The report also raised the questions about the right

to do surprise visits, whether or not rigs were doctored and dealt

with before the inspectors came along. We know, you know, that

is not exactly the best way to do oversight.

Secretary NORTON. On the Federal side, on the Federal lands

that are on the North Slope, we would expect to have a high level

of scrutiny, including surprise visits. We have two inspectors that

are already operating in the NPRA area that has only exploratory

wells at this point in time.

So we are already at a high level of scrutiny and expect to increase that level of scrutiny.

Mr. MILLER. If I might, Madam Secretary, I would like to follow

up in correspondence with you for some questions as a result of

this hearing.

Mr. Chairman, if that is all right, if I could forward those on that

topic?

The CHAIRMAN. Without objection.

Mr. MILLER. Thank you.

On another matter, the legislation before us designates the 1987

study, the 1002 report, as being adequate for discussions of environmental impacts. And I just wondered whether or not you concur

with that or the administration concurs with that.

Most members of this Committee weren’t in Congress when this

report was done. We have obviously had 10 years of additional experience, and clearly this report was done before the Exxon Valdez,

17

which brought into focus the nature of this system, the length of

the system, and the consequences of it.

And I just wondered whether you support the notion that we are

going to designate this as adequate or whether you think there

should be an update of this report, with respect to cumulative impacts; with respect to some of the issues of water usage that have

been raised; and obviously, the off-site impacts from additional

drilling with respect to the age of the pipeline, those issues that

are raised; and the shipments?

Secretary NORTON. I think it is important to note the very limited way in which that report would be utilized, and only at the

very beginning stages. As we move forward toward actual impacts

taking place, there would be additional studies that would be— Mr. MILLER. But that report, we understand why this is being

done. That report is key to going forward in a rapid fashion. I am

asking whether or not that key, which is the linchpin in terms of

moving forward with rapid—and that is clearly what the sponsors

want to do—whether or not you believe that is adequate or whether or not you believe there ought to be an attempt to make some

update based upon what we have learned over the last 15 years?

Secretary NORTON. Under the existing H.R. 2436, there would be

additional studies before there are actual impacts on the ground.

And I think that through those studies, we would see the advances

in technology that have taken place in the 15 years since that original study was done, and to see that the environmental impacts can

be further minimized as a result of the newer technology.

The CHAIRMAN. The time of the— Mr. MILLER. Mr. Chairman, I would make same request with respect to this topic, if I might— The CHAIRMAN. Without objection.

Mr. MILLER. —as a result of this hearing, forward questions to

the Secretary.

Thank you, Madam Secretary.

The CHAIRMAN. The gentleman from Maryland, Mr. Gilchrest.

Mr. GILCHREST. Thank you, Chairman.

Good morning, Madam Secretary. Welcome.

Three quick questions that you may be able to answer now or

maybe we can correspond on these later.

One is, I am Chairman of the Subcommittee that has jurisdiction

over wildlife refuges, and what we will be doing over the course of

the next few months is to hold hearings on existing oil and gas

leases on some of those refuges to see the type of oversight that has

been used and to ensure that those existing oil and gas leases are

living up to Americans’ expectations of environmentally sensitive

and so on and so forth. And we would just like to see what oversight existing authority and the previous administration has in

those areas. So sort of a heads up on that.

Number two, could you tell us where geothermal, hydropower,

and maybe even wind and solar, are promising on our Federal

lands?

And the third is, you mentioned technological advances and

American ingenuity, which are, I think, two characteristics that

have made this country great. But in that process, technological advances and American ingenuity, when you go through this seminar

18

this fall dealing with alternative energy sources, will it go beyond

geothermal, hydropower and so on to possibly a rapidly promising

technology known as a fuel cell, of which, I understand, in the next

couple of years it is possible to run all of your electrical needs in

your house with one of these devices, and within 10 or so years,

the kinks will be out of the technology so that it will become mobile. In other words, in less than 20 years, we could be operating

vehicles with long lives with fuel cells.

Secretary NORTON. The fuel cell technology is indeed exciting.

That is something that primarily the Department of Energy is pursuing. And while we would look forward to working with Energy

on the conference that we are proposing, this conference would be

based primarily on the public lands opportunity to contribute to— Mr. GILCHREST. I understand that. And your jurisdiction is the

public lands and hydropower and geothermal and wind and solar

and things like that.

But with American ingenuity, the crossover of technologies from

one department to another—I think it is sort of an American characteristic to look at other sources other just your area of jurisdiction.

You may not have the authority to do that, and I don’t know how

the Secretary of Energy feels about that, but it just seems that

some of these aquaculture fish farms out west could depend a little

bit on geothermal and wind and solar and things like that.

But the promising technology other than those would be interesting to build into the mix.

Secretary NORTON. We are working with the Department of Energy on using advanced technologies within our parks and within

other activities that we undertake. We have alternative fuel vehicles in a number of our parks.

So we are really trying to work with them to use ourselves as

an experimental population to help in the advancement and development of some of these things.

Mr. GILCHREST. Thank you very much.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you.

The past Chairman of the Committee, Mr. Young, has now joined

us.

And, Mr. Young, we would like to present to you a present,

whether you want it or not.

[Laughter.]

Would you hand Mr. Young his present, please?

I am going to tell you what it is; it is a pair of custom-made boots

and it took forever to have those made for you because of the odd

shape of your foot.

[Laughter.]

But anyway— Mr. YOUNG. Well, thank you, Mr. Chairman. This is indeed a

surprise. I am a little reluctant to open them.

I hope they are hip high—

[Laughter.]

—because a lot of times in these hearings, we hear a lot of stuff

that gets over the low-cut loafers, I can tell you that right now.

[Laughter.]

19

The CHAIRMAN. You are in for a disappointment.

[Laughter.]

Mr. YOUNG. I do appreciate this. And I will cherish them, wear

them, and use them when they’re appropriately needed, with the

sharp-pointed toe where it really belongs.

[Laughter.]

Thank you, Mr. Chairman. I do appreciate it.

The CHAIRMAN. They were made that way with that in mind.

[Laughter.]

And members of this Committee have chipped in to buy those for

you.

Mr. YOUNG. And I hope they understand that I do deeply appreciate it.

The CHAIRMAN. Okay, we thank you.

With that in mind, Mr. Kildee?

Mr. KILDEE. Thank you, Mr. Chairman.

And I thank you, Mr. Young, for what you do.

Mr. YOUNG. I deeply appreciate your contribution.

[Laughter.]

Mr. KILDEE. In conjunction, Madam Secretary—thank you for

being here again—with Mr. Gilchrest’s question, I think it is very

important that the departments of the executive branch do not operate in isolation. I am sure that you concur in that yourself.

But it seems that the Department of Energy, the Department of

Interior, and the Department of Treasury all play a vital role in the

future energy needs of this country. And I certainly hope that is

formalized in some way because you should be talking one to another because you have interrelated solutions, I think, to the energy needs of the country.

As co-Chairman of the congressional automotive caucus, I am

disappointed that the administration has been so timid on the

question of fuel efficiency, not just CAFE standards but such things

as tax credits for both R&D in the automotive industry, for alternative energy sources, tax credits for the customer who would purchase such vehicles, such as a vehicle with fuel cells.

And I agree with Mr. Gilchrest that the future of fuel cells, both

for mobile and stationary sources, is very, very promising. I have

talked to some of the power companies in the country who indicate

that some of them could have something the size of a refrigerator

in one’s backyard that, with the fuel cells, could produce the energy

for that home.

So I think that the fuel cells, both the for the automotive industry and for other sources of energy, is very, very important.

But I think that we should emphasize some incentives for that,

and tax credits are a great way to deal with incentives, both for

the customer who purchases that vehicle and for the automotive industry that has to spend a great deal of money on research.

We do allow some write-offs for R&D. Certain research and development has a great societal purpose. And I think right now the

societal purpose of fuel efficiency is very high.

So I would hope that you would talk with people in the administration and the Treasury on increasing tax credits, both for R&D

and for the purchasers of some of the hybrid vehicles.

20

I have driven hybrid vehicles, both at the Ford Company and

General Motors and at Chrysler, which is located in my district.

And I think the future is here, right now, with some of those vehicles.

So I was disappointed that the tax bill that went through the

House rather rapidly did not address that. But I would just commend you, as Secretary of Interior, to counsel with others in the

administration, particularly the Treasury and the Department of

Energy, to put together an energy package that includes with less

timidity fuel efficiency and encouraging alternative sources.

Secretary NORTON. The President’s plan does include a tax credit

for consumers who purchase automobiles that are fuel efficient alternative energy types of automobiles. And so that portion of your

suggestion is a part of the President’s plan.

There are also additional Department of Energy efforts in working with companies on development of new technologies. I am not

as familiar with that portion of the plan as I am with the ones that

deal directly with Interior. But the spirit of your remarks is reflected in the President’s plan.

Mr. KILDEE. I appreciate that, and I hope the President will push

that and pursue that. I wish he included that on the tax bill, because that was really greased up to pass, if I may use that term.

But thank you very much, Madam Secretary.

The CHAIRMAN. The gentleman from Nevada, Mr. Gibbons.

Mr. GIBBONS. Thank you very much, Mr. Chairman.

And, Secretary Norton, welcome. Pleased to have you here before

us today.

And I know there are many on this Committee and throughout

Congress who are going to criticize your organization for slowness

in getting things done, but we understand, and I hope they will understand, the critics especially, that staffing levels have been held

up by the leadership in the Senate. And so it is difficult to have

an agency running at full speed without everybody on board.

I have just two questions that I want to enter into the record,

if I may, Madam Secretary.

Your statement didn’t mention a provision within the bill which

is an outgrowth of a recommendation from a group established by

your predecessor, Secretary Babbitt. It is called the Green River

Basin Advisory Council. It consisted of state and local officials, environmentalists, and industry people.

And one of the ideas that they came forward with was to allow

lessees to pay for cumulative impact studies when the BLM lacked

sufficient appropriated funds to get the job done in an early and

timely fashion, to help remove some of the delays.

In return, the lessees would then receive a credit against future

royalty obligations for money they put up for third-party prepared

studies done to BLM specifications, for the BLM, of course.

But the solicitor at the time, and that would be Mr. John Leshy,

said that the Secretary lacked authority under the Mineral Leasing

Act to grant an eco-credit. Of course, when we offered him the authority in legislation, Secretary Babbitt then declined that authority.

Do you have any thoughts about this concept?

21

Secretary NORTON. The need for environmental planning and environmental analysis is obviously critically important to ensuring

that we go forward with any development activities in an appropriate way. And it does make sense to ask that we do allow that

money, instead of coming directly from the taxpayers to pay for

that, to essentially be put forward by the applicants.

Mr. GIBBONS. One final question, if I may, we have advanced the

idea of MMS collecting royalty in-kind natural gas volumes from

the Gulf of Mexico leases, and perhaps some onshore fields, like the

Powder River basin coal bed methane or the San Juan basin, and

designing a pilot program with the HHS folks to actually send that

product or those molecules to the LIHEAP-approved utilities which

serve low-income qualified households.

Does the language in this bill provide you the flexibility necessary to do such a demonstration program?

Secretary NORTON. We have been doing some pilot testing of royalty in-kind already, on a more limited basis, in Wyoming, Texas,

and the Gulf of Mexico. And we are now building on that.

I think this bill does allow us the flexibility to do the type of

LIHEAP program that you are talking about. And we will certainly

work with you to make sure that it does allow that type of flexibility.

Mr. GIBBONS. Great. Thank you, Madam Secretary.

Thank you, Mr. Chairman.

The CHAIRMAN. On the Democratic side?

Mr. DEFAZIO. Here, Mr. Chairman.

The CHAIRMAN. The gentleman from Oregon.

Mr. DEFAZIO. Madam Secretary, on page 2 of your testimony you

point out that ‘‘more than 50 percent of the President’s plan focuses

on energy efficiency, encouraging the development of fuel-efficient

vehicles.’’

Could you please tell me, what is the measure? Is it 50 percent

of pages, 50 percent of the tax credits, 50 percent of the energy

that we are going to capture through this plan? What is the measure? What is 50 percent?

Secretary NORTON. We counted the recommendations and half of

them dealt with that.

Mr. DEFAZIO. Okay, so half of them dealt with it. What percentage of the energy gained is going to come from those 50 percentage

of the recommendations rhetorically?

Secretary NORTON. I have not quantified that.

Mr. DEFAZIO. Okay. So wouldn’t that be a more important measure since over the last 20 years we have captured four times more

energy through efficiency measures than increased production

measures?

Secretary NORTON. Well, I apologize. It is a little simpler for us

to count the number of recommendations.

Mr. DEFAZIO. Right. Okay, well, at least we know what we are

measuring here.

I am a bit puzzled by one of the earlier questions of Mr. Rahall,

in particular, about project labor agreements, and I happen to be

a big supporter of them. I think they are a very efficient, effective

way to administer projects.

22

However, you said the administration has no objection to the Republican bill which would require only in Alaska project labor

agreements.

Now, I kind of wonder how that jibes with the February 17,

2001, executive order by the President of the United States where

he says: ‘‘shall ensure that neither the awarding government authority nor any construction manager acting on behalf of the government shall in its bid specifications reject agreements, project

agreements or other controlling documents.’’ That is a special executive order rescinding the Clinton administration order mandating

project labor agreements, that were ballyhooed by the President.

I guess I have a two-part question.

One is, you said you have no objection. Do you support project

labor agreements in this or does the President, notwithstanding his

earlier executive order prohibiting them?

And secondly, if it is good for Alaska, why isn’t it good everywhere else?

Secretary NORTON. As I said previously, this was not a portion

of the President’s plan. It was something that was negotiated by

Congress, and we do not object to it.

Mr. YOUNG. Will the gentleman yield?

Mr. DEFAZIO. Well, I don’t have a lot of time, Don. You have lots

of time.

Well, I will yield to you.

Mr. YOUNG. I would just like to suggest to you that you know

why it is in the bill.

Mr. DEFAZIO. Yeah, because you wanted it in there.

[Laughter.]

Mr. YOUNG. That is exactly right.

[Laughter.]

Mr. DEFAZIO. Okay.

Mr. YOUNG. I admit it, I accept it, and thank you a lot.

Mr. DEFAZIO. Couldn’t you want it somewhere else?

[Laughter.]

Mr. YOUNG. Remember, my job is to take care of my people, and

I am doing it.

[Laughter.]

Mr. DEFAZIO. But we would like to take care of working people

everywhere. So if the gentleman would like to extend it to the

lower 48, I would be thrilled to support that effort. So we will talk

about that later.

Further, on the issue of the Arctic National Wildlife Refuge exploration and drilling, I wonder if the administration would support restoration of the prohibition on the export of oil from Alaska,

in supporting the Arctic National Wildlife Refuge exploration and

drilling.

That is, assure the people of the United States that if there such

a crisis in the United States of America that we have to go into

this previously wild and pristine area to drill, that that oil is not

going to China or Japan or somewhere else, that that oil would remain in the United States, which was the law until 1996, which

unfortunately was passed by a Republican Congress and signed by

President Bill Clinton to allow the export of that oil.

Would you seek or support a reimposition of the ban?

23

Secretary NORTON. Our primary concern is trying to provide energy for America’s future, and our focus is trying to make sure that

that is the audience that we are addressing, that is the market

that we are addressing. I will be happy to get back to you with a

further statement as to— Mr. DEFAZIO. Okay. Well, that is an encouraging first step.

And I have legislation to reimpose the ban or the President could

do it by executive order. So if you could take a step unilaterally or

support legislation; that would be great.

I was reading an interview with you and it said that ‘‘Star Trek

Voyager’’ is your favorite television show. Is that true?

[Laughter.]

Secretary NORTON. Yes, and unfortunately it is now off the air.

[Laughter.]

Mr. DEFAZIO. Well, I would just observe, Madam Secretary, if

that is your favorite show— The CHAIRMAN. The time— Mr. DEFAZIO. Just very briefly, because I did yield generously to

him. Thirty seconds? Then we should have perhaps a more forward-thinking energy policy. You know, the Stone Age didn’t end

because they ran out of rocks.

[Laughter.]

They evolved. They went on. We went to new technologies.

And I would observe that this is mostly a petro-based energy policy. And really, I would like to see the 50 percent in efficiency and

alternatives expressed in more than words.

Thank you, Madam Secretary.

The CHAIRMAN. The time of the gentleman has passed.

We have two votes coming up, and the Secretary is going to

leave. We are going to try to finish with her before we go vote.

Let’s do this: one question each in a hurry. Okay?

On the majority side, you are next. Do you have a question for

the Secretary over here?

On the minority side?

Mr. Faleomavaega, one question.

Mr. FALEOMAVAEGA. One question.

Madam Secretary, thank you for coming this morning.

Madam Secretary, there are some 5.4 million Americans who depend entirely on imported fuel for their resources. And I am speaking mainly, as you know, of the State of Hawaii, Puerto Rico, the

insular areas. And I don’t see anywhere in the proposed legislation

anything dealing with the energy needs of these areas in our country, and I would really appreciate if you can pursue this.

On the question of ANWR, I would like to know what the position of the Native Alaskan tribes are in the State of Alaska concerning ANWR.

And secondly, I would like to note also that there is a question

about alternative sources of energy, and I don’t see anywhere in

this legislation about doing comprehensive research and study, especially on areas like deep ocean water energy resources, and I

would really appreciate if you could address that issue.

Secretary NORTON. As to the issue of your area and Hawaii and

the source of oil and gas, we would be happy to work with you further on that.

24

As to ANWR, the Alaska Federation of Natives, which is a statewide organization, voted to support opening ANWR. There are native lands that cannot be used by the natives for oil and gas as

they would like to do because of the restrictions, and they cannot

act until Congress allows them to utilize their own lands.

The CHAIRMAN. The gentleman from California, Mr. Calvert.

Mr. CALVERT. Just real quick, Mr. Chairman, I appreciate the

time. I would encourage the members to—I will do a little advertising—to get on my hydrogen act bill, which is named after Bob

Walker and George Brown, because that is the next energy source.

But I just wanted to point out to the Secretary that California

does a great job with wind, solar, geothermal; we probably use

more of those types of energy sources than any other state in the

union, but we still have a little problem that has been well-publicized.

And we certainly appreciate your efforts to attempt to find fuel

to get us through this next number of years until we can move to

a hydrogen-based economy, which at some point I think we will get

into.

So I know many of the members here are already on that bill,

Mr. Chairman, and I appreciate their support. But in the meantime, we are going to need to find additional hydrocarbon resources

throughout the country and Alaska to get us through this period.

I appreciate the time.

The CHAIRMAN. Madam Secretary, we have a little problem here.

We are going to have to go.

Maybe I understand it wrong, but I don’t think you can spend

the day with us, and we have a whole bunch of other witnesses sitting there, who have been very patient.

What are your druthers?

Secretary NORTON. I would be happy to accept any questions in

writing, to reply, and to talk with members with specific questions,

if that helps.

Mr. PALLONE. Mr. Chairman?

The CHAIRMAN. Well, let’s try—Mr. Pallone?

The gentleman from West Virginia.

Mr. RAHALL. Obviously, we had a larger turnout on our side of

the aisle today, and there are members, and I think they are entitled to their 5 minutes. Obviously, they can’t do it today.

I would ask the Chairman and Madam Secretary if she would be

so kind as to consider a reappearance before our Committee—I recognize schedules are tight today—at another time, so that our

members and additional majority members will have time for their

5 minutes.

Mr. KIND. Mr. Chairman, I have a housekeeping question as well

for Madam Secretary.

In her last appearance on June 6 before the Committee, testifying about the national energy policy, a lot of members submitted

written questions.

We were wondering if you will have an opportunity to respond

to those important questions prior to the markup of this legislation,

which I believe is going to take place next week.

The CHAIRMAN. The gentleman is correct. We are intending to

mark this up next week.

25

Secretary NORTON. Those are on their way. They were, unfortunately, in the OMB process. We could not deliver them to you in

advance of this hearing. But those will be to you very quickly.

The CHAIRMAN. I would suggest that the members write questions to the Secretary.

Mr. Pallone?

Mr. RAHALL. Can they be answered before the markup, Mr.

Chairman?

Mr. PALLONE. I just wanted to— The CHAIRMAN. It is up to the Secretary.

Mr. Pallone?

Mr. PALLONE. I just want to ask you very quickly, at the New

Jersey shore, which I represent, and other members, on a bipartisan basis, they are in an uproar over the possibility of offshore

drilling off the coast of New Jersey and the Mid-Atlantic.

There have been two proposals, one from the outer continental

shelf policy Committee and another from MMS itself to try to study

and look into exploration off the coast of New Jersey.

We now have a moratorium in place in our Interior appropriations bill on an annual basis. There is an executive order of the

President, President Clinton, for a 12-year moratorium for the MidAtlantic.

Does the administration support continuing those moratoria or is

the administration— Secretary NORTON. Yes.

Mr. PALLONE. You do. In both cases, both the 1-year annual appropriation plus the executive order?

Secretary NORTON. We don’t have any proposals to take the moratoria off the table.

Mr. PALLONE. Okay.

Secretary NORTON. Those are currently in place, and we have not

proposed making changes to those.

Mr. PALLONE. All right, I appreciate that.

The CHAIRMAN. We probably have time for one quick question.

Mr. Inslee?

Mr. INSLEE. Well, Mr. Chair, I spent 4 days in the Arctic refuge

last week, and we have before us an issue that will substantially

damage that, and I believe that we ought to have 5 minutes to get

our questions answered before we destroy our precious national resource.

We have questions outstanding for weeks we haven’t received

back from the Secretary. I understand she has a busy schedule.

We ought to have 5 minutes to get our questions answered before

we take a vote to destroy the Arctic wildlife refuge.

The CHAIRMAN. Mr. Underwood?

Mr. UNDERWOOD. Basically, I just wanted to reiterate the point

about the insular areas and the lack of an energy policy on this,

and also the fact that ocean thermal energy is not part of your discussion or apparently not part of anything that you have submitted

either for the record or in your conversation this morning.

Secretary NORTON. Thank you.

The CHAIRMAN. We are going to miss a vote unless we recess

right now.

[Recess.]

26

The CHAIRMAN. The Committee will come to order.

The Secretary has agreed to take these questions, if members

want to take their 5 minutes. That is very gracious of her. I think

of all of the times that people have had to run and many of us did

not get our time in.

Madam Secretary, we appreciate you graciously staying with us.

We know you have other things to do, but we truly appreciate that.

The gentleman from Wisconsin, do you want to get your 5 minutes now?

Mr. KIND. Thank you, Mr. Chairman.

And I want to thank Madam Secretary for your graciousness

with your time and agreeing to stay and answer a few more questions.

As you are aware, we are in all likelihood going to be going to

markup on this legislation that the Chairman and others have introduced in this Committee. It is a very important piece of legislation, and I am happy to hear that you are going to try to expedite

the response time in regard to the written questions we had submitted after the June 6 hearing as well.

The first question I have for you, Madam Secretary, I had an opportunity to review your written statement that you submitted to

the Committee for today’s testimony. You had stated in your written statement, and I quote, ‘‘The President has also proposed royalty in-kind provisions that will help us with the administration of

your royalty in-kind program.’’ But I have had a chance to review the administration’s report of

the national energy policy development group that was released in

May, as well as the President’s legislative initiatives that were recently released just a couple of weeks ago in June, and I can’t find

any reference at all to royalty in-kind in those two major documents.

Has the President in fact proposed that? If so, where is it? And

can we obtain a copy of the proposal?

Secretary NORTON. I apologize. You are correct in your reading

of that. And we did make a mistake in the written testimony.

The President did include provisions for trigger prices to trigger

that royalties would go into the LIHEAP program, but it did not

address the royalty in-kind aspect of that.

Mr. KIND. Just so I am clear on the administration’s current position, are you now here endorsing the legislation that has been

submitted, 2436, in regard to the royalty in-kind provisions contained in the legislation? Or hasn’t the administration taken a position on that?

Secretary NORTON. We believe that the provisions that are in

2436 are consistent with the energy plan, so we are endorsing generally those aspects of 2436.

Mr. KIND. I am a little confused because I was part of the bipartisan group that went down to the White House just a couple of

weeks ago to have a conversation with the President and Vice

President in regard to the energy policy.

During that meeting, Representative Rahall directly posed that

question with the President, and he at the time indicated that they

weren’t moving forward on any proposal regarding royalty in-kind.

He gave that assurance to Representative Rahall.

27

Now, is this a reversal in that policy position in endorsing the

legislation that has been submitted and we will be marking up

next week?

Secretary NORTON. I am not aware of what the statement was

that was interpreted in that way.

Mr. KIND. Well, perhaps we can follow up and just get some clarification from the administration on that provision in particular.

I don’t know, Madam Secretary, if you had an opportunity to review the article that appeared in the Wall Street Journal yesterday

titled ‘‘How Many Inspectors Make Safety Checks in Alaska’s Oil

Fields? Answer: Only 5 and That Worries Some People as Bush

Backs Drilling.’’

I think it an very important article in the fact that it raises so

many substantive issues in regard to our ability to go into Alaska

generally and the Arctic National Wildlife Refuge specifically and

be able to extract these resources in a environmentally friendly

way, in a clean fashion, which the administration touts as feasible

and possible.

Yet this article, which I would ask unanimous consent to submit

for the record at this time, Mr. Chairman, without objection, raises

some very important questions.

[The article follows:]

THE WALL STREET JOURNAL.

JULY 11,2001

FUELING CONTROVERSY: HOW MANY INSPECTORS MAKE SAFETY CHECKS IN ALASKA’S

OIL FIELDS?

ANSWER: ONLY FIVE, AND THAT WORRIES SOME PEOPLE, AS BUSH BACKS DRILLING;

LEGISLATURE TRUSTS INDUSTRY

BY JIM CANTON

DEADHORSE, Alaska—As Congress begins debate this week on President Bush’s

proposal for expanded oil drilling here on Alaska’s North Slope, concerns about safety are intensifying.

On April 15, a corroded pipeline spilled roughly 100,000 gallons of crude oil and

saltwater onto the delicate tundra. Crews working in below-zero conditions plugged

the leak in 12 minutes—but that was long enough to poison vegetation across an

area the size of two football fields.

Alaska’s 25-year-old oil infrastructure is showing its age, just as a new energy

boom is poised to hit the state. The problem stems from a combination of industry

and government behavior: As North Slope wells have been steadily depleted in recent years, oil production has declined, and energy companies eager to cut costs

have held back on much-needed investments in replacement parts and equipment.

Alaska’s legislature, meanwhile, eager to please the industry, has gutted the state

agencies responsible for regulating oil-field safety. Indiana, which takes a full year

to produce the amount of crude oil that Alaska pumps in three days, employs nine

oil-field safety inspectors. Alaska has five.

‘‘By and large, we are distrustful of big government up here,’’ explains State Rep.

Eldon Mulder, the Republican co-chairman of Alaska’s House Finance Committee

and a key hand in the killing of proposals for more-stringent regulation. Slumping

production has hurt the state economy and should be cured by more drilling, he

says. And, he adds, ‘‘the industry has done a good job regulating itself.’’

Others are more skeptical. Although the state hasn’t had a catastrophic oil spill

since the Exxon Valdez incident in 1989, critics of the industry, including some who

work in it, say danger signs abound. The 100,000-gallon spill in April, at a Phillips

Petroleum Co. field called Kuparuk, was just one of 50 modest-size and small spills

attributed to pipeline corrosion and other wear and tear in the past five years, Alaska regulators say. Yet the industry consortium that runs the vast oil field beneath

the North Slope and Prudhoe Bay—North America’s largest—says it has slashed

28

maintenance spending by 10% this year, to about $100 million, after years of holding the level roughly even.

A page one Wall Street Journal article in April reported that oil-rig technology

touted by President Bush as environmentally friendly and central to his expanded

drilling plans has malfunctioned at rising rates in the past five years on rigs in

western Prudhoe Bay. These technological problems, such as failures in spot checks

of emergency shut-off valves, are all the more worrisome because of the state’s relatively light regulation and reduced maintenance by the industry. Federal authorities in Alaska delegate most responsibility for the oil industry to the state.

If the safety valves on some rigs fail in a real emergency, as much as 3.5 gallons

per second of crude oil could gush into the ecosystem. ‘‘These valves are meant to

protect against catastrophic failure,’’ says Lou Grimaldi, one of the five state oilsafety inspectors. ‘‘They’re absolutely crucial.’’ Industry officials acknowledge they have had maintenance problems in recent

years but say the troubles are being addressed and pose no safety risk. ‘‘This place

is safe and getting safer,’’ says George Blankenship, Prudhoe Bay manager for

London-based BP Amoco PLC, which operates the field for the consortium. Other

BP officials add that this year’s maintenance-spending cut reflects expected consolidation after BP’s 1998 acquisition of Amoco Corp., which had operated part of the

Prudhoe Bay field.

The Bush administration’s call for more drilling responds to a projected shortfall

of 7.5 million barrels of oil per day in the U.S. over the next 20 years. Environmentalists counter that stepped-up conservation could cover any shortfall. But the

White House maintains that more fuel is needed and singles out Alaska as a particularly rich source of reserves.

The administration’s most controversial proposal—to allow drilling in the North

Slope’s pristine Arctic National Wildlife Refuge—was probably doomed by the Democrats’ recent takeover of the Senate. But with White House encouragement, industry

is gearing up for expanded exploration and production in other parts of Alaska

where congressional permission isn’t required.

A unit of Phillips Petroleum, for example, recently struck oil in three large fields

in the National Petroleum Reserve, a 23-million-acre area west of Prudhoe Bay in

which the White House directly controls drilling. Wells are being drilled in the

Beaufort Sea, as well as Cook Inlet near Anchorage. State officials also want to

build an 1,800-mile pipeline to transport natural gas from the Arctic, through Canada, to the lower 48 states—a plan that would raise concerns about potential pipeline explosions and fires.

Some Alaskans wonder whether the state’s creaking pumps and pipelines, and the

skeletal staff of regulators who oversee them, can handle a fresh oil boom. ‘‘The people doing the job now are stretched far too thin,’’ says Democratic State Rep. Ethan

Berkowitz, minority leader of the Alaska House.

The state legislature’s parsimony during the past decade has left Alaska’s oil industry with less safety oversight than many states that produce a fraction of Alaska’s output. Indiana, for one, pumps 2.5 million barrels of oil a year, compared with

Alaska’s current level of 400 million annual barrels, which amounts to 20% of the

nation’s domestic oil supply. Alaska spends about $3 million a year to monitor oilfield safety. Indiana spends $1.4 million, deploying its nine inspectors mostly across

a 480-square-mile oil patch. The five inspectors employed by Alaska’s Oil and Gas

Conservation Commission, by contrast, oversee wells spread across 1,000 square

miles of icy emptiness.

California, which produces about 300 million barrels of oil a year, has 40 oil-field

safety inspectors. Canada’s Alberta province, which produces 700 million barrels a

year, has 110. But the stakes are much higher on Alaska’s North Slope, where the

typical well gushes 750 barrels a day, far more than wells in these other places.

Overwhelmed by its task, Alaska’s tiny inspection cadre has abandoned the technique, used by its counterparts in some other states, of making surprise visits. The

Alaskan inspectors schedule their arrival at drill sites ahead of tine.

‘‘There is no question that the legislature has done a very myopic job in terms

of environmental responsibility,’’ says Alaska Gov. Tony Knowles, who is a Democrat but generally a strong industry backer. Alaska’s Republican-controlled legislature, the governor says, has mounted a dangerous budgetary ‘‘attack’’ on the state’s

safety agencies.

Take the Alaska Department of Environmental Conservation, the state’s pollution

watchdog. Its budget has been reduced by 55% since 1991—more than triple the

15% decline in Alaska’s overall state spending during that period due to lower oil

revenues. In December, the department’s staff, worried that aging gear on the North

Slope and elsewhere could cause a major spill, petitioned lawmakers for a $500,000

grant to monitor pipeline corrosion and study spill-prevention techniques.

29

As it happened, the legislature was considering the request in April when the

Phillips Petroleum pipeline burst at the Kuparuk field. Although the level of damage is still being studied, scientists with environmental groups say that sludge and

seawater killed surface plants and thawed underlying permafrost, making it unlikely the vegetation will ever fully recover. ‘‘Migratory birds also suffer, because

even a drop of crude on their eggs can cause them not to hatch,’’ says Pamela Miller,

an environmental consultant in Anchorage.

Still, the legislature rejected the department’s request, siding with industry lobbyists who argued that oil companies were capable of monitoring pipeline corrosion

themselves. ‘‘There appeared to be a certain amount of duplication’’ between the industry’s efforts and the department’s request, Republican State Rep. Loren Leman,

majority leader of the Alaska Senate, says in an interview.

Lawmakers did appropriate $3.6 million to help fund an industry lobbying campaign on behalf of Mr. Bush’s proposal to drill in the Arctic wildlife refuge. ‘‘There’s

nothing to oversee if there’s nothing coming out of the ground,’’ says State Rep.

Mulder, explaining lawmakers’ preference for lobbying over safety spending.

The oil industry generates two-thirds of Alaska’s revenue and provides annual

royalty payments of thousands of dollars for each of the state’s roughly 500,000 citizens. The drop in oil revenues in the early I 990s hit Alaska hard, forging strong

political will to boost production. Michele Brown, commissioner of the state’s Department of Environmental Conservation, says, ‘‘The legislature doesn’t care for our

mission. 

The paucity of resources makes it hard for Alaska’s oil-safety inspectors to do

their job. Stretched by the state’s vast terrain and its 3,500 wells, the five inspectors

say they schedule their field tests with the oil companies to ensure that inspectors

don’t travel hundreds of miles only to discover that necessary personnel or equipment aren’t around.

Lost is the element of surprise that regulators in some other major oil-producing

states swear by as the crucial component in keeping oil companies honest. ‘‘You

want to make sure that what’s going on in the field is what you-think it is,’’ says

Philip Asprodites, Louisiana’s commissioner of conservation. His staff of 35 inspectors runs surprise safety checks on oil rigs in the Gulf of Mexico.

Instead, Alaska’s safety regulators operate on trust, often established between inspectors and industry employees over years of working side by side in the state’s

desolate reaches.

On a snowy day on Prudhoe Bay, Mr. Grimaldi, one of the five inspectors, watches

a BP Amoco roustabout adjust pressure gauges inside an instrument shed, simulating a leak that instantly shuts down the oil well beneath them. The valves work

flawlessly, as well they should: The valves just underwent their regular tests by the

company, which also knows the inspector has a journalist in tow.

Despite the close coordination with the company, Mr. Grimaldi says BP wouldn’t

rig a test by fiddling with equipment before he arrives. ‘‘The No. I thing these guys

have going for them is we can trust them,’’ he says. BP’s supervisor on hand for

this day’s test is Merv Liddelow, whom he has known for many years and with

whom he once worked at another company.

At the reporter’s request, Mr. Grimaldi makes an unscheduled check of a BP rig

with a troubled history, known as G pad. Nearly a third of this platform’s safetyvalve components flunked a state test in March. It passed a scheduled retest in

April, and this time, without prior warning to the company, it passes again.

Out of the inspector’s earshot, however, a BP Amoco worker, who declines to be

named for fear of retaliation, says maintenance crews were dispatched to G pad the

night before the scheduled April retest to assure everything was working well.

When valves on one well continued to fail, that well was shut down--and was therefore bypassed by the state inspector the next day, the worker says.

A BP spokesman confirms the company performed its own preparatory maintenance on the eve of the inspector’s visit in April. But the spokesman adds that the

company was merely taking steps to head off any more safety-valve problems. He

says the bypassed well, were it operating, would not have significantly affected G

pad’s overall success rate.

Mr. KIND. And they highlight in the article that there are only

five oil safety inspectors currently working in Alaska, whereas the

State of Indiana, which produces oil over a year equivalent to the

amount of oil produced in just 3 days in Alaska, has nine inspectors.

30

And obviously, the question arises, is there sufficient safety programs or safety inspectors in place right now in the State of Alaska

in order to address some of these safety concerns? What is your

opinion?

Secretary NORTON. First of all, we would intend to have however

many inspectors it takes to ensure that we have not just appropriate standards in place, but also compliance with those standards.

Second, I think it is important to recognize that the North Slope

is a little different than other areas, and some of the comparisons

in that article are not quite correct. I would be happy to provide

you with the specific information.

But having visited there, I think there are 20 or 25 sites where

production takes place on the North Slope compared to probably

thousands of sites in a state in the lower 48 that is in production.

And so, in terms of being able to inspect on site-by-site basis, per

amount of oil produced, that is not an appropriate measure. It really is the facility itself that needs to be—

Mr. KIND. And I am not sure about the accuracy of the report

in the Wall Street Journal yesterday, but one of the troubling features of it, it indicated that State Legislature in Alaska has actually appropriated more money for lobbying purposes here in Washington to drill in the Arctic National Wildlife Refuge than they are

appropriating for safety inspection programs in the State of Alaska.

If that in fact is true, then I think there is more work that we

should be doing together in order to beef up the safety inspection

teams in Alaska, given the amount of production that is currently

taking place in some very valuable lands.

The CHAIRMAN. The time of the gentleman has expired.

Mr. KIND. Thank you, Mr. Chairman.

The CHAIRMAN. Mr. Pallone and Mr. Faleomavaega each have—

Mr. FALEOMAVAEGA. Four more minutes.

The CHAIRMAN. You get 4 more minutes and then Mr. Pallone

and then we will—

Mr. FALEOMAVAEGA. I didn’t use more than a minute.

The CHAIRMAN. Mr. Pallone?

Mr. PALLONE. Well, I am not going to use all 5. But I just wanted

to ask a question about two American Indian issues that have come

up in the context of energy.

You are probably familiar with Weatherman’s Draw in Montana.

This is also known as the Valley of the Chiefs. It is a sacred site

to Native Americans.

And I know that the Sierra Club and about 10 different tribes

have basically appealed to you, to the Secretary’s office, because of

the fact that drilling has been allowed there. Exploratory wells are

being drilled, and they are very much opposed to this.

And they also feel very strongly that not only shouldn’t it happen

because it is such a sacred site, but also that there was no consultation with the American Indians, with the tribes that consider

this a sacred site.

And I just wondered if had reviewed this, if we could you to be

supportive of not allowing drilling there, or at least have some consultation with the tribes.

31

I know that the Blackfeet Tribe were here a couple weeks ago

with our Ranking Member Rahall and had actually proposed that

they could lease part of their reservation instead of the sacred site.

And I just wondered if you could comment on any of that,

Madam Secretary.

Secretary NORTON. It is my understanding that there have been

discussions about an exchange like that, that would avoid the

Weatherman’s Draw site and that would take place on a private

basis. That is an issue that we are continuing to monitor. It is on

our radar screen at this point.

Mr. PALLONE. Would you be willing to play a role, though, in trying to work that out?

Secretary NORTON. To the extent that it is appropriate, my department at least certainly would be playing a role. We need to

look at what we can do while it is in an appeal process.

Mr. PALLONE. Okay.

Secretary NORTON. It was my understanding that there was at

least a statement made that the company was not planning on

going forward with any activity in that area— Mr. PALLONE. Well, they are doing— Secretary NORTON. —in a significant— Mr. PALLONE. They are doing exploration.

But if you are willing to have the department work something

out, I would appreciate that. I think that is what you are saying,

that you are willing to have the department try to work it out if

possible.

Secretary NORTON. We are certainly willing to try to work something out.

Mr. PALLONE. Okay.

Let me ask another thing. Under the 1992 Energy Policy Act,

you were authorized as Secretary to request funding for American

Indian renewable energy projects. And given that there is such a

potential for renewable clean energy products by tribes, are you

going to have any funding or be seeking any funding for the American Indian renewable energy project? And what is the department’s plan to help tribe develop their renewable resources?

Secretary NORTON. My new Assistant Secretary for Indian Affairs was just confirmed a week before last. And in my first meeting with him, I asked him to look at working with tribes on energy

issues, and that is part of what we would like to consult with the

tribes about.

Mr. PALLONE. Could we, as members of the Committee, myself

or others, follow up with that a request a meeting with him to talk

about what is going on in those areas?

Secretary NORTON. Certainly.

Mr. PALLONE. Okay. I appreciate it.

Thank you, Mr. Chairman.

The CHAIRMAN. I thank the gentleman.

Apparently, the word in Wall Street Journal upset the folks in

Indiana, and they have written me a letter refuting most of that,

signed by Mr. Slutz, James A. Slutz, Director of the Division of Oil

and Gas. I will submit that for the record for your perusal.

[The Letter from Mr. James A. Slutz, Director, Division of Oil

and Gas, Indians Department of Natural Resources, follows:]

32

33

The CHAIRMAN. The gentleman from American Samoa, you have

4 minutes left.

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman.

Madam Secretary, I can fully appreciate the complexity of so

many of the areas in your responsibility and the issues that you

take within the Department of Interior.

It has come to my attention that at a recent hearing held at the

other body, my good friend, the good Senator from Hawaii, Senator

Akaka, raised some questions with a couple of your subordinates

concerning insular areas, and they knew absolutely nothing about

territories, which is part of your jurisdictional authority.

I am a little concerned. And maybe perhaps at some time later

your subordinates who do have direct administrative authority over

these areas as assistant secretaries will meet with those of us who

do represent the insular areas. And that would really be helpful to

us so that we will know exactly who to talk to when we need to

get some results or things on the issues that we are concerned

about within the department, if that is all right with you.

Secretary NORTON. I would be happy to do that. We have our incoming Assistant Secretary for Policy Management and Budget

that is pending confirmation, and she would be the appropriate

person for you to speak with.

I did work on those issues myself when I was at Interior previously and have met with a number of people from the territories,

and look forward to working with you and others in the future.

Mr. FALEOMAVAEGA. As a followup of the question that I had

raised earlier—it was so quick that I didn’t even have a chance to

elaborate on this—as Mr. Underwood had indicated earlier also,

but the question of deep ocean water as an alternative source as

energy technology.

This technology was developed with one of our most noted nuclear scientists, Dr. John Craven, out in the State of Hawaii. And

I wanted to know if the administration if willing to commit resources to do this study, even in a more comprehensive fashion so

that perhaps this is another area that our nation can look into, not

just for the insular areas where we have the Pacific Ocean, but certainly coastal states where there is deep ocean water in which this

kind of technology can also be utilized.

Will the administration be willing to entertain possible amendments to look into this area?

Secretary NORTON. I would be happy to talk with the Secretary

of Energy. That may well fit under some of the existing research

type of programs that are already part of our package.

Mr. FALEOMAVAEGA. As another followup on the question,

Madam Secretary, of ANWR, there was a recent lead article out of

the L.A. Times questioning some of the real concerns of the native

Alaska tribes on the development of ANWR, and I understand also

that the Gwich’in tribe is probably the most directly impacted because of their tribal dependence so much on the caribou and the

life structure and how this tribe also meets their basic needs. It is

my understanding this tribe has never asked for any royalties on

anything dealing with oil, as opposed to other tribes.

Have you had an opportunity to talk to the leaders of the

Gwich’in tribe, Madam Secretary, on this issue?

34

Secretary NORTON. In my most recent visit to Alaska, I spent

several hours—I visited one of their villages, Arctic Village, and

spoke with the leaders of the Gwich’in tribe. They do not have royalties from their lands. They have leased apparently in the past,

but there was no finds of petroleum on their lands.

The tribe that is in the Coastal Plain, I have also met with them,

with the residents of Kaktovik, and they do desire to have development.

I would like to continue working with both groups of natives to

try to address the concerns of both groups.

Mr. FALEOMAVAEGA. Do you honestly believe that this proposal

does address seriously not only the environmental concerns but

that the development of ANWR can be done in a safe way in a

similar fashion when we developed the Alaska pipeline system? Is

this your basic position?

Secretary NORTON. I believe it is. We see 25-year-old technology

in parts of Prudhoe Bay and yet the caribou herds have increased.

And we can go forward with environmentally responsible technologies.

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman.

Thank you, Madam Secretary.

The CHAIRMAN. On the majority side? Questions for the Secretary?

Mr. Peterson?

Mr. PETERSON. Welcome. I look forward to working with you.

I was reviewing your statement. I just got here, so I missed most

of the discussion.

But I agree with you that there is no silver bullet to this issue,

that we really have to do a lot of things if we make energy abundant, because we will solve the energy problem when people have

choices of energy and they can use the most cost-effective one, in

my view.

And that is not really out there today. We have a lot of people

locked on one or two kinds of energy, and they rise or fall or their

business flourishes or dies because of the cost energy.

I just quickly made a list here of what I think needs to be a part

of it. Of course, conservation first, and then hydro, geothermal, fuel

cells, wind, solar, gas, improved access to gas, oil, coal, and nuclear.

I mean, I think if we leave any of those out, in my view, we are

short-changing Americans for a strong energy future because the

future of energy will depend on the success of this county. Do you

agree with that overall philosophy?

Secretary NORTON. Very definitely. And I think that is consistent

with our plan.

Mr. PETERSON. The one that concerns me, I guess, is that we find

Congress is willing to lock up one land after another. I guess I am

not sure there is a place we should drill or explore that will be

agreed to by everybody, but it appears to me that we have a lot

of naysayers in Congress who are seemingly willing to lock up

every piece of property they can to future energy availability.

But the one that bothers me is the—for the short term; this is

not a long-term problem, but for the short term, the dependence on

natural gas for power generation I think has some huge negative

35

problems, can bring on some huge negative problems, if we cannot

get enough gas into the pipeline to keep costs from exploding even

further.

In my district, home heating last year increased from 100 to 135

percent. And it looks like it might even be more difficult next year.

That had a huge impact on this country’s economy because that

money immediately came out of the holiday Christmas spending.

When you have costs driving up, when you have home heating

costs up, you have business operational costs up that dramatically,

you have a huge impact on businesses, you have a huge impact on

our seniors who are trying to stay in their homes in the north; I

come from the Northeast.

So I am concerned the overdependence on gas with the inability

to transport gas because of pipelines and the inability to drill for

enough new gas quick enough—because every power plant we hook

up, 95 percent of them, I am told, are gas, and everyone of them,

it takes a lot of gas wells to fill that high-pressure line that is

going to supply that power generation.

And if we want to negatively impact America’s economy, you

raise home heating costs and business costs drastically again next

year, and you are going to have a potential of a very negative impact on our economy.

Secretary NORTON. We chose as a nation to approach natural gas

as one of our main sources because of the air quality benefits. And

we continue to recognize those air quality benefits.

One of the reasons for having a comprehensive approach is to

look at both supply of natural gas and whether there are alternatives that can, with some adjustments, provide the same kinds

of air quality benefits as well.

So we want to look at both of those kinds of approaches, so that

we have both the supply to meet our needs as well as a diverse

range of sources.

Mr. PETERSON. Well, the charts I guess that have scared me are

the charts showing natural gas entering the system in the next

year is a shorter curve than gas being consumed for power generation, which is something we normally didn’t do in this country. We

sort of saved gas as that clean home heating fuel.

You know, I just lost a major business. Their energy costs last

year, they did not lock in gas prices, and their prices went from $3

a thousand to $10 and $12 a thousand last winter. I am losing that

business. It cost them $2 million in energy costs unanticipated, a

$2 million increase.

So I am losing it. And I know a lot of other businesses that had

to shut down temporarily during the winter.

You talk about fertilizer factories, sold their gas because they

made more money than making fertilizer.

I don’t think people realize how dependent—something that happened a few years ago—the tank bill, the underground tank bill,

where we removed all the underground tanks. A lot of my businesses had the ability to use fuel oil or gas. And when they removed their underground tank, gas was all-time world cheap, so

they didn’t put in tanks.

They no longer have that dual capacity. And so they were stuck.

36

Companies that had dual capacity last year immediately kicked

into fuel oil, because it was cheaper. But those who did not have

that chance to alter were stuck on gas.

My concern in the short term is that it can impact our economy

with huge spikes. If we have huge spikes again next winter, we are

really going to put the hurt on seniors and on businesses who depend on high usage of gas.

And I guess that is one of the concerns. If anybody has added up

how much we are adding to the system and how much new gas we

are putting into the system, and do those numbers meet. I am

afraid they don’t.

Secretary NORTON. We share those concerns.

Mr. PETERSON. Okay.

The CHAIRMAN. The time of the gentleman has expired.

Mr. Smith or Mr. Inslee, which one of you?

Mr. Smith is recognized for 5 minutes.

Mr. SMITH. I just wanted of follow up a little bit on Mr. Peterson’s questions, also Mr. DeFazio’s questions, because I do have

some sympathy for the administration’s position in terms of drilling

for natural gas or oil, in the sense that we can’t just close off the

entire country. I think we need to have a more serious examination

of weighing the options, what makes on spot better than another.

I think right now one side is saying drill everywhere, the other

side is saying drill nowhere, and I wish we could come to sort of

a list of principles, ‘‘Here are the goals that we want to achieve.’’ The thing that I find most disturbing about the administration’s

position now sort of follows up on what Mr. DeFazio was asking

about earlier, about how it is being portrayed that half of the energy plan focuses on energy efficiency and renewable sources. But

it really, at this point, is just half of the rhetoric, maybe even twothirds of the rhetoric.

But that doesn’t really do much for us, because if you are going

to seriously improve options like wind or fuel cells or energy efficiency, there are really three ways to do it: one, invest heavily in

R&D in any one of those areas; two, give big tax credits to people

to use those technologies; or, three, fairly aggressively set standards on the things that use the energy—for instance, electric motors, set a standard to have the highest energy efficiency required

on selling of electric motors.

And when I look at the budget, at what has been proposed—well,

first of all, given the fact that we just passed the tax cut that has

grown a little bit even since we past it, and there was nothing in

there, tax credits for energy, I wonder where we are going to find

the money, even if all of a sudden there is a new found commitment to do anyone of those things.

But in looking at it, other than rhetorically, where is the support

for these programs. Because if we don’t make the investment or

push it, it is not going to happen.

So I guess, how are we planning actually implementing the rhetoric on alternative sources of fuel and increased energy efficiency

without that significant investment? And where are we going find

the money?

Secretary NORTON. We are looking at a number of different kinds

of things, both within my Department and across the AdministraVerDate 11-MAY-2000 10:18 May 16, 2002 Jkt 000000 PO 00000 Frm 00040 Fmt 6633 Sfmt 6602 73674.TXT HRESOUR1 PsN: HRESOUR1
37

tion. I think if you will look at the recommendations that we have

made, you will see that there are many of those that do deal with

conservation.

In my Department, we are going ahead with steps to look at geothermal leasing, at solar areas that might be leased, at wind energy areas so that we can move forward with those kinds of

things—

Mr. SMITH. Specifically.

Secretary NORTON. —through our planning process.

Mr. SMITH. I mean, it is awful easy to make a recommendation

that, ‘‘We should use more wind. We hope we do.’’ But, okay, how?

What is the recommendation? And if it costs a significant amount

of money, how are we planning on funding it, since it is certainly

isn’t in the President’s budget that he submitted?

Now, he is talking about it a lot, but in the budget that we are

working our way through, it is not there. So I guess, what are the

specific recommendations and what is the specific plan for implementing it?

Secretary NORTON. There are a number of Department of Energy

programs dealing with alternative energy research and development.

From my Department’s perspective, what we need to look at is

whether we have obstacles in the way to geothermal and to solar

and wind development. That is why we are bringing together those

people who are actually involved in that industry to work with us

and help us discover if there are some of those obstacles that we

can work on.

The inventory that is suggested in H.R. 2436 is something that

would allow us to move forward with that, and to see what we can

do to make that a realistic contributor to our energy needs.

Mr. SMITH. That really doesn’t help me at all. It is okay; I appreciate the answer to the question. But basically, in sum, it is: We

are going to take a look at it, and we hope to figure it out.

And it just doesn’t seem good enough. I mean, there are—you are

right—very specific programs that have been around for years, for

that matter. Many of them very helpful.

And I suppose part of it has to be a winnowing process of which

ones are working, which ones aren’t. But another part of it has to

be saying, ‘‘Here’s the money. Here’s what we are going to do.’’ And

that is what I find noticeably absent from the administration’s plan

at this point, other than cranked up rhetoric about how much we

like energy efficiency and renewable sources.

It takes more than rhetoric to make this happen. And I hope we

can take those steps forward.

Thank you, Mr. Chairman.

The CHAIRMAN. The gentleman from Nebraska, Mr. Osborne.

Mr. OSBORNE. Thank you, Mr. Chairman.

Thank you, Madam Secretary, for your testimony today.

It has already been touched on briefly in the discussion of natural gas, but one of our major concerns in farm country has been

fertilizer and natural gas supply. And I noted in your testimony

that you mentioned that roughly 74 percent of the untapped or unrealized reserves are on Federal properties.

38

Could you be a little bit more specific, flesh that out a little bit?

Because as far as the farm economy is concerned, people kind of

ignore it, they forget about it, but this has been a huge impact. The

fertilizer costs have doubled and tripled. And with farmers, it has

just been almost impossible to make any kind of profit.

So this is a critical issue. And as was mentioned earlier, it

doesn’t look like it is going to get any better very soon.

So we appreciate all you can do. But if you could flesh that out

a little bit, I would appreciate it, as to where those resources are

and what are the probabilities that we can have fairly quick access

to them.

Secretary NORTON. I would be happy to provide you with some

of the specifics about where those resources are located. One of the

areas that we may be looking toward is having a gas pipeline bring

North Slope gas production to the lower 48. And that is a large resource that would soon be available to us even from the existing

Prudhoe Bay areas.

Mr. OSBORNE. Mr. Chairman, I yield back my time.

The CHAIRMAN. The gentleman from Washington, Mr. Inslee?

Mr. INSLEE. Thank you, Mr. Chair.

Madam Secretary, thank you for coming back. We appreciate it.

I just spend 4 days last week with the caribou and the plovers

and the mosquitoes, and I learned some things.

And one of the things I learned about is a fellow named Clarence

Rhode, who used to work for the Department of Interior in the

1950’s. Mr. Rhode was one of the people who had the vision for the

Arctic National Wildlife Refuge way back in the 1950’s, and he saw

that some day there would be an attempt to encroach in this area,

which was pretty perspective of him.

He died on August 21, 1958, when he was ferrying people

around, doing scientific research about the caribou herd and the

like in the Wind River drainage, and he crashed into a mountain.

And I am here to say that we are going to speak for his vision,

to not allow that vision to be shattered now, 43 years later, for several reasons.

One: I have seen that country and there is one thing I can tell

you for sure. After I went to Prudhoe Bay and the Aichilik River

on the refuge, I know Prudhoe Bay and Prudhoe Bay is not a wildlife refuge. It is a wonderful production facility, but it would be

shattering the vision of many people in the Eisenhower administration who had the foresight to recognize how unique this entire ecosystem is—entire ecosystem, meaning it is not just the caribou, it

is the entire ecosystem.

This is the largest intact ecosystem in America, and that is the

site that the administration wants to drill on.

What I saw on Prudhoe Bay was a honeycombed area over a 100

miles, honeycombed with oil production facilities, pipelines, gravel

roads, and ice roads that do leave a track on the tundra, because

I saw them with my own eyes. They are still there.

And it is disturbing to me that the administration ignores its

own science, of the U.S. Government.

In 1995, the Fish and Wildlife Service did a study on this, and

they concluded, quote, ‘‘Full development of the Coastal Plain

would result in the irretrievable loss of the wilderness character of

39

the area. The refuge, including the Coastal Plain, is a world-class

natural area.’’ Continuing, ‘‘Full leasing and development of the refuge Coastal

Plain would have a major impact on the Porcupine caribou herd.

Research indicates that displacement of the herd to the foothills

south and east of the 1002 area would subject the herd to the area

of highest predator density, reduce the amount and quality of preferred forage species available during calving—this is the maternity ward for the largest caribou in North America; that is my language—‘‘and restrict access to important coastal insect relief habitat.’’

To me, it is stunning when the science recognizes—and I keep

hearing about the central herd increasing. The central herd has

100 miles of Coastal Plain to deal with. You can displace the coastal central herd with a couple of buildings; it doesn’t hurt it. The

Porcupine herd—and you know this, because you have been there— has only 25 miles of coastal plain, has one-fourth area involved in

the calving area.

And that is why this research has been stunningly, I think, dramatic, in saying that we run a risk of damaging this intact ecosystem.

I am also disturbed that the vision of the Gwich’in people, who

live with the caribou, who have put solar panels up in the Arctic

Village to run their washroom, isn’t a vision shared by this administration, because a fair statement is, for every drop of conservation, for every drop of research in new energy, there are 55 gallons

of money for the oil industry.

And as I understand your proposal, and I need you to correct me

if I am wrong, and the legislation that is proposed here, the only

money you get for research of these new technologies that the

Gwich’in people themselves are using in the Arctic Village is if we

agree to this blackmail of agreeing to drill in the Arctic refuge.

That doesn’t sit well with us, to say you don’t do research unless

you agree to destroy the largest, most intact ecosystem in North

America. That doesn’t sit well.

Finally, I am very disturbed that 2 years after the pipeline explosion in Bellingham, Washington, that killed 3 children, a year-anda-half after a New Mexico explosion killing several people in New

Mexico, at the same time that the administration wants to open up

hundreds of miles of new pipelines in the Arctic refuge, we haven’t

seen the administration push one inch for improving pipeline safety

in this country.

And let me tell you why that is necessary. I was in the control

room of the Endicott drilling facility up on the North Slope on

Prudhoe Bay. And I was talking to a really nice fellow who operates the entire production facility at Endicott.

He sits there with these computer banks. He turns the well on

and he turns the well off. And if there is a leak, he is supposed

to know what to do.

I asked him about the Office of Pipeline Safety and the instruction he had from the Office of Pipeline and Safety and the certification and the testing and the information. He had never heard of

the Office of Pipeline Safety.

The CHAIRMAN. The time of the gentleman—

40

Mr. INSLEE. We need this administration—and I would just like

to give you, if want to comment on any of the things I have said,

I would appreciate your perspective. If I am inaccurate in any of

my assumptions, I would like to know.

The CHAIRMAN. Would the Secretary like to respond?

Secretary NORTON. The approach that you have described is not

the kind of approach we want to utilize. We have involved the scientists of the Fish and Wildlife Service in our proposals, in going

forward with exploration in the ANWR area.

The Coastal Plain is not even where the calving occurred this

year, as I am sure you know from having visited Alaska this year.

The herd calved in Canada and did not rely on the Coastal Plain

at all, and that has been the case in the past.

We believe that we can go forward and still allow that caribou

herd to flourish, as well as to protect the rest of the wildlife and

other resources in that area. We will maintain high standards to

do that.

Mr. INSLEE. If I can just make one comment, Mr. Chairman, in

response to something the Secretary said?

The CHAIRMAN. Briefly.

Mr. INSLEE. You are correct that the calving that occurred in the

migration route this year is an aberration which occurs about every

15 to 20 years. And they had twice the calving mortality as a result

of that, because these calves take place right here in the 1002 area.

The traditional and typical calving area, where the calves spend

their very first days of life, is right here in the 1002 area where

you want to put a major oil production area. We think that is

wrong.

And thank you for staying to take our questions. I appreciate it.

The CHAIRMAN. The gentleman’s time has expired.

The gentleman from Montana.

Mr. REHBERG. Thank you, Mr. Chairman.

And welcome, Secretary Norton. Thank you for being here.

And I want to congratulate you and applaud you for your resolve

in trying establish a meaningful energy policy in spite of the opposition that seems to be occurring in the United States Congress.

My question is specific to the Missouri Breaks.

And I defy anybody on this Committee to fly over the Missouri

River and locate the natural gas pipeline that goes up to the shores

and under the river and continues on south providing a much needed natural gas supply.

Does anything in the existing statutes, now that the area has

been put into a monument, in the House, whether it stands or

not—2 weeks ago I made an amendment on the Interior approps,

limiting oil and gas exploration or consideration within that Missouri Breaks. Is there anything within existing law that is going

to preclude our opportunity to expand the size of that natural gas

pipeline if necessary to bring additional product to the lower 48

from Canada?

Secretary NORTON. I am not aware of the situation as to the

pipeline. I do believe that President Clinton preserved existing oil

and gas rights within that area as a part of the declaration of the

monument itself. So I don’t know what provisions would have applied as to the pipeline.

41

Mr. REHBERG. I would hope that the administration will look into

the opportunities. The infrastructure is already in place. I am not

sure of the congressmen, when they made the vote on the floor,

truly understood that the infrastructure is already in place. Those

pipelines are already buried, and there is de facto creating a wilderness around private property within the Missouri Breaks.

But there is an opportunity—if pipeline supply is truly one of the

problems that exists in our ability to develop full energy policy. The

pipeline already exists, the easement already exists, and I hope the

administration would take the time to establish whether they can

in fact expand the size of that pipeline.

I don’t know. I have been asking that question. Nobody seems to

be able to answer the question for me, as to whether you would be

limited under that designation of monument status.

But the pipeline is already in place, and I think it would play

an important role. And if it isn’t covered, I would like to have an

amendment in this bill and hope that I would get the administration’s support to give us that opportunity to expand the size of the

pipeline.

Secretary NORTON. As you are aware, we have just started a

process of consulting with the governors and with state elected officials on the future of the monuments, as well as with Members of

Congress, and so we will be happy to obtain additional information

about that as part of our planning process.

Mr. REHBERG. That brings up another point. Your letter to our

governor actually has slowed down the process that I had hoped to

be able to bring to this Committee a reasonable discussion on the

private property that is included within that monument. Your

opening up the opportunity for their input has actually slowed that

process down.

So I hope that you will work expeditiously, because it will affect

our energy policy as we develop that through Congress.

Secretary NORTON. We felt it was important to get local input,

and we look forward to working with you to make sure we are

doing things in the right way.

Mr. REHBERG. Thank you, Mr. Chairman.

The CHAIRMAN. The gentleman from New Jersey, Mr. Holt.

Mr. HOLT. Thank you, Mr. Chairman.

And thank you, Madam Secretary, for taking some more time for

our questions.

There are lots of things I would like to talk with you about with

regard to mix of energy resources and conservation and a number

of other things, and Porcupine caribou and so forth.

But one thing I would like to focus on with regard to possible

drilling in area 1002 is the environmental mediation or the steps

that might be taken to mitigate environmental damage, and to

really get answer to the question: Is it possible—is it even possible—to drill up there without unacceptable environmental damage?

And, you know, ice roads sound attractive. Now, I notice in your

testimony that you say that the bill would limit exploration activities to a period of the year when ice roads could be used. Now, are

you saying ice roads would be used?

Secretary NORTON. Oh, absolutely.

42

Mr. HOLT. Almost exclusively, exclusively? That would be the

norm?

Secretary NORTON. That would certainly be the norm. And that

is already what is taking place.

One facility I visited, the Alpine facility, is a large producing facility, and it has absolutely no permanent roads to it. And I think

that is exactly the model that we would see utilizing, ore without

permanent roads.

Mr. HOLT. Madam Secretary, where would the water for these ice

roads come from?

Secretary NORTON. It has come from nearby water sources. That

is one of the things that in the Coastal Plain area we would need

to study, and that would have to be a part of the environmental

planning process, is making sure that the water would be available

in a way that is environmentally responsible.

I know that in the Coastal Plain, the 1002 area, that is one of

the concerns. And that is certainly something we would have to

deal with, the availability of that water.

Mr. HOLT. Well, we scientists are often doodling, doing back-ofthe-envelop calculations. And I just did a calculation of how much

water it would take to make a rather thin ice road, and it is on

the order of a million gallons per mile.

Now, as I understand it, we are talking about 60, maybe 100

miles of roads. As I looked up some figures here, it appears that

in all of the 200-and-some-odd miles of river in that area, there

might be 9 million gallons available.

Well, we are off by a factor of 10 at least in the water that is

even available to build ice roads, assuming that ice roads would be

environmentally attractive, that they would leave no permanent

scar on the land. And yet I hear from my colleagues who have just

flown over this area that the ice roads melted some time ago but

leave a very visible trace long after they are melted.

So just in this one area, just on this one point, it raises very real

questions about whether it is even possible to go in there without

unacceptable environmental damage.

I certainly would like to see from you facts and figures about

even the possibility of building ice roads of appropriate thickness,

of appropriate length, with the water that is available.

Secretary NORTON. We would be happy to look at that and provide you with information.

Mr. HOLT. Thank you, Madam Secretary.

The CHAIRMAN. The gentleman from Alaska, Mr. Young.

Mr. YOUNG. I thank the gentleman.

First I ask to submit for the record a letter from our Fish and

Game in the state. It quotes, ‘‘There is no evidence of negative effects on waterfowl population from oil development on the Coastal

Plain on Alaska. Development of the 1002 area of the Arctic coast

would have no measurable effect on waterfowl production for the

nation because relatively few birds nest in this area.’’

The CHAIRMAN. Without objection.

]The letter from Mr. Wayne Regelin, Director, State of Alaska

Department of Fish and Game, follows:]

43

44

45

Mr. YOUNG. And, Mr. Chairman, and, Madam Secretary, I do

thank you for being here.

I wished I was wearing my new boots, from what I have heard

recently.

Number one, these pictures that Mr. Inslee showed, I wished he

had identified really the Coastal Plain. If you will take the time to

look at the back page of the 1002 area, that was not an ice road

made by recent oil activity.

This is not a virgin area. This is an area that has people living

in it. It has people living in it. It has warning sites. It has military

activity, did have military warning sites, has a large native village

living there. And that they can cast this area as a pristine last

Serengeti is nonsense.

I wish you would take the time to go up there and see it, by the

way.

It is nonsense.

Secondly, may I suggest respectfully that the caribou argument

is full of holes. The so-called calving area, as has been said before,

is not an aberration. Three years in a row they calved in a migratory route, not in this so-called hospital room. This is something

that has been brought up by certain environmental groups.

And thirdly, the people that live in that area, that live on those

caribou say this can do no harm to the caribou, the Alaska native.

And that is something I think you ought to listen to, instead of the

environmental community that knows diddly-squat about this issue

period.

And thirdly, may I suggest that Rhode’s idea of the refuge—when

this area was considered and was established as a refuge, it was

said to be open for oil drilling. That was specifically in the legislation by this Congress.

And then fifth, may I suggest is when we pass the Alaska National Lands Act, Senator Tongass and Senator Jackson and Senator Stevens and, yes, Congressman Udall, agreed to let the 1002

area open for oil development, if it was decided it was important

to this nation.

This was never a wilderness area. It was a refuge to be open for

drilling, and we set aside approximately 17 million acres as wilderness area, but left the 1002 area open, the barren, flat area of the

whole refuge area that I have been on many times.

So this area is and has one of the largest, I believe, deposits of

oil. To say we can’t drill there, and it will do irreparable harm, is

really a factitious argument because we can. We have proven it in

the Alpine field; we have proven the new technologies from the

time we first opened Prudhoe Bay.

Before everybody jumps off this cliff because you are responding

to the environmental community, not scientifically, I would suggest

respectively you go up there.

Mr. Inslee went up and took a lot of pictures that have nothing

to do with the 1002 area. It is what you see in the postcards. It

is what you see in the propaganda on the television by the environmental community.

It is a dishonest presentation of so-called facts.

46

The facts are, this is 74 miles away from the existing pipeline,

the largest single deposit of oil left in United States that should be

developed for this country.

It is not my oil; it is your oil. But it should be developed for this

country.

No one has said during this hearing anything about the moneys

we are spending overseas to the OPEC countries, the billions of

dollars you send over out of your taxpayers’ pocket. Why don’t you

talk about that for awhile?

The money they take that bleeds this economy; the money that

goes into those countries would take and be an enemy of this country.

No one says anything about that. You are worried about something that does not exist, an area that should be drilled for this nation, if you believe in this nation.

Now, if you believe in the foreign countries, then you will keep

supporting the system that is in place now, the importation of foreign oil, and be dependent upon. That is what we have been.

Billions of dollars. The trade deficit we have today is not because

of manufactured TVs and such. It is because of the importation of

oil—refined oil and crude oil and gas.

And yet we try to develop something.

And this President, Madam Secretary, may I suggest, this President is tying to lead this country out of a terrible, terrible problem

that this Congress and previous administrations have allowed to

happen. And I commend him for that. I commend you for it.

Mr. KIND. Will the gentleman yield for a question?

Mr. YOUNG. Not until I am finished. I am on my soapbox right

now.

[Laughter.]

Mr. KIND. I know you are.

[Laughter.]

I hate to interrupt.

Mr. YOUNG. We sit here in Congress and grouse and complain

and talk about conservation and talk about all of the good things.

Where were you the last 20 years?

I have been trying to open this thing and did it in 1995, trying

to get production online and refineries built in place, and nobody

says, ‘‘Not in my backyard. We will buy it from overseas.’’ Bleeding

your taxpayers.

I think you ought to be ashamed of yourselves. I think you ought

to think about this country for a change. It is not about your election. Think about what is right for this country. It is not about

those interest groups that say, ‘‘Oh, we can’t do it.’’

Let’s think about America for a change.

Mr. KIND. Will the gentleman yield for question?

Mr. YOUNG. I will yield for a question.

The CHAIRMAN. Hang on a minute.

Does the gentleman ask for an additional minute for the gentleman from Alaska to respond for a question?

Mr. KIND. Without objection.

The CHAIRMAN. The gentleman asks without objection one additional minute.

47

Mr. KIND. We certainly appreciate the knowledge and experience

that the gentleman from Alaska brings to this debate, and it is a

very important debate.

But I wondering if the gentleman from Alaska had an opportunity to review the Wall Street Journal article that appeared just

yesterday. And I know when I raised this issue during the June 6

hearing, citing the Anchorage Daily News, you called that paper I

think it was ‘‘piece of rag.’’ But I am wondering if you have had a chance to review the Wall

Street Journal article in regard to the oil safety concerns that were

raised in it, the safety inspection teams that are currently in place

with current drilling operations in Alaska, and if you may be able

to provide the rest of the members on the Committee with your refutation of the facts contained in the Wall Street Journal article.

I think that would be— Mr. YOUNG. Well, in the first place, I don’t usually read that rag,

by the way. That is number one.

Secondly, they say Alaska is assigned more inspectors per well

than either Indiana or Louisiana. This is the most heavily inspected oil field in the world. That is what people don’t understand.

We have done the job right. We have had problems, yes, because

it was a project built too soon because this Congress in fact said

had to be done. And I don’t want to go through that again.

Right now we have the time to do what is correct. And this Secretary says she will do it correctly. We can assure it in the legislation.

Remember, we have more inspectors in Alaska than Indiana and

Louisiana all put together, the most inspected oil field in the

world—in the world.

And so I am suggesting it can be done. But you would say it can’t

be done because you are worried about someone’s presentation

about the environment. It has nothing to do with environment. It

has nothing to do with the environment.

If I didn’t think we couldn’t do this correctly, I wouldn’t be supporting it. I have always said; I always will. If I thought it hurt

the caribou, I wouldn’t be supporting it.

Mr. KIND. Well, I guess that is completely contrary to what the

article reads in yesterday’s Wall Street Journal, so if you have different facts, I think it would be helpful.

Mr. YOUNG. Well, I would gladly give you different facts. By the

way, if you believe everything—

Mrs. CUBIN. Regular order.

Mr. Chairman, regular order.

Mr. YOUNG. Are you regulating me?

[Laughter.]

The CHAIRMAN. The time of both gentlemen has expired.

The gentlelady from Minnesota. The gentlelady from Minnesota

is recognized.

Ms. MCCOLLUM. Thank you, Mr. Chair.

And, Secretary Norton, I do have some questions, although

tempting it would be to get in the middle of the rhetoric on both

sides here.

Could you tell me what, from reading your letter, what the goals

are going to be for the regulations, state regulations, Federal reguVerDate 11-MAY-2000 10:18 May 16, 2002 Jkt 000000 PO 00000 Frm 00051 Fmt 6633 Sfmt 6602 73674.TXT HRESOUR1 PsN: HRESOUR1
48

lations? Are you going to look at perhaps some different regulations, more stringent because being in the Arctic National Wildlife

Refuge?

Secretary NORTON. The regulations that we would like to see are

very stringent regulations, and the ones that are outlined in

H.R. 2436 meet that standard. They are the most stringent regulations that are in any statute, as far as oil and gas operations are

concerned.

Ms. MCCOLLUM. So, Madam Secretary, it is your opinion that we

don’t need to look at doing anything different in this area, with all

the controversy going on between the two groups, to do anything

more?

Secretary NORTON. I am saying we are doing something that is

quite different. We are doing something that is quite stringent.

Ms. MCCOLLUM. Well, Madam Secretary, you said you were

using regulations that are already in place.

Secretary NORTON. No, no, that are in the proposed legislation.

Ms. MCCOLLUM. Yes. I mean, they are there. You have already

decided what they are going to be. We have the right to amend,

add to them, but you have laid them out.

Could you please tell me, or get back to me—and I still am waiting to hear back from the letter I sent you on the Great Lakes drilling; I realize that you have been really busy, but I am assuming

you got it, although I didn’t get an acknowledgement.

Could you please get back to me with what your definition of reclamation is, because that can be very wide open? I don’t know if

you mean removing any gravel if gravel roads are there, making

sure that water is restored if water is pumped out.

Because when I visited some of the oil sites, they were working

very, very hard on coming up with scientific ways of doing reclamation in the sites that are in the Prudhoe Bay area. And I commend

the oil companies for working on it.

But they had different types of reclamation going on, trying to

figure out which would work best and which would be least disruptive.

And then, could you tell me, is it the Department of Interior’s intention to treat both the elected leaders, the tribal leaders, at the

same scale as those who are serving on the tribal corporation? Does

elected leadership have any more value, any more input to you,

when you are discussing with individuals versus the tribal corporations? Because I noticed in the bill that they appear to be given

equal weight.

So my basic questions are, the standards that you have come up

with, how do they compare with what is going on with the scientific

studies that are going up there, with the Arctic council, with how

that is going to interplay with what is going on with the global

warming, with what is going on with what is happening with the

permafrost in the area, with what is going on with the ozone in the

area.

Because I agree with some of the comments the gentleman from

Alaska made. You know, this isn’t just about the caribou. This is

about the air, this about the water quality and everything else.

And from what I witnessed up there, British Petroleum wants to

do a good job. I think that they are capable of doing a good job

49

much later on, in the future, than they are now, without leaving

an industrial footprint that is there.

But I want some followup on the questions. And I will submit

those again to you in writing.

Thank you very much, Mr. Chairman, for the time.

And thank you for staying.

Secretary NORTON. Thank you.

The CHAIRMAN. The gentleman from Utah, Mr. Cannon.

Mr. CANNON. Thank you, Mr. Chairman.

And, Madam Secretary, thank you for being here. I appreciate

that.

And I also appreciate your contributions over a very long period

of time to the careful development and balance with which we use

our natural resources.

Let me just ask you, actually, a couple of questions that you can

respond to, I hope.

This legislation places great emphasis on conducting a comprehensive inventory of the energy resources on our Federal lands.

Do you think this is necessary? And if so, what information do you

think we could learn from this activity?

Secretary NORTON. I think it is important for us to examine what

are the areas that have the highest potential for energy sources,

whether that is wind or geothermal or the more traditional sources.

That helps us in our planning process to identify those areas where

we can have that type of energy with the least environmental impact.

And so I think this gives us the opportunity to look across the

board and to make intelligent decisions about how to balance environmental protection and energy needs.

Mr. CANNON. We have done these kinds of inventories many

times in our history. In fact, I ran into a book recently that was

published in the century before the last century about mineral resources in Utah, for instance. A great little interesting piece based

on very old technology.

We have done a lot of things. We have a lot of technology that

helps us assess what our energy resources are.

And secondly, we have some new things that we are looking at

for energy. As you mentioned, wind and thermal and other kinds

of things.

Do you expect that if we do an inventory like this we will come

up with some new insights and new possibilities for development

in an environmentally friendly fashion?

Secretary NORTON. I certainly hope that that is what we find

from those kinds of inventories.

Mr. CANNON. By doing this inventory, do we do anything that

would put Federal lands at risk? In the process of conducting an

inventory, is there anything that would be damaging or a matter

of concern to the lands?

Secretary NORTON. Not that I am envisioning at this point.

Mr. CANNON. I mean, it seems to me these are noninvasive kinds

of things, generally speaking.

Secretary NORTON. Right.

Mr. CANNON. It is a matter of coordinating data. It is a matter

of finding what is there, looking with new technology.

50

But you are not anticipating in this inventory that we would do

anything destructive? We are not going to cut any roads or do crazy

new things, are we?

Secretary NORTON. What I am anticipating is largely looking at

the information that we already have and looking at the kinds of

information that we would get through our ongoing planning processes, just to make sure that we have really consolidated the information and thoroughly understand the big picture.

Mr. CANNON. Let me just point out that understanding the big

picture I think is going to be very, very important, partly because

we are using an enormous amount of energy that comes from other

countries and looking to exploit areas around the world that are

not going to have the environmental care taken with them that we

would take in America.

So if we care about the Earth as a whole, we ought to be in

America not just shunting off the responsibility to other countries

but taking an affirmative, aggressive role in deciding what the resources are, what the costs of developing them are, and how we can

protect and guard our stewardship in the process.

Enough of my homilies, by the way. Let me ask another question.

The national energy policy in its first recommendation suggested

any regulatory activity that affects energy should include a detailed

statement regarding the impacts of that action.

Do you believe that this would apply to negotiations that could

affect power production from Federal hydropower facilities?

Secretary NORTON. Yes.

Mr. CANNON. Could you elaborate?

[Laughter.]

Secretary NORTON. Okay.

I think that we need to consider hydropower as one of our resources, looking at how we can enhance hydropower production

from existing facilities.

We have a lot of balancing that needs to take place, especially

in years like this year where we have a lack of water through much

of our territory that has Bureau of Reclamation projects. And so we

need to factor in energy as one of the considerations that we have

in trying to manage those projects.

Mr. CANNON. With that in— Secretary NORTON. This is really an analysis kind of thing that

we would go through.

Mr. CANNON. As part of that analysis, are you looking at the Colorado River and the Glen Canyon Dam and other dams there, and

their peaking capacity and how we can make adjustments to help

meet the peak power demands in the Southwest?

Secretary NORTON. That is an ongoing issue that we fairly continually look at as part of our management.

Mr. CANNON. I notice my time has expired, so whatever is left,

I yield back, Mr. Chairman.

The CHAIRMAN. Thank you.

The gentleman from Massachusetts, Mr. Markey.

And happy birthday on your 29th birthday.

Mr. MARKEY. Thank you, Mr. Chairman, very much. I appreciate

it.

Mr. YOUNG. His hair used to be black.

51

[Laughter.]

Mr. MARKEY. That is the cruelest cut of all. You know that.

[Laughter.]

Thank you, Mr. Chairman.

Let me turn, Madam Secretary, to the issue of the red dot.

[Laughter.]

Now, everyone in the room is familiar with the red dot. The red

dot has been circulated in many forms, Madam Secretary, most recently in the form of a mousepad that got sent to each of our districts. But it is on every single document that is sent out by Arctic

Power or any of the advocates.

And it asserts that the footprint in the refuge from the drilling

would only represent 2,000 acres, just a little, teeny, tiny red dot.

[Laughter.]

Now, who could object to that little red dot?

[Laughter.]

So the first poster here shows you the little red dot in larger

scale placed randomly on the 1002 area of the refuge, the area

where some of the Committee would start drilling.

As you know, this red dot is intended to mislead us into believing

that the impact of the refuge would be very, very small. Who could

object to that?

And I would like to just correct that misinformation today,

Madam Secretary, with your assistance, if I could.

Now, none of us of course know exactly what the industry will

do if we let them loose in the refuge—

[Laughter.]

—because drilling and producing oil is a messy, inexact, unpredictable business.

But one thing we know for certain: It won’t look anything like

this little, teeny, tiny red dot on a white background.

For one thing, we are talking about a delicate and pristine ecosystem that has escaped the interference of human development for

eons.

Now, this first transparency begins to give you a visual feel for

some of the wildlife values that are at stake. This data is all based

on official reports of the U.S. Fish and Wildlife Service.

The yellow area is the area typically used by the Porcupine River

caribou herd for giving birth and regaining energy for the migration that has occurred every year for eternity, but always brings

the herd back to the 1002 area. Always. For eons.

The blue triangles and the pink squares show the spawning and

migration routes of fish. The black crosses represent the denning

locations of radio-collared female polar bears. The light green represents the common use areas of the tundra swans. The maroon

dot shows the distribution of radio-collared musk oxen.

My point is that this is a very special refuge area, set aside to

protect a one-of-a-kind ecosystem. This is the reason this are is

called the biological heart of the Arctic refuge.

And I guess you could argue that our heart is just a very small

part of our body. Why would anyone mind if they went into your

heart—

[Laughter.]

52

—as opposed to, you know, your fingers? It’s all the same, huh?

The heart is the same as any other part.

So this is just a little dot, say the drillers.

But the question is, how do you produce and deliver oil from the

dot? Is the oil going to come out by helicopter? Is it going to come

out by balloon? Maybe we could you use the Russian transport that

brought back our reconnaissance plane in pieces from China.

How are we going to get the oil out from the heart?

Maybe we will do it with a nice big pipeline. Ah, a pipeline to

bring out oil. Let’s see what that might look like, if we actually had

to build a pipeline. Oh, a little bit different.

[Laughter.]

Now, this is taken from the 1987 environmental impact statement of the Department of Interior. As you can see, it is not a red

dot. It represents impacts estimated by the Department of Interior

spreading over 130,000 acres to 303,000 acres, one-fifth of the entire 1002 area—not a 2,000-acre dot.

Now, this shows the pipeline needed to get the oil out of the refuge, the feeder lines to the well heads and the impact area around

the facilities.

The surface area is extensive and stretches across the entire refuge. It shows oil development less as a cartoon and more as a serious—may I have one additional minute, Mr. Chairman?

The CHAIRMAN. The gentleman has one additional minute.

Mr. MARKEY. I can’t help but notice that it looks a huge, pink

snake— [Laughter.]

—that sprawls over the entire area.

So my question to you, Madam Secretary, is this: Do you expect

the ultimate result of drilling in the refuge to look like the red dot

sent around as propaganda to every Member of Congress by the

drillers? Or do you expect it to look more like the pink snake that

Department of Interior describes in its own research?

Secretary NORTON. Mr. Chairman, if I may reply to that?

I anticipate and I double-checked just yesterday with the technical people on my staff, that 2,000 acres is the anticipated footprint of the drilling activities, and that is at full production.

Mr. MARKEY. How about the pipelines? What about the pipelines?

Secretary NORTON. The pipelines, I have seen pipelines that were

put in just a few years ago. They have no roadways next to them.

It is simply the pipe itself.

And that is something that will be a part of the transportation

facilities. But it is not the kind of huge, wide highway or even larger that you depict on that.

The technology has moved forward so that the impacts that

would have been predicted 15 years ago are dramatically less than

the impact that we would anticipate today.

Mr. MARKEY. This is based on Department of Interior information.

Secretary NORTON. It is based on 15-year-old information.

Mr. MARKEY. You can’t get the oil out without constructing a

pipeline.

The CHAIRMAN. The time of the gentleman has expired.

53

Madam Secretary, you are the most popular witness we have had

this year.

[Laughter.]

And we have some very patient people waiting here, but I have

to ask the gentleman from Alaska, whose district this is, is that dot

in the right spot?

Mr. YOUNG. That is a cumulative acreage disturbed by the drilling. That is all it is, trying to bring the size to the 1002 area.

And it is not misleading at all. And, staff, it is not misleading

at all.

Mr. MARKEY. So the lobbyists are wrong, then.

Mr. YOUNG. No, the dot is exactly the amount of acreage that

will be disturbed by the drilling in 1002. You keep forgetting this

is a small area set aside by this Congress to drill in.

Mr. MARKEY. So we should stop having lobbyists send us this

erroneous— Mr. YOUNG. Who said it was wrong?

Mr. MARKEY. Oh, okay.

Mr. YOUNG. I mean, if you can’t understand a dot, you ought to

start eating M&Ms.

[Laughter.]

Mr. MARKEY. This dot is inaccurate.

The CHAIRMAN. The time of the gentleman has expired.

The gentleman from Tennessee, Mr. Duncan.

Thank you, Mr. Markey.

Mr. DUNCAN. Thank you, Mr. Chairman.

I had to Chair a Subcommittee hearing at the Water Resources

and Environment Subcommittee, so I won’t try to repeat any questions that the Secretary has already been asked.

I will simply say that Mr. Cannon said the key word awhile ago,

I think, when he said the word balance. And I think that is what

we need to try to get back to, some balance and moderation in our

environmental policies.

We have these groups all over the country that protest any time

that anybody tries to dig for any coal or drill for any oil or cut any

trees or produce any natural gas. And what they are doing now is

really hurting the poor and the low-income and the working people

of this country because they keep destroying jobs, they keep driving

up the cost of energy.

And it may not be hurting some of these environmental elitists,

but it is starting to hurt a lot of middle-income and lower-income

people. And so I applaud the President for this energy plan that

he has come forward with.

In fact, I think just a few years ago, it probably would have been

considered a very liberal plan because it does have a great deal in

there about conservation and development of alternative resources

and things of that type.

But some of these groups have to keep raising the bar and have

to keep telling people how bad things are, and have to keep denying that there has been improvements over the last 25 or 30 years

so that they can keep getting in their big contributions. And I

think that is what a lot of this is about.

But I will repeat that we are letting the energy debate be controlled by extremists. And what we need to do is get some balance

54

and moderation. And I think that is what the President’s plan

does.

I would imagine, and probably Chairman Young can tell us more

about this, but I can imagine that many of these same arguments

were used many years ago to stop the development in Prudhoe Bay

and the pipeline that we have. And I hate to think where we would

be in this country today if we hadn’t had all those billions of barrels of oil.

As he pointed out a few minutes ago, it is certainly a matter of

national security. I am sure of these contributions to these groups

come from the OPEC countries, and foreign companies, and so

forth, that stand to gain huge profits if we don’t develop any of our

own natural resources.

But I mentioned in here one time, when the Secretary was here

before, that I had the mayor of a small town in my district, Englewood, Tennessee, who came to me a few months ago and said that

he had senior citizens in his district who were having to choose between eating or paying their utility bills, because we are letting

these extremists drive up the price of energy.

And I have mentioned in here before that I represent about half

of the Great Smokey Mountains National Park. We have between

9 and 10 million visitors a year to that park. I read in Time magazine about 3 months ago that the entire Arctic National Wildlife

Refuge had 1,000 visitors last year to 19.8 million acres.

That is 35 times the size of the Great Smokies. Yet all of these

9 or 10 million visitors we get to the Great Smokies think it is

huge.

And most people look at a map of the entire United States on one

little page in a book, and they don’t realize how unbelievably huge

this country is. And we just can’t fathom how huge this Arctic wildlife refuge is.

And as Chairman Young said, almost all of the people that I

have talked to who are opposing this drilling have never been there

before. I have been up there twice.

And I can tell you that when these groups show these pictures

of the mountains and the trees in opposing this, none of this drilling is going where the mountains and the trees and the Brooks

Range are.

It is amazing how they have distorted this issue almost worse

than Nazi propaganda.

And I repeat that who they are hurting are the poor and the

lower income and the working people of this country.

So I applaud you, Madam Secretary, for trying to bring some balance and moderation into our environmental policies. And I know

it is going to be difficult, but I hope you are successful. And I thank

you for being here today.

The CHAIRMAN. I thank the gentleman.

The gentleman from Oklahoma, Mr. Carson.

Mr. CARSON. Thank you, Mr. Chairman.

And thank you also, Madam Secretary, for staying around.

You recently visited my own congressional district, the Tall

Grass Prairie in Pawhuska, Oklahoma, to exemplify your interest

in development alongside ecological preservation as well. So thank

you for coming to northeast Oklahoma.

55

At the same time, I am sympathetic to opening up ANWR for exploration and production. You know, the EIA at the Department of

Energy says that price of oil, in 10 years, per barrel is going to be

$17 to $18 in time.

Obviously, the amount of recoverable oil in ANWR is extremely

sensitive to what the price of world oil going to be.

Are there any estimates that you have, if the Department of Energy’s predictions are right, about how much recoverable oil there

is going to be in ANWR?

Secretary NORTON. Our estimate that looks just at the Federal

areas within ANWR is 7.7 billion barrels of oil.

Mr. CARSON. And that is based on what assumptions, though,

about price, percentage recoverability, and things like that?

Obviously, it is sensitive to a number of important modeling assumptions here about the world oil market. I mean, I guess there

seems to be a strong sense, if what the Department of Energy is

true, that you are not going to have much recoverable oil, even

though I am sympathetic to the desire to open it up. I guess it is

an empirical question of how much is actually there.

Secretary NORTON. I would happy to provide you with all of the

details on that. I know it is a very complex type of analysis.

Mr. CARSON. Sure.

Secretary NORTON. And I would be happy to provide you with the

basis for our determination.

Mr. CARSON. One last question for you on a related subject about

hydropower. That section of the bill that deals with hydropower,

what changes does it make in the current regulatory scheme that

deals with hydropower and how does it address the crisis in licensing of hydropower facilities that we are having?

Secretary NORTON. It is my understanding that that is handled

in separate legislation, that this is primarily focusing on the aspects that look at enhancing what we have on existing Federal Bureau of Reclamation type dams, for example, so that we are making

sure that the dams we are currently operating are maximizing

their hydropower capability.

Mr. CARSON. Thank you for staying this afternoon as well.

And thank you, Mr. Chairman.

The CHAIRMAN. I thank the gentleman.

The gentlelady from Wyoming.

Mrs. CUBIN. Thank you, Mr. Chairman.

And thank you, Madam Secretary, for being here. I too apologize

for not having been here earlier, so I won’t ask questions just to

have you repeat answers. But if there is something that we wanted

to ask that isn’t already covered, then if you wouldn’t mind, I will

submit that in writing to you.

Secretary NORTON. Great.

Mrs. CUBIN. One point that I want to make is that people who

don’t live in a place like I live in where you have mining and oil

and gas exploration—excuse me, Mr. Young.

The CHAIRMAN. The gentlelady will—

Mrs. CUBIN. Excuse me, this is really important. I am on your

side, too.

Can you imagine how he cowers in front of me?

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The point that I want to make is people like Mr. Young and Mr.

Hansen and myself, who live in areas where minerals are produced, where forests are harvested, we see every single day how it

is possible—not only possible, it is healthy for wildlife to be able

to live in amongst oil wells and mines.

And let me tell you about a thing. When I took some Members

of Congress back to my state because they were voting differently

on environmental issues every single time than I thought they

should, took them back to Wyoming. We went to the largest open

pit mine in the Western Hemisphere, the Black Thunder Mine.

And as we were driving out of the big pit, up on the edge, there

was overburden in a pile like that, and up on the very rim of the

mine was the biggest buck deer you have ever seen. And that buck

deer followed us along, followed us along, as we were driving out

of the mine pit in the bus.

We then went to a gas field, and Newt Gingrich was along, and

he was just astounded because a rabbit ran across his foot.

There was a mother pronghorn antelope and her baby sitting in

the shadow of a compressor station.

As we went on, there were literally herds of antelope right intermingled in between the pumpers on an oil field.

And so people who look at illustrations like this and say, ‘‘Oh my

gosh, those animals can’t live there if minerals are produced or if

man steps foot on that,’’ they are just dead wrong.

And besides that, the pink snake looks like something way worse

than a pink snake to me.

[Laughter.]

And I just want to remind everybody that that is 15 years old,

that footprint of that pipeline. That is based on 15-year-old information.

And it simply isn’t fair. It shouldn’t be on the record.

And last point is, wildlife can live quite nicely and reproduce and

have a good home, and allow for development of minerals, too.

Thank you so much for being here.

The CHAIRMAN. Madam Secretary, you have the record. You have

worn them all out.

Secretary NORTON. Thank you.

The CHAIRMAN. And we appreciate your excellent testimony and

your patience and your good answers.

And I also want to thank all the other witnesses who have been

here. We are going to go ahead with the hearing. These are all important things that we want to hear.

And we will excuse you and ask our former colleague, the Honorable J. Bennett Johnston, former Senator from the State of Louisiana, to please come up.

Senator, we appreciate you being with us. Thank you so much.

We appreciate your patience. We will turn the time to you, sir.

STATEMENT OF THE HONORABLE J. BENNETT JOHNSTON,

FORMER SENATOR FROM THE STATE OF LOUISIANA, JOHNSTON & ASSOCIATES, WASHINGTON, D.C.

Mr. JOHNSTON. Thank you very much, Mr. Chairman. I am delighted to be here, back with the Committee again, in support of

your bill H.R. 2436.

57

I am testifying for myself and not for Chevron, on whose board

I serve, although I would assume—I have not discussed the bill

with them—I would assume they would support the bill because I

think is common sense, and I think it supports the policy of this

country to have a reasonable energy policy.

Mr. Chairman, I was asked to focus on royalty relief today. I will

be prepared on other parts of the bill, with which I am quite familiar.

But let me say, with royalty relief, in 1995, when we worked

with Mr. Young and others on this Committee and you to give royalty relief, the reason was that domestic resources were depleting

fast.

At that time, 50 percent of our oil was imported. Today it is 57

percent. By 2020, it is supposed to be 70 percent.

And with that importation, we export our jobs, we export our tax

money, we export the economic impact which domestic production

will give us. And we were not getting the kind of production in the

Gulf of Mexico that we thought we should, so we came up with a

proposal to give incentives to develop and drill in the Gulf of Mexico.

The theory was that in a competitive market, that the value of

that lease will be reflected. The higher the royalty, the lower the

bonus; the lower the royalty, the higher the bonus—that the real

value will be reflected.

We had economic models of that we projected to say that if we

gave royalty relief, that we would have higher bonuses, we would

have more activity, we would have more wells developed.

We were greatly challenged, Mr. Chairman, you will recall, on

the figures that we put out and that MMS put out reflecting what

we thought would be the success of this bill. In fact, Mr. Chairman,

the bill was much more successful than even what we had projected.

The acting director MMS, Ms. Kelleher, said after the first 2

years that deep water royalty relief for new leases has contributed

to record-breaking lease sales in the central and western gulf over

the last 2 years. A January 2000 study of MMS showed a large increase in bidding activity partly attributable to royalty relief.

Bonuses have exceeded $5 billion in this period of time. Investment in the period of 1998 to 2005 is estimated to be $9.5 billion

in drilling alone.

So, Mr. Chairman, I would say, to quote the old adage, ‘‘If it ain’t

broke, don’t fix it.’’ And if it is a huge success, don’t change it.

Now, Mr. Chairman, I can tell you that exploration and production budgets of oil companies are done on a very rational basis.

What you do is you balance risk and reward. There are huge risks

in drilling for oil and gas.

In the central gulf, about between one in three and one in four

wells produce a geologic success; that is, you find oil in producible

quantities.

But more importantly, Mr. Chairman, of those where you find

oil, only one-third are an economic success.

So, in effect, about 10 percent of the wells drilled, of the exploration programs in the Gulf of Mexico, lead to wells that produce

oil. That means that nine-tenths do not produce.

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So, in effect, Mr. Chairman, what the royalty relief bill has done

is, first, give more bonuses, because when nine out of 10 wells are

not going to produce, if you get the up-front bonuses from that, get

the use of that money in the meantime, as we have done far exceeding what the estimates were, then you get money which you

would not get for nine out of 10 of those wells.

Secondly, and this is very important, you reduce the threshold of

the reserve size necessary to support production. The size of the

field necessary to support production statistically has been shown

to be at about the median size of discovered fields in the gulf. That

median size is 143 million barrels of oil or oil equivalent.

So that means that for a field that is 143 million barrels of oil

and found in the Gulf of Mexico, the chances are 50-50 that it won’t

be produced. Or in other words, you can have fields of 100 million

barrels that it is too expensive to produce.

Now, when you have royalty relief, you reduce that size because,

first of all, you put your investment up front and that which is already sunk is not taken into consideration by a company as to its

expense of developing that well. And to the extent that they can

forego payment of royalties, then it makes it possible to develop a

smaller field.

Mr. Chairman, that has been our experience. We have proven

that this is so. I mean, MMS says, you know, incredibly successful

program.

The third thing the royalty relief does, Mr. Chairman, is it helps

keeps the independents and the small majors in the business.

In 1985, 45 percent of the 1.14 billion barrels of oil or oil equivalent in the gulf were produced by independents. By 1998, this had

increased from 45 percent to 55 percent. Independents now account

for 80 percent of the acreage under lease, 90 percent of the dollars

bid in the last two lease sales.

Now, Mr. Chairman, it is much more difficult for independents

and the small majors to invest in these deep water drilling programs. So this program of royalty relief is particularly important

for them.

In the very deep water, your bill provides, as the administration

does, over 800 feet, it is 9 million barrels of relief. In 1,600 meters,

it is 12 million. That is really not enough in the very deep water

to account for very much incentive.

In the shallower depths, where the independents play, between

200 and 400 meters where you provide 17.5 million barrels, and between 400 and 800 meters where you provide 52.5 million barrels

of relief, this is important.

Mr. Chairman, it is not a giveaway. Look, you get it on the front

end. I mean, to say that this is a giveaway is to suggest that oil

companies don’t recognize the value of that which they are bidding

on. They are going to bid in a competitive market what they think

it is worth. And if there is royalty relief in it, their bid is going to

reflect that. That is what experience has shown.

Mr. Chairman, your study I think is a good thing. I am not sure

that the National Academy of Sciences is the one to do it because

it is largely a question of statistics, to go analyze what has happened. It is largely a question of economics, to examine the prospect in the Gulf of Mexico as opposed to Nigeria, Angola,

59

Kazakhstan, other places around the world that have different

kinds of risks, political risks and others.

I might say that there political risk in the United States in drilling as well.

But it is not a giveaway. To the contrary, what it will do is spur

drilling by the independents in those shallower, still used to be

very deep water, but shallower, up to 800-meter proposals.

Mr. Chairman, I don’t know what this Congress is going to do

on ANWR. I support it strongly. Always have, although I know you

have an uphill fight.

But if you look at what this Congress and other Congresses have

done, not very encouraging on ANWR or on the Destin Dome. They

want to take that out.

Lease Sale 181 worked out by Governor Lawton Chiles and Governor Fob James with Bruce Babbitt, and that has been declared

off-limits.

One hundred percent of the East Coast is off-limits. One hundred

percent of the West Coast is off-limits. I think now the Great Lakes

is off-limits. Forty percent of the Rocky Mountains is off-limits.

I mean, most of it is off-limits. Now, we have a program that has

succeeded, Mr. Chairman. We can prove it. We have shown it.

And for goodness sake, Mr. Chairman, keep the faith on what

you are doing in your bill, because it has proved to be successful.

It will work, and it should be allowed to continue.

The CHAIRMAN. Thank you, Senator.

Questions for the Senator?

Mr. Young?

Mr. YOUNG. No questions. Thank you, Senator. And we did work

on that bill.

And unfortunately, as you know, it has worked greatly, but a lot

of the people—not everybody—on that side of the aisle still look

upon it as a giveaway, it won’t work, there is no need for it.

But I saw what it did in the gulf. I will continue to support that

concept, but I wish they had been here to listen. We have one Democrat and two Republicans left in this hearing, and it is unfortunate that they are not here to listen to the facts. But sometimes

facts are not part of their ball game.

But you bring up a good point, and I think we ought to take into

consideration your recommendation about the study. Maybe if you

have a recommendation about who should do it, it would be helpful.

And secondly, if you have any suggestions on how to use this royalty incentive onshore as well offshore, I think that should be encouraged, because my goal is try to get us back down to maybe 50

percent. I don’t think we will ever solely self-sufficient, but we

shouldn’t be so dependent on foreign countries.

And thank you for your testimony, Senator.

Mr. JOHNSTON. Thank you, Chairman Young.

The CHAIRMAN. The gentleman from Oklahoma, Mr. Carson.

Mr. CARSON. No questions.

The CHAIRMAN. The gentleman from Tennessee.

Mr. DUNCAN. Thank you, Mr. Chairman.

I won’t ask any questions. I will just say, I was here when Senator Johnston testified originally on this royalty relief bill, and I

60

am very pleased at the results you just mentioned, especially about

the independents. It seems that everything we do up here runs out

the small businesses first and then it starts getting the mediumsized ones.

And just for example, I have been told we have 157 small coal

companies in east Tennessee in 1978; now we have none, because

we opened up a office of surface mining and the environmental

groups came in. And I am sure they think it is good that there is

no coal production in east Tennessee, but that destroyed a lot of

jobs.

And some of these young people wonder why they can’t find good

jobs with just bachelor degrees now and why they are forced to go

to graduate school, but we send our best jobs to other countries.

But I thank you for the good work that you did on that legislation, and I am very pleased that you have come here today to testify and tell us these good results.

Thank you.

Mr. JOHNSTON. Thank you very much.

The CHAIRMAN. The gentlelady from Wyoming.

Mrs. CUBIN. Thank you, Mr. Chairman.

And thank you for being here, too.

I just have a couple of brief questions.

The 1995 Deep Water Royalty Relief Act was clearly successful

because the lessees, as you pointed out, had a better reason to pay

more in bonuses to the government. And so, whether or not the

mineral was produced, the bonus was paid anyway.

I have never personally seen a spreadsheet, if you will, balancing

out the effect of the royalty relief and bonus versus what the royalty would have been. Do you have any information like that, that

we could, in a simplified way, present to our colleagues to try to

help sell this deal?

Mr. JOHNSTON. Well, the information is available because we

know the precise number of barrels that have been foregone.

What you have is, the fields that have been discovered and are

producing, in those situations, it is a very good deal for the company that is producing the field. But what you have to do, is you

have to balance that where they find the field and they find enough

oil to produce it and to put in— Mrs. CUBIN. So the intangibles also play into it? In other words,

there are discoveries that otherwise probably wouldn’t have been

discovered. Is that what you are saying?

Mr. JOHNSTON. Yes, that is right. I mean, nine out of 10 of those

wells out there are economic dry holes.

Mrs. CUBIN. Right. Right.

Mr. JOHNSTON. Two-thirds are really dry holes. And of those that

hit, two-thirds are economic dry holes because they are too expensive to produce.

So if you have royalty relief, you can deduct that amount out of

what it would cost you to develop the field.

Mrs. CUBIN. Right.

Another thing that is important to me and why I wanted to have

deep water royalty relief in the energy bill is that we are, on our

side of the aisle, constantly being criticized as, you know, the water

boys for Big Oil.

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So would you explain—I know you covered it in your testimony— but would you explain just very precisely how this helps independents stay in the market and stay competitive instead of, you know,

just having to go up against the big money of Big Oil.

I far and away represent more people making their living because of independent operators than I do the majors. And so, you

know, you are criticized on the one hand because you do what you

can to support Big Oil. And then on the other hand, you are criticized when you try to help independents and smaller operators get

involved in something like this.

Could you just spell that out?

Mr. JOHNSTON. Yes, I would be glad to.

This really doesn’t help the majors, the big majors, very much,

because over 8,000 meters, it is only 9 million barrels, and 1,600

meters, it is only 12 million barrels. I mean, that compares to 87.5

million barrels in the previous bill in excess of 800 meters. So it

is down to a tenth of what it was.

And this really doesn’t help the majors very much.

It is a very important thing for the independents, who now are

drilling most of the wells. It is still a very high-risk and still very

expensive, in relative terms, in the shallower water.

The Miocene trend, for example, out there is red hot for independents but highly risky.

And, look, let me say this. You know, I understand the politics,

having been in the politics of energy and the substance of energy

now for 30 years. I understand Big Oil and how unpopular we are.

But if you think that it is such a good deal, I would tell these

people who think they are making a killing to go invest in the

stock. It is available to be purchased.

But do you know that Chevron, for example, on whose board I

serve, has a price-earning ratio of about 10. In other words, the

market thinks that is what they are worth. The average stock on

the New York Stock Exchange has a price-earning ratio in excess

of 20. The dot-coms, who have been going broke everywhere, a lot

of those still have—I think Microsoft is still in excess of 30.

So if it is such a good deal, then go buy the stock.

By the way, I think it is a good stock.

[Laughter.]

And we are making a lot of money right now.

Mrs. CUBIN. Thank you very much, Mr. Johnston.

Mr. YOUNG. [Presiding.] Thank you gentlelady. The time is up.

And, Senator, I do appreciate your insight. You have been

around a long time. You know this business.

I would suggest that you go talk to some of your allies on that

side of the aisle and explain the facts of life to them, because right

now you are really talking to the choir.

And I do thank you for being here, though—

Mr. JOHNSTON. Yes.

Mr. YOUNG. —and explaining the bill. I do appreciate it.

Mr. JOHNSTON. Let me just say one final comment for you, Mr.

Acting Chairman.

I took four trips up to ANWR with members of the Energy Committee and I well recall one trip. I had one particular Senator who

looked around and said, ‘‘This is all there is?’’ He said, ‘‘If I refuse

62

to allow drilling here, and I went back and tried to explain that

to people in the bar rooms in my state, why they would throw me

out of the Senate.’’

And guess what? A few weeks later that Senator voted no on

ANWR.

Mr. YOUNG. I understand.

Mr. JOHNSTON. So that is what you are facing. And that is why

I say it is an uphill fight.

Mr. YOUNG. Well, I hope that we will win it this year. If we

don’t, it will be because of those that don’t have the vision, as you

had in that royalty provision. And secondly, if they don’t do it, I

hope they all freeze in the dark big time.

And I said this all along, they continue to oppose this for no scientific reasons, for no facts, and it deeply disturbs me. But that is

going to be their bed that they have to sleep in.

Thank you, Senator.

Mr. FALEOMAVAEGA. Will the Chairman yield? Will the Chairman

yield?

Mr. YOUNG. Oh, yes, I am sorry. You just walked in. I am sorry.

Mr. FALEOMAVAEGA. Yes, I did. And I wanted to express my

apologies. Something took me out, but I wanted to pay my personal

respects to the gentleman from Louisiana, who for years had done

the tremendous jobs who come from those small insular areas. I

just wanted to let Senator Johnston know how much we appreciate

the work he has done to help our people. And I appreciate also his

presence here.

Mr. JOHNSTON. Well, thank you very much, Mr. Faleomavaega.

We have in fact worked for many years for the good of your people.

And you have done, if I may be permitted to say, an excellent job

for Samoa.

The CHAIRMAN. [Presiding.] Thank you, Senator. I appreciate you

being here.

Our last panel is Mr. Roger Herrera, of Arctic Power, Washington, DC; Mr. Richard Glenn, Arctic Slope Regional Corporation,

of Barrow, Alaska; Mr. Jerry Hood, International Brotherhood of

Teamsters, from Washington, DC; Mr. Adam Michael Kolton, Alaska Wilderness League, Washington, DC; and Ms. Linda Lance, the

Wilderness Society, Washington, DC.

Mr. YOUNG. Mr. Chairman?

The CHAIRMAN. The gentleman from Alaska.

Mr. YOUNG. Unfortunately, again, the other side of the aisle, Mr.

Inslee and the rest of them are not here.

Mr. Glenn is one of those people that lives in the area, represents those people in the area, is an Alaska native. And unfortunately, they are not being listened to. They are listening to the

Gwich’in, which is my group, which I belong to, which is 450 miles

away from where we are going to drill.

And by the way, Richard Glenn brought his wife. Arlene is in the

audience. Been sitting there very patiently, I understand, and his

daughter. And I thank both of them for being patient.

This congressional duty we have is sometimes very tiring and

very slow. But it deeply pleases me to have also Mr. Hood, and of

course everyone knows Roger Herrera.

63

And Mr. Hood is with International Brotherhood of Teamsters,

who happen to support this. I hope those people on that side of the

aisle remember that.

But welcome, for the Committee.

The CHAIRMAN. We appreciate you being here. And above all, we

sure appreciate your patience.

But as you noticed, the Secretary brought a lot of attention to

this issue. And it is a very important issue, and one we are very

concerned about. So, therefore, we wanted to take the time and let

all the members have it.

But believe me, the testimony you are about to give, we will pour

over every inch of it. So we do appreciate you being here.

I would like to take you in the order that I called you to the

panel: Mr. Herrera, Mr. Glenn, Mr. Hood, Mr. Kolton, and Ms.

Lance.

Mr. Herrera, I don’t know what they have told you before, but

we try to keep it within 5 minutes. I am sure most of you have

worked your testimony out for about that time, so we appreciate

it.

Mr. Herrera, the time is yours, sir.

STATEMENT OF ROGER C. HERRERA, ARCTIC POWER,

WASHINGTON, DC

Mr. HERRERA. Thank you, Mr. Chairman.

My name is Roger Herrera. And today I am representing Arctic

Power, which is a citizens’s grassroots organization mainly composed of Alaskans that support careful development of the Coastal

Plain.

I personally have spent most of my career working in the Arctic

as a geologist. I have literally lived way over a year in a tent on

the North Slope of Alaska and spent two summers and one cold

winter in the Arctic islands of Canada, much closer to the North

Pole than Alaska is.

So I have seen the Arctic in its worst moments and its most

beautiful moments. And they have certainly indelibly changed my

whole attitude to the area.

With regard to your legislation, Mr. Chairman, because in past

times I have played a role looking for oil in the North Slope for one

of the big oil companies, and also being responsible for environmental protection of the oil operations, I looked at the bill in the

light of that experience. And one thing that is very important with

regard to legislation covering activities in the Arctic is that it

mustn’t be too confining to prevent the ability for technology to expand beyond the regulatory control.

What has happened in the last 25 years in the Arctic is just that.

Technology has transformed the whole way of operating there for

the better, to improve environmental protection and improve the efficiency of the operations.

I think in this bill you have reached a nice balance in that regard. You have used all the technological improvements which

have been generated over the last 25 years, you have used all the

environmental protection which state of the art and experience has

shown to be necessary.

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But I think there is enough wiggle room for new technology even

better than the existing ones to evolve as time goes on. And that

is exactly what you should try to achieve when you are controlling

large oil operations on the Coastal Plain.

If I may, Mr. Chairman, I will just digress a little bit from my

written testimony to address the water problem which Mr. Holt

talked about earlier.

I spent a year of my life looking oil in the middle of the Sahara

Desert in southern Libya. And the Sahara Desert is a desert, as

we all know, just as the North Slope of Alaska is a desert. It

doesn’t have much rainfall in either area.

It is quite easy and routine to drill wells in the middle of the Sahara Desert where no fresh water exists. And in fact, the same

techniques that we use there will be used and have been used on

the North Slope of Alaska. One does not need to tap running fresh

water, especially in the wintertime, on the North Slope of Alaska

in order to drill oil wells.

First of all, one can use seawater and distill it quite comfortably.

In fact, most of the oil fields that are presently producing oil on the

North Slope of Alaska don’t use any freshwater at all. They all distill seawater.

If you are some distance away from the sea and it is to difficult

in the middle of winter to pipe the seawater to your location, you

simply drill a shallow hole beneath the permafrost 2,000 deep and

there in the geological formations is more saltwater than you have

ever seen in your life.

So once again, you use that water, distill it, and you have all the

freshwater you need.

With regard to making ice roads; first of all, you drive preferentially across the sea ice until you get the area where you want to

operate inland, and then you make an ice road over the tundra.

People seem to forget that in the wintertime, the North Slope of

Alaska is covered with snow. Snow is freshwater waiting to be

melted. And so all you do is put up a snow fence. Within 24 hours,

you have more snow than you have ever seen in your life because

of the winds that constantly blow there. You melt that and you

make your ice roads without disturbing the rivers and the fish and

all that sort of stuff. So it is not a practical concern.

I would just like to make one point further beyond my written

testimony, and that is only once today have we heard the term

OPEC. Mr. Young mentioned OPEC.

OPEC is controlling the world price of oil. And we are suffering

because of that control. If we don’t take advantage of the oil resources which we believe underlies the Coastal Plain to moderate

that OPEC control, we deserve the consequences of such control.

OPEC is looking after its own interests; it is not looking after the

interests of North America.

What Alaskans know and what Alaskans want you to know, Mr.

Chairman, is that the vast majority of us, 75 percent plus, support

careful development on the Coastal Plain. We have recognized for

the last 25 years that we have changed the history of the United

States of America because of the oil that has come out of Prudhoe

Bay and has benefited the whole nation.

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If Prudhoe Bay had not been discovered or the pipeline had not

been built, our whole history would have changed for the worse, no

doubt.

We think we can prolong that history in the future by careful development of the new oil beneath the Coastal Plain.

Thank you, Mr. Chairman.

[The prepared statement of Mr. Herrera follows:]

Statement of Roger C. Herrera, on behalf of Arctic Power

Mr. Chairman, My name is Roger Herrera. I am an Alaskan citizen and I have

been asked to represent Arctic Power today. Arctic Power is a grassroots, citizen’s

organization whose sole objective is to persuade Congress to open the Coastal Plain

of the Arctic National Wildlife Refuge (ANWR) to responsible oil and gas leasing.

Arctic Power has approximately 10,000 individual members, mostly Alaskans, and

represents all segments of Alaska people, of all political persuasions. It is funded

by individual contributions, plus generous grants from the State of Alaska approved

by the state legislature and governor. I, personally have lived in Alaska for almost

30 years and have been involved with its geology and the search for oil and gas

since 1960. I have spent many summers and several winters working on the North

Slope of Alaska and in the Canadian Arctic Islands with British Petroleum, where,

at different times, I was responsible for the exploration and environmental programs of the company. Because of that experience, I have accompanied scores of

members of Congress on their visits to the North Slope and the Coastal Plain, including members of your committee. I retired from BP in 1993 and am now a consultant to Arctic Power.

My long association with oil and gas exploration in the Arctic and my past responsibility for environmental protection in the region has allowed me to review, with

interest, the text of the Arctic Coastal Plain Domestic Energy Security Act of 2001.

It is a document which is a result of an evolution over the past 14 years during

which time many similar documents have been prepared and debated in the House

and Senate. Interestingly, none of the previous bills has been found wanting to the

extent that not one has suffered defeat in the committee or on the floor. However,

the fact that the issue has not been resolved indicates a certain resistance in the

minds of some people, probably based on their lack of intimate knowledge of the arctic.

My point is that the present bill is the product of many decades of experience,

not only of the preparation of legislative documents, but also, knowledge and practical know how of arctic operations and ways of protecting the arctic environment.

It is worth repeating that much of the technological change that can be recognized

in the oil industry’s operations over the past 30 years has resulted from ideas initiated on the North Slope of Alaska. These ideas, exemplified by treatment of waste

materials, long step-out horizontal wells, coiled tubing drilling, use of ice pads and

ice roads, new light-weight drilling rigs, etc., inevitably achieved the multiple objectives of more efficient, safer operations and more protection of the environment.

They incorporate technological improvements that make it easier to operate in the

harsh, dangerous, arctic winter and it has been the incentive supplied by the difficult climate coupled with the environmental responsibility of all Alaskans—especially the residents of the North Slope Borough—that has triggered that remarkable

evolutionary improvement. It has made the North Slope oil operations the cleanest

and most advanced in the world.

The language of H.R. — does nothing to diminish those benefits. It mandates that

best technology should continue to be used, but it resists the bureaucratic tendency

to stifle innovation by excessive rules. The bill gives great authority to the Secretary

of Interior to formulate appropriate regulations. One has to hope that that authority

will be used by staff with firsthand knowledge of the arctic that liaise closely with

the Eskimos and State of Alaska experts to achieve a win-win balance.

Such a balance can readily be established as exemplified by the Audubon Society

in its Rainey Sanctuary in Louisiana and its Baker Preserve in Michigan, where

careful oil and gas production has been quite compatible with nesting cranes and

other wildlife for many decades.

The arguments often voiced by more extreme environmental organizations that

the Coastal Plain cannot be developed in an environmentally acceptable way is opposed 75% of Alaskans (Dittman, 2001), to say nothing of the villagers of Kaktovik

(www.kaktovik.com) who are the only inhabitants of the Coastal Plain. It is remarkable that the Coastal Plain area, despite the rhetorical superlatives used inacVerDate 11-MAY-2000 10:18 May 16, 2002 Jkt 000000 PO 00000 Frm 00069 Fmt 6633 Sfmt 6621 73674.TXT HRESOUR1 PsN: HRESOUR1
66

curately to describe it, is one of the few federal land areas where the NIMBY syndrome does not apply. If the local viewpoint is so important in making decisions

against drilling beneath the Great Lakes or offshore Florida, surely it should be the

dominant consideration in opening the Coastal Plain!

Unfortunately the rules of engagement on this issue are more often emotional

rather than factual. Caribou are a case in point. One hears concerns that Coastal

Plain oil development might adversely affect the caribou of the Porcupine Herd. It

is worth recording that the herd has declined in numbers for 189,000 in 1989 to

128,000 today. This decline occurred in a period when the herd has been actively

managed and protected by a US/Canadian Caribou Commission and by the US Fish

and Wildlife Service. It has been subject to harvesting by the Gwich’in Indians of

Arctic Village and Canada, and some drilling has occurred within its range on the

Canadian side, but, by and large, the herd has apparently declined due to natural

causes. The recent history of other Alaskan Caribou herds is a warning of what might

happen to the Porcupine herd in the future. The Forty-mile Caribou herd in east

central Alaska was once over 500,000 animals. By the 1960’s the herd had declined

to 6,000 animals, but it slowly recovered over the next 30 years to about 22,000 caribou—a shadow of its historical size. Similar fluctuations have been recorded in the

Western Arctic Herd. In the 1970s, this herd crashed from 240,000 animals to only

75,000. The point about these huge statistical variations in caribou numbers is that

neither oil development nor wildlife management has much influenced them. It is

quite relevant, therefore, to worry about the Porcupine Caribou Herd decline, but

it is probably quite irrelevant to suggest that a Coastal Plain oil field will in any

way affect the population trends. The trend is clearly down for this herd, as it is

clearly up for the adjacent Arctic Herds. Bearing in mind that there are almost

twice as many caribou in Alaska as people, it is difficult to justify jeopardizing the

nation’s energy balance by excessive worry about the Porcupine Herd.

A decision to open the Coastal Plain as contemplated in H.R. — is all about careful development of its oil and gas resources. Therefore a brief discussion of how

much oil might underlie the Coastal Plain is appropriate, especially in the light of

the distortions that have been applied to the US Geological Service estimates by environmental organizations. In its 1998 assessment the USGS concluded that, at $25/

barrel oil and with an oil recovery factor of 37–38%, there was a 95% chance that

the Coastal Plain could produce 5.7 billion barrels of oil over a period of 25+ years,

and a 5% chance that almost 16 billion barrels could be produced. The relevance

of these estimates is not in the geological assessment of how much oil might be

present, but rather in the economic and technical parameters which impact the figures. I believe that the price of oil demanded by the USGS for optimum production

is much too high. It does not take into account the huge cost efficiencies of the new

arctic drilling technology already discussed. However, even more important, is the

USGS estimate of how much oil can be taken out of a given geological reservoir.

The expectation that only 37–38% of the oil present can be extracted is too low. The

Prudhoe Bay field is now calculated to have 60–65% of its oil eventually produced.

The Endicott field producing from a different, more difficult, geological horizon, will

give up more than 55% of is oil, and the Alpine Field, which is the beneficiary of

state of the art, 2001 technology, and which taps a ‘‘tight’’ reservoir, will produce

over 50% of its oil. These examples justify the assertion that 37–38% recovery is

much too low. Consequently the USGS resource figures are extraordinarily conservative and can be considered minimal and pessimistic.

I would prefer to await the results of exploratory drilling before being dogmatic

about the amount of oil present, but because we already know that significant

amounts of oil are present in the Soundough Field, which partially underlies the

western edge of the Coastal Plain, and because of the conservative nature of the

USGS figures, it is easy to believe that 10 billion or more barrels might be producible from the area. Such an amount would represent the largest new oil province

found in the world in the past 30 years. The Caspian Sea area might prove the single exception to that, but it remains to be fully proven.

This testimony has argued that there is a lot of oil beneath the Coastal Plain and

that it can be produced, with the law established by H.R. —, in a manner which

will not sacrifice the environment and wildlife. Despite those conclusions, it is necessary to establish why we need the oil. The answer has a lot to do with peace of

mind, a viable economy and OPEC. It goes without saying that America should continue to use innovation, energy efficiencies and other conservation measures to reduce the level of concern we presently and realistically have for our energy future.

In particular, it is hard not to embrace more efficient automobiles, just as we embrace more efficient jet airplanes. Jets are safer, faster and cheaper to operate than

they were 20 years ago, and other forms or transportation should strive to mirror

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that improvement. Having wished that, it is nevertheless difficult to forecast a significant reduction in our use of petroleum energy in the next generation or two, if

only because of population growth. If that proves to be the case, America will inevitably become more and more dependent on oil imports from OPEC countries, specifically Middle Eastern producers.

This is a situation, which has faced advanced countries such as France, Japan

and Britain for many decades. Britain’s reliance on Middle Eastern oil was neutralized by its discoveries of the North Sea Oil. France and Japan both coped by embracing nuclear energy and by foreign policy decisions, with regard to Arab nations,

quite different than those of the U.S. Unfortunately, OPEC nations now have effective control of the world price of oil. This is exemplified by the fact that in 1999

when OPEC increased world oil production by 1.75 million barrels of oil per day,

the price of oil immediately slumped from $25.00/barrel to $10.00/barrel. Conversely

an OPEC tightening of supply is solely responsible (coupled with world demand) for

the present levels of $25–30/barrel. OPEC nations have every reason not to get too

greedy in increasing the price of oil to levels where alternative or unconventional

oils become competitive, but likewise the United States has every reason to reduce

OPEC control by using ANWR oil to moderate the world price (any new oil in the

world market will moderate price), and to reduce our reliance on OPEC production.

The U.S. is the world’s largest energy market so a clear indication to OPEC that

we are willing to manage our energy use and production in a manner that lessens

the cartel’s influence is a very strong message indeed.

The alternative to more domestic production of oil is inevitably more U.S. troops

in the Middle East to ‘‘protect’’ OPEC oil, and a sustained higher price. The alternative would also demand a radical change in our foreign policy in the region with

the inevitable problems associated with such changes.

These are heavy issues that the energy legislation tries to address in a reasoned

manner. Unfortunately, the opponents to ANWR oil and gas production whose

mantra is environmental protection, wish to disregard the NIMBY syndrome by offering millions of acres of wind farms and tens of millions of acres of solar panels

across the nation—all in an effort to prevent 2000 acres of ANWR Coastal Plain

from being developed. Perhaps we should embrace windmills, solar, hydro, and nuclear, etc., but we still need oil and gas, and our own oil is better than anyone else’s. Production of oil from the Coastal Plain has been bitterly criticized on the basis

that it only represents six months supply of oil to the nation. To some extent I have

already addressed this misrepresentation in the above discussion on reserve estimates, but it is worth amplifying the practical reality of ANWR production. The

Coastal Plain is different from many isolated oil and gas basins (such as the Canadian Beaufort Sea) because it is already within 25 miles of an existing pipeline and

has the benefit of the Prudhoe Bay infrastructure, 60 miles to the west. I mentioned

that part of the Sourdough Field underlies the western edge of the Coastal Plain.

It is possible that that known deposit would be developed very quickly after the first

lease sale. Consequently, because only a feeder pipeline 25 miles long would be necessary to link to the Trans Alaska Pipeline, first production from the Coastal Plain

could be expected as quickly as 2 or 3 years after leasing took place. Litigation used

as a delaying tactic could increase that time and unfortunately such legal strategy

has been used routinely in Alaska, nevertheless, all the physical plant for production could be built very quickly. Moderate sized oil fields in the arctic would have

a 20–25 year lifespan. Giant fields (>1billion barrels) will inevitably continue to

produce for a much longer period of time, so the coastal plain could easily be producing oil from 2005 for 50 years. The two certainties of such a long time frame

is that more oil will be produced than originally estimated, due to continuous technological breakthroughs, and, second, that oil will still be a valuable world commodity as a source of petrochemicals if not of energy.

It is difficult to be sanguine about our energy situation in the near term and while

we in America have taken cheap, reliable energy for granted all our lives, we have

also exhibited a quick irritability when it becomes too expensive or not available.

The tendency of opposition groups to impose nuisance delays on oil development

projects should be of concern in the future. The public process must always be rigorously followed to ensure responsible decisions on new developments, but deliberate

litigious delay for the sake of delay should be strongly discouraged. I am not sure

that H.R. — achieves that necessary protection.

In conclusion Arctic Power—representing the vast majority of Alaskans—is fully

supportive of passage H.R. —. We are proud of Alaska’s contribution to America’s

energy portfolio over the last 45 years. We think we have long proven the compatibility of responsible oil development and healthy wild life populations better than

anyone else. The Lower 49 states supply Alaska with all its goods and services because we have no manufacturing base, so our oil development generates hundreds

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of thousands of jobs for those states. The Coastal Plain belongs to all of us, but first

it belongs to the Inupiats of Kaktovik, then it is Alaskans’ responsibility and finally

it belongs to any American who cares to think about it or visit it. This bill will realize its true riches and sacrifice nothing by so doing.

The CHAIRMAN. Thank you, sir.

Mr. Glenn?

STATEMENT OF RICHARD GLENN, ARCTIC SLOPE REGIONAL

CORPORATION, BARROW, ALASKA

Mr. GLENN. Thank you, Mr. Chairman. It is an honor for me to

come before the Committee this afternoon.

My name is Richard Glenn. I am the vice president of lands for

Arctic Slope Regional Corporation, which is the native-owned regional corporation of Alaska North Slope comprised of a membership of more than 8,000 Inupiat Eskimos.

And it is an honor again for me to represent them.

I would like to request that my written testimony be adopted for

the record, and I will not belabor the Committee with going over

the testimony verbatim.

The CHAIRMAN. Without objection, all of your testimony will be

put in the record.

Mr. GLENN. In addition, Mr. Chairman, I would to provide a little digression. It is a double honor for me to speak here.

Chairman Young hails from my home state. My mother is

Inupiat Eskimo born and raised on Alaska’s Arctic Coastal Plain.

And in addition to that, it is a double honor because my father

is a son of the great State of Nebraska. And to be here among the

membership of this Committee with the great Tom Osborne is just

going to elevate my testimony to near heroic status when I go home

and tell my family about it.

[Laughter.]

But I have a job to do here, and that is to represent the views

of our Inupiat Eskimos, who join with the majority of Alaskans in

support of safe, responsible exploration of the Coastal Plain.

We live in the Coastal Plain of the Arctic. We are the only group

of native Alaskans who live in the Arctic National Wildlife Refuge.

Our communities are scattered across the Coastal Plain from the

Canadian border to the western North Slope. We are subsistenceoriented people. We value the resources of the land and the sea.

We depend on them for food. And so it is in our interest to see that

these resources are protected. And it is in the interests of all Alaskans and all Americans.

The priorities that bring me here are threefold.

First is the protection of our culture, the well-being of our people,

and the natural resources that we depend on.

Second is the economic self-determination and the opportunity to

develop our lands, some of which exist inside the Coastal Plain of

ANWR, for the betterment of our people. We live there, and we

view this as a very important issue.

Third, we believe in and support the responsible exploration and

development of the public lands of the Coastal Plain. We know that

it can be done. We have seen it over the last 30 years of active exploration and development on the North Slope.

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So as a people, we support passage of Title V of the Energy Security Act, and we want to make that message clear.

There has been, Mr. Chairman, almost a century of exploration

on the North Slope, and our people have borne witness to that exploration for minerals, for coal. We have assisted them, advised

them.

Natural gas seeps located around the North Slope where methane is percolating to the surface. Oil seeps located by our people

furnished to explorationists. Mineral exposures, coal, all of these

have been accessed by the outside world, with access provided by

our people.

In addition to that, we have viewed the history of development,

beginning with Prudhoe Bay and coming up to the present, in several lights.

At first, we feared exploration and development. We fought

against it. But we learned, along with industry. We commented, we

harangued, we fought, but in the end, industry listened. And they

listened to our views.

And as a result, the oil industry of the past is a lot different from

the oil industry of the present. The oil fields of Alaska’s North

Slope are among the cleanest oil fields producing in the world.

And to those who want to compare an unspoiled wilderness with

an area of active exploration and development, I would urge an additional comparison: that between the Alaska oil fields on the

North Slope and those areas around the world where oil production

is going on today. Look in places like the Russian Far East or in

Colombia or in parts of the Middle East, where they don’t have the

environmental safeguards that we hold dear. This is the kind of exploration and development that will continue is we are prevented

from this responsible development of Alaska’s North Slope.

Mr. Chairman, there are professional views that I also hold, as

a geologist, a professional geologist, that support the development

of the Coastal Plain of the refuge.

The 800-mile long pipeline that supplies our country with oil

needs to be running at capacity, or, according to the law, when the

pipeline is not flowing, it will be shut down.

It is not like areas of the Canadian foothills or in areas of West

Texas where there are many ways to move our oil to market. While

that pipeline is there, Mr. Chairman, it needs to be efficiently producing oil.

Our people are a sharing people. We have shared among each

other. We share food. We share resources. We share our time and

our effort.

And it is this attitude of sharing, Mr. Chairman, that I would

like to bring to this Committee. In return, I would expect and hope

that this attitude of sharing can be foisted back upon us by the

United States Government.

We have shared our lands with the Federal Government. Huge

enclaves of our area have been given to the petroleum reserve, the

wildlife refuge and to the national park, areas that were part of our

aboriginal claim. It was later settled by the Native Claims Settlement Act, but we received a much smaller acreage.

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In this attitude of sharing, Mr. Chairman, we ask that we have

access to our own lands, our traditional homeland within the

Coastal Plain of the wildlife refuge.

And, Mr. Chairman, that we have this avenue of economic selfdetermination for the betterment of our people, jobs for our people,

jobs for native Alaskans, jobs for Alaskans in general.

For these reasons, we urge passage of the energy act and specific

support for Title V of this act. Thank you.

[The prepared statement of Mr. Glenn follows:]

Statement of Richard Glenn, Vice President, Arctic Slope Regional

Corporation

My name is Richard Glenn. I am the Vice President of Lands for Arctic Slope Regional Corporation (ASRC). I am here to offer testimony in support of the passage

of the Energy Security Act (or, the ‘‘Act’’), and wish to give specific support to Title

V of the Act, which is titled, ‘‘The Arctic Coastal Plain Energy Security Act of 2001’’.

ASRC is the Alaska Native-owned regional corporation representing the Inupiat

Eskimos of Alaska’s North Slope. ASRC owns surface and subsurface title to certain

Alaskan North Slope lands. This ownership stems from an earlier claim of aboriginal title--covering the entire Alaskan North Slope--that was eventually settled in

part by the Alaska Native Claims Settlement Act of 1971 (ANCSA). Under the

terms of ANCSA, ASRC’s land selection rights, which amounted to a small fraction

of what was originally claimed as aboriginal title, were further limited by what at

that time were pre-existing state and federal withdrawals. ASRC’s corporate mission

is to enhance the cultural and economic freedoms of it shareholders.

With title to approximately 4.6 million acres of surface and subsurface estate, our

regional corporation represents the biggest North Slope landowner outside of the

federal government. ASRC lands include the subsurface estate to 92,160 acres of

land within the Arctic National Wildlife Refuge (ANWR) Coastal Plain. The ASRCowned ANWR subsurface estate lies under and adjacent to the Inupiaq village of

Kaktovik. The Kaktovik Native village corporation, KIC, holds the surface title to

these same lands.

More than eight thousand Inupiat comprise the membership of ASRC, seventyfive percent of whom live in Arctic Slope communities scattered from the Canadian

border in the east to the Chukchi Sea in the west, covering an area about the size

of the state of Minnesota. We live close to the land and sea and depend on the resources they provide, including caribou, fish, seabirds and marine mammals. In addition, we also depend on jobs, because today’s subsistence lifestyle demands a mix

of financial resources and traditional resources. As a result, the values of our people

and of our regional corporation reflect our recognition of the benefits of careful stewardship of the land and the need for gainful employment for our people. This blend

of development and stewardship is reflected in a core value statement of our corporation, which states that we ‘‘shall develop our lands and resources by means that

respect Inupiat subsistence values and ensure proper care of the environment, habitat and wildlife.’’

As owners of lands which we view as our traditional homeland, as subsistence

hunters who have close ties to the land and sea and the resources they provide, and

as village and North Slope community residents who have witnessed firsthand the

exploration and development of Alaskan North Slope by the oil industry, we offer

our support of the Arctic Coastal Plain Energy Security Act of 2001. In doing so,

we have three main priorities: First, the protection of our subsistence way of life

and the resources upon which we depend. Second, the opportunity for economic selfdetermination by allowing environmentally responsible exploration and development

of Native-owned lands within ANWR. Third, the opening of the public lands of the

Coastal Plain to responsible oil and gas exploration and development.

A BALANCE OF STEWARDSHIP AND RESPONSIBLE DEVELOPMENT

In our region we constantly balance the protection of the land with the need for

environmentally sound exploration and development of natural resources. In our

view, the Act provides this kind of balance, and it obligates the Secretary of Interior

to follow a method of careful stewardship regarding oil and gas exploration and development in the ANWR Coastal Plain. The method has proved itself with successful

exploration and development of other federal North Slope lands—most recently in

the National Petroleum Reserve in Alaska (NPR–A).

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The Inupiat people have contributed to responsible North Slope oil and gas development. Thirty years ago, our people were strongly opposed to all forms of oil and

gas development in our region. We feared it. With our regard for the environment

in mind, we created strong permitting and zoning policies within our local borough

government. We were not complacent with oil development, we were—and still remain—vigilant. In the face of strong local development ordinances, oil industry exploration and development methods have improved over the last twenty-five years.

We have fought, argued, commented and complained, an on occasion we have said,

‘‘No’’; and the industry has listened. As a result, today’s oil industry on the North

Slope is a far cry from the industry of the past. In fact, we believe that the North

Slope oil and gas practices of today are the best examples of environmentally responsible development. Industry practices still are not perfect, and we remain vigilant, in an effort to continually improve industry’s performance in our environment.

We are confident that with the appropriate level of local consultation and control,

the Coastal Plain of ANWR can be explored and developed in a way that protects

natural resources for everyone.

The oil industry of today follows a strict local permitting and zoning process that

protects areas warranting special designation. Our Inupiat people have a part in

this process at all governmental levels. Today’s drill rigs explore in the winter season, when a snow and ice cover has formed a protective layer between exploration

equipment and the underlying tundra. Seismic acquisition is now conducted by vibrating vehicles rather than the shothole/dynamite methods of the past. Drilling

practices are strongly regulated by state and federal agencies, and no drilling

wastes or equipment are left onsite after an exploratory well is completed. Finally,

production facilities are located only in acceptable areas, and occupy a small fraction

of their former area. The advent of directional drilling and the streamlining of production methodology has allowed for the smaller footprint of infrastructure in Alaska’s oil fields. Once in place, production facilities have little or no impact on local

fish and wildlife resources of the area.

ECONOMIC SELF–DETERMINATION FOR ALASKA’S INUPIAT PEOPLE

In northern and northwestern Alaska, there is no industry except for resource extraction. The land is too cold for agriculture, and too remote for refined manufactured products. In addition, the way of life in our rural communities has with time

become a combination of subsistence and cash economies. As a result, our people

are needful of both a healthy natural environment and access to gainful employment. With the exception of a small amount of tourism and government service positions, our people can look only to resource development for jobs within our region.

Hence, we have assisted with the development of the North Slope oil and gas resources through our own Native-owned oil field service company subsidiaries, which

has employed and developed the skills of our people. In addition, we have made efforts to seek title to subsurface and surface lands, including the KIC lands acreage,

that hold natural resource potential, that we might benefit from the oil and gas industry as a resource owner of lands that have been traditionally used by our people.

As it now stands, we are prevented from developing our Kaktovik-area lands due

to Section 1003 of ANILCA. The exploration and development of the Coastal Plain

of ANWR, including the KIC lands, then represents an issue of economic self-determination for our people.

In addition, our local government and village residents realize great benefit from

the sustained presence of the oil and gas industry on the North Slope. Because of

the practices developed over time on Alaska’s North Slope, the residents of the

North Slope Borough live in a land with few environmental hazards, and have

begun to build in their communities what is often taken for granted in the rest of

this country. Facilities for education, health care, police and fire protection, reliable

power generation, and sanitation all have been initiated by the North Slope Borough, thanks to a revenue stream generated by the taxation of property including

oilfield infrastructure. In the absence of new development such as the potential development of the Coastal Plain, the North Slope Borough revenues would see a

sharp decline, due to the depreciation of the older Prudhoe Bay infrastructure. Our

communities are cleaner and safer, our people are living longer, and our children

no longer have to travel a thousand miles or more to get a primary and secondary

education.

With Borough operating revenue as well as programs initiated by our Native organizations, we are building training programs to give our local workforce skills to

participate anywhere in today’s economy. For example, we have established an education foundation at ASRC that provides financial assistance to Inupiat members

interested in obtaining a college degree or technical training. Finally, ASRC continues to incorporate into its business the Inupiat value of respecting and taking

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care of our elders. ASRC has established an elders benefit trust that provides elderly Inupiat members with a monthly stipend to offset the high cost of living in the

region. Many of our elders do not have retirement funds as many did not work prior

to the introduction of the oil industry within our region. The reason for this is simply because prior to the oil industry we did not have an economy, and thus no jobs

for our elders to work at to save for a retirement fund.

IN THE NATIONAL INTEREST

Finally, we view the exploration and development of the ANWR Coastal Plain as

in the nation’s interest. This ANWR Coastal Plain marks the most significant onshore area for potentially large accumulations of oil and gas in the nation. Even

with conservation and assuming that the United States oil demand remains static,

there needs to be new production to replace production from older declining fields.

The supergiant Prudhoe Bay oil field, which once produced twenty percent of the

nation’s crude supply, has declined to less than half of its peak production. America

needs a continuing source of domestically produced oil. The alternative, importing

oil from countries of political instability, or from countries with less than acceptable

environmental practices, will surely do more harm than good.

COMMENTS ON SPECIFIC PROVISIONS WITHIN TITLE V OF THE ACT

Section 503 (d)—Relationship to State and Local Authority--ASRC strongly supports this provision, and the desire of the North Slope Borough to retain its broad

governmental powers regarding development in the Coastal Plain. These powers, including planning, permitting, zoning, right-of-way determination, and taxation are

the tools by which the residents of the North Slope become stakeholders in the development of Coastal Plain lands.

Section 503 (e)—Special Areas—ASRC strongly supports the provision that mandates the participation of Kaktovik and the North Slope Borough in the selection

of lands, if any, for designation of special areas worthy of special management or

protection. The local residents have the most to offer in determining the special status of any lands, and should be consulted.

Section 506 (a) (7)—ASRC strongly supports the provision that mandates lessees,

agents and contractors of Coastal Plain exploration and development follow the

terms of section 29 of the 1974 Federal Agreement and Grant of Right of Way for

the Operation of the Trans–Alaska Pipeline, of employment and contracting for

Alaska Natives and Alaska Native Corporations from throughout the State.

Section 507 Coastal Plain Environmental Protection—ASRC Strongly encourages

local consultation for all the terms of Section 507 Parts a- through f. In light of the

successful process adopted by the Department of Interior for the exploration and development of the northeastern part of the National Petroleum Reserve in Alaska,

ASRC suggests that Interior adopt a similar framework to incorporate consideration

of local input from the village of Kaktovik and from the North Slope Borough for

environmental protection measures regarding the Coastal Plain of ANWR. Such

input would include strong recommendations for siting of consolidated facilities

where the local population desires, so that village residents can benefit from jobs,

and the proposed facilities can benefit from existing infrastructure.

Section 507 (d)- ASRC recommends strengthening this section to mandate that

subsistence access is ensured.

Section 510 Conveyance—ASRC strongly supports the entirety of Section 510,

which addresses the completion of conveyance of the surface title of the KIC lands

to the Village Corporation and conveyance of the subsurface title of the same lands

to ASRC, in the interest of removing any clouds on title.

Section 511 Impact Fund Assistance—ASRC strongly supports Section 511 of the

Act, which provides for Impact Fund Assistance, following the model of the NPR–

A impact fund assistance program. Although the positive impacts of development

may often outweigh any negative ones, the negative impacts still do exist. The villages closest to the effects of oil and gas development are always in the most need

of impact fund assistance to address some of the direct negative effects of development.

The CHAIRMAN. Thank you.

Mr. Young, you have a motion?

Mr. YOUNG. Mr. Chairman, I ask unanimous consent to have the

testimony of the mayor of the North Slope Borough submitted for

the record at this time.

The CHAIRMAN. Without objection, so ordered.

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[The statement of Mr. Ahmaogak, Mayor, North Slope Borough,

follows:]

Statement of The Honorable George Ahmaogak, Sr., Mayor, North Slope

Borough

Mr. Chairman and Members of the House Committee on Resources, my name is

George Ahmaogak, Sr., and I am the Mayor of the North Slope Borough (Borough).

I greatly appreciate the opportunity to submit written testimony to you regarding

H.R. 2436, the Energy Security Act, which was introduced yesterday, July 10, 2001,

by Chairman Hansen. My specific purpose is to provide testimony regarding the

Borough’s support for oil and gas exploration and development on the Coastal Plain

of the Arctic National Wildlife Refuge (ANWR).

ANWR’s Coastal Plain is this Nation’s best prospect for major new oil discoveries.

The ANWR Coastal Plain is located within the boundaries of the Borough. The only

community within the Coastal Plain is the Village of Kaktovik. The residents of

both the Borough and Kaktovik strongly support exploration and development of the

Coastal Plain. These activities, however, must be subject to appropriate measures

to protect subsistence uses, the environment, the caribou, and other fish and wildlife.

1. Introduction

The Coastal Plain portion of the 19 million acre ANWR is very important to the

nation’s economic well-being and to its energy security. This 1.5 million acre area

is also of critical importance to the Inupiat Eskimos and residents of the Borough.

We are the full-time residents of the North Slope. Our ancestors have lived in the

Arctic for thousands of years. They have been the stewards of its land, environment

and wildlife. We have an Eskimo Village with 240 residents located in the heart of

the Coastal Plain.

2. National Interest in the Coastal Plain

Mr. Chairman, Members of this Committee have made a compelling case for opening the Coastal Plain to oil and gas exploration and development. With gasoline

prices approaching—and in some states exceeding—$2.00 a gallon, the American

people are looking for action. Citizens are concerned about rising energy prices and

about who controls oil supplies. This is a complex issue. But one thing is very clear.

Opening the Coastal Plain now is the right thing to do. The Coastal Plain area:

• has the potential for major new oil reserves, estimated at 9 to 16 billion barrels

of economically recoverable oil;

• could slow or reduce our growing oil import dependence, currently at over 56%;

• could be developed with minimal impact on the environment and wildlife;

• could generate billions of dollars in new Federal revenue from bonus bids, royalty and corporate taxes; and

• could address the need for increased national energy security.

3. The Borough’s Interest in the Coastal Plain

The interests of the residents and the Inupiat people in the Coastal Plain are both

economic and cultural. Congressional action on legislation to open the Coastal Plain

will determine whether or not my constituents will have a long-term tax base from

which to provide essential public services. It will determine whether there will be

jobs and economic activity for our young people and our children. It will also determine whether the Inupiat people, who once held aboriginal title to all of the North

Slope’s 56 million acres, will be permitted to develop the economic potential of the

92,160 acres of private lands that they own in the Coastal Plain at the Village of

Kaktovik, pursuant to an act of Congress.

Let me summarize my constituents’ specific interests in the Coastal Plain.

a. Tax Base, Public Services and Local Government

Prior to the discovery of Prudhoe Bay in 1968, there was no tax base on the North

Slope and no effective means to provide essential public services to the Inupiat people. Sewage service was by ‘‘honey bucket.’’ Ice was hauled by dog sled from lakes

for household water. Children were sent to Bureau of Indian Affairs (BIA) high

schools thousands of miles away. There was little to no medical care. Fire and police

protection did not exist. Electrical services were unreliable. Communication with

persons and communities outside of the Borough was sporadic. Housing conditions

were very poor. The cost of food and many other essentials was significant. Our people only managed to survive by their wits, by barter, by subsistence hunting, and

by continuing the Inupiat tradition of ‘‘sharing.’’

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Prudhoe Bay’s discovery brought major changes. These changes included, for the

first time, jobs, economic activity, a tax base, and an opportunity to establish a local

government. We established the ‘‘North Slope Borough’’ in 1972 to address our need

for vital public services

b. Uncertain Economic Future

Oil development in the Arctic has improved the quality of life of the people of the

North Slope in many ways. But our future is still very uncertain. Prudhoe Bay’s oil

production began in 1977. Oil production peaked at over 2.1 million barrels per day

in 1988, but is now in decline and down to about 1.2 million barrels per day.

Already, we are seeing job opportunities disappear as oil production declines and

many oil industry activities are down-sized, consolidated and reduced to ‘‘maintenance’’ level operations.

New oil prospects need to be opened to attract exploration capital and extend the

economic life of the Trans Alaska pipeline for 30 years or more. If discoveries are

not made soon, we will see our tax base further eroded. This means the minimal

public services that the Eskimo people enjoy today will have to be cut back.

Without Congressional action, the economic opportunities for the people of the

North Slope will decline, and our nation’s dependence on high cost OPEC oil will

grow.

4. Nation’s Best Oil and Gas Prospect

If Congress adopts a National Energy Policy that opens the Coastal Plain to oil

and gas exploration and development—we see a brighter future for all of Alaska’s

Native people, for the State of Alaska, and for the nation. This future could mean

as many as 250,000 to 735,000 new jobs in all fifty states; an increase in our gross

national product of $50 billion; a major reduction in the $100 billion annually we

now spend for imported oil; and a significant source of new revenue to reduce the

Federal deficit.

No one disputes that the Coastal Plain is the nation’s best prospect for major new

oil and gas reserves. Government and private geologists are in agreement here.

They have identified 26 separate major oil and gas prospects in the Coastal Plain.

This does not necessarily mean Prudhoe Bay’s 10 billion barrel discovery will be repeated. But it does mean that the potential is there for both another giant oil discovery and for many smaller oil fields.

Domestic oil companies are willing to commit additional resources and capital to

areas on the North Slope with high potential. But, absent authorization for leasing

in prime areas such as the Coastal Plain, these resources and jobs will be allocated

to major prospects in other countries.

5. Precedent for Development

Opening the Coastal Plain to leasing does not set new a precedent. Prudhoe Bay

and other fields next to the Coastal Plain were leased forty years ago. They have

produced as much as 25 percent of the nation’s oil production since 1977. This production has been occurred safely, with no harm to the environment, the land, the

wildlife, or to Native subsistence users.

The Department of the Interior and the Mineral Management Service has had an

aggressive Beaufort Sea OCS leasing policy in offshore waters adjacent to the Coastal Plain for more than two decades. The State of Alaska has been leasing lands

within the three mile limit—some areas touching the shore of the Coastal Plain—

for years. Wells are being drilled in these waters and discoveries are being made.

Yet, the environmental dangers presented by development in these icy, turbulent,

wind-driven waters far exceed any conceivable risk of development in the flat onshore Coastal Plain.

6. Support for Specific Legislative Provisions and Regulations

a. Impact Aid for North Slope Communities

The Borough supports the provisions of the Energy Security Act of 2001, that recognize the need for ‘‘impact aid’’ for Kaktovik Village and the North Slope Borough

to provide essential infrastructure and necessary social services. A decision to open

this area will greatly increase visitor traffic and other social pressures on this small

Village. The people who live there support oil development, but they want to retain

their privacy, their culture and their character as a traditional subsistence Eskimo

community. With advance planning and impact aid, both the Borough and Kaktovik

can play an important role in meeting the legitimate needs of the industry and government in connection with Coastal Plain exploration and development. The impact

aid provision should also be made available for any other community that might be

affected by leasing and development.

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Land Use and Environmental Provisions

I have carefully watched oil development on the North Slope. In the 1960’s, like

many of my people, I had concerns, about the social and cultural impact of development. Thirty years of experience demonstrate that our initial fears were unfounded.

A quality environment and healthy stocks of fish and wildlife are compatible with

responsible oil development. Our lands remain pristine. Our subsistence lifestyle

has not been adversely impacted. The Central Arctic caribou herd at Prudhoe Bay

is larger than ever—3,000 in 1972 and as high as 24,000 in recent years—and thriving.

The footprint of oil development is constantly decreasing in size. Technology has

made major gains. Horizontal drilling means more wells are able to reach out much

farther from small drilling pads. Better land use planning consolidates common facilities. Gravel roads are being replaced by winter ice roads and drill pads which

melt without leaving a trace of man’s activity.

These gains did not happen by chance. They are the product of regulation and

hard work by an industry that is constantly being pushed by the Borough, by the

State of Alaska and by the Federal government. The regulatory objective is to

produce the oil we need more efficiently with fewer and fewer impacts on the land,

the environment, fish and wildlife and the subsistence activities of the people of the

North Slope.

The Borough recommends that Coastal Plain leases incorporate the state- of-theart lease provisions approved by the Department of the Interior in the recent National Petroleum Reserve-Alaska (NPR–A) lease sale.

7. Wildlife in the Coastal Plain

Mr. Chairman, there are those who oppose leasing and advocate designation of

the Coastal Plain as Wilderness. They have advanced a wide range of shifting arguments over the years. In recent times, they have turned their arguments on the

need to protect the Porcupine Caribou herd.

My people are subsistence hunters. We live on the North Slope. We give priority

to the need to protect all forms of fish and wildlife. This includes caribou. Fortunately, we know how to do this. Prudhoe Bay demonstrates compatibility with the

Central Arctic Herd. It also demonstrates years of caribou-friendly planning and

operational experience.

The caribou is a very adaptive animal. The Canadians showed us this when they

drilled fifty or more oil wells just east of the Coastal Plain over the past twentyfive years. They also demonstrated this when they constructed the Dempster Highway through the heart of the range of the Porcupine Caribou herd.

There are many known and proven ways to explore for and develop oil fields in

ways that are compatible with caribou. These included raised pipelines and covered

ramps to assist pipeline crossing; seasonal closing of exploration during the short

calving season; and concentrating year round activities such as maintenance facilities in areas least used by caribou and other wildlife.

8. Alaska Federation of Natives’ Support

The Alaska Federation of Natives (AFN), the state-wide organization of Alaska’s

Native institutions, is on the record in support of leasing the Coastal Plain. AFN

supports leasing in the Coastal Plain for reasons that are very important to Alaska’s

Native Americans. Over 80 percent of our State’s revenues for education, medical

care, public sanitation and other programs come from taxes and royalty on North

Slope oil. North Slope oil provides many of the jobs for Native people and much of

the economic activity that is essential to Native-owned businesses and our State

economy.

Many of Alaska’s rural native villages lag behind urban areas in employment,

public services and opportunity. Closing this gap requires the resources that North

Slope oil and gas and the Coastal Plain can provide.

9. Local Opposition

In recent years The Gwich’in Steering Committee has been vocal in opposition to

Coastal Plain development. I want to make a couple of points about this opposition.

First, I do not believe the Steering Committee represents the views of the majority of the Athabascan Indians who live in the interior of Alaska or of Doyon, Ltd.,

their Regional Corporation. A major Doyon business enterprise owns and operates

the rigs used in drilling North Slope oil wells.

Second, in 1980 the Gwich’in tribe leased all of their 1.8 million acres of land on

the Venetie Indian Reservation. This oil and gas lease was sold to the Rouget Oil

Company for $1.8 million.

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Third, this oil and gas lease, which was recorded as a matter of public record, did

not contain any provisions to protect the Porcupine Caribou herd that often passes

through the reservation during its annual migration.

Fourth, after the expiration of the original oil and gas lease, the tribal government for the 350 residents of the two Villages on the Venetie Reservation again advertised and offered to lease all of their 1.8 million acres of land to any other oil

company.

Fifth, a number of the present members of today’s Gwich’in Steering Committee

were among the officials who signed the oil and gas leases as well as the subsequent

offer to lease.

The Inupiat people want what the Gwich’in people have already had. We want

the opportunity to have the economic benefit of developing our private lands at

Kaktovik Village. We also believe that the public land area of the Coastal Plain

should be developed for its highest and best use—oil and gas. This will benefit the

American public and all residents and Native people in Alaska.

10. The NPR–A Precedent

The Clinton Administration prepared a comprehensive EIS and conducted an indepth review of all issues associated with the 1998 decision to lease 5 million Northeast portion of the (NPR–A). As a part of this review, then–Secretary of the Interior

Babbitt personally visited the North Slope. He camped out, ran rivers and toured

NPR–A. He also visited the new Alpine oil field near our Village of Nuiqsut, west

of the Kuparuk field. The former Secretary Babbitt reviewed the latest in land use

plans, saw the newest oil field technology, and weighed the benefits of development

against the environmental impacts within NPR–A.

The former Secretary also visited subsistence hunting and fishing camps and

dined on Native food in a subsistence camp site. He learned a good deal about Native culture, the subsistence life style, and Native knowledge about our land and

wildlife resources. According to press reports, the former Secretary Babbitt enjoyed

his time at the camp.

Subsequently, former Secretary Babbitt approved the lease sales and exploration

and development in the Northeast NPR–A. This approval reflected scientific judgments in the Department about the compatibility of oil development in NPR–A with

wildlife, environmental, and subsistence values. The Secretary personally weighed

the evidence. We believe he made the right decision. And the Nation will benefit.

It is important to recognize that the same careful land use planning and new

technology used at Alpine, in partnership with the State of Alaska and Native Corporations, and at other new fields and in the NPR–A, would also be used in the

Coastal Plain. The differences are that: • The Coastal Plain’s wildlife, environmental and scenic values are not as significant as the Northeast NPR–A’s values; • The oil and gas potential of the smaller Coastal Plain area are, according to geologic studies, greater than the potential of the Northeast NPR–A; and • Most land-based subsistence activities of the Inupiat people on the North Slope

occur within the NPR–A, where the majority of our people live.

I urge the Bush Administration, this Committee, and Congress to look at the

Coastal Plain on the merits. If they apply the same standards that were applied in

opening Northeast NPR–A, they should support legislation to open the Coastal

Plain.

11. CONCLUSION

Mr. Chairman, I appreciate the opportunity to present the North Slope Borough’s views. Development of the Coastal Plain is of critical importance to our children’s future and maintaining our culture.

We strongly urge the Committee to adopt energy legislation to open the Coastal

Plain to a carefully regulated, environmentally sensitive program of leasing, exploration and development. Thank you.

The CHAIRMAN. Mr. Hood?

STATEMENT OF JERRY HOOD, INTERNATIONAL

BROTHERHOOD OF TEAMSTERS, WASHINGTON, DC

Mr. HOOD. Mr. Chairman, I am Jerry Hood. I serve as special assistant to the general president for the International Brotherhood

of Teamsters on energy. I am also the principal officer of local

union servicing the entire State of Alaska.

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I am here today in both my roles on a local level and an international level to convey our support and general president Hoffa’s

support for the Energy Security Act that you have introduced

today.

I am going go abbreviate my comments due to the length of the

hearing today. I would ask that my written statement be entered

in the record.

Mr. YOUNG. Without objection.

Mr. HOOD. I would like to clarify some misconceptions Congressman Markey brought forward with regard to the red dot. The

drillers didn’t submit that mousepad to the Members of Congress.

It was not Arctic Power that submitted the mousepad to the Members of Congress with the red dot. It was the Teamsters.

And we take umbrage, as well as Mr. Markey did, to some of the

distortions that take place when discussions of development of the

Coastal Plain of ANWR take place.

Everywhere I go, I see pictures of beautiful mountains and caribou on those mountains and saying that we are going to drill

there. That is not true. We are not going to drill in those mountains.

We are going to drill on the Coastal Plain section 1002 that was

designated by Congress for that purpose because of its potential for

oil and gas contribution to America’s energy independence.

Alaskans have a 30-year history of prudent, safe, sound, environmentally responsible oil development in our state. We think that

the same attitude can be accomplished in the Coastal Plain of

ANWR as well with the technology that exists today.

There is a group of people in Alaska that were environmentalists

long before there were bullet faxes, mail solicitations, and phone

banks. They have cared for that land for centuries. They are the

Inupiat Eskimos.

They live off that land. They don’t have 7-11 stores. They don’t

have Safeway stores to go buy groceries. That land is their grocery

store.

And I submit to you, Mr. Chairman, that if there was a chance

that this land would be destroyed, it would decimate their subsistence lifestyle, and they would not be here today supporting this

issue.

So I think it is a native rights issue. They own 92,000 acres of

land within the Coastal Plain. That is private land that they cannot touch unless Congress says they can. And I think that is an

important consideration for this Committee and this Congress as

well.

OPEC has been mentioned, the importation of foreign oil. Up

until recently, we imported 700,000 barrels of oil a day from Iraq.

At the same time, our military forces have put their lives on the

line defending the no-fly zone for what purpose? To protect that

foreign source of oil for this country.

The money we spend in Iraq goes to build missiles and chemical

weapons that are aimed at our allies, Israel. That doesn’t make a

whole lot of sense to me or the members that we represent.

We represent 600,000 truckers across this country that deliver 80

percent of the freight. They depend on a reliable and dependable

and affordable source of fuel for their trucks.

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It was mentioned in earlier testimony that some of those truckers have gone out of business because they couldn’t compete in the

marketplace. We are messing with an infrastructure in our country, the delivery of freight, that is going to have severe ramifications on each and every American, not just those of us in Alaska

that support this issue.

So while many may consider a vote for this bill as a vote for the

big, bad oil industry, I see it as something else. I see it as a vote

for increasing the United States energy independence. I see it as

a vote for national security. I see it as a vote to support oil production where it is done using the most environmentally sensitive

methodology in the entire world. I see it as a vote for American

rights. I see it as a vote to keep the power on in 12,000 low-income

Maryland homes that was just reported Sunday that they may lose

their utilities because they can’t afford to pay their bills.

But most importantly, I see it as an opportunity to put Americans, and specifically Teamsters, to work. When we have lost

400,000 jobs since the first of the year in this country—good-paying

jobs, not service sector jobs but high-tech, high-skilled and wellpaying jobs—we have lost 500,000 jobs in the oil industry over the

last decade, many of whom were Teamster members and many of

whom were the members that I represent in the State of Alaska.

So I urge the support this legislation. Thank you.

[The prepared statement of Mr. Hood follows:]

Statement of Jerry Hood, Special Assistant to the General President for

Energy, International Brotherhood of Teamsters

Mr. Chairman and Members of the Committee:

My name is Jerry Hood, Special Assistant to the General President for Energy

at the International Brotherhood of Teamsters and Principal Officer of Teamsters

Local 959 in Alaska. In my roles as a Teamster official at the local and international

levels, I am here today to convey the support of my union, its 1.5 million members,

and our General President James P. Hoffa, for the House ‘‘Energy Security Act.’’

However, my support of this legislation does not end with my union affiliation.

As a consumer, as an Alaskan, and as a father, I urge you to vote for the ‘‘Energy

Security Act.’’

As a consumer, I support this bill. While some opponents of increasing energy

supply would like you to believe that there is no energy crisis, the evidence is incontrovertible. This past winter, working families from central and northeast states

were faced with record high home heating bills. Rolling blackouts have plagued

California for two straight summers. Gasoline prices continue to put the squeeze on

low and middle income Americans, forcing many to cancel summer vacations.

And, just this past Sunday, the Baltimore Sun ran a story on 12,000 low-income

Maryland families who face the very real possibility of having their utilities cut off.

According to the article, these families are still trying to find a way to pay for their

winter heating bills, due to the fact that the cost of fuel has doubled and tripled

over the previous year.

While the article focuses on metropolitan Baltimore, it also paints the picture of

a growing national crisis. More than four million households in 19 states face a

similar fate—having their power cut off during the hottest days of summer. The article also notes that low-income families are hit especially hard by skyrocketing energy costs, as they tend to spend three times more of their income on energy costs

than medium-income families.

For these consumers—the 12,000 in Maryland and the 4.3 million nationwide—

the energy crisis is more than a subject to be debated on Sunday mornings. It is

a reality that hit them this winter, continues to haunt them today, and threatens

to permanently harm their ability to provide for their families.

As an Alaskan, I support this bill. For decades, we have been proving that the

need to provide energy for Americans can be balanced with the need to protect the

environment. Since the opening of Prudhoe Bay in the early 1970’s, the State of

Alaska played a critical role in increasing the United States’ energy independence—

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providing, at its peak, more than 2 million barrels a day. Even with the recent decline in oil production, Alaska still supplies the country with one fifth of its domestic

oil. And we have accomplished this with minimal impact to the environment, which

is one of the reasons why 75% of Alaskans support the opening of ANWR.

Alaskan oil is produced using the cleanest, most technologically advanced, environmentally sensitive methods in the world. We—Alaskans—set the standard for

the industry. This is due, in no small part, to a group of environmentalists who have

played a critical role in ensuring that we produce oil in Alaska in the most responsible manner possible. Unlike most environmental groups, this one does not have

an office in Washington, D.C. That is because this group has, for generations, lived

in Alaska, in ANWR, in Section 1002, in the village of Kaktovik.

This group is the Inupiat—a community indigenous to the North Slope of Alaska.

Long before there were phone banks, blast faxes, or direct mail solicitations, the

Inupiat cared for the land in and around ANWR. For centuries, the Inupiat have

balanced their need to use the land and its resources with a desire to ensure that

those resources would remain for future generations. With the introduction of oil

production in the 1970’s, the Inupiat continued their role as stewards of the land.

In light of this history, I find it unconscionable that Congress would prohibit the

people of Kaktovik from utilizing the petroleum resources that lie beneath their

own, private lands. However, that is the reality today. If any member of Congress

considers himself or herself to be an advocate for the native peoples of this country,

then there is only one option—give the Inupiat people the right to use their lands

to provide for their families. I ask you—Who in this room could possibly believe that

he or she is more qualified than the Inupiat on the issue of protecting the North

Slope of Alaska?

As a father, I support this bill. The United States is increasingly dependent on

foreign nations for its energy needs. Our dependence on foreign oil, in particular,

leaves us vulnerable to the whims and machinations of unscrupulous foreign nations.

Earlier this year, Iraq was supplying 700,000 barrels of oil to our country every

day and using the revenues to buy chemicals, missiles, and other weapons of mass

destruction that are designed for use against our allies—particularly Israel. At the

same time, United States military personnel put their lives on the line every day

to enforce the no fly zone, all because of our need to protect the oil supply in the

region. This makes no sense.

Even nations that are not preparing for war against our allies do not hold paramount the effect of oil pricing on our national security. Their chief concern, of

course, is profit. OPEC unabashedly holds back supply in order to keep prices high;

as our domestic energy supplies decrease, so does our ability to respond to this price

fixing.

Today, we are dependent on foreign nations for more than 50% of our oil supply.

While this may not seem that dire under current circumstances, it will become a

real problem in a time of crisis or international conflict. We should set, as a minimum, the goal of decreasing our dependence on foreign oil to less than 50%. While

conservation and efficiency measures can help us in meeting that goal, it cannot be

done without increasing domestic supply. It cannot be done without the efforts set

forth in this bill.

Finally, as a Teamster, I support this bill. Every day, more than 600,000 Teamsters start their day by turning a key to an 18-wheeler, a bus, a cab, or a delivery

van. Two hundred thousand Teamsters work in industries or for companies that

would directly benefit from the opening of ANWR. For these men and women, a reliable and affordable source of petroleum isn’t just important—it is critical to their

livelihood.

In addition, the Wharton Econometrics Institute estimates that opening ANWR

will create 735,000 jobs throughout the United States. Many of these jobs will be

in the energy industry, which is among the most unionized industries in the country. We estimate that over 25,000 of those jobs will go to Teamsters—in direct oil

production related jobs alone. The potential to create jobs—good paying, secure jobs

with decent benefits—is overwhelming.

However, this is not just about job creation; it is about job preservation. In the

last decade, more that 500,000 jobs have been lost in the domestic oil and gas industries. Many of those were Teamsters jobs. Many of those were members of my local.

In every industry, the jobs losses are mounting. Already this year, 400,000 jobs have

disappeared from the American economic landscape. If we do not act now to reinvigorate the economy, particularly the domestic energy industry, this trend will continue. Congress must act now to reverse it.

In other words, while many of you may consider a vote for this bill as a vote for

the big, bad oil industry, I see it as something else.

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I see it as a vote for increasing the United States’ energy independence. I see it

as a vote for national security. I see it as a vote to support oil production where

it is done using the most environmentally sensitive methods in the world. I see it

as a vote for Native American rights. I see it as a vote to keep the power on for

12,000 low income Marylanders.

Most importantly, I see it as a vote to put Americans, including Teamsters, to

work.

For these reasons, I urge you to vote for the ‘‘Energy Security Act.’’

The CHAIRMAN. I thank you, Mr. Hood.

Mr. Kolton?

STATEMENT OF ADAM MICHAEL KOLTON, ALASKA

WILDERNESS LEAGUE, WASHINGTON, DC

Mr. KOLTON. Mr. Chairman and members of the Committee,

thank you for the opportunity to testify on the Energy Security Act,

H.R. 2436.

My name is Adam Kolton, and I am the Arctic campaign director

for the Alaska Wilderness League, a nonprofit organization based

here in Washington, D.C., that serves as a voice for Alaska’s wilderness.

I am pleased to be accompanied today by Ken Whitten, who was

a chief caribou research biologist for Alaska’s Department of Fish

and Game for two decades before retiring last year. Ken will be

happy to answer any questions members of the Committee might

have.

Mr. Chairman, we strongly oppose Title V of H.R. 2436 as it

would change the law to mandate oil and gas leasing, exploration

and development in the Arctic National Wildlife Refuge Coastal

Plain, the area that the United States Fish and Wildlife Service

considers the biological heart of the Arctic refuge.

If enacted, Title V would reverse more than four decades of environmental progress begun under President Eisenhower, who had

the vision and foresight to protect the northeast corner of Alaska

in 1960. Drilling would drive a stake in the heart of the wildest

place left in America.

Far from a mere footprint, drilling would require hundreds of

miles of roads, pipelines, and other industrial facilities scattered all

across the Delaware-size Coastal Plain.

Critical habitat for vast free-roaming herds of caribou, denning

polar bears, grazing musk oxen, and nesting migratory birds would

be destroyed, and the wilderness values of the last 5 percent of

Alaska’s North Slope still off-limits for oil exploration and development would be lost forever.

What is the payoff? Ten years from now, after exploratory wells

and drill pads and airstrips and roads invade this landscape that

William O. Douglas once called ‘‘the most wondrous on God’s

Earth,’’ we might just tap enough oil to meet 1 percent of our daily

demand. Not enough to lower electricity, home heating oil or gasoline prices for consumers anywhere in America, and certainly not

enough to lessen our dependence on imported oil.

Of course, drilling proponents argue the opposite. But the facts

are inescapable. With less than 3 percent of the world’s oil reserves, we cannot drill our way to energy independence.

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Recall that when Alaska’s Prudhoe Bay oil field came online in

1977, average United States gasoline prices nearly doubled within

4 years. And if one looks at realistic estimates from the United

States Geological Survey, the Arctic refuge is unlikely to produce

anything close to that giant field.

Mr. Chairman, with your permission, I would like to submit for

the record a new report by an Alaskan economist that puts in better perspective the USGS numbers in terms of what is economically

recoverable from the refuge.

The CHAIRMAN. Without objection.

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

files.]

Mr. KOLTON. Thank you.

If the Energy Information Agency is right about oil prices in

2010, roughly 3.2 billion barrels of oil will be economically recoverable from the refuge.

Far from the only option for increasing Alaska oil production,

even the industry projects having enough oil from lands already

open to development to keep the Trans-Alaska pipeline flowing

with oil for at least another three decades.

What about creating jobs or helping to address California’s

needs? We do not oppose a new natural gas pipeline, provided it

complies with environmental laws and stays within existing rightof-way corridor, such as the Alaska and Alcan Highways.

But let’s be clear: Government estimates demonstrate that there

is five times the amount of natural gas outside the refuge, elsewhere in the North Slope, than might exist in it.

Of course, before any major new projects are undertaken, we

would like to see the industry clean up the mess it has already

made. More than 55 contaminated waste sites and 250 reserve pits

litter the North Slope; 400 spills of diesel crude oil, acid seawater,

and other substances have been occurring each year.

Like the more than 500 scientists who recently wrote President

Bush to oppose drilling in the Arctic refuge, we do not believe it

is possible to explore, drill and produce oil from the Coastal Plain

without undermining its incomparable wildlife and wilderness values.

Still, with this being the goal to Title V, it is remarkable how little its specific provisions would do to limit the damage to the

Coastal Plain. Among other things, the bill eviscerates National

Environmental Policy Act, gives the Secretary the discretion to

allow drilling during critical wildlife cycles, allows the industry to

drain the Coastal Plain’s scarce supplies of freshwater, places no

limitations on intrusive seismic exploration, and fails to ban gravel

mining or even permanent road construction.

We respectively urge the Committee to reject Title V of the Energy Security Act. History, our children, and our grandchildren will

judge us well if we have the courage and foresight to leave this incomparable national treasure alone.

Thank you for the opportunity to testify.

[The prepared statement of Mr. Kolton follows:]

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1 Alaska National Interest Lands Conservation Act, Section 1002, 16 USC 3143

2Special Message to the Congress on the Legislative Program, May 3, 1960.

3 ‘‘Secretary Seaton Sends Arctic Wildlife Range Bill to Congress,’’ U.S. Department of the Interior press release, May 1, 1959. 4Section 1 of draft legislation to authorize the establishment of the Arctic Wildlife Range,

Alaska, as transmitted with a covering letter from Fred. A. Seaton to Hon. Sam Rayburn, April

30, 1959 (emphasis added).

Statement of Adam Kolton, Arctic Campaign Director, Alaska Wilderness

League

Mr. Chairman, Congressman Rahall, and members of the committee, thank you

for the opportunity to testify on the ‘‘The National Energy Security Act (NESA) of

2001.’’ My comments focus on Title V of the legislation, which would authorize exploration and development of the Coastal Plain of the Arctic National Wildlife Refuge in Alaska.

My testimony has been endorsed by the Alaska Center for the Environment, the

Alaska Conservation Alliance, the Alaska Chapter of Sierra Club, and Trustees for

Alaska. It has also been endorsed by the Alaska Coalition, which is made up of more

than 500 conservation, sporting, religious and other public interest groups representing millions of Americans.

SUMMARY

We oppose Title V of NESA as it would change the law to allow oil and gas exploration and development in the Arctic National Wildlife Refuge. The Arctic Refuge

is America’s greatest wilderness, protecting more abundant and diverse wildlife

than any area in the circumpolar north. The U.S. Fish and Wildlife Service considers the 1.5 million-acre Coastal Plain, the area now targeted for prospective oil

and gas development, to be the ‘‘biological heart’’ of the entire refuge and its ‘‘center

of wildlife activity.’’ The Coastal Plain also represents the only five percent of Alaska’s North Slope that is protected, by law, from oil and gas exploration or development. In short, we firmly believe the Arctic National Wildlife Refuge is unique, not

only to Alaska, but to the world, and should remain as it has since President

Dwight Eisenhower first protected the northeast corner of Alaska in 1960, free of

industrialization.

I. POLITICAL HISTORY OF THE ARCTIC NATIONAL WILDLIFE REFUGE

Some have argued that the Coastal Plain—the so-called ‘‘1002 Area’’—was expressly set aside for its oil and gas potential. This claim relies primarily on the fact

that Congress failed to designate the area as Wilderness in ANILCA and, in the

same law, authorized limited, one-time seismic studies of the area’s energy potential. 1 This argument ignores the purposes for which the area was originally protected and the real history of ANILCA.

Research and field studies by government and independent scientists in the

1930’s, 40’s and 50’s led the Department of the Interior to recommend that the

Northeast corner of Alaska be protected as part of a new conservation area. In response, in 1960 President Dwight Eisenhower urged Congress to pass legislation

preserving this ‘‘priceless’’ wilderness of the Arctic. 2

Eisenhower’s Arctic Wilderness Bill. In sending Eisenhower’s Arctic Wildlife

Range legislation to the Congress, Secretary of the Interior Fred A. Seaton singled

out this 9-million-acre area as ‘‘biologically irreplaceable land,’’ explaining that it

‘‘offers the only opportunity for this Nation to preserve an undisturbed portion of

the Arctic large enough to be biologically self-sufficient.’’ 3

Eisenhower’s Arctic wilderness legislation proposed to establish the area ‘‘in order

to preserve, in the public interest, a magnificent wildlife and wilderness area.’’ 4

Thus, as a matter of conservation history, Eisenhower’s Arctic Wildlife Range bill

was the first legislation ever proposed by a president explicitly linking preservation

of wilderness habitat to the achievement of wildlife refuge goals—an ecologically-enlightened concept now accepted as fundamental to preserving complex communities

of wildlife species which, as Seaton said, ‘‘require a sizeable unrestricted range’’.

Stressing that the purpose of the Range would be the preservation of ‘‘wildlife and

wilderness values,’’ Seaton stressed that use of the area for other purposes would

be ‘‘permitted in a manner that would not impair the intent of this legislation.’’

With extraordinary foresight, Seaton told Congress ‘‘

Looking ahead 50 years to the unfolding story of Alaska’s development, it is clear

that the only economically feasible opportunity for maintaining a wilderness frontier

large enough for the preservation of the caribou, the grizzly, the Dall sheep, the wolVerDate 11-MAY-2000 10:18 May 16, 2002 Jkt 000000 PO 00000 Frm 00086 Fmt 6633 Sfmt 6621 73674.TXT HRESOUR1 PsN: HRESOUR1
83

5Fred A. Seaton to Hon. Sam Rayburn, April 30, 1959, transmitting draft legislation to authorize the establishment of the Arctic Wildlife Range, Alaska. 6Public Land Order 2214, December 6, 1960, 25 Fed. Reg. 12598 (emphasis added). The Secretarial Order was based on an application from the Bureau of Sports Fisheries and Wildlife, November 18, 1957. A notice of this application was published in January 1958, explaining that

‘‘The applicant desires the land for an Arctic Wildlife Range for the preservation of the wildlife

and wilderness of northeastern Alaska.’’ 23 Fed. Reg. 364. 7 ‘‘Secretary Seaton Establishes New Arctic National Wildlife Range,’’ U.S. Department of the

Interior press release, December 7, 1960. 8 ‘‘Some of the very interests [conservation groups in Alaska and nationally] which are pressing for the establishment of this area [the Arctic Wildlife Range] have withstood or resisted the

attempts to restore this Public Land Order 82 area [west of the Range] to public domain previously. We think that this [establishment of the Wildlife Range] is a confidence-building factor

as we move step by step to demonstrate to these people who are so interested in the preservation of some conservation lands in Alaska.’’ U.S. Congress, Senate, Arctic Wildlife Range—Alaska, Hearings before the Merchant Marine and Fisheries Subcommittee of the Committee on

Interstate and Foreign Commerce on S. 1899, a bill to authorize the establishment of the Arctic

National Wildlife Range, Alaska, and for other purposes, 86th Congress, 1st Session, 1959. 9 ‘‘Secretary Seaton Establishes New Arctic National Wildlife Range,’’ U.S. Department of the

Interior press release, December 7, 1960.

verine, and the polar bear, all of which require a sizeable unrestricted range, lies

in this northeastern Arctic region of the State’’. For the wilderness explorer, whether primarily a fisherman, hunter, photographer, or mountain climber, certain portions of the Arctic coast and the north slope

river valleys, such as the Canning, Hulahula, Okpilak, Aichilik, Kongakut, and

Firth, and their great background of lofty mountains, offer a wilderness experience

not duplicated elsewhere in our country. 5

Senate Failed to Act, So Eisenhower Used Executive Authority to establish the

Arctic Wildlife Range

In one of its proudest achievements for conservation, the House of Representatives

passed Eisenhower’s bill to establish the Arctic Wildlife Range in February 1960.

However, opposition from Alaska’s senators blocked any Senate action on the bill.

In response, Eisenhower instructed Secretary Seaton to use executive authority to

protect the area.

Eisenhower’s Public Land Order Establishes the Wilderness Refuge. On December

6, 1960, as instructed by Eisenhower, Secretary Seaton issued a Public Land Order

establishing the Arctic National Wildlife Range ‘‘by virtue of the authority vested

in the President’’ ‘‘for the purpose of preserving unique wildlife, wilderness and recreational values.’’ 6 In a press release, Secretary Seaton explained: ‘‘In these circumstances I felt it my duty, in the public interest, to move as promptly as possible

to take the steps administratively which would assure protection and preservation

of the priceless resource values contained in the proposed Arctic National Wildlife

Range.’’ 7

Quid Pro Quo Opens Other Federal Lands to Oil Development. At the same time,

Seaton lifted withdrawals on approximately 20 million acres of North Slope federal

lands to the west of the new Arctic Wildlife Range. An assistant to Secretary Seaton

acknowledged that the opening of the federal lands to the West for state selection

and potential oil development was a quid pro quo for leaving the new Arctic Wildlife

Range undeveloped. 8 Large portions of those lands were soon selected by the State

of Alaska under its statehood grant and became the site of the extensive petroleum

operations in the Prudhoe Bay area.

Expanding the Arctic Refuge and Further Protecting the Arctic Coastal Plain

As was common at the time, the original Wildlife Range was viewed as a multiple

purpose area, but other uses—such as mineral leasing—were secondary to ‘‘a primary purpose of providing permanent habitat for Arctic wildlife.’’ Since 1960 we

have learned much more about the complex and fragile wilderness ecosystem, and

ever greater value has been placed on the preservation of the totally unmarred wilderness of the Arctic Refuge.

In what was to become a pattern, the Alaska congressional delegation strongly opposed the Eisenhower Administration’s establishment of the Arctic National Wildlife

Range. In a statement that was to prove prophetic, Secretary Seaton noted that

while Congress could override his Public Land Order, ‘‘I cannot believe that such

action would be taken in view of the unparalleled wildlife, wilderness and scenic

values involved in the new range.’’ 9 Indeed, in subsequent decades, Congress—led

by the House of Representatives—has repeatedly strengthened the protection of the

Arctic Range.

Alaska National Interest Lands Conservation Act of 1980 (ANILCA). In 1971,

President Richard Nixon signed the Alaska Native Claims Settlement Act (ANCSA),

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10 ANILCA, Section 1003. 11 ANILCA, Section 1002(i).

which also set in motion comprehensive studies of federal lands in Alaska that

might be given stronger conservation protection. As a result of these studies, developed during the administrations of Presidents Nixon and Gerald Ford by Secretary

Rogers C.B. Morton, in 1980 the Congress and President Jimmy Carter doubled the

size of the Range through ANILCA. Most of the core Refuge area originally set aside

by President Eisenhower in 1960 was further protected as an 8-million-acre statutory wilderness pursuant to the 1964 Wilderness Act. Thus, as the heritage of great

bipartisan effort over more than four decades, with particular leadership from the

House of Representatives, today we have the 19-million-acre Arctic National Wildlife Refuge.

The Arctic Coastal Plain. In the 1980 law, a portion of the Coastal Plain of the

original Eisenhower wildlife range was not designated as Wilderness, but the wildlife and wilderness values—having been so strongly supported in the House passed

version of the bill, were given the next best thing: a prohibition on commercial oil

leasing, exploration, development and production that could only be reversed by a

future Act of Congress. 10 Furthermore, the Coastal Plain area was withdrawn from

mining and mineral leasing laws. 11 This is the area that continues under debate

today.

It is worth noting that the House of Representatives overwhelmingly passed full

statutory wilderness protection for the Coastal Plain in 1978 and again in 1979. The

Senate had been poised to do the same, but negotiations led to the compromise language that expressly prohibited oil development on the Coastal Plain. While authorizing further study of the area’s oil potential, the legislation also required an assessment of its wildlife and wilderness values—oil was certainly given no preference. In

neither the proclamation establishing the Arctic Wildlife Range nor in ANILCA

were the purposes of the Coastal Plain defined to include oil exploration and development. Given that the Coastal Plain was part of Eisenhower’s original Range and

that ANILCA only strengthened statutory protections for the area, it is not reasonable to conclude, as some have, that the Coastal Plain was set aside for its energy

resources.

II. WHY THE COASTAL PLAIN MERITS PERMANENT PROTECTION

Nowhere else in Alaska’s Arctic are the mountains and glaciers of the Brooks

Range as dramatically close to the coastline as in the Arctic Refuge. Looking back

across the Coastal Plain from the shoreline of the Beaufort Sea, the mountains lie

only ten to forty miles away. Farther west, near the oil fields at Prudhoe Bay and

the National Petroleum Reserve, the mountains are between 100 and 200 miles in

the distance. Those who surveyed Alaska’s Arctic in the last century determined

that the Northeast corner of the state provided the best opportunity to protect a

complete range of arctic and sub-arctic ecosystems. It was the only place where, in

one conservation system unit, America’s northernmost forest, the highest peaks and

glaciers of the Brooks Range, and the barrier islands, lagoons, braided rivers, and

rolling tundra of the Coastal Plain could be protected.

Some have sought to belittle the wilderness values of this area, noting that it is

‘‘flat’’ and ‘‘treeless.’’ Yet, the Reagan Administration’s 1987 Arctic National Wildlife

Refuge Coastal Plain Resource Assessment Report concluded that the area ‘‘has outstanding wilderness qualities: scenic vistas, varied wildlife, excellent opportunities

for solitude, recreational challenges, and scientific and historic values.’’ The Reagan

report also determined that, with the exception of two abandoned DEW (Defense

Early Warning) line sites along the coast, the entire Coastal Plain meets the criteria

under the 1964 Wilderness Act. During the summer of 2000 the buildings and infrastructure from these sites was removed.

Wilderness designation of the Coastal Plain will ensure that at least one portion

of Alaska’s North Slope will forever remain free from industrialization. Because of

the primary ecological value of the Coastal Plain to the remainder of the Refuge as

well as the adjacent lands in Canada (some of which are protected as National

Parks), it is imperative that the strongest protection be given to this very special

area.

Wilderness designation of the Coastal Plain will also afford permanent protection

to the greatest abundance and diversity of wildlife along Alaska’s arctic coast. More

than 200 species call the Coastal Plain home, including musk oxen, polar bears and

grizzlies, wolves and wolverines, and migratory birds that fly to or through four continents and nearly every state.

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12The author, Dr. Richard A. Fineberg of Ester (Fairbanks), Alaska, is an independent analyst

who specializes in economic and environmental issues related to North Slope development and

the Trans–Alaska Pipeline System. A copy of the report may be obtained by contacting the Alaska Wilderness League.

Most notably, the Coastal Plain is the site of one of our continent’s most awe-inspiring wildlife spectacles: the annual gathering of nearly 130,000 caribou. Each

year, the Porcupine (River) Caribou Herd migrates 1,400 miles across Alaska and

Canada, typically arriving on the Coastal Plain in late May where the females give

birth to as many as 50,000 calves. Even in the rare years when the Porcupine Herd

has calved in Canada because of snow conditions, the herd has always moved west

to the Arctic Refuge Coastal Plain for the post-calving season. The desirable coastal

habitat has served as a birthplace and a nursery ground for these caribou for centuries.

While there are larger herds of caribou in Alaska, none calve in so restricted an

area as the Porcupine Herd. The relatively narrow Coastal Plain has fewer predators and far better foraging opportunities than the adjacent Brooks Range and provides extremely favorable insect relief habitat due to its close proximity to the Beaufort Sea and lagoons.

No other caribou herd in North America is subject to international treaty obligations, and no other herd is as heavily relied upon by native people for sustenance

and as a central part of their culture. The Gwich’in people of Alaska and Canada

have settled in 15 villages along the migratory route of the herd. In some of their

communities, up to 80 percent of their diet comes from caribou and other wild meat.

The United States is also party to an agreement on the conservation of polar

bears. That treaty obligates our nation to protect polar bear ecosystems with special

attention given to denning and feeding sites. The Coastal Plain has the highest density of land-denning polar bears on Alaska’s North Slope.

BIPARTISAN SUPPORT FOR WILDERNESS DESIGNATION

Several years after passage of the 1980 Alaska Lands Act, Representative Morris

K. Udall (D–AZ) introduced legislation to designate the Coastal Plain as Wilderness.

Senator William Roth (R–DE) introduced a companion measure in the Senate. This

year, Representatives Ed Markey (D–MA) and Nancy Johnson (R–CT) are sponsoring that same legislation, now named the Morris K. Udall Wilderness Act

(H.R. 770). Together with its Senate companion measure sponsored by Senator Joseph Lieberman (D–CT), H.R. 770 has more bipartisan cosponsors than any other

wilderness proposal before this Congress.

In simple fairness, we urge the Committee to hold hearings on this legislation and

provide an opportunity for its consideration when the House debates the fate of the

Arctic National Wildlife Refuge in the coming weeks.

The American people want to see the Arctic Refuge protected for future generations, not exploited for a short-term supply of oil. In a recent bipartisan poll conducted by Greenberg Quinlan Research and the Tarrance Group, 62% of Americans

opposed drilling in the Arctic Refuge while only 34% supported development. Similarly, a new Gallup poll released last week demonstrated that proposed Arctic Refuge drilling is the least popular part of President George W. Bush’s proposed ‘‘National Energy Strategy.’’

III. ARCTIC REFUGE OIL POTENTIAL: A DROP IN THE NATIONAL BUCKET

Policy-makers and the press have used a wide range of numbers to characterize

the potential oil and gas resources of the Coastal Plain. Although no one can say

for sure how much oil and natural gas—if any—the area may hold, a great deal of

information is available from the U.S. Geological Survey’s 1998 report which summarized a three year analysis of geologic information, re-processed seismic data, results from nearby test wells, and economic modeling to come up with a range of projections of the area’s oil and gas resources.

As the attached new report, ‘‘Understanding the U.S. Geological Survey Analysis

of Estimated Oil Beneath the Coastal Plain of the Arctic National Wildlife Refuge,’’

prepared for the Alaska Wilderness League by Dr. Richard Fineberg, 12 makes clear,

drilling proponents have significantly exaggerated the area’s energy potential. For

example, some have claimed that the Coastal Plain is likely to hold up to 16 billion

barrels of oil. This figure comes from the USGS’s 5% probability-estimate (1-in–20

chance) of finding technically recoverable oil from an area larger than the actual

Coastal Plain (1002 study-area) that includes the adjacent State offshore and Native

lands. The correct 5% (low probability) estimate for technically recoverable oil from

the actual 1002 area is 11.8 billion barrels of oil and the mean estimate is 7.7 billion

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13The Future of Oil Prices: The Perils of Prophecy (Cambridge, MA and Chicago: Cambridge

Energy Research Associates and Arthur Andersen & Co., 1984), p. iii. 14 ‘‘Price history, crude oil, natural gas and motor gasoline,’’ International Petroleum Encyclopedia, 1989 (Tulsa: Pennwell, 1989), p.337.

barrels. It is important to note, however, that these estimates do not take into account the costs associated with producing that oil, or the effects of oil prices on commercial viability.

Large oil fields that demonstrate the importance of the distinction between a technically recoverable resource and an economically recoverable resource have already

been discovered on the North Slope. One example is the West Sak field near

Prudhoe Bay. That field is estimated to hold approximately 20 billion barrels of

heavy oil. Much of that oil is technically recoverable, but the economics are not

favorable—it would cost too much to produce. To deal with problems of this nature,

it is customary to apply economic analysis to geological information. USGS followed

this customary practice. The USGS projected that oil prices would have to be sustained at above $15.30

per barrel (in 1996 dollars) for any oil from the Arctic Refuge to be commercially

viable . Adjusting for inflation, this translates to $16.53 per barrel in current dollars. While lower than today’s average prices, the Alaska Department of Revenue

projects that average prices in 2010, when Arctic Refuge oil might first be available

(if leasing were approved and oil were discovered), would average $17.30 per barrel.

Adjusting for inflation, this figure equates to $14.19 per barrel in today’s dollars.

If the State of Alaska’s forecast is correct, then it’s possible that no oil from the

Coastal Plain will be economic to produce. According to the USGS, at a price of $20 per barrel (in 1996 dollars) the Coastal

Plain would likely yield 3.2 billion barrels of oil or the equivalent of what the U.S.

consumes in less than 6 months. Adjusting for inflation, the price necessary to sustain production at this level would be $21.60 in 2001 dollars. The Energy Information Agency forecasts that prices will average $22.12 in 2010, slightly above the

price necessary to yield this amount of oil.

To be sure, oil prices are higher than that today. But the sudden, unpredicted and

precipitous price swings that have characterized world oil prices for the past three

decades have taught the industry the perils of basing tomorrow’s forecast on today’s oil prices. 13 Oil executives will tell you that their investment decisions are not made

on today’s prices, but on their assessment of future conditions.

One of the most important conclusions of the USGS report is that the geology of

the Arctic Refuge Coastal Plain does not favor discovery of oil in one super-giant

field like Prudhoe Bay. In contrast to previous analyses, USGS now believes that

production from the Coastal Plain is likely to come from approximately five smaller

accumulations that might be discovered among 33 discrete pockets spread out across

the entire Delaware-sized area. In other words, production of mean estimate volumes would require development of multiple fields across a wide area, not a mere

‘‘footprint the size of Dulles Airport,’’ as some have suggested.

Proponents of Arctic Refuge oil drilling have not only mischaracterized the

amount of oil that might lie beneath the Coastal Plain, but the impact this oil might

have on energy costs paid by American consumers and our nation’s energy security.

Oil prices are determined principally by global supply and demand, not the presence or absence of an individual field. Consider the case of Prudhoe Bay. In 1976— the year before the nation’s largest oil field ever discovered entered production—a barrel of West Texas Intermediate (WTI) crude oil sold for $12.65 and standard gasoline averaged $0.59 per gallon. Two years later, with Prudhoe Bay adding more

than a million barrels per day to domestic supply, WTI had increased by more than

15% (to $14.85 per barrel) and gasoline averaged $0.63 per gallon. During the next

two years, as Prudhoe production increased, oil prices skyrocketed to $37.37, while

gasoline nearly doubled, to $1.19 per gallon. In 1985, with Prudhoe Bay and

Kuparuk both operating at full throttle, a barrel of WTI sold for more than $28 and

gasoline averaged $1.12. 14

Similarly, Arctic Refuge oil would do nothing to reduce the price that consumers

pay for gasoline, home heating oil, or electricity. When Congress lifted a two-decadeold ban on the export of Alaska oil in 1995, the oil companies vociferously argued

that there is no connection between Alaska oil production and prices paid by U.S.

consumers. Last year, British Petroleum made the same argument in its filings with

the Federal Trade Commission during that agency’s consideration of its proposed

takeover of Arco.

More egregiously, some have tried to use the current electricity crisis in California

to make the case for oil drilling in the Arctic Refuge. With less than 1% of its electricity derived from oil, California would realize no benefit from Arctic Refuge oil.

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15 John H. Schuenemeyer, ‘‘Assessment Results,’’ U.S. Geological Survey, The Oil and Gas Resource Potential of the Arctic National Wildlife Refuge 1002 Area, Alaska (Open File Report 98–

34, 1999), Chapter RS, Table RS14. 16For example, in the forward to the 1995 edition of a booklet advocating drilling in the Arctic

Refuge, Alaska Governor Tony Knowles wrote, ‘‘According to a 1991 report by the U.S. Dept.

of Energy, the North Slope fields currently using the Trans–Alaska Pipeline are expected to

produce so little oil by the year 2009 that the pipeline could be abandoned’’ (The Arctic National

Wildlife Refuge: Its People, Wildlife Potential, and Oil and Gas Resources [State of Alaska,

Arctic Slope Regional Corporation and North Slope Borough, June 1995]). At the time the estimate used by the Governor was widely recognized as being out of date and probably wrong. In

a letter to all employees dated Oct. 6, 1994, Alyeska Pipeline Service Co. President David

Pritchard told Alyeska employees that expected investment in existing fields would keep the

Trans–Alaska Pipeline operating until at least 2030. (See: Alaska Wilderness League, Litany of

Lies Nov. 28, 1995, Attachment 1A.) 17L.D. Maxim, ‘‘Trans Alaska Pipeline System Throughput Analysis,’’ Feb. 15, 2001 (draft),

in Trans Alaska Pipeline System Owners, Environmental Report for Trans Alaska Pipeline System Right-of–Way Renewal [draft], Vol. 2, Appendix A, pp. A–1—A–4 (May 2, 2001). 18 Alaska Department of Revenue, ‘‘Spring 2001 ANS Production Forecast—Total Liquids’’

(forecast through 2034), provided by Alaska Dept. of Revenue (calendar year = average of [state

fiscal year + following state fiscal year]); for forecast through 2010 see: Alaska Department of

Revenue Tax Division, ‘‘Historical and Projected ANS Production,’’ Fall 2000 Revenue Sources

Book, p. 90 (on-line at State of Alaska, Dept. of Revenue, Tax Division).

Some have suggested that natural gas could be produced from the Coastal Plain and

be used for electricity and other purposes. This assertion ignores two basic facts.

First, tapping any natural gas from any part of Alaska will require the construction

of a new pipeline costing $10–15 billion to which the industry has yet to commit.

Secondly, there are between 26–35 TCF of gas already discovered in the immediate

vicinity of Prudhoe Bay compared to the 7 TCF of technically recoverable natural

gas the USGS says might lie beneath the Coastal Plain. 15

With respect to arguments that drilling the Coastal Plain would somehow enhance our nation’s energy security, I would simply point out that using any of the

realistic USGS estimates of economically recoverable oil, which range from 0 to 5.2

billion barrels of oil, Arctic Refuge oil drilling will not curb our nation’s dependence

on imports. Since the U.S. has less than 3% of the world’s oil reserves and no prospective provinces that rival the much larger fields of the Middle East and the

former Soviet Union, it is simply not possible for us to drill our way to energy independence.

By contrast, increasing the average fuel economy of our nation’s cars and sport

utility vehicles to 39 miles per gallon would save 15 times the amount of oil that

the Coastal Plain might yield. This far more rational investment would dramatically

lower prices for American consumers and greatly reduce our tab for, and dependence

on, imported oil. Simply requiring that replacement tires on American automobiles

be just as good as those outfitted on new cars would also save more oil than the

Arctic Refuge might hold.

IV. NORTH SLOPE: SIGNIFICANT OIL RESOURCES OUTSIDE REFUGE

As recently as 1995, drilling proponents asserted that the Trans–Alaska Pipeline

System (TAPS) would run dry shortly after the turn of the century without oil from

the Arctic National Wildlife Refuge. 16 These claims looked specious and misleading

at the time; it is now clear how wrong they were. Enhanced oil recovery from existing fields and discoveries of new ones have prompted the TAPS owners to predict

at least another three decades of Alaska oil production without drilling the Arctic

Refuge or even the National Petroleum Reserve–Alaska (NPR–A). In the oil companies’ application to renew their State lease and Federal right-of-way grant to operate TAPS, submitted May 2, 2001, they assume that North Slope production declines until 2020 but then levels out at 490,000 barrels per day (bpd) through 2034,

the end of the proposed lease renewal period. 17

Still, the TAPS owners’ report suggests that even these production levels may be

too low. For example, the report notes that rapid technological progress could result

in a higher production level from existing fields in 2020 of 660,000 bpd; in this case,

total production and production in 2034 could be higher than their baseline level.

The State of Alaska’s own estimates confirm these optimistic projections. The

Alaska Department of Revenue forecasts higher production levels for this decade

than the TAPS owners baseline scenario, declining to 302,000 bpd in 2034. 18 According to the TAPS owners’ report, the State’s projections ‘‘have consistently proven

to be reliable over the near term ... [but] have proven to be conservative over the

long term,’’ and ‘‘successive projections have generally resulted in upward revisions

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19Trans–Alaska Pipeline System Throughput Analysis, p. A–1. In this regard, it is interesting

to note that the State’s current forecast exceeds its 1996 long-term production estimates by approximately 18 per cent (author’s calculation). 20 ‘‘Evaluation of Three NPR–A Discoveries Phillips’ Top Priority,’’ Petroleum News Alaska,

June 2001, p. A13. 21See: ‘‘Spring 2001 ANS Production Forecast—Total Liquids’’ and Petroleum News Alaska,

Feb. 2001, p. A24. 22 ‘‘Spring 2001 ANS Production Forecast—Total Liquids.’’ 23 Earlier this year, BP Exploration (Alaska) Inc. President Richard Campbell noted the potential of the West Sak and Schrader Bluff deposits, which he said contain an estimated 15 billion

barrels of heavy oil that he described as ‘‘cold, viscous and very difficult to produce.’’ According

to Campbell, ‘‘our heavy oil production technology is improving, and some of our recent wells

have been very promising.’’ He added that recovery of just 10 per cent of that heavy oil ‘‘would

be like finding another Kuparuk,’’ the nation’s second largest producing field, just west of

Prudhoe Bay (Richard Campbell, ‘‘BP’s future in a word: Growth,’’ Petroleum News Alaska, January 2001, p. A1 [guest editorial]). 24For a brief rundown of Phillips Petroleum’s stellar results since its acquisition of ARCO’s Alaska properties in March 2000, see section III. of my February 8, 2000 memorandum, ‘‘Alaska

North Slope Development Prospects.’’ Argus Company Reports on the major North Slope companies were issued May 9 (BP Amoco PLC; rated ‘‘buy’’ with a 12-month target price of $72 per

share, approximately 44% above present levels), June 1 (Phillips Petroleum; rated ‘‘buy’’ with

a 12-month target price of $72 per share, approximately 30% above present levels) and June

12 (Exxon Mobil; rated ‘‘buy’’ with a 12-month target price of $100 per share, approximately

15% above present levels).

... as well as postponement of the year at which production is expected to fall below

a certain benchmark.’’ 19

Both the State of Alaska and the industry’s forecasts indicate that the North

Slope can be expected to produce over seven (7.0) billion barrels of oil between 2002

and 2034—an average of more than 600,000 barrels per day. The TAPS owners’ assumptions result in total production ranging from 7.1 billion barrels (declining scenario) to 7.8 billion barrels (baseline). With production from known fields and no

production from the Arctic Refuge or NPR–A, the State of Alaska’s production forecast for the same period is 7.7 billion barrels—more than double what USGS estimates might be produced from the Arctic Refuge Coastal Plain at oil prices of $21.60

in 2001 dollars.

Recent discoveries in NPR–A and more aggressive development of the heavy oil

deposits near Prudhoe Bay are likely to increase forecast production and further extend the life expectancy of TAPS.

Last winter, the National Petroleum Reserve–Alaska (NPR–A), to the west of

Prudhoe Bay was the focus of intensive exploration by both Phillips Petroleum and

BP. In May Phillips Petroleum announced the discovery of what the company believes to be three separate hydrocarbon deposits in NPR–A. Further evaluation of

those discoveries is Phillips’ top priority for next winter’s drilling, while the company also plans additional NPR–A exploration. 20 News reports from the North Slope

hint at the potential of the region to the west of the Prudhoe Bay complex, while

the largest discovery in that region to enter production—Alpine—began producing

in November. Said to be one of the ten largest fields in the United States, Alpine

presently accounts for nearly ten per cent of the North Slope’s oil. 21 As noted above,

the Alaska Department of Revenue production totals do not include production from

NPR–A.

Another source of potential future production is the large deposits of heavy oil in

the West Sak and Schrader Bluff formations in the existing Prudhoe Bay complex.

These deposits contain an estimated 20 billion barrels of heavy oil. The Alaska Department of Revenue’s long-range forecast includes approximately 740 million barrels of West Sak and Schrader Bluffs oil—less than four per cent of the total accumulation. 22 The oil in these formations is comparable in quality to heavy crude oil

in production in California; with production and transportation infrastructure in

place, it is possible that the industry will find a way to bring greater quantities of

this commodity to market. 23

The oil and gas industry companies that earned record-breaking profits for the

year 2000 include the three major North Slope producers: BP, Exxon and Phillips

Petroleum. An indication of the strength of these companies can be gleaned from

recent Argus Research Company reports. This independent research company recommends the stock of all three companies and anticipates that the share price of

each will increase significantly during the next 12 months. 24 Argus is particularly

enthusiastic about BP, citing the company’s Alaska trade as a major reason for its

optimism.

While government agencies do not publish reckonings of North Slope profits, a

preliminary estimate indicates that during 2000 the North Slope producers earned

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25This preliminary estimate of Alaska production and pipeline is based on the model developed in the author’s report, How Much Is Enough? Estimated Industry Profits from Alaska

North Slope Production and Associated Pipeline Operations, 1993—1998 (Anchorage: Oilwatch

Alaska, 1998, Ch. 2), with revisions to 1998 data for changes in production, price, pipeline tariff

and tanker costs. (Note: This estimate is limited to Alaska operations and therefore does not

include profits on tanker, refining and marketing activities.) 26 British Petroleum (BP), Exxon Corporation and Phillips Petroleum produce more than 90

per cent of the North Slope’s crude oil and own more than 90 per cent of TAPS (see: Richard

A. Fineberg, The Big Squeeze: TAPS and the Departure of Major Oil Companies Who Found

Oil on Alaska’s North Slope (Anchorage: Oilwatch Alaska, 1997).

more than $9.50 per barrel after taxes on every barrel of North Slope oil they produced and delivered to refineries, resulting in total annualized profits of approximately $3.5 billion. 25 The lion’s share of those hefty profits are shared by three

major oil companies that control more than 90 per cent of both North Slope production and TAPS. 26

V. PROVISIONS OF NESA INADEQUATE TO PROTECT UNIQUE

ENVIRONMENT OF ARCTIC REFUGE COASTAL PLAIN

The National Energy Security Act (NESA) of 2000 asserts up front that a Coastal

Plain leasing program will be ‘‘environmentally sound’’ and ‘‘will result in no significant adverse effect on fish and wildlife, their habitat, subsistence resources and the

environment.’’ Yet NESA’s specific provisions fail to ensure that these lofty goals be

met. Simply put, NESA fails to safeguard the extraordinary wildlife and wilderness

resources of the Arctic National Wildlife Refuge Coastal Plain.

As an initial matter, NESA is remarkable for what it does not do to protect the

Refuge. For example, the U.S. Fish and Wildlife Service states that the Coastal

Plain does not have an adequate supply of fresh water to support both fish and wildlife and winter ice road construction or oil field operations. Yet the bill fails to ban

the use of water from the braided rivers, ponds, and lakes of the Coastal Plain.

Similarly, the legislation does not prohibit the construction of permanent roads,

either within individual fields or to connect separate ones. As a result, millions of

cubic feet of gravel could be dredged from riverbeds to build these roads. This also

belies the ‘‘small footprint’’ argument, as the failure to prohibit permanent roads

make it more likely that the impact of development would spread throughout the

Coastal Plain in all seasons.

NESA also exempts leasing regulations from analysis under the landmark precautionary environmental law of our nation—the National Environmental Policy

Act. The bill declares that a 14-year-old analysis is sufficient for NEPA purposes.

The fallacy of this provision is revealed by other provisions of the proposed legislation, which require, for example, that the Secretary ‘‘prescribe such regulations as

may be necessary’’ to protect fish and wildlife, their habitat, subsistence resources,

and the environment of the Coastal Plain. See Section 503(g)(1).

Moreover, the proposed legislation artificially restricts NEPA review of lease sales

themselves by providing that only leasing alternatives can be considered and that

only a preferred and a single leasing alternative be analyzed. The alternatives analysis is considered the ‘‘heart of NEPA’’ because it allows decision makers to evaluate

the environmental impacts of the proposal as compared with the impacts of a number of possible alternatives to the proposal. This type of comparative analysis is critical to clearly defining the environmental issues at stake and to providing ‘‘a clear

basis for choice among options.’’ (40 CFR 1502.14). By artificially restricting the alternatives to be evaluated, the legislation ensures that decision makers and the public will be ill-informed about the environmental consequences of any lease sale proposal and will be forced to make decisions in a vacuum.

Additionally, the bill only allows the Secretary of the Interior to designate 45,000

acres of ‘‘Special Areas’’ in the Coastal Plain, an insignificant amount given the important calving, denning, and nesting habitat found throughout the 1.5 million acre

area. Furthermore, NESA does not prohibit intrusive seismic exploration of Special

Areas.

NESA also gives the Secretary the discretion to allow year round drilling of the

Coastal Plain, rather than simply directing the Secretary to ban exploratory and development activities during critical denning, calving, and nesting periods for migratory or resident wildlife populations.

Further, NESA merely requires the use of the ‘‘best commercially available technology’’ for oil and gas operations. A more protective standard, used in clean water

and other applications, would require that companies exploring, drilling, and producing oil from the Coastal Plain use the ‘‘best available technology,’’ regardless of

economic considerations. The proposed standard is thus not the most protective of

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the environment, as the Coastal Plain’s status should compel. The bill does include

a range of other environmental stipulations and mitigation measures, however all

give the Secretary broad discretion in their interpretation and application.

Additionally, through both limitations on public comment under NEPA and limitations on judicial review NESA restricts the public’s ability to participate in

crafting a leasing program on the Coastal Plain.

Finally, NESA also fails to reinstate the ban on the export of Alaska North Slope

crude oil that had been in effect prior to 1995. As a result, any oil discovered and

produced from the Arctic Refuge under this Act could be exported to foreign countries, undercutting the purported ‘‘national security’’ justification for this bill. The

bill moreover grants an enormous 90% of the royalties from lease sales to the State

of Alaska, rather than the traditional 50% royalty. The bill does include ‘‘projectlabor agreement’’ language, but only applies this to the Arctic Refuge and to no

other federal lands on the North Slope or to the construction of a new natural gas

pipeline in the State, which would necessitate many times more jobs than refuge

drilling.

In summary, while NESA states that ‘‘oil and gas exploration, development, and

production activities on the Coastal Plain will result in no significant adverse impact on fish and wildlife, their habitat and the environment,’’ provisions included

and not included in the bill ensure that this standard will not be met.

CONCLUSION

We respectfully urge the committee to reject Title V of the National Energy Security Act of 2001. This section of the bill would mandate oil exploration and drilling

in the wildest place left in America for a speculative short-term supply of oil that

would do nothing to lower prices for American consumers or enhance U.S. energy

security. The bill would rollback decades of environmental progress, originally initiated by President Dwight Eisenhower, effectively allowing oil exploration or development to occur along America’s entire Arctic coastline. Despite language in Title

V that attempts to limit and mitigate the environmental consequences of leasing the

Coastal Plain, its provisions are inadequate to protect its irreplaceable wildlife and

wilderness values. The American people do not support drilling in the Arctic Refuge

nor is drilling in the Arctic Refuge necessary to maintain robust oil and gas activity

in Alaska for decades to come.

Thank you for the opportunity to testify. I’m happy to answer any questions the

committee might have.

The CHAIRMAN. I thank the gentleman.

Linda Lance?

STATEMENT OF LINDA LANCE, THE WILDERNESS SOCIETY,

WASHINGTON, DC

Ms. LANCE. Thank you, Mr. Chairman.

I am Linda Lance. I am the vice president for policy at the Wilderness Society, and I very much appreciate the opportunity to testify on this important issue today.

I did want to introduce the Committee to two people who are

with me today and who will also be available for questions, should

the Committee wish to ask them.

Jim Waltman is our program director for wildlife refuges at the

Wilderness Society, and Luci Beach is the executive director of the

Gwich’in Steering Committee and represents the 7,000-member

Gwich’in nation. And as the Committee is aware based on the earlier discussion, the Gwich’in nation is opposed to drilling in the

Arctic Refuge.

Mr. Chairman, we also are strenuously opposed to this bill, and

our concern is generally stated that this bill, rather than providing

an abundant and affordable energy supply for the country, which

is a goal that we very much share with the Committee, this bill

will put our most precious lands not only at risk, but in a situation

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in which they are irreplaceably lost. We don’t think that that is a

price that country needs to pay for an affordable, abundant energy

supply.

Some of these places are well-known. The Arctic National Wildlife Refuge has been discussed at considerable length today, and I

won’t spend a lot of time on that in my statement.

But there are other places as well in the lower 48 that are not

nearly as well-known, but they currently have protection from oil

and gas drilling that are put in risk in this bill. There are also incredible resources for this country that will be irreplaceably lost if

oil and gas production proceeds on those places.

The concern that we have in particular about this bill is it seems

to be based on the premise that there is an enormous amount of

oil and gas resources that exist on public lands and that are locked

up somehow and put off limits from production. We simply don’t

see any evidence that that is the case.

In fact, what really seems to be happening as the price of natural

gas, for example, increases, is that we have what is reasonably

viewed as a boom in gas production in particular on public lands,

particularly in the lower 48.

Some numbers I thought would be useful for comparison:

The acres of public lands that have been leased for oil and gas

development since 1993: 64 million.

The acres in the Rocky Mountain states that are available for oil

and gas leasing: 110 million. This is of course larger than the State

of California.

The number of operating oil and gas wells on public lands:

57,000.

The number of drilling permits issued on the public lands in

1990: 2,617.

The number of drilling permits on public lands that were issued

in 2000: 3,496.

And I thought the Chairman might be interest in, and is probably well-aware, in the increase in activity that is going on in his

own state. The number of drilling permits on public lands in Utah

that have been issued so far this year: 438. And that is 146 percent

of the number of drill permits issued all of last year.

The percentage of United States oil and gas production that

comes from the Federal lands has increased considerably over the

last decade. Thirteen percent of our oil and gas, domestic oil and

gas production, came from public lands in 1992. Twenty-five percent of our domestic oil and gas production came from public lands

in 1999.

And as Senator Johnston so eloquently described, offshore oil

production is up 65 percent since 1993, and Gulf of Mexico gas production is up 80 percent in just the last 2 years.

So there are some very special places in this country that have

been put off-limits, typically by Congress, from oil and gas drilling

because of their unique and special qualities. But the vast majority

of public lands and offshore areas that are productive in this country are very much available, are being produced, and are increasingly being produced as the price signals send the industry into

those places.

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For example, the acres of public lands that have been protected

as national monuments increase 1993: 5,568,000. But in many of

those monuments, there are existing oil and gas leases and those

valid existing rights have been protected.

The point here is that there is a myth, we believe, driving this

push to drill in the public lands, and that myth is that the significant resources on the public lands are somehow locked up. They

simply are not.

A moment on the Arctic refuge. It has been discussed at some

length, and I won’t spend a lot of time.

If I might have one more minute, Mr. Chairman?

The CHAIRMAN. Go ahead.

Ms. LANCE. I do think that it is important that the views of the

Gwich’in nation be recognized by the Committee. Some of the other

witnesses have made the point that there is obviously a difference

of opinion among Alaskan natives about whether it is appropriate

to drill in the Arctic refuge. The Gwich’in nation makes their living

off of the Porcupine caribou herd in the refuge and is very much

opposed drilling.

And just in closing, Mr. Chairman, as this Committee is wellaware, its responsibilities here are enormous. The stakes are very,

very high. But unlike with some legislation where if mistakes are

made, they are reversible, in this case, some of the mistakes that

could be made and that would be made by this bill are irreversible.

Once there is drilling in the Arctic refuge, once there is drilling in

some of the other places in the lower 48 that are protected today,

you can’t go back.

So we would urge this Committee not to act to do that, and to

look at the facts, and rely on what the facts are as opposed to some

mythical desire to drill all over our public lands.

Thank you, Mr. Chairman.

[The prepared statement of Ms. Lance follows:]

Statement of Linda Lance, Vice President, Public Policy,

The Wilderness Society

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

testify on the H.R. —, ‘‘Energy Security Act,’’ on behalf of the Wilderness Society.

The Wilderness Society is an organization of 200,000 members nationwide. Since its

founding in 1935, it has been dedicated, to ensuring that future generations will

enjoy the clean air and water, wildlife, beauty and opportunities for recreation and

renewal that pristine forests, rivers, deserts and mountains provide.

We also understand clearly the vital importance to our country of a reliable, affordable energy supply. However, we believe that achievement of our energy goals

without appropriate protection of the natural environment does the nation permanent, irreversible damage. We can meet our energy needs without sacrificing our

most precious lands. Both goals should guide the formulation of an energy policy,

and that policy should be balanced, well-informed, and carefully crafted.

We appreciate the Committee’s expeditious attention to the energy issue through

preparation of this draft legislation. We are concerned, however, that the draft bill

takes too narrow a view of the energy issue and focuses only on maximizing energy

resources from the public lands owned by all Americans. We believe the bill as currently drafted will sacrifice the lands Americans hold most dear--including the

Arctic National Wildlife Refuge--and will do so without any appreciable effect on our

energy supply. For that reason, we are strenuously opposed to this bill.

This statement will first set out some factual background that we believe provides

important context for any consideration of this issue. It then will address specific

concerns about the bill as drafted.

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I. Background on Energy Supply and Production on Federal Lands

A. Most Public Lands Are Open to Production

Much of the discussion of energy production from federal lands appears to be driven by the perception that abundant resources have been ‘‘locked-up’’ or put off limits, to the detriment of the country’s energy future. This is a myth that should not

drive the energy policy debate. The facts show that the vast majority of federal

lands are open to energy production. Significant efforts were made in the last few

years to enhance, where appropriate, oil and gas production on these lands even in

the face of falling prices. Important new areas were opened and are being leased.

Domestic oil production declining for several decades after peaking in 1970 at 9.6

million barrels per day. During the prior Bush Administration, domestic oil production decreased by an average of 250,000 barrels per day each year. During 1992

alone domestic gas and oil drilling activity decreased by nearly 17% and was at its

lowest level since 1942.

The causes for these declines were varied, but included plentiful global supplies

and correspondingly depressed prices. Despite these price pressures, overall oil and

gas production on federal lands and offshore have continued to increase throughout

the past decade. According to Department of the Interior data, the contribution of

oil and gas production from federal lands, as a percentage of overall domestic oil

and gas production, increased from 13% in 1992 to 25% in 1999. See Attachment I.

From 1992 to 2000, 7091 new leases were issued on the Outer Continental shelf,

covering approximately 38 million acres. Nearly four million acres of the National

Petroleum Reserve in Alaska, adjacent to the existing Prudhoe Bay fields, were

opened for oil and gas exploration and production in 1998. Exploration is underway

following an initial lease sale that netted more than $100 million for the U.S.

treasury.

As of September 30, 2000, oil and gas leases were issued on more than 35 million

acres of public lands. See, BLM, ‘‘Public Land Statistics 2000,’’ Tables 3–13 and 3–

14. There are nearly 60,000 producing oil and gas wells on the public lands. See

BLM, ‘‘Public Rewards for Public Lands 2000,’’ Attachment II. Thousands of new

drilling permits have been issued during the past eight years--3400 by the Bureau

of Land Management in fiscal year 2000 alone. See BLM, ‘‘Public Land Statistics

2000,’’ Table 3–16. According to BLM data, over 95% of BLM lands in the Overthrust Belt states of Colorado, Montana, New Mexico, Utah and Wyoming (the areas

believed to have the largest oil and gas resources) are available for oil and gas leasing. See Attachment III. Over one third of our nation’s yearly coal production is derived from federal land. See Attachment II.

Some in industry have claimed that they lack access to these lands. Upon closer

examination, these claims deal with two very different categories: lands that are entirely off limits to development; and lands that are open subject to ‘‘stipulations’’ or

provisions in the leases requiring that the operations take particular precautions to

protect the environment or other resources.

The former areas include, for example, designated wilderness areas, offshore moratorium areas, portions of national monuments, and areas where other mineral activities are taking place. These are places where oil and gas activities could pose

extreme environmental or safety hazards, or be incompatible with other values. Currently, such areas comprise roughly five percent of BLM-managed land in the five

states of the Overthrust Belt. See Attachment III.

Many of these areas have been off-limits to development for many years, in a

shared public recognition that they are simply inappropriate for such use. For example, Congress placed the Arctic National Wildlife Refuge off-limits in 1980, following

executive action in 1960. There have been longstanding moratoria on offshore oil

and gas production off certain areas of the east, west and Gulf Coasts, and the

House recently passed a moratorium on Lease Sale 181 off the Florida Coast. We

have a long history of restricting oil and gas drilling in our national parks, thereby

voluntarily losing the potential geothermal resources in Yellowstone National park

or the hydropower in the Grand Canyon. Finally, national monuments generally

prohibit new oil and gas drilling, and the House recently acted in the Interior Appropriations bill to reinforce that limitation for existing monuments.

The latter ‘‘stipulations‘‘category is designed by agency land managers to protect

multiple resources while allowing for oil and gas production. They protect such values as water quality, critical seasonal habitat for elk, antelope and other wildlife,

archaeological sites, and recreational sites. BLM may require that operations only

occur at certain times of the year, when such areas are not in use by wildlife species. In other cases, BLM imposes ‘‘No Surface Occupancy’’ requirements in which

the lessee is required to access the oil and gas from off-site. This restriction is usually done to protect some other resource that may be in conflict with oil and gas

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production such as underground mining operations, archaeological sites, campsites,

or important wildlife habitat. These leases may be accessed from another location

via directional drilling.

These stipulations do not put oil and gas off limits, but merely balance the need

for oil and gas with the BLM’s responsibility to manage other resources on these

public lands. Industry often touts the benign nature of advanced exploration and development technology. However, many of their complaints about lack of access are

over areas with ‘‘No Surface Occupancy’’ limitations that merely require the use of

this advanced technology for directional drilling.

These stipulations are often misunderstood or used to overstate the extent to

which oil and gas resources are off limits. An example is a report issued on June

6, 2001 by the Department of Energy, ‘‘Federal Lands Analysis , Natural Gas Assessment, Southern Wyoming and Northwestern Colorado.’’ As pointed out in a review of this report by Dr. Peter Morton, Resource Economist for the Wilderness Society, (Attachment IV) this report uses flawed methodology to overstate the effect

on the availability of oil and gas. It includes ‘‘No Surface Occupancy’’ stipulations

in the category of those areas that are off limits; focuses only on ‘‘technically’’ as

opposed to ‘‘economically’’ recoverable gas, vastly overstating the gas resources involved; and focuses only on undiscovered gas resources as opposed to the extensive

development of known reserves already underway in the area.

B. Oil and Gas Resources in Protected Areas Are Not Significant

Those special places--such as national monuments or national forest roadless

areas--that are off-limits contain at most very small amounts of oil or gas. The

Arctic National Wildlife Refuge contains no more than six months’ worth of U.S. oil

consumption. Its destruction for oil production would have negligible impact on the

country’s energy security and no impact on the price of gasoline at the pump. The

same is true for the other special areas now off limits.

All national forests currently supply only 0.4% of total U.S. oil and gas production, half of which occurs on Little Missouri Grasslands (Forest Service Roadless

Area Conservation EIS, 2000, pages 3–312 and 3–316). The vast majority of national

forest lands subject to roadless area protection have been open to leasing for decades, and there has been little interest in exploiting potential resources.

This is likely because there are only small amounts of undeveloped, resources in

these areas. A recent Wilderness Society assessment of the energy potential of national forest roadless areas in six Rocky Mountain States shows that these areas

contain only 0.4% of the total U.S. oil resources (on and off shore), and only 0.6%

of total U.S. gas resources. See Attachment V.

Similarly, in the fifteen recently created national monuments in the West managed by BLM there are only about 15 days worth of total U.S. consumption of oil,

and about 7 days worth of the total U.S. consumption of gas. See Attachment VI.

The U.S. Geological Survey recently confirmed that only five out of the 21 new national monuments had a moderate to high possibility for the occurrence of any oil

and gas. As attachment VI shows, even those five taken together have a very small

amount of potential energy. Four of the five currently allow for continued development under existing leases (Canyon of the Ancients, Carrizo Plain, Hanford Reach,

Upper Missouri Breaks.) The fifth, California Coastal, is surrounded by waters covered by the existing moratorium against off-shore drilling.

II. Specific Concerns About Draft Legislation

The Federal Land Policy and Management Act (FLPMA) and the National Forest

legislation provide a useful context for consideration of oil and gas production on

public lands. According to FLPMA, in addition to providing for the development of

minerals, the public lands under the jurisdiction of the Secretary of the Interior are

to be managed:

‘‘...in a manner that will protect the quality of scientific, scenic, historical, ecological, environmental, air and atmospheric, water resource, and archaeological values;

that, where appropriate, will preserve and protect certain public lands in their natural condition; that will provide food and habitat for fish and wildlife and domestic

animals; and that will provide for outdoor recreation and human occupancy and

use...’’ (43 U.S.C. 1701(a)(8))

See also Forest and Rangeland Renewable Resources Planning Act of 1974, 16

U.S.C. 1600.

Unfortunately, the ‘‘Energy Security Act’’ appears to be focused solely on ‘‘expediting’’ energy development proposals, surmounting ‘‘impediments’’ to energy development and ‘‘streamlining’’ environmental review procedures, while ignoring the

other resources that exist on the public lands and national forests. This is an unprecedented and extremely narrow perspective on the values of our public lands that

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is not reflected in existing land management laws, and causes serious concern about

the bill in its entirety. The following sections are of particular concern.

Title I — Section 102 of the bill requires the Secretary to inventory all ‘‘federal

public lands’’ except for national parks and designated wilderness areas for their potential to produce wind, solar, coal, and geothermal energy. All national monuments, national wildlife refuges, Bureau of Land Management Wilderness Study

Areas, National Conservation Areas, national forest roadless areas, Wild and Scenic

River corridors, National Recreation Areas, units of the National Trails System, and

BLM Areas of Critical Environmental Concern apparently are eligible for future energy production sites. If so, this evidences a serious disregard for the special qualities of these areas, which also should be exempted from inventory proposals.

We do believe, however, that additional reporting and analysis in the area of the

public lands and energy production would be useful and that this section should be

revised to ensure such reporting. For example, a comprehensive report, regularly

updated, could provide the acreage of public lands and national forests available for

energy activities, with descriptions of any special safeguards imposed on such lands

to protect other resources. In addition, the BLM currently reports on drilling activity long after it has taken place. It would be very useful to have a system that

makes publicly available the status of applications for permits to drill (APDs) and

drilling activities on the public lands on a periodic basis, perhaps monthly or quarterly.

Such information could directly address what we believe to be the myth discussed

above--that vast areas of resources are off limits. In addition, a cumulative analysis

of the overall impacts of energy production on the other values to be protected by

the BLM and the Forest Service has never been done and is vital, certainly before

consideration of any major expansion of energy production on these lands. As stated,

there are now almost 60,000 producing oil and gas wells on the public lands; thousands of well sites have been abandoned, and not reclaimed; millions of acres of the

public lands are now devoted to oil and gas activities; thousands of miles of rightsof-way are devoted to various energy development infrastructure requirements; and

there are increasing demands for more of this. Analysis that describes the current

situation not only for the energy resources but for all of the resources on these public lands is clearly warranted.

In addition, Congress should review and upgrade the BLM’s reclamation bonding

program before it is allowed to lease millions more acres and permit thousands more

wells. It is our understanding that the BLM has not increased the amount of its

reclamation bonds since 1960. Moreover, the BLM has no program and no money

to reclaim thousands of abandoned wells. Addressing this situation should take

precedence over additional financial relief for the industry as provided in later titles

of the bill.

Titles II and III -- Section 202 requires suspension of royalties for certain sales

in federal waters in the Outer Continental Shelf. As we understand it, the rationale

for the existing law, which gives the Secretary of the Interior the discretion to suspend these royalties, was unusually low world oil prices. With oil prices more robust, and deepwater drilling increased, it is unclear why this royalty relief must

now be mandated. The taxpayers deserve to receive fair market value for the commodities extracted from the public lands. As stated, the Secretary currently has the

authority to suspend these royalties if necessary (43 U.S.C.1337 (3). Under the provisions of this section oil and gas companies could produce quantities of oil worth

$1.4 billion before paying any royalties to the taxpayer—a loss of hundreds of millions of dollars to the taxpayer.

Section 222 requires the Department of the Interior and the Department of Agriculture to perform a study of ‘‘impediments to efficient oil and gas leasing and operations on Federal onshore lands in order to identify means by which unnecessary

impediments to the expeditious exploration and production of oil and natural gas

on such lands can be removed.’’ Moreover, Section 223 limits the ability of the BLM

and Forest Service to require environmental safeguards for oil and gas activities on

the public lands and national forests that are more stringent than those imposed

by state oil and gas conservation commissions. The obvious intent is to discourage

the federal land managers from providing the environmental safeguards and balanced management they believe to be necessary in a particular area. This is a totally unwarranted bias toward energy production above all other resource values.

Sections 225 and 303 remove the requirement in existing law that the Secretary

of Agriculture must consent to any oil, gas or geothermal leasing on the national

forests. This is an apparent reaction to decisions advanced in recent years by the

Forest Service through its land use planning program and with vast public support,

to restrict certain areas of the national forests from oil and gas development. It is

completely inappropriate to remove the decision making authority of the agency

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with the greatest expertise on, and responsibility for, protection of all the resources

of our national forests.

Title V—Title V of the bill would mandate opening the coastal plain of the Arctic

National Wildlife Refuge to oil and gas drilling. It is hard to imagine a more inappropriate and unnecessary action. Any legislation directed to this purpose should be

summarily rejected. Protecting this special place has been the unyielding commitment of many thousands of conservationists, scientists, sportsmen and women, religious and human rights leaders, and countless other Americans throughout the 50

states.

At The Wilderness Society, we say that the Arctic Refuge is in our blood. The Wilderness Society founder, Bob Marshall traveled extensively in the Brooks Range. He

was among the first to suggest that large tracts of Alaska be preserved. Longtime

Wilderness Society leaders Olaus and Mardie Murie are described by the U.S. Fish

and Wildlife Service as ‘‘founders’’ of the Arctic Refuge. They and others waged a

campaign to protect the area that led to the establishment of the Arctic National

Wildlife Range in 1960 by executive authority under President Eisenhower.

Resource Values in the Refuge

The 19.6 million-acre Arctic National Wildlife Refuge is a spectacular wilderness

of boreal forests, rugged mountains, undulating tundra, coastal lagoons, and barrier

islands. Located in the northeastern corner of Alaska, the Arctic Refuge is the only

conservation area in America that protects a complete range of arctic and sub-arctic

ecosystems.

The refuge has been called ‘‘America’s last great wilderness’’ since the 1950s when

a concerted effort was made to protect the area as a wildlife refuge. In fact, the

Arctic Refuge is unique to the National Wildlife Refuge System in that it was established specifically to preserve wilderness. Public Land Order 2214, issued by President Eisenhower’s Interior Secretary Fred Seaton in 1960, created the refuge ‘‘for

the purpose of preserving unique wildlife, wilderness, and recreational values.’’

Seaton explained that the refuge was ‘‘the only economically feasible opportunity for

maintaining a wilderness frontier large enough for the preservation of the caribou,

the grizzly, the Dall sheep, the wolverine, and the polar bear, all of which require

a sizeable unrestricted range.’’

At the heart of the Arctic Refuge stands the 1.5 million acre coastal plain-the very

portion of the refuge that the legislation before the committee would open to oil and

gas drilling. The U.S. Fish and Wildlife Service has called the coastal plain ‘‘the center for wildlife activity’’ for the entire refuge.

Polar and grizzly bears, wolves, and muskoxen, are just a few of the more than

200 animal species that use the coastal plain of the refuge. Millions of birds, representing some 125 species, migrate from as far away as the Southeastern United

States, South America, and Asia to nest, rear their young, molt, and feed on the

Coastal Plain—preparing themselves for their long return migrations. Many of these

birds grace local parks and refuges across the coterminous U.S. during their migrations and during the winter months. According to the Fish and Wildlife Service, the

coastal plain is also the most significant on-shore polar bear denning habitat in the

U.S.

The Arctic Refuge is perhaps most famous for the 129,000-member Porcupine

River Caribou herd that has used the coastal plain as a calving area for millennia,

traveling hundreds of miles from wintering grounds in Canada and the U.S. There

is no alternative to this sensitive habitat for the caribou herd. The gathering of the

herd following calving is a spectacle reminiscent of Africa’s Serengeti and of the

enormous herds of buffalo that once thundered across the Great Plains.

The Gwich’n (Athabaskan) people depend on the Porcupine Caribou Herd for their

subsistence and culture, a relationship that has existed for thousands of years. The

close association of the Gwich’in people and the Porcupine caribou herd have

prompted opposition to oil drilling schemes in the refuge from a diverse array of organizations: the Canadian government, National Congress of American Indians, National Council of Churches, Native American Rights Fund, Episcopal Church,

United Methodist Church among many others.

Oil drilling on the coastal plain would irrevocably destroy the unparalleled wilderness character of the area, pollute air and water, and threaten fish and wildlife populations and subsistence hunting that relies on them. And for what? In 1998, the

U.S. Geological Survey has estimated that the most likely amount of oil that could

be recovered economically would be 3.2 billion barrels-less than what the U.S. consumes in six months. At no time would oil from the refuge be expected to supply

more than two percent of America’s demand. The U.S. Geological Survey’s’ mean estimate for technically recoverable natural gas from the refuge is 7 trillion cubic feetabout what the U.S. consumes in four months (none of this gas was projected to

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be economically recoverable at the time of the report). Using updated projections for

future oil prices, the Congressional Budget Office estimated this February that the

mean estimate for economically recoverable oil from the refuge would be 2.4 billion

barrels-about what the U.S. consumes in four months.

Effects of Drilling

The oil industry claims it can develop the Arctic Refuge in an ‘‘environmentally

sensitive’’ manner and points to its history in Prudhoe Bay. Nothing could be further from the truth. Oil drilling in the Arctic Refuge would introduce a major industrial facility in the heart of this magnificent wilderness. This activity is fundamentally incompatible with the purposes for which the Arctic National Wildlife Refuge

was established. Development would bring the following to this pristine area:

* Hundreds of miles of roads and pipelines leading to dozens of oil fields;

* Chronic spills of oil and other toxic substances onto the fragile tundra;

* Rivers and streambeds--key habitat for wildlife--stripped of millions of cubic

yards of gravel for road, airstrip, and drillpad construction;

* Enormous water diversions to support drilling at the expense of pristine rivers

and wetlands;

* Living quarters, sewage treatment, and other infrastructure for several thousand workers;

* Helicopters, cargo planes, dump trucks and bulldozers; the sights and sounds

of heavy equipment would be almost constant for long periods. See also, ‘‘Oil

in America’s Arctic,’’ prepared by Trustees for Alaska, Attachment VII.

Spills

Spills of oil and various other toxic substances are a chronic problem on the North

Slope and the Trans–Alaska Pipeline. According to the Alaska Department of Environmental Conservation, oil companies emit more than a spill and day of oil and

other toxic substances-over 1.3 million gallons between 1996 and 1999.

One would think that, with their desire to gain access to the Arctic Refuge in the

public eye, oil companies would be particularly careful this year. But on April 15,

Phillips Petroleum spilled more than 92,000 gallons of saltwater and crude oil on

Alaska’s North Slope. Between January 16 and March 3 of this year, BP had three

spills of oil and drilling fluids on the North Slope of between 3,000 and 18,000 gallons. In 2000, BP Amoco and its subcontractor pled guilty to illegally dumping hazardous waste at the supposedly benign Endicott oil field near Prudhoe Bay and were

fined $22 million.

The number of spills and the high proportion with unknown causes suggest faulty

spill prevention systems, sloppy practices, and inadequate government oversight and

enforcement. Between 10 and 30 percent of safety shut-off valves in BP Amoco’s

drilling operations on Alaska’s Prudhoe Bay failed to pass state safety tests during

the first quarter of 2001. The failures were reported by the Wall Street Journal in

April, 2001 which described the safety shut-off valves as ‘‘the main line of defense

against pipeline ruptures that could spew thousands of barrels of hot underground

crude oil across the Arctic tundra.’’ The Journal also reported that ‘‘secondary

valves, which connect the platforms with nearby processing plants, often fail to close

properly as well, according to employees of BP Amoco PLC’s Prudhoe Bay operations. In other words, they say, the valves can’t be relied upon to shut in an emergency, creating the potential for a natural catastrophe.’’

Air Pollution

Prudhoe Bay oilfields emit large quantities of nitrogen oxides, carbon monoxide,

sulfur dioxide, volatile organic compounds, particulate matter, and other pollutants.

The quantity of emissions is so great that it may endanger the health of the workers

and contribute to global warming.

Water Diversions

Over 400 pollution control and discharge permits issued by both state and federal

governments govern wastewater discharges from oil field operations at Prudhoe

Bay. From 1991 through 1997, approximately 25 billion gallons of contaminants

were discharged into surface waters under such permits. Permitted wastes include

discharges from water flood and sewage treatment plants, drilling muds and

cuttings, and gravel pit de-watering discharges.

Industrial ‘‘Footprint’’

Arctic drilling proponents claim that this activity can be done with a minimal

‘‘footprint,’’ which may impact as little as a few thousand acres. These same people

have made the same arguments about Prudhoe Bay-that oil field development has

only impacted some 10,000 acres. In reality, oil field development in America’s

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Arctic includes a vast network of seismic exploration trails, gravel mines, roads,

drill pads, pipelines, processing facilities, operating and housing facilities, and waste

and sewer treatment plants that stretches across 1,000 square miles of tundra and

has changed forever the Arctic ecosystem. It is one of the largest industrial complexes in the world.

Besides the huge volume of industrial wastes produced by any other large industrial complex, oil drilling operations also generate tens of thousands of cubic yards

per day of drilling muds and cuttings, oil contaminated wastes and sludges, and produced water from drill sites. Drilling wastes typically contain a variety of toxic metals as well as petroleum hydrocarbons and other harmful substances. Over 325 million gallons of wastes have been injected into Class I waste disposal injection wells

and 40 billion gallons have been injected into Class II wells. Between 2 and 6 billion

gallons of drilling wastes were dumped into 450 reserve pits before this practice was

banned.

In addition, the oil industry on the North Slope uses immense amounts of water

for drilling activities. Twenty-seven billion gallons of water are used per year for

oil exploration and development on the North Slope. Removing water and building

drilling facilities have severely damaged the Arctic ecosystem.

Finally, a layer of gravel at least five feet thick is needed as an insulating foundation under production wells, permanent roads, causeways, offshore man-made islands, airstrips, pump stations, and all other oil field facilities. ARCO needed over

1.3 million cubic yards of gravel to fill 115 acres of wetlands tundra at its supposedly environmentally benign Alpine oil development.

Some have suggested that work in the Refuge can be done solely on ‘‘ice roads’’

that have no permanent impact and disappear in the summers. Again, this is a

myth. First, ice roads require enormous amounts of water to produce. Unlike

Prudhoe Bay, for example, the Refuge has a relatively limited water supply that

could not support such roads without damage to the ecosystem. Also, this argument

ignores the infrastructure necessary to support construction of the ice roads and the

serious impact these roads would have on polar bear denning activity. Finally, this

argument focuses only on exploratory drilling and has no application to production,

which would require significantly more permanent infrastructure.

Oil Industry Exemptions From Environmental Regulations

Congress and the Alaska legislature already have granted the oil industry lowered

standards and exemptions from basic environmental regulations, resulting in high

profits for oil companies at the expense of a healthy, sustainable environment. This

bill would grant the industry even more special treatment under environmental

laws. Existing exemptions include:

* Clean Air Act. Sulfur content in motor vehicle fuels is strictly regulated under

the Clean Air Act. However, Alaska is exempt from this regulation.

* Resource Conservation and Recovery Act (RCRA). Disposal of hazardous and

‘‘general’’ solid waste is regulated under the Resources Conservation and Recovery Act. However, certain oil and gas extraction wastes are exempted from regulation as hazardous wastes. Exempted materials include drilling muds and

cuttings, rig wastes, produced water, tank bottoms, pit sludges and workover

wastes produced during oil industry operations.

* Emergency Planning and Community Right to Know Act. This law requires polluters to report their toxic releases annually to the public. The oil industry was

granted an exemption from this Act for most of their exploration and production

facilities in 1996. No North Slope facilities are required to report their toxic releases.

Proponents of oil drilling in the Arctic Refuge have claimed that such activity

could be done in an environmentally benign way. If so, one would expect that the

oil companies would have no trouble complying with U.S. environmental laws. But

the ‘‘Energy Security Act’’ provides the following new exemptions:

* National Wildlife Refuge System Administration Act. Under this act, activities

can only be permitted on a national wildlife refuge if the Fish and Wildlife Service can demonstrate that such uses are ‘‘compatible’’ with the wildlife conservation purposes of the refuge and the mission of the National Wildlife Refuge System. The draft energy legislation just simply declares that oil drilling in the refuge is a compatible activity when it clearly was not.

* National Environmental Policy Act. Under this Act, federal agencies are required to analyze the environmental consequence of their proposed actions and

a range of alternative actions prior to proceeding. That Act requires that the

analysis use up-to-date information. The draft energy legislation declares that

an Environmental Impact Statement prepared by the Reagan Administration in

1987 is sufficient.

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* Alaska National Interest Lands Conservation Act (ANILCA). Title XI of

ANILCA established a process and strict standards for sighting roads, pipelines, and powerlines through national wildlife refuges and other federal conservation areas in Alaska. The draft energy legislation exempts any pipelines

necessary to transport oil and gas across the refuge from this provision.

Arctic Refuge Jobs Myth

Proponents of oil drilling in the Arctic Refuge have suggested that hundreds of

thousands of jobs would be created from opening the refuge to drilling. What they

don’t tell you is that their job figures are based on a highly criticized 1990 report

done for the American Petroleum Institute (API).

Among its inaccuracies, the API report assumed that the price of crude oil would

be nearly $58 per barrel in 2000 ($42.84 a barrel in 1988 dollars). Oil prices, of

course, are hovering in the middle to high twenties. The U.S. Geological Survey concluded that the mean estimate for oil that could be economically recovered from the

refuge is 3.2 billion barrels—about a third of the API assumption and less than

what the U.S. consumes in six months.

Most of the jobs estimated in the API report were not directly related to drilling

but were jobs assumed to occur if refuge drilling reduced oil prices and that such

reductions would stimulate additional economic growth.

Other reports have reached dramatically different conclusions than API’s. A 1994

report by the Economic Policy Institute (EPI) concluded that the most realistic number of jobs that could be created from drilling the refuge would be less than 8 percent of the jobs projected by the American Petroleum Institute. The EPI report stated that the API study assumes a ‘‘hypothetical oil strike deemed highly unlikely by

government scientists’’ in creating their employment projection.

A report by the Congressional Research Service (1992) on the economic impact of

refuge development concluded that, ‘‘only a magnitude of oil production that would

be associated with a very large discovery (in terms of present assessments) could

produce conditions that could lead to readily apparent benefits to the economy.’’

A 1993 study by the Tellus Institute, prepared for The Wilderness Society, concluded that initiatives to increase vehicle and non-transport energy efficiency would

result in nearly ten times as many jobs as drilling in the refuge.

Conclusion

This bill is inappropriately focused only on increasing energy production from federal lands. It contains no recognition of the importance of protecting other resources

on federal land, or of viewing the issue in a balanced, comprehensive manner. We

urge the Committee to reject this legislation and approach the issue in a way that

protects both the energy supply and our most precious natural areas.

Thank you for the opportunity to testify on this important issue.

The CHAIRMAN. I thank you.

The gentleman from American Samoa?

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman.

And I want to thank the members of the panel for their fine testimony. And I certainly apologize for the long, arduous hours that

we have had in going in through the hearing process. However, it

is a necessary process.

I would like to ask Mr. Glenn, I plead ignorance with understanding the situation with the native Alaskan regional corporations. That was part, I think, of the congressional enactment of the

Alaska Native Claims Settlement Act.

How many regional corporations are there in existence among

the native Alaskans?

Mr. GLENN. Thank you.

Mr. Chairman, I would like to answer the question.

There are 12 native regional corporations in Alaska. In addition

to that, there is a thirteenth regional corporation that represents

natives who are abroad and was created in an effort to answer the

claims for those who had scattered before the passage of the Native

Claims Settlement Act.

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In addition, there are more than 200 federally recognized tribes

in Alaska. So the tribal organizations coalesced into these 12 major

groups.

It doesn’t mean that the regional corporations speak for the

tribes, for example, but that, in large part, in my region, for example, our regional corporation contains eight different tribal organizations.

Mr. FALEOMAVAEGA. Okay, that is what I wanted to ask.

Among the eight different tribes in your regional corporation, is

the Inupiat the largest number?

Mr. GLENN. They are all Inupiat. It is just village subsets of the

Inupiat people.

Mr. FALEOMAVAEGA. I see. So among the Inupiat generally, the

Gwich’in is part of your tribal—

Mr. GLENN. No. The Gwich’in—and we have a representative

from the Gwich’in Steering Committee here.

We are neighbors. The Gwich’in people are Athabaskans and

they number within about 10 villages, spanning the Canadian border between Alaska and Canada, with several villages on each side

of the border.

Mr. FALEOMAVAEGA. I see. And they number about, what, 450,

compared to 8,000 Inupiats?

Mr. GLENN. I imagine there is a lot more Gwich’in than 450.

Ms. LANCE. Seven thousand.

Mr. FALEOMAVAEGA. I see. I just kind of want to get a better

sense.

Mr. GLENN. There are 7,000 Gwich’in.

Ms. LANCE. There are 7,000.

Mr. FALEOMAVAEGA. There are 7,000 Gwich’in.

Mr. GLENN. Some in Canada, some in the United States.

Mr. FALEOMAVAEGA. Okay. Is this also true with the Inupiat

tribe?

Mr. GLENN. The Inupiat people stretch from northwestern Alaska in kind of a spectrum all the way over to Greenland.

Mr. FALEOMAVAEGA. I don’t want to make this kind of like a majority rules, in terms of the number of native Alaska tribes which

support and which do not support, but I can just tell you quite seriously that my vote is going to come heavily in terms of how the

native Alaska tribes look at this issue in terms of their needs and

the question of development. And I just wanted to share that with

you, Mr. Glenn.

Mr. GLENN. Excuse me, I would not want to mislead you either,

that there would 100 percent unanimity among the Alaska natives

regarding this issue.

In addition, it is in our interest to see that if development comes

to the Coastal Plain, we want it to be done right. We want the

Gwich’in Athabaskan people to be by our side to make sure that

it happens.

It is not an issue where we see division. There are more things

that we have in common than separate us by difference.

Mr. FALEOMAVAEGA. Basically, the land area involved for drilling, if there would be drilling, is the land belonging to the Inupiat

people?

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Mr. GLENN. The Coastal Plain of ANWR lies within the area that

we claimed as aboriginal title, a portion of which we received actual legal title in the Alaska Native Claims Settlement Act. It is

our lands that lie within the Coastal Plain of ANWR.

Mr. FALEOMAVAEGA. Thank you.

Mr. Hood, I am being very tribal, too, because I am a member

of the Samoan tribe, and if I don’t do this, my cousin is going to

kill me.

Mr. Leo Reed wanted to be absolutely certain that I would attend

the hearing and make sure that I give my courtesy to Mr. Hood

when he attends today’s hearing this afternoon. And I want to convey best regards from Mr. Reed.

Mr. HOOD. I will report dutifully back to him.

Mr. FALEOMAVAEGA. All right, please. I appreciate that.

Ms. Lance, you mentioned the strong opposition of the Wilderness Society to this proposed legislation, especially dealing with

ANWR. You mentioned that there really is not a sense of supporting of the native Alaska tribes on this proposed project. You

are pretty firm on that, in terms of the numbers?

Ms. LANCE. As I said, the Gwich’in nation—and there are 7,000

members of the Gwich’in nation—have been consistently opposed to

drilling in the Arctic refuge.

Mr. FALEOMAVAEGA. I see.

Ms. LANCE. And Ms. Beach, who is here today, can speak much

more eloquently than I about the reasons for that opposition.

Mr. FALEOMAVAEGA. And, Mr. Hood, on the labor-management

aspects, I think, of the legislation, is the Teamsters union the only

union that is supporting this? Are there other unions that are

supporting—

Mr. HOOD. No, sir. The Operating Engineers, the Laborers International Union, the Building Trades, the maritime union, and

many others are totally supportive of the environmentally responsible opening of ANWR.

Again, primarily for the craft unions, it is a job issue.

Mr. FALEOMAVAEGA. Of course, as I have mentioned the job

issue, what will this entail, as far as jobs for the working people

in the ANWR, if this project ever should—

Mr. HOOD. Wharton business school did a study some years ago

and estimated that the successful opening of ANWR would create

somewhere in the neighborhood of 735,000 jobs throughout the

country. Some of the information that this is developed from was

actual vendor invoices that the producers on the North Slope spent

with vendor companies in various states.

And so it does show that the job impact—and it varies by degree.

Some states will benefit more, and others will benefit a little bit

less, but that each state is impacted by job creation by North Slope

production in ANWR.

Mr. FALEOMAVAEGA. I am little confused—I am sorry, Mr. Chairman, I think my time is up, but just one more minute?

I keep hearing this figure that ANWR is only going to supply

about 3 percent of the oil. And I hear from Ms. Lance there is a

tremendous amount of production in other drilling activities going

on in the lower 48 states.

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Has there been any real accurate assessment in terms of what

would be the total production level? How much are we really going

to be getting out of ANWR if and when they should ever get off— Mr. HOOD. Well, there was a 1995 USGS study that said that

there was a 95 percent chance that we would find 5.7 billion barrels of oil, and there was a 5 percent chance that we would discover

16 billion barrels of oil. And the Secretary testified earlier today

that they did a study and they were talking about 7 billion barrels

of oil.

If you want analogize it Prudhoe Bay, when we started there almost 30 years ago, they predicted that we would find 9 billion barrels of oil. To date, we have already pumped 13 billion barrels of

oil.

And I guess if you look at the opposition’s analogy, that it is only

180 days’ supply, that is of course given the fact that we could fact

that we could pump all of that oil out of there that fast, which is

not possible. But it would fuel everything in America for 6 months.

That’s a lot of oil.

But in reality, we could replace Iraqi oil for 58 years. We could

fuel every car in America with what is in ANWR for 8 years.

But the reality of the situation is it will contribute to America’s

domestic supply of oil for 30 years or more. So it is probably the

largest single domestic find that we will experience in North America as we have in the last 30 years.

So it is a tremendous amount of oil.

As long as we are talking about domestic supplies and you have

raised the issue, you know, it was testified earlier that we import

today 58 percent of our petroleum. By 2010, that is going to be 70

percent.

We ought to set as a goal as a country to reduce our dependence

on foreign oil to below 50 percent. I think that is realistic. With crises that may face us in the future, energy independence is going

to be crucial to the success of our endeavors.

So I think that is a realistic figure that could be achieved as we

increase our domestic supplies. And Alaska can contribute greatly.

We currently contribute one-fifth of the supply of domestic oil.

Mr. FALEOMAVAEGA. Mr. Chairman, thank you.

Thank you, gentlemen and Ms. Lance.

The CHAIRMAN. I thank the gentleman.

The gentlelady from Wyoming.

Mrs. CUBIN. Thank you, Mr. Chairman.

I would like to address a couple of questions to Ms. Lance.

You referred in your testimony to the myth that is out there,

that the Federal lands really are available for exploration for energy. But I want to talk about the real myth or several real myths

that I see in your testimony.

In your statement you said that based on a 1995 report from the

BLM, that 95 percent of the lands in the Rocky Mountains are

available for oil and gas leasing. Well, I want to talk about what

you mean by oil and gas leasing.

A direct result of the section 604 amendment on the inventory

of oil and gas that was in last year’s energy bill, a report came out

last month called, ‘‘Federal Lands Analysis: Natural Gas Assessment, Southern Wyoming and Northwestern Colorado.’’

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This analysis basically says that 21 percent of the lands are offlimits and an additional 32 percent of the lands in that area are

restricted.

So I wonder if you could explain to me, based on this new information versus 1995 information, how you can possibly sit there

today and say that 95 percent is available? And if it really is available, is it economically feasible?

Ms. LANCE. Sure. And I am happy you raised that. I couldn’t

quite fit that into my 5 minutes, but I think it is a very important

issue.

And, Mr. Chairman, one of the documents submitted with my

testimony, which I would ask to be made a part of the record, is

a review of the report that you refer to on the Green River basin

done by our resource economist in Denver, pointing out some of the

concerns that we have about the methodology that was used there.

So I was— Mrs. CUBIN. I am aware that you some reservations about it. One

of those was that no surface occupancy was considered in the report as a way that land is not available.

But you think no surface occupancy says land still is available.

Ms. LANCE. Well, I— Mrs. CUBIN. Even if it isn’t geologically or technologically possible to do horizontal drilling or whatever, you still consider it all

no surface occupancy available.

Ms. LANCE. I don’t want to be so categorical. I think it is important to really— Mrs. CUBIN. But your testimony is that categorical.

Ms. LANCE. No, I don’t believe so. What our concern is, is that

when you assume that no surface occupancy stipulation—and

maybe I should just back up and, for the record, what we are talking about here is stipulations on leases. The area is available for

leasing, but the leases contain certain stipulations and they vary

from—Mrs. CUBIN. Which make it economically unfeasible in most cases

to be able to produce the energy.

Ms. LANCE. Well, here is the concern that we have. The no surface occupancy stipulation says that you cannot put your drill rig

on that area— Mrs. CUBIN. Right.

Ms. LANCE. —but you could—and the concern that we have is

that industry very often says and has said here today, we use very

advanced technology and that allows us to have a very small or no

footprint in a sensitive area because we can drill, as you say, horizontally or directionally into an area.

So if that is the case, then it just doesn’t seem to be consistent

to say—

Mrs. CUBIN. So what you are saying is quite a sweeping statement, when you say that no surface occupancy, that classification,

that that means that it is still accessible.

That makes no sense to me. Let’s change subjects.

The BLM proposed raising oil and gas lease bonding in its rewrite of the oil and gas regulations, which are now awaiting final

publication. And you state in your testimony that thousands of well

sites have been abandoned and not reclaimed.

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I take issue with that. But if it were the case, do you think that

the Federal Government should take over those wells and pay for

the reclamation?

Ms. LANCE. I think that this is a very difficult policy choice. And

I haven’t done enough research on it to give you a educated answer. So I— Mrs. CUBIN. Well, just for your information, the BLM says that

there are actually fewer than 200 orphan wells out of over 60,000

wells that are capable of production. Not thousands, but fewer than

200.

Ms. LANCE. Well, the information that we had is from the public

lands statistics that BLM has produced. So I would be interested

in the additional BLM data. But I, too, would be guided by BLM’s

data, and that is what I have indicated.

Mrs. CUBIN. You state that the obvious purpose of section 222 is

to discourage Federal land managers from providing environmental

safeguards to oil and gas operations. Do you believe that state oil

and gas conservation commissions are not adequate in their requirements for environmental protection and for reclamation?

Ms. LANCE. Well, I think two things.

One is that they are not required to apply Federal law, so if it

devolves to state-level regulation, it is not clear then that the Federal law will be applicable.

Second— Mrs. CUBIN. Are you aware that most state regulations are at

least as stringent as Federal regulations? In my own state, every

regulation is at least environmentally as stringent as the Federal.

So my question to you is really simple: Do you think that the

state conservation commissions are not qualified or do not protect

the environment as well as they should?

Ms. LANCE. Well, two points. One is that if in fact they apply the

exactly the same rules as the Federal regulators, then certainly

they do provide the same level of protection.

But this provision would not be necessary in this bill if there

weren’t some differences between Federal and state law, because

clearly it anticipates that there may situations in which the state

and Federal regulators will differ.

The second point, I thought it was interesting today when Secretary Norton testified about the Wall Street Journal story and the

Alaska State regulation. She said something to the effect that:

Well, that was about state regulation on state land. And I can assure you that if we go into the North Slope of the Arctic refuge,

we will have Federal regulators applying Federal law.

So—

Mrs. CUBIN. On Federal land.

Ms. LANCE. Exactly. But that is what the telling—

Mrs. CUBIN. And that is my point—

Ms. LANCE. —thing is as well.

Mrs. CUBIN. —that that is the status quo. Federal requirements

are required on Federal land.

Ms. LANCE. But this bill tries to change that, is our concern.

Mrs. CUBIN. Well, it doesn’t. But I have used up my time.

Thank you, Mr. Chairman.

The CHAIRMAN. Mr. Carson?

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Mr. CARSON. Let me apologize for missing the last two witnesses’ testimony. I was called out to a meeting.

Let me direct my questions to Mr. Herrera, who in his written

testimony—I apologize for—our view is blocked here—but in your

written testimony, you addressed an issue that I am interested in,

that I brought up with the Secretary as well, and that is about the

amount of recoverable oil in ANWR. And I specifically was thinking, it has obviously been a raging dispute about how much is

there, under what conditions and what assumptions you have to

have it be recoverable.

There was a recent article in Foreign Affairs that talked about

the so-called false promise of Alaskan oil that doesn’t attack it from

the environmental angle that is often done here, but really about

the economics of oil recovery in ANWR.

I was talking to Mr. Young a moment ago and he was saying he

thinks there is going to be, you know, 30 billion barrels of oil recoverable out of the 1002 area before it is all said and done.

I wonder if you could talk a bit—and in your testimony it does

talk a bit about some of the assumptions on what you consider conservative and pessimistic assumption of the USGS. But what

about, given what world oil conditions are speculated to be over the

next 5 to 10 years, when leasing activity is going occur, what you

think the amount of recoverable oil is and under what economic assumptions we should be operating.

Mr. HERRERA. Well, that is a big question to answer, but I will

give it a try.

Let me go to the back half of your question first, because it is

something which is rarely considered, albeit there is lots of information in the record, and that is what is going to happen in 5

years’ time or 10 years’ time with world oil supply.

The point I would make in commenting on that is there are

about, let’s say, 44—it might be 45 or 43, I have forgotten—producing oil countries in the world. And of those 44, 39 of them have

already reached their peak of production and production of oil in

those countries is in decline, as it is in the United States of America.

There are only five countries, all of which are around the Persian

Gulf, which have not yet reached the peak of production. Now, they

all happen to be OPEC producing countries.

My point is that we become, as time goes on, we become more

and more reliant on OPEC oil because that is where the world reserves are, those are the only countries that can increase production.

And quite soon now, it is estimated that even those will reach

their peak and start to decline within perhaps 3 to 5 years from

the present time.

So we are looking forward, if we are looking in a decade timeframe in the future, into a brand new energy time zone that we

have never encountered before, where there is still plenty of oil in

the world—don’t get me wrong.

But the world does not have infinite capacity to increase production. It will have reached its peak of production and so presumably

demand will start to impose its influence on price.

That is one comment.

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The other comment, you asked about the USGS figures, and they

are misused and sometimes misrepresented. In my testimony, I argued that there are three factors which any geologist or any organization uses to make resource estimates.

One is, obviously, the geology. The geology doesn’t change over

time. It is there, it is static, it is not going to change. The technology of it might change, but it actually stays the same.

The other thing that affects resource estimates are the price of oil because if oil is at $10 a barrel, there is probably very little oil

in the Arctic which is economically viable. If, on the other hand,

oil is at $20 or $25 a barrel, probably all of it is economically viable

even today.

So price is important. And obviously, therefore, one has to predict price in the future, which is difficult to do, but I just mention

the likelihood that it is probably going to go up.

The third factor, of course, is technical ability to recover oil out

of the reservoir, and this is the factor where I disagree with the

USGS because their figures assume that 37 or 38 percent of the oil

in the reservoir can be pulled out of the ground and sent to market.

Now, that assumption is a good historical assumption. As a rule

of thumb, over the last 40 years, most reservoirs gave up a third

of their oil, more or less what the USGS is using for their assumed

figures of extractability.

However, in the last 10 or 15 years, with the huge technological

changes which have been introduced largely in the Arctic, certainly

in the existing Alaskan oil fields, the recoverability of oil from the

existing fields varies from 50 to 65 percent of the oil in the reservoir that can be brought out of the ground.

That is significantly higher than the estimates that the USGS

uses. And if you believe the reality of those figures which are being

proven as we speak, on the North Slope of Alaska, and assume that

the geology is quite similar beneath the Coastal Plain, which demonstrably it is, then clearly 37 percent is wrong and probably 50

percent of extraction of the oil is closer to reality.

Therefore, the USGS resource estimates are very low. They are

very conservative, and probably too low and unrealistic.

Mr. CARSON. If oil is at the price of $25 a barrel and there is 55,

60 percent recovery of ANWR, do you have an estimate yourself,

just back-of-the-envelop calculation or hunch, about the kind of reserves we would be looking at?

Mr. HERRERA. Yes. Then you would go from the high-end probability of 95 percent chance of the amount of oil being present

reaches about 10 billion barrels, and the low end, 5 percent chance

goes up to about 27 billion barrels.

Mr. CARSON. Very good.

Mr. HERRERA. And as I mentioned, 10 billion barrels of new oil

would be probably the largest oil resource found in the world in the

last 30 years.

Mr. CARSON. Do either of the last two witnesses want to comment on that issue of the economics of oil recovery there?

Mr. KOLTON. Thanks, Congressman Carson, if I might just respond to some of the things that Mr. Herrera said.

First, I think it is a very important point that the technology is

allowing greater recovery from oil fields. And if you look back at

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the record of this debate of the years, in 1995, for example, there

were claims made to this Committee, to Congress, that the TransAlaska Pipeline would run dry by the turn of the century unless

we drilled in the Arctic National Wildlife Refuge.

The fact is, as I pointed out in my testimony, that even the industry now acknowledges in its own filings for renewal permits for

the Trans-Alaska Pipeline that it has 30 years’ more oil in the existing state lands. This doesn’t even include the National Petroleum Reserve, an area about the size of Indiana where as recently

as 1995 Mr. Herrera said there was no oil potential.

You know, the fact is that Phillips and British Petroleum have

been in aggressive exploration there. And they may have discovered what could amount to a billion-barrel field.

So there is significant production on the North Slope outside of

the refuge. And the new technological advances that are referred

to are one of the reasons why we can leave the Coastal Plain alone.

With respect to our dependence on OPEC, I think it is important

to point out that as a percentage of our total petroleum use, a percentage of our total imports, we are actually less dependent on

OPEC today than we were in the 1970’s. We get more oil from Canada than we do Saudi Arabia.

So simply using the total foreign import figure is misleading.

With respect to the USGS study and the comments made there,

Mr. Herrera is willing to accept the geology somewhat but reject

the economics. Parts of the report he likes, and other parts he

doesn’t.

Yet we heard today about all kinds of things, new technology

that is going to be deployed. We are going to distill the water to

make the ice roads.

A lot of the expense of some of this was not taken into account

in the USGS report. They didn’t calculate all the expenses of all

these great new technologies and regulations that are being proposed.

So I would submit that, if anything, the economic report of the

USGS was off and the cost will be much greater.

As I indicated in my testimony, according to the USGS, it is possible that there could be no economically recoverable oil in the refuge, depending on prices. There could be 3.2 billion. But not in one

field like Prudhoe Bay, spread out in 33 discrete pockets the all

across Delaware-size Coastal Plain.

Mr. CARSON. I see my time is up.

The CHAIRMAN. I thank the gentleman.

I thank the Committee, those who have remained. And I thank

all those who have been here. It has been a very long hearing, but

extremely informative.

And I would want to say to the folks from Interior, the Secretary

did a fantastic job and thank you for her being here.

And Senator Johnston and this panel, I appreciate your great

input on this.

I hope we don’t get lost in the minutiae of this thing because the

whole thing is predicated on dependence. And as Mr. Hood pointed

out, the goal of many of us is to get below 50 percent. It may be

very difficult. We do have a heavy dependency on Saudi Arabia.

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I have been there, in Kuwait and those areas, and looked them

over. We have talked to everyone who develops in those areas. We

are becoming more and more dependent on those areas.

What bothers a lot of us is we are becoming dependent on those

we can least depend on.

And as one of the senior, senior guys on the Armed Services

Committee, I can tell you, it is of great, great concern to us. And

you get down to the point of the realistic part of it.

I think President Bush has put together a realistic piece of legislation, and the 105 points he has brought up, of which today we

are talking about maybe 15 are going to be very important to

America.

As a past military man myself, and one of the guys on the Armed

Services Committee, I can just tell you, it is nice to talk in theory

on all of these things, but when it gets down to reality, those

planes have to fly, those subs have to go, those carriers have to

move, and we move on fossil fuels.

Fortunately, in some of our big ships now, we do use nuclear,

which you bring that up and you hear nothing but gasps from people, saying that is the worst thing in the world. I surely would hope

that some people could understand how important that is.

And we have gone from 12 percent to 20 percent on nuclear, just

through efficiency and putting another plant in.

The dependency is going to be a whole question. We are going

to get caught in a bad situation if we don’t do this. It is not only

the workers of America, it is the security of America.

And in my many years, I have never driven up to a gas station

where there was pump that said ‘‘alternative energy.’’ I hope they

do that. I hope we are able to develop a lot of those.

But right now, we are depending on fossil fuels.

So we will continue with this particular piece of legislation.

I think back in September 1996 when President Clinton went to

the South Rim of the Grand Canyon to declare the Grand Staircase-Escalante. The interesting thing was, he had never been

there. And when he was asked where it was on the map, he put

it in Nevada. It is Utah.

And when he talked about the coal reserve—and for those folks

who don’t realize this, the Grand Staircase-Escalante has the highest amount of low-sulfur coal known in the world. I mean, we are

talking billions of tons of coal.

And I keep telling people, if you haven’t been there, don’t complain about it.

I had John Leshy sitting in front of our Subcommittee years ago

to tell me about this pristine area, and my dad had mines on that

area. I have flown airplanes into that area. I have put down a

Piper SuperCub less than 100 yards from where that thing is. I am

very familiar with it.

There is nothing there that Mr. Leshy described. There is no

water. There is not cottonwood trees. There is no green glens.

Nothing but sagebrush.

And I would really appreciate it if most members of the Committee would do the very same thing when they go talk about

ANWR, they go up there.

But don’t get it wrong, we do appreciate your testimony.

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One thing I have got to add is President Clinton made the statement in his proclamation on the Grand Staircase, he said, we can’t

have mines everywhere. The answer to that is, true, only where

there is ore.

And that is what we have here. I mean, we talk about public

areas, we talk about areas that are off-limits. And believe me, a lot

of America is off-limits right now.

I have been on this Committee 21 years and I have been all over

this country, and it is off-limits. And so you can only go where it

is on-limits to get that small amount that is left.

When it comes down to the security of America, I think of the

guy who was chairing this Committee when I was sitting way down

on the end there, 21 years ago, and he said, if it is necessary, we

will go in the bottom of the Grand Canyon to get something, if it

means the security of America.

We would hope we would never get to that. I would hate to go

into that pristine area.

On the other side of the coin, keeping this country free and keeping the world free falls on the lot of Americans. We have to be very,

very careful.

I do want to thank each one of you. Your testimony has been

good. A lot of controversy here today. It has kind of been fun to listen to it. I have enjoyed it.

And believe me, we don’t discount anything that anybody says.

It is one thing nice about America; we can say what we think.

So we thank each and every one of you for being here and for

enduring this long testimony. I think we all learned a lot.

And we stand adjourned.

Whereupon, at 2:05 p.m., the Subcommittee was adjourned.]

Statements of Members submitted for the record follow:

[The prepared statement of Mr. Pallone follows:]

Statement of The Honorable Frank Pallone, Jr., a Representative in

Congress from the State of New Jersey

Thank you, Mr. Chairman, for convening this hearing on the ‘‘Energy Security

Act’’.

I am very interested in hearing from our witnesses today and I think there are

a lot of questions that need to be answered.

In the 1970’s we saw our Nation’s energy security threatened by OPEC. The result was chaos in the marketplace. We quickly found out that our energy base was

not diversified. We were not only dependent on oil, but we were dependent upon

oil supplied by other countries whose behavior was beyond our control.

Following our experiences with OPEC, we created policies that encouraged energy

diversification and conservation. We made our Nation’s energy security a priority

and we managed that crisis.

However, that dependence on oil has not changed. In fact, I believe it will never

change. Our country will never be able to produce enough oil to supply the needs

of Americans and we will never be able to economically recover enough oil to alter

the world’s oil prices and be free from foreign oil use.

Today, we in Congress are managing a different energy condition. It is not the

same as the critical shortages of thirty years ago but we are finding ourselves once

again focusing on the nation’s energy future. We find that demand, through our own

growth, has placed a stress on the market’s supply.

But instead of looking at the outdated ‘‘traditional’’ means of meeting energy demands such as drilling hundreds of wells with towering rigs, constructing thousands

of miles of new roads, transmission lines, waste pits, pipelines and pollution, I challenge us to create alternatives—alternatives that do not create such a negative impact on our country’s natural resources.

110

The answer to today’s energy condition is not opening up the Arctic National

Wildlife Preserve. It is not removing the environmental protection on public lands.

It is not removing the Forest Service in leasing decisions—and it is not providing

royalty relief to oil companies who in the last couple months have shown record

profits.

The answer to today’s condition, to protecting our nation’s energy security, must

be tackling the demand side of this equation. We must decrease our need for oil—

whether domestic or imported.

As the largest user of oil, I would argue that the most effective thing we could

do to protect our energy security it to strengthen our policies to encourage the development of transportation alternatives and better mass transit infrastructure. Secondly, we need to fund conservation projects that help us reduce our demand and

finally we need to add even more alternative energy sources to our energy mix. We

must provide encouragement for American ingenuity to create alternatives to oil

consumption.

Finally, I would like to touch on drilling in the Arctic National Wildlife Refuge—

possibly the most controversial component of the Chairman’s bill. Drilling in the

Arctic refuge is not a benign activity and industrialization is inherently incompatible with wilderness.

I have questioned what the Administration calls, ‘‘environmentally friendly’’ technology and have yet to have a satisfactory definition to this process. In fact, an April

13 Wall Street Journal article reported that the oil-rig technology supported by

President Bush as environmentally friendly has malfunctioned at rising rates in the

past five years on rigs in western Prudhoe Bay. It seems that environmentally

friendly drilling technology is not exactly what it sounds like.

I was also disturbed to read, just yesterday, that Alaska supports only 5 safety

inspectors, five, to inspect the production of Alaska’s 400 million barrels of oil per

year. The Wall Street Journal compared this to Indiana that produces 2.5 million

barrels of oil per year and employs nine safety inspectors and California that produces 300 million barrels per year has 40 oil-field safety inspectors. Quite plainly,

the 5 percent of Alaska’s protected wilderness could face devastating affects from

oil and gas exploration.

But, with this all said, I can’t say that I’m surprised by the leadership’s actions.

The Administration has made it very clear to the American people that his term

as President is a gift-giving season to the oil industry. This has trickled through

to the members of this House. The legislation before us places the oil industry first

by opening more land to exploration and profits and by providing royalty ‘‘relief’’—

and it places consumers and environmental protection last.

[The prepared statement of Mr. Kind follows:]

Statement of The Honorable Ron Kind, Ranking Democrat,

Subcommittee on Energy and Minerals

Thank you Mr. Chairman. Two weeks ago, a bipartisan House and Senate Congressional delegation was invited by President Bush to the White House to discuss

energy issues. At that meeting, the President expressed concern that he was unfairly being characterized as ‘‘the Big Oil President’’ and asked us to work in a bipartisan fashion to develop a balanced national energy policy. I’m sad to say, Mr.

Chairman, that this bill does not get us there and did not heed the President’s advice. H.R. 2436 is largely a license for the oil and gas industry to accelerate drilling

activity while at the same time scaling back important environmental protections.

Rather than developing a balanced energy policy, H.R. 2436 provides royalty holidays worth billions of dollars to the oil industry, allows industry to perform its own

environmental impact analysis and requires that the federal government reimburse

industry for these same analyses. The bill also usurps important federal environment protections by limiting environmental protection oriented lease stipulations to

those allowed by state law. In addition, the bill strips the Forest Service of its authority to consent to proposed leases in National Forest lands, thus opening the way

to drilling in roadless areas and other sensitive lands.

We hear good words from the President and our Republican colleagues regarding

renewable energy and conservation, but where the rubber meets the road, this

legislation’s answer to the country’s energy crisis is to provide billion dollar royalty

holidays to the oil companies, open national monuments to drilling, and scale back

environmental protections. This bill is clearly out of touch with what the American

people want and expect of us. I challenge our Republican colleagues to work with

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able energy and advanced technology to increase energy efficiency and conservation

to meet our energy needs.

Over the short term, we need to increase domestic production of our traditional

energy sources to meet our needs. However, this must be done in a manner that

is sensitive to the equal need to protect our environment. We should not allow the

current situation to be used as an excuse to rollback environmental protection. Over

the long term, our economic and environmental future depends on us finding 21st

century solutions to our 21st century energy challenges, which means using advanced technology to develop clean, renewable energy sources and becoming more

energy efficient.

[The prepared statement of Mr. Tom Udall follows:]

Statement of The Honorable Tom Udall, a Representative in Congress from

the State of New Mexico

Mr. Chairman, Mr. Ranking Member:

The Energy Security Act, sponsored by Chairman Hansen, supports several recommendations of the National Energy Policy that was released by the National Energy Policy Group on May 17. Thus, the Energy Security Act promotes an increase

in domestic oil, gas, coal, geothermal and solar production on federal public lands.

This includes opening national monuments for coal and geothermal energy, which

is contrary to the recent House Interior Appropriations bill vote. Moreover, the bill

specifically repeals provisions of the Alaska National Interest Lands Act of 1980 and

opens 1.5 million acres of the Arctic National Wildlife Refuge (ANWR) to oil and

gas leasing and development.

The U.S. Energy Information Administration projects that U.S. demand for refined petroleum products will grow over 35 percent by year 2020, and natural gas

is expected to rise in that same time by 45 percent. Instead of reducing this escalating rate of consumption, this legislation suggests, among other things, that the

answer to our energy crises is to increase our energy supplies, remove regulatory

hurdles, and expedite the permit process for new projects.

A key component of the Energy Security Act is to promote domestic energy security and reduce our reliance on foreign oil. I agree with that premise, but I cannot

agree to pursuing that plan by opening the coastal plain of ANWR to oil and gas

drilling. Focusing on drilling in ANWR is an unrealistic and misplaced priority because it does not exercise proper stewardship responsibility of our federally managed lands. Moreover, with small changes in vehicle fuel efficiency, we could save

many times over the amount of energy at stake. After all, the oil and gas under

the coastal plain isn’t going anywhere and we may develop future technologies

which are much less damaging to this magnificent resource.

The coastal plain of ANWR is the most biologically productive part of the refuge

and the heart of its wildlife activity. In the mid–1980’s, I rafted the Hula Hula

River traveling over 100 miles from the mountains of the Brooks Range, through

the coastal plain to the Beaufort Sea. I viewed first-hand the critical habitat for caribou, muskox, swans, snow geese as well as the Porcupine Caribou Herd which supports the subsistence lifestyle of over 7,000 Gwich’in (gwe–CHEEN’) American and

Canadian Indians who oppose the drilling in ANWR because of the potential disruption of the caribou herd. As such, I question whether this legislation the energy plan

in general intends to protect federal lands appropriately and take into consideration

the input of the general population and our nation’s native and traditional communities who will be most affected by such an initiative.

The Arctic Refuge is the only area on the North Slope of Alaska that has been

set aside as off limits to oil and gas leasing. The 23 million acre National Petroleum

Reserve-Alaska (NPR–A) was set aside by Congress in 1923 for preservation as a

future supply of oil, and was specifically opened for leasing in 1980. With recent discoveries of oil and gas reserves on the North Slope, it makes much more sense to

explore for more production in NPR–A instead of squandering the time, energy, and

resources on ANWR. Moreover, H.R. 2436 authorizes oil and gas leasing in the

Arctic Refuge under broad exemptions from environmental laws. The potential environmental consequences of such legislation could be devastating to the fragile coastal ecosystem of the North Slope.

(Gas Pipelines)

The Energy Security Act would also establish an administrative interagency task

force to develop an agreement to expedite and facilitate the environmental review

and permitting of interstate natural gas pipelines. However, nowhere in this section

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lines. This is not only important environmentally, but also of great importance to

the many safety issues involved.

Reflecting on the horrible pipeline explosion near Carlsbad, New Mexico last August that killed 12 people and on the Bellingham, Washington gas pipeline tragedy,

I want to further ensure that our existing and future gas pipelines across the U.S.

are safe. With that in mind, the Administration and Congress must strengthen our

current oversight program for pipelines in order to enhance safety and reliability.

The Secretary of the Interior should take the lead in the administration and work

with Secretaries Abraham and Mineta to provide to Congress ideas on how to provide the maximum safety to our committees and to our workers in the industry.

Efforts to expedite and facilitate the environmental review and permitting of

interstate natural gas pipelines as outlined in this measure give me concern that

an increase in production capacities will have serious environmental consequences.

Since many of gas pipelines cross Bureau of Land Management lands, the Department of the Interior should make regulatory law compliance a priority, specifically

in regards to environmental analysis and the permitting process.

The projected growth in energy has called into question whether regulatory actions and permitting processes can keep pace with the necessary construction of new

delivery facilities. The current staffing and budget levels at the BLM field offices

for these efforts are inadequate. I look forward to hearing from Secretary Norton

how the Department of the Interior intends to address this issue. Without focusing

on this aspect, I do not see how the BLM can effectively implement its resource

management program in the lower 48 states with the proposed President’s budget.

The President’s BLM budget for fiscal year 2002 identifies an overall decrease of

$2.1 billion from fiscal year 2001 to $1.8 billion for fiscal year 2002. Although the

administration intends to increase the BLM’s energy and mineral program by $15

million, a large portion of that will be going toward exploration on Alaska’s North

Slope and completion of the BLM’s land management planning process. That doesn’t

leave much money for the BLM to manage its other programs, and the programs

will suffer tremendously because of the budget cuts.

In conclusion, let me say that the key elements for a balanced, long-term comprehensive energy strategy must be the reduction of our consumption levels and diversification of our energy base in an environmentally sound manner. Let me stress

that last element—environmentally sound. These basic goals can be accomplished

through a variety of measures including improving energy efficiency, promoting the

use of renewable energy sources, and enhancing the productive capacity of the domestic oil industry. Thus, a comprehensive strategy should ensure that energy and

environmental policies are complementary, and work together to support long term

energy goals as opposed to implementing a policy at either extreme. America has

placed its trust in this Administration and in Congress to implement an energy policy that is balanced and that serves not only our present environmental and energy

interest, but also those of future generations.

Æ