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81–279 PDF 2013

OPPORTUNITIES LOST: CONSTRAINTS ON OIL AND 

GAS PRODUCTION ON FEDERAL LANDS AND 

WATERS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY POLICY, 

HEALTH CARE AND ENTITLEMENTS 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

MAY 16, 2013 

Serial No. 113–27 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://www.house.gov/reform 

(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

DARRELL E. ISSA, California, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, JR., Tennessee 

PATRICK T. MCHENRY, North Carolina 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

TIM WALBERG, Michigan 

JAMES LANKFORD, Oklahoma 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

DOC HASTINGS, Washington 

CYNTHIA M. LUMMIS, Wyoming 

ROB WOODALL, Georgia 

THOMAS MASSIE, Kentucky 

DOUG COLLINS, Georgia 

MARK MEADOWS, North Carolina 

KERRY L. BENTIVOLIO, Michigan 

RON DESANTIS, Florida 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

JOHN F. TIERNEY, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

JACKIE SPEIER, California 

MATTHEW A. CARTWRIGHT, Pennsylvania 

MARK POCAN, Wisconsin 

TAMMY DUCKWORTH, Illinois 

ROBIN L. KELLY, Illinois 

DANNY K. DAVIS, Illinois 

PETER WELCH, Vermont 

TONY CARDENAS, California 

STEVEN A. HORSFORD, Nevada 

MICHELLE LUJAN GRISHAM, New Mexico 

LAWRENCE J. BRADY, Staff Director 

JOHN D. CUADERES, Deputy Staff Director 

STEPHEN CASTOR, General Counsel 

LINDA A. GOOD, Chief Clerk 

DAVID RAPALLO, Minority Staff Director 

SUBCOMMITTEE ON ENERGY POLICY, HEALTH CARE AND ENTITLEMENTS

JAMES LANKFORD, Oklahoma, Chairman 

PATRICK T. MCHENRY, North Carolina 

PAUL GOSAR, Arizona 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

TIM WALBERG, Michigan 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

BLAKE FARENTHOLD, Texas 

DOC HASTINGS, Washington 

ROB WOODALL, Georgia 

THOMAS MASSIE, Kentucky 

JACKIE SPEIER, California, Ranking 

Minority Member 

ELEANOR HOLMES NORTON, District of 

Columbia 

JIM COOPER, Tennessee 

MATTHEW CARTWRIGHT, Pennsylvania 

TAMMY DUCKWORTH, Illinois 

DANNY K. DAVIS, Illinois 

TONY CARDENAS, California 

STEVEN A. HORSFORD, Nevada 

MICHELLE LUJAN GRISHAM, New Mexico 

(III) 

C O N T E N T S 

Page 

Hearing held on May 16, 2013 ............................................................................... 1 

WITNESSES 

Mr. Tommy P. Beaudreau, Acting Assistant Secretary for Land and Minerals 

Management, U.S. Department of the Interior 

Oral Statement ................................................................................................. 5 

Written Statement ............................................................................................ 7 

Mr. Frank Rusco, Director, Natural Resources and Environment, U.S. government Accountability Office 

Oral Statement ................................................................................................. 12 

Written Statement ............................................................................................ 14 

(1) 

OPPORTUNITIES LOST: CONSTRAINTS ON OIL 

AND GAS PRODUCTION ON FEDERAL LANDS 

AND WATERS 

Thursday, May 16, 2013, 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON ENERGY POLICY, HEALTH CARE & 

ENTITLEMENTS, 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, 

Washington, D.C. 

The subcommittee met, pursuant to call, at 10:32 a.m., in Room 

2154, Rayburn House Office Building, Hon. James Lankford [chairman of the subcommittee] presiding. 

Present: Representatives Lankford, Jordan, Chaffetz, Walberg, 

Farenthold, Hastings, Speier, and Horsford. 

Also Present: Representative Lummis. 

Staff Present: Molly Boyl, Majority Parliamentarian; Joseph A. 

Brazauskas, Majority Counsel; Daniel Bucheli, Majority Assistant 

Clerk; Caitlin Carroll, Majority Deputy Press Secretary; Sharon 

Casey, Majority Senior Assistant Clerk; Steve Castor, Majority 

Chief Counsel; Brian Daner, Majority Counsel; Adam P. Fromm, 

Majority Director of Member Services and Committee Operations; 

Linda Good, Majority Chief Clerk; Ryan M. Hambleton, Majority 

Professional Staff Member; Laura L. Rush, Majority Deputy Chief 

Clerk; Jaron Bourke, Minority Director of Administration; Nicholas 

Kamau, Minority Counsel; and Adam Koshkin, Minority Research 

Assistant. 

Mr. LANKFORD. The Subcommittee on Energy Policy, Healthcare 

and Entitlements come to order. 

I would like to begin this hearing by stating the Oversight Committee mission statement. We exist to secure two fundamental 

principles: first, that Americans have the right to know that the 

money Washington takes from them is well spent and, second, 

Americans deserve an efficient, effective Government that works 

for them. Our duty on the Oversight and Government Reform Committee is to protect these rights. 

Our solemn responsibility is to hold Government accountable to 

taxpayers, because taxpayers have the right to know what they get 

from their Government. We will work tirelessly in partnership with 

citizen watchdogs to deliver the facts to the American people and 

bring genuine reform to the Federal bureaucracy. This is the mission of the Oversight and Government Reform Committee. 

To the witnesses, thank you. I am going to do a brief opening 

statement. Our ranking member will do an opening statement. We 

2 

will go straight to your testimony after that. I do have to warn you 

that I have a cold, and for all those who have compassion for me 

and my cold, about three days from now, if you shook my hand, you 

will have great compassion for me. So I apologize for that and we 

will struggle through this together. 

The American people, we as taxpayers, we own millions of acres 

of land for our national benefit. We hike, we camp on it; we boat, 

fish, and swim in it; we drive through; and we use the resources 

from it. We protect it for the future and we manage it for today. 

The minerals underlying our public lands are held in the public 

trust and the Department of Interior is in charge of managing 

these materials for the benefit and the profit of the American people. 

The Department of the Interior administers 700 million subsurface acres in Federal mineral estate and over 1.7 billion acres 

in Federal offshore acreage. There are extraordinary quantities of 

oil and natural gas under these lands and waters. These resources 

promise to deliver two things unimaginable just a decade ago: 

American energy independence and a broad economic renaissance. 

A recent economic study found that increasing access to Federal resources can generate $127 billion in economic activity and 

552,000 jobs annually over the next seven years. Americans are 

trying to explore energy on American land are facing some roadblocks. At a field hearing last year, this committee heard a story 

from Mike McDonald, a small producer with 11 employees and four 

decades of experience in oil and gas production. Mike has a few 

leases where he has to work with the Bureau of Land Management. He testified that once those wells run dry, he will never 

again bid on another BLM lease. The reason? He said because he 

has to interact with the Federal Government’s bureaucracy. 

Stories like these are all too common. The simple fact is the Department’s policies have become sometimes onerous, time-consuming, and costly, so that some producers give up or don’t even 

try. The result is billions of dollars in capital left on the sidelines, 

hundreds of thousands of good paying jobs foreclosed, and continued dependence on foreign imports. This is especially difficult to 

understand in areas of the Country that want the economic development and jobs that come with energy exploration. 

The committee understands the Department is obligated to manage our oil and gas resources in accordance with acts of Congress. 

However, there is no question that the Department possesses discretion to facilitate oil and gas production in a timely, responsible, 

efficient manner, and environmentally sensitive. We know the solutions are out there, noncontroversial policies the Department can 

begin to implement immediately. We just ask a few questions of 

today. 

Can we modernize and streamline the permitting process? In an 

electronic world, BLM still relies primarily on hard copies and 

mail. Real-time interfacing can facilitate complicated negotiations 

and dramatically reduce permitting delays. 

Can we rededicate ourselves to an existing pilot program that 

concentrates resources on the busiest, most overworked BLM field 

offices? The program, that was instituted in 2005 to ensure that 

staff and diverse Federal regulatory agencies, including BLM, the 

3 

Fish and Wildlife Service, and EPA, work in the same building for 

each region. This greatly improves coordination and reduces delays. 

Can we open more areas to oil and gas lease sales? At our confirmation hearing in March, Secretary Jewell stated that her goal 

was to bring balance between conservation and energy development. I couldn’t agree more, especially now that only a tiny sliver, 

about 5.9 percent of our public lands, are open to oil and gas leasing. 

Can we complete a long-promised seismic study in the mid-and 

South Atlantic outer continental shelf? This study is critical if we 

hope to take off the blindfold and see what is out there. 

One more thing: Can we answer the question—let me put a map 

here on the screen, as well, so everyone can see it. When we look 

at some areas of energy exploration, this is a section of North Dakota, and I think the witnesses have a copy of this. If you look at 

the dots, each dot represents a well, and there are many areas 

where you will see a dot right next to where Federal lands are located, but not crossing the border. Rarely they cross into it. This 

section of North Dakota has seen a tremendous amount of energy 

exploration, but rarely actually venturing into Federal lands. 

The question is, why? They pay less in royalties if they go into 

Federal lands, so you would assume the price is less, so why 

wouldn’t they go into Federal lands and explore, because it would 

be cheaper for them? But instead they don’t choose to go into those 

areas when they have the opportunity. Why? 

Ultimately, the goal of this hearing is not to condemn the Department but, rather, to work with all departments, including Secretary Beaudreau, to figure out what is going wrong and to find 

some common sense solutions. 

I now recognize the distinguished ranking member, the 

gentlelady from California, Ms. Speier, for her opening statement. 

Ms. SPEIER. Mr. Chairman, thank you for holding this hearing. 

Secretary Beaudreau and Mr. Rusco, thank you for participating 

in it. 

I have a slightly different view on this topic. I think this hearing 

should focus on the thousands of leases for millions of acres of Federal land and water that oil and gas companies are sitting on, but 

not producing on. For example, in 2012, nearly 46 million offshore 

acres were under lease or approved for exploration, while only 6.6 

million acres were producing any oil or gas. A full 70 percent of the 

open leases for offshore oil and gas production are inactive. 

These are inactive not because they don’t have oil and gas. They 

are inactive because they are just not drilling on them. It is estimated to contain 17.9 billion barrels of oil and 49.7 trillion cubic 

feet of natural gas. 

Even more importantly, we ought to be examining the Department of Interior’s failure, and I underscore failure, to collect the 

full amount of revenues and royalties that these companies owe the 

American people for the oil and gas they are producing or not producing from publicly owned lands. This year, the GAO reported to 

Congress that Government royalty collection for oil and gas drilling 

operations on Federal lands are at high risk for waste, fraud, and 

abuse. Let me repeat that: at high risk for waste, fraud, and abuse; 

4 

precisely the kinds of issues that this committee should be focused 

on. 

While the total and aggregate revenues lost due to inaccurate oil 

and gas production reporting has not been determined, it is likely 

to be a very significant amount. When the GAO looked closely at 

oil and gas leases in the Gulf of Mexico, they found that about 5.5 

percent of the time companies did not submit the necessary royalty 

reports, potentially resulting in $117 million of uncollected royalties. The GAO also found that some companies reported negative 

royalty values, potentially costing the Treasury another $41 million 

in uncollected royalties. 

Further, the GAO high risk report to Congress found that the Interior Department allowed consistent errors in company reported 

data on oil and gas production on public lands and sales data that 

did not reflect the prevailing market price for oil and gas. Now, 

why would we be not using prevailing market prices for oil and 

gas? 

The GAO also found that the Interior does not utilize technologies that could dramatically reduce these errors, such as wireless flow meters, similar to the basic smart meter technology currently used in 36 million homes nationwide. 

The money we are losing to these reporting errors is significant. 

But if the American people knew that we in Congress had authorized royalty-free drilling on public lands, they would be throwing 

more than rotten tomatoes at us. 

Interior data shows that the royalty-free drilling has already cost the Treasury nearly $11 billion in lost revenue. Royalty-free drilling is estimated to cost an additional $15.5 billion in foregone revenue over the next 10 years, and may ultimately exceed $40 billion, 

equal to the federal income tax paid each year by 9.4 million American families. 

Then let’s add the $7 billion of taxpayer subsidies to the industry 

and ask ourselves how many more gifts do we have to give to an 

industry already making record profits. 

As the Country struggles with sequestration, budget deficits, and 

across-the-board cuts, it is truly incredible and unjustifiable that 

the Department of Interior is leaving money on the table and in 

pockets of the oil and gas industry, rather than putting it in the 

people’s Treasury. 

This is the Oversight Committee, and we should be doing what 

our mission statement says: securing an efficient and effective Government for the American taxpayer. What could be more deserving 

a topic than making sure we collect the royalties the oil and gas 

industry owes the American people? Owes. Not prospective; owes. 

What could be a better time to do it than now? 

I hope Chairman Lankford will join me today in taking the first 

steps in that direction by asking the GAO to analyze Interior’s 

progress in addressing the challenges GAO identified with respect 

to revenue collected from oil and gas produced on lands owned by 

the American people. 

I thank the chairman and yield back. 

Mr. LANKFORD. Thank you. 

Members will have seven days to submit their opening statements for the record. 

5 

We will now recognize our first and only panel today. 

Mr. Tommy Beaudreau is the Acting Assistant Secretary of Land 

and Minerals Management at U.S. Department of Interior. 

Mr. Frank Rusco is the Director of Natural Resources and the 

Environment, the U.S. Government Accountability Office. 

Thank you both for being here. Pursuant to committee rules, we 

will swear in all witnesses. If you would please rise and raise your 

right hand. Thank you. 

Do you solemnly swear or affirm the testimony you are about to 

give will the truth, the whole truth, and nothing but the truth, so 

help you, God? 

[Witnesses respond in the affirmative.] 

Mr. LANKFORD. Thank you. Let the record reflect the witnesses 

answered in the affirmative. You may be seated. 

In order to allow time for discussion, both of you have been 

through this before, you know very well about the five minute rule 

on that. We will be a little bit flexible on that since this is the only 

panel, but would enjoy having some time for questions, as well, and 

some interaction on that. 

Mr. Beaudreau, you are first up on this one. Thank you. 

STATEMENT OF TOMMY P. BEAUDREAU 

Mr. BEAUDREAU. Thank you very much, Chairman Lankford, 

Ranking Member Speier, and members of the subcommittee. 

I thank you for the opportunity to appear today to discuss the 

Interior Department’s work to expand responsible energy development and production on Federal lands and offshore. I am pleased 

to appear with Mr. Rusco from the Government Accountability Office. We have worked closely with Mr. Rusco and his team on many 

issues relating to the stewardship of the Nation’s energy resources, 

and I appreciate very much their insight and their recommendations. 

Because this is my first appearance before this subcommittee, I 

would like to take a moment to introduce myself. I grew up in 

Alaska. My father worked on the Prudhoe Bay oil field, on the 

North Slope, and he moved our family to Alaska during the boom 

times in the 1970s. Like a lot of those workers, he was laid off after 

the boom times went bust in the mid-1980s. So I know firsthand 

the oil and gas industry’s central role in driving the Nation’s economy and our energy security. It is important to energy producing 

States like Alaska, and what the industry means to the men and 

women who work in it and to the families who depend on it for 

their livelihoods. 

I joined the Interior Department in June 2010, in the midst of 

the response to the Deepwater Horizon oil spill, to help lead the 

Department’s broad reforms to strengthen offshore oil and gas safety and environmental standards, as well as strengthen Federal 

oversight, including the sweeping reorganization of the former Minerals Management Service into three separate, independent agencies with clear and focused missions. 

Following the completion of the reorganization, I became the 

head of the newly formed Bureau of Ocean Energy Management, 

which oversees responsible management of offshore oil and gas, as 

well as renewable energy resources in U.S. waters. I believe our reVerDate Aug 31 2005 11:15 Jun 12, 2013 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 C:\DOCS\81279.TXT APRIL
6 

forms have been successful. Offshore oil and gas activity is now at 

a pace exceeding that prior to the spill, and is anticipated to increase even further as new exploration and development continues 

and new discoveries are made. And that work is happening more 

safely and more responsibly than ever before. 

We have successfully stood up the new oversight agencies, and 

while we will always continue to work to enhance our oversight capability and our regulatory efficiency, GAO has removed the reorganization from its high-risk list. 

In March I was formally appointed to be the Acting Assistant 

Secretary for Land and Minerals Management at DOI, and I now 

help oversee the stewardship of public lands, as well as our offshore energy and mineral resources. DOI is an important contributor in implementing the President’s all-of-the-above energy strategy, which includes expanding safe and responsible production of 

our domestic oil and gas supplies, both offshore and onshore, and 

seeking our regulatory and oversight efficiencies so as to create a 

more efficient and predictable environment for both Government 

and industry. 

Chairman Lankford, I think some of the suggestions you pointed 

out to in your opening are exactly in line with what our new secretary has in mind and what we have in mind, so I look forward 

to discussing those. 

One of the keys to further unlocking the vast energy resources 

with which our Nation is blessed is ensuring the American people 

that development of those resources is being done responsibly and 

with appropriate protections for the environment. The Natural Petroleum Council, NPC, a Federal advisory committee, recently completed a study requested by the Energy Department, entitled Prudent Development: Realizing the Potential of North America’s 

Abundant Natural Gas and Oil Resources. 

I would like to highlight one of the four fundamental conclusions 

of that study: that ‘‘Realizing the benefits of natural gas and oil depends on environmentally responsible development and that the 

critical path to sustained and expanded resource development in 

North American includes effective regulation and a commitment of 

industry and regulators to continuous improvement and practices 

to eliminate or minimize environmental risk.’’ 

This conclusion is premised on a sophisticated and compelling insight into the relationships between industry, Government oversight, and the public trust, and I couldn’t agree with it more. And 

I believe you alluded to these exact same principles in your opening, Chairman. So I look forward to discussing more with the committee and the subcommittee today about what we are doing exactly along these lines and I look forward to your questions. Thank 

you. 

[Prepared statement of Mr. Beaudreau follows:] 

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Insert offset folio 1 here 81279.001

Statement of 

Tommy P. Beaudreau 

Acting Assistant Secretary, Land and Minerals Management 

U.S. Department of the Interior 

Before the 

Honse Committee on Oversight and Government Reform 

Subcommittee on Energy Policy, Health Care and Entitlements 

May 16,2013 

Chairman Lankford, Ranking Member Speier, and members of the Subcommittee, I am pleased 

to appear before you today to discuss the Department of the Interior's work to expand 

responsible energy development and production on Federal lands and waters. 

Consistent with the Administration's Blueprintfor a Secure Energy Future, 001 is engaged in a 

broad effort to secure the Nation's energy future by producing more oil and natural gas at home, 

developing and using clean renewable energy sources, and improving energy efficiency. Since 

the President took office, America's dependence on foreign oil has decreased every year, and 

domestic oil and natural gas production has risen every year. In 2012, American oil production 

reached the highest level in two decades and natural gas production reached an all-time high. 

Access to Energy Resources 

001 is an important contributor in implementing the President's all-of-the-above energy 

strategy, which includes expanding the safe and responsible production of our domestic oil and 

gas supplies, both offshore and onshore, and seeking out regulatory and oversight efficiencies, so 

as to create a more efficient and predictable environment for both government and industry. 

The Bureau of Ocean Energy Management (BOEM) is implementing the Five Year Outer 

Continental Shelf (OCS) Oil and Gas Leasing Program for 2012-2017 (Five Year Program). The 

Five Year Program makes all of the oes areas with the greatest resource potential available for 

oil and gas leasing. Together, these areas contain more than 75 percent of the undiscovered, 

technically recoverable oil and gas resources estimated to exist in federal waters offshore the 

United States. 

To increase access to the Gulf's world-class oil and gas potential, the Administration has 

negotiated an Agreement between the United States and Mexico concerning Transboundary 

Hydrocarbon Reservoirs in the Gulf of Mexico. This agreement will make nearly 1.5 million 

acres of the Outer Continental Shelf, currently subject to a moratorium under the Western Gap 

Treaty, immediately available for leasing. It will also make the entire trans boundary region, 

which is currently subject to legal uncertainty in the absence of an agreement, more attractive to 

U.S.-qualified operators. For example, BOEM estimates that the transboundary area currently 

under moratorium contains as much as 172 million barrels of oil and 304 billion cubic feet of 

natural gas. We look forward to continuing to work with Congress on legislation to implement 

this Agreement. 
8 


Insert offset folio 2 here 81279.002

DOl also is moving forward with overseeing safe and responsible offshore oil and gas 

exploration in frontier areas, including the Arctic. The Arctic holds substantial oil and gas 

potential, but also presents unique environmental and operational challenges. Offshore 

exploration in the Arctic must proceed in a way that is safe, responsible, and respectful of the 

Alaska Native communities that depend on the ocean for subsistence. The Interagency Working 

Group on Coordination of Domestic Energy Development and Planning in Alaska, established 

by Executive Order in July 2011 and chaired by the Department's Deputy Secretary David 

Hayes, has taken the lead in coordinating and rationalizing the permitting of energy projects 

across the relevant federal agencies. Last summer saw the first significant offshore exploration 

activity in the Alaska OCS since the 1990s. This activity was closely overseen by DOl, the U.S. 

Coast Guard, the National Oceanic and Atmospheric Administration and other federal agencies. 

The Department also is pursuing a specific strategy to evaluate potential future offshore oil and 

gas leasing in new areas, such as the Mid and South Atlantic. BOEM is working to complete a 

Programmatic Environmental Impact Statement (PElS) evaluating the potential environmental 

impacts of proposed geological and geophysical activities in the Mid and South Atlantic. The 

completion of this PElS is part of a region-specific strategy to responsibly develop modern 

information about the significance and location of oil and gas resources to inform future 

decisions about whether leasing in the Atlantic would be appropriate, and if so, where such 

leasing should take place. The PElS is expected to be completed later this year. Further, early in 

the process BOEM also is actively working to identify and evaluate potential conflicts with 

existing uses in these areas, including with the military. 

Onshore, the Bureau of Land Management (BLM), which has about 37.8 million acres under 

lease for oil and gas development, is scheduled to hold more than 30 oil and gas lease sales this 

year. At the end of Fiscal Year 2012, there were approximately 49,000 oil and gas leases on 

Federal public lands, of which over 23,000, covering 12.5 million acres of Federal mineral 

estate, were producing oil and gas. The amount of producing acreage has increased by about 

200,000 acres since 2011. Over 3,000 new oil and gas wells were started in 2012, and oil 

production from the Federal onshore is up 18 percent since 2008 reaching its highest level in 

over a decade. Indeed, at the end of the last fiscal year, industry held almost 7,000 approved 

drilling permits that had not yet been drilled. 

Harnessing our Nation's coal resources is also an important part of our all-of-the-above energy 

strategy. The BLM is responsible for leasing the Federal coal mineral estate on approximately 

570 million acres, and the BLM's coal program supports production that provides important 

energy for the Nation, as well as revenue for the Treasury. Currently, about one-fifth of all 

electricity generated in the country comes from coal mined on Federal lands. 

A true all-of-the above energy strategy includes the development of the new, renewable energy 

resources that are vital to our Nation's long-term economic development and energy security. 

Securing clean sources of energy not only is positive for the environment, but also creates 

American jobs and promotes innovation in the United States. 

The BLM has focused on an accelerated, but environmentally responsible, permitting process for 

the development of renewable energy on public lands that ensures the protection of signature 

2 
9 


Insert offset folio 3 here 81279.003

landscapes, wildlife habitats, and cultural resources. The BLM's 2012 Solar Energy Plan 

identified almost 20 million acres of land as potentially suitable for utility-scale solar energy 

development. Working cooperatively with other resource agencies, the BLM has developed a 

2013-2014 active priority project list that includes wind, solar, and geothermal projects. The 

BLM further expects to propose rules that would establish a competitive process for issuing 

rights-of-way leases for solar and wind energy development on public lands. 

Offshore renewable energy also holds great potential, and DOl is working closely with other 

Federal agencies, coastal States, industry, tribes and a broad range of stakeholders under the 

Smart From the Start strategy to lease offshore wind projects in the right places. BOEM has 

established renewable energy task forces with a total of 12 coastal states, including recent task 

forces in the states of Hawaii and South Carolina. BOEM has also issued two commercial leases 

for offshore wind energy areas and expects to hold two competitive lease sales for areas offshore 

Rhode Island and Massachusetts and Virginia this year, with lease sales in additional areas 

offshore New Jersey, Maryland and Massachusetts to follow. 

The Results 

The first two sales of the 2012-2017 Five Year Program were held in the Gulf of Mexico in 

November 2012 and March 2013, and resulted in over $1.3 billion dollars in industry investment 

and government revenue through bidding on 436 new leases. A third lease sale, scheduled for 

this August, will offer 21 million acres offshore Texas, making all unleased acreage in the 

Western Gulf of Mexico available for leasing. 

The BOEM has achieved substantial efficiencies in its review process for offshore oil and gas 

exploration and development plans, while requiring compliance with the heightened safety and 

environmental protection standards promulgated following the Deepwater Horizon blowout and 

oil spill. For example, exploration and development plans for deepwater drilling in the Gulf of 

Mexico submitted between October 2010 and October 2011 averaged 190 days from submission 

to approval. In contrast, since October 2011 these plans have averaged 125 days for approval. 

The President's Budget request for 2014 includes funding for the ePlans initiative. which is 

projected to reduce plan processing times significantly. 

Similarly, the Bureau of Safety and Environmental Enforcement (BSEE) achieved an average 

review time of 52 days for deepwater permits in 2012, down from 83 days in 2011, all while 

requiring compliance with the heightened safety standards. Finally, as many floating deepwater 

drilling rigs are working in the Gulf of Mexico today as prior to the Deepwater Horizon spill, 

with drilling activity expected to steadily increase over the coming year. 

Onshore, from FY 2006 to FY 2012, the amount of time it took for all BLM field offices to 

process and approve complete drilling applications fell by 40% from 127 to 77 days. The 

number of inspections completed by all BLM offices rose 73 percent from FY 2006 to FY 2012, 

from 19,974 to 34,571. 

The BLM has also completed a new comprehensive plan - the first ever - for the 23-million acre 

National Petroleum Reserve - Alaska, or NPR-A. The plan provides access to 72% of that area's 

estimated oil potential and prevents conflicting land uses in an important east-west corridor that 

3 
10 


Insert offset folio 4 here 81279.004

could be needed for pipeline infrastructure to eventually carry Chukchi Sea oil or gas production 

to the Trans-Alaska pipeline. 

The Federal coal program has generated over $9 billion in revenue over the past decade. The 

Administration is making more coal available as well, with the number of producing acres rising 

4 percent from 464,380 in Fiscal Year 2009 to 484,017 in Fiscal Year 2012. The amount of coal 

the agency leased last fiscal year is the highest since FY 2003. 

In the Energy Policy Act of2005, the Congress set a goal of approving at least 10,000 MW of 

non-hydro renewable energy on the public lands by 2015. The BLM achieved the lower limits of 

that goal in December 2012, three years ahead of schedule. 

Since issuance of a March 2009 Secretarial Order prioritizing the consideration of 

environmentally responsible renewable energy projects, the BLM has approved 41 renewable 

energy projects, including 23 utility-scale solar facilities, 8 wind farms, and 10 geothermal 

plants, with associated transmission corridors and infrastructure to connect to established power 

grids. If fully built, these projects would provide more than 12,000 MW of power, or enough 

electricity to power more than 4.2 million homes, and support an estimated 17,000 plus 

construction and operations jobs. 

Renewable energy approvals continue to be a focus area for the BLM. Former Secretary Ken 

Salazar signed a Record of Decision in October 2012 that designated 285,000 acres within 17 

Solar Energy Zones for solar development, as well as some 19 million acres of variance land 

potentially available for development. The Department is moving forward on the 2013-14 active 

priority list, which includes 23 renewable energy projects (14 solar, 6 wind, and 3 geothermal) 

with a potential capacity to generate about 5,300 MW. 

BOEM has taken a number of major steps to advance offshore wind development, including: 

approving the construction and operations plan for the Cape Wind project offshore 

Massachusetts, which has power purchase agreements for 75 percent of generation capacity; 

issuing a commercial wind energy lease offshore Delaware; completing steps to hold competitive 

wind energy lease sales in areas offshore Rhode Island, Massachusetts, and Virginia in 2013, 

with additional competitive lease sales to follow for wind energy areas offshore Maryland, New 

Jersey, and Massachusetts; and issuing formal requests to gauge interest in the areas offshore 

New York, North Carolina, and Maine. BOEM is also overseeing progress in the planning of a 

potential Mid-Atlantic Wind Energy Transmission Line, which would enable up to 6,000 MW of 

wind turbine capacity to be delivered to the electric grid along the East Coast. 

Conclusion 

The Obama Administration and the Department of the Interior are working to secure our energy 

future by ensuring that our domestic energy resources are safely and responsibly developed, and 

that the potential for clean energy development on our public lands and waters is realized. The 

Department, through its policies, priorities, and project work, has taken a balanced approach, and 

it is an approach that works. 

4 
11 


Insert offset folio 5 here 81279.005

Again, thank you for the opportunity to discuss the Department of the Interior's policies and 

programs on energy production from Federal lands and the OCS. I will be pleased to answer any 

questions that you or the Committee may have. 

5 
12 

Mr. LANKFORD. Thank you. 

Mr. Rusco. 

STATEMENT OF FRANK RUSCO 

Mr. RUSCO. Thank you, Chairman Lankford, Ranking Member 

Speier, and members of the subcommittee. I am pleased to speak 

with you today about the Department of the Interior’s management 

of oil and gas produced on public lands and waters. 

Interior manages the leasing of public lands and waters for oil 

and gas exploration development and production. These activities 

provide an important domestic source of energy, create jobs in the 

oil and gas industry, and raise revenues that are shared between 

Federal, State, and tribal governments. 

Revenue generated from oil and gas produced from Federal 

leases is one of the largest non-tax sources of Federal Government 

funds, accounting for about $10 billion in revenues annually in recent years. 

It is important that Interior strikes the right balance between 

providing access to oil and gas resources, while also making the 

Nation’s lands and waters available for multiple other uses, including recreation, agriculture, fishing, mining, and forestry. In addition, Interior is responsible for protecting the environment and for 

enforcing Federal laws and regulations on public lands and waters. 

In recent years, GAO has undertaken many evaluations of Interior’s management of Federal oil and gas activities and found numerous material weaknesses. These weaknesses hamper the agency’s ability to strike the right balance between encouraging domestic oil and gas production on the one hand and, on the other, maintaining operational and environmental safety while providing reasonable assurance that the public is getting the revenues to which 

it is entitled. 

I will focus the remainder of my remarks on these areas of concern. 

In 2012, we reported on changes to Interior’s oversight of offshore oil and gas activities in the Gulf of Mexico. These changes 

were brought about, in part, as a result of findings of inadequate 

environmental and safety oversight in the Gulf, as well as the need 

to better oversee drilling plans and evaluate the performance of offshore oil and gas operators. In that report we found that these 

changes to oversight had initially led to increased permitting time 

frames. At the time, we reported these time frames had begun to 

fall as oil and gas industry and Interior became more familiar with 

the new processes. 

We also found that Interior was not collecting data needed to 

identify and evaluate safety and other violations its inspectors encountered on offshore drilling rigs and production platforms. We 

made a number of recommendations aimed at improving Interior’s 

oversight and permitting processes. Interior generally agreed with 

our recommendations and is taking steps to implement them. 

In a 2010 report to Chairman Issa of the full Committee on Oversight and Government Reform, we found that Interior has been unable to complete production inspections, maintain reliable royalty 

and production data, and provide reasonable assurance that the 

public is receiving its fair share of oil and gas revenues. SpecifiVerDate Aug 31 2005 11:15 Jun 12, 2013 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 C:\DOCS\81279.TXT APRIL
13 

cally, in the 2010 report we found that Interior has had longstanding challenges in hiring, training, and retaining staff in key 

skilled positions. 

For example, we reported that Interior experienced high turnover 

rates in key oil and gas inspection and engineering jobs. In addition to hampering production verification efforts, these human capital challenges resulted in delays in issuing leases and permits, and 

have caused Interior to miss its statutory and agency goals for performing safety and environmental inspections of oil and gas on 

Federal leases. 

In a 2009 report we found that Interior lacked consistent and reliable data on the production and sale of oil and gas from public 

lands and, therefore, cannot provide reasonable assurance that it 

was appropriately assessing and collecting royalties. 

In 2008 we found that Interior had not comprehensively evaluated its revenue collection structure in over 25 years, despite many 

important changes in the oil and gas industry during that time. 

Based on this body of work, we have made numerous recommendations to Interior to improve its oversight of oil and gas 

produced on Federal leases. Interior generally agreed with our recommendations and has made good progress in implementing many 

of them. However, its management challenges are great and we 

have ongoing work looking at revenue collection efforts, as well as 

Interior’s persistent human capital challenges. 

In closing, it is essential that Interior continue to improve its 

management of oil and gas produced on Federal leases and address 

its material weaknesses. The agency must be able to provide Congress and the public with reasonable assurance that billions of dollars of revenues owed the public are being properly assessed and 

collected. Also, Interior must maintain an appropriate balance between efficiency and timeliness in leasing and permitting on one 

hand, and protection of the environment and operational safety on 

the other. 

Thank you for the opportunity to speak about these issues. I will 

be happy to respond to any questions you may have. 

[Prepared statement of Mr. Rusco follows:] 

14 


Insert offset folio 6 here 81279.006

For ReJease on Delivery 

Expected at 10:30 a.m. EDT 

Thursday, May 16, 2013 

GAO-13-647T 

United States Government Acconntability Office 

Testimony 

Before the Subcommittee on Energy Policy, 

Health Care, and Entitlements, Committee 

on Oversight and Government Reform, 

House of Representatives 

OIL AND GAS 

MANAGEMENT 

Continued Attention to 

Interior's Revenue 

Collection and Human 

Capital Challenges Is 

Needed 

Statement of Frank Rusco, Director 

Natural Resources and Environment 
15 


Insert offset folio 7 here 81279.007

GAO 

Highlights 

Highlights of GAO-13-64 7T I a testimony 

before the Subcommittee on Energy Policy, 

Health Care, and Entitlements, Committee on 

Oversight and Government Reform, House of 

Representatives 

Why GAO Did This Study 

Interior issues permits for the 

development of new oil and gas wells 

on federal lands and waters; inspects 

wells to ensure compliance with 

environmental, safety, and other 

regulations; and collects royalties from 

companies that sell the oil and gas 

produced from those wells. In recent 

years, onshore and offshore federal 

!eases produced a substantial portion 

of the oil and gas produced in the 

United States. In fiscal year 2012, 

Interior collected almost $12 billion in 

mineral revenues including those from 

oil and gas development, making it one 

of the largest nontax sources of federal 

government funds. Previous GAO work 

has raised concerns about Interior's 

management and oversight of federal 

oil and gas resources. 

This testimony focuses on (1) Interior's 

oversight of offshore oil and gas 

resources, (2) Interior's collection of oil 

and gas revenues, and (3) Interior's 

progress to address concerns that 

resulted in its inclusion on GAO's High 

Risk List in 2011. This statement is 

based on prior GAO reports issued 

from September 2008 through 

February 2013. 

GAO is making no new 

recommendations. Interior continues to 

act on the recommendations that GAO 

has made to improve the management 

of oil and gas resources. GAO 

continues to monitor Interior's 

implementation of these 

recommendations. 

View GAO-13-647T. For more information, 

contact Frank Rusco at (202) 512-3841 or 

ruscof@gao.gov. 

Il!iM·u" 

OIL AND GAS MANAGEMENT 

Continued Attention to Interior's Revenue 

Collection and Human Capital Challenges Is Needed 

What GAO Found 

Interior's oversight of offshore resources. In July 2012, GAO reported on 

changes to the Department of the Interior's oversight of offshore oil and gas 

activities in the Gulf of Mexico following the Deepwater Horizon incident. 

Specifically, GAO reported that Interior had established two new bureaus, 

separating resource management oversight activities from safety and 

environmental oversight activities. GAO also reported that new requirements and 

policy changes designed to mitigate risk of a well blowout or spill had initially 

required additional resources and increased permit approval times, but that 

approval times decreased as Interior staff and oil and gas companies became 

more familiar with the new requirements. GAO also found that Interior's 

inspections of offshore Gulf of Mexico drilling rigs and production platforms 

routinely identified violations, but that Interior's database was missing data on 

when violations were identified and corrected. GAO made 11 recommendations 

aimed at improving Interior's oversight activities. Interior generally agreed with 

the recommendations and plans to implement them. 

Interior's col/ection of oil and gas revenues. In September 2008, GAO reported 

that Interior collected lower levels of revenues for oil and gas production in the 

deep water of the U.S. Gulf of Mexico than all but 11 of 104 oil and gas resource 

owners in other countries and some states. In July 2009, GAO reported on 

problems with Interior's efforts to collect data on oil and gas produced on federal 

lands, including missing and erroneous data. In March 2010, GAO reported that 

Interior was not taking needed steps to ensure that oil and gas produced from 

federal lands was accurately measured and was not conSistently meeting its 

goals for oil and gas production verification inspections. GAO made numerous 

recommendations aimed at improving Interior's revenue collection policies, 

including oversight of production verification activities and controls on the 

accuracy and reliability of royalty data. Interior generally agreed with these 

recommendations and has implemented many of them. 

Interior's oil and gas management on GAO's high risk fist. In February 2011, 

GAO added Interior's management of federal oil and gas resources to its list of 

federal programs and operations at high risk for waste, fraud, abuse, and 

mismanagement or needing broad-based transformation. GAO added this high 

risk area because Interior (1) did not have reasonable assurance that it was 

collecting its share of revenues; (2) continued to experience problems hiring, 

training, and retaining sufficient staff to provide oversight and management of oil 

and gas operations; and (3) was engaged in a broad agency reorganization that 

could adversely impact its ability to effectively manage oil and gas during the 

crisis following the Deepwater Horizon incident. In February 2013, after Interior 

completed its reorganization, GAO narrowed the oil and gas high-risk area to 

focus on revenue collection and human capital challenges and is currently 

examining these issues. While Interior has begun to implement many of GAO's 

recommendations, it has yet to fully implement a number of others, including 

recommendations intended to (1) provide reasonable assurance that oil and gas 

is accurately measured, and that the public is getting an appropriate share of 

revenues, and (2) address its long-standing human capital issues. 

_____________ United States Government Accountability Office 
16 


Insert offset folio 8 here 81279.008

GAO U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

441 G St. N.W. 

Washington, DC 20548 

Chairman Lankford, Ranking Member Speier, and Members of the 

Subcommittee: 

I am pleased to be here today to discuss the Department of the Interior's 

management and oversight of federal oil and gas resources and 

collection of associated mineral revenues. Interior plays an important role 

in permitting the development of new oil and gas wells on federal lands 

and waters; inspecting those wells to ensure compliance with 

environmental, safety and other regulations; and collecting royalties from 

the companies that sell the oil and gas produced from those wells. 

In recent years federal leases onshore and in offshore federal waters 

produced a substantial portion of the natural gas and oil produced in the 

United States. In 2012, onshore federal leases produced 13 percent of 

domestic natural gas and 5 percent of domestic oil, while in 2011-the 

most recent year for which data are available-offshore federal leases 

produced almost 24 percent of domestic natural gas and over 6 percent 

of domestic oil. In fiscal year 2012, the federal government collected 

almost $12 billion in mineral revenues, including those from oil and gas 

produced from federal lands and waters, bonus bids for new oil and gas 

leases, and annual rents on existing leases.' Revenues from federal oil 

and gas are one of the largest nontax sources of federal government 

funds-and, as we have previously reported, improvements in the 

management of federal oil and gas resources could provide an important 

source of potential revenue enhancements as the government faces fiscal 

challenges.' 

Several Interior bureaus are responsible for regulating the processes that 

oil and gas companies must follow when leasing, drilling, and producing 

oil and gas from federal leases. The bureaus are also responsible for 

ensuring that companies comply with all applicable requirements. 

Historically, Interior's Bureau of Land Management (BLM) managed 

onshore federal oil and gas activities, while the Minerals Management 

Service (MMS) managed offshore activities and collected royalties on 

1Readily available data from Interior for nonroyalty revenue-such as rents and bonus 

bids-include revenue from aU minerals, including oil and gas, coal, and other resources. 

2GAO, Opportunities to Reduce PotenUal Duplication in Government Programs, Save Tax 

Dollars, and Enhance Revenue, GAO-11-318SP (Washington. D.C,: March 2011). 

Page 1 GAO·13·647T 
17 


Insert offset folio 9 here 81279.009

federal leases. 3 In May 2010, in the aftermath of the Deepwater Horizon 

incident, the Secretary of the Interior announced plans to reorganize 

MMS and divide its responsibilities among separate bureaus. The 

Secretary stated that this division of responsibilities would help ensure 

that each of the newly established bureaus would have a distinct and 

independent mission. Since the reorganization, BLM continues to oversee 

onshore federal oil and gas activities, the Bureau of Ocean Energy 

Management oversees offshore oil and gas leasing, the Bureau of Safety 

and Environmental Enforcement reviews drilling permits and conducts 

inspections, and the Office of Natural Resources Revenue is responsible 

for collecting royalties on oil and gas produced from both onshore and 

offshore federal leases. 

Interior's management of federal oil and gas activities has been a focus of 

a large body of our work over the past several years. In our resulting 

reports, we noted numerous weaknesses and challenges, and we made 

specific recommendations to Interior for addressing them. In February 

2011, we added Interior's management of federal oil and gas resources to 

our list of federal programs and operations at high risk for waste, fraud, 

abuse, and mismanagement or needing broad-based transformation.4 

Since that time, Interior has taken significant steps to address identified 

weaknesses and modify its practices for managing oil and gas resources 

but, as of May 2013, many of our recommendations remained 

unimplemented. 

In this context, my testimony today discusses findings from our past work 

on three broad areas: (1) Interior's oversight of offshore oil and gas 

resources, (2) Interior's collection of oil and gas revenues, and 

(3) Interior's progress to address concerns that resulted in its inclusion on 

our High Risk list in 2011. This statement is based on our extensive body 

of work on Interior's oil and gas leasing and royalty collection programs, 

including reports issued from September 2008 through February 2013. 

We conducted the performance audit work that supports this statement in 

accordance with generally accepted government auditing standards. 

Offshore Energy and Minerals Management oversaw offshore oil and gas 

activities, while its Minerals Revenue Management was responsible for royalty collections 

from both onshore and offshore federal leases. 

4GAO. High-Risk Series: An Update. GAO-11-278 (Washington, D.C .. February 2011). 

Page 2 GAO·13-647T 
18 


Insert offset folio 10 here 81279.010

Interior's Oversight of 

Offshore Oil and Gas 

Resources 

Additional information on our scope and methodology is available in each 

issued product. 

In July 2012, we reported on changes Interior made to its oversight of 

offshore oil and gas activities in the Gulf of Mexico in the aftermath of the 

Deepwater Horizon incidentS Specifically, we reported that 

On October 1, 2011, Interior officially established two new bureaus, 

separating offshore resource management oversight activities, such 

as reviewing oil and gas exploration and development plans, from 

safety and environmental oversight activities, such as reviewing 

drilling permits and inspecting drilling rigs. Because the 

responsibilities of these new bureaus are closely interconnected, and 

carrying them out will depend on effective coordination, Interior 

developed memoranda and standard operating procedures to define 

roles and responsibilities and facilitate and formalize coordination. 

New safety and environmental requirements and policy changes 

designed to mitigate the risk of a well blowout or spill initially required 

Interior to devote additional resources and time to reviewing certain oil 

and gas exploration and development plans and drilling permits for oil 

and gas activities in the Gulf of Mexico. Specifically, these policy 

changes affected Interior's (1) environmental analyses, (2) reviews of 

oil and gas exploration and development plans, and (3) reviews of oil 

and gas drilling permits. Our analysis of drilling permit approval time 

frames found that approval times initially increased after the new 

requirements went into effect, but as both Interior staff and oil and gas 

companies became more familiar with these requirements, the review 

times decreased. 

Interior's inspections of offshore Gulf of Mexico oil and gas drilling rigs 

and production platforms from January 1, 2000, through September 

30, 2011, routinely identified violations. However, Interior's database 

was missing data on when violations were identified, as well as when 

they were corrected for about half of the violations issued. As a result, 

Interior did not know on a real-time basis whether or when all 

violations were identified and corrected, potentially allowing unsafe 

conditions to continue for extended periods. During this same period, 

SGAO r Oil and Gas Management: Interiors Reorganization Complete but Challenges 

Remain in Implementing New Requirements, GAO-12-423 (Washington, D,C ' July 30, 

2012). 

Page 3 GAO·13·647T 
19 


Insert offset folio 11 here 81279.011

Interior's Collection 

of Oil and Gas 

Revenues 

Interior issued approximately $18 million in civil penalty assessments. 

At the time of our report, Interior had begun implementing a number of 

policy changes to improve both its inspection and civil penalty 

programs-but had not assessed how these changes would affect its 

ability to conduct monthly drilling rig inspections. 

Interior continued to face challenges following its reorganization that 

may affect its ability to oversee oil and gas activities in the Gulf of 

Mexico. Specifically, Interior's capacity to identify and evaluate risks 

associated with drilling remained limited, raising questions about the 

effectiveness with which it allocated its oversight resources. Interior 

also experienced difficulties in implementing effective information 

technology systems, such as those that aid its reviews of oil and gas 

companies' exploration and development plans. It also continued to 

face workforce planning challenges, including hiring, retaining, and 

training staff. Moreover, Interior did not have current strategic plans to 

guide its information technology or workforce planning efforts. 

Our July 2012 report resulted in 11 recommendations for specific 

improvements to Interior's oversight of offshore oil and gas activities, 

including those intended to improve its drilling inspection program and 

human capital planning. Interior generally agreed with our 

recommendations and has committed to implementing them. 

Federal oil and gas resources generate billions of dollars annually in 

revenues that are shared among federal, state, and tribal governments; 

however, in several reviews over the past 5 years we found Interior may 

not be properly assessing and collecting these revenues. 

In September 2008, we reported that Interior collected lower levels of 

revenues for oil and gas production in the deepwater of the U.S. Gulf of 

Mexico than all but 11 of 104 oil and gas resource owners in other 

countries, as well as in some states whose revenue collection systems 

were evaluated in a comprehensive industry study· In addition, despite 

significant changes in the oil and gas industry over the past several 

decades, we found that Interior had not systematically reexamined how 

the U.S. government is compensated for extraction of oil and gas in over 

25 years. We recommended Interior conduct a comprehensive review of 

6GAO, Oil and Gas Royalties: The Federal System for Collecting Oil and Gas Revenues 

Needs Comprehensive Reassessment, GAO-08-691 (Washington, D.C.: Sept. 3, 2008) 

Page 4 GAO-13..s47T 
20 


Insert offset folio 12 here 81279.012

the federal oil and gas fiscal system using an independent panel. After 

Interior initially disagreed with our recommendations, we recommended 

that Congress consider directing the Secretary of the Interior to convene 

an independent panel to perform a comprehensive review of the federal 

oil and gas fiscal system and establish procedures to periodically 

evaluate the state of the fiscal system. In response to that 

recommendation, Interior commissioned a study that compared the U.S. 

government's fiscal system with that of other resource owners. We are 

currently conducting work to assess how Interior plans to use the results 

of this study to inform decisions about its fiscal system. 

Furthermore, we reported, in July 2009, on numerous problems with 

Interior's efforts to collect data on oil and gas produced on federal lands, 

including missing data, errors in company-reported data on oil and gas 

production, and sales data that did not reflect prevailing market prices for 

oil and gas.1 As a result of its lack of consistent and reliable data on the 

production and sale of oil and gas from federal lands, Interior could not 

provide reasonable assurance that it was assessing and collecting the 

appropriate amount of royalties on this production. We made a number of 

recommendations to Interior to improve controls on the accuracy and 

reliability of royalty data. Interior generally agreed with our 

recommendations and has implemented the majority of them. 

We also reported, in March 2010, that Interior was not taking the steps 

needed to ensure that oil and gas produced from federal lands was 

accurately measured.' For example, we found that neither BlM nor MMS 

had consistently met their agency goals for oil and gas production 

verification inspections, intended to examine, among other things, 

whether lessees were taking steps to ensure that the amount of oil and 

gas produced from federal lands and waters was being accurately 

measured. Without such verification, Interior cannot provide reasonable 

assurance that the public is collecting its share of revenue from oil and 

gas development. We also raised concerns over Interior's efforts to 

develop software to allow inspection staff to remotely monitor gas 

Mineral Revenues: MMS Could Do More to Improve the Accuracy of Key Data 

Coilect and Verify Oil and Gas Royalties, GAO-09-549 (Washington, D.C .. July 

15,2009). 

BGAO, Oil and Gas Management: Interior's ON and Gas Production Verification Efforts Do 

Not Provide Reasonable Assurance of Accurate Measurement of Production Volumes, 

GAO-l0-313 (Washington, D.C,: Mar, 15, 2010) 

PageS GAO-13-647T 
21 


Insert offset folio 13 here 81279.013

Interior's Oil and Gas 

Management on the 

High Risk List 

production. Specifically, we found that BLM's Remote Oata Acquisition for 

Well Production program-a program designed to provide industry and 

government with common tools to validate production and to view 

production data in near real-time-had shown few results, despite 10 

years of development and costs of over $1.5 million. Our March 2010 

report identified 19 recommendations for speCific improvements to 

oversight of production verification activities, including recommendations 

intended to strengthen BLM's production inspection program and its 

ability to obtain near real-time gas production data. Interior generally 

agreed with our recommendations; it has already implemented many of 

them and continues to work on the remainder. 

Additionally, we reported, in October 2010, that Interior's data likely 

understated the amount of natural gas produced on federal leases, 

because the data did not quantify the amount of gas released directly to 

the atmosphere (vented) or burned (flared) during the production 

process' This vented and flared gas represents lost royalties to the 

government and contributes to greenhouse gases. We recommended that 

Interior improve its data and address limitations in its regulations and 

guidance to reduce this lost gas. Interior generally agreed with our 

recommendations and is taking steps to implement them. 

In February 2011, we added Interior's management of federal oil and gas 

resources to our list of federal programs and operations at high risk for 

waste, fraud, abuse, and mismanagement or needing broad-based 

transformation." We added Interior to the list because the department: 

(1) did not have reasonable assurance that it was collecting its share of 

revenue from oil and gas produced on federal lands; (2) continued to 

experience problems in hiring, training, and retaining sufficient staff to 

provide oversight and management of oil and gas operations on federal 

lands and waters; and (3) was engaged in a broad reorganization of both 

its offshore oil and gas management and revenue collection functions, 

leading to concerns about whether Interior could provide effective 

program oversight while undergoing such a broad reorganization. 

9GAO, Federal Oil and Gas Leases: Opporlunities Exist to Capture Vented and Flared 

Natural Gas, Which Would Increase Royalty Payments and Reduce Greenhouse Gases, 

GAO-11-34 (Washington, D.C .. Oct. 29, 2010). 

1OGAO, High-Risk Series: An Update, GAO-11-278 (Washington, D.C.: February, 2011). 

PageS GAO~13-647T 
22 


Insert offset folio 14 here 81279.014

In the February 2013 update to our High Risk list," we narrowed the 

federal oil and gas management high-risk area to focus on revenue 

collection and human capital challenges because Interior had completed 

its reorganization. 

In order for GAO to remove the high-risk designation, Interior must 

successfully address the challenges we have identified, implement open 

recommendations, and meet its responsibilities to manage federal oil and 

gas resources in the public interest. While Interior recently began 

implementing a number of GAO recommendations, including those 

intended to improve the reliability of data necessary for determining 

royalties, the agency has yet to implement a number of other 

recommendations, including those intended to help the agency 

(1) provide reasonable assurance that oil and gas produced from federal 

leases is accurately measured and that the public is getting an 

appropriate share of oil and gas revenues and (2) address its longstanding human capital issues. 

We are currently engaged in two reviews examining the remaining two 

high-risk issues. First, we are conducting a follow up review of Interior's 

collection of revenues from the production of oil and gas on federal lands 

and waters. As part of this review, we will examine Interior's progress, if 

any, in (1) ensuring the government is getting a fair return for federal oil 

and gas resources, (2) meeting agency targets for conducting oil and gas 

production verification inspections, and (3) providing greater assurance 

that oil and gas production and roya~y data are consistent and reliable. 

Second, we are reviewing the extent to which Interior continues to face 

problems hiring, training, and retaining staff, and how any remaining 

problems affect Interior's ability to oversee oil and gas activities on federal 

lands and waters. As part of this effort, we will focus on the causes of 

Interior's human capital challenges, actions taken, and Interior'S plans for 

measuring the effectiveness of corrective actions. In addition, while we 

have narrowed the focus of the high-risk area to revenue collection and 

human capital issues, we will, in the course of ongoing work on these 

issues, continue to consider Interior's reorganization and its affect on the 

agency's ability to oversee federal lands and waters. 

High-Risk Series: An Update, GAO-13-283 (Washington, D.C.: February, 2013). 

Page 7 GAO·13-647T 
23 


Insert offset folio 15 here 81279.015

GAO Contact and 

Staff 

Acknowledgments 

(361493) 

In conclusion, Interior's management of federal oil and gas resources is in 

transition. Our past work has found a wide range of weaknesses in 

Interior's oversight of federal oil and gas resources, ultimately resulting in 

its inclusion on our High Risk List in 2011. Since then, Interior has 

successfully implemented many recommendations and resolved one of 

the three concerns that led to its inclusion on the high risk list-the 

challenges associated with its reorganization. We remain hopeful that 

Interior will continue to implement the many remaining recommendations 

we have made, thereby providing greater assurance of effective oversight 

of federal oil and gas resources. 

Chairman Lankford, Ranking Member Speier and Members of the 

Subcommittee, this concludes my prepared statement. I would be 

pleased to answer any questions that you or other Members of the 

Subcommittee may have at this time. 

If you have any questions concerning this testimony, please contact me at 

(202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this statement. Other individuals who made key contributions include 

Jon Ludwigson, Assistant Director; Christine Kehr, Assistant Director; 

Janice Ceperich; Glenn Fischer; Cindy Gilbert; Alison O'Neill; and 

Barbara Timmerman. 

PageS GAO-13-647T 
24 

Mr. LANKFORD. Thank you. 

I will recognize myself for five minutes for the first round of 

questioning. 

Mr. Beaudreau, I am sure you are hearing all of this from Mr. 

Rusco as well on some of the recommendations, and I know that 

some of the recommendations have already been implemented and 

there is a process going on, but let me talk to you specifically on 

some of the Federal permitting issues. 

Can you point to a State right now that is not doing a good job 

regulating oil and gas? Do you know of a State that is having an 

issue with that in their regulatory system? 

Mr. BEAUDREAU. My concern is not with criticizing any particular State’s regulatory and oversight regime with respect to oil 

and gas. My concern is with ensuring that the Interior Department, BLM specifically, fulfill its obligations under its statutes for 

Mineral Leasing Act and our broad responsibility for stewardship 

of Federal lands, which includes reconciling a host of multiple uses. 

It is embedded in our mission. 

Mr. LANKFORD. Sure. 

Mr. BEAUDREAU. So that is what we are focused on, is fulfilling 

our responsibilities under Federal law, not to criticize any particular State. That said, there are a lot of examples within States, 

Wyoming, Colorado, just to name two, that have best practices that 

we can draw on in utilizing our oversight as well. 

Mr. LANKFORD. So the question is, from what Mr. Rusco is mentioning, there are serious issues right now with human capital, I 

think was the term that you used, of just managing what we have 

now, and then the concern is that Interior is looking to then add 

also an additional fracking rule on top of that, what we already 

have. We already can’t keep up with the permitting time periods, 

there are dramatic delays to try to get a basic permit; there are all 

kinds of human capital that is a problem managing now; and then 

we are talking about adding another layer on it from there. 

I am trying to look for an issue here. They already receive a 

State permit to do exploration for energy; they already have standards they have to abide by. I am trying to figure out why add an 

additional responsibility when we are having a tough time keeping 

up with the previous responsibilities. Does that make sense? 

Mr. BEAUDREAU. Yes. And there are a couple components to it. 

Mr. LANKFORD. Okay. 

Mr. BEAUDREAU. One is fulfilling our underlying responsibilities. 

Mr. LANKFORD. But can that be delegated to a group? Do you 

have the authority to be able to say, okay, I am going to designate 

this person or certify this State or recognize a State that is doing 

a good job like you mentioned, Colorado or Wyoming or other areas, 

and say, okay, they are doing a great job, they are certified, they 

have it? 

Mr. BEAUDREAU. To frame it slightly differently, we can’t delegate that authority, but we can draw from best practices being 

used by States like Colorado, like Wyoming. So I think there is 

something to that and, frankly, that is something we are considering in the context of our re-proposed hydrofracking rule. 

The second issue, and you alluded to it in your opening, is a resource allocation issue. We need greater flexibility to be able to diVerDate Aug 31 2005 11:15 Jun 12, 2013 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 C:\DOCS\81279.TXT APRIL
25 

rect BLM’s permitting resources to areas with demand. Your map 

shows it. North Dakota: tremendous demand, tremendous opportunity. BLM’s resources aren’t properly aligned to meet that opportunity and that demand. And part of what we would like, and part 

of what Secretary Jewell has already talked about, is greater flexibility to match up with a very nimble industry in the oil and gas 

industry. 

Mr. LANKFORD. Is that something that is explainable when you 

look at that map of North Dakota, to try to figure out why there 

is so much energy exploration around Federal lands, rather than 

on Federal lands, I mean, literally stationing wells on the border 

on private lands all the way around it at times? 

Mr. BEAUDREAU. I think there are a couple dimensions to it. I 

think there is the resource issue that we have discussed. I also 

think there is, in general, because of this multiple use mission that 

we have on Federal lands and because the American people have 

a lot of different interests in how Federal lands are used, we have 

to manage those potential conflicts and do our best to, very early 

in the process, de-conflict those areas so that they don’t get tied up 

in litigation. 

Mr. LANKFORD. So how do States manage that and we don’t? Is 

there something that we can fix legislatively to be able to repair 

that, or is it some new authority you need, or just a reorganization 

within the structure itself? 

Mr. BEAUDREAU. I think we have undertaken substantial reforms 

of our leasing process. We brought protest rates way down over recent years because of the reforms. So part of it is public engagement; part of it is the reforms that we have put in; and part of it, 

and I do think Congress can help with this, is additional flexibility 

in providing us resources and with how we use those resources. 

Mr. LANKFORD. Okay. We will follow up on that in a moment, 

then, and come back from there. 

Let me yield to the ranking member, Ms. Speier. 

Ms. SPEIER. Thank you, Mr. Chairman. 

Secretary Beaudreau, 76 percent of the offshore acres leased for 

development already are not being used for oil extraction. How 

many acres has the Department actually leased out of the total 

Federal estate? 

Mr. BEAUDREAU. I don’t have that precise number. What I can 

speak to is some of the reasons why that happens and some of the 

reforms we put in place to encourage diligent development of leases 

acreage. 

Ms. SPEIER. Well, let me just ask the questions and see where 

we go from there, and maybe you can incorporate that answer. 

I am trying to find out whether this is a anti-competitive action 

that we are allowing to take place under our watch, where some 

companies are buying up leases, not actually drilling on them, but 

setting it up so at some future time they have access to them and 

no one else can. So I want to know about whether or not we should 

create some kind of rule around use it or lose it, because these 

leases go on for how long? 

Mr. BEAUDREAU. It depends. There is variability under OCSLA 

and how long the leases can be issued for. The maximum is 10 

years. So we are quite concerned with diligence, with operators 

26 

using drilling, the lease holdings that they have. It is for those reasons that, with respect to offshore leasing, we have implemented a 

number of reforms in that area as well, including increasing the 

minimum bid that an operator has to put on the table to acquire 

an acre of OCS property or lease. We have increased that minimum 

bid from $35 historically to $100 today, and I think what we have 

seen over the last couple lease sales in the Gulf of Mexico is the 

impact of this focus on diligence. 

We are not seeing broad acquisition of acreage; we are seeing 

much more focus on highly prospective areas, and that is encouraging because we want to see investment in areas that are prospective and we want to see operators drill those areas and bring it into 

production. 

Ms. SPEIER. Okay, in 1996 Congress attempted to encourage 

deepwater drilling. Do we need to encourage deepwater drilling 

today? 

Mr. BEAUDREAU. If the reference is to royalty relief, I don’t believe any form of royalty relief with respect to offshore oil and gas 

is appropriate. Our current leases do not include royalty relief. 

Ms. SPEIER. Okay. I want to talk about the 24 companies that 

pay no royalties for the leases they have. Who are they? 

Mr. BEAUDREAU. I can’t list for you the companies, but they are 

the companies who purchase leases under a regime that provided 

royalty relief. Some of those leases are in production now. 

Ms. SPEIER. Are these big companies? 

Mr. BEAUDREAU. Some of them are, yes. 

Ms. SPEIER. Are they the Exxons, the Mobils, the Standard Oils? 

Are these big companies that have these oil-free leases? 

Mr. BEAUDREAU. Some of them are, yes. 

Ms. SPEIER. I mean these royalty-free leases? 

Mr. BEAUDREAU. Royalty-free. Some of them are. Some of them 

have lease contracts that provide for royalty relief under their 

leases, and that is a legal obligation that we are stuck with. 

Ms. SPEIER. And how long are those leases good for? 

Mr. BEAUDREAU. Again, variability. Once those leases are 

brought into production, the term is indefinite as long as the lease 

is producing. 

Ms. SPEIER. So they have an indefinite lease to drill oil and pay 

no royalties to the taxpayers of this Country? 

Mr. BEAUDREAU. Under their lease contract, under those legal 

terms that were in effect at the time they acquired their lease, yes, 

as long as they are producing from that lease, those terms apply 

including, the royalty relief. 

Ms. SPEIER. Am I the only one who thinks that is a little outrageous? 

Mr. HASTINGS. Would the gentlelady yield? 

Ms. SPEIER. Yes. I would be happy to. 

Mr. HASTINGS. Well, the question you ought to ask is why did the 

administration in charge then let those leases out. I mean, a contract is a contract. 

Ms. SPEIER. I understand that. 

Mr. HASTINGS. And while there may be some concerns about 

that, I think that the question is why were the leases let out in 

the first place. 

27 

Ms. SPEIER. Evidently, the leases were made at that point in 

time to encourage this deepwater drilling, I am assuming. Is that 

correct? 

Mr. BEAUDREAU. I wasn’t here then, and that is not the policy 

that I would favor today, let me put it that way. 

Ms. SPEIER. All right, so my time is about to expire, but when 

these leases are granted and then they don’t act upon them, is 

there any cost to the Department? 

Mr. BEAUDREAU. So, in general, again, our policy is to encourage 

diligence, because we want to see acreage that we lease brought 

into production. We do collect rentals during the period, during the 

term of the lease prior to production, but I think there is an opportunity cost when we see investment in acreage that isn’t drilled, 

isn’t brought into production, as opposed to acreage that is more 

prospective. So in that sense I think there is an opportunity cost 

to the American people there. 

Ms. SPEIER. I yield back. 

Mr. LANKFORD. Thank you. 

Mr. Chaffetz. 

Mr. CHAFFETZ. Thank you, Mr. Chairman. 

Mr. Beaudreau, in the current law there is a use it or lose it provision, correct? The Secretary of Interior has the power to cancel 

a lease if they don’t produce within 10 years? 

Mr. BEAUDREAU. There are diligence requirements within the 

lease. You have to drill a well under the lease within the lease 

term or the lease expires. 

Mr. CHAFFETZ. So there are use it or lose it. A hundred percent 

of everything that is leased does not actually get into production, 

right, because there isn’t necessarily the assets below the ground 

that we thought there were going to be, correct? 

Mr. BEAUDREAU. That is a geologically true statement, yes. 

Mr. CHAFFETZ. And getting into production, I mean, it is not as 

if, once you get the lease, you can just flip on the switch, right? 

These things can take years, up to 10 years, to actually get into 

production, correct? 

Mr. BEAUDREAU. That is correct. And in some of the high-value 

prospective areas that are emerging in the Gulf of Mexico, for example, there is a lot of assessment and work a company has to do 

before those areas can be brought into production. That is true. 

Mr. CHAFFETZ. Secretary Jewell has testified in her confirmation 

hearing that there was a need for ‘‘balance between conservation 

and energy development on public lands.’’ My understanding is 

that less than 6 percent of all land actually has oil and gas production on it. Is that number correct, less than 6 percent? 

Mr. BEAUDREAU. To talk about sort of areas, sort of broadly is 

difficult; different areas have different resources. 

Mr. CHAFFETZ. Statistically, though, we are able to look at the 

acres that are open for drilling. I mean, it is a fairly easy statistical 

thing. I will take your word for it if you don’t have that number 

right in front of you, but the point I guess I would like to make 

is that less than 6 percent of the land in this so-called balanced approach is actually open to oil and gas drilling. 

Let me move on, because my time is eroding here. I really would 

like to explore the personnel challenges that Mr. Rusco highlighted. 

28 

I don’t know if I have time to go deep into this, but one of the concerns here is the number of new leases. Let me kind of read some 

statistics and see if you think there is any problem. 

Between the fiscal years of 2009 and 2011, the number of new 

leases offered by the Department of Interior fell by 42 percent. In 

Utah we had a drop of nearly 64 percent, and you can see the concern because these numbers really bear out over the next 10 years, 

they don’t necessarily show up in the immediate time. So why is 

the number of leases dropping so dramatically at the time that our 

Country needs so much energy production? 

Mr. BEAUDREAU. So there are currently 49,000 oil and gas leases 

on Federal land. Twenty-three thousand of those leases are producing. So again, on the issue of leasing reform to try to encourage 

onshore development, reduce conflict, we have focused very intensely on de-conflicting those areas so that, when leases occur, 

when we issue leases, operators have a much easier time, much 

more straightforward without objection, without lawsuits, to operating those leases. 

Mr. CHAFFETZ. Okay, well, if that is true, then why, in 2007, of 

the approved 7,124 permits had an average time of 196 days to get 

through the process. In 2012 you only approved 4,256 permits, with 

an average time of 228 days. So States will take 10 to 15 days to 

go through this approval process, but you are actually approving a 

lot less permits and it is taking more time. 

Mr. BEAUDREAU. So on the general point of improving the process, trying to reduce times within recognition of our responsibilities 

for stewardship of Federal lands, I agree with you, I think there 

is an opportunity, and I think BLM embraces this, I think there 

is an opportunity to bring greater efficiency to the permitting process. There are dimensions to that; resources is part of it, aligning 

ourselves with industry on what the opportunities are part of it, 

bringing greater efficiency—— 

Mr. CHAFFETZ. Help with the resources, because I am going to 

run out of time here. If you are going from 7,000 permits down to 

4,200 permits and you are taking an extra 30 days to do it, explain 

to me the personnel changes between 2007 and 2012. Do you have 

less personnel? Do you have more personnel? Is there a turnover 

problem? 

Mr. BEAUDREAU. Well, GAO has been very helpful in pointing 

this out. We do have challenges recruiting petroleum engineers, for 

example, the people involved in permitting that activity; there is a 

lot of competition for those folks, including with industry. That is 

a general problem. There are opportunities for greater efficiencies. 

Introducing an electronic system, a straightforward system could 

shave weeks off of permitting times. We are open to that, we want 

that to happen, and it is something Secretary Jewell has already 

focused quite specifically on. 

Mr. CHAFFETZ. Do you know do you have less people or more people? 

My time has expired, I yield back, but if the gentleman could answer do we have more personnel or less personnel than we did in 

2007. 

29 

Mr. BEAUDREAU. I can’t answer that specifically, but I know personnel challenges are a persistent issue, well documented by us 

and by the GAO. 

Mr. CHAFFETZ. If you could help get back to us, that would be 

great. 

Thanks, chairman. Appreciate everybody’s indulgence. 

Mr. LANKFORD. Thank you. 

Mr. Farenthold. 

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

I would like to turn just for a couple seconds to offshore. As I 

hear from some of our Texans involved in offshore drilling, there 

was, in the past, back when it was MMS and BOEMRE, there was 

a much more cooperative attitude between the regulators and the 

drillers. Oftentimes, when a drilling rig would become available on 

short notice, permits could be pushed through rapidly. Now the 

permitting process is taking much longer and, in fact, sometimes 

permits aren’t being issued until one or two days before the proposed drilling date, and the reports that I have heard anecdotally 

are the Government is actually sitting on these permits until right 

before because they are thinking there might be a change in the 

law. Doesn’t it seem like you ought to issue the permits when they 

are done under current law, and deal with changes in regulations 

when and if they actually happen? 

Mr. BEAUDREAU. So following the Deepwater Horizon spill, part 

of what we did is we introduced very strong, heightened standards 

around drilling safety and environmental protection. It is true that 

for a period of time after the introduction of those standards there 

was uncertainty around the permitting process and permits did 

take a long time to issue. We are three years removed from that. 

I met with oil and gas CEOs, along with Secretary Jewell, just last 

week in Houston, at OTC, and I think what we have seen, and this 

has not been by accident, has been the product of a lot of hard 

work and close engagement with industry is a much more predictable permitting time frame, and time lines for issuing permits have 

dropped dramatically over time. So to answer sort of the last point 

you made about whether we are intentionally sitting on permits in 

anticipation of regulatory changes, I will tell you that is absolutely 

not true. 

Mr. FARENTHOLD. Great. That is reassuring to hear. As a result 

of the Deepwater Horizon, BSEE is also looking at new regulations 

with respect to blowout preventers. Do we have any idea how that 

is coming along and when we can expect to see something? 

Mr. BEAUDREAU. The BOP rule, obviously coming out of 

McConda, one of the central issues was the performance of the 

Deepwater Horizon blowout preventer. That was a focus of the 

President’s commission review, as well as DOIs investigation, and 

there is substantial need for continued improvement with respect 

to BOPs. We put in some rules already. The BOP rule is a high 

priority for BSEE. I would expect the draft rule to be published 

sometime this year. 

Mr. FARENTHOLD. I know the producers are looking forward to 

knowing what they have to deal with, so the sooner that comes 

down—— 

30 

Mr. BEAUDREAU. And we look forward to engaging on it. Part of 

what we need to do is continue engagement with industry around 

these rules. 

Mr. FARENTHOLD. All right. I want to get to some of the things 

that some of the other questions have dealt with, specifically dealing with the allegation that oil and gas producers are sitting on 

their Federal leases. What I tend to hear is there is a permitting 

issue and it takes them a real long time to get a permit. Now, I 

also hear that there are reports that there are 6,000 approved, but 

unused drilling permits. Are you aware of the reporting of that 

number of unused permits, we are counting ones that have gone 

beyond the two year deadline in the permit and actually aren’t still 

under an active permit? 

Mr. BEAUDREAU. I am aware that there are a substantial number 

of APDs that BLM has approved that have not been drilled on. 

That is part of what we are focused on, is how are we using our 

resources. Are we lining up our resources with opportunities that 

industry wants to pursue? They are waiting for permits in those 

areas while, in the meantime, we are approving permits that don’t 

get drilled. That doesn’t make sense. 

Mr. FARENTHOLD. I want to get to that number again, because 

I think there is an issue there. Are you all counting, in that 6,000 

number, coal bed methane that nobody is really doing anymore? 

Mr. BEAUDREAU. I can look into that for you. 

Mr. FARENTHOLD. I would appreciate it. Now, are you aware of 

a problem with unused, undrilled leases and unused permits on 

State land, as opposed to Federal land? 

Mr. BEAUDREAU. I am not familiar with that issue, no. 

Mr. FARENTHOLD. I think you will find that you don’t have nearly 

the problem on State land that we do on Federal land. 

I see my time has expired. I yield back. 

Mr. LANKFORD. Thank you. 

Mr. Hastings. 

Mr. HASTINGS. Thank you, Mr. Chairman, and thank you for 

having this hearing. 

Mr. Beaudreau, good seeing you again. 

Mr. Rusco, I know you have been very quiet. I don’t have a question for you, either. 

Mr. BEAUDREAU. I was just thinking he needs more questions. 

Mr. HASTINGS. Mr. Beaudreau, I noticed in your testimony, 

which, of course, is much longer, your written testimony, which is 

much longer than your oral testimony, you made no mention of the 

impending rule on hydraulic fracking. You mentioned it just briefly 

in reference to Mr. Lankford. Why didn’t you mention that in your 

testimony? 

Mr. BEAUDREAU. My understanding of the purpose of the hearing 

was to talk about resource access, so I wanted to address that in 

my written testimony. I am happy to talk about where things stand 

with hydrofracking. 

Mr. HASTINGS. Where does it stand? 

Mr. BEAUDREAU. The publication of the revised proposed rule is 

imminent; not a matter of months, a matter of days. 

Mr. HASTINGS. We heard it is going to be this afternoon. 

Mr. BEAUDREAU. That may be true. I don’t know. 

31 

Mr. HASTINGS. Well, if it is, would you convey to Secretary Jewell 

that, as chairman of the Natural Resources Committee, we would 

very much like her to be there to discuss the rule and the potential 

impacts of that rule? 

Mr. BEAUDREAU. I will convey that, yes. 

Mr. HASTINGS. If you will. 

Now, were you personally involved at all in that writing of that 

regulation, the fracking rule? 

Mr. BEAUDREAU. I, in my capacity as acting ASLM, have reviewed the rule. I didn’t personally draft any of it, but I have reviewed it. 

Mr. HASTINGS. You say you personally drafted part of it? 

Mr. BEAUDREAU. No, I have not personally drafted it; I have reviewed it. 

Mr. HASTINGS. Okay. 

Mr. BEAUDREAU. It will be published soon. As far as I know, it 

is not final yet, but it will be published soon and I have reviewed 

it. 

Mr. HASTINGS. Well, we have heard 3:00. 

One issue, though, in that that I do want to ask you regarding, 

and that is there have been different costs of what the rule would 

cost an individual well. Your Department has at least made public 

said that they thought that cost would be about $11,000 a well, yet 

other analysts, independent analysts, have looked at that and they 

say that the cost could be $200,000 and maybe as high as $375,000 

per well. Why would you think that, within the industry, there 

would be that big of a discrepancy? 

Mr. BEAUDREAU. I think part of what we are asking for comment 

on in republishing the rule is on the economic impacts of the rule. 

So I think there probably is a range of potential costs associated 

with compliance of the rule depending on the complexity of the 

well, depending on the technology being used, depending on the 

overall drilling program. 

Mr. HASTINGS. Not to get ahead of the game, but going through 

that analysis, your $11,000 figure could rise, is that correct? 

Mr. BEAUDREAU. Part of what we want is we want an understanding of industry’s reaction to the cost analysis, the economic 

analysis that is in the report, and I look forward to getting that. 

Mr. HASTINGS. I always say because what has been sent out thus far was your $11,000 and independent analysts 20 times that. 

Mr. BEAUDREAU. There is some economic analysis in the revised 

proposed rule. 

Mr. HASTINGS. All right. I only have a minute here. I want to 

talk about the national petroleum reserve in Alaska. As you know, 

with your new regulations that came out, there is overwhelming 

opposition to that, and, yet, you state or imply in your testimony 

that there be more access to NPRA. Keep in mind, NPRA was put 

in place in the 1920s as a reserve. Your new rule, it looks to me 

like, restricts the use of NPRA in particularly those areas in the 

eastern part of NPRA, where the most potential resources exist. 

Would you comment on that? 

Mr. BEAUDREAU. Based on our current understanding of the geology, the areas available for potential oil and gas leasing in NPRA 

cover 70 percent of the resource potential. 

32 

Mr. HASTINGS. Wasn’t NPRA designed to have 100 percent? 

Mr. BEAUDREAU. NPRA includes, among other things, extremely 

sensitive—— 

Mr. HASTINGS. Wait, wait. I didn’t ask you that question. One 

could debate that question, because that debate goes on with 

ANWR forever. Was not NPR set aside 100 percent as the potential 

reserve? 

Mr. BEAUDREAU. NPRA includes reserve around oil and gas, that 

is potential development that is included in the plan. 

Mr. HASTINGS. Right. 

Mr. BEAUDREAU. We also, under the law, have responsibility, 

consistent with our general resource management, land management responsibility, to conserve those sensitive resources, and 

other interests as well. 

Mr. HASTINGS. My time has expired, but just briefly, if I may, 

Mr. Chairman. 

Why do you suppose there is so much opposition from the people 

in Alaska on your rule on NPRA? 

Mr. BEAUDREAU. As an Alaskan myself, I understand and I appreciate the concern for resource development; it is the life blood 

of the economy of that state, it is what I grew up with. I also appreciate concern for the conservation of resources and habitat. 

Among the Alaska natives, for example, on the North Slope, there 

is substantial concern about caribou herd, about migratory animals, and the potential impact of oil or gas activity on those uses 

as well. 

Mr. HASTINGS. My time has expired. I could go on, but thank you 

very much, Mr. Beaudreau. 

Mr. LANKFORD. Thank you. 

Mr. Walberg. 

Mr. WALBERG. Thank you, Mr. Chairman. 

I thank the panel for being here. Issue of great importance. 

Mr. Beaudreau, there appears to be at least 20 projects on Federal lands that have been undergoing the NEPA process for two, 

three, even five years. These projects would have created, according 

to a study commissioned by the Western Energy Alliance, would 

have created hundreds of thousands of jobs, billions in wages, and 

billions more in economic activity. In fact, it is indicated by 2020 

that the resources that would have been developed from these 

projects would have produced as much oil and natural gas potentially as what the U.S. imports from Russia, Iraq, Kuwait, Saudi 

Arabia, Venezuela, Algeria, Nigeria, and Colombia combined. 

Now, if they are off by one country, it is still an awful lot. So 

let me ask you, with these 20 projects on Federal lands that have 

been undergoing NEPAs process for a significant number of years, 

why is it taking so long for the Department of Interior to perform 

this analysis? 

Mr. BEAUDREAU. So I am not positive the specific 20 projects you 

are talking about, but, in general, part of our responsibility under 

our operating statutes is to analyze thoroughly the multitude of 

uses that are available on public lands. That includes energy development, oil and gas development, it includes other uses, and it includes responsibility for the protection of habitat, as well. So those 

33 

are complex issues. There is also a lot of potential for litigation and 

conflict. So that sets the stage for all of these analyses. 

That said, I agree with you that for NEPA processes, as well as 

leasing or permitting processes, they should be efficient. And if 

there are ways to improve the efficiency to bring closure to those 

reviews, that is something that we are quite interested in doing. 

Mr. WALBERG. Well, I would suggest that we may have some answers to that and the efficiencies if we look at what States do 

themselves, even in the length of permitting. For instance, North 

Dakota takes 10 days to get an oil and gas permit, 27 days in Colorado, 14 in my neighboring State of Ohio; whereas, it takes, on average, 228 days to get a Federal permit. Wouldn’t it be far more 

efficient for the Federal Government to take on the best practices 

of the States in order to reduce the time? 

Mr. BEAUDREAU. I agree that there are opportunities to consider 

and incorporate best practices from the States. Again, we have to 

do that within our broad responsibilities as stewards of Federal 

lands, so we have issues that we are responsible for that we have 

to fulfill. But there is opportunity to look at States for best practices, I agree. 

Mr. WALBERG. Well, I would hope that that would be pushed up 

in a fast track, because, again, the States certainly have a concern 

about what goes on in their State. They want to make sure that 

all of the related issues, including animals, that the environment 

protection, the uses by humans for various recreational purposes, 

they are concerned about that as well; in fact, maybe more so individually as States than the Federal Government should be. So I 

question the fact that it takes significantly longer, inordinately 

long times for getting these permits to get in place resources that 

we have. 

Could you tell us of any specific efforts moving toward? 

Mr. BEAUDREAU. A couple I have mentioned already. We want to 

align better resources, align our resources better with the opportunities. We want to bring additional people onboard, and that is included in our budget request for 2014, a way to bring additional 

people onboard to help manage the workload. And I think there are 

a lot of opportunities modernizing our regulatory process, moving 

towards a more electronic system that, if implemented, can shave 

weeks off of the permitting process. So there is ample opportunity 

there. 

Mr. WALBERG. Mr. Chairman, I yield back. 

Mr. LANKFORD. Mrs. Lummis. 

Mrs. LUMMIS. Thank you, Mr. Chairman. 

I want to go through some of the comments that have been made 

in the testimony from Mr. Beaudreau and make some comments on 

those. 

One of the remarks that you made, Mr. Beaudreau, is that the 

amount of producing acreages and new wells is up and oil production rose by 18 percent since 2008, reaching its highest levels in 

a decade. You know, I would point out that it takes about five 

years after a lease has been issued to get wells in full production, 

so most of those wells were issued on Federal lands during the 

Bush era. The average number of new leases under the Obama AdVerDate Aug 31 2005 11:15 Jun 12, 2013 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 C:\DOCS\81279.TXT APRIL
34 

ministration represents a 35 percent decline compared to the Bush 

era, and a 52 percent decline compared to the Clinton era. 

I would also point out that oil production on Federal lands is 

down 7 percent; natural gas production in Federal lands is down 

23 percent; coal production on Federal lands is down 7.7 percent; 

uranium is stymied by BLM regulations; huge reserves of uranium 

have been locked away in Arizona. 

I would also point out that your thoughts about approval of 

APDs that have not been filled represent a misunderstanding, I believe, of how this works. Industry pays the entire cost of acquiring 

an APD, so they don’t really have an incentive to get an APD and 

not use it. You have to keep a steady stream of APDs in the pipeline, so to speak, to ensure future production, and I would point out 

that, in Wyoming, about 2400 of undrilled APDs exist; they are all 

in coal bed methane wells. The economics of drilling for coal bed 

methane have collapsed, so these wells are economically unviable. 

Hence, using the argument that industry held almost 7,000 approved APDs that had not been filled, thereby providing them with 

sufficient inventory into the future is simply economically erroneously. 

Also, I would add my concern that while, even if BLM is using 

77 days to complete an APD, the law requires that the BLM complete its APDs in 30 days. So 77 days is still in violation of the law. 

As has been pointed out previously, most States are able to do it 

in less than 30 days themselves, leaving one to ponder why BLM 

continues to violate the law in that regard. 

Mr. Chairman, given all these facts and the fact that I see, in 

my State, where the vast majority of minerals are produced on 

Federal lands and that the Federal Government is, by far, the largest single landowner in the State, and that I see part of the reason 

that our unemployment remains low is that dozens and, in fact, 

hundreds of people that I know personally have pulled up stakes 

and gone to the Balkan in North Dakota to work in the oil and gas 

fields up there because that is their area of expertise, and that is 

where the production is and it is all on private land. 

So can you really tell them that the Department of the Interior 

is doing all it can to produce domestic energy from public lands? 

Mr. BEAUDREAU. So, as I have said during the course of my testimony, we are quite interested and quite committed to doing even 

more to encourage production from Federal lands, oil and gas production, coal production from Federal lands. 

Mrs. LUMMIS. Sir, what specifically? 

Mr. BEAUDREAU. As I have described, so, for example, talk about 

unused APDs. From my perspective, and I don’t take issue with 

your description that companies need to make their own sort of 

capital decisions about when and where to drill and they want to 

have APDs in their pocket to give them flexibility, but from the 

standpoint of overseeing an agency that is resource constrained, I 

do have concerns. Why are we putting time and effort into or are 

we using our resources properly? 

Mrs. LUMMIS. Sir, then why are we using BLM resources to designate things like blueways, which are not authorized by statute, 

as new, contrived ways to gain control over lands that are adjacent 

to waterways? Why are there BLM guidance on wildlands manageVerDate Aug 31 2005 11:15 Jun 12, 2013 Jkt 000000 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 C:\DOCS\81279.TXT APRIL
35 

ment practices when the wildlands designation was never put into 

place, yet you are managing by those? 

The problem here is that the Department of the Interior, I believe, is misallocating its resources. 

Mr. Chairman, I yield back. 

Mr. LANKFORD. Mr. Beaudreau, did you want to respond to that? 

I will let you respond. 

Mr. BEAUDREAU. Only broadly to sort of reemphasize the point 

that I do believe there is substantial opportunity to better align the 

BLMs resources to be responsive to opportunities from industry, so 

that is something that we are very focused on. We want to bring 

resources into BLM for a host of reasons, including to be responsive 

to observations and recommendations from GAO. So I take your 

point. I don’t want to argue it, only to say I do think there is opportunity to align our resources in a better way. 

Mr. LANKFORD. There was a statement made earlier that it takes 

about 228 days to get a permit, on average. Is that you think is 

a typical permit for oil and gas wells? Is that the new number? 

Mr. BEAUDREAU. I think there is variability in that, depending 

on what time points you look at and what region you look at. 

Mr. LANKFORD. So it differs from office to office? 

Mr. BEAUDREAU. Yes. 

Mr. LANKFORD. Is it possible for this committee to get a copy, 

then, of the different time periods that it takes for each office? I 

am sure you have a master breakdown of all the offices, the time 

period it takes for each. To come up with an average of 228 days, 

there has to be a compilation of all of those somewhere. Can we 

get a copy of that by office? 

Mr. BEAUDREAU. We can look into that. I am not sure what state 

the data is in right now, but we can provide something responsive 

to your request. 

Mr. LANKFORD. Yes. We want to get something specifically by office so that we will know. My understanding is some offices are as 

short as 90 days. If that is so, then that means some offices are 

closer to 400 days. 

Mr. BEAUDREAU. Without getting into the numbers, I am sure 

there is variability. 

Mr. LANKFORD. Okay, great. We will look forward to getting a 

chance to get that. 

Let’s talk a little bit about the frac rule. Mr. Hastings brought 

that up as well. Talk me through the science behind that. There 

seems to be something that is working its way through the process. 

Why now, on creating a new frac rule on Federal lands? 

Mr. BEAUDREAU. So, again, we have our responsibilities with respect to oversight of Federal lands, and some of the key areas that 

we are concerned with, that were reflected in the original proposed 

rule, will be carried through to the revised proposed rule, are basically three areas: one, disclosure of fracking fluids. And, again, 

there is a lot of good work being done in different States on this 

issue, and part of the reason why we took a step back to re-propose 

is to do further evaluation of those issues. 

Mr. LANKFORD. Right. Something like FracFocus. 

36 

Mr. BEAUDREAU. Something like FracFocus, exactly. And whether that would sort of be useful and fit in a way to address the 

issue. 

Second, well integrity issues to ensure and provide public confidence that there is not comingling between fracking fluids and 

aquifers and drinking water, again, within the theme of giving the 

public assurance that this activity can be done safely and responsibly. 

And the third big area is managing and dealing with flowback, 

how that is managed and how that is contained. 

So, again, the rule will be put out soon. Mr. Hastings suggests 

this afternoon. I knew it was imminent. That is when the Department is doing it. 

Mr. LANKFORD. But is there a specific State that raises this to 

the top? That is what I am trying to figure out. It is obvious there 

has been a repetitive theme here: you are short of staff; you are 

short of resources; you are having difficulty keeping staff that are 

qualified to do this. So now we are expanding into a new area. Is 

there a State in particular that is driving this, that you would say 

because of this, they are not overseeing what is happening in their 

State, well, we need to step in and add another layer of something? 

Mr. BEAUDREAU. Again, the perspective here isn’t criticism of any 

particular State or any particular—— 

Mr. LANKFORD. But States all do that already, is that correct? So 

they are going to go through a State permitting process and State 

requirements to be able to drill, and then now there is going to be 

another layer of the Federal process as well? 

Mr. BEAUDREAU. We want to have a process that is familiar to 

operators, that takes best practices from States in which operators 

work, but to have it apply uniformly across Federal lands. That is 

our responsibility and I think what you will see in the fracking rule 

is very commonsense, straightforward measures that address those 

three issues that I described that are primary concerns, but also 

are ways to address those concerns that are familiar to industry 

and that industry can comply with. 

Mr. LANKFORD. So consistent fracking rules that would go all the 

way from Pennsylvania to New Mexico to Oklahoma to wherever? 

Mr. BEAUDREAU. On Federal land. 

Mr. LANKFORD. Okay. I am still struggling with one of the big 

issues here. Well, let me get into a separate issue, because if we 

have time we will mention this one last thing. 

In California there seems to be an issue going on with some of 

the leasing. And my question is did BLM violate the Mineral Leasing Act of 1920 when they cancelled the sale in California? 

Mr. BEAUDREAU. So those lease sale cancellations I think, was 

BLM, and this was a decision that came from the State office in 

California, and it was based on resources. It was, let’s try to focus, 

in budget-constrained times, focus on permitting and issues under 

existing leases. 

Mr. LANKFORD. Right. But the law actually states that you have 

to do that four times a year. Is there still a plan to catch up on 

that, to try to fulfill the requirements of the law as well? 

Mr. BEAUDREAU. So I believe the office intends to have a lease 

sale before the end of the year. We are talking with the office about 

37 

ensuring that their leasing program and where they are in the 

leasing program is consistent with the requirements under the 

Mineral Leasing Act. 

Mr. LANKFORD. But in your testimony you have a statement that 

you have accelerated some of the renewable processes in leasing. 

By the way, great, all that. I want to see all the permits and I want 

all the above coming out as well. All these need to be fixed on this. 

But I am a little confused on where we have resource issues where 

one that is a consistent sales process is now cancelled, saying we 

don’t have enough money, and at the same time we are accelerating other permits. Can you help me balance those two out? 

Mr. BEAUDREAU. Part of it is just different areas of expertise. In 

order to go through a permitting process with respect to oil and gas 

APDs and drilling permits, you need petroleum engineers. Those 

are people who are in high demand. 

Mr. LANKFORD. So this is not necessarily a we don’t have money 

because of sequestration or whatever it is, it is the people that you 

are lacking to be able to fulfill this. 

Mr. BEAUDREAU. It is a combination of those things; it is resources where demand is from industry and it is also human capital and expertise. There are a lot of dimensions to this issue. 

Mr. LANKFORD. Obvious requirement to fulfill the law in this as 

well. 

Mr. BEAUDREAU. Yes. 

Mr. LANKFORD. Ms. Speier. 

Ms. SPEIER. Mr. Chairman, thank you. 

On that issue, since it is California and I represent parts of California, those two leases were two small, I underscore small lease 

sales, and the importance here is to note that the two delayed lease 

sales would have auctioned off approximately 33,000 acres of public 

land. But what the industry has declined to say in their consternation about that was that over the last month the Bureau of Land 

Management auctioned off 132,941 acres of public lands in other 

States. So let’s keep all of this in perspective. 

And to follow up in terms of perspective, Mr. Chaffetz had asked 

a question on the amount of time it took to process APDs, and I 

can actually give you the data, secretary. BLM processing time has 

decreased. In fact, in 2006 it took 127 days; in 2011 it now takes 

71 days. You now have the lowest number of pending APDs since 

2004. So let’s kind of stay focused on what is really going on. 

Mr. Rusco, we have just ignored you, and it is time to ask you 

some questions. You stated that in September 2008 we reported 

that Interior collected lower levels of revenue for oil and gas production in the U.S. Gulf of Mexico than all but 11 of 104 oil and 

gas resource owners in the Country. So you are basically saying 

that our collection rate was lousy, if I am not mistaken. 

Mr. RUSCO. We looked at a number of studies that had compared 

how much revenue was collected by other countries, by some 

States, and some private entities, and the Gulf of Mexico was definitely in the low end of that spectrum. It is important to say that 

since that report, the royalty rates in the Gulf of Mexico have been 

raised twice, so I am not sure what the current state would be if 

we looked at that. 

38 

Ms. SPEIER. So what is the cost of potential waste, fraud, and 

abuse in drilling of oil and gas and collection of royalties for those 

activities on Federal lands and water? 

Mr. RUSCO. We can’t make an estimate of that. What we found 

is that a number of processes, in particular data processes and 

clarity of data elements are lacking, and because of that you can’t 

tell sometimes when there is something missing. We found that, 

systematically, Interior has missed inspection requirements for reviewing production verification and, therefore, you don’t have assurance that oil and gas is being measured correctly and you also 

don’t know whether it is being reported correctly. 

We have made recommendations to fix a lot of those problems 

and Interior is taking steps to do so, but we are still in the process 

of looking at that. 

Ms. SPEIER. So can GAO tell us how much additional revenue 

would have been paid if Interior had been utilizing the new technologies to locate and prevent venting and flaring of natural gas on 

Federal lands? 

Mr. RUSCO. Not precisely, but we did find that the amount of 

methane that is vented in the process of gas production and oil production far exceeded what was reported by several percentage 

points difference, and if that were counted, then royalties would be 

due on that amount. 

Ms. SPEIER. So you have now placed Interior and this particular 

revenue collecting function on your high-risk list for three years. It 

seems like they have been dragging their feet a lot in terms of implementing your recommendations. What additional recommendations do you think they should be embracing that they haven’t, and 

what can we do as the chair and ranking member on this committee to assist you in making sure that the taxpayers in this 

Country get their money’s worth from these leases? 

Mr. RUSCO. I think that Interior has been very diligently addressing recommendations. What we are looking for is an overall 

strategic and high management level approach to addressing these 

problems. We want to see Interior taking a set of problems associated, say, with their IT systems and their data, and we want them 

to say this is strategically how we are going to deal with this, not 

addressing one recommendation here and one recommendation 

there. 

We need the same thing in terms of a workforce plan, a strategic 

plan for addressing human capital issues. It has been mentioned 

that the resources aren’t always where they are needed. There has 

been a big revolution in shale production, and a lot of production 

in the United States has moved from one area to the next. We have 

talked about coal bed methane. That is not economic, so a lot of 

staff are in offices that were addressing issues related to coal bed 

methane development, and now they are in the wrong place. 

So there are some issues that Interior can address, and some of 

them are strategic and some of them are some flexibility to move 

people around, move resources. 

Ms. SPEIER. All right. Thank you. 

Mr. LANKFORD. Mr. Horsford. 

Mr. HORSFORD. Thank you, Mr. Chairman. Happy belated anniversary, by the way. Hope you had a good time. 

39 

I just came from my Natural Resources Committee and this is 

a topic that we have had several hearings on in that committee as 

well, and I do want to indicate that although the title of this hearing is Opportunities Lost, I really feel like there is a bit of a misnomer on what has been done, and we have covered, again, this 

topic many times in our Natural Resources Committee. 

Some say that the Obama Administration is against the oil and 

gas industry and has erected artificial barriers to fossil fuel energy 

production and generation, but that is simply not what the facts 

bear out. In 2011, the U.S. exported more gasoline, diesel, and 

other oil-based fuels than it had imported. This was the first time 

since 1949 that the U.S. was a net exporter of oil products. And 

according to the International Energy Agency, by 2020 U.S. oil production will rise to 11.1 million barrels per day, making the U.S. 

the largest crude oil producing nation. 

So, Mr. Beaudreau, is it fair to say the record high oil and gas 

production seen in recent years is the result of the Obama Administration’s all of the above energy strategy? 

Mr. BEAUDREAU. Some of the statistics you described I am not 

familiar with, but, in general, yes. This Administration, this Department is committed to an all-of-the-above energy strategy that 

includes oil and gas production on Federal lands and waters, includes coal production, includes standing up and developing renewable energy resources. So the Interior Department is truly where 

all of the above happens, and I think we have seen results from 

that. 

Ten years ago nobody would have thought you were sane if you 

were talking in realistic terms about the potential for energy independence. That kind of conversation is happening now. The natural 

gas boom has the potential to be truly transformative not only with 

the energy industry, but with manufacturing, transportation, and 

other industries. So it is an exciting time and we do embrace all 

of the above. 

Mr. HORSFORD. Thank you. Just to follow up, some would say 

that the Administration should not take credit for the high record 

of high levels of domestic natural gas production because most of 

it was produced on non-Federal lands. I come from Nevada, where 

over 80 percent of our lands are controlled by the Federal Government but, again, according to the White House, natural gas production from public lands increased by 6 percent during the first three 

years of the Obama Administration, compared to the last three 

years of the previous administration. Would this be considered a 

significant increase, in your opinion? 

Mr. BEAUDREAU. I think it is a reflection of our commitment to 

the development of energy resources. So taking credit or avoiding 

blame is not really my interest. My interest is providing for the Nation’s energy security, making resources available in a responsible 

and safe way. And as you pointed out, I think our record bears out 

that commitment and that strategy. 

Mr. HORSFORD. Just briefly, Mr. Rusco. Over the past five years 

you have found that the Department of the Interior may not be 

properly assessing or collecting revenues owed to the American 

people. Can you elaborate further on that? 

40 

Mr. RUSCO. There are a number of facets to that. One is that, 

as we talked about, human capital challenges and not having 

enough people to go out and do production verification inspections, 

so in some cases there are problems with that that are unresolved. 

We have also seen issues with data collection and data management, where incorrect data elements have been entered in terms of 

production or royalties owed or prices, and Interior is taking steps 

to sort of improve their IT systems, but there are still challenges. 

Mr. LANKFORD. I want to do a quick follow up on this as well. 

Mr. Horsford’s question was an excellent question, but the wording 

was important here. 

Mr. Beaudreau, he asked you the increased production of oil and 

gas in the United States, is that a result of Obama Administration 

policy decisions. It almost sounded like you said yes on it. For instance, the first three years of increased production of natural gas, 

those leases were not done during the Obama Administration time, 

they were done during the previous administration time. I am trying to figure out which policies in particular from the Administration have increased the production of oil and gas in the United 

States. 

Mr. BEAUDREAU. Our broad strategy and our broad policies to 

promote responsible energy development I think are the right ones. 

Mr. LANKFORD. So you are saying without those policies we 

would not have had increased production of oil and gas in America? 

Mr. BEAUDREAU. I think the suggestion that this Administration 

is somehow opposed to or seeks to obstruct energy production isn’t 

borne out by the facts. 

Mr. LANKFORD. No, no, that wasn’t the question. The question 

was the increased production is a result of. That is different than 

saying it is opposition, because there is obviously a lot of oil and 

gas exploration happening. But the question was an excellent question: Is it a result of Obama Administration policies that we have 

increased oil and gas? 

Mr. BEAUDREAU. I think it is completely consistent with the 

Obama Administration policies to promote responsible and safe energy development, and I think we have seen that borne out and I 

think this Administration’s record is very good on all of that. 

Mr. LANKFORD. I think there would be a few studies that would 

disagree with that, just in process, and just based on length of time 

and process and leases that happened on Federal lands when the 

Administration came in and inherited those leases and the production, versus new leases now. We have gotten three years previous 

on the listing, about a 55 percent decrease of new leases that are 

happening on Federal lands and, as I mentioned on the map to you 

before, in North Dakota it is interesting to look at and see you 

have all this production everywhere but Federal lands, and it 

seems to me even though they pay fewer royalties, they tend to go 

everywhere else but to try to get away from Federal policies and 

Federal implementation of that to go to State or private entities for 

that. 

So that is the only challenge here, is to say if the Administration 

wants to take credit and say what we have done has led to this is 

different than this has happened on our watch and we haven’t opposed it. So that is all I am trying to clarify. 

41 

Mr. BEAUDREAU. And the only point I am making is what is happening with energy development and the opportunities that we are 

seeing as a result of energy development are things that this Administration supports. We have implemented reforms to try to promote energy development, reduce conflict, with the ultimate goal of 

increasing the economic opportunity offered by energy, providing 

for greater energy security and providing for the economic opportunity that comes with all of that, and to do it safely and responsibly. 

So to talk about credit or blame I think is beside the point in a 

lot of respects. I think we do support what is happening on the energy front; it is good for the Country for all the reasons we talked 

about, and we are going to continue to pursue it. 

Ms. SPEIER. Mr. Chairman, will you yield? 

Mr. LANKFORD. Sure. 

Ms. SPEIER. To give yet another perspective, there is plenty that 

the Administration could have done to impede energy development, 

you could argue. They did not do that. And whether these leases 

originated during the Bush Administration or the Obama Administration, the fact is it is a good news story and the Administration 

hasn’t done anything to impede those leases. 

Mr. LANKFORD. I would suggest that there are a lot of producers 

around the Country that would argue with that statement, that 

there hasn’t been something to impede the production of energy, 

not just from Interior, but from EPA and other regulations, and 

slow-walking permits. There would be some dispute, I would say, 

if we had some producers here, whether there hasn’t been a difficulty going after some of those things. 

Ms. SPEIER. Well, would you admit that we actually have seen 

an increase in production? I mean, that is what we are talking 

about, who are we going to give credit to for the increase in production. 

Mr. LANKFORD. We have absolutely seen an increase in production, and that is based on new technology dealing with horizontal 

drilling and fracking. When you do directional drilling and the 

fracking in new areas, as has been mentioned by Mr. Rusco as 

well, trying to move and shift people into the correct places to actually do the permitting does a significant shift to us in the Federal 

side and trying to permit that. So they have moved to State and 

private lands to try to go after energy that is plentiful there. 

Just 20 years ago we thought we were running out of natural gas 

and the Federal Government was telling us to only use coal because we were running out of natural gas. Now there is a dramatic 

shift to come back and say we have so much natural gas, we are 

seriously looking at exporting and, quite frankly, I believe we 

should be exporting. 

Ms. SPEIER. So, Mr. Chairman, would you yield again? 

Mr. LANKFORD. Absolutely. 

Ms. SPEIER. Let me just say that it is not an asset that is wasted. 

The asset of oil or gas being drilled on Federal lands, it does not 

dissipate because it is not permitted and oil or gas is not being 

drilled. One could argue that we are sitting on a gold mine, and 

if we wait to permit, we are going to make more money for the taxVerDate Aug 31 2005 11:15 Jun 12, 2013 Jkt 000000 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 C:\DOCS\81279.TXT APRIL
42 

payers of this Country. So there are lots of different ways to look 

at this. 

I yield back. 

Mr. LANKFORD. Sure. Well, the challenge of that is, in the days 

ahead, we need to find every way that we can to be energy independent as quickly as we can. All the geopolitical reasons, all the 

military reasons, everything that we would see as a super power 

that we can provide our own energy as fast as we can, as efficiently 

as we can, safely, and clean for the environment as we can. 

One last statement, then I am going to close out as well, and 

that is that the statement again about States and whether States 

can handle overseeing fracking and permitting. The question just 

about memorandums of understanding that Interior commonly does 

with States that is a common practice, in fact, around the Federal 

Government with States, is there a way to be able to allow States 

to be able to oversee what happens on Federal lands to accelerate 

the permitting process on this and to have clear guidelines, and 

then the limited staff that you have is able to then make sure that 

those guidelines are being kept? 

Mr. BEAUDREAU. So, again, we have our authorities; it is our responsibility to fulfill and to meet those authorities under Federal 

law. So we can’t delegate any of that to the States or anybody else. 

That said, and I think you will see some reflection of this in the 

revised proposed fracking rule, for example, we are quite interested 

in taking best practices, looking at what States are doing; not causing duplication for operators, so that if they can demonstrate compliance with our standards, because that is what they are doing on 

State land, that should make it much more straightforward for operators. 

Mr. LANKFORD. Okay, thank you. 

Ms. Speier, do you have any other questions, thoughts? 

Ms. SPEIER. No. 

Mr. LANKFORD. Thank you. 

With that, this committee is closed. 

[Whereupon, at 11:57 a.m., the subcommittee was adjourned.] 

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