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[Senate Hearing 108-12]
[From the U.S. Government Publishing Office]

                                                         S. Hrg. 108-12
 
                   ENERGY PRODUCTION ON FEDERAL LANDS
=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

       TO RECEIVE TESTIMONY REGARDING FEDERAL ENERGY DEVELOPMENT 
                            ON PUBLIC LANDS

                               __________

                           FEBRUARY 27, 2003

                       Printed for the use of the
               Committee on Energy and Natural Resources

                       U. S. GOVERNMENT PRINTING OFFICE
86-709                          WASHINGTON : 2003
____________________________________________________________________________
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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                 PETE V. DOMENICI, New Mexico, Chairman
DON NICKLES, Oklahoma                JEFF BINGAMAN, New Mexico
LARRY E. CRAIG, Idaho                DANIEL K. AKAKA, Hawaii
BEN NIGHTHORSE CAMPBELL, Colorado    BYRON L. DORGAN, North Dakota
CRAIG THOMAS, Wyoming                BOB GRAHAM, Florida
LAMAR ALEXANDER, Tennessee           RON WYDEN, Oregon
LISA MURKOWSKI, Alaska               TIM JOHNSON, South Dakota
JAMES M. TALENT, Missouri            MARY L. LANDRIEU, Louisiana
CONRAD BURNS, Montana                EVAN BAYH, Indiana
GORDON SMITH, Oregon                 DIANNE FEINSTEIN, California
JIM BUNNING, Kentucky                CHARLES E. SCHUMER, New York
JON KYL, Arizona                     MARIA CANTWELL, Washington

                       Alex Flint, Staff Director
                     James P. Beirne, Chief Counsel
               Robert M. Simon, Democratic Staff Director
                Sam E. Fowler, Democratic Chief Counsel
                         Dick Bouts, BLM Fellow
                Patty Beneke, Democratic Senior Counsel

                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Alberswerth, David, Director, Bureau of Land Management Program, 
  The Wilderness Society.........................................    45
Bayless, Robert L., Jr., President, Independent Petroleum 
  Association of Mountain States.................................    30
Bingaman, Hon. Jeff, U.S. Senator from New Mexico................     2
Bunning, Hon. Jim, U.S. Senator from Kentucky....................     2
Domenici, Hon. Pete V., U.S. Senator from New Mexico.............     1
Griles, J. Steven, Deputy Secretary, Department of the Interior..     4
Leer, Steven F., President and CEO, Arch Coal, Inc., on behalf of 
  the National Mining Association................................    35
Murkowski, Hon. Lisa, U.S. Senator from Alaska...................     3

                               APPENDIXES
                               Appendix I

Responses to additional questions................................    69

                              Appendix II

Additional material submitted for the record.....................    73

                   ENERGY PRODUCTION ON FEDERAL LANDS

                              ----------                              

                      THURSDAY, FEBRUARY 27, 2003

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 a.m., in room 
SD-366, Dirksen Senate Office Building, Hon. Pete V. Domenici, 
chairman, presiding.

          OPENING STATEMENT OF HON. PETE V. DOMENICI, 
                  U.S. SENATOR FROM NEW MEXICO

    The Chairman. The hearing will please come to order. This 
hearing is taking place to take the testimony on energy 
production from our Federal lands. It is my understanding that 
Federal lands hold 80 percent of the U.S. oil reserves and 60 
percent of the gas reserves. In spite of this significant 
resource, only about 5 percent of domestic oil production and 
about 11 percent of gas production come from the Federal lands.
    Specifically, the committee is interested in how Federal 
lands can help to supply the growing daily demands in the 
United States. What are the current production levels from 
Federal lands? What is the potential for new production? Where 
are these resources? And what is being done to develop the 
Federal resources and bring them to market?
    I decided from my standpoint to forego opening statements 
so that we can hear from the witnesses. If any of my colleagues 
would like to make an opening statement, you are welcome to do 
so as part of your first round of questions.
    Before we begin, I would like to inform members that the 
record will remain open until 6 o'clock this evening, in order 
to submit questions of the witnesses.
    We have four witnesses today: Steve Griles, Deputy 
Secretary of the Department of Interior. We welcome you here 
today, Steve, to testify on the Federal energy resources under 
the administration of the Interior Department. We will then 
allow time for questions. And then I understand he is on a 
tight time schedule, which means he has a plane to catch before 
noon.
    Following Mr. Griles' testimony, I would like to ask our 
other witnesses for their testimony. So let us begin with Mr. 
Griles. If that is satisfactory with Senator Bingaman, let us 
proceed.
    Mr. Secretary, will you proceed?
    [The prepared statements of Senators Bingaman, Bunning, and 
Murkowski follow:]
        Prepared Statement of Hon. Jeff Bingaman, U.S. Senator 
                            From New Mexico
    The subject of energy production from federal lands is of great 
interest to all of us. These lands contain a wealth of resources and 
are used for multiple and varied purposes. They provide rangeland for 
the ranching community. Public lands afford unique recreational and 
scenic opportunities. These lands are the source of timber, they 
provide important fish and wildlife habitat, and last but not least, 
they are a vital source of energy for our Nation.
    Clearly, the energy resources found beneath these lands make a 
significant contribution to meeting our energy needs and must continue 
to play that role. Lands administered by the BLM provide 5 percent of 
the Nation's oil production and 11 percent of its natural gas 
production. In fiscal year 2001, my home state of New Mexico produced 
more natural gas from onshore federal lands than any other state and 
ranked second in oil production. Federally-administered offshore oil 
and gas resources are also crucial to our energy security. The OCS 
provided over 25 percent of both the Nation's oil and gas in 2003.
    There is substantial interest on the part of industry in the 
development of coalbed methane in the Rocky Mountain West. Last month, 
the BLM issued two final environmental impact statements regarding oil 
and gas development in the Powder River Basin, indicating that there 
could be as many as 63,000 new coalbed methane wells in drilled on 
federal lands in that area. I understand that a similar analysis is 
being undertaken with respect to the San Juan Basin, and that 
significant new drilling is anticipated in that area, as well. These 
wells are projected to provide significant energy resources, but at the 
same time raise issues with respect to water duality and quantity and 
potential conflicts with other uses of the federal lands, such as for 
grazing and coal production. I will be interested to hear the 
witnesses' views on this topic.
    I also expect that the witnesses will comment on the issue of 
access to federal lands for energy development purposes. Because this 
is a topic of interest to me, I co-authored a provision in the Energy 
Policy Conservation Act Amendments of 2000, calling on the Department 
of the Interior to undertake an analysis of oil and gas resources 
underlying federal lands and restrictions on their development. The 
report that was issued last month focusing on five basins is a helpful 
step in providing information on this subject. My goal in seeking this 
report is to be certain that the discussion of this topic is focused on 
fact and not fueled by rhetoric. I hope that the hearing today will 
help us better understand this important subject.
    I have voiced my concerns in the past regarding the level of 
resources devoted by the Interior Department to the oil and gas leasing 
program. I believe that a key reason for backlog and delay in 
processing drilling requests is a lack of resources. I also am 
concerned that the Department devotes inadequate dollars to the 
inspection and enforcement of existing operations. I have received 
assurances that this topic is being addressed and I hope that the 
Deputy Secretary can confirm my understanding.
    Finally, a word about renewable energy. I am pleased that the 
President's National Energy Policy called on the Secretaries of the 
Interior and Energy to look at ways to increase renewable energy 
production on federal lands. I believe that the potential for 
environmentally sound renewable energy production on our federal lands 
is great. I am particularly interested in hearing what the Department 
of the Interior is doing to encourage renewable energy production.
    I want to thank the witnesses for their attendance. I look forward 
to hearing their testimony.
                                 ______
                                 
   Prepared Statement of Hon. Jim Bunning, U.S. Senator From Kentucky
    Thank you, Mr. Chairman.
    I appreciate having this opportunity to take a look at the types of 
energy production available on federal lands.
    This is an important issue to examine when we are trying to put 
together a common sense energy policy.
    In the past, I think Congress has failed to make progress on energy 
because we have fallen into the trap of choosing between conservation 
and production.
    But now I think that we have escaped that trap and reached the 
point where most of us in the Senate understand that a balanced energy 
policy must do both--it must help boost production of domestic energy 
sources, as well as promote conservation.
    As we have seen from the previous hearings on the current state of 
oil and gas supply in the United States, America's demand for energy 
continues to rise while our supply diminishes.
    In the interest of America's energy future, and most importantly, 
our national security, we must increase domestic energy production.
    We must have an energy policy that helps reduce our dependence on 
foreign oil to strengthen our energy independence and to protect 
ourselves from dictators like Saddam Hussein and the politics of the 
Middle East.
    New technology now enables us to increase our production of energy 
by operating with less impact on the environment. In fact, today's 
domestic operations for producing energy would be conducted under the 
most comprehensive environmental regulations in the world.
    I look forward to hearing about the possibilities of production of 
energy from oil, gas, and coal on federal lands as a way for us to 
increase domestic energy production.
    I appreciate the time our witnesses have taken today to come 
testify.
    Thank you.
                                 ______
                                 
  Prepared Statement of Hon. Lisa Murkowski, U.S. Senator From Alaska
    Mr. Chairman, thank you for calling this hearing today regarding 
energy production on federal lands. As you and the other members of the 
committee are aware, this topic is very important to my State of 
Alaska. I look forward to hearing the testimony of the panel.
    We face an energy crisis in this country. Insufficient supply, 
excess demand, and a failing infrastructure unable to deliver energy to 
where consumers need it the most are resulting in rising energy prices 
that impact every American family and business, impair U.S. economic 
growth, and threaten our national security.
    And with a war in Iraq very likely the situation shows no sign of 
improving. Energy prices continue to rise.
    Congress and this committee must take action.
    The United States must take a balanced approach to lessening our 
dependence on unstable foreign energy sources.
    There are solutions to our energy crisis, and the production of 
energy on land currently owned by the federal government is one way we 
can lessen our dependence on unstable foreign sources of energy.
    It is time for us to act.
    The members of this committee are very aware that much of the 
land--with and abundance of natural resources--of my State of Alaska 
are owned by the federal government. Those resources remain unavailable 
for production.
    67.9 percent of the 586,412 square miles of land in my State of 
Alaska is owned by the federal government.
    This includes 76 million acres of Wildlife Refuges, 51 million 
acres of National Parks, 26 million acres of Bureau of Land Management 
lands and 23 million acres of National Forests.
    The potential for energy production on federal lands in Alaska is 
unparalleled anywhere else in the U.S.
    The place to start is ANWR. And we should also consider the 
production of energy in the National Petroleum Reserve-Alaska (NPR-A).
    The 1.2 million acre 1002 area of the Arctic National Wildlife 
Refuge (ANWR) and the 23.5 million acre NPR-A both along Alaska's North 
Slope contain a great deal of recoverable oil and natural gas .
    The U.S. Geological Survey also estimates that the Coastal Plain 
area of ANWR contains between 3.5 and 16 billion barrels of oil. And 
the mean average estimate offered by the U.S. Geological Survey and the 
Minerals Management Service are that the NPR-A contains 9.3 billion 
barrels of oil and 59.7 trillion cubic feet of natural gas. The actual 
amounts could be higher.
    These resources can be recovered using new technologies that would 
minimize the impact on the natural environment and the area wildlife.
    We have been over the details of the arguments for and against 
responsible exploration in ANWR ad nauseam, so I will not repeat the 
myriad of reasons that support my position at today's hearing.
    I will simply say that a new energy strategy is needed, and 
production on federal lands on the North Slope of Alaska should be part 
of the solution to the ongoing energy crisis.
    I am committed to seeing that these areas are opened up to 
environmentally sensitive oil and natural gas leasing as part of a 
comprehensive national energy policy.
    Of course, energy production in ANWR and the NPR-A cannot be the 
only elements of a national energy strategy. There are many exciting 
possibilities for lessening our dependence on foreign imports of 
petroleum, besides increasing domestic production, including renewable 
resources and other energy alternatives.
    While I will fight for oil and gas leasing in federal lands on the 
North Slope, I will also work on other initiatives to promote new 
technologies that will lessen harmful emissions and improve efficiency.
    During the last Congress, this committee considered many proposals 
for a new national energy policy. Negotiations got as far as a 
Conference Committee, but a compromise could not be reached on many of 
the controversial issues.
    I hope efforts this year to enact a national energy policy will be 
successful. We must work together, and see to it that all the parties 
can reach a common ground. I intend to fight for the interests of my 
State, while I carefully evaluate the positions of all interested 
parties.
    The goal of any national energy policy needs to be reducing the 
cost of energy, reducing our dependence on unstable foreign energy 
imports and reducing harmful emissions.
    I will work very hard to see this vision come to fruition.
    These initiatives will benefit our economy by reducing costs for 
consumers and businesses, and by creating jobs in the energy sectors 
and those parts of the economy that support the energy sector.
    Finally, Mr. Chairman, I look forward to working with you, and 
Senator Bingaman, and the other members of this committee on a national 
energy policy that includes environmentally responsible energy 
production on federal lands in my State of Alaska.
    Thank you, Mr. Chairman.

STATEMENT OF J. STEVEN GRILES, DEPUTY SECRETARY, DEPARTMENT OF 
                          THE INTERIOR

    Mr. Griles. Yes, sir. Mr. Chairman, I am Steve Griles, the 
Deputy Secretary of the Interior. And as you said, I am on my 
way out of town, hopefully before the snowstorm gets here. And 
I appreciate the committee allowing me to come before you and 
spend some time to talk to you about energy.
    Patty Morrison, the Deputy Assistant Secretary for Lands 
and Minerals Management, will be here with you the rest of the 
morning and is also very knowledgeable on the Department's 
energy policies and will be able to respond to other questions 
that may come after I leave.
    I would like to ask that my statement in totality be 
entered into the record. And I will just try to summarize for 
you, Mr. Chairman, some of my thoughts.
    The Chairman. Without objection, that will be done.
    Mr. Griles. America's public lands have an abundant 
opportunity for exploration and development of renewable and 
nonrenewable energy resources. Energy reserves contained on the 
Department of the Interior's onshore and offshore Federal lands 
are very important to meeting our current and future estimates 
of what it is going to take to continue to supply America's 
energy demand.
    Estimates suggest that these lands contain approximately 68 
percent of the undiscovered U.S. oil resources and 74 percent 
of the undiscovered natural gas resources. President Bush has 
developed a national energy policy that laid out a 
comprehensive, long-term energy strategy for America's future. 
That strategy recognizes we need to raise domestic production 
of energy, both renewable and nonrenewable, to meet our 
dependence for energy.
    For oil and gas, the United States uses about 7 billion 
barrels a year, of which about 4 billion are currently imported 
and 3 billion are domestically produced. The President proposed 
to open a small portion of the Arctic National Wildlife Refuge 
to environmentally responsible oil and gas exploration.
    Now there is a new and environmentally friendly technology, 
similar to directional drilling, with mobile platforms, self-
containing drilling units. These things will allow producers to 
access large energy reserves with almost no footprint on the 
tundra. Each day, even since I have assumed this job, our 
ability to minimize our effect on the environment continues to 
improve to where it is almost nonexistent in such areas as even 
in Alaska.
    According to the latest oil and gas assessment, ANWR is the 
largest untapped source of domestic production available to us. 
The production for ANWR would equal about 60 years of imports 
from Iraq.
    The National Energy Policy also encourages development of 
cleaner, more diverse portfolios of domestic renewable energy 
sources. The renewable policy in areas cover geothermal, wind, 
solar, and biomass. And it urges research on hydrogen as an 
alternate energy source.
    To advance the National Energy Policy, the Bureau of Land 
Management and the DOE's National Renewable Energy Lab last 
week announced the release of a renewable energy report. It 
identifies and evaluates renewable energy resources on public 
lands.
    Mr. Chairman, I would like to submit this for the record.* 
This report, which has just come out, assess the potential for 
renewable energy on public lands. It is a very good report that 
we hope will allow for the private sector, after working with 
the various other agencies, to where can we best use renewable 
resource, and how do we take this assessment and put it into 
the land use planning that we are currently going, so that 
right-of-ways and understanding of what renewable resources can 
be done in the West can, in fact, have a better opportunity.
---------------------------------------------------------------------------
    * The report has been retained in committee files.
---------------------------------------------------------------------------
    The Department completed the first of an energy inventory 
this year. Now the EPCA report, which is laying here, also, Mr. 
Chairman, is an estimate of the undiscovered, technically 
recoverable oil and gas. Part one of that report covers five 
oil and gas basins. The second part of the report will be out 
later this year.
    Now this report, it is not--there are people who have 
different opinions of it. But the fact is we believe it will be 
a good guidance tool, as we look at where the oil and gas 
potential is and where we need to do land use planning. And as 
we update these land use plannings and do our EISs, that will 
help guide further the private sector, the public sector, and 
all stakeholders on how we can better do land use planning and 
develop oil and gas in a sound fashion.
    Also, I have laying here in front of me the two EISs that 
have been done on the two major coal methane basins in the 
United States, San Juan Basis and the Powder River Basin. 
Completing these reports, which are in draft, will increase and 
offer the opportunity for production of natural gas with coal 
bed methane.
    Now these reports are in draft and, once completed, will 
authorize and allow for additional exploration and development. 
It has taken 2 years to get these in place. It has taken 2 
years to get some of these in place. This planning process that 
Congress has initiated under FLPMA and other statutes allows 
for a deliberative, conscious understanding of what the impacts 
are. We believe that when these are finalized, that is in fact 
what will occur.
    One of the areas which we believe that the Department of 
the Interior and the Bureau of Land Management is and is going 
to engage in is coordination with landowners. Mr. Chairman, the 
private sector in the oil and gas industry must be good 
neighbors with the ranchers in the West. The BLM is going to be 
addressing the issues of bonding requirements that will assure 
that landowners have their surface rights and their values 
protected.
    BLM is working to make the consultation process with the 
landowners, with the States and local governments and other 
Federal agencies more efficient and meaningful. But we must 
assure that the surface owners are protected and the values of 
their ranches are in fact assured. And by being good neighbors, 
we can do that.
    In the BLM land use planning process, we have priorities, 
ten current resource management planning areas that contain the 
major oil and gas reserves that are reported out in the EPCA 
study. Once this process is completed, then we can move forward 
with consideration of development of the natural gas.
    We are also working with the Western Governors' Association 
and the Western Utilities Group. The purpose is to identify and 
designate right-of-way corridors on public lands. We would like 
to do it now as to where right-of-way corridors make sense and 
put those in our land use planning processes, so that when the 
need is truly identified, utilities, energy companies, and the 
public will know where they are Instead of taking two years to 
amend a land use plan, hopefully this will expedite and have 
future opportunity so that when the need is there, we can go 
ahead and make that investment through the private sector. It 
should speed up the process of right-of-way permits for both 
pipelines and electric transmission.
    Now let me switch to the offshore, the Outer Continental 
Shelf. It is a huge contributor to our Nation's energy and 
economic security.
    The Chairman. Mr. Secretary, everything you have talked 
about so far is onshore.
    Mr. Griles. That is correct.
    The Chairman. You now will speak to offshore.
    Mr. Griles. Yes, sir, I will.
    Now we are keeping on schedule the holding lease sales in 
the areas that are available for leasing. In the past year, 
scheduled sales in several areas were either delayed, canceled, 
or put under moratoria, even though they were in the 5-year 
plan. It undermined certainty. It made investing, particularly 
in the Gulf, more risky.
    We have approved a 5-year oil and gas leasing program in 
July 2002 that calls for 20 new lease sales in the Gulf of 
Mexico and several other areas of the offshore, specifically in 
Alaska by 2007. Now our estimates indicate that these areas 
contain resources up to 22 billion barrels of oil and 61 
trillion cubic feet of natural gas.
    We are also acting to raise energy production from these 
offshore areas by providing royalty relief on the OCS leases 
for new deep wells that are drilled in shallow water. These are 
at depths that heretofore were very and are very costly to 
produce from and costly to drill to. We need to encourage that 
exploration. These deep wells, which are greater than 15,000 
feet in depth, are expected to access between 5 to 20 trillion 
cubic feet of natural gas and can be developed quickly due to 
existing infrastructure and the shallow water.
    We have also issued a final rule in July 2002 that allows 
companies to apply for a lease extension, giving them more time 
to analyze complex geological data that underlies salt domes. 
That is, where geologically salt overlays the geologically 
clay. And you try to do seismic, and the seismic just gets 
distorted. So we have extended the lease terms, so that 
hopefully those companies can figure out where and where to 
best drill. Vast resources of oil and natural gas lie, we hope, 
beneath these sheets of salt in the OCS in the Gulf of Mexico. 
But it is very difficult to get clear seismic images.
    We are also working to create a process of reviewing and 
permitting alternative energy sources on the OCS lands. We have 
sent legislation to Congress that would give the Minerals 
Management Service of the Department of the Interior clear 
authority to lease parts of the OCS for renewable energy. The 
renewables could be wind, wave, or solar energy, and related 
projects that are auxiliary to oil and gas development, such as 
offshore staging facilities and emergency medical facilities.
    We need this authority in order to be able to truly give 
the private sector what are the rules to play from and buy, so 
they can have certainty about where to go.
    Mr. Chairman, it is my understanding that today Chairmen 
Tauzin and Barton, Senator Inhofe, and others will be 
introducing the President's Clear Skies legislation. Although 
that proposed legislation will have the jurisdiction on another 
committee, if enacted, it will assist in stabilizing the use of 
coal and gas in this country for electric generation, as well 
as reducing air emissions.
    Mr. Chairman, this legislation will reduce emissions more 
rapidly, more surely, and more cheaply than the current 
standards. In so doing, coal-fired utilities and that issue 
will give certainty and a rational approach to emissions 
reductions. And the American consumer will have cleaner air and 
more reliable electric generation, which is energy.
    Witnesses before this committee this week, as I read in the 
paper, indicated that gas prices are at extremely high levels. 
They are. $12 at Henry Hub two days ago is extraordinary. Each 
year electric generation is being built exclusively for gas. 
Gas is what most American consumers are relying on heat their 
homes, in many instances. We must provide assurances and long-
term stability to the utility community so we can continue to 
assure a diverse source of fuels, including coal and electric 
generation. That is what the Clear Skies legislation will do.
    In concluding, I just want to say that it is a pleasure to 
be with you. And it is also going to be a pleasure to work with 
you. We need to get the national energy legislation that the 
President has proposed enacted. We look forward to working with 
each of you to see how we can best accomplish that.
    Mr. Chairman, thank you.
    The Chairman. Thank you very much, Mr. Secretary.
    [The prepared statement of Mr. Griles follows:]
       Prepared Statement of J. Steven Griles, Deputy Director, 
                       Department of the Interior
    Mr. Chairman and Members of the Committee, thank you for the 
opportunity to appear here today to discuss energy production on 
Federal lands. I would like to discuss the key role the Department of 
the Interior has in meeting the nation's energy needs. I am accompanied 
by Patricia Morrison, Principal Deputy Assistant Secretary for Land and 
Minerals Management.
                           our energy future
    America faces an energy challenge. Energy use sustains our economy 
and our quality of life, but a fundamental imbalance exists between our 
energy consumption and domestic energy production. We must look at ways 
to narrow the gap between the amount of energy we use and the amount we 
produce. There is no one single solution. Achieving the goal of secure, 
affordable and environmentally sound energy will require diligent, 
concerted efforts on many fronts on both the supply and demand sides of 
the energy equation.
    President Bush's National Energy Policy report laid out a 
comprehensive, long-term energy strategy for securing America's energy 
future. That strategy recognizes that to reduce our rising dependence 
on oil and gas, we must also increase domestic production. The 
President proposes to open a small portion of the Arctic National 
Wildlife Refuge (ANWR) to environmentally responsible oil and gas 
exploration using newly available, environmentally friendly technology. 
ANWR is by far the largest untapped source of domestic petroleum and 
would equal nearly 60 years of imports from Iraq.
    In 1998, a United States Geological Survey assessment of petroleum 
resources of the 1002 region of ANWR estimated the expected mean volume 
of technically recoverable oil beneath the 1002 area to be 10.4 billion 
barrels. For comparison, the U.S. currently consumes about 7 billion 
barrels per year. Of this, the U.S. imports about 4 billion barrels and 
produces about 3 billion barrels.
    Most media coverage focuses on the production of traditional energy 
sources in the National Energy Policy, but increased energy 
conservation and alternative and renewable sources are also critical 
components of the President's balanced, comprehensive policy. Good 
stewardship of resources dictates that we use energy efficiently and 
conserve resources. Thus, fossil fuel development is only a part of the 
solution to our Nation's energy issues. Americans have already made 
great strides in using energy more efficiently. Since 1973, the United 
States economy has grown nearly three times faster than energy use, in 
part due to more efficient use of energy. Had we continued to use 
energy as intensely as in the 1970's, the United States would have 
consumed about 177 quadrillion BTUs of energy in 2001, compared to 
actual consumption of approximately 97 quadrillion BTUs. To put that in 
perspective, the 80 quadrillion BTUs saved is more than the total 
amount of energy produced in the United States from all sources oil, 
gas, coal, nuclear, renewable--in the year 2000.
                    alternative and renewable energy
    Alternative and renewable sources of energy can also play an 
important role in helping meet our increased energy needs. To this end, 
the National Energy Policy encourages development of a cleaner, more 
diverse portfolio of domestic energy supplies. The Policy includes 
measures to aid in the development and expansion of renewable energy 
technologies in use today, including geothermal, wind, solar, and 
biomass, as well as continued research into using hydrogen as an 
alternative energy carrier. Such diversity helps to ensure that 
Americans will continue to have access to the energy they need.
    Between 1975 and 2000, total renewable energy production in the 
United States increased from about 4.8 to 6.8 quadrillion BTUs, 
supplying about seven percent of the Nation's energy consumption in 
2000. By 2020, renewable energy production is forecast to rise to about 
8.6 quadrillion BTUs, but still will account for only about seven 
percent of consumption.
    Thus, for the present and as far as the future can be reasonably 
forecast, renewable energy is likely to remain an incremental source of 
supply supplementing fossil fuels as our primary source of energy. 
Renewable and alternative energy sources are currently considered a 
``step'' energy technology, but they can be an important component to a 
diversified domestic energy portfolio especially for addressing 
distributed energy and peak demand needs. At the Department of the 
Interior, Secretary Norton has convened two conferences focused on 
renewable resources.
    As part of its efforts to advance the President's National Energy 
Policy, the BLM recently released a joint report with the Department of 
Energy that identifies and evaluates renewable energy resources on 
public lands. The BLM will use the report's findings to prioritize 
land-use planning activities, and to increase the development and use 
of renewable energy resources on public lands.
                energy production from federal resources
    The Department of the Interior has administrative and managerial 
responsibility for the Bureau of Land Management (BLM), the Minerals 
Management Service (MMS), and the Office of Surface Mining Reclamation 
and Enforcement (OSMRE). All of these bureaus are undertaking 
significant initiatives to fulfill the President's National Energy 
Policy, and are working diligently to promote environmentally sound 
production of our Nation's energy resources. The BLM and MMS have 
authorities to offer lands under their jurisdiction to produce mineral 
and energy (renewable and non-renewable) resources consistent with 
environmental protection goals.
    The Department of the Interior manages approximately 500 million 
surface acres of land, with the BLM managing 262 million surface acres 
and more than 700 million subsurface acres of Federal mineral estate. 
MMS manages approximately 1.76 billion acres of offshore Federal 
mineral estate. These lands and resources currently account for 30% of 
total domestic energy production--including 48% of geothermal 
production, 35% of natural gas production (25% offshore and 10% 
onshore), 35% of coal production, 35% of oil production (30% offshore 
and 5% onshore), 20% of wind power, and 17% of hydropower production.
                          new energy resources
    Deepwater areas of the Gulf of Mexico are expected to provide 
substantial volumes of new natural gas production, but it may be 
several years before that area reaches its potential. The shallow 
waters of the Gulf of Mexico hold the greatest promise for new 
resources of natural gas to meet the Nation's near-term gas needs. MMS 
is taking steps to develop economic incentives to spur industry 
activity in this area of the Gulf. Beginning in 2002, MMS started 
providing royalty relief as part of OCS lease sale terms to encourage 
production from wells on new leases drilled to deep horizons (greater 
than 15,000 feet total depth). This deep gas play, expected to hold 
between 5 and 20 trillion cubic feet (Tcf) of gas, can be developed 
quickly due to existing infrastructure in the shallow waters of the 
Gulf. MMS also issued a final rule in July 2002 that allows companies 
to apply for lease suspensions for exploration of subsalt resources.
    Coalbed natural gas, also known as coalbed methane, accounts for 
about 9.6% of the total natural gas reserves in the United States. The 
Rocky Mountain States of New Mexico, Utah, Colorado, Wyoming, and 
Montana hold an estimated 30 to 48 Tcf of undiscovered natural gas 
resources associated with coal. This represents the second largest gas 
resource in the United States behind the Gulf of Mexico. While many 
areas of the United States are experiencing declining natural gas 
reserves, the Rocky Mountain resources are largely untapped and the 
amount of newly discovered gas in the area is increasing on a daily 
basis.
    I am recused from certain matters involving the subject of coalbed 
natural gas and do not directly participate in them. Thus, I will speak 
here only to the Secretary's position on these issues. The majority of 
the coalbed natural gas is in the federal mineral estate. As good 
stewards of these domestic natural gas reserves and consistent with the 
National Energy Policy directive to facilitate our domestic energy 
supplies, we should develop these resources in an environmentally-
responsible manner to sustain our Nation's quality of life in the face 
of our increasing demand for natural gas.
    Coalbed natural gas from public lands can and should play a role in 
meeting increasing energy demands. Congress established a policy of 
multiple use for much of the federal lands, which the Department 
strongly supports. Many uses, including access for energy development, 
can co-exist on public lands, if properly managed. We do not believe 
the public lands and resources should be put off limits to development. 
Today the Nation meets over 50% of demand for petroleum products with 
imports. Many of these imports are vulnerable to disruptions resulting 
from instabilities in exporting Nations or regimes. Thirty percent of 
our total domestic energy production comes from Federal lands and 
resources. Without the contribution of public resources, the country's 
energy supply would be even more dependent on foreign sources. And, of 
significance for the public lands states that are anywhere from 30% to 
80% Federally-managed, the development of these resources can help 
western rural economies by creating jobs, new wealth, and tax revenue.
                           the epca inventory
    In January 2003, BLM delivered to Congress the first Energy Policy 
Conservation Act (EPCA) inventory of 59.4 million acres managed by 
Federal agencies in five study areas in the West. The areas contain the 
bulk of the known natural gas and much of the known oil resources under 
public management in the onshore United States. The EPCA inventory 
provides an estimate of undiscovered technically recoverable resources 
and proved reserves of oil and gas beneath the five basins and an 
inventory of the extent and nature of limitations to their development. 
All information gathered as a result of the EPCA effort will be 
integrated into the BLM's ongoing land use planning efforts are a 
cornerstone for future energy production from public lands. The BLM has 
also prioritized a number of land-use planning efforts that have major 
oil and gas components.
                          energy rights-of-way
    Federal lands are important to the rights-of-way needs of the 
energy industry and utilities, especially in the western United States. 
BLM estimates that 90% of the oil and natural gas pipeline and electric 
transmission rights-of-way in the western U.S. cross federal lands. The 
BLM alone administers approximately 85,000 rights-of-way, including 
approximately 23,000 for oil and gas pipelines.
    Our challenge is to improve and expand the existing network of 
pipelines and transmission lines to meet the increased demand for 
energy. One way to meet that challenge is to identify and designate 
right-of-way utility corridors on public lands in a collaborative 
manner. The Department has been working with the Western Governors' 
Association and the Western Utility Group to do just that. The 
designation of utility corridors through BLM land use plans provides an 
important tool in the planning and location of future pipelines and 
assists in the processing of rights-of-way applications on the public 
lands.
                           offshore resources
    As you may know, Federal offshore lands on the Outer Continental 
Shelf (OCS) encompass 1.76 billion acres. However, of this total, about 
600 million acres are currently off limits to oil and gas leasing. This 
action has been extended by Presidential directive through 2012. 
Nevertheless, industry activities on the remaining areas available for 
development, particularly the 40 million acres currently under lease, 
make the OCS an essential part of ensuring the energy and economic 
security of the United States.
    At the end of December 2002, the Department estimated that Federal 
offshore lands produce about 1.7 million barrels of oil each day, 
accounting for 30 percent of the oil produced in the United States. 
This makes the OCS the largest single source of oil for the U.S. 
economy (larger than Saudi Arabia or our neighbor to the north, 
Canada). In addition to oil, the OCS is also a major source of the 
Nation's natural gas, making a contribution of about 13 billion cubic 
feet per day, or about 25 percent of the Nation's domestic production. 
More than 90 percent of these resources come from the Gulf of Mexico 
OCS, with the rest coming from leases offshore California and the 
Beaufort Sea offshore Alaska.
    With major projects slated to come online in the next few years 
(including Thunder Horse, the largest discovery in the U.S. in the past 
30 years), we project that OCS production could easily reach 2 million 
barrels per day in the next few years and account for over a third of 
domestic crude oil production. Natural gas production is expected to 
remain at its current level, or increase slightly.
    At the Department, we are taking steps to ensure that the OCS 
remains a solid contributor to our Nation's energy and economic 
security by holding sales in available areas on schedule. The OCS 5 
Year Oil and Gas Leasing Program for 2002-2007, which was approved in 
July 2002, calls for 20 lease sales in the Gulf of Mexico and certain 
areas offshore Alaska during that timeframe. We estimate that these 
areas could contain economically recoverable resources of up to 22 
billion barrels of oil and 61 trillion cubic feet of natural gas.
    In 2002, the Department's Minerals Management Service held the 
128th and 129th competitive oil and gas lease sale since OCS leasing 
began in 1954. For these two Gulf of Mexico sales alone, MMS leased 
over 800 tracts, bringing in more than $500 million in revenue from 
high bids for the American people. Next month, on March 19, 2003, the 
Department will hold the 130th lease sale in the program. Since 1953, 
more than $140 billion has been brought into the U.S. Treasury from OCS 
lease sales.
    In addition to holding the lease sales outlined in the 2002-2007 
program, MMS has developed a series of economic incentives to encourage 
industry to explore ``frontier areas'' where business risks are very 
high, and to facilitate getting the most production possible from 
available OCS acreage. The MMS continues to offer a royalty incentive 
program for deepwater leases in the Gulf of Mexico, and has expanded 
the incentives to promote development of natural gas from deep horizons 
in shallow waters. These leasing incentives come in the form of a 
royalty suspension for specified amounts of production from these 
areas. Currently, MMS is considering extending the shallow water, deep 
gas royalty relief provisions to leases purchased before 2002. MMS has 
also offered lease extensions for certain qualifying exploration 
activities that focus on reservoir targets that occur beneath 
subsurface salt sheets.
    For offshore areas of Alaska, MMS is considering various incentives 
in addition to changes in suspension policies that will allow more time 
for exploration activity to occur. Additionally, MMS is evaluating its 
business processes program wide to take advantage of opportunities to 
make the permitting process for drilling wells more efficient.
                  offshore alternative energy proposal
    For the past 50 years, the Department has leased the OCS for oil, 
gas, and other minerals under the mandates of the OCS Lands Act. 
However, in recent years we have seen a growing interest by the private 
sector in developing alternative energy projects located on the OCS, 
such as renewable energy production from currents, wind and waves, and 
floating supply bases and other facilities that would directly support 
OCS oil and gas development.
    In an effort to facilitate these innovative projects and to ensure 
that the Federal government's economic and land use interests are fully 
protected, the Administration submitted legislation to Congress in June 
2002 that would set up a statutory framework for reviewing and 
permitting such activities that are not otherwise covered by statute. 
It was developed in close collaboration with other Federal agencies 
with permitting authority on the OCS and would provide the Department 
with a full suite of regulatory tools necessary to comprehensively 
manage non traditional OCS energy and related activities.
    The Administration continues to strongly support enactment of such 
legislation and looks forward to working closely with Congress on this 
important issue. We firmly believe that we must encourage new and 
innovative technologies to help us meet our increasing energy needs. 
Enactment of this legislation will be one important step in helping us 
meet those needs.
                               conclusion
    We will continue to operate under Secretary Norton's leadership and 
vision for managing the public resources--through communication, 
cooperation, and consultation in the service of conservation. The 
essence of this goal is to continue to forge new and stronger 
partnerships with other Federal and state agencies, Tribal governments, 
and all of our stakeholders--including Congress--to create greater 
opportunities for the responsible development of energy resources on 
Federal lands.
    In summary, the following actions have been implemented or are 
being considered to facilitate the President's National Energy Policy:

   The BLM has recently released a joint report with the 
        Department of Energy that identifies and evaluates renewable 
        energy resources on public lands. The BLM will use the report's 
        findings to prioritize land-use planning activities, and to 
        increase the development and use of renewable energy resources.
   To ensure that the OCS remains a solid contributor to our 
        Nation's energy and economic security by holding sales in 
        available areas on schedule, we approved a 5-year Oil and Gas 
        Leasing Program in July 2002 that calls for 20 lease sales in 
        the Gulf of Mexico and certain areas offshore Alaska during 
        that timeframe. We estimate that these areas could contain 
        economically recoverable resources of up to 22 billion barrels 
        of oil and 61 trillion cubic feet of natural gas.
   MMS is acting to increase energy production in promising, 
        shallow waters of the Gulf of Mexico by providing royalty 
        relief in OCS lease sale terms to encourage production from new 
        wells drilled to deep horizons (greater than 15,000 feet total 
        depth). This area of the Gulf of Mexico is expected to hold 
        between 5 and 20 trillion cubic feet (TCF) of gas and can be 
        developed quickly due to existing infrastructure in the shallow 
        waters of the Gulf.
   MMS is considering providing similar shallow water, deep gas 
        royalty relief to leases purchased before 2002.
   MMS issued a final rule in July 2002 that allows companies 
        to apply for lease term extensions that will provide additional 
        time to analyze complex geophysical data in area under salt 
        sheets. Vast resources of oil and natural gas may underlie 
        sheets of salt in the OCS, which makes it difficult to obtain a 
        clear image of the subsalt geology. This will help identify and 
        define drilling targets and accelerate discovery and production 
        of deep natural gas as well as foster new technology.
   The Department completed the EPCA inventory this year. The 
        EPCA inventory provides an estimate of undiscovered technically 
        recoverable resources and proved reserves of oil and gas 
        beneath the five basins and an inventory of the extent and 
        nature of limitations to their development.
   BLM is completing the necessary land management planning for 
        the two major coalbed methane basins in the United States: San 
        Juan and Powder River Basin. BLM's completion of these plans 
        will allow for considerable additional drilling, which will 
        increase the production of natural gas from coalbed methane. 
        BLM is developing an approved methodology for drilling permit 
        approval and are improving our coordination with regard to land 
        owners in the regions. In addition, BLM is improving the 
        necessary coordination and consultation with State and other 
        federal agencies to address the concerns that have been raised 
        and to make the process more efficient.
   The BLM has prioritized a number of land-use planning 
        efforts that have major oil and gas components. Once the public 
        process is completed, this will expedite the development of 
        natural gas and oil.
   The Department is working with State and local governments 
        as well as with industry on identifying and designating right-
        of-way utility corridors on public lands. For example, the 
        Department has been working with the Western Governors' 
        Association and the Western Utility Group to do just that.
   The Department is taking steps to ensure that the OCS 
        remains a solid contributor to our Nation's energy and economic 
        security by holding sales in available areas on schedule. In 
        past years, scheduled sales in several areas were either 
        delayed, cancelled or put under moratoria even though they 
        appear on a 5-year schedule. This did not provide industry with 
        the certainty it needs to make long-term investments in the 
        OCS.
   In support of the President's goal of streamlining 
        permitting of energy projects, MMS has initiated a multi-year 
        effort designed to increase our efficiency in processing 
        applications to permit drilling of OCS wells.
   The Administration submitted legislation to Congress in June 
        2002 that would set up a statutory framework for reviewing and 
        permitting alternative energy and energy-related activities not 
        otherwise explicitly covered by statute. This legislation will 
        include renewable energy projects, such as wind, wave or solar 
        energy; and energy-related projects that are ancillary to OCS 
        oil and gas development, such as offshore staging facilities 
        and emergency medical facilities.

    Thank you for the opportunity to testify before you today. I 
welcome any questions the Committee may have.

    The Chairman. The various reports that you have alluded to 
will be made part of the record. They will be adjunct to the 
record. We thank you for bringing them. And I assume--have they 
been distributed heretofore, or are you just bringing them up 
today?
    Mr. Griles. They have been given to the committee. But we 
will make copies available to the committee, sir.
    The Chairman. All right.
    The Chairman. Mr. Secretary, I have a few questions. And 
then I will yield to Senator Bingaman. He has to leave for a 
little while and will return. Then we will go to our side for 
questions before we take the next witness.
    Again, we appreciate your coming. And thank you for your 
succinct testimony. We hope that we can work with you and with 
the reports and the President's program in putting together a 
bill in the not-too-distant future, which will yield results 
this year.
    Let me talk a little bit about the EPCA report.
    Mr. Griles. Yes, sir.
    The Chairman. Does it tell the full story when it comes to 
the impediments and delays associated with oil and gas leasing 
on Federal lands?
    Mr. Griles. No, sir. It does not give the full story, an 
entire story. It was--in the opinion of the Bureau of Land 
Management, when they started this study, I think it was in 
2000, 2001, it did not give the full story. It gave as best 
story as it could. But there are other things that it does not 
deal with, like some of the impediments that go through the 
leasing processes and the appeals processes and those kind of 
things.
    But I think that it gives an overview of where the oil and 
gas is. And by using that and incorporating it into the land 
use plans, we hope that it will at least give some 
understanding of what we believe the future should be for these 
land use plans for oil and gas development.
    The Chairman. What specific action is the BLM taking with 
regard to the EPCA report?
    Mr. Griles. Well, what it will do, sir, it is incorporating 
today into these ten land use plans that are underway. We 
prioritized all the land use plans that we thought would 
respond to the President's energy plan. And this EPCA report 
will be integrated into those land use plans so that the public 
and all stakeholders will know what we believe the potential 
will be for oil and gas development, so that the people in the 
West and all people in this country will know what these land 
use plans will be looking at, and how can we go forward given 
the conflicts with endangered species, as well as scenic values 
that we have to deal with, as well as looking at where these 
resources are located.
    The Chairman. Now that you have completed the EPCA report, 
can you characterize the significant features that the study 
brought out with regard to oil and gas availability on Federal 
lands?
    Mr. Griles. Well, I will give you a quick summary. But I 
think that question deserves more than me just trying to do it 
from the hip. But I would like to give you a more detailed 
response for the record, if I could.
    I think that the conclusions I would reach from this is 
that, yes, the report showed that a large amount of Federal 
land, greater than 60 percent, were open for oil and gas, that 
it in fact is under lease, much of it. But what it also points 
out is that 40 percent of it is not. And of that 40 percent, it 
shows that, I believe the number is in the 30 percent range. 
And I would like to make sure we get that submitted to the 
record, so my guessing is not incorrect.
    The Chairman. Right.
    Mr. Griles. But maybe 30 percent of the potential out there 
is in these 40 million acres that are closed. And if we are 
going to increase domestic oil and gas production, it is going 
to be from those areas which are closed, as well as from those 
areas that are open. We can do additional infield drilling. We 
can do additional leasing from the areas that are not 
restricted.
    But even in those areas where it is open, we have seasonal 
stipulations. We have restrictions imposed in those land use 
plans that go way back, Senator, to when I was the assistant 
secretary. These land use plans go back, in many instances, 15 
to 20 years ago. They do not reflect modern technology. They do 
not reflect an understanding of the science. And they do not 
reflect better ways in which you can deal with these conflicts.
    So we need to update all these plans, incorporate the other 
stuff, and try to get a better public acceptance and 
understanding of how oil and gas can be done in the West.
    The Chairman. When you say we must, you mean if the 
administration must do that. Is that correct?
    Mr. Griles. Yes. These are administrative decisions that 
the Department will reach with these ten high priority land use 
plans that are under way right now and should be completed 
within the next year and a half.
    The Chairman. Various oil and gas industry experts say that 
the number of APDs processed under the administration--that is 
this administration--has fallen relative to the previous 
administration. How do you explain this trend, if it is so?
    Mr. Griles. Well, I think that may be an accurate number. I 
am not going to dispute the number. I will explain it this way, 
Senator. What we found when we came is that we did not have 
these documents done. And until you have a land use plan that 
authorizes the issuance of APDs, you cannot issue them. We 
found that we did not have inspectors in the field to inspect 
the oil and gas areas.
    This committee and members of this committee have 
increased, and asked for increases in, the budget for BLM. That 
started even under the previous administration, increasing the 
number of inspectors out there. Until you get these land use 
plans completed, you cannot issue APDs. And so the numbers 
probably are down. But they are down because without the 
authority to issue an APD, if you issue it, you will just be 
stopped in the court. That is not in the best interest of 
anyone.
    The Chairman. Thank you very much.
    Senator Bingaman.
    Senator Bingaman. Thank you very much.
    Secretary Griles, thank you for being here. One issue that 
I have been concerned about for some time is that it has 
appeared to me that we have not had adequate resources either 
to process applications, which of course is a major concern of 
the industry, or to do the inspection and enforcement, which is 
intended to happen, to be sure that people are actually 
following the stipulations. Because I come at this with the 
idea that not all stipulations are necessarily bad. In fact, 
many of them are very important and need to be enforced.
    And the extent of the conflict is growing, particularly in 
some of the basins we are talking about, in the San Juan Basin, 
for example. Your draft statement there that you are still 
working on.
    Mr. Griles. Right.
    Senator Bingaman [continuing]. Indicates that you are going 
to intend or expect to issue 10,000 to 12,000 new wells or 
permits to drill new wells over the next 10 or 15 years. I 
believe that is roughly accurate. And most all of that is 
infield drilling.
    Mr. Griles. That is correct.
    Senator Bingaman. And there is more and more concern by 
surface owners and others about the impact of this and the 
failure to enforce the stipulations that do exist. Do you have 
the resources you need to do this job right? I mean, we have 
been going at this. When I asked Secretary Norton whether they 
were going to add 13 new people up in the San Juan Basin, she 
said yes, they were. I am still not confident that that is 
adequate.
    Could you give us your opinion?
    Mr. Griles. I would say I do not know if 13 is adequate or 
not. I will tell you that we are very concerned, as you are. I 
would agree with all the sentiments you expressed, Senator. 
Before I came back into government, one of the things that I 
worked with you and others on the committee on was getting more 
resources allocated to BLM to assure we had not only the right 
to issue and the people to issue the permits, but to have 
people on the ground.
    We need to make sure that the landowners and the surface 
owners know that we have adequate trained people that are going 
to assure that the stipulations are enforced and met. If we do 
not do that, the kinds of conflicts we have seen even in your 
State that have arisen in the last 6 months will occur. We have 
to provide that assurance.
    We are going to be looking at that. The President's budget 
asks for--and I will use a number, I think it is $15 million. 
That may not be right. And maybe Patty can respond when she 
comes up, if that number is correct--additional monies for 
additional people. And those people are not only APD issuers, 
but also inspectors on the ground.
    I could not agree with you more that we have to make sure 
that have enforced and assured that those stipulations are in 
place.
    Senator Bingaman. Well, I appreciate your comments very 
much, because, you know, one area that is now being looked at 
by the BLM for leasing is the Otero Mesa in my State. It is 
very controversial, a lot of opposition. One of the things that 
I hear from the opposition there is that all of this talk about 
how the BLM will require that certain stipulations and 
remediation occur, all of that is just hogwash, because, in 
fact, they have not been doing it in the San Juan Basin. It 
does not matter what the stipulations say. The BLM is not going 
to enforce them. I mean, that is the line that we hear from 
various of the groups that are opposed to that drilling.
    I have not opposed the notion of drilling in that entire 
area, but I certainly do hear some validity in their concerns 
about whether or not the BLM is going to be prepared to go 
ahead and actually enforce the stipulations that they are 
saying they would enforce.
    Let me ask about another issue, surface use conflicts. We 
have a whole bunch of problems. Senator Thomas is, I am sure, 
very focused on this issue of conflicts between coal production 
and coal bed methane production. What is the department doing 
to address those conflicts and get that resolved?
    Mr. Griles. Well, two things. Just from a historical 
perspective, Senator, this was a big, very big issue in the 
late 1990's and the early 2000's. And I do not have any 
personal knowledge except what was conveyed to me a few minutes 
ago by some of the coal bed methane producers in the audience 
and some of the coal companies. I was told that the prior 
conflicts had been resolved in Wyoming. I do not know that is 
true. I know that is what I was told. I do not have any 
personal knowledge except for that information.
    It is a fundamental issue that where the Federal Government 
has offered and leased coal and offered and leased oil and gas, 
that it is provided the rights to two different private 
parties. And it did it back in the 1970's and 1980's before 
there was a knowledge that coal bed methane had a real value.
    So we have a conflict. The BLM adopted a directive about 
how it ought to be dealt with. That has helped some. There is a 
need potentially for some legislative consideration. Do we need 
to find a way, if intractable arguments occur in the future, 
about how to mitigate those? I would encourage you to look at 
that. We will look at it with you to see if we think 
legislative efforts are needed.
    As I said to you, some of the problems of the past seem to 
be resolved. But it may be something we ought to figure out how 
better to assure that it does not occur in the future. The BLM 
needs to understand that if it leases for oil and gas and there 
is a coal lease there already, it creates an inherent conflict. 
And it needs to be sure that that lease reflects some kind of 
right of establishment. Those who are first time have the right 
for the ones who come second can compensate and find a way that 
is reasonable, not through extortion, but reasonable payment so 
that values can be acquired.
    Senator Bingaman. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Bingaman.
    Before I yield to Senator Thomas, let me just say, Mr. 
Secretary and Senator Bingaman, I was out in New Mexico and met 
with Linda Rundell, the new Director of the BLM. And we spoke 
of the issue that you just raised. And she is very aware of the 
conflict that is brewing between the ranchers and the oil and 
gas producers with reference to the stipulations and compliance 
with them. And she is busy attempting to set up a plan to 
figure out just what is needed, so that there is better 
compliance so that we do not have this conflict growing into 
something that prevents the appropriate use by both.
    It is obvious that under multiple use, grazing is supposed 
to take place, and ranching and also oil and gas development. 
But we cannot have that continue if in fact one of the users, 
to wit the ranchers, feel that the production people do not 
care about their rights and do not do what they are supposed to 
do.
    So that is going to get done. If we have to find new money 
to give them more inspectors and more field people, we are 
going to do that. I assure those who are concerned about it 
that I have already spoken to the administration. And I am 
going to work personally on some of the appropriation matters 
to make sure they have enough people to do it. Thank you for 
raising the issue again, Senator Bingaman.
    Now, Senator Thomas, would you like to proceed?
    Senator Thomas. Yes. Thank you, Mr. Chairman.
    I would like to say, as you point out, the two of you, 
there are two factors. One is the split, where the surface 
owner and the mineral owner are different. And the other, of 
course, is where you have leases for coal and gas. So both of 
those are very important.
    Thank you for being here, Mr. Secretary. Last year Senator 
Landrieu and I introduced a bill that had to do with altering 
the Federal acreage cap for oil leases. And the productive 
aspect of it was not charged against the total. Is the 
Department supportive of that sort of an exemption on the cap?
    Mr. Griles. Senator, we very much believe that the 
chargeability law needs to be updated. It is a standard that 
was adopted way back in the turn of the century. And it was 
very low acreage. And that acreage every 10 or 15 years is 
changed to reflect what is going on.
    But the consolidation that has occurred in the oil and gas 
industry and with the greater expansion of oil and gas that has 
gone on in the West, it seems logical that we need to have a 
chargeability number that reflects the current needs of capital 
investment, and also to assure that the chargeability does not 
inhibit the exploration and development of oil and gas. And I 
think it has.
    We would support your efforts and that of Senator Landrieu 
to change the chargeability standard.
    Senator Thomas. Well, the investment issue is really very 
much a part of it, as you know. You know, one of the 
difficulties, of course, in this whole thing is accessibility 
and being able to do it in a fairly timely way. It seems like 
at least part of the time the BLM, for example, will go ahead 
and do the IS' and start to do the permitting. And then EPA 
comes in later and says: Wait a minute. That is not done 
properly. And it stalls the whole thing.
    It seems like it would make sense if there was a little 
more coordination in the production of those permits, rather 
than having them observed later and sometimes being turned 
back. What is your reaction to that?
    Mr. Griles. I agree with you 100 percent, Senator. The 
Government needs to coordinate its activities and its efforts. 
We have initiated with the EPA and the State and the local 
governments. And we are trying to do in each of these land use 
plans and EISs a cooperative agency status so all parties are 
sitting at the table. And they all have the opportunity to 
participate in the decision making and in the writing of the 
drafts, so that the final document, when it comes out, we do 
not have the dispute, well, I was not at the table.
    In the Dagmar Hills EIS that we have here, Senator, that is 
exactly what we did. We have all the parties. The governmental 
parties became cooperating agencies and gave them status so 
that they have a legal and a moral obligation to participate. 
So that we can say: You are at the table. You have the right to 
participate. We expect you to participate. And we are trying to 
do this at all levels of government, so that everyone is there. 
And it is the result of those very comments.
    Senator Thomas. Yes. I certainly met with Administrator 
Whitman yesterday. And she also seems to be interested in doing 
that. From the--you know, particularly in the methane area, the 
length of time it takes to get permitting and so on has a great 
deal to do with how this thing works out.
    The other, sometime we talked about coal and how coal is 
really our long-term resource for generation. But you have to 
have transmission. And you have to have to have right-of-way 
And I am told often the most difficult place to get rights-of-
way is on Federal land. How do you react to that?
    Mr. Griles. Well, I would say that is exactly right. We are 
not easy to deal with. That is probably a great understatement 
for those in the audience----
    [Laughter.]
    Mr. Griles [continuing]. Including the conservation 
community. But the fact is, Senator, these are not easy 
processes to follow.
    Senator Thomas. I know.
    Mr. Griles. FLPMA and NEPA and all the other statutes we 
have have historical perspective built in, as well as judicial 
efforts. So we have to do it right. And doing it right, we 
found, takes a lot of time and effort. It is now 2 years to do 
one of these volumes, 2 years from the time someone comes to us 
and says: I need a right-of-way. Okay. You need an EIS. It 
takes a long time, probably 18 months at a minimum, to do an 
EIS. Then it takes the decision-making process. A record of the 
decision has to be built. And it goes through these processes. 
It is 2 years.
    One of the things that I mentioned earlier was the 
cooperative effort with the Western Governors and the Western 
utility corridors, which includes transmission pipelines, as 
well as electrical wires. If we can do that in these land use 
plans we are doing now, then that cuts that 2 years down to an 
application of request and the processing of the application.
    So if we can think through where these corridors are going 
to be and do it up front, as we do these land use plans within 
a swath, then that stops that. And you do not have to go 
through the 2 years.
    Senator Thomas. Well, the challenge for all of us is to 
have access and multiple use of these lands, maintain the 
environment, as well as being able to do that. So it is a 
challenge.
    I just want to commend Kathleen Clarke and the BLM for 
working with DOE and the Forest Service on this thing. I think 
that was an excellent effort. And I hope it can be worked in.
    Thank you, sir.
    Mr. Griles. Thank you, Senator.
    The Chairman. Senator Alexander.
    Senator Alexander. Thank you, Mr. Chairman.
    On almost all these issues there is an intersection of the 
energy and environment. There is a balance there. And I would 
like to get your comments in two areas. You mentioned one. 
Would you talk a little more about the new technology that 
reduces the risk to the environment? Because that seems to me 
to be awfully important. And where that technology might be 
used to produce the greatest energy production benefit.
    The second area is the idea already used in the law, which 
was a part of the--which was a principal, which we talked about 
in the mid-1980's, when I chaired President Reagan's Commission 
on Americans Outdoors. And that was to take some of our 
revenues from oil drilling and use it to fill up the land and 
water conservation fund.
    I wonder if one way to think about building a broader base 
of support for additional drilling in the future is to allocate 
more of those funds to particularly the State part of the 
program.
    Mr. Griles. Senator Landrieu is smiling. I cannot imagine 
why.
    Senator Landrieu. I am so happy to have a friend over 
there.
    [Laughter.]
    Senator Landrieu. Not that I have favorites.
    Mr. Griles. I will respond to the latter question first, 
Senator. Obviously, the issue of revenue sharing with producing 
States is something that has been before this body for a number 
of years, a lot more years than a lot of people have been 
senators and longer than I have been in Federal service.
    So it is an issue that we struggle with, as to how you 
incentivize States and local Government to participate, at the 
same time how those resources are going to be shared. I have 
seen bills that shared revenue from offshore drilling in 50 
States. We do not even have oceans in 50 States. And yet they 
are going to get revenues from it.
    So the question is, do you put it in the Federal Treasury 
and distribute it or do you give it to all the States?
    Senator Alexander. Well, you put it in the land and water 
conservation.
    Mr. Griles. That is one way, sir. That is true. And that is 
one that needs to be looked at.
    Senator Alexander. As I understand, Federal lands belong to 
all the taxpayers.
    Mr. Griles. That is correct.
    Senator Alexander. So revenues, if they were to be 
distributed, would be distributed in some way to all the 
taxpayers, would they not?
    Mr. Griles. That is true. And the administration is always 
willing to consider ways to find means to allow us to be better 
neighbors. And also in the conservation field, how do we assure 
that our conservation efforts can be enhanced? And that is the 
kind of areas that the President is looking at, and how to 
better do that.
    As you and the other Senators look at how to do this, we 
will be more than willing to sit down and discuss it with you. 
In the fiscal constraints we have today, these are tough issues 
to deal with. And we are not unaware of the need to have good 
conservation on also revenue sharing to the States and 
communities that are in fact the greatest impacted by the 
exploration and development of the activities.
    So let me move to the first question, if I could, for you.
    Senator Alexander. Yes. And I just want to emphasize that 
the--I am sure the recommendation came many years ago for that 
kind of thinking. But one place it came from was the commission 
appointed by President Reagan in 1985 and 1986. And it was a 
unanimous recommendation of the commission.
    Mr. Griles. And I was in the Reagan administration. And I 
remember you serving as chairman of that. And you did a great 
job for us then, and I am sure you will as Senator, too.
    Let me just say that on the technology environmental 
question, last week, within the last 2 weeks, I had a company 
come in and gave me a CD and showed me new technology of how 
one can explore and develop in the most sensitive areas, 
environmental areas. And if I could best describe it, it would 
be like to have ice pilings driven through the tundra. And the 
platform would be set on the ice pilings. And it would move 
from one set of pilings to the other. And the impact on the 
tundra would be almost nonexistent.
    The technology growth curve since even in the last 10 
years, in the last 5 years, has been phenomenal. So anything we 
do in terms of ANWR, we need to make sure we do not limit the 
technology. We need to make sure we have the greatest 
opportunity for technological advances. And that is going on 
today in a pilot program that DOE is funding with the private 
sector to see how in fact it can best work.
    Many years ago, when we had oil and gas drilling, every 
well had its own pad. Today we have a small pad, on which wells 
for directional drilling can go out from several miles. So the 
impact is greatly minimized. We need to do more of that. We 
need to find better ways to do that.
    The confluence of good environmental practices and good 
technological advances are occurring every day. And we are 
working with the industry to make sure those are put in place 
through stipulations, as well as good practices that the 
industry is doing.
    Senator Alexander. Thank you.
    The Chairman. Senator Burns.
    Senator Burns. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary, for coming today. First, to give 
you some kind of an idea, as you know, we have extensive coal 
bed methane development in the south central part of Montana. 
We have completed the EIS up there, which is 900 pages. And we 
also have many more pages in the research on how we develop 
that in a sensitive way.
    Can you give me a time line, or where do we go from here? 
It seems like after we complete this EIS and we jump through 
all the hoops, it seems like something magic falls out of the 
air, and we just--we are stalemated. In other words, there is 
just the lack of any activity. There is lack of movement in the 
Department.
    So what are those challenges? How do we jump over that last 
hurdle before we start most of the permittings being done? And 
the only thing lacking is the green light to start a--what do 
we have to do to get over that last hurdle?
    Mr. Griles. Well, Senator Burns, I would like to respond 
two ways. First of all, as you probably are aware, in my 
private sector I represented a lot of the coal bed methane 
companies. So I have a recusal on these particular documents 
sitting here. So I do not want to respond specifically to any 
of the things relating to coal bed methane, the issuing or 
permitting. I am not involved in it.
    Generically, I can respond this way: Any time the Federal 
Government is involved, there is a process. And these processes 
require people. It requires an understanding. And it requires 
industry to produce the best document possible to meet the 
standards. The confluence of those two in the beginning, in a 
new area, takes some time to be done. But we will be happy, I 
will be happy to have submitted to the record for you from 
other people in the Department who are directly involved and 
can respond to your question better than I can, if I could do 
that, Senator.
    Senator Burns. Now saying that, if you had this big 
Christmas tree of things out here of what you think and what is 
generally accepted in the scientific community of practices, in 
the legislative sense, if you only had a wish for one thing to 
happen legislatively, what would it be, so that we might help 
you and help this country in its recovery of tremendous energy 
resources that we have on our public lands?
    Mr. Griles. Pass ANWR.
    Senator Burns. Lisa, have you talked to him before this 
hearing today?
    It is something for--I would imagine in conversation--and, 
of course, we have had many of them. But I just want--I want to 
really say that the new BLM director is terrific. She is doing 
a terrific job for you. And we understand that agencies get 
jerked in all kinds of directions. And it took a long time to 
get those laws in place. We could identify the misuse of those 
laws, the unintended consequences of those laws. But it seems 
like getting them changes to fit the times is very difficult.
    I look forward to working with you and identifying those 
areas and make some progress in some areas. We in Montana, I do 
not think there is a State in the Union that is more sensitive 
to the environment. But we are also very sensitive in the 
prospects of balancing our State budget, as in the past, coal, 
gas, oil, timber, all of these great resources in mining paid 
for a lot of roads and a lot of schools, a lot of public 
services, in the States that have a large amount of public 
lands.
    Just to give you an idea, I met with a group that said they 
were being denied access to their national forest. Now I know 
that is not under your jurisdiction. And he said, ``Those are 
public lands.'' He says, ``By gosh, I'm part of the public. I 
deserve access to that land.''
    And I said, ``They also belong to that little, old lady on 
5th and Park Avenue in New York City. And she don't want you on 
that land. And so you go argue with her.''
    That is the conflict. And we have--it seems like we do not 
have a framework for dispute resolution. And I would recommend 
that somewhere in the bureaucracy that we should form a 
special--I know CEQ was supposed to be that answer. But it has 
been used for other things, also. But I would recommend that we 
find some way, if we have to go outside of government, for 
dispute resolution.
    That is the way we did on a little border problem called 
the Milk River in mining in Canada. Three people from Canada 
were assigned to that commission, three people from the United 
States. They were from completely outside the industry. And 
with no government pressure. We resolved that water issue out 
of that mining project in Alberta and its impact on the Milk 
River that, as you know starts in Montana, comes up into 
Canada, and then comes back into--or up into Canada and then 
comes back in Montana.
    That has worked pretty well. And those border disputes that 
we get into with our friends to the north and the impact that 
they may have on the United States, especially in environmental 
issues. So I would--we cannot--our only problem is the border 
with Wyoming. We do not have any way to take care of that.
    Senator Thomas. Do you see that red light out there?
    [Laughter.]
    Senator Burns. I am going to quit right now. But I wish you 
would give us some consideration, though. And we might resolve 
some of these areas that we think should either, let us say, if 
we are going to say no, let us say no and move on. If we say 
yes, let us say yes and move on. And I think that is what the 
industry is looking for, is a decision to move.
    I congratulate you and thank you for coming today.
    Mr. Griles. Well, thank you, Senator. I--within the context 
of these decisions, they are never easy. Multiple use is just 
that. And it means there has to be a balance reached in all of 
these decisions. And yes, you are right. These lands belong to 
all Americans. And they need to be protected and managed for 
all Americans. And that is a difficult choice that we have to 
make every day within the Department of the Interior.
    I do not go outside of Interior to get in a fist fight. The 
Fish and Wildlife Service and Park Service, the BLM, Bureau of 
Reclamation can all be arguing for the exact same piece of land 
for entirely different missions. And as they go through the 
resolution, all of a sudden the BIA shows up and says it 
belongs to an Indian tribe who has a claim on it. So we have 
those debates at Interior.
    Kathleen Clarke is a wonderful Director of BLM. She is 
trying to put the right people in the field in these State 
directors and the field offices that can work with all the 
stakeholders, so that the issues that each of you have raised, 
that you have confidence that we are going to take care of 
landowners' concerns. We are going to assure certainty in the 
processes. And it is going to be an evenhanded, balanced 
approach to decision making.
    I just wanted to say, Senator Alexander, I would like to 
offer you an opportunity. You should come up, or the entire 
committee should come up, and visit the National Petroleum 
Reserve, which we are drilling in Alaska, some very sensitive 
areas, and see the technology that is now being employed. I 
think it would really be an education that is just evolving 
almost every day, as to how and what we are doing within these 
sensitive environments.
    I really would love to accompany you, love to offer you the 
chance to come up.
    Senator Alexander. Can we come in late June or July?
    Mr. Griles. Absolutely, Senator. And I will be there with 
you.
    Senator Burns. Now is the time to go, right now.
    I just want to offer a comment. And I know we have to deal 
with some of these sensitive areas. But I want to--we have to 
talk about fish and wildlife and my position on the 
Appropriations Committee. End of comment.
    The Chairman. Are you finished?
    Senator Burns. Yes, sir.
    [Laughter.]
    The Chairman. Senator Landrieu.
    Senator Landrieu. Thank you, Mr. Chairman.
    I just want to begin by thanking the Senator from Tennessee 
for his remarks regarding the land and water conservation fund. 
I was really kidding, actually, because every member of this 
committee has really contributed in many positive ways to this 
debate over the last 6 years. And we represent different States 
and different views. But we have made a lot of progress.
    I want to thank you for your leadership and, as your 
service as governor, leading that effort. I just gave a speech 
to about 400 people yesterday from around the country, 
Governors and recreational directors and interests, community 
activists, environmentalists, business leaders. And the feeling 
is very strong out there in this Nation that we need to 
continue to pursue more balanced policies that allow us to make 
more strategic and significant investments in the conservation 
of our land and management of our land that we already own, 
which is brought up quite often on this committee, and which I 
agree with, in expanding the opportunities for recreation in 
urban areas, in small communities, large communities, and to 
maintain our wilderness and large national parks.
    Senator, you have done an outstanding job, along with many 
members. But there is a broad bipartisan grassroots and, my new 
phrase top roots, around this country that feel very strongly 
about this, Mr. Secretary, as you know.
    My second comment, Mr. Chairman, is to thank our Assistant 
Secretary Mr. Griles for his comments about the balance that is 
required to achieve this and how promising I think--although 
prices are high, and we are in the verge of a war, the economy 
is in a dip, you would say: How could you be optimistic? Maybe 
it is because I think sometimes pain and tightening helps us to 
focus on what things we can do.
    One of the great things that has happened in these 
hearings, at least for me, is clarifying in my mind the 
difference between the oil market and the gas market. While we 
have limited control over the oil market, we have a tremendous 
amount of control, Mr. Chairman, over the natural gas market 
here in the United States, and the benefits of natural gas and 
clean coal. I am more familiar with natural gas, of course. My 
State is a huge producer. But the benefits of natural gas to 
the environment, lie in the exciting and extremely promising 
new technologies that exist to minimize the impact to the 
environment.
    So what I want to say and then ask a question is, it seems 
to me that it is not that difficult, first, to understand why 
it is important to stabilize our gas market, to recognize that 
it is within our power to do so. It is not impossible to 
streamline regulations, standardize regulations, open some 
public lands--we do not have to open all public lands, but some 
public lands--and to include revenue sharing with States and 
communities, and an increased commitment to stewardship.
    I want to show you a couple of charts, Mr. Chairman, if you 
will just bear with me, about this stewardship idea. First I 
want to show the Gulf Coast drilling in that chart here.
    [Chart.]
    Senator Landrieu. We have been drilling in Louisiana for a 
lot of reasons. One, we have a lot of resources. Two--and you 
will see that in the whole continental, Outer Continental 
Shelf, $140 billion has come from offshore. You can see 
basically where it has come from, off the coast of Texas and 
Louisiana. The red shows that. I want, Mr. Chairman, for you 
particularly to be able to see that.
    There is a little bit off the coast of California. Now I am 
not going to get into that debate right now. But I would just 
say to you that we are happy to produce this in Louisiana. We 
do so for a number of interesting reasons, which would take me 
too long. But one of them is that the Government does not 
necessarily--they own the land that you see there. But onshore, 
private owners own the land and the mineral rights.
    There as a great incentive, because the drilling, benefits 
of the drilling, not only went to the Government that got 
royalties and fees, but also the private landowners benefitted 
financially and otherwise, as I believe is appropriate. Because 
I think there is enough money to benefit the Government to 
benefit the landowners, and to benefit the land itself, to keep 
it as pristine as possible and to keep the water clean. I just 
believe there is enough money.
    With gas at $12, I know there is enough money. But even if 
it was at $5, it is a huge amount of money. We are just not 
distributing it correctly.
    So we have been drilling offshore, of course. The Federal 
Government owns the land. And let me just say to my friend from 
Wyoming, he and I do this debate. And I am so happy that 
Wyoming got $448 million last year from their drilling.
    Louisiana sent $5 billion to the Federal Government. And we 
did not get anything. Now I am happy for Wyoming to continue to 
share in those revenues. But I do think it is important for 
other States.
    Now I want to show you what happens when you do not spend 
your money correctly. Can you all see this picture?
    [Chart.]
    Senator Landrieu. This is 50 years of stupidity. This 
highway, Mr. Chairman, is the highway, the only highway. It is 
two lanes. There are 1,000 trucks a day, a day, 1,000 trucks a 
day, that try to get, if you could visualize Louisiana from 
somewhere like around New Orleans, which is south, but they try 
to get from I-10, to this little tiny highway. This is it. It 
is LA-1.
    When it rains, it goes under water. This is the highway 
that 25 percent of the Nation's energy supply depends on. And 
while these trucks are trying to get down the highway, children 
are trying to go to school. And so when the bridge closes, the 
schools close. The people that work there--now you would think, 
people in New York would not put up with this for one second. 
It is just the way they are, the way people in California. I 
mean, you know, we are like well, whatever. We have been 
dealing with this for 50 years.
    It is ridiculous. So I have asked for a portion of the 
money to come back to reorganize this highway, protect the 
environment, make it safe for everyone. And that is what this 
is all about.
    My point of showing you this picture is, I do not blame 
people in the West, Mr. Chairman, for being upset about 
drilling on land that they are using for other purposes. They 
do not see what they are going to get out of it. They think 
their land is going to be damaged. This is the Federal 
Government's policy. So why would anyone with common sense want 
any drilling anywhere?
    But it is not hard to solve. You just fix it, revenue share 
in the appropriate ways and make sure that a lot of that money 
goes for environmental protection. And then we can have a good, 
sound market for natural gas that helps us clean the 
environment, keeps the air clean, and keeps prices low.
    And the final point I will say about this is if we do not 
get natural gas prices stabilized and down, this economy will 
never recover. We are going to lose jobs. And instead of losing 
the 2 million or whatever we have lost, we are going to lose 
more, Mr. Chairman.
    I thank you for giving me just a few moments. I will pass 
on my questions, because you can understand the direction they 
might be going. But I look forward to working with you on full 
funding for land and water, proper stewardship, streamlining, 
and opening up public access where it is appropriate.
    Thank you.
    The Chairman. Thank you very much. We look forward to 
working with you on that, having you work with us on a 
comprehensive bill. Thank you very much, Senator.
    Now we have Senator Murkowski and then Senator Talent.
    Senator Murkowski. Thank you, Mr. Chairman.
    Good morning to you, Mr. Secretary. And I appreciate all 
the lead-ins that everybody has given me. I mean, you have 
given me ANWR. There has been some great pictures on how to do 
it wrong. I wish I had the pictures on how to do it right. But 
I appreciate the invitation that you have extended to all my 
fellow committee members to come up to the great State and 
really see how it can be done.
    I think most people understand that Alaska is huge. We are 
huge in just our geography. We are huge in our natural 
resources. But, you know, to put it in perspective in terms of 
our ownership, it is important to recognize that of the 586,412 
square miles that are in the State, 68 percent of the entire 
State is owned by the Federal Government.
    I think you need to put that in context of your State, 
whether it is Louisiana or Wyoming or Missouri, and say: What 
would my State look like if 68 percent of it were owned by the 
Federal Government? What would be happening within our State?
    Within that makeup, in terms of ownership, we have 76 
million acres of wildlife refuges, 51 million acres of national 
parks, 26 million acres of BLM lands, and 23 million acres of 
national forests. Million acres. This is huge.
    When we talk about what is happening in the Federal lands, 
and in our opinion the Federal Government's obligation to 
manage these resources for not only Alaskans, but for all 
Americans, we are talking about just huge numbers. And in terms 
of what is available up there for America to meet our energy 
needs, when we look at the National Petroleum Reserve and the 
reserves that are available there, the mean average estimate 
offered by USGS and Minerals Management, NPRA contains 9.3 
billion barrels of oil and 59.7 trillion cubic feet of natural 
gas. We are assuming these actual amounts. We are anticipating 
that they are going to be higher.
    As far as ANWR goes, the estimates there are between 3.5 
and 16 billion barrels of oil. We are talking about huge, huge 
quantities. Our problem, of course, as has been pointed out by 
yourself and several other people in the hearings that we have 
had over these past few days, is the access to them.
    We are glad that we are moving ahead with the leasing on 
NPRA. We are looking forward to that and to what we are going 
to be seeing out of that. We need to make sure that we are able 
to do the same on the coastal plain of ANWR and get moving 
there with the recognition that it takes so long to get the 
energy down the line to meet the needs across the country. And 
we have some serious access issues. But I do not need to tell 
you about that.
    I would ask you to comment a little bit more. When you were 
talking about the land use plans and the need to just re-up 
them, make them more current, with the recognition that we have 
enhanced in technology, and you hit just on the highlights of a 
few. It is amazing. It is incredible what we have managed to 
accomplish in terms of how drilling is conducted, at least in 
the Arctic, between the time that we constructed the oil 
pipeline 30 years ago and where we are now. It is a technology 
that I think people could not have even dreamed of.
    When you look to that footprint that we leave, whether--it 
used to be multiple drilling pads. Now we are down to one 
through the directional drilling. You have mentioned the pads 
on the tundra. These are huge advantages. How can we make sure 
that when we update these land use plans that we do not limit 
ourselves to just the technology of that moment? Because this 
is going to be critical. We tie ourselves to a technology that 
does not exist anymore for all intents and purposes.
    I want to know how we can help you in that regard. What do 
we have to do? Is it more PR, or how do we get that message out 
that we do do it better?
    Mr. Griles. Senator, I think that there is--specifically, 
the National Petroleum Reserve, we call it the West plan, is 
now out for review. It is and has a lot of stipulations in it, 
some to address and assure the balance of the environment and 
the opportunity to drill for oil and gas are compatible, or at 
least we understand the conflicts. The kind of technologies you 
talk about, as you say, they are almost space age in comparison 
to where we were 30 years ago. And they are.
    One of the things that we are encouraging, not only these 
land use plans, but in the lower 48 as well, is what I call an 
adapted management principle. And how that works is, instead of 
making all the decisions black and white, you have to allow for 
discovery science and new technology. And you set up an 
advisory committee. And you let that advisory committee have 
the authority in the land use plan to go back and look at the 
stipulations and see, okay, what in fact science has occurred 
since that land use plan was completed.
    What have we learned? And that advisory committee can set 
up a subcommittee of experts and come back to the advisory 
committee. And the advisory committee can make a recommendation 
to the State director of BLM to modify them without going 
through another 2- to 3-year planning period. And all the 
interest groups, conservation groups and industry groups, can 
participate in adaptive management principles.
    And this allows us to assure that modern technology, and if 
we find that we have an endangered species that we did not know 
it was there, that occurs, we can modify those stipulations to 
account for that, without going through this laborious planning 
process that we have set in place.
    But what that means, it means that all the affected parties 
have to be willing to be there and participate and make sure it 
happens. And they have to be willing to allow for flexibility. 
And that is what we are encouraging in all of these land use 
plans.
    Heretofore, we said you cannot drill or you can drill. And 
in many instances, neither answer was right, because we did not 
know what the technology changes were going to be. And we 
really did not know what the science was on those sites until 
we had a full monitoring of the exact site.
    Sometimes an endangered species would never show up during 
drilling season. But the stip says you cannot drill from April 
to May, because that is when they are supposed to be there. So 
we find out they are not there. Let us drill. If we find out 
they are there, when we did not think they were going to be 
there, you should not drill, but they were authorized to drill.
    The adapted management principles, in my opinion, will 
create some uncertainty for industry, but it also creates the 
certainty that we can do the best way to manage those kind of 
activities.
    NPREs, there were stipulations imposed in that plan 2 to 4 
years ago that are not reflective of the technology today. One 
of the things the BLM is going to go back and look at is in the 
NPRs land use plan that was adopted, do those stipulations need 
to be reflective of new technology? And can we, in fact, not 
make them black and white, but ways to look at them so we do 
not inhibit the opportunity for exploration, and we assure that 
the environment is going to be protected?
    So we are going to do those. And we are going to be 
reviewing that again. So those are the kind of things 
specifically you have asked that I hope respond to your 
question.
    Senator Murkowski. Well, I just hope they work.
    Mr. Griles. I think they can work. I think the responsible 
operators that you and I know that are in Alaska can make it 
work. They will make it work. We in the Government have to be 
partners with them and assure that they are in fact doing it 
and they are doing it right. And in that regard, the 
environment is protected, and the American people may get the 
energy that is there.
    Senator Murkowski. Thank you.
    The Chairman. Thank you very much, Senator.
    Senator Talent.
    Senator Talent. Thank you, Mr. Chairman.
    Let me just ask the witness, because I have been reading 
through the different statements of the witnesses who are to 
come. And they present vastly different pictures in a very 
broad sense of what is happening on our public lands, which is 
not uncommon in terms of these kinds of hearings.
    Mr. Bayless is saying that basically most of the land is 
unavailable for leasing and exploration either in theory or in 
practice or both. And Mr. Alberswerth is going to testify that 
most of the land is in fact available for leasing and 
exploration, and that leasing and exploration is up and is 
increasing. And it is at an intense level of activity.
    I think that is a fair summation of both men. I am not 
trying to put--they are both going to have an opportunity to 
testify. And I am trying to be as neutral as possible in 
summarizing them both.
    This, of course, is an example of the kind of situation 
that people in my position are put in. I cannot go out over all 
of the public lands and get a sense of what actually is 
happening on my own. Which in your view is correct, if you 
would care to speculate? And I am going to ask both those 
witnesses that, if I am still here and can do that.
    And second, how can we get some kind of a system of 
reliable estimations and information? So that people who are in 
positions we are in have a reliable basis of facts to go on. 
And I am not saying that your department is. And I am sure it. 
But, I mean, you see? We get diametrically opposite, at least 
in a general sense, statements about what ought to be questions 
of fact. These are not opinions about which interest we ought 
to weigh more or less. These are statements of fact about the 
situation.
    So would you care to comment on that?
    Mr. Griles. Well, I think that is a legitimate question. 
And I am sure both witness will respond to your concern. And 
they can----
    Senator Talent. If you do not want to comment----
    Mr. Griles. Oh, I am more than happy to comment, Senator. 
That is one thing you will find about me, unfortunately.
    Senator Talent. Okay.
    Mr. Griles. You know, I am not going to say either one is 
right or wrong. This report says the following, that about 60 
percent of the land is open for exploration and development. 
Mr. Bayless will say, yes, but the 60 percent, you put 
stipulations on them that say 90 percent of the time I cannot 
be on the land. So it is not open. It is closed. And it is only 
open 10 percent of the time.
    Senator Talent. Let me just interrupt for a second. So when 
Mr. Alberswerth says that--and he will speak for himself. I am 
not trying to--because I like witnesses to comment on other 
witnesses are saying. That is the only way we reach any 
conclusions here. He says 85 percent of the technically 
recoverable oil and 88 percent of the technically recoverable 
natural gas resources underlying Federal lands in this region 
of the country are currently available to leasing and 
development.
    He is talking about total amounts of energy. And you are 
talking about acreage. Is that the reason for the difference?
    Mr. Griles. Well, he is using a resource number of what is 
technically recoverable oil and gas. And let me give you a 
little bit of information on that.
    First of all, on the acreage basis, you know, we can--this 
report is as good of information as you are going to get on it 
today. If you use a technically recoverable number, 5 years 
ago, you would have said the amount of oil and gas that is in 
the Powder River Basin was maybe 2 tcf. Today it is maybe 30. 
Until you drill, until you open it, until you look at it, it is 
all a guess.
    So when you get into the numbers of what the resource 
number is, is it economically recoverable? Is it technically 
recoverable? Is it a resource? So these numbers are science 
numbers. But they are science based on intuition, which people 
like sit around the table. They say, well, my estimate is this. 
Why is that? My estimate is this. Why is that? And they try to 
come together with some consensus over the number.
    But they will always have a range. And the ranges will be 
based on technological considerations and economical 
considerations. And science and government uses those kind of 
ranges. And so when you ask the question, you can get three 
different answers. And guess what? They are all right. They are 
all right, based on the assumptions they make, as well as the 
question and the way it is asked.
    I think the U.S. Geological Survey, the Bureau of Land 
Management, and those agencies are the best. And any time you 
have a question, I will be happy to have them respond. But they 
should never give you one answer. They should give you a range 
of answer, because there is not one answer, because we do not 
all the answers. We can tell you what our best guess is.
    So these gentlemen will be responding. And I hope they will 
be fair with you about that. They are always estimates. And 
they are based on the assumptions they make. And you should ask 
them: What are the assumptions you are making? If you change 
that assumption to something else, what would the answer be?
    In terms of the lands that are open, a lot of lands are 
open. So the sources that we know about have been drilled. They 
have been discovered. Where do you find and what do you project 
the undiscovered resource? It is going to be in the undrilled 
lands. So when you talk about undiscovered guesstimates, they 
are going to be on the undrilled land.
    So you have to look at that is where maybe 40 percent of 
the area is not open. And so that is how these numbers play 
out, Senator. And sometime when you have a moment, we will sit 
down and we will go through some of these.
    Senator Talent. I understand. And hearing formats are not 
necessarily the best one for resolving these things. But I 
wanted to at least raise the issue.
    Mr. Griles. Absolutely.
    Senator Talent. I thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    I think we had better proceed to the next panel. Could I 
just make one observation, as we change panels, Senator Talent? 
One of the problems is, in addition to the one you raised, is 
that frequently we think we have done something that we have 
not. And so we change the law and assume that this and this and 
this is going to happen. And it takes 5 years. And we find out 
that we did not because of what is happening in the field, in 
the courts, in the interpretations.
    It appears to this senator that we have an opportunity 
because a lot more studying has been done, as we prepare for 
this bill than before, to make some decisions as to whether we 
want to streamline some of the processes or not, and to 
understand which ones we are streamlining, and they pertain to 
which lands. Those will be tough votes, because some people 
will assume that if you streamline, you destroy something that 
is very sacred.
    We have so much land that is not producing that many people 
assume could produce, and we have a shortage of both natural 
gas and crude oil, that we have to make some decisions on where 
should some risks be taken. Should it all be absolutely 
certain, or should we take some risks? And which way would we, 
in making risks, which way would we move the teeter-totter? And 
I think it is time to take a few risks on open public lands, 
especially where there is--we are not speaking of a wilderness. 
We are not speaking of a national park. We are speaking of 
other public lands that are multiple use lands.
    Mr. Secretary, appreciate it very much. And our staff will 
be working with yours as we prepare to use those documents 
which you have given us. We understand they are going to be 
very helpful. And we thank all those who worked so hard to 
prepare them.
    Mr. Griles. Well, Mr. Chairman, thank you so much for the 
opportunity to be before you. I look forward to working with 
all of you as we go forward.
    The Chairman. Yes, indeed.
    The next panel is made up of Robert Bayless, Jr., from 
Farmington, New Mexico, Independent Petroleum Association; 
Steven Leer, Arch Coal; David Alberswerth, Wilderness Society 
of Washington.
    [Pause.]
    Senator Talent, were you going to introduce one of the 
witnesses?
    Senator Talent. Yes, with your permission. Thank you.
    The Chairman. Would you do that, please?
    Senator Talent. Thank you. I appreciate that, Mr. Chairman.
    We are pleased in Missouri to have the headquarters of Arch 
Coal, with produces roughly 6 percent of the electricity used 
by Americans each year. And I am grateful to have them there 
and appreciate the opportunity to introduce today the president 
and the CEO of Arch Coal, Mr. Steve Leer. Steve is an 
outstanding industry executive and a member of our community. I 
look forward to this opportunity to introduce him and, as a 
member of the committee, to hear his testimony on these 
important issues. And I thank, Mr. Chairman, for the 
opportunity to do so.
    The Chairman. Thank you very much, Senator.
    Senator Talent. Thank you for being here today.
    The Chairman. We will proceed with Mr. Bayless first. Thank 
you so much for coming up here and giving us of your time. And 
we appreciate hearing from you;. Your remarks will be made a 
part of the record, as will the remarks of all the witnesses. 
If you could proceed to streamline and make your remarks as 
brief as possible, we would appreciate it.

  STATEMENT OF ROBERT L. BAYLESS, JR., PRESIDENT, INDEPENDENT 
            PETROLEUM ASSOCIATION OF MOUNTAIN STATES

    Mr. Bayless. I will attempt to do that. May I also, before 
I make my remarks, add to the record a brochure that my 
organization, IPAMS, has prepared. It has many of the facts 
that we have discussed today.
    The Chairman. It will be done.
    Mr. Bayless. Thank you.
    Mr. Chairman, members of the committee, I am Rob Bayless 
with Robert L. Bayless Producer, L.L.C., and this year's 
president of the Independent Petroleum Association of the 
Mountain States, IPAMS. Today I am testifying on behalf of 
IPAMS and the Independent Petroleum Association of America.
    I would like to thank the committee for focusing its 
attention on the significance of Federal land in developing a 
sustainable national energy policy. There are three points that 
I would like to make today.
    First, I would like to call attention to the disconnect 
between policies that increase demand for natural gas and 
policies that restrict the access to supplies of natural gas.
    Second, I would like to address industry's ability to meet 
future demand and the important role that Federal lands and 
land managers will play in that effort.
    And third, I will address some of the misperceptions that I 
believe are limiting a constructive dialogue on how to improve 
the management of oil and gas and development on public land.
    Over the last two decades, there has been a growing 
disconnect between policies that encourage demand for natural 
gas and policies that restrict access to new supplies. This 
policy disconnect is a root cause of the high prices and 
volatility currently being expressed in the marketplace.
    Further, because many people are unfamiliar with the 
impediments that encumber natural gas development on Federal 
land, some question the gas industry's ability to meet the 
Nation's future demand. Natural gas producers can meet the 
Nation's future need for energy. But the Federal Government 
must play an important role. It is, after all, the single 
largest owner of natural gas reserves through its land 
holdings.
    The Federal Government must partner with industry to ensure 
the efficient and environmentally responsible development of 
its resources to meet current and future demand. Largely 
considered a frontier with great potential, the Inter-Mountain 
West has a strong track record that earns it broad enthusiasm. 
The region not only produces nearly 20 percent of the total 
natural gas in the lower 48, it is also the only region that 
has consistently experienced growth in production over the last 
30 years. And the best news is that it still contains more than 
40 percent of the Nation's estimated and proven reserves.
    My third point is that misperceptions about the Inner-
Mountain West have frequently clouded important policy 
discussions. members of Congress have been regularly 
misinformed and mislead about what is actually occurring on 
public lands. Congress has been told that 95 percent of Federal 
lands in the Inter-Mountain West are available for leasing. 
This is inaccurate. A recent report by the Department of the 
Interior sets the record straight, showing that 36 percent of 
the region is off limits to leasing.
    Another common misperception is that Federal lands in the 
region have seen a rapid influx in drilling over the last 2 
years. In reality, 30 percent fewer wells were drilled in 2002 
than in 2001. And the number of wells drilled in the United 
States in 2002 was approximately 80 percent less than in the 
early 1980's.
    Reports about an onslaught of development on Federal lands 
have been pervasive, but also inaccurate. The Inter-Mountain 
West has shown strong production growth over the last decade. 
But only 5 percent of the Federal mineral estate in the region 
is both leased and currently producing.
    There are also misperceptions regarding the rate of new 
permitting on public lands. Some groups have claimed that it is 
accelerating. Having analyzed the BLM's own data, we find 
evidence to the contrary. An application for permit to drill, 
an APD, that, according to BLM guidance should take 30 days to 
process, takes on average 137 days to be approved.
    Despite the best intentions of BLM leadership, agency 
performance, in the processing of applications, decreased by 60 
percent in 2000. What is worse, the level of uncertainty has 
grown. Last year, companies seeking permission to drill waited 
as long as 370 days for Federal approval. In just one year, the 
average permitting time has nearly doubled.
    I mention BLM performance not to disparage their efforts, 
but to draw attention to the needs of an agency that is 
inadequately funded and desperately in need of additional staff 
and new technology.
    In closing, I would like to reiterate that our industry can 
meet the Nation's growing demand for natural gas. But it will 
occur one well at a time. Meeting this future demand will 
provide a partnership between industry and Government. Policies 
that provide adequate and timely access to the resource will 
bring gas to market more quickly and help stabilize gas prices.
    IPAMS and IPAA stand ready to aid Congress and the 
administration in reducing the barriers to the appropriate 
development of the abundant resources on Federal lands.
    Thank you.
    The Chairman. Thank you very much.
    [The prepared statement of Mr. Bayless follows:]
          Prepared Statement of Robert L. Bayless, President, 
          Independent Petroleum Association of Mountain States
    Mr. Chairman, members of the committee, my name is Robert L. 
Bayless, Jr., Executive Manager of Robert L. Bayless, Producer LLC, and 
this year's President of the Independent Petroleum Association of 
Mountain States (IPAMS), based in Denver, Colorado. Today, I am 
testifying on behalf of IPAMS and the Independent Petroleum Association 
of America (IPAA). IPAA and IPAMS represent virtually all of the 
independent oil and natural gas producers across the nation. 
Independent producers drill 85 percent of the wells, and produce 40 
percent of the oil and 65 percent of the natural gas in the United 
States.
    I would like to thank this committee for focusing its attention on 
the significance of federal land in developing a sustainable national 
energy policy. Policies that either limit or encourage energy 
development on federal land have very real consequences. Policies that 
promote the use of a particular energy source, yet fail to provide for 
the necessary and orderly development of that same resource are 
predisposed to failure. Such has been the predicament of policies that 
address natural gas.
    There are three main points I would like to make today. First I 
would like to call attention to the growing disconnect between policies 
that increase demand for natural gas, and policies that restrict access 
to supplies of natural gas. Second, I would like to address industry's 
ability to meet future demand and the important role that federal lands 
and land managers will play in that effort. Finally, I will address 
some of the misperceptions that I believe are limiting a constructive 
dialogue on how to improve the management of oil and gas development on 
public land.
    Over the last two decades, a disconnect has grown between 
environmental policies that encourage demand for natural gas, and 
federal land management policies that restrict the development of new 
supplies of natural gas. This policy disconnect is a root cause of the 
high prices and volatility currently being expressed in the 
marketplace. Furthermore, because most people are unfamiliar with the 
many impediments that encumber natural gas development on federal land, 
some question the gas industry's ability to meet the nation's future 
demand for natural gas.
    Natural gas producers can meet the nation's future need for natural 
gas, but the federal government must play an important role. The 
federal government is the single largest owner of natural gas reserves 
through its land holdings. The federal government must partner with 
industry to ensure the efficient and environmentally responsible 
development of these resources to meet current and future demand.
    In the Inter-Mountain West, a gas industry/government partnership 
will be critical since more than half of the mineral estate is owned by 
the federal government (figure 1).* Largely considered a frontier with 
great potential, the Inter-Mountain West has a strong track record that 
supports the broad enthusiasm for the region. The region not only 
produces nearly 20 percent of the total natural gas production in the 
lower 48, it is also the only region that has consistently experienced 
growth in natural gas production over the last 30 years (figure 2). 
And, the best news is that it still contains more than 40 percent of 
the nation's estimated and proven reserves (figure 3).
---------------------------------------------------------------------------
    * Figures 1-8 and the appendix have been retained in committee 
files.
---------------------------------------------------------------------------
    My third point is that misperceptions about the Inter-Mountain West 
have frequently clouded important policy discussions. In short, I 
believe that Members of Congress have been regularly misinformed and 
misled about what is actually occurring on public lands.
    For example, Congress has been told that 95 percent of federal 
lands in the Inter-Mountain West are available for leasing. So 
pervasive is this misinformation that it is often quoted in hearings on 
both sides of the Hill. However, a recent report by the Department of 
the Interior (See Appendix for more on the EPCA Report) sets the record 
straight, showing that 36 percent of the region is off limits to 
leasing.
    Another common misperception is that federal lands in the Inter-
Mountain West have seen a rapid influx in drilling over the last two 
years. In reality, 30 percent fewer wells were drilled in 2002 than 
were drilled in 2001. To put this in perspective, the number of wells 
drilled in the United States in 2002 was approximately 80 percent less 
than in the early 1980s.
    Reports about an onslaught of development on federal lands have 
been pervasive, but upon further discovery are also found to be 
inaccurate. While the Inter-Mountain West has shown strong production 
growth over the last decade, only five percent of the federal mineral 
estate in Inter-Mountain West is both leased and producing (figure 4). 
Much of the recent growth in production from the region is attributable 
to development on state and private lands (figure 5). In Colorado, 
Utah, and Montana, production from federal land has not even begun to 
keep pace with production on adjacent private and state lands (figures 
6 & 7). In Colorado for example, per acre production from non-federal 
land is six times greater than per acre production from federal land.
    A misperception also exists over the level of protection and 
environmental analysis required prior to the approval of a drilling 
project on federal land. Contrary to popular myth, the time and costs 
of preparing environmental studies have increased exponentially in 
recent years, reaching a level that prevents many smaller companies 
from considering projects on federal land. (See Appendix for more on 
NEPA)
    Another misperception involves alleged changes or improvements to 
the permitting process. Using the Bureau of Land Management's own data, 
IPAMS recently examined the permitting performance for all the BLM 
offices in the Inter-Mountain West (figure 8). What we found confirmed 
our deepest frustrations about the delays associated with working on 
federal land. An Application for Permit to Drill, or APD, that 
according to BLM guidance should take 30 days to process, takes on 
average 137 days to be approved. Despite the best intentions of BLM 
leadership, agency performance in the processing of applications 
decreased by 60 percent in 2002.
    What's worse, the level of uncertainty has grown. In 2002, 
companies found it harder than ever to plan their business around BLM 
permitting uncertainties. For example, companies seeking permission to 
drill waited an average of 137 days, and sometimes as long as 370 days 
for federal approval. In just one year the average permitting time has 
nearly doubled. I mention BLM performance not to disparage the efforts 
of an agency that I believe is truly doing its best in spite of 
inadequate funding, limited personnel, and antiquated technology. 
Instead, I mention these facts to illustrate that misperceptions and 
misinformation often prevent us from focusing on solutions to the many 
real challenges associated with developing natural gas on federal land.
    In closing, I would like to reiterate that our industry can meet 
the nation's growing demand for natural gas, but it will occur one well 
at a time. Meeting the nation's future demand for natural gas will 
require a partnership between industry and government. Policies that 
provide adequate and timely access to the resource will bring gas to 
market more quickly and also stabilize prices. IPAMS and IPAA stand 
ready to partner with Congress and the Administration to reduce the 
barriers in developing the abundant resources on federal lands.
   Additional Testimony Regarding Energy Production on Federal Lands
    The Independent Petroleum Association of America (IPAA) and the 
Independent Petroleum Association of Mountain States (IPAMS) would like 
to submit additional testimony for the February 27, 2003 hearing on 
energy production on federal lands. Specifically, we would like to 
address issues involving assessments of the federally controlled 
resource base.
    In 2002, RAND released an Issue Paper presenting ``A New Approach 
to Assessing Gas and Oil Resources in the Intermountain West.'' This 
new approach can be graciously considered as a well-intentioned 
misunderstanding of the federal development process or more critically 
viewed as a specious effort to further misdirect the issues associated 
with access to the resource base by those opposing its development. 
Taken to its logical conclusion the RAND approach would vest in the 
federal bureaucracy the determination of development decisions that are 
now--and properly so--a part of the federal permitting process. The 
federal government has never been positioned to make economic judgments 
on the development of its resources--nor should it be. That is the role 
of the permitting process. The RAND approach should be rejected for 
what it is--a theoretical but inappropriate think tank white paper.
    In broad terms, RAND inaccurately presents the role of the recently 
released EPCA Study that addresses both the location of natural gas and 
oil resources underlying federally controlled lands and the federal 
restrictions to accessing these reserves. It is essential to put the 
intent of the study in perspective, which is stated in the Executive 
Summary of the report:

          It is important to emphasize that this inventory was prepared 
        at the direction of Congress. It is not a decision making 
        document. The inventory identifies areas of high and low oil 
        and gas potential and the nature of constraints to the 
        development of those resources in five basins in the Interior 
        West. Any reassessment of these restrictions on oil and gas 
        activities will occur in public-land use planning or the 
        legislative process, both of which are fully open to public 
        participation and debate over the appropriate balance between 
        resource protection and resource development.

    The primary interest in developing this information relates to 
assuring that the debate over access is addressing real issues--land 
where the resources are, the restrictions that exist there, and the 
basis for those restrictions. It is a valuable tool to get beyond the 
false arguments that have been made over the past few years that 95 
percent of federal lands are available to leasing. With the SPCA Study, 
these efforts at misdirection can be avoided.
    However, RAND tries to obfuscate the issue by suggesting new 
factors should be considered. Specifically, RAND suggests that the 
determination of resources should be based on a new test--viable 
resources. To move from the current approach of defining ``technically 
recoverable'' resources--the type of analysis in the EPCA study--to 
``viable resources,'' RAND proposes three additional factors. These 
are: (1) exploration and production costs, (2) infrastructure and 
transportation costs, and (3) environmental impacts. All of these are, 
in fact, elements that go into the ultimate development decision for a 
resource. At issue is not whether they are factors, but how they will 
be used.
    In the RAND approach, the federal government would assess these 
issues. While the environmental impacts of development are an 
appropriate issue for the federal government to ultimately address, the 
economic determinations are not.
    In the RAND theory, the federal government would assess whether the 
wellhead price was adequate to justify development. RAND even includes 
a simple graph demonstrating that its economic assessment in a specific 
basin diminishes the justifiable resource to a negligible volume. The 
RAND theory would also have the federal government determine if there 
was adequate infrastructure and transportation to move the produced oil 
and natural gas to market.
    Simply put, the federal government is not positioned to make these 
determinations. This is the role of the permit process and capitalism. 
Currently, those who believe they can meet the economic challenges of 
finding, producing, and transporting oil and natural gas drive the 
development decisions. If they believe they can economically develop 
the resource, they apply for permits to drill. This is a logical and 
proper approach. No U.S. Geological Survey assessment of a resource 
will be as robust as those who seriously seek to develop it. They will 
look to more extensive information and, if convinced, will take the 
risk to find it. Risk is the key issue here. The federal government 
does not bear the burden if its assessment is right or wrong. But those 
who want to permit an area do. If they fail, they lose the money. So, 
they will carefully choose when and where to develop. They will make 
the decisions regarding whether the wellhead price is adequate--or will 
be. They will make the decisions on whether the infrastructure is 
adequate--or will be. This is the proper place for these decisions to 
fall--not the RAND approach of tossing these choices to the 
bureaucracy.
    The final issue of environmental impacts becomes a part of the 
permitting process. On a case-by-case basis, the federal government 
makes the decisions regarding what environmental requirements must be 
met to develop an area. It has been an imperfect process for decades. 
But, it should remain a function that is applied through the 
development of Resource Management Plans and permits. If the 
environmental protection requirements are too severe, they will limit 
or stop development. At the same time these decisions should be based 
on sound science and pragmatic management of the environmental needs of 
each area.
    The RAND approach fails a key test--where decisions should be made. 
It may be interesting reading, but it is valueless as a policy tool.
    Thank you this opportunity to submit testimony. We look forward to 
working with the Committee on these important issues in the coming 
months.

    The Chairman. I think we will proceed to hear the witnesses 
and then inquire of them, unless somebody wants to otherwise. 
Let us proceed then.
    The next witness is Mr. Steven Leer. You have been 
introduced, Mr. Leer. Please proceed.

  STATEMENT OF STEVEN F. LEER, PRESIDENT AND CEO, ARCH COAL, 
       INC., ON BEHALF OF THE NATIONAL MINING ASSOCIATION

    Mr. Leer. Thank you, Mr. Chairman and members of the 
committee. And thank you, Senator Talent, for that gracious 
introduction.
    As Senator Talent said, I am president and CEO of Arch 
Coal. And I am here on the behalf of Arch Coal and the National 
Mining Association. I appreciate the opportunity to appear 
before the committee and ask that my entire written statement 
be made part of the hearing record.
    The Chairman. It will be made a part of the record.
    Mr. Leer. Mr. Chairman, we want to thank you for holding 
these hearings on the important role of resources found on 
Federal lands and how those resources will play in a balanced 
national energy strategy. We also want to commend your efforts 
to produce balanced comprehensive energy policy legislation.
    The need for legislation is being driven home daily, as we 
witness the stunning run-up in stop market prices for oil and 
gas over this winter, prices that will be reflected in the 
energy markets as well and will be reflected in our economic 
performance.
    Affordable and reliable energy is a necessity for economic 
growth. One of the foundations of our economy is reasonably 
priced abundant energy. Coal is the fuel of choice for over 50 
percent of the electricity generated in the United States. Low-
cost coal-fired electric generation has tripled since 1970, 
while criteria emissions are only 70 percent of what they were 
1970.
    The Chairman. Would you state that again, please?
    Mr. Leer. Coal-fired electricity is about 50 percent of the 
Nation's generated electricity today. Low-cost, coal-fired 
electric generation has tripled since 1970, yet criteria 
emission, as measured by the EPA, are only 70 percent of what 
they were in 1970. The Clean Air Act is working is what that 
really says.
    The Chairman. Right.
    Mr. Leer. With approximately 395 million tons of production 
in 2001, the latest available data, coal from Federal lands 
constitutes 35 percent of the domestic production. In the 
Western United States, 71 percent of the coal is produced from 
Federal lands. These mines on Federal lands directly employ 
approximately 11,000 workers with annual wages of nearly $500 
million. Royalties paid to the Federal Government were an 
estimated $337 million in 2001, with many millions more paid 
through bonus bids to obtain the leases.
    In 2001, my company paid over $145 million in royalties, 
bonus bids, taxes, and fees to the Federal and State 
governments from a single mine in Wyoming. That is over 40 
percent of the total sales realization from that operation. And 
it does not include income tax.
    Because coal is a domestic energy resource that is 
reliable, affordable, and, through the use of clean coal 
technologies, increasingly clean, coal can and should continue 
to play a major role in meeting the energy needs of our Nation 
in the future. Of the known Btus in the ground in the United 
States, 85 percent are in the form of coal, 10 percent are 
natural gas, and 5 percent are oil.
    Coal production will increase. And much of this new coal 
will be from reserves located on Federal lands or lands 
effectively controlled by Federal policies. BIA estimates that 
the Nation will require an additional 300 million tons of coal 
production per year by 2020. 90 percent of that additional 300 
millions of production will probably be produced from Federal 
lands.
    With coal from Federal lands projected to play an 
increasingly important role in meeting our growing energy 
needs, Federal policy should promote efficient and responsible 
production of coal resources. To meet this anticipated need and 
to fulfill the balance in environmental and economic visions 
that I have heard many in this room articulate, demand limited 
and focused modifications to the Federal Coal Leasing Act of 
1976.
    These changes will help enhance our use of domestic energy 
in a time of increasing uncertainty. Neither NMA nor Arch 
advocate a wholesale reform of the Federal Coal Leasing Act. 
However, we do support the focused modification of a limited 
number of provisions that, one, no longer reflect the economic 
and market realities; two, result in bypass of nearby coal 
reserves from existing leases; three, compel inefficient 
production; and, four, reduce Federal and State royalties and 
bonus bid revenues.
    Specifically, we propose eliminating the 160-acre life of 
lease limitation on Federal modifications to mines so that 
smaller adjacent tracts of noncompetitive Federal coal that 
would be otherwise bypassed can be added to a Federal coal 
lease. Particularly in the West, the mines have gotten and 
larger. And 160 acres is really something that was appropriate, 
probably, back in 1976, but is just inappropriate today.
    Giving the Secretary discretion to allow consolidation of 
leased reserves that will require more than 40 years to mine, 
thereby providing long-term efficiency and orderly development 
of Federal, State, and private coal and minimizing the 
potential for bypassing nearby coal resources and the attendant 
loss of Federal and State royalty and tax revenues. Again, the 
mines are much larger. Our largest mine has over $800 million 
invested and produces over 70 million tons a years, which, to 
put that in perspective, is 30 miles of unit trains every day. 
It is not a train crossing anybody wants to be at.
    Allowing the Secretary to accept the payment of advanced 
royalties in lieu of continued operations for a total of 20 
years and allowing the lessees to apply those paid royalties 
against actual production beyond the current 20-year 
limitation, while simplifying the methodology for computing 
advanced royalties.
    And the last point would be allowing--excuse me, second to 
last point--allowing the Federal coal lease to lessee to file 
its mine plan with the Secretary later than three years after 
the issuance of the lease, but before taking any action on the 
lease that might cause a significant environmental disturbance, 
so that the coal operator can coordinate his preparation and 
submission of its MLA plan, lease plan and mine plan, dealing 
with the coal resource recovery with the permit required under 
the Surface Mining and Control Act, SMACRA, which addresses the 
environmental planning and production measures, as appropriate.
    And last point is clarifying that the act does not require 
a bond in connection with deferred bonus bid for coal leases 
while protecting the Federal interests, but that if a lessee 
fails to pay an installment of a deferred bid on or before its 
due date, the lease would revert back to the Federal 
Government.
    These changes recognize the long lead times and the 
extremely large capital expenditures necessary to produce 
Federal coal in the most efficient low cost and environmentally 
sensitive manner.
    I have reached my time, but I would like to add just one 
last comment on some of the other--really, following perhaps 
Senator Talent's point. We talked a bit about coal bed methane 
and the Powder River Basin as a huge producer of both coal and 
coal bed methane. Really, legislation is urgently needed to 
provide a statutory mechanism to resolve the mineral 
development conflicts, which have resulted from conflicting 
leases issued by the Federal Government and since the 1999 
Supreme Court decision that reversed the previous practice in 
the Souther Ute case.
    This committee has previously reported legislation to 
provide a mechanism to resolve these conflicts. And we are 
eager to work with the committee to report a comparable measure 
as a free-standing legislation or part of a broader energy 
package.
    My prepared statement also does make some comments on the 
poorly developed and, I would argue, legally questionable late 
2004 service roadless rule. And I think it is imperative of 
expeditiously addressing the need for western regional power 
planning process to facilitate the siting and construction of 
necessary generation and transmission.
    Again, I would like to thank you, Mr. Chairman, for all of 
your hard work, and the committee's, because this is very 
important to the Nation. Thank you.
    The Chairman. Thank you very much.
    [The prepared statement of Mr. Leer follows:]
Prepared Statement of Steven F. Leer, President and CEO, Arch Coal Inc.
    Mr. Chairman, my name is Steve Leer. I am President and CEO of Arch 
Coal, Inc. headquartered in St. Louis, MO. I am appearing here today on 
behalf of the National Mining Association (NMA) to testify on the 
important role energy resources on federal lands, specifically coal 
resources, have in maintaining the reliable and affordable supply of 
energy that our nation needs to support our economy. Thank you for the 
opportunity to present the mining industry's views on this subject.
                                summary
    Affordable, reliable energy is a necessity for economic growth. 
Domestic, affordable and increasingly clean coal provides over 20% of 
all the energy that is used in the United States and is the fuel of 
choice for over 50% of the electricity generated in our nation today. 
Nearly 35% of our coal production is from mines on federal and Indian 
lands. Over one-third of the nation's coal reserve is found on lands 
owned or controlled by the federal government. Forecasts show that 
close to 90% of new production expected to come on line over the next 
20 years will be from mines on federal lands. This statement will 
discuss the changes in policy needed to ensure that the vast resources 
on federal lands can contribute to the goal of energy self-sufficiency 
while at the same time ensuring that both the environment and the 
economies of the regions in which these resources are located are 
protected and advanced.
                          general introduction
    Arch Coal, Inc., headquartered in St. Louis, MO is the second 
largest coal producer in the United States. In 2002, our operating 
subsidiaries mined nearly 115 million tons of coal--approximately 11 
percent of the nation's production--from surface and underground mines 
in Wyoming, Colorado, Utah, West Virginia, Kentucky and Virginia. Arch 
shipped coal to approximately 140 power plants in 30 states, providing 
the fuel for 6% of the electricity used by Americans last year. Arch 
owns or controls approximately 3.0 billion tons of coal reserves 
including reserves on federal lands.
    In 2002, our company mined nearly 70 million tons of low-sulfur, 
sub-bituminous coal from our operating mines in the Powder River Basin 
(``PRB'') of Wyoming, 7 million tons in our West Elk Mine in Colorado 
and 13 million tons from three mines in Utah. This coal is almost 
exclusively mined on federal lands. One of Arch Coal's highest 
priorities is to operate safe and environmentally responsible mines. We 
are very proud of the safety and reclamation performance of our mines 
and the national recognition we have received from the Office of 
Surface Mining (OSM) and the Mine Health and Safety Administration 
(MSHA) for our efforts
    The National Mining Association (NMA) represents producers of coal, 
metals and non-metal minerals, as well as manufacturers of processing 
equipment, machinery and supplies, transporters, and engineering, 
consulting and financial institutions serving the mining industry. The 
members of NMA produce over 80% of America's coal, a reliable, 
affordable, domestic fuel choice used to generate over 50% of the 
electricity used in the nation.
          coal from federal lands is an important contributor 
                to a balanced national energy strategy.
    Mr. Chairman we would like to commend you for holding these 
oversight hearings on the important role resources found on federal 
lands play in a balanced national energy strategy. Energy, whether it 
is from coal, oil, natural gas, uranium or renewable sources, is the 
common denominator that is imperative to sustain economic growth, 
improve standards of living and simultaneously support an expanding 
population.
    There is no question that our nation will require more energy in 
the future both for economic reasons and to support a larger 
population. We will use energy more efficiently due to technological 
advances, conservation and increased efficiency. But, we will use more 
energy. Meeting this demand with reliable affordable energy while 
maintaining high environmental standards will be a challenge, but a 
challenge that can be met with the correct policies that consider and 
enhance the role of all energy sources, including those sources found 
on federal lands.
                    the role of coal in u.s. energy
    Coal reserves, which are geographically distributed throughout the 
US, comprise the greater share of the nation's energy resource base. 
The demonstrated coal reserve is over 500 billion tons, a reserve large 
enough to support a growing coal demand for over 200 years. In 2002, 
1.1 billion tons of coal were produced in mines located in 26 states. 
Coal, or electricity generated from coal is used in all 50 states. The 
coal industry contributes some $161 billion annually to the economy and 
directly and indirectly employs nearly 1 million people.
    Last year, close to one billion tons of coal were used to generate 
over 50 percent of all electricity used in the U.S. Although this is 
more than triple the amount of coal used for electrical generation in 
1970, emissions have declined by over one-third. The Energy Information 
Administration forecasts show that electricity use will increase by 
another 40% by 2020 and that coal use for electricity will total at 
least 1.265 billion tons in 2020, some 280 million tons or 28% more 
than is currently utilized. Data supporting the EIA Annual Outlook 2002 
forecast shows that over 90% of the increase in coal production needed 
to meet these new requirements will come from coal reserves located on 
federal lands.
    Meeting electricity demands will require construction of new power 
plants including coal fired power plants and transmission facilities to 
move the power to where it is needed. Although beyond the scope of this 
hearing, the comprehensive energy bill that is ultimately passed by the 
Congress should include provision for incentives that allow companies 
building these new plants to assume the risks of commercializing new 
advanced clean coal technologies. The mining industry supports 
legislation designed to provide a measure of burden-sharing to cushion 
the cost of improving the environmental performance of existing coal-
based generating facilities and to stimulate deployment of advanced 
technologies to further reduce emissions and improve efficiency in new 
generating facilities.
    Coal fired electricity is and will remain the most reliable and 
affordable electricity available. Electric rates in regions dependent 
upon coal for electricity average at least one-third lower than rates 
in regions dependent upon other fuels for electricity. Forecasts show 
that these differentials will remain in place over at least the next 
twenty years.
    Because coal is a domestic energy resource that is reliable, 
affordable and, through utilization of clean coal technologies, 
increasingly clean, coal can and should continue to play a major role 
in meeting the energy needs of our nation in the future. Coal 
production will increase and much of this new coal will be from 
reserves located on federal lands or effectively controlled by federal 
land policies.
                         coal on federal lands
    Coal mined on federal lands provides a vital portion of the 
nation's domestic energy supply. In 2001 (the latest data available) 
approximately 395 million tons of coal, 35 percent of national 
production, was mined on federal lands. Considering western production 
only, 71 percent came from mines on federal lands and, considering that 
the majority of privately held western reserves are on lands that are 
effectively controlled by federal land policies one can assume that at 
least this much or more of the growing western coal industry depends 
upon federal land management policies. Coal mines on federal lands are 
found in Colorado (68% of production within the state), Montana (56% on 
federal lands and another 13% on Indian lands), New Mexico (26% on 
federal and 35% on Indian lands), North Dakota (8%), Oklahoma (46%), 
Utah (75%), Washington (53%) and Wyoming (85%). In addition, 100% of 
Arizona's coal production occurs on Indian Lands.
    Coal produced on federal lands contributes directly to local 
economies in a positive way. In 2000, this coal was worth over $3 
billion. Production activities provided high paying jobs for at least 
11,000 workers in 2000, paying wages of nearly $500 million. 
Considering both direct and indirect economic benefits, coal produced 
on federal lands provided employment for nearly 110,000 workers with 
wages of over $3 billion dollars. Royalties paid to the Federal 
Government due to coal produced were an estimated $337 million in 2001. 
Additionally, several million dollars annually is received by the 
federal government and shared with the public land states from bonus 
bids for federal coal tracts.
    All the benefits of coal mined on Federal Lands do not remain 
within the region as this coal is shipped to electric generators in 30 
states. Taken as a whole, coal mined on federal lands is used to 
generate over 40% of all electricity generated from coal, or 
approximately 20% of all electricity produced in the U.S.
    The Federal Government owns about one-third of the Nation's coal 
resources, which are located on approximately 76 million acres of land 
principally in the Western United States. Western federal lands contain 
approximately 60 percent of the total western coal reserve base. An 
additional 20 percent of the coal resources in the West are managed or 
impacted by the Federal Government by virtue of (1) the commingling of 
State and private coal reserves with Federal leases and (2) trust 
responsibilities for Indian lands.
                   mineral leasing act modifications
    As stated earlier, over one-third of our coal reserve is owned or 
controlled by the federal government. In the western United States 80 
percent of the coal comes from federal lands. Further, a majority of 
privately held western coal reserves are on lands that are effectively 
proscribed by federal land policies, because of the commingling of 
state and private coal reserves with federals leases. To meet the 
demand described above, limited, focused modifications to the Mineral 
Leasing Act of 1920 (MLA) must be made. These changes will also help 
ensure the nation's energy independence in a time of increased 
uncertainty.
    The MLA authorizes the Department of the Interior through the 
Bureau of Land Management to lease federally owed coal for development 
by private lessees subject to payments and other lease terms and 
conditions. Significant leasing of federal coal did not occur during 
the first 40 years of the MLA. However, by the early 1970s, the amount 
of coal under lease was four times the amount leased prior to 1960, but 
actual production had not increased significantly. This raised concern 
about the holding of vast coal reserves for speculation and whether the 
government was receiving a fair return for the resource.
    In 1976, after several administrative moratoriums on coal leasing, 
Congress addressed these concerns with the passage of the Federal Coal 
Leasing Act Amendments Act (FCLAA). FCLAA imposed a series of 
requirements related to development time frames, land use planning, and 
royalty rates for federal coal leases. Many of these policies were 
based upon forecasts of immediate spikes in coal demand and prices in 
the wake of the 1973-1974 oil embargo. For example, FCLAA's legislative 
history cites forecasts that predict coal demand reaching as high as 
1.4 billion tons by 1980. Although these events spurred development of 
western coal reserves, coal demand never reached the level predicted 
and coal prices actually declined in real terms by $10 a ton in just 10 
years following FCLAA's enactment.
    In many respects, the coal leasing policies adopted in FCLAA were 
intended to address a coal market and industry structure anticipated in 
a different era. In the more than 25 years since FCLAA's enactment, the 
coal industry has undergone a substantial restructuring in order to 
survive a market and price structure that dictates flexibility and 
efficiency. While there are many features of the federal coal leasing 
program that present impediments to the most rational and efficient 
development of federal coal resources, today we focus our testimony on 
modifications to a limited number of provisions that: no longer reflect 
economic and coal market realities; result in the bypass of nearby 
federal coal reserves; compel inefficient production; and reduce 
federal and state royalty revenues.
    These changes recognize the long lead times and extremely large 
capital expenditures necessary to produce federal coal in the most 
efficient, low cost and environmentally sensitive manner. Moreover, 
they reflect the very type of flexibility most private coal lessors 
retain in order to assure that their coal resource can be fully 
developed so they can maximize their return in the form of future coal 
royalty revenue.
    Coal Lease Modifications: Current law recognizes that it might not 
always be possible to determine all the lands to include in an initial 
lease due to geologic uncertainty or other reasons. In an effort to 
balance the desire to ensure federal coal is competitively bid, with 
the realization that an operating mine may need to add unleased federal 
coal, it was provided that up to 160 acres in the aggregate could be 
added to a federal coal lease. This provision would eliminate the 160 
acre life-of-mine limitation on federal coal lease modifications. This 
provision would allow the Secretary to add smaller quantities of non-
competitive coal to an existing lease outside the time consuming lease-
by-application process. This valuable tool facilitates the leasing of 
small quantities of contiguous coal that might otherwise be bypassed 
forever as the coal in question cannot support a stand-alone mining 
operation. Certain leases either have met and others are dangerously 
close to the current limitation.
    The Secretary's discretion in the granting of lease modifications 
is not unfettered. 43 CFR 3432 allows the authorized officer to modify 
the lease to include all or part of the lands applied for if it is 
determined that: (1) the modification serves the interests of the 
Untied States; (2) there is not competitive interest in the lands or 
deposits; and (3) the additional lands or deposits cannot be developed 
as part of another potential or existing independent operation. While 
the lands could be added without competitive bidding, the government 
would retain discretion to lease these tracts based upon its 
determination whether it will receive the fair market value for the 
lease of the added lands, either by cash payment or adjustment of the 
royalty applicable to the lands added to the lease by the modification.
    40-Year Mine-out Requirement: The Secretary should be given the 
discretion to allow the consolidation of leased coal reserves into a 
logical mining unit (LMU) that will require more than 40 years to mine. 
A logical mining unit may include federal leases as well as contiguous 
lands where the U.S. does not own the coal. The purpose of an LMU is to 
allow the coal lessee to achieve maximum economic recovery of federal 
coal, and where mixed coal ownership exists by combining federal and 
private tracts of coal into one unit for purposes of meeting MLA 
requirements of diligent development and continued operations. Current 
law requires that the coal reserves of the entire LMU must be mined 
within a period of 40 years.
    This change would allow long term efficiency and orderly 
development of federal, state and private coal and minimize the 
potential for bypassing nearby coal resources and attendant loss of 
federal and state royalty and tax revenue. This proposal would not 
affect the existing requirement of diligent development or continued 
operation.
    Advance Royalties: The Secretary should be allowed to accept the 
payment of advance royalties in lieu of continued operation for a total 
of 20 years, allow the lessees to apply those paid royalties against 
actual production beyond the initial twenty year lease term, and 
simplify the methodology for computing advance royalties. This change 
would permit the Secretary and federal coal lease holders the 
flexibility to manage federal coal resources for maximum return to the 
federal and state treasuries and avoid the compulsion of production 
that is not warranted by market conditions.
    LMUs and individual federal coal leases are subject to the MLA's 
requirements of ``diligent development'' and ``continued operation.'' 
To meet the diligent development requirement, a federal lessee must 
produce the LMU or federal lease's recoverable coal reserves in 
commercial quantities within its initial 10-year period. ``Commercial 
quantities'' is defined by regulation as one percent of the lease or 
LMU's recoverable coal reserves. Failure to meet diligent development 
requirements shall result in the termination of the lease by the 
Secretary. The diligent development requirement cannot be postponed or 
substituted by the payment of advance royalties. NMA is not suggesting 
the elimination of the existing diligent development requirement in the 
MLA.
    After the diligent development requirement is met, the lessee must 
continue to produce coal from the lease or LMU in commercial quantities 
defined by regulation as one percent of the recoverable reserves during 
the remainder of the lease term. This is referred to as the continued 
operation requirement. Any federal coal lease on which continued 
operation is not maintained shall be cancelled.
    Continued operation is not always possible if the coal producer 
cannot mine coal at the prevailing market price. As a practical matter, 
a lessee must spend tens of millions of dollars, if not hundreds of 
millions, in order to lease federal coal, prepare and process permits, 
acquire equipment, hire a labor force, and achieve diligent 
development. Obviously, the operator of a mine wishes to continue 
operating after the significant costs to open the mine have been 
expended. However, a currently operating mine may temporarily lose its 
competitiveness, due to a number of factors, including: increased costs 
of production due to geology; limited labor supply in rural areas; 
changes in prices for competing coals or other fuels such as oil, gas, 
hydro and nuclear; changes in transportation costs for coal and 
competing fuels, which transportation costs constitute a significant 
cost to the coal consuming customer; and shifting state and federal 
environmental regulations which periodically affect which coal can be 
burned in which power plant. When one or more of these factors arise, 
an operation is generally idled and when the market dictates, 
operations resume.
    Under current law, upon application to and approval by the 
Department of Interior, an operator/lessee may pay advance royalties in 
lieu of continued operation. This system keeps royalty income flowing 
to the government while a mine is idled. Currently however, the 
aggregate number of years during the period of any lease for which 
advance royalties can be paid in lieu of continued operations is 10. 
Thus, a mine which periodically opens and closes as the market 
dictates, can add to this aggregate 10 year limitation. Due to the 
current age of many currently operating mines exceeding 25 years, and 
the potential for many additional years of mining at the same 
locations, the 10 year aggregate should be extended to 20 years.
    When advance royalties are paid in lieu of continued operation, 
those amounts can be used to offset production royalties due when coal 
is again produced. At present, no advance royalty paid during the 
initial 20-year term of a federal lease or LMU may be used to reduce a 
production royalty after the 20th year of that lease or LMU's initial 
term. This arbitrary limitation should be removed in light of the 
longevity of mines producing federal coal.
    When advance royalty is accepted in lieu of continued operation, it 
must be paid in the amount equal to the production royalty that would 
be owed on the production of 1 percent of the recoverable coal reserves 
and shall be computed on the federal recoverable reserve estimated by 
BLM at the initiation of the lease. Determining this amount is a long 
and contentious process. Changing the calculation to one computed based 
on the average price for coal sold in the spot market from the same 
region saves considerable federal and industry resources currently 
expended over disputes on acceptable valuation methods and more 
accurately reflects the current market conditions that idled the mine. 
Simply put, if the mine is idled, the coal is marginal and would find 
its highest value in the spot market. If the coal actual sale reflects 
a higher value, the difference in the royalty is collected at that 
time.
    Due to the shifting competitiveness of various operations, several 
federal coal lease holders have been forced temporarily to curtail 
production and idle mines. Without the option of extending the lease by 
paying advance royalties, producers will be forced to take one of three 
courses of action: 1) prematurely terminating leases and walking away 
from the massive existing investment; 2) pay advance royalties on older 
leases with no opportunity to recover advance royalties; 3) dump coal 
onto the market at distress prices. All of these options will have a 
negative impact on the Nation's energy position, disrupt coal and 
electricity markets, waste federal coal resources, cost jobs, and 
reduce federal and state tax and royalty income.
    If leases are terminated, the probability of the location being 
mined again is small. Royalty income that would otherwise flow from the 
payment of advance royalties would cease. Not only would jobs at the 
subject mine be lost, but so would jobs in the mine support sector 
(transportation, construction, vendors, consultants, and other jobs in 
the community that support the miners and their families.) Coal that 
otherwise would fuel electricity generation would remain in the 
ground--wasted.
    Paying advance royalties without ever recouping the payment would 
result in the practical application of a 25 percent royalty on future 
production. Even if the market could bear the price of coal burdened 
with this levy, which is unlikely, electricity rates would ultimately 
reflect this increase.
    If federal coal lessees/operators send this coal to market in order 
to recover at least a portion of the cost of production, it would 
compete not just with other federal coal from the West, but also 
private coal in markets shared by private coal from the Midwest and 
Appalachia. Failure to address these anachronistic provisions in the 
MLA will hurt non-federal coal producers in the Midwest and Appalachia. 
Modifications to the advance royalty provisions do not favor Western 
coal over Eastern coal or federal coal over private coal. They just 
make good sense for America's energy future.
    Coal Lease Operation and Reclamation Plan: Under current law, 
before causing a significant disturbance of the environment, but no 
later than three years of lease issuance a lessee must submit for the 
Secretary's approval an operation and reclamation plan. NMA supports 
the elimination of the three year mandate.
    This change would allow the coal operator to coordinate the 
preparation and submission of its MLA mine plan dealing with coal 
resource recovery with the permit required under the Surface Mining 
Control and Reclamation Act (SMCRA) which addresses the environmental 
planning and protection measures. This will eliminate duplication of 
resources by both the lessee and the Department while still requiring 
the lessee/operator to submit a plan before it takes any action which 
might cause a significant environmental disturbance as required 
presently by the MLA.
    Financial Assurances with Respect to Bonus Bids: This section 
clarifies that MLA does not require a bond in connection with deferred 
bonus bids for coal leases. However, if the lessee fails to pay any 
installment of a deferred bid, the lease would terminate.
    A combination of economic conditions and extraordinary events over 
the past two years has caused severe constraints in the surety capacity 
available to satisfy financial assurance requirements of the coal 
mining industry. It is unlikely that in the near term adequate surety 
capacity will be available to meet the mining industry's financial 
assurance requirements. The mining industry's inability to access 
surety for various financial assurance requirements imposed under 
federal and state regulatory programs is a product of severe 
disruptions to the credit markets, and not a result of any unusual loss 
experience associated with mining related projects. Indeed, the surety 
industry loss experience for mining related bonds are no more, and 
often less, than that for the other surety lines. Between 1989 and 
2000, for example, the loss ratio for the entire surety industry was 
about 28%, while the ratio for mining related obligations was about 
25%. However, substantial losses that began to appear at the end of 
2000 through 2002 in the surety industry's other underwriting lines of 
business has resulted in the exit of many primary sureties from the 
market and caused the remaining ones to limit their underwriting in all 
areas. For the mining industry, the inability to access surety 
jeopardizes the continuation of existing operations and thwarts 
development of new operations since bonds are required as a condition 
to receive permits or other necessary government authorizations.
    Last summer, the House Resource Committee Subcommittee on Energy 
and Mineral Resources conducted a hearing on this emerging crisis in 
the surety market. The Subcommittee heard testimony describing how an 
investment grade company was unable to access a surety bond at a 
reasonable price and terms to secure its deferred bonus bid payments 
for a federal coal lease. Companies that cannot access surety bonds for 
their financial assurance requirements must use cash or cash 
equivalents which compromise their capital and liquidity positions. The 
effect of these developments for the federal coal leasing program is 
that potentially fewer bidders will participate and bids will be lower 
than before as companies factor in the higher expense of posting some 
form of financial assurance. At the same time, not requiring a bond or 
other form of financial assurance to secure future installments for a 
deferred bonus bid does not pose any undue risk. First, bonus bids must 
be paid in five installments with the first due upon execution of the 
lease. Placing a lease into production typically exceeds five years so 
the leasehold will remain largely undisturbed. If the successful bidder 
defaults on an installment and is unable to cure that default, the 
Department of the Interior can cancel the lease and the cancelled lease 
resold to another prospective bidder.
    In sum, this provision protects the government in the event of 
default without further reducing the limited surety capacity available 
to guarantee performance of other regulatory obligations.
        coal/coal bed methane conflict in the power river basin
    The Powder River Basin of Wyoming and Montana is one of the world's 
richest energy resource regions and includes the largest reserves of 
low sulfur coal in the United States. Virtually all of the coal and 
about 50 percent of the oil and gas reserves in the Basin are owned by 
the federal government and managed by the Bureau of Land Management 
(BLM) under the Mineral Leasing Act of 1920. Problems have arisen 
because BLM issued federal coal leases and federal oil and gas leases 
for the same locations in the Basin. When these oil and gas leases were 
issued coal bed methane resource development was not contemplated. It 
was not until a Supreme Court decision that the law became clear 
regarding whether the coalbed methane underlying federal land belongs 
to the oil and gas lessee or the coal lessee.
    In those areas leased both for coal and oil and gas, disputes over 
timing of mineral development have risen. For safety and operational 
reasons, concurrent development typically is impossible. No statutory 
measure exists to resolve disputes over the sequence of mineral 
development in these areas where the federal government has ``double 
leased'' its minerals. BLM has yet to provide effective guidance to 
reduce the likelihood of these disputes.
    In order to achieve optimum recovery of the Basin's energy assets, 
legislation that would provide the necessary statutory direction to 
resolve these minerals development contests should be enacted. The 
statutory provisions should be used only in the conflict areas of the 
Powder River Basin and only as a last resort if private negotiations 
and BLM administrative policies prove to be inadequate.
    Absent a statutory mechanism, coal production could be delayed, 
blocked or jeopardized by the inability of the coal producer to meet 
FCLAA's diligence requirements and, as a consequence, forfeiting its 
lease and/or reducing royalty revenue to federal government and states 
if coal is bypassed on active operations. Bonus bids paid to the 
federal government, and shared by the state, could also be diminished 
as a consequence of the bidder uncertainty over whether the coal leased 
can be economically and timely developed.
    This committee has previously reported legislation to provide a 
mechanism to resolve these conflicts and we are eager to work with the 
committee to include comparable provisions either as free-standing 
legislation or as a part of a larger energy package.
         u.s.da forest service roadless area conservation rule
    As the roadless rule was being developed in the late1990s, the 
mining industry sought meaningful maps from the Forest Service that 
identified the areas affected by the proposed rule. Other than large 
scale maps available to the general public on the Forest Service's 
roadless area web site, NMA members were given no maps nor descriptions 
on which a coal operator could base operational decisions. Ultimately, 
coal operators with reserves underlying or adjacent to lands 
administered by the U.S. Forest Service developed their own maps for 
Colorado and Utah and provided copies to the agency. These maps showed 
that in several locations the roadless area boundaries overlaid 
existing federal coal leases and other significant coal resources.
    The roadless area boundaries are based on a 20-year old inventory 
and were never field-verified to establish whether the areas in 
question still retained the roadless values the rule supposedly was 
designed to protect. Neither the Forest Service nor any other federal 
agency has made an effort since the promulgation of the rule to 
undertake such verification.
    While implementation of the rule was enjoined by the U.S. District 
Court in Idaho, operations located on Forest Service administered lands 
continued with modest delays as a result of federal agency concerns 
about the roadless area boundaries. Since the 9th Circuit Court set 
aside the District Court injunction, affected operations on and 
adjacent to Forest Service administered lands have been subject to 
noteworthy delays and uncertainties.
    Many of the coal mines that are impacted by the roadless rule are 
underground operations that do not cause the surface disturbance that 
is associated with surface mining operations but do need access to the 
surface to construct and maintain ventilation and other systems 
essential to the health and safety of miners. Many of these systems 
must be in place in advance of extraction. Others, such as fire 
suppression systems must be accessible instantaneously in the event of 
emergency.
    Unless unexpected and immediate access to surface areas overlying 
operations is certain, no mine operator will develop underground coal 
already under lease. Unless it is certain that reserves lying beyond 
initial-leased areas will be available for leasing in the future, 
capitol for any mine development will not be available. To overcome 
these obstacles, a process must be established by policy, rule, or 
legislation whereby the roadless area boundaries can be identified and 
modified based on currently existing roadless values in a timely 
manner. Whatever the mechanism, the process must be flexible, 
predictable and timely.
   electric power plants built near western coal fields can provide 
  reliably affordable electricity, but changes need to be made in how 
        transmission lines cost justifies, funded and permitted.
    Low cost coal and hydroelectric generation are the two reasons 
electricity is affordable in the U.S., by providing over 60% of the 
electricity in the Western U.S. and well as the U.S. as a whole. The 
West in particular, and the the U.S. in general, have benefited from 
locating this generation where the natural resource is located and 
building high voltage transmission lines to deliver the affordable 
energy to the load. The West as in most of the U.S. completed the last 
of these major low cost generation and transmission expansion over 20 
years ago. Since that time, the electric load has grown by 60%, but 
little new low cost generation has been added and the transmission 
system has expanded by less than 20%. The Western power crisis two 
years ago as well as the current price run up that is working its way 
through the country but especially the Northeast is significantly 
attributable to the lack of transmission to move low cost generation to 
the high cost areas which are transmission constrained. In order to 
stabilize electricity prices and continue to provide affordable 
electricity in the U.S., new low cost coal generation needs to be built 
along with the associated transmission lines. The most significant 
barrier to adding this low cost generation is getting the necessary 
transmission built.
    There are three fundamental obstacles to getting transmission built 
in the U.S.. The first is having a regional transmission planning 
analysis which will show economic value via reduced power prices by 
adding major transmission lines in conjunction with new and existing 
low cost generation. Such planning and cost/benefit analysis does not 
currently exist but is sorely needed to convince and provide support to 
the State regulators and public officials of the need for these new 
and/or upgraded transmission lines. This is especially true in the West 
where three Regional Transmission Organizations bifurcate the West. The 
Western Governors have proposed a voluntary region wide planning 
process, however the effort is sorely in need of funding and, without 
official standing, is unlikely to make timely or useful progress.
    The second obstacle to getting new transmission built is having a 
mechanism to allow customers who are hundreds if not over a thousand 
miles away from the low cost generation fund on a long term basis part 
of these transmission lines so they can receive the benefits of this 
low cost remote generation. The lack of a truly regional and in the 
West, Westwide transmission planning and rate setting entity prohibits 
customers far away from low cost generation to advocate and pay for 
these valuable transmission projects which are associated with new 
affordable generation.
    The final obstacle to getting new transmission built is the timing, 
siting and permitting processes. This obstacle will only be apparent 
once the first and second transmission obstacles are removed. No 
project will get to the siting and permitting phase unless it has 
recognized cost/benefits and can be funded, hopefully in part by those 
who will benefit from the lines being built. While siting and 
permitting is difficult, the West appears to have a protocol developed 
by the Western States and the Federal land and environmental agencies 
that have jurisdiction over some element of siting and permitting 
transmission lines. This joint protocol is intended to enable a single 
coordinated review of the siting and permitting issues to timely 
process transmission applications. I would add that it may useful to 
have the DOE take the lead moving these projects through the siting and 
permitting phase similar to what occurred via Executive Order to 
address the California energy needs.

    The Chairman. You know that the issue you raised is very 
sensitive to some of the Senators for their respective States. 
And we are going to try our best to resolve that issue.
    Mr. Leer. Thank you.
    The Chairman. Mr. Alberswerth, we welcome you here. Would 
you please note that your testimony is going to be made a part 
of the record and proceed, please?

   STATEMENT OF DAVID ALBERSWERTH, DIRECTOR, BUREAU OF LAND 
           MANAGEMENT PROGRAM, THE WILDERNESS SOCIETY

    Mr. Alberswerth. Thank you very much, Mr. Chairman, for 
inviting me today. As predicted by Senator Talent, my views on 
the new EPCA report are quite different from Mr. Bayless'. And 
I will briefly try to describe those differences. And my 
remarks today focus on the availability of onshore Federal oil 
and gas resources in the Rocky Mountain States.
    The vast majority of Federal oil and gas resources within 
the Rocky Mountain States is currently available for leasing 
and development and has been for a long time. That is the 
inescapable conclusion to be drawn from the Interior 
Department's recently released EPCA report. It concludes that 
85 percent of the technically recoverable oil and 88 percent of 
the technically recoverable natural gas resources underlying 
Federal lands in this region are currently available for 
leasing and development.
    Interesting, if you add to those amounts of technically 
recoverable oil and gas estimates, the oil and gas on non-
Federal lands, that would be State and private lands, the 
amount of technically recoverable oil and gas is even greater.
    The Chairman. Why has it not been recovered? Why has it not 
been used?
    Mr. Alberswerth. I believe that a lot of it is being 
developed. I think the estimates include resources that are 
currently under development. There are several different 
categories that that report discusses, including those lands 
that are currently under development, sir.
    The Chairman. Those numbers are not the same. The amount 
that is available is not the amount that is producing, is that 
not right?
    Mr. Alberswerth. That is correct.
    The Chairman. I am asking why, if there is so much, why is 
so little producing?
    Mr. Alberswerth. I believe that there is--well, as I 
understand it, there are about--about 11 percent of our natural 
gas is coming from Federal lands. I think that includes the 
OCS.
    The Chairman. That begs the question: How much of the 
Federal land is not producing natural gas that is available for 
natural gas? And how much of it that is available for oil is 
not producing oil? Do you know?
    Mr. Alberswerth. That, I cannot tell you, sir.
    The Chairman. Would it not be a lot?
    Mr. Alberswerth. I think that the point of the EPCA report 
was to report that there is a great deal of Federal oil and gas 
that is in fact available for development. And in fact there is 
a lot that is being developed and explored for currently.
    The Chairman. I guess my question is: Is the industry not 
interested in developing that that is not currently being used, 
or why is it not developing it?
    Mr. Alberswerth. Oh, no, sir. I believe the rest of my 
statement goes into how much development is--to give you a 
sense of how much development is taking place. We believe 
that--it appears to us that oil and gas development is a very 
robust activity on the Federal lands.
    The Chairman. Proceed.
    Mr. Alberswerth. Okay. Thank you, sir.
    For example, according to the Bureau of Land Management, 
there are currently over 94,000 producing oil and gas wells on 
the public lands that it manages. In 2001, the BLM permitted a 
record 4,850 drilling projects on BLM lands, which was up from 
3,400 permits issued in fiscal year 2000. The recently released 
Powder River Basin environmental impact statement projects 
development of over 39,000 new wells in the Wyoming portion of 
the Powder River Basin--this was one of the documents that Mr. 
Griles is submitting for the record--and between 10,000 and 
26,000 new wells in the Montana portion over the next 10 years.
    The new reasonably foreseeable development scenario for the 
Farmington resource area in your State projects a development 
of close to 10,000 new wells during the next 20 years, an area 
that already has 19,000 producing oil and gas wells. I think 
the point, sir, in response to your question is that the oil 
and gas program of the BLM is a very robust one on the public 
lands.
    These facts and trends and the recent findings of the EPCA 
report contradict claims that there are too many restrictions 
or impediments that inhibit industry access to oil and gas on 
the public lands. For instance, the Bush administration's 
National Energy Policy claimed that about 40 percent of the 
natural gas resources on Federal land in the Rocky Mountain 
region have been placed off limits to development. However, the 
new EPCA report, based on the most recent information that we 
have, indicates that it is about 12 percent.
    If you view that from another perspective, and that is the 
estimates of gas resource base published in the National 
Petroleum Council's 1999 study, that 12 percent amounts to 
about 1 percent of the total gas resource base that we have in 
the Continental United States and the Outer Continental Shelf.
    Because it is now established from the Interior 
Department's new analysis of Federal onshore research that very 
little publicly owned natural gas is off limits to development, 
the industry's focus, lobbying focus, may shift to that 
category of lands in the EPCA report that is called available 
for leasing with restrictions in oil and gas operations beyond 
standard stipulations. And there was an earlier discussion 
about stipulations.
    I have a list of the basic categories of stipulations in my 
written statement. I will not go into those now. But I think a 
point to keep in mind--and I notice I am out of time here--is 
that these stipulations are very flexible. And they are 
frequently waived. The BLM in some field offices actually 
publishes the record of waivers of protected stipulations for 
oil and gas leases. And if you look, for instance, on the 
Pinedale and Rawlins field office web sites, you will find that 
during the 2001/2002 season, stipulations were granted about 77 
percent of the time, in 2002/2003 about 86 percent of the time, 
et cetera. So those are very flexible stipulations.
    In conclusion, in light of the new information from the 
Department of the Interior's EPCA study that most Federal 
lands, most Federal oil and gas resources, within the Rocky 
Mountain region are available for leasing and development, the 
question policy makers should be asking is not: Are too many 
Federal oil and gas resources unavailable?
    Instead, we should be asking such questions as: Have we 
adequately protected the scenic, ecological, environmental, air 
and water resources, wildlife habitat and wilderness values of 
our public lands and natural forests? Are farmers and rancher 
with split estate lands being treated fairly when it comes to 
coal bed methane development? Are we being careful enough to 
protect the precious surface and groundwater resources of the 
rural communities where the coal bed methane boom is in full 
swing?
    Should we be more careful in waiving leasing provisions 
designed to protect wildlife resources? And are reclamation 
bonds imposed upon operators adequate to the task of assuring 
post-operation cleanups?
    Thank you again for this opportunity to present our views. 
And I will be pleased to answer your questions.
    The Chairman. Thank you very much.
    [The prepared statement of Mr. Alberswerth follows:]
   Prepared Statement of David Alberswerth, Director, Bureau of Land 
               Management Program, The Wilderness Society
    Mr. Chairman and Members of the Committee, thank you for the 
opportunity to present the views of The Wilderness Society on the 
subject of oil and gas development on onshore federal lands. My name is 
David Alberswerth, and I am The Wilderness Society's Bureau of Land 
Management Program Director. My statement will focus on the Bureau of 
Land Management's onshore oil and gas program affecting the public 
lands of the Rocky Mountain States.
    The vast majority of federal oil and gas resources within the Rocky 
Mountain Overthrust Belt states is currently available for leasing and 
development, and has been so for a long time. Despite industry claims 
to the contrary, and earlier assertions by the Bush Administration, the 
Department of the Interior's recently released ``EPCA'' report 
concludes that 85 percent of the ``technically recoverable'' oil, and 
88 percent of the ``technically recoverable'' natural gas resources 
underlying federal lands in this region of the country are currently 
available for leasing and development. Interestingly, if one includes 
the EPCA estimates of ``technically recoverable'' oil and natural gas 
from non-federal lands in the analysis, only 7 percent of natural gas 
and about 9 percent of oil within the study region are unavailable for 
development (see attachment).1,* The inescapable conclusion 
to be drawn from the most recent data available is that over 90 percent 
of the region's oil and gas resources, on federal and non-federal 
lands, are available for leasing and development.
---------------------------------------------------------------------------
    * All attachments have been retained in committee files.
---------------------------------------------------------------------------
    Oil and especially natural gas development is a robust activity on 
federal lands within the Rocky Mountain West. For example, according to 
the Bureau of Land Management, there are currently over 94,000 
producing oil and gas wells on the public lands that it manages. In 
fiscal year 2001, the BLM permitted a record 4,850 drilling projects on 
BLM lands, up from 3,400 permits issued in fiscal year 2000 (see 
attachment).\2\ The recently released Powder River Basin environmental 
impact statement projects the development of over 39,000 new coal bed 
methane wells within the Powder River Basin within the next 10 
years.\3\ The new ``reasonably foreseeable development scenario'' 
published for the BLM's new draft Farmington Resource Management Plan 
projects the development of 9,970 new wells during the next twenty 
years within that planning area, which currently has over 19,000 
producing oil and gas wells.\4\ During the Clinton Administration, 
leases were issued on 26.4 million acres and 19,310 drilling permits 
were issued (see attachment).
    These facts and trends, and the recent findings of the EPCA report, 
contradict claims by industry advocates that there are too many 
``restrictions'' or ``impediments'' that inhibit industry ``access'' to 
oil and gas resources on public lands. For example, the Bush 
Administration's ``National Energy Policy'' claimed that, ''. . . about 
40 percent of the natural gas resources on federal land in the Rocky 
Mountain region have been placed off-limits'' to development.\5\ 
However, the EPCA report concludes that, of the 138 trillion cubic feet 
(TCF) of ``technically recoverable'' gas resources within its study 
area, only 15.9 TCF is actually off-limits to development, or 12 
percent.\6\
    Viewed from another perspective, this 15.9 TCF is about 1 percent 
of the 1,466 TCF ``gas resource base'' within the continental U.S. 
(exclusive of Alaska) identified by the National Petroleum Council in 
its 1999 study, Natural Gas: Meeting the Challenges of the Nation's 
Growing Natural Gas Demand.\7\
    Because it is now established from the Bush Administration's own 
analysis of federal onshore resources that very little publicly-owned 
natural gas and oil is off-limits to development, the industry's 
lobbying focus may shift to that category of lands identified in the 
EPCA report that is ``Available for Leasing With Restrictions on Oil 
and Gas operations Beyond Standard Stipulations.'' Just what is the 
nature of these ``special and seasonal stipulations'' of such concern 
to industry?
    This category of available lands often encompasses areas where 
evidence indicates the presence of sensitive wildlife habitats, such as 
elk calving or winter range areas, or big game migration corridors, or 
sage grouse leks, or critical raptor habitat where oil and gas 
activities at certain times of the year could pose severe threats to 
wildlife. In such cases, the BLM may require that operations only occur 
at certain times of the year, when such areas are not in use by certain 
wildlife species. In some cases, the BLM imposes ``No Surface 
Occupancy'' leases, whereby the lessee is required to access the oil 
and gas resource from off-site. Such ``NSO'' stipulations are also 
designed to protect wildlife habitats, while making the resource 
available for extraction. The types of special imposed to protect 
environmental values can be summarized as follows:

          ``Standard Stipulations''--These are provisions within 
        standard BLM oil and gas leases regarding the conduct of 
        operations or conditions of approval given at the permitting 
        stage, such as: prohibitions against surface occupancy within 
        500 feet of surface water and or riparian areas; on slopes 
        exceeding 25 percent gradient; construction when soil is 
        saturated, or within 1/4 mile of an occupied dwelling. These 
        are generally applied to all BLM oil and gas leases, regardless 
        of special circumstances.
          ``Seasonal'' or other ``Special'' Stipulations--``Seasonal 
        Stipulations'' prohibit mineral exploration and/or development 
        activities for specific periods of time, for example sage 
        grouse strutting areas when being used, hawk nesting areas, or 
        on calving habitat for wild ungulate species. These are often 
        imposed at the request of state wildlife officials, as well as 
        in compliance with U.S. Fish and Wildlife Service requests to 
        protect sensitive species.
          ``No Surface Occupancy''--NSO leases prohibit operations 
        directly on the surface overlaying a leased federal tract. This 
        is usually done to protect some other resource that may be in 
        conflict with surface oil and gas operations, for example, 
        underground mining operations, archeological sites, caves, 
        steep slopes, campsites, or important wildlife habitat. These 
        leases may be accessed from another location via directional 
        drilling.

    Representative of the oil and gas industry have voiced criticism 
regarding why such provisions are imposed on federal oil and gas leases 
at all, or why certain areas of our public lands and national forests 
are off-limits entirely to oil and gas development, when in their view 
energy extraction is such an important activity on federal lands. The 
answer is that the federal land management agencies' primary obligation 
is not to satisfy the wants and desires of the oil and gas industry. 
Instead, they are statutorily mandated to balance the wishes of the oil 
and gas industry with the protection of a multitude of environmental, 
ecological, scientific, and cultural values harbored by our public 
lands.
    For example, Congress mandated in the Federal Land Policy and 
Management Act that the Secretary of the Interior manage the public 
lands,

        ``. . . in a manner that will protect the quality of 
        scientific, scenic, historical, ecological, environmental, air 
        and atmospheric, water resource, and archeological values; that 
        where appropriate, will preserve and protect certain public 
        lands in their natural condition; that will provide food and 
        habitat for fish and wildlife and domestic animals; and that 
        will provide for outdoor recreation and human occupancy and 
        use.'' (43 U.S.C. 1701(a)(8))

    Similar statutory requirements pertain to the National Forests. The 
imposition of special, seasonal, or NSO stipulations in certain 
circumstances is the result of a policy developed in the 1980s by the 
BLM to balance the industry's desire for access to oil and gas deposits 
with the BLM's responsibility to manage the other resources and values 
enumerated in FLPMA. Although characterized as ``burdensome'' by some 
industry representatives, these stipulations can--and frequently are--
waived at an operator's request.
    Attached to my statement are tables published and available on the 
Pinedale and Rawlins BLM Field Office websites. Both areas are subject 
to intense contemporary exploration and development activities. What 
the tables clearly indicate is that wildlife stipulations on oil and 
gas leases are frequently waived at the request of the operator to 
accommodate activities not otherwise allowed during the period of the 
seasonal restriction, or within an area ordinarily set aside from oil 
and gas activities. For example, the table listing ``Winter Range 
Exceptions 2001-2002'' for the Pinedale Field Office indicates that of 
40 requests for stipulation waivers, 31 were granted, or 77 percent. 
During the 2002-2003 season, of 52 requests for waivers received by the 
Pinedale Field Office, 45 were granted, or 86 percent. Rates of waiver 
approval are similar from the Rawlins Field Office for fiscal year 
2002: Of 128 requests recorded, 103 were granted, or 80 percent (see 
attachments). Instead of focusing on instances where the BLM may not 
have issued a particular drilling permit application in a timely manner 
satisfactory to the operator, it seems to us that the frequency of 
stipulation waivers in areas where there is intense development raises 
the question as to the effectiveness of stipulations as a means of 
protecting key environmental values.
    For example, we know that sage grouse populations in the U.S. are 
in severe decline, in fact, their distribution has declined by about 
50%, while estimated population size has declined by about 90%. As a 
population they are very sensitive to habitat fragmentation. Given the 
frequency of the waivers indicated on the attachment for sage grouse 
habitat, it seems to us the question we should be asking is not, ``Why 
does the industry have to put up with seasonal restrictions for sage 
grouse habitat?'' Instead, we should ask, ``What impacts are occurring 
to sage grouse populations as a consequence of the BLM's frequent 
waiver of stipulations designed for their protection?''
    Finally, in our view it is entirely appropriate that some federal 
lands should be off-limits to oil and gas leasing and development. 
Lands identified as off-limits in the EPCA Report include National 
Parks, National Monuments, designated Wilderness Areas, and Wilderness 
Study Areas. One specific area that has been placed administratively 
off-limits to future leasing and has drawn especially harsh criticism 
from the oil and gas industry is the Rocky Mountain Front area of the 
Lewis and Clark National Forest in Montana. In 1997, following an 
extensive public involvement process, the Forest Service adopted a 
Forest Plan amendment for approximately 356,000 acres of the Front that 
effectively prohibited leasing for the duration of the Plan amendment. 
The area in question--the spectacular and dramatic uplift of the Rocky 
Mountains from the Northern Great Plains--is a region of remarkable 
scenic beauty, and harbors a multitude of extraordinary wildlife, 
scenic, and recreational values. It has been the focus of preservation 
efforts by Federal, State and private entities for almost a century.
    The Lewis and Clark National Forest Plan adopted in 1986 emphasized 
management of the area in question for its special wildlife, 
recreation, and scenic attributes. The Plan Amendment adopted in 1997 
implemented that earlier management direction by prohibiting oil and 
gas leasing for the next 10-15 years. It should also be noted that the 
1997 Plan Amendment enjoys widespread support within the State of 
Montana. Although the oil and gas industry has attempted to 
characterize the Forest Supervisor's decision as essentially 
``arbitrary and capricious'', the Supervisor's decision has been upheld 
upon administrative appeal and at the District and Appeals Court 
levels. As the Bush Administration pointed out in its brief to the 
Supreme Court in opposition to the industry's request that the Supreme 
Court review the Court of Appeals decision, ``. . . the Record of 
Decision approving the [1986] Forest Plan acknowledged `people's 
apprehension over the effects of oil and gas development and their 
desire for the land to remain unchanged,' and concluded that 
`management of the Rocky Mountain Division should emphasize wildlife, 
recreation, and scenic values.''' (Brief for the Federal Respondent in 
Opposition at 5, Independent Petroleum Association for America v. U.S., 
279 F. 3d 1036 (9th Cir.), cert denied, 123 S. Ct. 869 (2003).)
    In conclusion, in light of the new information from the Department 
of the Interior's EPCA study that most federal oil and gas resources 
within the Rocky Mountain region are available for leasing and 
development, the question policy-makers should be asking is not, ``Is 
too much federal oil and gas unavailable for leasing and development?'' 
Instead, we should be asking such questions as: Given the extensive 
availability of our publicly-owned onshore oil and gas resources for 
development, have we adequately protected the scenic, ecological, 
environmental, air and water resources, wildlife habitat, and 
wilderness values of our public lands and national forests? Are surface 
owners with split estate lands being treated fairly when it comes to 
coalbed methane development? Are we being careful enough to protect the 
precious surface and groundwater resources of the rural communities 
where the coalbed methane boom is in full swing? Should we be more 
careful in waiving leasing provisions designed to protect wildlife 
resources, especially when it comes to declining species, such as sage 
grouse? And, are reclamation bonds imposed upon operators adequate to 
the task of assuring post-operation clean-ups?
    Thank you again for this opportunity to present our views.
                               End Notes
    1. BLM, January, 2003, Scientific Inventory of Onshore Federal 
Lands' Oil and Gas Resources and Reserves, etc., pp. xii-xiii, xv.
    4. Engler, Thomas W., et.al., BLM, July 2, 2001, Oil and Gas 
Resource Development for San Juan Basin, New Mexico.
    6. Op. cit., p. 3-5.
    7. Domestic Petroleum Council, December, 1999, Natural Gas--Meeting 
the Challenges of the Nation's Growing Natural Gas Demand, Volume I., 
Summary Report, pp.7-8.
                                addendum
      Alaska's North Slope and the Arctic National Wildlife Refuge
    The Congress will soon have before it yet another proposal to open 
the magnificent Arctic National Wildlife Refuge to oil and gas leasing 
and development. What has not received much attention, however, is the 
fact that the vast majority of Alaska's North Slope is legally 
available to oil and gas exploration and development.
    In 1999, Secretary of the Interior Bruce Babbitt opened 4.6 million 
acres in the northeast section of the National Petroleum Reserve-Alaska 
on the North Slope. More than 85 percent of this area is open to 
leasing under this decision. The Bureau of Land Management has just 
began the process of preparing an Environmental Impact Statement to 
allow full field development of three successful exploration wells 
drilled by Phillips Petroleum in the area. The Bush Administration has 
indicated that it will reopen the Northeast NPR-A plan this spring to 
consider offering more acreage for leasing.
    Last month, the BLM released a draft Environmental Impact Statement 
on a plan to open 8.8 million acres in the northwest section of the 
NPR-A. The Administration is expected to open most, if not all, of this 
vast area for leasing. This would constitute the largest single onshore 
offering to industry in the history of America's Arctic. A Final EIS is 
expected in late summer.
    Earlier this month, the Minerals Management Service issued a Final 
EIS for the Beaufort Sea Outer Continental Shelf, off the coast of 
Alaska's North Slope. This action opened 9.8 million acres to oil and 
gas leasing--virtually the entire Arctic Ocean off Alaska's North 
Slope.
    The state of Alaska is pursuing an aggressive lease sale program 
under what it calls ``Areawide'' leasing on state lands and waters on 
Alaska's North Slope. Each year the state offers for lease all of the 
unleased state-owned acreage between the Canning and the Colville 
Rivers, and state-owned waters offshore between Barrow and the Canning 
River. On state lands alone, the oil industry has access to an 
additional 14.7 million acres.
    The Arctic National Wildlife Refuge--which constitutes just five 
percent of Alaska's North Slope--now stands as the only stretch of the 
North Slope that is closed by law to oil and gas exploration and 
development. Oil development would severely damage this national 
treasure. The Arctic National Wildlife Refuge is truly one-of-a-kind. 
The refuge's diverse wildlife includes significant populations of polar 
bears, brown (grizzly) bears, muskoxen, caribou, and wolves. Millions 
of migratory birds nest or feed on the refuge each spring and summer 
between annual migrations that bring them through the backyards and 
nearby parks and refuges of Americans throughout the rest of the 
country. The area should remain closed to oil and gas development. We 
will continue to oppose efforts to open this rare and special place to 
oil and gas development.

    The Chairman. Senator, would you like to lead off with 
questions of your witness from your State, Senator Talent?
    Senator Talent. Actually, Mr. Chairman, I can afford to 
stay. So if the other Senators want to go, that is fine.
    The Chairman. Mr. Bayless, let me start off with you. 
First, let me thank you again for coming and also thank you for 
the time and effort that your family has put forth in the basin 
in terms of community activities and being the good corporate 
citizens that you have been.
    Now let me raise an issue that I think cannot be avoided. 
It was raised by Senator Bingaman briefly in his remarks. There 
is a growing concern in the San Juan Basis by the ranching 
community that the issues related to the responsibility of the 
oil and gas producer on the split estates where the ranchers 
have surface rights, that you also have the right to go in and 
use that, produce access, use access and produce wells that the 
independent producers are not adequately complying with the 
rules and regulations regarding cleanup, regarding notice, 
regarding minimizing the damages.
    Can you express to us what you know about that and what is 
being done and by whom to see if these issues can be resolved?
    Mr. Bayless. Yes, sir. I will address that.
    First, let me say you introduced me from Farmington, New 
Mexico. And although I have lived in Denver for 25 years, I 
view myself as a New Mexican.
    The Chairman. Right.
    Mr. Bayless. And I appreciate your willingness to continue 
to claim me as such.
    The Chairman. You have a lot of family there.
    Mr. Bayless. Yes, I do. And I still spend a lot of time 
there. Thank you.
    We have also read about the difficulty of the split 
estates, these issues. But the reality is, in the vast majority 
of instances, the partnership between the surface owner and the 
mineral owner works pretty well. The two groups are kindred 
spirits. They earn their livings from developing the natural 
resources of the land.
    I am also in the cattle ranching business and know that it 
can be a fragile relationship between mineral owner and the 
surface owner. It must be approached with sensitivity, honesty, 
and patience on all sides of the table. And usually there is 
resolution to be found.
    The Chairman. Mr. Bayless, let me suggest for you, your 
information is different than mine. And I would suggest that 
you had better go take a look. Because the kindred spirit is 
falling apart. It is falling apart very rapidly.
    Mr. Bayless. Okay.
    The Chairman. And somebody had to put it together. It will 
either be put together in a friendly basis, or we will have a 
lot of problems that we do not have to have. So whatever your 
experience in the field is, I submit to you that you had better 
be asking some people that are down there and be asking the 
BLM, because there are some very ruffled feathers that are 
about to rupture the kindred spirit that existed between the 
two groups, to the extent that they are preparing for the 
ranchers a set of proposals that would generate a different set 
of rights than have existed heretofore that they are submitting 
to us, asking that we create more rights for the rancher that 
should be enforced by new laws.
    So I think it is important that people like you know that. 
I am trying to get the information to the other people in New 
Mexico. Some of them have it already. But they had better get 
it very quickly.
    Mr. Bayless. I appreciate that. I know that there is a 
problem. The producer inherited the problem. We did not create 
this split estate. It is something we must live with and we 
must address and come up with solutions.
    The Chairman. There is no question.
    Mr. Bayless. And we certainly welcome your help in arriving 
at those solutions.
    The Chairman. Now, Mr. Bayless, let me just ask two 
questions. We seem to have some use of language that is 
creating a situation where something is falling between the 
cracks here that we are not understanding. Because on the one 
hand the reports seem to be saying one thing and the 
independent producers seem to be telling us another thing about 
the production of oil and gas on the public domain, in terms of 
how long it takes, in terms of what is really available.
    So what we understand is that maybe EPCA does not report 
the full story when it comes to the impediments and delays 
associated with oil and gas leasing on the Federal lands. Is 
that a true statement that I have just stated? And if so, can 
you for the record supply us with information regarding that?
    Mr. Bayless. Yes, sir. Your statement is accurate. The EPCA 
study talks about lands available for leasing.
    The Chairman. Correct.
    Mr. Bayless. It is certainly accurate. Going back to my 
earlier statement, when we looked, that 5 percent--and maybe 
this is where the facts speak for themselves--5 percent of the 
Federal mineral estate is both leased and currently productive. 
More than that is leased, is yet to be productive. Hopefully it 
will be explored, and productive reserves will be found.
    There are many impediments for oil and gas development. A 
big one is the timely processing of APDs that I discussed. The 
EIS process, the inadequate funding of the EIS process in most 
instances, although that is a congressional mandate to do an 
environment impact statement, that ends up being funded by 
companies that are interested in working in that area, all 
those delays that Mr. Griles was discussing earlier in the 
morning.
    The Chairman. Okay. Very good. And if you have any further 
details on the delays, we would like to know about them. And if 
there is funding, let us know that there is inadequate 
resources. If it is the rules and regulations, if you will let 
us know, either you or through your association, we would like 
to try to work with the group of people to see if we can 
expedite them from the standpoint of changing rules or 
providing more resources so the job can be done better and more 
expeditiously.
    Mr. Bayless. I think providing more resources is a key part 
of it. I think providing some direction to the Department of 
the Interior that we need to look for, you know, and this is 
very global, but need to look for ways to say yes, development 
can be done in an appropriate fashion and get away from the 
mindset of no, not here, not now, not yet, without more study.
    The Chairman. Yes. Great.
    Mr. Leer, let me talk to the Wilderness Society first. Your 
testimony seems to me to indicate that you express a certain 
amount of satisfaction with the findings in the EPCA report. 
Does this represent a new philosophy that accepts leasing and 
development in those areas already open to oil and gas leasing?
    Mr. Leer. Mr. Chairman, we think that that report is a very 
useful document for the reasons that Secretary Griles said it 
would be used for as a basis for land use planning. I am not 
sure that we do agree necessarily that all of the areas that 
are identified in the report should be available for leasing.
    I mean, well, for instance, some of the areas identified as 
not available for leasing, I do not think there is any dispute 
about. There are national parks, designated wilderness areas, 
national monuments. Perhaps there is--I am sure that there is 
more detail in the background documents about, you know, 
specific areas that are listed as available for leasing that we 
might not agree with. But from the written report, we were not 
really able to tell that. But by and large, as a planning 
document and as a useful guide, we think that this is a very 
useful report.
    The Chairman. Thank you very much.
    Senator, do you want to go now?
    Senator Bingaman. If you are through.
    The Chairman. I am finished. Go ahead, Senator.
    Senator Bingaman.
    Senator Bingaman. Thank you very much, Mr. Chairman. I 
apologize to everybody for having had to duck out for another 
hearing.
    Let me just ask a couple of questions, one on the subjects 
that I was focused on before with Secretary Griles. Maybe I 
will ask you, Mr. Bayless, on this issue of adequate personnel 
with the BLM to actually do the process applications for 
permits to drill and also to do the inspection work and the 
enforcement work there in the San Juan Basin, what is your 
perspective on whether or not they are adequately staffed there 
in the San Juan Basin to do that, or whether this is an issue 
that requires more attention?
    Mr. Bayless. I do not know whether the additional 13 people 
that you discussed, I do not know whether they are all on board 
and whether that will be adequate or not.
    Senator Bingaman. I do not think they are yet.
    Mr. Bayless. But it is certainly moving in the right 
direction. The permitting delays in the--out of the Farmington 
office have not been--are middle of the road, are not as bad as 
they are in some parts of the Rockies. It certainly takes much 
beyond the 30 days that is specified to receive an APD to go 
through that process. But things certainly are moving in the 
right direction.
    Senator Bingaman. Okay. Let me ask on the other issue, 
which I also asked Secretary Griles about. That is, this 
conflict between coal leasing and coal bed methane production. 
He indicated that he had just heard this morning that all those 
problems have gone away. Is that your impression, Mr. Leer?
    Mr. Leer. No.
    Senator Bingaman. What do you think the extent of the 
problem is? And what is needed to fix it?
    Mr. Leer. I think what the Secretary had been referencing 
was perhaps that in the latest round of Federal coal leases and 
methane leases, coal bed methane leases, that there probably 
have--we probably worked out some arrangement, very difficult. 
I can speak to my own company. We bid on the coal leases under 
the old law. The law changed. And all of a sudden found 
ourselves in conflict with the then-coal bed methane holder. 
And we had an $800 million coal mine that basically cost $1 
million a day that does not run, a little over, actually. And 
for a $30,000 coal bed methane well, we could stop the coal 
mine.
    And we ended up working out an unfavorable fee to start 
buying the wells, as we came to them. But nonetheless, that was 
done.
    I would refer back to the Department of the Interior's 
legislation and testimony back last year, I believe, under 
H.R., on the House side, 2952, I think, to Congresswoman 
Cubin's coal CBM bill. And the Department of the Interior 
testified that it supported legislation to resolve the CBM coal 
mine conflicts and provide for timely--to provide for timely 
conflict resolution, where the inability to reach a settlement 
agreement could result in bypassing vast amounts of valuable 
coal or possibly even the premature closing of major mining 
operations.
    That testimony was Tom Fulton, Deputy Assistant Secretary 
of Land and Minerals Management, U.S. Department of the 
Interior, on October 11, 2001, before the House Subcommittee on 
Energy and Mineral Resources.
    There is another round of major coal bids coming up, bonus 
bids coming up, in 2004. I think the revenues for the Federal 
Government will certainly surpass several hundred million 
dollars for those bids. I will suspect we will go into another 
major conflict with the coal bed methane producers in those 
rounds and bids.
    And from a very practical point, when we are looking at a 
bonus bid to the Federal Government and ultimately the State 
who shares in that, we do a calculation of what we think it is 
going to cost to mine the coal, what we think that it is going 
to--what the pricing of the coal might be. And we calculate a 
value that we think the coal lease is worth. And if we do not 
think we can get a reasonable number for buying out coal bed 
methane or resolving the conflict, we will put in a high 
number. That high number lowers the value we can pay for the 
bid.
    I mean, that is just the reality of how the financing 
works. And I can assure you our bids are lower under the 
current setup than they would be under one where we would have 
a finite resolution mechanism to solve that.
    Senator Bingaman. Thank you very much, Mr. Chairman.
    Senator Thomas. Let me very quickly--I am sorry. I had to 
step out, also.
    The fact is, however, there is less conflict than there was 
2 or 3 years ago.
    Mr. Leer. Yes, sir, there is.
    Senator Thomas. And moving in that direction. Let me just 
very briefly, each of you, what we are talking about, the 
access, the use, proper use of Federal lands. What is the major 
issue that you think--what issue would you change, if you were 
sitting here? Very quickly. Just go down the line.
    Mr. Alberswerth. There are a number of areas in the West.
    Senator Thomas. Give your best one.
    Mr. Alberswerth. Okay. There are a number of areas in the 
Western States that we think should be considered for 
protection as wilderness or other national protective 
categories that we would like considered in the new BLM 
planning process.
    Senator Thomas. Okay. Would you also agree that when they 
have wilderness studies, there ought to be some conclusion to 
it? It either ought to be made wilderness or get out of the 
study category?
    Mr. Alberswerth. Well, sir, we would very much like those 
wilderness study areas designated as wilderness.
    Senator Thomas. I agree. But they should not go on the 
study forever.
    Mr. Leer.
    Mr. Leer. I would really ask that the amendments, the 
limited amendments, to the coal leasing act be enacted and 
clarified, because it covers three or four points. But each 
point is specifically impacting either Federal revenues or the 
ability to efficiently mine coal in the most responsible 
environmental and economic manner.
    Senator Thomas. Thank you
    Mr. Bayless.
    Mr. Bayless. I would ask that you direct the BLM to have 
greater accountability for management under the multiple use 
concept.
    Senator Thomas. Okay.
    Ms. Morrison. Senator Thomas, I think that I would have to 
second Deputy Secretary Griles' request to pass ANWR. I would 
highlight, however, that our proposal for that Reserve to be 
open does include funds that would be rolled back into 
conservation and land and water resources. We wanted to provide 
for conservation efforts with the funds, the monies, the 
royalties, the bonus bids that could be had from that area.
    Senator Thomas. Okay. Thank you. Appreciate you all being 
here. As you know, we are probably in the time when the energy 
production and so on--we had--all this week we have been 
talking about that gas, specifically yesterday, the coal, the 
clean, clear air thing, and so on. And it is going to make a 
real impact on people in this country and the availability of 
energy. And at the same time, all of us particularly who live 
in the West, I think, and live there with the public lands, 
want to preserve those as well. But most of us are dedicated to 
multiple use. And we can do that.
    Senator Alexander.
    Senator Alexander. Thank you, Mr. Chairman.
    My question is about clean coal technology and specifically 
coal gasification. Mr. Leer, let me start with you. But if 
other shave any comments on it----
    Is coal gasification a realistic, as we look toward the 
future? What are the limits on it? And what are the incentives 
that you specifically were referring to in your testimony, that 
you would suggest we consider for clean coal technology, to 
encourage clean coal technology?
    Mr. Leer. Yes, Senator. Coal gasification is realistic. In 
fact, if we go back 50 years, we have seen coal gasification 
processes primarily in Europe and South Africa. We do have 
demonstration plants currently running in the United States. 
Now in terms of pure economics, the economics have not been 
competitive against current coal fired generation or hydro or 
some of the other generations.
    Senator Alexander. How far apart are they? And what would 
it take to make it competitive?
    Mr. Leer. I think it is getting into the technologies. And 
you are going to get beyond my expertise here pretty quickly. 
But you get into the technologies of raising the heat 
efficiencies within the plant itself. The combined cycle 
natural gas plants, which are the most efficient powerplants in 
the United States, or currently in the world, have about a 60-
percent heat rate, as they call it, or efficiency rating, where 
a normal single cycle coal plant might be in--a modern one 
might be in the very low forties.
    As we take coal gasification forward, I think we can, with 
ceramics and some of the other technologies that might be out 
there, we could raise that. And for each increase in 
efficiency, you are going to get a tremendous lowering of the 
total cost.
    And again, the demonstration plants, by their very nature, 
are high cost, high capital, because you are still 
experimenting. You are still changing and tweaking things as 
you are going along. But as the technologies develop, I think 
it is tremendous.
    The incentives that I was referencing were really the 
incentives that were contained in the energy legislation of 
last year on both the House and Senate side, and the 
administration, for that matter. The numbers were a bit 
different, but basically it comes down to a simple fact. And I 
am an engineer. And I am a pretty simple guy. When I look at 
the indigenous energy in the United States of known fossil 
fuels, 85 percent of them are coal. And if I have 85 percent of 
anything within our company, I want to figure out how to use it 
better and more efficiently, because I know I have a lot of it.
    As we move forward, if we move forward towards a hydrogen 
economy, I mean, there are two ways to generate hydrogen, 
basically. There is electrolysis through water, or it is 
capturing the hydrogen atom that is combined with a carbon 
atom. Again, it is a fossil fuel. And I think coal is going to 
play that important role in that process.
    So to me it is the public-private partnership to develop 
these technologies. We, as Arch, support some clean coal 
technology removal, a group called ZEBCO, which is zero-based 
emissions powerplant. It is probably 20 or 30 years off. But 
when you do the math on the math balances, the energy balances 
on paper, it works.
    But gasification exists. It is just the highest cost kind 
of electric generation before you get to the subsidies of 
renewals that exist out there, if you rank order. And again, 
our economy, we are going to see the impact of the energy 
prices on our economy right now. It has me concerned that the 
current energy spike is going to maybe move us in the wrong 
direction on economic growth.
    Senator Alexander. Thank you, Mr. Chairman.
    The Chairman. Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman. I would like to 
direct my comments or questions to Mr. Alberswerth here.
    Looking at your written testimony, you have an addendum, 
which is highlighted, Alaska's North Slope and Alaska National 
Wildlife Refuge. And I read through it. And quite honestly, I 
was confused. And if I am confused, and I think I know a fair 
amount of what is going on with Alaska's resources up there, I 
cannot imagine what the public thinks.
    You stated that, and I quote, ``the vast majority of 
Alaska's North Slope is legally available to oil and gas 
exploration and development.'' You further go on to state that 
more than 85 percent of this area, now we are talking about 
NPRA, is open to leasing under former Secretary Babbitt's prior 
decision.
    You then go on in the very last statement, as we are 
talking about ANWR, to state that ANWR, which constitutes just 
5 percent of Alaska's North Slope, now stands as the only 
stretch of the North Slope that is closed by law to oil and gas 
exploration and development.
    So we have a situation. We have 1,000 miles of coastline up 
there in Northern Alaska. And your statements would seem to 
indicate that virtually all, or a vast majority, or 
approximately 85, is open to oil and gas exploration and 
development. You have used the term legally available. And 
maybe this is where we are splitting hairs or mincing words. 
But then you go on to say that only 5 percent is closed by law.
    I am more than just a little bit confused. And I think it 
is these types of statements that do confuse the public in 
terms of what is open and what it actually means to say that 
these are open for development. We may have it available for 
leasing. But leasing cannot take place because of the 
environmental impact statements, because of the regulations. 
Statutorily it may be--you can go in there, but in terms of the 
science, in terms of the environmental impact, and in terms of 
the regulations, it is not physically possible to do.
    We have incredible coal reserves available in the North. We 
have 120 billion tons of coal in the Northwest Arctic. But we 
are subject to restrictions and regulations and permitting 
requirements that say you have to replace the land to its 
natural condition. We have permafrost. We have ice lands. It is 
scientifically, physically impossible.
    So is that open in terms that you are considering open? Is 
this what we are talking about when we say legally available?
    The information and the word that we are trying to get out 
to the public is that when you look at that thousand miles of 
coastline, there is approximately 14 percent of Alaska's 
northern coastline that is available and is possible to open, 
and is open currently for drilling and development. 14 percent 
is a far cry from the 85 percent, or possibly 95 percent, that 
you have referenced. And I guess I would like to hear your 
comments when you say that the vast amount of Alaska is open 
for oil and development.
    Before I have you respond to that, I would go down to, 
again, your last paragraph, where you are discussing ANWR. And 
you state, ``Oil development would severely damage this 
national treasure.''
    Now we have had testimony here earlier today. We have had 
testimony in this room over the past several weeks and years 
prior to this, talking about the available technology that is 
out there that does focus on the environment and how we can 
allow for the drilling in these environmentally sensitive 
areas.
    And I will grant you that all of the North Slope is in a 
sensitive area. But we have been working on the technology to 
allow for this in a manner that is not going to severely 
damage. These are the types of arguments that we are up against 
consistently. And it is very difficult to get the facts across 
to a public who has never seen, and most Americans will never 
see, never have the opportunity to go up there and see 
firsthand what we are talking about.
    So when we are using statistics, when we are using facts, 
it is important that we do not over exaggerate. And I would 
state that an exaggeration of the vast majority of Alaskan 
lands, upwards of 85 percent to 95 percent, open, when in fact 
what we are talking about is 14 percent, is a far cry.
    Mr. Alberswerth. I believe that percentage, that is 
referring to the Arctic coastal plain, the so-called two areas, 
which, of course is off limits to development and the whole 
debate we are having as to whether or not Congress should 
change that statutory protection or not. So that is what the 5 
percent comes from.
    In just reviewing the statement that we did enter into the 
record here, it appears to us that there is a great deal of 
activity under way in Alaska by the Federal Government to open 
up large areas of the Arctic Slope.
    As to the 14 percent, I am not aware of the basis for that 
figure. I can get you the 85 percent figure for the record, if 
you would care for that.
    Senator Murkowski. I would. And I will provide you with a 
copy of our map that shows how we have arrived at the 14 
percent.
    Let us see. I had another point that I wanted to make here, 
but----
    The Chairman. You indicated you would supply a copy. What 
would you like him to do, analyze your copy and comment on it? 
Is that the purpose for submitting it?
    Senator Murkowski. Well, what I would like to submit, and I 
will give this to Mr. Alberswerth, is our map that details what 
is open, what is not open. And as you rightly point out, it is 
the 1002 area that is specifically closed for exploration. That 
is 5 percent of that coastal area, as we go across. So I will 
be happy to provide this to the committee for the record, as 
well as Mr. Alberswerth.
    The Chairman. Thank you very much, Senator.
    Senator Talent.
    Senator Talent. Thank you, Mr. Chairman.
    Let me start with you, Mr. Bayless. Mr. Alberswerth says in 
his statement, ``As evidence of the fact that oil and natural 
gas development is a robust activity on Federal lands, in 
fiscal year 2001, the BLM permitted a record 458 drilling 
projects on BLM lands, up from 3,400 permits issued in fiscal 
year 2000.''
    Now would you agree, if you know, that that statement is 
factually correct or not?
    Mr. Bayless. I could certainly--I believe more permits were 
issued in 2001 than in 2000. Fewer permits were issued in 2002. 
All of these are a much smaller number than using, just 
grabbing a baseline at a busier time in the industry, back to 
the early 1980's, a much, much higher level of drilling 
activity at that time.
    Senator Talent. So you are saying it could be true, but it 
is not significant, in your view, evidence of whether robust 
activity is occurring.
    Mr. Bayless. That is correct.
    Senator Talent. Now in the appendix, Mr. Alberswerth 
provided applications for permits to drill going back to like 
the year 1985, in which it appears--and you may not have this 
in front of you. But it appears----
    Mr. Bayless. I do not.
    Senator Talent [continuing]. In this that permit approvals 
have varied pretty wildly since 1985. You know, 1985, 3,300; 
1986, 1,800; 1987, 1,400. Does that shed any light, in your 
view, on whether this is a significant statistic? I mean, why 
is it not a significant statistic? I mean, it would seem to me 
that if they are granting a record number of applications for 
permits to drill, that is some sign that the activity on 
Federal lands is pretty robust.
    Mr. Bayless. I do know the drilling level in the Inter-
Mountain West is much less than it was 25 years ago.
    Senator Talent. Okay.
    Mr. Bayless. Is it robust? It is moderately robust. I think 
part of what really impacts this, and certainly we have alluded 
to it before, activity in the Powder River Basin, where there 
are a large number of very shallow, small, high-density wells. 
I think that can skew the statistics at times, depending on 
which year you grab, deleting those or including those.
    Senator Talent. So some of the applications may be for 
drilling projects that are pretty small in nature and do not 
affect the--is that what you are saying? That could be it?
    Mr. Bayless. They certainly have an impact. But some of 
those permits may be for 300-foot wells. Some may be for 
14,000-foot wells.
    Senator Talent. Ms. Morrison, do you have a comment on any 
of this? Do you want to help clarify this for me at all?
    Ms. Morrison. Thank you, Senator. I cannot tell you 
offhand----
    Senator Talent. Start with the Chairman. Well, I guess it 
is okay.
    [Laughter.]
    Ms. Morrison. I think I would say in the most recent years 
what you have seen are coal bed natural gas or coal bed methane 
wells. Those are more frequently drilled than, say, a 
conventional oil and gas well.
    Senator Talent. Okay.
    Ms. Morrison. So the numbers may be, as Mr. Bayless has 
indicated, may be skewed from that standpoint. Because in 
Wyoming in particular, Colorado, New Mexico, we have seen the 
coal bed methane wells increase. You are going to have 
shallower, more wells than you will with conventional drilling.
    That could be one of those items, if you would like the BLM 
to analyze the numbers that Mr. Alberswerth appended to his 
testimony, we would be happy to do that.
    Senator Talent. Yes. I think that would be good.
    Mr. Alberswerth, do you have a comment? Is that possible, 
what she is saying?
    Mr. Alberswerth. Yes, I think that----
    Senator Talent. There are more permits but actually less 
significant activity. Is that----
    Mr. Alberswerth. Well, I am not sure what she means by less 
significant activity. There has been a big boom in coal bed 
methane development in, you know, the Powder River Basin of 
Wyoming, in particular in the San Juan Basin. I have a 
speculative answer to part of your question and I think a 
factual answer to part of it, as well.
    I think if you look at the--if you were to track these 
drilling permit numbers with the fluctuating price of oil and 
gas, that might tell you something about why that fluctuates so 
much from year to year. And I think that it is worth looking 
into, whether or not this is evidence more of price variability 
for oil and gas or whether it is availability of land for 
drilling. And I think that is part of the answer.
    Senator Talent. Well, let me get one thing. I do not have 
time to get all the comparisons I would have liked to. But Mr. 
Bayless raised an issue, which seems to me to make sense. And I 
would like you to comment on it. He says that an application 
for permit to drill, that, according to BLM guide, should take 
30 days to process takes on average 137 days to be approved and 
does not blame BLM leadership, but it says that their 
performance decreased by 60 percent. Companies seeking to drill 
waited an average of 137 days and sometimes as long as 370 days 
for Federal approval.
    Now is that a fair statement, in your view, if you know?
    Mr. Alberswerth. It may well be. And I do not know, but it 
may well be.
    Senator Talent. Okay. Now here is the point they are 
getting at. And I would just like you to comment on this.
    And then, Mr. Chairman, I am over my time, but----
    The Chairman. That is fine.
    Senator Talent [continuing]. I just want to follow up on 
this point.
    Would you agree that, in principle, anyway, whether this is 
actually what is happening now, that in principle this could 
happen, that land could be open for leasing and development and 
drilling and the rest of it, in theory, I mean legally open, 
but in practice the difficulties and delays in getting it 
permitted and being able to use it are so great that, as a 
practical matter, it is closed? Would you agree in principle 
that could happen, whether you think that is happening now or 
not?
    Mr. Alberswerth. I agree in principle that that could well 
happen. But you should understand that those lease terms are 
out there. I mean, when you purchase the lease, you know what 
the stipulations are that are on them. And so you are going 
into this deal with the Federal Government, you know, eyes 
open.
    Senator Talent. Right. And that actually--one of the points 
you made is that--and I wanted to bring this up with you--you 
keep focusing on whether it is fair or unfair to these 
companies, which I guess is, to me, a tertiary-type thing. You 
say the answer is the Federal Land Management Agency's is not 
to satisfy the wants and desires of the oil and gas industry, 
which I think we would all agree with.
    But what I want you to see the connect in, and maybe 
comment on this, is I am not worried about the oil and gas 
industry, except insofar as they are employing people in my 
State. I am worried about when business people tell me that one 
of the big reasons they are thinking of leaving the country is 
because of high energy prices. Do you see what I am saying?
    Mr. Alberswerth. Yes.
    Senator Talent. It is not a question of fair. Well, they 
knew going in that they should not have tried to lease it, 
because--you see, I want the energy produced, if we can do it 
in a way that is environmentally sound. It is in all our 
interests to do that.
    And so maybe you can consider whether what they are saying 
is not true to some extent, that these long delays are making 
it financially impossible for them to explore and use this, 
even though in theory that there is--you see the loss to the 
country, if that were the case?
    Mr. Alberswerth. I can certainly sympathize with the 
experiencing long delays in getting a drilling permit. The 
focus of our concern more, though, has been some of the 
criticism leveled at these stipulations that are imposed on 
leases to protect wildlife. And it may take awhile in some 
instances for the BLM to determine whether or not it is a good 
idea to allow a certain type of operation to take place on 
sensitive lands like that.
    That is all I can tell you. I believe that from the data 
that we have seen here in this EPCA report that it is really 
quite clear that most of these federally owned resources are in 
fact available. There are conditions that attack to Federal 
leases to protect these other resources that you mentioned.
    Senator Talent. Right.
    Mr. Alberswerth. And I think that is fair.
    Senator Talent. I think what we have narrowed this down to, 
they are in law available. And then the question over which 
there is obviously disagreement here is whether they are in 
fact available. Because whether the delays or the other 
problems puts them, in effect, you know, off reach. And if 
anybody wants----
    Mr. Alberswerth. Well, I would like to draw your attention 
to another aspect of my statement, which is that those 
stipulations are frequently waived. Seventy, 80, 85 percent of 
the time that the companies ask for them to be waived, at least 
in the three field offices that have published data on their 
website. Now this may be different in other places, but that is 
the data that we were able to get.
    Mr. Bayless. Senator, if I could follow up, not only is it 
an issue of whether those lands are available, but as you 
pointed out, the timing, if there is a long delay, it impedes 
industry. You are not worried about the industry; you are 
worried about gas supply. There are signals that come out of 
the market, price signals, that say we need more gas. We need 
greater--the price has gone up. Where is the supply?
    With these long delays, it creates uncertainty for 
companies to be able to drill those additional wells, to budget 
for drilling those additional wells. It really puts a bad 
filter on those price signals.
    Senator Talent. Thank you, Mr. Chairman.
    The Chairman. Thank you very much, Senator. Might I say 
that I think your last line of questions, with a couple more 
problems added to the approach you have taken, are the essence 
of the argument. Available as a matter of law versus available 
in fact. And it is not all just the stipulations that are at 
issue in terms of whether or not in law and in fact are getting 
close together or are getting farther apart.
    It would appear that in the eyes of the industry which 
produces the energy for the country it is getting farther 
apart, not closer. And I think we are going to get to that in 
terms of the kind of bill we right, the kind of work we do with 
the BLM, in an effort to get them to solve this problem in a 
better way, with the environment taken into consideration.
    Let me just ask one additional question of the 
administration. Mr. Leer spoke of the conflicts that have 
arisen in recent years between Federal oil and gas leases and 
Federal coal leases. Now I have been in and out a couple of 
times for other matters. Has this issue of what are the 
department's plans to resolve this, has that been asked? And 
have they answered that? Could you answer that, please, either 
now or for the record?
    Ms. Morrison. Yes, Mr. Chairman. I would be happy to answer 
that for you, if I can turn to my materials on that. In 
September 2001, the BLM's policy on the coal versus coal bed 
methane or coal bed natural gas conflict expired. We are 
currently, as you had mentioned, with Director Clarke looking 
at taking a more aggressive stance through our policy on that 
very issue, working through the lease terms that we can enforce 
on these properties, that we do know there is a conflict.
    We will do everything we can to work with both of those 
factions of the industry in order to come up with the best 
policy that the BLM can use to help that situation. I think we 
can all probably agree that we want to conserve and to promote 
the production of both of those resources. But it does come at 
a time when they are in conflict in production.
    I think there are ways to do it. I think there are 
voluntary agreements. What the BLM is looking for is what can 
we do through our own lease stipulations to encourage that 
conflict to be resolved in a more amicable way.
    The Chairman. Mr. Leer, is that one of the issues that is 
around now that must be resolved?
    Mr. Leer. I do believe it is, Senator, that the issue--
again, there have not been many big fed releases of coal bed 
methane and coal in the last year. But there is a large number 
scheduled for next year. And I think it is going to rise and be 
a major issue in 2004.
    So if we can get that resolved this year, it will be a plus 
to public policy and clearly a plus to the interested parties.
    The Chairman. Very good. Just a couple more.
    Mr. Bayless and perhaps Ms. Morrison, what is the reason 
for the new surge of well activity in the Four Corners area, 
the new infield drilling? Is that a new rule, a new regulation, 
a conservation change, or what is it that brings that on?
    Mr. Bayless. A lot of it is a new rule from the State 
Conservation Commission allowing a second well in the Fruitland 
coal formation to be drilled per 320-acre spacing. So 
essentially, it is down spacing from 320 to 168-acre spacing. 
This is not--throughout the basin, it is--scientifically it was 
addressed. And there are different areas of the basin where 
this makes sense. But that is one of the--that is impetus for 
some of the drilling. Other is a continued Mesa Verde drilling 
and down spacing.
    The Chairman. Is the activity in that basin, will it be on 
an accelerated pace for a number of years, as a result of what 
you have just described?
    Mr. Bayless. There is going to be a lot of activity for 
several years. There are many thousands, as you have pointed 
out, there are many thousands of wells to drill. That basin 
produces about four billion cubic feet of gas per day. It takes 
a lot of continual drilling to maintain that production.
    The Chairman. Well, that is why I repeat it has become 
very, very urgent, in light of the fact that this drilling will 
be very close in proximity one well to another, that there be 
some arrangements made to assure the ranchers that in fact this 
is not going to be done without regard to their particular 
interests. Because they are all aware of that, and they are 
very concerned that that is going to cause environmental 
degradation, that it impacts on their right to use the ranch 
land, the surface, in a manner that they have leased it for.
    So I urge you again to get started in your community. And 
we will be doing that, too, to get some people working on it.
    Mr. Alberswerth, have you had a change in perspective with 
reference to more renewable energy development on Federal 
lands?
    Mr. Alberswerth. Have we had a change?
    The Chairman. Yes.
    Mr. Alberswerth. If you are referring to the new study that 
was----
    The Chairman. No. Do you have some concern with wind as a 
renewable on public lands that you did not have a few years 
ago, when you were generally in favor of renewables?
    Mr. Alberswerth. Well, we think that there are probably 
places on the public lands where renewable, you know, wind 
farms are appropriate. I think in terms of an overall direction 
on this, Senator, that it would be a wonderful thing if our 
energy policies were to encourage that activity on private 
lands. I mean, it would be a real win-win situation for 
agricultural communities. Farmers and ranchers have experienced 
economic distress----
    The Chairman. How do we encourage it?
    Mr. Alberswerth. Perhaps with tax credits. I am not 
familiar with the current programs, to tell you the truth. But 
I know that there was a witness here the other day from the gas 
industry talking about the boon that section 29 gas credits 
were for the coal bed methane industry. Perhaps you could 
develop something like that similar that would benefit private 
ranchers and farmers in the Northern Plain States and 
elsewhere.
    The Chairman. One last observation for you and your 
members. There is a very large and beautiful ranch in northern 
New Mexico owned by Ted Turner, the Vermejo Ranch. Have you 
heard of it?
    Mr. Alberswerth. I believe I have heard of it, but I am not 
familiar with it.
    The Chairman. I think it is probably one of the best and 
most beautiful multiple use ranches in the United States. And 
the reason it comes to mind is because I heard the testimony, I 
heard you talking about Alaska and how damaging drilling might 
be. Do you know that on that rather fantastic ranch there are 
1,500 gas wells that have been drilled and are producing on 
private property that Mr. Turner says has caused no damage 
whatsoever to this ranch, in terms of its multiplicity of uses?
    It would seem to me that somehow or another there is an 
inconsistency when somebody like that has found a way on 
private property and--I am almost certain that if that property 
were Federal, you would be sitting here saying: Do not drill a 
well on it, almost certain. Not sure, but almost certain. And I 
think that is--if that is possible, probable, then I think that 
is very, very discouraging from my standpoint, because I do not 
think you ought to have a policy that is different than Mr. Ted 
Turner with reference to preserving his ranch. I think he is 
preserving it as well as we ever would. And he thinks you can 
drill gas wells on it. In fact, there may be more than 1,500 
before you are finished.
    Now we have been at it since 10 o'clock. But I will stay 
here for a few questions, if you would like.
    Senator Cantwell. Thank you, Mr. Chairman.
    The Chairman. You are welcome.
    Senator Cantwell. I appreciate the opportunity to 
participate in this hearing. I am particularly interested in 
this area as it relates to further developing alternative 
energy supplies, which I believe our State of Washington needs 
to look at, natural gas specifically. We are very hydro reliant 
and have had lots of challenges because of that hydro system, 
both in the short-term as it relates to droughts and supply and 
complications of the spot market, as well as long-term issues 
on the environment and impact on saving our wild salmon.
    So we certainly want to diversify. And we want to invest 
more resources in developing natural gas, particularly in 
northwest areas of Alaska and possibly even Canada. I do want 
us to think wisely about where we get those resources. And so I 
have a question as it relates to national forest roadless areas 
and information that has been published by both the U.S. Forest 
Service. And I think the Wilderness Society might have 
published something, too, as far as reports.
    I am trying to understand what resources we might actually 
get out of what has been protected as roadless areas and what 
amount of natural gas or oil might actually be there. Because 
when I look at what we have allowed within the roadless area 
rule, roadless areas accounted for 0.4 percent of the total 
domestic natural gas production, according to the U.S. Forest 
Service. So, it was a very small number.
    But the roadless area rule obviously allows for existing 
leases. It allows for continuation or extension of renewal of 
existing leases. It also allows for lease extensions on 
previously leased land, if the application for the extension is 
made before the termination of an existing lease. So there is a 
lot of flexibility as it relates to current leases, which 
really has, in my understanding of the issue, been those areas 
that you would want to most access for gas development.
    I want to make sure that we are clear for this hearing what 
natural gas is available in areas that are protected as part of 
the roadless area rule.
    So Mr. Alberswerth, I think you might know some of that 
information as it relates to a similar report that the 
Wilderness Society did that might have similar information to 
what the U.S. Forest Service has provided.
    Mr. Alberswerth. Thank you, Senator. You are correct. The 
Forest Service's environmental impact statement on the roadless 
rule indicated there was about .4 of 1 percent of the natural 
gas resources of the United States in the roadless areas 
affected by that rule. Existing and, under the rule, exiting 
leases would be honored. They had valid existing rights.
    And we did do recently an analysis of the amount of oil and 
gas beneath forest lands in the five or actually six-State area 
of the Rocky Mountain West and came up with the following 
numbers. Now the analysis was somewhat different than the 
analysis performed in this recent EPCA report by the Interior 
Department. So there is probably--and it was based on somewhat 
different data.
    So we could get into an apples and oranges type of 
discussion here. But the bottom line is that there is not very 
much gas in those roadless areas. I am not sure how the EPCA 
report treated roadless areas in its analysis. You might wish 
to ask the Interior Department how they did so. But the bottom 
line was that our analysis indicated, based on U.S.GS 
estimates, that there was only about a two to 2\1/2\ month 
supply of natural gas in those roadless national forest areas.
    Senator Cantwell. Plus they are hard to get to and they 
lack the current infrastructure. Is that of interest to the 
other panelists, looking at those particular areas for such a 
small supply?
    Mr. Leer. I am going to address it from a coal perspective. 
And I think, at least my perception is there is some 
misunderstanding in what happened in the late 1990's, when the 
roadless rule was promulgated. Also, even some of the ways it 
was promulgated, some questions. But when you looked at what 
was happening, we were aware in the 1990's that the U.S. Forest 
Service was trying to develop, you know, roadless rules. And 
the mining industry did ask for what are the maps, where can we 
go, how is it going to overly? Because, again, most of the 
western coal is being produced, and a lot of the coal bed 
methane gas is being produced, from Federal lands.
    And we never could get the maps. The maps were never drawn. 
In fact, the industry ultimately developed its own maps and 
gave them to the Forest Service. And then the roadless area 
boundaries were based on a 20-year-old inventory that were 
never field verified and established whether there is in 
question still retained roadless values that the rule 
supposedly was trying to protect.
    I mean, I can speak to one particular mine that we own and 
operate in Colorado that is a deep mine. In fact, most of the 
mines in the roadless areas that are affected are deep mines. 
They do not particularly affect the surface at all, except for 
when you do have--sometimes you need to run a ventilation shaft 
to the mine, or if you have a mine accident, you may need 
access to wherever the mine is under the proposed roadless 
area.
    The area that they have outlined, I have been up on it. 
There are roads everywhere. But it is in the roadless area. It 
is not a--20 years ago, perhaps, it was a correct map. Today I 
would be happy to take any of the Senators and show them at 
least one little area that certainly was drawn incorrectly.
    I am not sure the data on the oil and gas side is 
reflecting the coal bed methane piece of that, as well. And 
again, in the roadless areas we are talking more about deep 
mines. And they do not have a footprint on the surface, except 
for emergency situations or you can have, if you get far enough 
away, you do need to run an air shaft down it.
    So, you know, to me the whole process, when it was base don 
20-year-old data, it needs to be updated. And I think the late 
midnight promulgation of the rule, it just did not feel right. 
And I do not think it was right. So it deserves more study than 
just making a rule. And I think the Forest Service even agreed 
with that at one point. But then the 9th Circuit obviously 
overturned that. So----
    Senator Cantwell. Right. I would say probably the tens of 
thousands of people from my State that wrote in over a year and 
a half do not exactly think it is a late night rule. I can 
think of other examples in the Congress where riders were 
attached to bills that they would define as late night. I do 
not think that this one necessarily qualifies as such.
    So you are saying that it is not so much that you disagree 
with where the oil and gas supply might be as much as maybe 
some of the areas might not have been reflecting of what coal 
supply is. That is your main point.
    Mr. Leer. That would be my main point, but that is my 
experience and what I have followed. And you know, the coal bed 
methane operations that were seen developed in the West are 
going obviously into the coal seam. So you do have that from a 
gas supply. And I do not know if the data that David here has 
referenced is reflecting that or not. And I will not try to 
find on that.
    Senator Cantwell. Well, I care deeply about the roadless 
area rule, because I think it is good natural resource 
management policy. So I probably will take you up on that offer 
to go out and see the specific----
    Mr. Leer. We will follow up.
    Senator Cantwell [continuing]. Lines and where this was 
drawn, because I think it is--I think there is much more 
consensus about what is good forest management in areas that 
really are not going to give us the gas supply. But maybe we 
can make some headway.
    Mr. Bayless, did you want to comment on that?
    Mr. Bayless. Yes. Based on the Wilderness Society 
information, I believe the National Forest Service land under 
lease today has declined by 85 percent over the last 15 years. 
So kind of much less of land is really in play. Today less than 
five million acres of national forest lands are leased. So we 
are moving away from the direction of oil and gas development 
on national forests.
    Taking your question in a slightly different direction, we 
have--I have experience on a recently formed national monument 
where part of the formation of that was that existing and 
active oil and gas leases would remain valid. This was--this 
contains a 50-year-old producing oil and natural gas field. 
Both the BLM and my company were co-defendants in a suit filed 
by Mr. Alberswerth's organization for trying to develop a 
shooting seismic survey across those existing leases.
    So sometimes there is a jump between what is promised and 
really how it works out in practice.
    Senator Cantwell. Well, I see the red light is on. I do not 
want to take up more time, Mr. Chairman. But I do think the 
issue, when put in the context of the U.S. Forest Service, if 
it is 0.4 percent of the supply, and yet I look at the National 
Petroleum Reserve in Alaska, where we might get something like 
59 trillion cubic feet of gas or the Gulf of Mexico in the deep 
water areas, I think why are we focusing on roadless areas.
    My State would love natural gas. It would love to diversify 
off of hydro. We want to get natural gas from Alaska or Canada 
or various places. But it seems as if this particular supply, 
as it relates to the roadless areas, is not worth the 
investment, especially in light of the disruption that it would 
provide to the environment.
    Thank you, Mr. Chairman.
    The Chairman. The only comment I would make, if you cannot 
do either of the other two, then either of them----
    Senator Cantwell. Well, we certainly want to get that 
natural gas from Alaska.
    The Chairman. Okay. Thank you.
    Senator Cantwell. Thank you.
    The Chairman. We stand adjourned.
    [Whereupon, at 12:42 p.m., the hearing was adjourned.]
                               APPENDIXES

                              ----------                              

                               Appendix I

                   Responses to Additional Questions

                              ----------                              

                               National Mining Association,
                                    Washington, DC, March 13, 2003.
Hon. Pete V. Domenici,
Chairman, Committee on Energy and Natural Resources, Dirksen Senate 
        Office Building, Washington, DC.
    Dear Chairman Domenici: Thank you for the opportunity to testify 
before the Committee on Energy and Natural Resources on the subject of 
energy production on federal lands. The following are answers to the 
questions which have been submitted for the record.
                    Responses to Committee Questions
    Question. How will the coal leasing amendments you suggest benefit 
the country in terms of new coal production?
    Answer. The suggested changes recognize that long lead times and 
capital investments as high as $1 billion require a predictable but 
flexible leasing program that allows federal coal lease holders to deal 
with operational, regulatory and market variables throughout the life 
of a lease. Uncontrolled increases in the cost of production due to 
geology, limited labor supply in rural areas, changes in prices for 
competing fuels, changes in transportation costs, and changes in state 
and federal environmental regulations which affect either production 
costs or the ability to customers to use the coal from the lease are 
examples of occurrences that can chill investment in federal coal 
resources and new coal production. If the recommended targeted 
modifications to the Mineral Leasing Act are enacted, investment in new 
coal ventures will be encouraged with the assurance that operations 
will be able to adjust to meet these variables.
    Question. You have indicated there are problems with the coal 
industry's bonding requirements. Can you explain why you are suggesting 
the elimination of financial assurances with respect to bonus bids?
    Answer. The limited availability of financial assurances 
jeopardizes the continuation of existing operations and thwarts 
development of new operations since bonds are required as a condition 
to receive permits or other necessary government authorizations.
    The Department of the Interior's requirement that successful 
bidders for federal coal leases post a financial assurance to guarantee 
the payment of deferred bonus bids is unnecessary and duplicative. The 
suggested elimination of this particular requirement will free up 
surety capacity while protecting the federal government by providing 
that if the successful bidder defaults on a bid installment the 
Department of the Interior can cancel the lease and the cancelled lease 
resold to another prospective bidder.
    Question. Do the Mineral Leasing Act provisions you are proposing 
eliminate the diligent development requirement?
    Answer. There is nothing in the suggested changes that NMA 
recommends that would in anyway eliminate the diligence requirement 
established in the Act.

                                               Steven Leer,
                                                    Arch Coal, Inc.
                                 ______
                                 
    [Responses to the following questions were not received at 
the time the hearing went to press.]
Responses of Deputy Secretary Griles to Questions From Senator Bingaman
                       epca study (stipulations)
    Question 1. As you know, I was one of the authors of section 604 of 
EPCA, requiring the Department to undertake the oil and gas resource 
inventory.
    The report attempts to quantify leasing stipulations. Does the 
report take into account the frequency of waivers of leasing 
stipulations by federal land managers?
    Does the report address the fact that directional drilling is a 
viable option in some instances where no surface occupancy stipulations 
are in place?
                           lease stipulations
    Question 2. Energy development on our public lands is essential. 
Yet, these are by law multiple use lands. I understand that many of the 
oil and gas lease stipulations are timing limitations relating to fish 
and wildlife concerns, but am I also correct in my understanding that 
leasing stipulations also can relate to:

   coal mining
   ranching (such as cattle movement)
   recreational use (camping and snowmobile use)
   water quality and quantity
   paleontological and historic resources?

    What other matters are covered by leasing stipulations? What are 
the Department's intentions with respect to existing stipulations? Are 
there alternative ways of protecting the environment and other land 
uses, and if so, what are they?
                         surface use conflicts
    Question 3. What is the Department doing to address the issue of 
conflict between coal production and coalbed methane production?
    What is the Department doing to address the conflicts that can 
arise between the ranching community and those who seek to develop 
federal oil and gas resources?
    What is the extent of these problems?
                 coalbed methane in the san juan basin
    Question 4. I understand that the BLM is working on an 
environmental impact statement relating to oil and gas resource 
development in the San Juan Basin. Many expect that this document will 
project a tremendous increase in coalbed methane development. What is 
the status of the work on this analysis?
              funding for i&e and environmental compliance
    Question 5. I have had a long-standing concern over what I consider 
to be inadequate resources being devoted by the Department to both the 
Inspection and Enforcement Program and to processing oil and gas 
applications, including environmental compliance.
    I am pleased that the Secretary reiterated the Department's 
commitment to hire additional personnel for the I&E program in the BLM 
Farmington field office when she appeared before the Committee 
recently. Can you give me a status report on that matter?
    What else does the Department do to ensure that the BLM has 
adequate resources to do their job with respect to energy development 
on federal lands?
                   economically recoverable resources
    Question 6. The EPCA report bases its analysis on U.S.GS 
technically recoverable oil and gas resources and EIA proven reserve 
estimates. This is helpful information. However, I was disappointed 
that the EPCA report did not also address economically recoverable 
resources, which I believe would also be useful information if the 
underlying assumptions are clearly set forth. The Department has 
provided this information for both the Arctic National Wildlife Refuge 
and the National Petroleum Reserve-Alaska. I have received a letter 
saying you will provide it for the basins studied in the EPCA report, 
but not unti1 2005. Is there any way to speed up this work?
                            renewable energy
    Question 7. I have been concerned that those seeking to develop 
wind and solar energy on our public lands do not get adequate 
assistance or information on availability of public lands from federal 
land managers.
    What policies, guidelines and procedures does BLM have in place to 
facilitate the development of wind and solar energy on public lands 
appropriate for such development? Please provide a copy for the record.
    Under what legal authorities are wind and solar energy on public 
lands allowed?
    What regulations, guidelines or policies do you have relating to 
such authorizations? Please provide a copy for the record.
                royalty relief for marginal onshore gas
    Question 8. The Department has a regulation in place providing 
royalty relief for production of oil from marginal stripper wells. I 
believe that we need a comparable provision for production of natural 
gas from public lands. Last Congress, I worked on such a provision 
during the energy bill conference.
    Will you assist us as we continue to work on this measure?
                          federal coal leasing
    Question 9. Do you believe that the Federal coal leasing provisions 
of the Mineral Leasing Act need to be amended? Please provide the 
Administration's position on each of the recommended amendments to the 
Federal coal leasing provisions of the MLA contained in the testimony 
of the National Mining Association. Provide your rationale and also 
provide information on the number of leases, lessee and location of the 
leases that would be affected by the amendment.
    Question 10. How many orphaned and abandoned oil and gas wells are 
there on lands administered by the BLM? Does BLM have a plan to 
remediate the sites? How much would it cost?
    Question 11. What is the processing time for applications for 
permits to drill? When delays occur, what are the reasons?
    Question 12. You indicate that the Department is reviewing right-
of-way corridors. Please describe more fully what this review entails 
and what your timeframe is?
    Question 13. The Department has a task force reviewing the issue of 
bonding. What issues specifically are being reviewed? Is the Department 
looking at bonding issues related to onshore oil and gas? Offshore oil 
and gas? Coal? Hardrock minerals? When can we expect to see the 
recommendations and report of the task force?
    Question 14. The oil and gas industry witness testified that oil 
and gas permitting time has doubled in one year. Is this correct? If 
so, what accounts for this?
                                 ______
                                 
              Responses to Questions From Senator Bunning
    Question 1. What is the potential for coal mining on federal lands? 
How much coal is available to be mined on federally owned land? Is coal 
on federal lands available for mining in the eastern United States? If 
so, where is it available where the Federal Government owns the rights 
to the coal?
    Question 2. How do you think federal laws should be changed to best 
bring about a balanced energy policy that will boost domestic energy 
production while also promoting conservation?
    Question 3. What are some of the obstacles in current regulations 
that have prevented the United States from boosting its energy 
production on federally owned lands?
                              Appendix II

              Additional Material Submitted for the Record

                              ----------                              

                              American Petroleum Institute,
                                    Washington, DC, March 12, 2003.
Hon. Pete V. Domenici,
U.S. Senate, Washington, DC.
    Dear Senator Domenici: On February 27, 2003, the Senate Committee 
on Energy and Natural Resources held a hearing on Energy Production on 
Federal Lands. The American Petroleum Institute, which represents all 
sectors of the U.S. oil and natural gas industry, appreciates the 
opportunity to submit this letter and its attachment for the written 
record.
                      importance of federal lands
    The importance of multiple-use federal lands to domestic energy 
supplies cannot be overestimated. Set aside by Congress to help provide 
energy to the nation, these lands comprise about 31 percent of total 
U.S. land area and a large part of the Outer Continental Shelf. 
According to the U.S. Geological Survey and the U.S. Minerals 
Management Service, federal lands contain about 77 percent of the 
nation's estimated undiscovered oil and 59 percent of its estimated 
undiscovered natural gas. The remainder is on state and private lands.
    The federal lands holding undiscovered oil and gas resources lie 
mostly in frontier areas such as Alaska, the Outer Continental Shelf, 
and the Rocky Mountain States. Federal lands contain an estimated 
undiscovered 99 billion barrels of oil and 577 trillion cubic feet 
(Tcf) of natural gas. Put in perspective, that is enough oil to fuel 
more than 166 million automobiles for 20 years and heat more than 67 
million homes for 20 years. It is enough natural gas to meet the needs 
of 10 million residential customers for 664 years. These lands can play 
a vital role in meeting our growing needs for oil and natural gas--if 
opened to development in a timely fashion.
    The Energy Information Administration (EIA) projects that between 
1999 and 2020 oil consumption will increase 39 percent in the U.S. and 
58 percent globally. U.S. natural gas demand is expected to grow by 
more than 50 percent by 2025. To ensure both adequate and secure 
supplies, the United States must continue to diversify its foreign 
sources of supply, which already provide 58 percent of the nation's 
oil, and increase domestic supplies through oil and natural gas 
development activity on federal lands.
    The attached paper highlights the importance of federal lands to 
meeting our energy needs.*
---------------------------------------------------------------------------
    * Retained in committee files.
---------------------------------------------------------------------------
           all impediments to development need to be reviewed
    A January 2003 study by the U.S. Department of the Interior and 
other agencies, evaluated oil and gas resources on federal lands and 
examined the restrictions and impediments to developing oil and gas 
resources in five important oil and natural gas bearing basins in the 
Rocky Mountains. The study (Scientific Inventory of Onshore Federal 
Lands' Oil and Natural Gas Resources and Reserves and the Extent and 
Nature of Restrictions or Impediments to their Development) shows that 
some lands are not leased because Congress has designated them as 
Wilderness or National Parks. Administrative actions, such as the 
Bureau of Land Management designating lands as Wilderness Study areas, 
have also prevented leasing. Other lands are not leased because 
requisite federal land use planning or NEPA analysis has not been 
undertaken or completed. Additionally, many areas are leased but with 
very restrictive stipulations such as ``No Surface Occupancy'' or very 
limited timeframes allowed for operations, essentially making them 
unavailable for development.
    However, restricted leasing of public lands is only part of the 
access problem. Major stumbling blocks arise after a company obtains a 
BLM lease. After leasing, producers must obtain a wide variety of 
approvals and permits (federal, state and local) before drilling can 
commence. The first step is usually to obtain BLM approval of the 
``Application for Permit to Drill'' or APD. To do this, an applicant 
must first obtain other permits, reviews, and approvals (often called 
Conditions of Approval). For example, the applicant very likely will 
have to conduct an Environmental Impact Study, a Cultural Survey, and 
an Endangered Species Survey. The applicant will also likely have to 
obtain a Private Landowner Agreement and a Right of Way permit. These 
permits are often difficult to obtain, and delays--sometimes very 
significant--are common.
    While the EPCA study provides an up-to-date estimate of resource 
potential and important leasing and pre-leasing impediments, it, 
unfortunately, does not examine the numerous permitting and other post-
leasing problems that can delay otherwise viable projects by many 
months or years. As noted later in this letter, Congress should require 
an evaluation of post-leasing impediments in the five basins already 
studied and require a comprehensive study of pre- and post-leasing 
issues for all other federal lands.
                  technology protects the environment
    Because of advanced technology, energy resources on federal lands 
can be developed with little or no impact on the environment.
    Advanced technologies such as 3-D seismic imaging provide the 
ability to better ``see'' underground oil and natural gas deposits, 
greatly improving the ability to find oil or gas. This reduces the 
number of wells necessary and dramatically reduces the ``footprint,'' 
or surface disturbance, of the exploration and production activity.
    Highly sophisticated directional drilling systems can travel deeper 
and in various directions--even horizontally--to reach potential oil 
and natural gas resources more quickly and more precisely.
    According to a 1999 U.S. Department of Energy study (Environmental 
Benefits of Advanced Oil and Gas Exploration and Production 
Technology), innovative technologies have led to environmental 
benefits. Among them:

   ``Smaller, lighter rigs and advances in directional and 
        extended-reach drilling shrink the footprint of oil and gas 
        operations and reduce surface disturbance.''
   ``Continuing improvements in recovery efficiency per well 
        translate into fewer wells . . .''
   ``Resources underlying arctic regions, coastal and deep 
        offshore waters, sensitive wetlands and wildlife . . . can now 
        be contacted and produced without disrupting surface features 
        above them.''
   ``From coast to coast, innovative E&P approaches are making 
        a difference to the environment. With advanced technologies, 
        the oil and gas industry can pinpoint resources more 
        accurately, extract them more efficiently and with less surface 
        disturbance, minimize associated wastes, and, ultimately, 
        restore sites to original or better condition.''
     actions congress can take to improve responsible oil and gas 
                              development
   Mandate an Energy Policy and Conservation Act (EPCA) Phase 
        II study assessing post-leasing impediments to development in 
        five resource basins addressed in 2003 report.
   Initiate EPCA evaluation of resources and both pre- and 
        post-lease impediments to development for other federal lands, 
        including the Outer Continental Shelf.
   Require DOI to act promptly to complete all outstanding 
        resource management plans needed to allow thousands of 
        permitting decisions to proceed.
   Provide specific oil and gas leasing and permitting reform 
        measures as identified by the federal government's Applications 
        for Permits to Drill (APD) Project Team.
   Direct funds to agencies involved in public lands 
        development, requiring timely preparation of necessary 
        environmental documentation for such activities.
   Provide additional funding for MMS/BLM permitting/management 
        activities from bonus bid/royalty stream.
   Codify Executive Orders (EO 13212 and EO 13211) to expedite 
        increased energy supply and availability to the nation by (1) 
        considering the affect of federal regulations on the nation's 
        energy supply, distribution and use, and (2) ensuring ``energy 
        accountability'' within federal resource management agencies. 
        Accountability may include requiring internal agency audits to 
        establish performance measures and benchmarks for addressing 
        permit backlogs and Resource Management Plan updates.
   Provide support for pending CEQ-led administration pilot 
        program, Northern Rocky Mountain Energy Policy Program, to 
        foster early collaboration of federal and state decision-making 
        and effective management of energy policy issues on public 
        lands in the northern Rocky Mountains.

    We appreciate the opportunity to offer these comments. Please let 
us know if you have any questions or need additional information.
            Sincerely,
                                        Charles E. Sandler,
                                                    Vice President.
                                 ______
                                 
             Statement of the Geothermal Energy Association
    Thank you for the opportunity to present the views of members of 
the Geothermal Energy Association (GEA) regarding geothermal energy 
potential on public lands and the obstacles to developing this 
important national energy resource. GEA is a trade association that 
represents 80 companies and organizations involved in the U.S. 
geothermal industry, from power plant owners and operators to small 
drilling and exploration companies.
                     geothermal energy's potential
    Geothermal energy provides a significant amount of the energy and 
electricity consumed in the Western U.S. Geothermal heat supplies 
energy for direct uses in commercial, industrial and residential 
settings in 26 states. Geothermal resources furnish substantial amounts 
of electricity in California, Nevada, Utah and Hawaii. Indeed, 6 
percent of California's electricity comes from geothermal energy.
    There has been renewed interest in geothermal power. A small-scale 
power facility has started operation in New Mexico, and the BLM reports 
that there is an active interest in leasing and permitting in eleven 
western states. In part this is due to the adoption in many states of 
renewable production standards to ensure a market for new renewable 
power. We believe it is also due to the interest shown in the Congress 
in expanding the Section 45 production tax credit to include geothermal 
energy. Further, the high-level interest shown in expediting the 
processing of geothermal leases and permits by federal and state 
governments has contributed as well.
    Today, Senators Harry Reid (D-NV) and Gordon Smith (R-OR) will be 
reintroducing legislation that they sponsored in the 107th Congress to 
expand the Section 45 production tax credit to geothermal and other 
renewable energy sources. Many of the Senators on this Committee 
supported one of several bills in the last Congress that proposed 
taking this action. We hope that you will again support Senators Reid 
and Smith in this effort and consider adding you name as a co-sponsor 
of their bill. This is the single most important measure before 
Congress to stimulate new investment in new renewable power production 
in the United States.
    Expanded use of geothermal resources will provide additional clean, 
reliable energy to the West. Thousands of megawatts of new geothermal 
power, and an equal amount of direct-use energy, could be developed in 
the immediate future; however, obstacles created by public land 
agencies must be removed.
    Geothermal energy contributes directly to both state and local 
economies and to the national Treasury. To date, geothermal electricity 
producers have paid over $600 million in rentals, bonus bids and 
royalties to the federal government. Moreover, according to an analysis 
performed by Princeton Economic Research, it would be reasonable to 
estimate that the geothermal industry has paid more than 6 times that 
amount in federal income tax, for a combined total of over 4 
billion.\1\ If the economic multiplier effects were considered, the 
total contributions of geothermal energy to the local and national 
economy would be substantially greater.
---------------------------------------------------------------------------
    \1\ Princeton Economic Research, Inc., Review of Federal Geothermal 
Royalties and Taxes, December 15, 1998. (Figures expressed in 1998 
dollars.)
---------------------------------------------------------------------------
    What is the potential for geothermal energy on public lands? What 
are the benefits of developing these resources? These questions are 
difficult to answer, in part because the efforts of the U.S. Geological 
Survey (``U.S.GS'') and the Department of Energy to define the U.S. 
resource base have not been funded for many years. In fact, as the 
U.S.GS pointed out in its testimony before the Energy Subcommittee in 
May, its last assessment was undertaken roughly 30 years ago.
    In order to produce a more current picture of the near-term 
potential of the geothermal resource base, GEA Executive Director Karl 
Gawell together with Dr. Marshall Reed of DOE and Dr. Michael Wright of 
the Energy and Geosciences Institute at the University of Utah, 
conducted a systematic survey of known geothermal experts from 
business, academia and government in 1999. The results of this survey 
were assessed and a brief report was released in April of that year 
entitled ``Preliminary Report Geothermal Energy: The Potential for 
Clean Power from the Earth.''
    That report concluded that the U.S. geothermal resource base could 
support significantly increased production. U.S. geothermal electric 
capacity, now at about 2,600 MW, could triple and, with expected 
improvements in technology, could reach nearly 20,000 MW in 20 years.
    These figures would appear to be fairly consistent with the 
estimates presented to the Subcommittee on Energy and Minerals by the 
U.S. Geological Survey. Their testimony indicated a potential for 
22,290 MW of geothermal electricity production (see Attachment #1). As 
GEA's Executive Director testified before the Energy and Minerals 
Subcommittee, these figures also concur with the results of the 
planning workshop that helped produce the current DOE Strategic Plan--
an effort that brought together many of the leading experts from 
industry, laboratories and academia. At that workshop, there was a 
consensus that, with market support, as much as 10,000 MW of electric 
capacity could be brought on-line in the West by 2010 by expanding 
existing resource production and developing new facilities.\2\
---------------------------------------------------------------------------
    \2\ U.S. Department of Energy, Office of Geothermal Technologies, 
Strategic Plan for the Geothermal Energy Program, June 1998, page21.
---------------------------------------------------------------------------
    Achieving this additional geothermal production would have 
substantial economic and environmental benefits in the western United 
States. If the goal of the DOE Strategic Plan could be reached, the 
cumulative federal royalties from the new power plants would reach over 
$7 billion by 2050, and estimated income tax revenues would exceed $52 
billion in nominal dollars.\3\ The state share in these royalties alone 
would result in an additional investment of $3.5 billion in schools and 
local government facilities in the western states.
---------------------------------------------------------------------------
    \3\ Princeton Energy Research Inc., Op. Cit., Volume I, page 17.
---------------------------------------------------------------------------
    Expanded use of geothermal resources can also contribute to the 
President's goal of a hydrogen future.Using geothermal resources to 
drive catalytic processes is ideal for generating hydrogen. In fact, 
Iceland is expected to be the first country in the world to make a 
significant transition to hydrogen fuels, which it will achieve by 
using its geothermal and hydropower resources.
      recent efforts to address barriers to geothermal energy use
    We were very pleased by the administration's interest in enhancing 
the use of renewable resources on public lands. Vice President Cheney, 
Secretary Norton, and Secretary Abraham have all shown a strong 
interest in promoting renewable energy use, and addressing the problems 
the geothermal industry has experienced.
    Vice President Cheney met with leaders of the renewable energy 
industry. The National Energy Policy release in May of 2001 by the 
National Energy Policy Development Group included several key 
recommendations. The NEPDG recommended that the Secretaries of the 
Interior and Energy re-evaluate access limitations to federal lands in 
order to increase renewable energy production. It also recommended that 
the Secretary of the Interior determine ways to reduce the delays in 
geothermal lease processing and permitting.
    Twelve days after the release of the Vice President's report, the 
President signed Executive order 13212--Actions to Expedite Energy-
Related Projects. This order established the White House Task Force on 
Energy Project Streamlining, to ensure interagency collaboration.
    In response to the Vice President's report, the Secretaries of the 
Interior and Energy convened at a conference entitled ``Opportunities 
to Expand Renewable Energy on Public Lands'' in November 2001. This 
meeting brought together over 200 senior executives from industry with 
state and federal agency representatives as well as a wide range of 
other interested groups.
    This interest and initiative from the Administration has been 
supported by Congressional action. The House Resources Committee and 
its Energy Subcommittee have held hearings on renewable energy 
development on public lands, and specifically on geothermal energy 
issues. The Congress has included funding for key activities by the 
Bureau of Land Management, U.S. Geologic Survey and Department of 
Energy.
    We appreciate the interest and attention of the Senate Energy 
Committee, and hope that these hearings will build upon the progress 
being made. We are pleased to say that there is progress being made, 
although we must report that there are still problems and obstacles to 
overcome.
                   geothermal energy on public lands
    Whether and when the economic benefits of further geothermal 
development are realized will greatly depend upon the action, or 
inaction, of the federal land management agencies. Today, about 75% of 
U.S. geothermal electricity production takes place on federal public 
lands since that is where most of the resource is located. If we expect 
to see significant increases in geothermal energy production in the 
United States, we will have to access resources yet to be developed on 
public lands.
    New geothermal development requires the timely and reasonable 
oversight of federal leasing, permitting, and rights-of-way and 
environmental reviews by public land management agencies. 
Unfortunately, the previous administration's management of federal 
geothermal resources was marked by bureaucratic delay and indecision by 
public land agencies; as a result, there has been a rapid decline in 
new geothermal energy development.
    To understand the impact that delays can have, it is important to 
recognize that all of the estimates discussed earlier are nothing more 
than that--estimates. A company interested in developing a geothermal 
resource will have to invest millions of dollars in defining the 
resource before construction of a power plant can even begin. 
Unfortunately, there are few reliable surface exploration techniques 
for geothermal energy that can provide any degree of confidence. 
Confirmation and definition of the resource involves drilling, which 
means the investment risk is high and may remain high until after 
several wells have been drilled.
    Geothermal wells are more expensive to drill than oil and gas 
wells, and if successful have a payback period substantially longer 
than oil and gas wells. They are drilled in hot, hard, fractured, 
abrasive rocks where problems are frequent and expensive. For ``green 
field'' development, resource definition work may account for as much 
as 40% of the cost of the project, and that considerable expense must 
be borne before the resource is sufficiently confirmed in order to 
secure financing for a project--making the risk to the developer even 
greater.
    Companies will not take on such a considerable expense and risk 
without assurance that if then are successful they will be able to 
develop a power plant. To begin with, they need a lease to ensure their 
rights to develop the particular resource identified.
    This brings us to bureaucratic problem number one: tens of 
thousands of acres of geothermal leases were applied for in the West, 
to which federal agencies failed to respond. Lease applications 
languished, often for years.
    Because this Administration has made renewable energy development 
on public lands a priority, and with Congress support, we have seen 
some progress. The de facto moratorium on geothermal development on 
public lands appears to be lifting. Last year, BLM was able to make 
substantial inroads on the lease backlog in Nevada, and the Secretary 
of the Interior has committed the agency to eliminating the backlog 
entirely.
    But while progress is made in some areas, BLM clearly still lacks 
the resources to eliminate the problem. In addition to a lack of 
resources to complete lease processing, and the necessary land-use 
planning and environmental reviews, BLM is still seeking the active 
cooperation of other agencies, particularly the Forest Service. Lease 
applications that have been pending for years, some for as long as a 
decade, still await action in Washington and other states. We 
understand that persistent pressure from the BLM has resulted in some 
progress being made on pending lease applications on Forest Service 
lands, but still, new leases are not being issued.
    If you wonder why there are not more geothermal projects being 
developed in the West, these delays are a big part of the answer. If a 
company cannot obtain a lease, it will not spend millions of dollars on 
the exploration needed to determine whether or not there are adequate 
subsurface geothermal resources to support a geothermal power project.
    Furthermore, once a company obtains a lease, the administrative 
processing of permit applications and environmental reviews can be 
expected to take years. As GEA testified before the House Resources 
Committee's Energy Subcommittee, it has been our members' experience 
that ``environmental reviews have been unnecessarily extensive, costly, 
and repetitive; and in areas where an EIS has been completed, decisions 
by federal agencies have been subject to years of delay and appeal.''
    During the House Resources Energy Subcommittee hearing in May of 
2001, an official from Calpine Corporation, the largest geothermal 
energy company in the United States, testified about his company's 
experience in trying to develop geothermal resources on Forest Service 
land in Northern California. The area in question was leased by BLM in 
the 1980s, with the approval of the Forest Service, for geothermal 
development. In fact, the area is situated in the Medicine Lake Known 
Geothermal Resources Area, one of the first KGRAs to be designated 
after the Geothermal Steam Act was passed in 1970.
    Despite the fact that BLM and the Forest Service encouraged 
development in this area for more than two decades, and the Bonneville 
Power Administration supported the project and agreed to buy the 
electric power, it took over seven years to complete the initial 
permitting and EIS on the project. The project was approved with some 
of the most extensive and onerous conditions ever imposed on a 
geothermal project. Despite approval of the project, the Calpine 
official declared in his statement before the Subcommittee ``. . . if 
Calpine knew in 1994 what it knows now, it is safe to say that it never 
would have invested its time and capital in the Fourmile Hill 
project.'' He continued: ``. . . Unless the situation changes, Calpine 
is unlikely to embark on a similar project ever again. This should 
concern this Subcommittee because many of the geothermal resources in 
the United States are located on federal land. As long as the federal 
permitting process remains as time-consuming and costly as what Calpine 
has experienced, private companies will be severely discouraged from 
developing these resources.''
    The message is clear: Extensive and expensive administrative 
processing is having a significant negative impact on geothermal 
development on public lands. The Years of delay and uncertainty in 
moving forward at these sites sent shock waves through the geothermal 
industry. It sends the message to every company considering a new 
geothermal project on public lands--expect many years of arduous and 
expensive bureaucratic processing.
                  geothermal energy on military lands
    In addition, there are millions of acres of public land in the West 
that are reserved for use by the military. These lands potentially hold 
significant geothermal resources. GEA fully recognizes the importance 
of the military's use of public lands, and believes that leasing or 
development should occur on military lands only with their consent, and 
under such terms and conditions as they deem necessary and/or advisable 
to meet the military mission.
    However, where development occurs, GEA believes geothermal leasing 
and development on lands subject to military reservation there should 
be:

          (1) Uniform policies on securing and maintaining the 
        leasehold estate;
          (2) Uniform royalty structures and consistency with policies 
        affecting development on non-military lands; and
          (3) Centralized administration of the lease and royalty 
        programs.

    What we are asking for is that standard, uniform policies be 
developed regarding leasing and royalties on military lands so that a 
potential developer knows what to expect. The current situation, which 
allows ad-hoc decisions to be made on a case-by-case basis, deters 
geothermal development on military lands. Essentially, we believe 
geothermal resources should receive treatment similar to other oil, gas 
and mineral activities on military lands.\4\
---------------------------------------------------------------------------
    \4\ See 43, U.S.C. 158. The Engle Act of 1958 placed mineral 
resources on withdrawn military lands under jurisdiction of the 
Secretary of the Interior and subject to disposition under the public 
land training and mineral leasing laws.
---------------------------------------------------------------------------
              a new national resource assessment is needed
    One of the proposals made during the last Congress was to direct a 
new national resource assessment by the U.S. Geologic Survey, and we 
strongly support this proposal. The importance of U.S.GS resource 
assessment was affirmed by the National Research Council, ``effective 
and timely scientific information from [the U.S.GS] programs is needed 
to help the nation determine its enemy options through the year 2000 
and beyond.\5\
---------------------------------------------------------------------------
    \5\ Energy-Related Research in the U.S.GS. National Research 
Council, 1995, National Academy Press. Washington, DC.
---------------------------------------------------------------------------
    The last assessment of the U.S. geothermal resource base was 
conducted in the late 60s and early 70s. A lot has happened in thirty 
years, including our fundamental understanding of the earth's geology. 
The lack of an up-to-date resource assessment is a fundamental barrier 
to expanded geothermal development in the United States. The U.S.GS has 
initiated a new assessment for the Great Basin with funding and support 
from Congress. This assessment should be expanded, and the U.S.GS 
should be authorized, directed, and funded to complete an entire 
national resource assessment over the next three years.
                   updating the geothermal steam act
    While we applaud the efforts made to date by the Administration to 
promote the development and use of geothermal resources on public 
lands, industry has begun to recognize that there are some fundamental 
problems with the Geothermal Steam Act that need to be addressed. The 
House Resources Committee proposed a series of amendments to the Steam 
Act during the 107th Congress that have been the basis for an on-going 
discussion about how to improve the underlying law. Following is a 
summary of our views on some positive amendments to the Steam Act that 
would help encourage new geothermal development.
KGRAs and Competitive Leasing
    To begin with, the Steam Act was written at a time when government 
experts were expected to determine where the best resources were 
located. The federal government would determine what areas would be 
designated ``Known Geothermal Resource Areas,'' and these would be 
subject to competitive bidding. This method is not too different from 
the approach taken by the oil and gas leasing laws prior to their 
modification by Congress in the 1980s. Similar modifications should be 
made to the Geothermal Steam Act.
    We recommend that KGRAs be eliminated as a criterion for 
determining where bidding is held on a competitive basis, and that the 
law should be modified to resemble the current oil and gas leasing 
statutes where lands are offered first for competitive bidding and then 
made available on a non-competitive basis. In states where there are 
expressions of interest in bidding, BLM should hold a competitive lease 
sale at least once every two years. Prior to scheduling the sale, 
companies should be asked to submit any nominations they may have for 
specific lease blocks upon which they wish to bid.
Royalties
    The current royalty requirements should be modified to reduce 
administrative costs and promote new power and direct use development. 
Instead of the complex and administratively expensive net back formula 
now used, royalties should be based upon a simple percentage of gross 
proceeds. We estimate that currently that would be roughly a 3\1/2\% 
gross royalty.To encourage new development, federal royalties could be 
``stepped,'' or be set at 2% of gross revenues for the first four years 
of production with an increase to 3\1/2\% for the remaining term of the 
lease. Recognizing that local governments rely upon royalty payments 
for essential services, if a stepped royalty is adopted, we would 
further recommend that the state share of the royalty should be 
increased to 100% for the initial period.
    For direct use operations, there should be no royalty or a simple, 
nominal fee. Experts on direct use operations believe that the current 
royalty requirement is perhaps the major impediment to greater direct 
use of geothermal energy in commercial, mining, ranching and similar 
operations in the West. Kevin Rafferty of the Geo-Heat Center in 
Klamath Falls, Oregon states, ``The really telling statistic in my 
opinion is that we now have hundreds of direct use projects in 
operation across the West and we are only able to identify 3 that use 
resources on the public lands. The users are out there and so are the 
Federal resources but no one is using them. It seems pretty obvious 
that something is wrong.'' According to Mr. Rafferty, the high cost of 
direct use royalties was the most commonly cited problem at a recent 
meeting held to discuss how to expand geothermal energy use in the 
West.\6\
---------------------------------------------------------------------------
    \6\ Email communication from Kevin Raffert, Associate Director, 
Geo-Heat Center, Klamath Falls, Oregon, February 24, 2004.
---------------------------------------------------------------------------
    Similarly, co-production of mineral by-products from geothermal 
sites should be subject to no royalty or a nominal fee. Mineral 
production from geothermal sites should be treated the same as mineral 
production elsewhere on the federal lands. It is sadly ironic that 
under the existing law a federal lessee producing metals from the fluid 
used in a geothermal plant would have to pay the federal government a 
royalty on the mineral (in addition to a royalty on the power), but 
producing that same metal by open pit mining on the public lands would 
not be subject to a royalty. There is significant potential to produce 
minerals from geothermal sites that should be encouraged. Doing so will 
not only help the economy and national security but will reduce the 
overall environmental impacts of mineral production.
Royalty Revenues
    A fundamental problem facing the federal governments' efforts to 
promote geothermal production on federal lands is the lack of resources 
to support the efforts urgently needed by the BLM, U.S.GS, and others. 
To help address the substantial backlog of leasing, permitting and 
related environmental and land-use reviews and to support a new 
geothermal resource assessment we would propose that the federal share 
of geothermal royalties be dedicated to these efforts on a temporary 
basis.
    For the next five years, the federal share of geothermal royalties, 
bonus bids, and rentals should be used to fund the U.S.GS resource 
assessment above, to eliminate the backlog in BLM planning, leasing and 
permitting activities, and to complete targeted environmental reviews 
for areas with significant new development potential. These 
environmental reviews should be conducted cooperatively with state and, 
as appropriate, tribal land authorities and should seek to minimize 
subsequent permitting and related project delays. For military lands, 
the share of federal royalties should be dedicated for their geothermal 
development efforts.
Payments/Due Dates Lease/Reinstatement for Inadvertent Lapses
    Again, unlike the oil and gas leasing law, there is no flexibility 
in the existing geothermal statute for inadvertently late lease rental 
payments. If a payment if even one hour late, the law would impose 
termination of the lease. This is not only unreasonable, it can 
seriously disrupt lease development.
    We would recommend that a standard 30-day grace period be applied 
for all payments due to the BLM, with a penalty as prescribed by 
regulations, similar to oil and gas.
Lease Consolidation, Unitization/Pooling
    For a number of reasons, including efficient development of the 
resource, a geothermal area should be developed under common terms and 
agreements. In some cases, this would mean lease consolidation where a 
single company has multiple leases. In other cases, this could mean 
unitization or pooling where there are multiple leaseholders or perhaps 
a mix of federal, state or other leases.
    The current law and regulations do not facilitate these 
developments. For example, the BLM cannot unitize a group of leases 
unless they have exactly the same lease terms. Also, they do not have 
the same degree of authority to prompt pooling arrangements or unit 
agreements as they have for oil and gas leases.
    We would recommend that the law be modified to provide BLM the 
authority to consolidate leases that do not have exactly the same terms 
(issued same day, same royalty rate, etc. . . .) BLM should be 
authorized to renegotiate lease terms in order to have common terms for 
a lease block. BLM should also be given broader authority to initiate 
unitization or pooling agreements when it would facilitate development 
of the resource.
BLM as Lead Federal Agency
    There continues to be significant problems with leasing and 
development of geothermal resources where there are multiple agency 
jurisdictions involved. We applaud the efforts of the BLM to work 
cooperatively with the Forest Service and the Navy, and encourage all 
parties to work together. However, the law should be amended to provide 
BLM greater authority to ensure timely decisions are made.
    We would recommend that the Steam Act be amended to make it clear 
that BLM has lead status for all decisions under the Steam Act. BLM 
should be authorized to establish, by regulation, specific timeframes 
for actions by other agencies where their consent or consultation is 
required.
Agency Appeals Process
    Finally, appeals of agency decisions under the Steam Act should be 
expedited. The U.S. Forest Service has a more expeditious process 
governing appeals of their actions as compared to the BLM. The BLM 
should consider modifying its regulations to be more like the Forest 
Service.
    Specifically:
    1. The BLM should adopt regulations similar to those of the Forest 
Service whereby only National Environmental Protection Act (NEPA) 
decisions can be appealed, such as a Decision Notice or Record of 
Decision. Implementing actions, such as the issuance of a permit or 
sundry notice, cannot be appealed. The current BLM regulations allow 
for the appeal of the NEPA decision, and then for the further appeal of 
any permit that is issued subsequently. The delays can be endless.
    2. Regulations should be modified to set a time limit for the 
Interior Board of Land Appeals (IBLA) to decide appeals. The 
regulations should provide that if the IBLA does not make a decision 
within the time limit, then the appeal is deemed denied. The Forest 
Service regulations set a 45 day time limit for deciding an appeal. In 
contrast, an appeal of the BLM Record of Decision for Calpine's 
Fourmile Hill geothermal project (referenced earlier) took 22 months 
before a decision was reached to deny the appeal.
                              transmission
    Since most geothermal power facilities must be located where the 
resource occurs, they are often in rural areas. The benefits of this 
coincidence for rural economic development are substantial and 
positive. In nearly every county that currently has a geothermal power 
plant, it is the largest taxpayer in that county and provides 
substantial long-term employment as well.
    However, for the developer this adds a potentially significant 
problem--the location may or may not be near transmission lines. This 
obstacle needs to be recognized by the federal agencies, and they need 
to place a priority on processing rights-of-way and permits for 
transmission lines. It also raises the need to plan transmission 
systems to optimize their availability for power production from 
geothermal and other renewable resources.
    Just this week, the Departments of the Interior and Energy issued a 
report entitled Assessing the Potential for Renewable Energy on Public 
Lands. This is an important and positive step forward for agency land-
use planning efforts, and should provide important information for 
state, regional and federal agencies that are undertaking transmission 
planning. When the U.S.GS completes a new geothermal resources 
assessment, we expect its findings will provide even more reliable 
resource information for transmission planning purposes.
                               conclusion
    Geothermal resources on the public lands can contribute 
significantly to our Nation's energy supplies. Solid progress is being 
made through the initiatives of the White House, Secretary Norton and 
Secretary Abraham to achieve the expanded use of our geothermal 
resources. Congress' support for these efforts, and for funding these 
efforts, will be critical to their success.
    We urge this Committee to consider amendments to the Geothermal 
Steam Act that will build upon the Administration's efforts. These 
amendments could help streamline the existing law, and ensure that the 
resources are available to eliminate the backlog of leasing and 
permitting decisions, and to complete a new national geothermal 
resource assessment.
    Geothermal energy can help address the critical energy problems of 
our Nation. With the tax, regulatory and legal changes we have 
discussed, there would be a dramatic revival in the use of geothermal 
energy use for electric power production, greenhouse heating, 
aquaculture, and other purposes. This would reduce our dependence upon 
foreign oil, reduce our spiraling demand for natural gas, and provide a 
substantial and immediate stimulus for the economy.
    Thank you.
                                 ______
                                 
    Statement of Roger Zion, Honorary Chairman, 60 Plus Association
    In 1973, I served as the Chairman of the House Republican Task 
Force on Energy and Resources.
    I gave a speech on the House floor in which I said: ``If we don't 
make maximum used of domestic energy sources, we will be held up by the 
Arabs and our National Defense will be threatened.'' At that time we 
were importing 35% of our oil. Now it's over 60%.
    As the 108th Congress resumes debate on comprehensive energy 
legislation we believe that the following issues must be addressed:

   The U.S. must increase its domestic production of natural 
        gas.
   Congress should also enact legislation to streamline natural 
        gas pipeline construction to enable gas to enter the mid-
        continent and Northeastern markets, enhance gas supply and 
        distribution capabilities, and relieve system constraints.

    The Inupiat Eskimos of Alaska have this to say, ``In 1969, when oil 
was first discovered on our lands, we sought for self-determination in 
order to be able to protect our resources. Since then, we have had over 
twenty years of working with the oil industry here. We enacted strict 
regulations to protect our land and the oil companies have consistently 
met the standards we imposed.''
    The Arctic Natural Wildlife Refuge provides a valuable source of 
domestic petroleum that significantly enhances the national security of 
the United States.
    Political instability in the oil producing regions of the world, 
particularly the Persian Gulf area, creates considerable uncertainty 
regarding the reliability of imported sources of oil. As part of a 
sound national energy policy, it is imperative for the federal 
government to refrain from restricting development of domestic supplies 
in cases where the necessary resources are amenable to commercial 
development.
                                 ______
                                 
            Statement of Dr. Rollin D. Sparrowe, President, 
                     Wildlife Management Institute
                              introduction
    Mr. Chairman, I write to you on behalf of the Wildlife Management 
Institute (Institute) to express our concerns regarding the orderly 
development of energy resources on public lands. Our Institute, 
established in 1911, is staffed by professional wildlife scientists and 
managers. Its purpose is to promote the restoration and improved 
management of wildlife and other natural resources in North America. We 
commend your Committee for initiating this dialog and for attempting to 
address the social, economic and environmental impacts of energy 
development. We are concerned that the seriousness of the impacts 
energy development may have on wildlife and other natural resources may 
be underestimated, and we urge your Committee to lay the groundwork 
that will lead to a plan for long-term and orderly development of 
energy resources with the least amount of impact on wildlife and other 
natural resources. We request that our written testimony be included in 
the record of the hearing to examine issues related to energy 
production on federal lands held on February 27, 2003 by the Senate 
Energy and Natural Resources Committee.
    Our Institute believes exploration and development of energy 
resources may seriously impact wildlife and other natural resources. 
Though many site impacts are not fully understood, it is clear that 
energy development projects represent a major hazard to wildlife in 
some of the nation's most imperiled habitats. For example, it is 
estimated that coalbeds already provide at least six percent of the 
nation's natural gas, and geologists predict that contribution could 
double as new fields are developed. Potential coalbed methane (CBM) 
deposits exist in widespread locations in Alabama, Arizona, Colorado, 
Indiana, Illinois, Iowa, Kansas, Kentucky, Michigan, Montana, New 
Mexico, Oklahoma, Ohio, Pennsylvania, Texas, Tennessee, Utah, West 
Virginia and Wyoming; and there are thousands of proposed CBM 
development projects across the United States. The process of 
extracting methane gas from coalbeds involves de-watering the saturated 
coal beds to reduce pressure that traps methane vapors. Once the 
pressure is released, well rigs extract the liberated gas. This process 
results in huge amounts of water of varying quality being brought to 
the surface at each well site. This massive amount of ground-water 
removal can negatively influence amount and quality of important 
underground aquifers. In addition, infrastructure, including roads, 
pipelines, and electrical power to support CBM extraction, also 
threatens wildlife habitats and movements among those habitats. Often 
thousands of miles of roads, pipelines and powerlines are needed to 
fully develop CBM deposits, which increase the fragmentation of already 
modified wildlife habitats. We are concerned over the lack of reliable 
estimates regarding the impacts these proposed developments will have 
on wildlife and other natural resources.
    A responsible approach to energy development must include a more 
comprehensive program to manage fish and wildlife. Neither the Bureau 
of Land Management or Forest Service, nor the individual states 
involved have the data or staff and money to do all the work necessary 
to take care of renewable fish and wildlife resources, considering the 
pace and magnitude of proposed and future developments.
    We hear from energy companies, the Administration, and many in the 
Congress that we must remove restrictions on exploration, development 
and operations and open new areas--without specifying which ones. 
Please keep in mind that these mule deer, elk, and pronghorn are 
important wildlife populations that support local businesses and 
culture, and whose recovery from past over-exploitation at the turn of 
the century was paid for over the past 65 years by sportsmen's dollars. 
It is simply unfair to expect American sportsmen and women to foot the 
bill to recover wildlife populations a second time.
    We are not opposing orderly development of energy resources to meet 
our country's needs. However, not all of the restrictions on energy 
development are products of last minute decisions of the departed 
Administration. In fact, many of them occurred over several years, with 
lots of input from wildlife and fisheries organizations. Neither the 
Congress nor the Bureau of Land Management should make hasty decisions 
to roll back processes and procedures currently used to conserve 
wildlife while development occurs.
    Decisions on energy development should be made carefully, based on 
specific consideration of geographically distinct areas and impacts on 
wildlife populations and their seasonal ranges. So far, wildlife 
interests are not at the table as discussions occur about plans and 
proposals to open important more exploration. Recent hearings in the 
Congress on developing our energy reserves have not included invited 
testimony from any and fish interests. Also, planning for accelerated 
development with energy producers has not included our interests. 
Representatives from the Fish, wildlife, ranching and energy 
communities met in June 2002 to share concerns and began an overdue 
dialog. The Department of the Interior helped support the dialog, which 
prompted another meeting on March 5, 2003 to focus on the needs of big 
game herds. We are hopeful that this dialog will result in specific 
recommendations for their welfare.
    The problems that would be caused by precipitous action on existing 
protections for wildlife are shared not only by hunters and anglers. 
For example, rural towns in the Green River Basin of Wyoming tell us 
that half of their annual income is collected during hunting season to 
motels, restaurants, grocery stores and the like. The Fish and Wildlife 
Service's 2001 National Survey of Hunting and Fishing indicates that 
annually $1.8 billion in retail sales and 43,000 jobs are realized by 
the states in the Northern Rocky Mountains from hunting alone; add 
fishing and observing wildlife, and the value is about three times that 
figure. It is important to note that these are long-term, substantial 
benefits that accrue regularly to local communities only if wildlife 
and their habitats are secure. Local people will need to rely on 
wildlife and fishery resources to sustain their local economy and 
culture long after energy development is gone.
    Accelerated energy development must be done with much more 
attention to detail, and careful evaluation of costs and benefits, than 
is evident in much of the recent dialogue. Importantly, organizations 
representing hunters and anglers have a lot to offer that has not yet 
been used by government or the Congress. The diverse array of wildlife 
and fishery organizations can provide evaluation and analysis of 
important resource values, and we are ready to help. The generalized 
calls to ``open things up'' must get back to reality and deal with 
specific, geographically identified areas to which we can all relate.
    We suggest a reasonable platform for the consideration of energy 
development on public lands: (1) development and production of energy 
on public lands should be conducted with as much care as such 
development on private lands; (2) renewable resources such as mule deer 
and cutthroat trout require equal consideration under law along with 
mineral extraction; (3) scarce hunter and angler dollars from excise 
taxes should not have to pay to monitor the effects of development nor 
fund remedial action, but those tasks must be done and paid for as a 
required cost of development; and (4) where development occurs, it must 
be authorized carefully on a site by site basis with specific attention 
to the fish and wildlife resources.
                    the key question for the future
    The real question is: at what cost do wildlife and fish adapt to 
further intrusions on the landscape? Neither wildlife managers nor the 
energy industry has the answer, and BLM as the responsible agency for 
energy development has not been willing to consider the large issues of 
incremental effects and habitat fragmentation. The issue in most cases 
will not be that a single road or a single development or a single 
industry should be blamed for its effects on wildlife. Our mule deer, 
elk, pronghorn and sage grouse have been affected by roads, fences, 
ranching and farming, towns, second home development and long-term 
reduction in habitat quality. Migratory herds in Wyoming live on the 
National Forest in summer where accelerated development is proposed, 
and migrate over 100 miles to the sage desert where accelerated 
development already is underway. Can they persist as we know them with 
major changes on all parts of their annual range? Herds of elk that 
previously migrated even further from Jackson Hole to the sage deserts 
along the Green River can no longer do so because of those multiple 
influences. At some point the next new activity will be the one that 
leads to a potential irreversible reduction in the ability of some of 
these herds to survive and certainly to sustain the current level of 
public use and local economic benefit.
    A critical need for coping with these changes as they occur is for 
effective, science-based monitoring to answer specific questions. Many 
of the potential effects of accelerated energy development are subtle, 
long term in nature, and difficult to measure. This results in a 
continuing standoff where wildlife managers say ``look at those roads, 
structures and activities, they have to have an impact'', and 
development interests say ``look at those wildlife standing around the 
structures, they don't care at all''. Our wildlife and fish resources 
cannot stand this impasse while development occurs.
    Energy and mineral exploration and development involve significant 
outlays of funds by state wildlife, fish and natural resource 
management agencies for environmental studies, planning, development, 
monitoring, mitigation and management of fish and wildlife resources. 
State wildlife, fish and natural resource management agencies are 
funded primarily through permit and license fees paid to the states by 
the general public to hunt and fish, and through federal excise taxes 
on equipment used for these activities. Revenues derived from sales, 
bonus bids, royalties, and rentals under the mineral leasing laws of 
the United States are paid to the United States Treasury through the 
Minerals Management Service of the Department of the Interior, yet none 
of these revenues are returned to the states specifically to manage the 
impacts of energy and mineral exploration and development on the 
wildlife, fish and other natural resources for which they are 
entrusted.
    We propose a wildlife and fish funding concept for your 
consideration. Revenues from energy development are substantial and 
likely to increase, and those already collected from onshore oil and 
gas producers that go into the U.S. Treasury offer a logical source of 
funding for wildlife. This wildlife and fish funding concept would not 
interfere with the revenues that go to the states or elsewhere. The 
funds designated for wildlife and fish in proportion to the development 
activity would go back to the states to fund programs designed to 
manage these wildlife for monitoring and evaluating impacts, and for 
habitat protection and enhancement of fish and wildlife populations 
influenced by development. In this manner, the long-term nature of 
development and necessary active management can be accommodated. All 
appropriate property rights and other concerns could be dealt with 
directly in legislation. We envision distribution of funds proportional 
to the amount of development occurring in each state involved in 
onshore production.
    In conclusion, Mr. Chairman, we urge your committee to provide 
leadership on this important nationwide issue. A wide array of wildlife 
and fishery organizations and our hunters and anglers across America 
have a stake in the outcome of any decision to accelerate energy 
development on public lands. It is not enough to proclaim that energy 
development can occur in all areas in an environmentally sound manner. 
Some areas are so important, and the alternatives for wildlife in harsh 
climates are so few, that such sweeping statements likely are 
incorrect. There is not the current knowledge base that will allow such 
action to be taken and still assure that wildlife will be sustained, 
unless a long-term investment is made for the welfare of affected fish 
and wildlife. We suggest that implementing this funding concept would 
reflect positively on the Congress, Administration and the energy 
industry. It would bring the solutions back to the states where the 
issue arose.
    Thank you very much for considering our view on this important 
nationwide issue. We look forward to working with your Committee on 
this matter, and we are available at your convenience to discuss our 
concerns and recommendations. I am available at (202) 371-1808, as is 
Terry Z. Riley, our Director of Conservation.
                                 ______
                                 
             Statement of The Lincoln Heritage Center for 
             National Security Studies, Evansville Indiana
    The Lincoln Heritage Center for National Security Studies urges the 
United States Congress to approve leasing the Arctic National Wildlife 
Refuge for commercial production of oil.
                            summary position
    The Arctic Natural Wildlife Refuge provides a valuable source of 
domestic petroleum that significantly enhances the national security of 
the United States.
    Political instability in the oil producing regions of the world, 
particularly the Persian Gulf area, creates considerable uncertainty 
regarding the reliability of imported sources of oil. As part of a 
sound national energy policy, it is imperative for the federal 
government to refrain from restricting development of domestic supplies 
in cases where the necessary resources are amenable to commercial 
development.
    The role of the federal government should be limited to proper 
execution of leases, in particular assuring that leases be granted at 
fair market value, and enforcing existing statutes to assure orderly 
development and compliance with legal standards for environmental 
protection.
    The accompanying position paper describes the rationale for this 
recommendation.
    This position paper is produced by the Lincoln Heritage Center for 
National Security Studies (hereafter the Center). It is intended to 
support the Center's position in favor of opening the Arctic National 
Wildlife Refuge for commercial development.
                              introduction
    The Arctic National Wildlife Refuge (hereafter ANWR) is an area 
encompassing 19 million acres in northeastern Alaska. Its status as a 
wilderness refuge wad established in 1980 by the Alaska National 
Interests Lands Conservation Act. The coastal plain area, encompassing 
1.5 million acres, is one of the most promising onshore areas for oil 
exploration in the United States. Located approximately 75 miles east 
of the Prudhoe Bay commercial development, the coastal plain is 
potentially accessible to the Trans Alaskan Pipeline System. Estimates 
of total ANWR reserves range from 7.0 billion barrels to 13.8 billion 
barrels. By comparison, the total potential capacity of the Prudhoe Bay 
operation is estimated to be 10 billion barrels.
    In 1987, the U.S. Department of the Interior, in an assessment of 
ANWR's economic potential, estimated the probability of successful 
commercial development to be 0.19.\1\ The study projected that oil 
operations would affect less than one percent of the coastal plain 
area. After determining that development could be managed in such a way 
that adverse effects on wildlife and the environment would be sustained 
at acceptable levels, the Secretary of the Interior recommended full 
scale leasing of the ANWR coastal plain for commercial development. 
That action requires approval by a vote of the U.S. Congress.
                 oil as a resource in the u.s. economy
    Petroleum and natural gas account for 65 percent of the U.S. energy 
supply. Domestic production of oil totaled 5.7 million barrels per day 
as of November 2002, an amount that includes 0.97 million barrels per 
day from Alaskan production. As a consequence of domestic production, 
the United States derives approximately 40 percent of its oil supply 
from American sources. The remaining 60 percent share of imports is 
distributed as follows: Canada, 10.6 percent; Saudi Arabia, 8.6 
percent; Venezuela, 8.2 percent; Mexico, 8.0 percent; United Kingdom, 
3.0 percent; Nigeria, 2.9 percent; Norway, 1.6 percent; Russia, 1.5 
percent; Angola, 1.3 percent; Algeria, 1.2 percent; and all others 
(none exceeding 1.2 percent), 12.9 percent. The sum of all Persian Gulf 
sources accounts for 10.9 percent, and the sum of all sources within 
the Organization of Petroleum Exporting Countries (OPEC) accounts for 
23.7 percent.\2\
    These data establish the relative diversification of import sources 
for American oil. In particular, the U.S. is not strongly reliant on 
any individual supplier from the Persian Gulf or OPEC. The Centers 
advocacy of ANWR leasing therefore does not rest on the objective of 
relieving its ``dependence'' on any single foreign supplier. Rather, 
the ANWR development offers potential to further increase 
diversification in the portfolio of potential energy sources, thereby 
reducing the risk associated with future supply disruptions. The 
significance of ANWR is that it will be relatively free of the 
vicissitudes of geopolitical instability both present (Venezuela, Iraq) 
and future (Saudi Arabia, Iran) among America's sources of supply.
            anwr leasing as a venture of the private sector
    The defining principle of American civilization is its embrace of 
political and economic freedom. The culture of free enterprise, based 
on protection of private ownership, restrained government, and the rule 
of law, has produced the most dynamic and prosperous economy in 
history. It is the Center's position that the proposed leasing of ANWR 
should not be an exception. Applied to the ANWR development, the 
principle of freedom requires developers to pay fair market value for 
leasing rights, using capital provided by private investors.
    Since the 1980's the price of oil has been determined in the world 
commodity market. Oil prices are the outcome of powerful forces that 
transcend the influence of any single country. The commercial potential 
of ANWR, depends on the long-term price. Powell (1991) estimated that 
the economic success of ANWR would require a price in excess of $20 per 
barrel.\3\ It is the Center's position that the price contingency is 
for private investors to deal with. An important reality is the 
relative cost disadvantage of Alaskan oil. Chapman and Khanna (2001) 
estimate that the average per-barrel production cost of Persian Gulf 
oil equals $2.50; the comparable cost for Alaskan oil is $15.\4\ The 
best prospect for ANWR development rests on free market forces that 
determine the market price. The prospect of higher prices appears to be 
present, due to unstable political conditions among the world's leading 
producers. Current instability exists in Venezuela and Iraq. Conditions 
for future unrest exist in Saudi Arabia, where popular resentment of 
the Saudi royal family is increasing, and Iran, where dissent is 
mounting against the ruling Islamic theocracy. The possibility of 
political instability not only increases the prospect of ANWR as a 
successful economic venture, but also highlights the need for 
additional sources of petroleum for the American economy.
    In the event that future world events cause disruptions in oil 
supply, the optimal government policy is to encourage domestic supply. 
The current restriction of ANWR development constitutes a major 
obstacle to supply. If development is allowed to proceed, it will 
mitigate price increases in the U.S. market. However, the extent of 
ANWR reserves is not sufficiently large to offset major supply 
disruptions. In that event, the optimal policy is to allow the forces 
of free markets to stimulate conservation on the part of buyers. There 
is a history of significant conservation in the U.S. During the past 
two decades, real Gross Domestic Product has increased 75 percent, 
while energy consumption has increased 25 percent. The relative decline 
in energy consumption was occasioned by higher energy prices in the 
1970's and 1980's.\5\ In addition, significant price increases will 
have the effect of stimulating development in alternative fuels, such 
as coal gasification and derivation of petroleum from oil shale and tar 
sands.\6\
    In summary, it is increasingly clear that future episodes in the 
world oil market will result from powerful forces that defy the control 
of any individual country. The most rational way to face future is 
apply the time-honored lessons of free markets. The Center's position 
is that those lessons instruct us to proceed with private development 
of the ANWR coastal plain.
                         environmental concerns
    The Center shares with all concerned Americans a desire to assure 
the environmental protection of the ANWR coastal plain. It is in 
America's best interest to take all reasonable steps to minimize the 
environmental impact of exploration and drilling. The Center regards 
environmental protection in all aspects of U.S. energy policy to be an 
important issue of national security and public health.
    Existing federal law requires petroleum companies to protect the 
environment during oil and gas operations on federal land. An example 
is the Marine Mammals Protection Act, which protects polar bears in the 
North Slope area of the Prudhoe Bay operation. Evidence of success in 
wildlife preservation is found in the population of the Central Arctic 
caribou herd, which has increased from an estimated 3,000 in the 1970's 
to more than 23,000 today.\7\ The Center's position is that in the case 
of ANWR development the federal government should enforce existing 
environmental statutes.
    Recent developments in petroleum technology have improved the 
prospects for environmental protection. Improvements in transportation 
methods and containment of residuals and wastes have combined to 
minimize impacts on the Arctic surface and the underlying permafrost. 
New advances in extraction technology include horizontal drilling, 
which permits exploration and recovery in subsurface areas that are far 
removed from the wellhead. Using directional technology, it is possible 
to develop 80 square miles from a single two-acre drill site.\8\ If the 
Prudhoe Bay operation was developed from inception today, its 
``footprint'' would be 64 percent smaller, drilling impact would be 74 
percent smaller, roads would consume 58 percent less surface area, and 
operating facilities would require 50 percent less space.\9\ An 
illustration of the technical advance is the Alpine field in the North 
Slope development, which uses 97 acres of surface area to produce 
100,000 barrels per day from a field underlying 40,000 acres of surface 
area.
    There is abundant evidence that oil and gas production are 
compatible with responsible environmental policy and protection of 
wildlife. For example, the Audubon Society owns the Rainey Wildlife 
Sanctuary in Louisiana, a preserve encompassing 26,000 acres that 
provides habitat for an exceptional variety of wildlife. In addition, 
the preserve contains substantial reserves of oil and natural gas. The 
Audubon Society has permitted private production of the petroleum in 
exchange for annual royalties, which in turn support the Society's 
other activities. These actions of the Audubon Society, one of the 
foremost advocates of wildlife protection in the United States, clearly 
indicate the compatibility of petroleum production and environmental 
interests.\10\
    In summary, there is ample reason to believe that ANWR development 
can proceed without violating the environmental integrity of the 
coastal plain area. Recognizing that the federal government controls 
one third of all land in the U.S., including 322 million acres in 
Alaska, the encroachment caused by development of ANWR is miniscule by 
any standard of measurement. Opponents of ANWR development might argue 
that any commercial presence in the coastal plain, however small, is 
not acceptable. The Center's position is that the benefits in terms of 
national and economic security exceed the modest environmental costs by 
a substantial margin.
                                 notes
    1. Clough, N.K. P.C. Patton, and A.C. Christiansen, editors (1987). 
``Arctic National Wildlife Refuge, Alaska, Coastal Plain Resource 
Assessment.'' Washington, D.C: U.S. Fish and Wildlife Service, U.S. 
Geological Survey and Bureau of Land Management.
    2. United States Department of Energy, Petroleum Supply Monthly, 
December 2002.
    3. Powell, S.G. (1991) ``A Risk Analysis of Oil Development in the 
Arctic National Wildlife Refuge''. Energy Journal, Vol. 12, Issue 3, 
pp. 55-77.
    4. Chapman, D., and N. Khanna. (2001) ``An Economic Analysis of 
Aspects of Petroleum and Military Security in the Persian Gulf . . . 
Economic . . . Vol. 19, No.4 (October), pp. 371-381.
    5. Brown, S.P. (1996) ``Directions of U.S. Energy Conservation and 
Independence' Business Economics (October), pp. 25-30.
    6. Chapman, D., and N. Khanna. (2000) ``World Oil: The Growing Case 
for International Policy''. Contemporary Economic Policy, Vol. 18, No. 
1 (January), pp. 1-13.
    7. Lee, D.R. (2001) ``To Drill or Not to Drill: Let the 
Environmentalists Decide''. The Independent Review, Vol. VI, No.2 
(Fall), pp. 217-226.
    8. American Petroleum Institute: www.api.org (2003) ``Exploring for 
Oil and Gas.''
    9. American Petroleum Institute: www.api.org (2003) ``Exploring for 
Oil and Gas''.
    10. The Audubon Society has adopted a position in opposition to 
development of ANWR. For a discussion of this point, see Lee, D.R. 
(2001) ``To Drill or Not to Drill: Let the Environmentalists Decide''. 
The Independent Review, Vol. VI, No.2 (Fall), pp. 217-226.

                                    

      
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