[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
OFFSHORE DRILLING: WILL INTERIOR'S REFORMS CHANGE ITS HISTORY OF FAILED
OVERSIGHT
=======================================================================
HEARING
before the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
JULY 22, 2010
__________
Serial No. 111-109
__________
Printed for the use of the Committee on Oversight and Government Reform
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio JOHN J. DUNCAN, Jr., Tennessee
JOHN F. TIERNEY, Massachusetts MICHAEL R. TURNER, Ohio
WM. LACY CLAY, Missouri LYNN A. WESTMORELAND, Georgia
DIANE E. WATSON, California PATRICK T. McHENRY, North Carolina
STEPHEN F. LYNCH, Massachusetts BRIAN P. BILBRAY, California
JIM COOPER, Tennessee JIM JORDAN, Ohio
GERALD E. CONNOLLY, Virginia JEFF FLAKE, Arizona
MIKE QUIGLEY, Illinois JEFF FORTENBERRY, Nebraska
MARCY KAPTUR, Ohio JASON CHAFFETZ, Utah
ELEANOR HOLMES NORTON, District of AARON SCHOCK, Illinois
Columbia BLAINE LUETKEMEYER, Missouri
PATRICK J. KENNEDY, Rhode Island ANH ``JOSEPH'' CAO, Louisiana
DANNY K. DAVIS, Illinois BILL SHUSTER, Pennsylvania
CHRIS VAN HOLLEN, Maryland
HENRY CUELLAR, Texas
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
PETER WELCH, Vermont
BILL FOSTER, Illinois
JACKIE SPEIER, California
STEVE DRIEHAUS, Ohio
JUDY CHU, California
Ron Stroman, Staff Director
Michael McCarthy, Deputy Staff Director
Carla Hultberg, Chief Clerk
Larry Brady, Minority Staff Director
C O N T E N T S
----------
Page
Hearing held on July 22, 2010.................................... 1
Statement of:
Rusco, Frank, Director, Natural Resources and the
Environment, GAO; Mary L. Kendall, Acting Inspector
General, Office of Inspector General, U.S. Department of
the Interior; Danielle Brian, executive director, Project
on Government Oversight; and Charlotte Randolph, president,
LaFourche Parish........................................... 60
Brian, Danielle.......................................... 95
Kendall, Mary L.......................................... 89
Randolph, Charlotte...................................... 106
Rusco, Frank............................................. 60
Salazar, Ken, Secretary, U.S. Department of the Interior; and
Michael R. Bromwich, Director, Bureau of Ocean Energy
Management, Regulation, and Enforcement.................... 15
Bromwich, Michael R...................................... 29
Salazar, Ken............................................. 15
Letters, statements, etc., submitted for the record by:
Brian, Danielle, executive director, Project on Government
Oversight, prepared statement of........................... 97
Bromwich, Michael R., Director, Bureau of Ocean Energy
Management, Regulation, and Enforcement, prepared statement
of......................................................... 31
Connolly, Hon. Gerald E., a Representative in Congress from
the State of Virginia, prepared statement of............... 130
Issa, Hon. Darrell E., a Representative in Congress from the
State of California, prepared statement of................. 10
Kendall, Mary L., Acting Inspector General, Office of
Inspector General, U.S. Department of the Interior,
prepared statement of...................................... 91
Luetkemeyer, Hon. Blaine, a Representative in Congress from
the State of Missouri, prepared statement of............... 121
Randolph, Charlotte, president, LaFourche Parish, prepared
statement of............................................... 108
Rusco, Frank, Director, Natural Resources and the
Environment, GAO, prepared statement of.................... 62
Salazar, Ken, Secretary, U.S. Department of the Interior,
prepared statement of...................................... 18
Towns, Chairman Edolphus, a Representative in Congress from
the State of New York, prepared statement of............... 4
OFFSHORE DRILLING: WILL INTERIOR'S REFORMS CHANGE ITS HISTORY OF FAILED
OVERSIGHT
----------
THURSDAY, JULY 22, 2010
House of Representatives,
Committee on Oversight and Government Reform,
Washington, DC.
The committee met, pursuant to notice, at 10:11 a.m., in
room 2154, Rayburn House Office Building, Hon. Edolphus Towns
(chairman of the committee) presiding.
Present: Representatives Towns, Maloney, Cummings,
Kucinich, Clay, Watson, Connolly, Kaptur, Norton, Van Hollen,
Murphy, Welch, Speier, Driehaus, Chu, Issa, Burton, Mica,
Duncan, Turner, McHenry, Bilbray, Jordan, Fortenberry,
Luetkemeyer, and Cao.
Staff present: John Arlington, chief counsel--
investigations; Kwame Canty, senior advisor; Lisa Cody, Craig
Fischer, Katherine Graham, investigators; Brian Eiler and Neema
Guliana, investigative counsels; Aaron Ellias, staff assistant;
Linda Good, deputy chief clerk; Velginy Hernandez, press
assistant; Adam Hodge, deputy press secretary; Carla Hultberg,
chief clerk; Marc Johnson, assistant clerk; Mike McCarthy,
deputy staff director; Leneal Scott, IT specialist; Ron
Stroman, staff director; Lawrence Brady, minority staff
director; John Cuaderes, minority deputy staff director; Rob
Borden, minority general counsel; Jennifer Safavian, minority
chief counsel for oversight and investigations; Frederick Hill,
minority director of communications; Adam Fromm, minority chief
clerk and Member liaison; Justin LoFranco, minority press
assistant and clerk; Tom Alexander and Kristina Moore, minority
senior counsels; and John Ohly, minority professional staff
member.
Chairman Towns. The meeting will come to order.
Good morning and thank you for being here.
The Interior Department is responsible for the regulation
and oversight of offshore oil drilling. Unfortunately, the BP
oil spill followed a long history of regulatory and ethical
failures at the Interior Department and its Minerals Management
Service [MMS].
The Deepwater Horizon disaster has now exposed what appears
to be continuing, major problems at MMS. Over the last decade,
MMS has essentially permitted the oil industry to police
itself.
For example, in 2000, MMS issued an alert requiring oil
companies to have a backup system to activate ``blowout
preventers,'' one of the components that failed, contributed to
the Deepwater Horizon explosion, and exacerbated the size of
the oil spill. But MMS officials decided to let oil industry
executives determine how they wanted to comply with this
requirement.
In other words, BP and the other oil companies were
essentially on the honor system. The Deepwater Horizon disaster
suggests this is not an effective approach to ensuring safe
offshore drilling.
Regulatory failures at MMS were made worse by the rapid
growth of offshore oil drilling in the Gulf. Over the last two
decades, the number of offshore oil rigs in the Gulf of Mexico
has expanded dramatically, and extended further offshore into
much deeper waters. Yet, at the same time, MMS remained
relatively small, had trouble recruiting qualified engineers
and inspectors, and could not keep up.
Though drilling has expanded in the Gulf by tenfold, the
number of inspectors has only grown by 13 percent. The result:
fewer than 60 inspectors are currently responsible for
conducting over 18,000 inspections annually.
The agency was born with a built-in conflict of interest.
When MMS was created, it was given the dueling responsibilities
of promoting drilling and collecting royalty payments on the
one hand, while also issuing and enforcing environmental and
safety regulations on the other hand.
It seems as though it was only a matter of time before
these conflicting responsibilities would lead to the disaster
we are seeing here today.
In short, it was a tug-of-war between drilling and safety.
As the BP disaster illustrates, safety found itself on the
losing side of the struggle.
Even worse, regulatory failures have been accompanied by
ethical failures.
In 2008, the Interior Department's Inspector General found
a ``culture of ethical failure'' within MMS's Royalty-In-Kind
program. The IG's investigation revealed that, over a 4-year
period, senior employees within MMS improperly accepted gifts
and engaged in sex and drug abuse with oil company employees.
Unfortunately, this was not an isolated incident.
Just last month, the IG released another report which found
that inspectors improperly accepted gifts from oil companies.
Additionally, at least one employee simultaneously conducted
inspections of an oil company's operations while negotiating
employment with the very same company.
In addition, in a series of reports, GAO found that flaws
in royalty collection have resulted in millions of dollars in
lost revenue.
We can and must do a better job overseeing offshore oil and
gas activities.
Today, we will hear directly from the Secretary and Mr.
Bromwich about how exactly they plan to implement the
reorganization and increase oversight and accountability at
MMS, which we are anxious and eager to hear.
Before we begin, however, I want to make one final
observation.
While the Interior Department is responsible for regulating
the oil industry and they have been taking a lot of heat for
that, it does not change the fact that BP was responsible for
the safety of its oil well and BP was responsible in terms of
responding to the oil spill. And it is BP that is ultimately
responsible for the entire cleanup and the costs, as well as
the job losses and lost income resulting from the spill.
I am committed to ensuring that the Government has the
authority and ability to effectively regulate the safety of
offshore oil drilling.
On that note, I now yield 5 minutes to the ranking member
of the full committee, the gentleman from California,
Congressman Issa.
[The prepared statement of Chairman Edolphus Towns
follows:]
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Mr. Issa. Thank you, Mr. Chairman, and thank you for
holding this important hearing.
Five years ago we began looking at failures in the Gulf and
more. In light of Hurricane Katrina, we knew that this was a
sensitive area and one that would struggle for years to come,
and one that was vulnerable to failures by the Federal
Government in just an area or two. And whether it is the levies
that failed to protect the people of New Orleans or the plan
approved by Mineral Management Service that failed to even
consider the possibility that oil could come ashore in a
disaster of this size, we, the Federal Government, have failed.
Every day every American here somewhere, it seems, a chain
is only as strong as its weakest link. There were two weak
links that led to this disaster: British Petroleum acting
irresponsibly, failing to maintain safety standards well
established in the industry, failing to maintain their own
safety standards, and being in too big a hurry to cut corners,
cut costs, ultimately leading to the loss of life and the loss
of billions of dollars to the American people around the Gulf
and beyond.
But there is another weak link, a well noted weak link, one
that this committee has been pursuing change for almost 6 years
now from: Mineral Management Service, an organization that has
checks and balances that mean nothing. Years ago we discovered
that when a contract was signed, person after person after
person was required to initial it. They initialed it and
nothing else; they did not read it, they did not verify, they
did not ask any questions.
That kind of absence does not just go to the engineers that
are hard to recruit; it goes to the very top of the
organization, and has under multiple administrations. In fact,
problems in our first set of hearings go all the way back to
the Clinton administration. But let us make it very clear,
those problems were well known during the entire Bush
administration, and for those 8 years change did not occur.
Sadly, Mr. Secretary, during the year and a half of your
administration, change did not occur. I know that it seems like
a very little bit of time, but if in fact the 20 or so findings
that have occurred by your own IGs and GAO had been put
together with the work of this committee sooner, and the
urgency put onto it, I believe this could have been prevented.
Having said that, we need to look to the future. We need to
look to real change in the Mineral Management Service. I
personally would not like to see it broken into three even
smaller parts but, rather, have the real focus either as an
independent agency or as one that has a level of clarity to the
American people, much more similar to the EPA. We need to have
that. We need to have the American people understand that the
proper revenue that has not come to the American people is a
factor; the proper controls and safeguards are a factor.
Chairman Waxman, Mr. Kucinich, Mr. Towns, and the rest of
us have all seen hearings, but we haven't seen the amount of
hearings that we should have had, and we haven't had the
followup by previous administrations or, to date, by your
administration.
I believe that there are a number of factors that we can
deal with today that have to do with the current disaster, with
a number of factors including, if you will, an overstatement of
available resources, an over-reporting of available resources
and when they were there, and a number of other areas. Those
occurred under your watch.
But ultimately this is the Committee on Oversight and
Reform, and it is those published 20 reports that we want to
deal with primarily; it is the discovery of documents that
would allow us to take a first hand in the reorganization to
ensure that, when this is over with, we can count on an agency
that recruits and trains the kind of second guessers to an oil
industry.
I think it is important to note that there are many, many,
many rigs that have been operated safely and responsibly. It
only takes one operating irresponsibly and then a lack of
oversight. In fact, to my amazement, the last inspection by
Minerals Management Service of this rig before the disaster
occurred, as required, with two individuals; two being part of
the inspection team. That was because there was a requirement
to have two separate people independently second-guessing each
other. To my amazement, of course, it was a father-son team
and, in fact, less likely to be independent.
This is one of many too cozy relationships at MMS that have
to change. This has to be an organization of professionals, not
a family practice.
The American people want us to take care of a number of
items, but they want us to go further. I will note today that
four other major oil companies have announced an investment in
the construction of a very large dome designed to work in the
Gulf, certainly on our part of the Gulf, but perhaps in Brazil
and other areas, if a similar event happens. This kind of
proactive thinking is important.
In fact, Mr. Secretary, to the extent that you have been
involved in it, either by urging or demanding, I would like to
personally applaud you. I believe that when we look at the
blow-off preventers next generation, something that has been
needed since 2003, and we look at the recovery and response
assets, not just for this event, but for any event, for a major
shipwreck, a hurricane that destroys a refinery, or even
chemical failures, we all have a responsibility to see that we
go with a program much more similar to putting a man on the
moon than simply business as usual in the Gulf.
So, Mr. Chairman, I look forward to an extensive hearing
today. I look forward to the balance of our discovery, and I
look forward to working with you on trying to oversee over the
next couple of years a real birth of an organization unlike the
old MMS and much more like an organization that we can all be
assured will keep the good actors doing what they are supposed
to and the bad actors altogether out of the business.
With that, I yield back the balance of my time.
[The prepared statement of Hon. Darrell E. Issa follows:]
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Chairman Towns. I also now recognize for 3 minutes the
gentleman who is the chairman of the subcommittee from Ohio,
Congressman Kucinich.
Mr. Kucinich. Thank you very much, Mr. Chairman, for
calling this hearing on ``Offshore Drilling: Will Interior's
Reforms Change Its History of Failed Oversight.''
It is important that we do our work of oversight, but I
also have to tell you that while I am sitting here looking at
the preparation for the hearing and thinking about how we are
going to focus on things, for example, I am going to have some
questions, so you can think about it now, about the Atlantis
platform, how 19 Members of Congress wrote to the Minerals
Management Service back in February raising questions about
engineering documents and didn't get the answers that we were
entitled to. The breach in the catastrophe occurred with
Deepwater Horizon, but the questions that we raised with
respect to the Atlantis platform were relevant not only to
Atlantis, but Deepwater Horizon and other platforms that are
out there in the Gulf.
So we are going to get into that in the Q&A, but I just
have to say something about this moment. There seems to be some
feeling in this country that we can endlessly invade the
natural world without any consequences. Well, the catastrophe
in the Gulf put the lie to that, but we still believe we can do
it. We are still moving forward with people talking about doing
drilling and we have built our whole economy around this.
So, Mr. Secretary, you are being asked to defend a system
which truly is basically collapsing. It really is. And I thank
you for your service, but the fact of the matter is the system
itself is collapsing. We think we can keep interfering in the
natural world without any consequences. We think we can
postpone the delivery or the development of alternative
energies. We think we can keep on living in this country the
way we have been living, without any correction in our course,
even in the face of a tremendous catastrophe in the Gulf.
Well, we are going to have to start thinking again.
I yield back.
Chairman Towns. I thank the gentleman from Ohio.
I now recognize the gentleman from Florida, Congressman
Mica, for 3 minutes.
Mr. Mica. Well, first of all, I want to thank Chairman
Towns and Mr. Issa for convening this hearing. I am pleased to
see the Secretary here. There are some very serious questions
that need to be answered about what took place and also what
measures we have in place to deal with the current spill that I
see from Florida around the Gulf Coast, affecting people's
life, the moratorium. We have so many questions, but I am
pleased that you are here to hopefully shed some light on it,
and your colleague.
Mr. Issa stated that we knew something was rotten in the
Minerals Management Service even under the Bush administration,
and I will put in the record a copy of a letter that cites
three criminal investigations were launched during the Bush
administration on that agency, things we knew there were
problems with. I would like to know from you, when you
inherited that position, if that was one of your focuses.
There are other questions that have been raised about the
development of policy with the new administration. You know, I
think a lot of people voted for President Obama on the other
side; they thought they were the protectors of the environment
and all this. And it turns out that they were asleep at the
switch.
What baffles me is how you could come up with proposals,
and I want to know if you were consulted on this budget
proposal in 2011 to cut the Coast Guard budget, which is one of
the first responders whenever you have an oil incident or a
disaster in this country. In addition, $2 million cut from MMS,
Minerals Management Service's budget for environmental reviews.
It is in here; these were proposals. I don't know if you had
anything to do with this in February of this year. This is
February, and then in March the administration develops a
policy. Here is the headline from the New York Times, ``Obama
to Open Offshore Areas to Oil Drilling,'' and it cites the Gulf
of Mexico.
So here we are cutting the assets and those responsible for
oversight and permitting, and there are questions about the
rubber-stamping carte blanche of the approval. This is the
approval signed by your administration to drill in deepwater.
And then the rush to do more deepwater drilling. This is the
list of 33 approvals by the Obama administration. There is only
a total of 27 deepwater operations in the Gulf after those are
exploratory, half, approximately, production, but your rush to
more drilling and cutting the assets.
I think I would like to know how this policy was developed
and if you had any part in it, or what the thinking was when
they took this path.
Chairman Towns. The gentleman's time has expired.
Mr. Mica. I yield back the balance of my time.
Chairman Towns. Thank you very much.
Let me indicate that is the longstanding policy of this
committee that we swear all of our witnesses in, so if you
would stand and raise your right hands.
[Witnesses sworn.]
Chairman Towns. You may be seated.
Let the record reflect that the witnesses answered in the
affirmative.
We are delighted to have Secretary Salazar with us. He is
serving as the fiftieth Secretary of the U.S. Department of
Interior. Prior to his confirmation, Secretary Salazar served
as a Senator from the great State of Colorado. Before becoming
Senator, Secretary Salazar spent two terms as Colorado's
attorney general and served as chief legal counsel and
executive director of the Colorado Department of Natural
Resources in the cabinet of Governor Roy Romer.
Welcome. We are aware of your time constraints, and we will
respect them, no question about it.
Then Mr. Michael Bromwich was sworn in to lead the Bureau
of Ocean Energy Management, Regulation, and Enforcement,
formerly known as MMS, on June 21, 2010. Director Bromwich
previously served as inspector general for the Department of
Justice and as an assistant U.S. attorney in the southern
district of New York. Most recently, Director Bromwich was a
partner at the law firm of Fried Frank, where he specialized in
conducting internal investigations.
We welcome both of you.
At this time, I ask that each witness deliver their
testimony within 5 minutes, which will allow the committee
ample time to raise questions, also considering your time
constraints, Secretary. Of course, you know the rules. They
start out with the light on green; then, of course, you know,
because you know all about these lights, then at the end it
becomes red. So, Mr. Secretary, you may begin.
STATEMENTS OF KEN SALAZAR, SECRETARY, U.S. DEPARTMENT OF THE
INTERIOR; AND MICHAEL R. BROMWICH, DIRECTOR, BUREAU OF OCEAN
ENERGY MANAGEMENT, REGULATION, AND ENFORCEMENT
STATEMENT OF KEN SALAZAR
Secretary Salazar. Thank you very much, Chairman Towns, and
thank you, Congressman Issa, and all the distinguished members
of the committee who are here. At the outset, let me just say
thank you to the committee for the work that it has done in the
prior years relative to putting into the spotlight some of the
necessary reform efforts that are required of the Minerals
Management Service, many of those which we have been working on
since day one, when I became Secretary of the Interior.
Let me, at the outset, just say to the members of the
committee I know you are all wondering about the status of
where we are with respect to the containment of the oil leak
out in the Gulf of Mexico. Since day one, and today is day plus
93, we have been working from early morning until late at night
making sure that the entire arsenal of the United States of
America is focused on the problem and getting it resolved.
Myself and Secretary Suh, other members of the Cabinet,
have been working on this from day one, and as of today we see
the light at the end of the tunnel. There is a shut-in that has
occurred of the well and the monitoring that we have required
of BP is showing that it is holding. But the weather patterns
that we are seeing may have some interruption in terms of
getting to the ultimate solution here, which is the ultimate
kills that have to occur of this well. But we are seeing the
light at the end of the tunnel.
Let me move to the subject area that I think this committee
wants to explore, and that is the issue of responsibility and
what is it that has happened here. Let me frame it for this
committee the way that I see it. This is a collective
responsibility, and I do not believe that, at the end of the
day, the blame game is going to help us relative to how we move
forward and develop the broad energy portfolio and the
comprehensive energy plan that is required of America; that we
need to work together to fix the problem, make sure we learn
the lessons from this incident, and that we move forward with
an energy portfolio that I think, at the end of the day, will
include oil and gas. That has been the position of the
President and my position as Secretary of Interior.
In terms of the responsibility for this incident that
brings us here today, certainly, BP and other companies that
were involved have broken the rules and have strayed from the
best practices of the industry. Many investigations are going
on. Much of that has already been reported in the press.
Second, industry has made the wrong representations, both
to the Congress as well as to the Department of Interior and
others, with respect to drilling safety, with respect to the
ability to contain blowouts, and with respect to oil spill
response. The efforts announced yesterday by the four major
companies in moving forward with a billion dollar effort, on
which I was briefed, will need significant additional work
before we can be satisfied with at least one of those
particular prongs that I think are essential to be righted.
Third, the Congress serves a responsibility. This committee
has been at the forefront, at least, of exposing some of the
ethical lapses, but, at the end of the day, the drilling that
has occurred in the deepwater drilling has been something which
this Congress has also embraced. And I recognize that I too was
a Member of the U.S. Senate. The passage of the 2005 Energy
Policy Act which you, Congressman Issa, and other members of
this committee, voted on essentially was part of a national
framework.
Fourth, there is a reality that this is an issue which
requires looking back not just at one administration, but it is
multiple administrations. The MMS was formed in 1981, and you
think about the fact that there have been Republican and
Democratic administrations that essentially have allowed this
organization to continue by fiat of Secretary Lauder, and it
was for that reason that even as early as last year proposed to
the Natural Resources Committee, Congressman Rahall's
committee, that we move forward with organic legislation
because the missions of this agency are so important.
So let me just say it is a shared responsibility and we
need to move forward and fix the problems.
I believe that we started, in my tenure as Secretary of the
Interior, moving forward implementing the reform agenda, much
of which had been uncovered through some of the work of this
committee. On ethics, from day one, we put together a strong
and robust ethics program, working with the findings of the
Inspector General and moving forward to clean up the corruption
that occurred in Lakewood and other places. People have been
fired; people have been sent over for criminal prosecution;
people have been suspended; and we have done everything that we
can to clean house from an ethics point of view.
We eliminated the Royalty-in-Kind program which had existed
for a long time and which had been one of the magnets for
corruption. That has been eliminated and we move forward with a
comprehensive review and change with respect to the Outer
Continental Shelf plan that had been proposed by the prior
administration. Finally, we have worked very hard to stand up
the renewable energy resources out in the oceans of America.
With respect to what has happened since April 20th and how
we move forward with that reform agenda, it is a continuing
effort. We have proposed and developed a report on safety to
the president of the United States. It was a 30-day report that
laid out a number of different majors from prevention
mechanisms to moving with cementing, encasing, and the like.
We have proposed, in the last 2 years' budgets, efforts to
expand the number of inspectors that we have at MMS and we are
moving forward with the reorganization of MMS now into the
Bureau of Ocean Energy Management, Enforcement, and Regulation,
and that is being done under the leadership of Wilma Lewis and
Michael Bromwich.
Let me just say that both of them have incredible
credentials as prosecutors, as well as Inspectors General, and
they were chosen by me to run the agency in large part because
of the ethical improprieties which this committee and which the
Inspector General had uncovered.
So we have been working hard on making sure that those
ethical lapses are not there, and we understand that there is
still significant reform that we have to undertake in the days
and months ahead, and we will be focused on it like laser beam
and look forward to working with you, Mr. Chairman, Congressman
Issa, and members of this committee, to make sure that the new
organizational ultimately gets it right.
Let me finally say I know some of you will have questions
on the moratorium. I would be delighted to answer those
questions.
Finally, just in terms of what I hope the legacy of this
crisis is. I would hope that, as we learn the lessons from this
crisis, that at the end of the day we will look back at this
time and we will say that we have, together as a Nation,
developed safer oil and gas production in the Outer Continental
Shelf that does in fact protect the environment and protect the
safety of the workers.
I would hope that we can move forward as a Nation and say
that we have restored the Gulf Coast to a place that it is in a
better condition than it was before April 20th, and I would
hope that we are able to move forward and embrace the new
energy future of America with a much broader portfolio that
includes solar and wind and geothermal and all the rest of the
portfolio that is part of the renewable energy initiative of
President Obama and Members of this Congress.
Thank you, Mr. Chairman.
[The prepared statement of Secretary Salazar follows:]
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Chairman Towns. Thank you, Mr. Secretary, for your
statement.
Mr. Bromwich.
STATEMENT OF MICHAEL R. BROMWICH
Mr. Bromwich. Thank you very much, Chairman Towns, Ranking
Member Issa, and other distinguished members of the committee.
It is a pleasure to be here and to testify before you, and to
answer any questions you may have.
As the chairman noted and as the Secretary noted, I am new
on this job; I have been on the job exactly a month yesterday
as head of the newly renamed Bureau of Ocean Energy Management,
Regulation and Enforcement. The change of name was made by
Secretary Salazar with a point, which was to stress and
emphasize the regulation and enforcement part of the
organization's mission that many people have fairly suggested
has been ignored or neglected in the past.
Let me focus very briefly on three things that we have been
doing since I got there. No. 1, on the second day after I was
named Director, with Secretary Salazar's approval, we created
an Investigations and Review Unit within the organization that
will have several primary functions, but the principle function
will be some self-policing. It will be authorized in
conjunction and cooperation and communication with the Office
of the Inspector General to do investigations into ethical
lapses, into misconduct, and so forth. To my surprise, there
had not been that capability within the organization
previously. I believe that any healthy and robust organization
should have that capability. This organization now has that.
Second, that unit, the Investigations and Review Unit, will
spearhead a heightened enforcement program that will be focused
on oil and gas companies, and that will launch aggressive
investigations in those cases in which there are allegations
that the rules have been violated. Too often in the past I have
heard and I fear enforcement has not been vigilant, it has not
been aggressive. That will change.
Finally, as the ranking member and the chairman noted,
there have been many, many reviews and investigations by
various entities, including the Office of the Inspector
General, GAO, and so forth. One of the duties of this
Investigation and Review Unit will be to followup on those
reviews to see whether the remedial steps that should have been
taken and where statements may have been made that those
remedial steps had been taken, whether they in fact have been
taken. So that kind of followup work will be a central mission
of the Investigations and Review Unit.
The next subject I would like to touch on briefly are the
new regulations that have already been implemented and that
will be implemented in the future. Following the Deepwater
Horizon blowout and the 30-day safety report that the Secretary
mentioned, a new safety regulation, NTL-5, was issued that is
binding on the industry. That was followed by the issuance of
NTL-6, which is a more environmentally oriented regulation.
These are tough new rules and regulations that govern oil and
gas companies as they do work in the Outer Continental Shelf,
and I think they are fair and appropriate new rules and
regulations.
There are other rulemakings that are in process that are,
in part, the product of learning that has gone on in the
Interior Department both previously and that is going on in an
accelerated way over the last 2 months, and we hope to be
putting out those rules in the near future. Again, I think we
feel that those are necessary and appropriate.
Finally, the Secretary mentioned briefly the moratorium.
One of the charges he gave me in connection with the moratorium
issued on July 12th was to conduct a series of public forums
around the country to gather information on three central
issues, drilling safety, spill containment, and spill response,
with an eye to gathering as much information from industry,
from academia, from stakeholders, from NGO's, from
environmental groups to determine whether there are ways in
which the moratorium might be shortened before the November
30th current expiration date, but generally to learn as much as
we can on what additional measures need to be taken on those
three dimensions to ensure that when deepwater drilling is
resumed it is done in a safe and appropriate manner.
We will begin those meetings starting August 4th in New
Orleans. We will follow those with a series of meetings in
Mobile, AL, Pensacola, FL, Santa Barbara, CA, Anchorage, AK,
Biloxi, MI, Houston, TX, and Lafayette, LA. Those will be
conducted between August 4th and September 15th with a call to
report back to Secretary Salazar with the results of those
public forums no later than October 31st.
It is a lot of work, but it is a lot of important work, and
we look forward to doing it and I look forward to working with
you. Thank you very much.
[The prepared statement of Mr. Bromwich follows:]
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Chairman Towns. Thank you. Thank you for your statement.
Let me begin with Secretary Salazar. Will you commit today
that the reorganization process will be transparent and this
committee will be provided with all the critical details?
Secretary Salazar. Yes, we will absolutely be working with
the committee, with Members of Congress relative to legislation
on the reorganization, as well as keeping you up to date on the
implementation of the new organization.
Chairman Towns. Now, I want to know how will the
reorganization help to prevent further future disasters.
Secretary Salazar. Well, first, in terms of dealing with
some of the ethical lapses, which I agree have been abhorrent
in the past and which this committee has appropriately pointed
out, as well as our Inspector General of the Department of
Interior, we are dividing up the agency into different units so
the revenue functions that were formerly in the MMS will move
over into an office of Natural Resources Revenue.
So the dollar collectors will be separated from those who
are in charge of granting the leases and doing the enforcement.
The rest of the agency which Director Bromwich will oversee
will be split into a Bureau that essentially manages the
resource out in the Outer Continental Shelf, both conventional,
as well as renewable, and another unit that essentially will be
in charge of safety and enforcement.
So that is the essential concepts around the
reorganization, to ensure, first of all, that conflicts of
interest are avoided in the future, the kinds that you have
pointed out in your investigations, and, second of all, that
there is a kind of enforcement with respect to safety and
environmental requirements.
Chairman Towns. The GAO and, of course, DOI IG have made
numerous recommendations to improve royalty collection. Have
you implemented any of these recommendations up to this point?
Secretary Salazar. Mr. Chairman, the answer to that is we
have in major ways relative to the elimination of the Royalty-
in-Kind program. We are also looking at other ways in which we
can provide a more effective calculation of royalties and have
been working at putting together a program so that the American
taxpayer receives the return from the royalties from oil and
gas production that the American taxpayer deserves.
Chairman Towns. Let me ask you have you looked at the
turnover process in terms of people that work for MMS moving on
based on the fact that they are so poorly paid?
Secretary Salazar. The revolving door issue is one that has
troubled us and one that we are working on. It is my personal
view that if you have been an MMS Director, that you ought not
to go out and then work with the industry. But I will have
Michael Bromwich, if I may, Mr. Chairman, just quickly answer
that question, because it is something that we have been
focused on.
Chairman Towns. Sure.
Mr. Bromwich. I think it is a serious issue and a serious
problem. There have been historical problems in recruiting
qualified inspectors, and many of the qualified inspectors do
come from industry and then seem to want to go back to
industry.
Now, it is my view that we can do a couple of things about
that. One is to create tighter rules to ensure that if people
who are agency government inspectors do go back into the
private sector, that at least they don't deal directly with the
agency that they just left on any of the matters that they
worked on, and for some period of time perhaps not deal with
the agency at all. So that is one set of issues that we are in
the process of addressing.
I think a more fundamental issue, though, is how do you
enlarge the pool of qualified inspectors. One of the things
that I have begun conversations about is talking to some of the
schools of engineering around the country to see if we can
develop recruiting programs so that this becomes a desirable
public service career path. Let's recruit the best and the
private out of some of the petroleum engineering schools around
the country, people who have no prior ties with industry, and
let's make it a sustainable career path so that they are not
tempted by more dollars in the private sector, but they can
make a decent living serving as a qualified inspector.
I had a conversation yesterday with the Dean of the School
of Engineering at UC Berkeley. He said there are a number of
schools of engineering deans around the country who are
interested in working with us on precisely this point. So we
are at the very beginning stages of this, but I am very hopeful
that we will have some robust alternatives to the back and
forth revolving door system that has existed up until now.
Chairman Towns. That is very encouraging.
I now yield 5 minutes to the ranking member, Congressman
Issa.
Mr. Issa. Thank you, Mr. Chairman. First, I would like to
do just a little technical housework.
Mr. Secretary, your staff, up until last night, told us
that there was a policy which they would not provide in
writing, that you only deliver document requests to the
majority. Now, the majority has been kindly making copies and
giving them to us; however, under Ranking Member Waxman and the
Bush administration, we never saw such a policy and we were not
able to get it in writing.
Would you pledge that both the rest of the discovery would
be coming, which you have already said before the committee
hearing started, but also that the discovery would be
transparent to both sides? The chairman may have requests that
are slightly different than we have, but that what we request
would be granted to both sides at the same time, rather than
relying on somebody to go through and try to make an effective
copy, rather than your knowing that you delivered both sides
the same information?
Secretary Salazar. Congressman Issa, we delivered thousands
of pages of documents both to the chairman, as well as to you,
and we are working with you to try to get all the additional
documents----
Mr. Issa. And I appreciate your participation and your
promising that. It was actually more technical than that. Until
last night, any documents we got we got because they were
delivered to the majority and not to the minority, and the
majority then made copies. And that is not a normal practice
from government.
Each of us has independent requests and usually they are
shared by delivering them either to the person who requested
them, if only one requested, but in most cases administration
delivers to both sides so that both sides know exactly what is
being delivered. This was troubling, particularly when, last
night, your folks suddenly changed, probably because you were
going to be here, and gave us both copies. We would like to
know that would continue, that each of us would get information
independently, but copied to the other.
Secretary Salazar. Congressman Issa, let me just say that
we will follow the processes that the Department of Justice and
others have required of the executive branch of Government. My
view is that transparency is important. We have provided
tremendous documents to this committee and will continue to
work with you to provide you the information that you need so
that you have absolute information relative to what it is that
you are seeking.
Mr. Issa. OK, I won't belabor the point; I will trust that
if you gave it to us directly last night, you are probably
going to continue giving it to us directly, and not the way
your staff had decided to do it prior to that time.
The questions I have are a number, and I will try to be
brief. The culture at MMS, we can talk about changing. Mr.
Bromwich, I am looking forward to your helping change that. But
in our earlier investigations one of the things we discovered
was that not only was this organization cozy, it was inept. We
had testimony in evidence that now what you own, or maybe what
you own, Mr. Secretary, the portion that was collecting the
money completely relied on the energy companies to deliver how
much was owed from where; that there was no independent
accounting and that no audit ever basically found a different
number, meaning if Kerr-McGee, when they were still in
business, said we got X amount out and delivered X amount of
dollars, they just took the money and recorded it; that they
had no independent ability to know whether that was the right
number or not.
Do you, one or both of you, have plans to implement a
system so that you can independently discover how much oil or
natural gas or other resources are being taken out and verify
them, not just take the word of the good players and the bad
players alike?
Secretary Salazar. The answer to that, Congressman Issa, is
yes, and we have already done it, indeed, with BP. We just sent
them a notice for some, I think, $5 million with respect to
royalty under-payments on an onshore activity. Second, with
respect to the Office of Natural Resource Revenue, which we
have created, there will be the auditing functions so that we
can do that independent verification, and perhaps Director
Bromwich may want to comment on that as well.
Mr. Bromwich. I agree with you, Congressman Issa, that is
an inappropriate and unacceptable system. The Secretary has
just said that has been changed and that is absolutely the
right way to do it. You cannot rely on the regulated entity to
report without checking that, auditing it, and coming up with
an independent assessment.
Mr. Issa. I appreciate that. Very quickly, I might suggest
that every year the Army Corps of Engineers has huge amounts of
senior engineers retire who still would like to work for
government. I would hope that you look at both ends of the
spectrum, those coming directly out of universities that have
never worked with oil companies, but perhaps senior engineers
who have 5, 10, or 15 more good years to give that also are not
tainted by an ambition to work for seven figures for an oil
company.
Mr. Bromwich. I think that is a great idea. Last week I
found out that there may be a pool of people in the Coast
Guard, I think they are called warrant officers, who similarly
have useful experience that we can count on. So I think there
are actually pockets of experienced personnel all over
government that people just haven't thought of tapping into in
the past, but that we are going to try to tap into now.
Mr. Issa. Thank you.
Thank you, Mr. Chairman.
Chairman Towns. The gentleman's time has expired.
I now yield to the gentleman from Ohio, Congressman
Kucinich.
Mr. Kucinich. Thank you very much, Mr. Chairman.
I indicated in my opening remarks that I had some questions
about the way that the Minerals Management Service handled the
British Petroleum's Atlantis platform issues in the Gulf of
Mexico. I was 1 of 19 Members of Congress who signed a letter
to the Minerals Management Service back in February 2010.
Mr. Bromwich, this was about 2 months before the Deepwater
Horizon incident. Ms. Birnbaum, the former director, received a
letter about BP Atlantis's platform. We requested an
investigation to verify a whistleblower claim that 90 percent
of the final construction plans for the platform, almost 7,000
plans, were never approved. So if there is an accident on that
rig, there would be no plans for response teams to use to try
to deal with it.
Though I am happy to see that an investigation is now
underway, I am concerned that it is not expected to conclude
until September. It is important to keep in mind that this
platform is in waters deeper then the Deepwater Horizon
platform, and BP's own worst case scenario for a catastrophe
with Atlantis would put over 200,000 barrels of oil per day
into the Gulf, which is about anywhere from 4 to 10 times the
size of the Deepwater Horizon catastrophe.
My first question, Mr. Bromwich, is whether BP would be
found in violation of the law if it does not maintain certified
as-built drawings on file.
Mr. Bromwich. I don't know the answer to that. Let me get
back to you on that. My intuition is----
Mr. Kucinich. I am disappointed that----
Mr. Bromwich. My intuition is that the answer----
Mr. Kucinich. I am disappointed you don't have the answer
to that because that is your job. I will give you the answer.
The answer would be yes.
Now, I am told that it should not take that long to review
the plans. That raises a question: that the plans might not
even exist. I am concerned that Atlantis is the rule, and not
the exception. Given what we know about the Horizon accident,
and how BP Atlantis does not have engineer-certified documents
for its subsea components, as required by law, wouldn't it make
sense for the Bureau of Ocean Energy Management, Regulation,
and Enforcement to close the Atlantis project, as well as any
deepwater drilling production operations in the Gulf that lack
final plans until an independent third party have proven that
they are operating with complete sets of engineer-approved
drawings for their above- and below-sea components? Mr.
Bromwich.
Mr. Bromwich. Congressman, you are correct that there is an
investigation ongoing. You are also correct that it is going to
be completed by the end of September. I am advised that there
is a letter that is on its way to me that will update you and
other interested members of the committee with what I
anticipate will be preliminary results of that investigation.
The truth is I have spent the bulk of the month since I
came onboard dealing with various offshoots of the Deepwater
Horizon matter, so I am not as fully aware of the Atlantis
matter as you would like me to be, but I will make it my
business to become more knowledgeable about it and am very
happy to talk to you further about it in the near future.
Mr. Kucinich. Mr. Bromwich, I appreciate that response, but
I think it would be useful for you to review the letter that
was sent back on February 20, 2010, signed by 19 Members of
Congress, including myself, which provides a very powerful
warning about the consequences of not having an appropriate
inspection of the issue relating to engineering plans at that
BP Atlantis platform.
Mr. Bromwich. I will review that.
Mr. Kucinich. You understand the concern here. You are
dealing with a catastrophe from the lack of appropriate
oversight at Deepwater Horizon. What I am maintaining to you,
and what other Members of Congress have all joined together in
asserting, is that lack of appropriate oversight also exists
with respect to a BP Atlantis platform, which would have even
more catastrophic implications than the Deepwater Horizon
disaster.
I thank the gentleman. I yield back.
Secretary Salazar. If I may, Mr. Chairman. Congressman
Kucinich, I would want to just supplement what Director
Bromwich said by saying, one, the investigation is underway and
he will keep you posted as to the results of the investigation.
No. 2, we have sent inspectors out into the Gulf to look at the
drilling, as well as the production platforms, so there is an
ongoing inspection effort underway.
And, No. 3, one of the things that should come out of the
lessons learned here is that you cannot have 60 inspectors
essentially having the responsibility of conducting the massive
job that has been assigned to these inspectors, and that is why
there is a budget amendment in front of this Congress to try to
beef up the level of inspection and investigation capability
within the agency.
Mr. Kucinich. Mr. Chairman, I just want this committee to
be on notice that we have to find out whether BP has certified
as-built drawings on file. This is a serious matter, especially
in light of Deepwater Horizon. Thank you.
Chairman Towns. The gentleman's time has expired.
I now yield 5 minutes to the gentleman from Florida,
Congressman Mica.
Mr. Mica. Thank you.
Again, we appreciate your being here, Mr. Secretary. I
raised some questions in my couple of minutes of opening
statement, and I think everyone has to be baffled by the
administration's development of policy. You were one of the
first people nominated, I think, back by the President. People
were pleased we had somebody from the Congress and your
experience in the position.
So you came in in 2009. You had an opportunity to develop
budget and policy, I would imagine. I was kind of shocked,
again, when the staff gave me the budget and it showed cuts
like $2 million in the mineral management environmental permit
activity that was proposed by your agency. Did you participate
in making decisions on that?
Again, the primary agency for response in these kinds of
disasters would be the Coast Guard. The administration proposed
1,100 positions cut, cutting assets; ships, planes,
helicopters, all the things that you would use in a response.
Were you part of the decision to make those cuts either in your
agency, maybe not the Coast Guard?
Secretary Salazar. Congressman Mica, with respect to the
budget that had been submitted to MMS, you will, if you look at
the 10-year history of the budget, there had been erosion
within the Department of Interior MMS, as well as with all----
Mr. Mica. But you were proposing----
Secretary Salazar. Well, let me just finish. With respect
to the rest of the other agencies within Interior, including
MMS, a very significant erosion until we came onboard. Now, you
will note that the inspectors that are set forth in the budget
for MMS are a significant increase from what had been there in
the past. Now, the question is appropriate, I think, for this
committee and for the Congress is is that number sufficient;
and in our view it is not. We need to have additional capacity.
Mr. Mica. Well, again, all I can go by is the budget. I
asked if you were there when the decision was made to cut the
environmental review activities, which also reviewed permits.
Then the next thing is this is February it came out. In
March did you participate in the decision to expand drilling in
the Gulf and other areas?
Secretary Salazar. The----
Mr. Mica. Were you consulted? Is there any documentation--
--
Secretary Salazar. Not that I was consulted; it was my
decision and it was my plan, and it is a plan that is a very
well thought out plan relative to moving forward in a
thoughtful way that changes the direction that we are going on
in the OCS that does different things with respect to what was
being planned on the Atlantic and does different things than
was being planned in Alaska, and brings in the kinds of
environmental reviews that are necessary.
Mr. Mica. Well, again, let's go to that. You were there
when they issued this one-page permit, and this is the person
to drill for BP, one page. This is backed up by a 500-page
cleanup spill plan. I am sure you didn't review this.
But you told me that people who were responsible and all
were fired and people changed.
Have we got that organization chart?
The guy that was responsible for signing this, we have two
people here, Saucier and then Tolbert signed it for Saucier. He
is still there. That circle there, the yellow thing. So he
wasn't fired. He gave carte blanche. This is the approval for
BP to drill and the conditions by which they drill, and it
refers to a 500-page document.
That 500-page document my staff tells me it says it has
spill provisions for dealing with cleanup for seals, walruses,
and polar bears, none of which I have seen in the Gulf. It
looks like all this was sort of carte blanche approval. Is that
what it appears to be? And is this guy going to get fired? This
guy is still making the decisions. This is Saucier, and here is
Saucier here making the decision on implementing the
moratorium.
Secretary Salazar. Congressman Mica, let me respond with
two points. First, while it is true that there were people who
committed both criminal and ethical conduct that is wrong----
Mr. Mica. And he signed or was responsible for issuing the
permit----
Secretary Salazar. Well, hold on, let me finish. Let me
finish, Congressman Mica. The reality of it is that there are
many good people within the agency. There are some bad people.
Those are being dealt with. With respect to the document that
you referred to and with respect to people that were involved
concerning the approvals of the Macondo well and what happened
there, I have asked the Inspector General to take a look at
that, and the Inspector General----
Chairman Towns. The gentleman's time has expired.
Secretary Salazar [continuing]. Will provide us their own
independent review, which I would be happy to share, as
appropriate, with members of this committee.
Mr. Mica. I would appreciate a list on the status of those
who were held responsible. Thank you. Maybe we could submit
that to the committee.
Chairman Towns. Without objection.
Mr. Mica. Thank you.
Chairman Towns. I now yield 5 minutes to the gentlelady
from California, Ms. Speier.
Ms. Speier. Thank you, Mr. Chairman.
Thank you to the Secretary and to Mr. Bromwich. A series of
questions. From the outside, there is an ethical crisis at MMS,
whether you change the name or not. There has been a history of
drugs, sex, rock and roll concerts, and I am concerned, based
on the Post article today that says that there is a much higher
degree of revolving door that exists in the oil industry than
anywhere else in that three out of every four lobbyists had
some relationship to the Government. We know there are 12
former employees of MMS that are now lobbying for the oil
industry.
Mr. Bromwich and Mr. Secretary, I would like to know what
you are going to do now to freeze out those 12 former employees
from interacting with MMS.
Mr. Bromwich. Well, we will certainly make sure that they
observe the current ethical rule that exist that restrict their
contacts to some extent. But one of the things I have to do is
to gather information from people who have the information. If
they happen to be former employees of the agency, I am not
going to exclude them for that reason, but I am certainly not
going to give their information any more weight than anyone
else's.
I agree, I read the same article you did and I am troubled
by it. I think what I can tell you and tell the committee, that
you will never see me in that position. I will say right now
that I will self-impose a lifetime ban on contacts with the
agency, and I hope that sets an example for other people in the
agency and other people throughout government. I agree it is
unseemly----
Ms. Speier. Well, I guess from our perspective can you take
action, independent of Congress passing a bill, to restrict
former employees from having access to the agency?
Mr. Bromwich. Well, let me give you an example. I have
actually met with two of the former directors who are now part
of trade associations within the last couple weeks.
Ms. Speier. But that was at your request.
Mr. Bromwich. No, it was at their request. But I am in the
business right now of trying to gather information from a
variety of sources, including from trade associations, because
they have relevant information to provide bearing on some of
the issues that the Secretary and I are working on. I am going
to give them a hearing, but I am also going to give all other
groups, including environmental groups, including----
Ms. Speier. OK, I understand that. I have a limited amount
of time, so----
Mr. Bromwich. OK.
Ms. Speier. My question was can you act independent of
Congress in creating some restrictions around access to the
agency after employees have left.
Mr. Bromwich. Yes, we can, but----
Ms. Speier. All right, thank you.
Mr. Bromwich [continuing]. We need to do it in a thoughtful
way.
Ms. Speier. All right. So you will report back, once you
have decided on what you are going to do, to the committee?
Mr. Bromwich. Sure.
Ms. Speier. All right. The GAO report to this committee
indicated that the revenue share the Government collects for
oil and gas produced in the Gulf ranks 93rd out of 104 revenue
collection regimes around the world. I think most of us find
that stunning and shocking.
What are you going to do to change that so that the
royalties being received from the Gulf are reflective of the
world as a whole, at least the international average of
royalties received around the world?
Secretary Salazar. Congresswoman Speier, let me just say
that the royalty issue in getting a fair return to the American
taxpayer is foremost in our minds. We have been working on it;
we are working on it. We have proposals to change how royalties
are in fact collected to make sure that the American taxpayer
is getting a fair return for royalties not only in the
offshore, but also on the onshore, where you have a
circumstance that probably is even worse, where you still have
the same royalty rate that existed since the 1920 Mineral
Leasing Act was passed at 12.5 percent. So we are making the
kinds of changes that will bring in the right level of
royalties and, at the same time, make sure that there is
accountability with respect to the auditing functions related
to that.
Ms. Speier. And when will those be put into place and do
you need congressional action to do that?
Secretary Salazar. We are already working on it; we are
moving forward with it. It is being put into place as we speak.
The elimination of the Royal-in-Kind program was part of that
effort and there are continuing efforts to address the issue.
Ms. Speier. That is good news to hear. One last question.
My understanding, along with Congressman Mica's reference, is
that this particular 600-page document was reviewed by two
people for a total of 10 hours. So by anyone's measurement it
was inadequate. I don't care if you are a speed reader; there
is no way that, in 10 hours, you can give the kind of attention
to that document. What are you doing, moving forward, to make
sure the employees doing that kind of review are both qualified
and have adequate amount of time to do the review?
Secretary Salazar. With the reorganization that we have put
on the table and the resources that we have asked from Congress
to be able to do the right kind of work ensuring safety and
ensuring environmental protection should address those issues.
Chairman Towns. The gentlelady's time has expired.
I now yield to the gentleman, Mr. Turner.
Mr. Turner. Thank you.
Mr. Secretary, I have a few items on a time line that lead
up to the explosion in the oil field and the oil leak, and I
would like to go over those items and get some of your
responses to them. We focus a lot on what happens after the
explosion. I would like to focus on the period leading up to
it.
And, Mr. Chairman, I would like this time line included in
the record.
The time line begins with January 29, 2009, and the
Secretary being declared the Secretary; he is appointed on that
date and declares himself the new sheriff in town. That is
January 2009.
In February 2009, in a site-specific exploration plan filed
by BP, it states that it was ``not required'' to file a
scenario for a potential blowout of the Deepwater well.
In March 2009, as we have a new sheriff in town, a
whistleblower brought forth an issue of a safety breach by BP
in the Gulf of Mexico to the attention of MMS. ``The
whistleblower who was hired to oversee the company's data bases
that housed documents related to its Atlantis project
discovered that the drilling platform had been operating
without a majority of the engineer-approved documents it needed
to run safely. No action was taken by the agency.''
But the most important thing was 2 months after the
whistleblower came forward, May 2009, MMS fails to perform a
standard monthly inspection of Deepwater Horizon. But what is
happening in the Secretary's office May 2009? Our Interior
Secretary is speaking at the Wind Energy Conference in Chicago.
June 17, 2009, MMS proposes new rules to require oil and
gas operators to develop and implement ``safety environmental
management systems for offshore drilling.'' The rule is still
not finalized 1 month and 1 year later.
In June, that same month that these rules were provided but
not finalized, Secretary Salazar hires Sylvia Baca away from BP
America to become his Deputy Assistant Secretary of Lands and
Materials Management, according to this time line.
Summer 2009, the MMS awards Transocean's U.S. Gulf of
Mexico operation a safety award for excellence and our
Secretary directs MMS to begin focusing on promoting wind
energy. Elizabeth Birnbaum assumes duties as the Director of
MMS. The U.S. Times reported that, ``In particular, she was
tasked with handling the politically charged issue of citing
the 25 mile cape wind farm off of Cape Cod.
But what happens the next month, August 2009? MMS fails to
perform a standard monthly inspection of Deepwater Horizon.
August of that same month, at the White House's request,
Secretary Salazar takes a break from your wind energy efforts
to begin the big effort of selling health care reform.
August 2009 you travel throughout the West to tout Obama's
stimulus plan. I understand from this time line that on August
21st you were in Grand Canyon, South Rim highlighting $10.8
million of stimulus dollars. On August 20th you were in Utah,
$3.6 million of stimulus dollars, and August 20th again you
were in Oregon on stimulus dollars.
That very next month the National Oceanic Atmospheric
Administration sends MMS a letter about the offshore drilling
proposal, saying MMS understated environmental impacts of the
new drilling proposal.
September 8th of that month Salazar says, during an
interview at Reuters, right now we are focused on health care
reform.
In fact, CBS reports, in November 2009, that anticipating a
struggle, the White House deputized Interior Secretary Ken
Salazar and former Senate Majority Leader Tom Daschle to join
Vice President Joe Biden in trying to clear the way for health
care bills overhaul perform of the next several weeks.
But MMS is busy. MMS has a renewable energy task force
meeting in Rhode Island, Massachusetts, and New Jersey, and
with all this activity happening in November, what happens in
the Gulf in December? December 2009, MMS fails to perform the
standard monthly inspection of Deepwater Horizon.
They again failed to perform the inspection in January, and
then through a series of notifications that BP provides to the
agency, the specifications from Deepwater are continued to be
adjusted; MMS responding in 7 minutes to one request for a
modification, 4\1/2\ minutes to another after having routinely
not shown up for standard inspections.
And in April the Deepwater Horizon rig explodes and then
sinks, and I believe the Secretary is there by April 30th,
after attending, on April 27th, participating in a ceremony on
wind turbines, April 28th announcing the approval of the Cape
Wind Project, and then your attending in the Gulf to take a
look at what has occurred.
Chairman Towns. The gentleman's time----
Mr. Turner. It sounds like a significant amount of
inactivity----
Chairman Towns. The gentleman's time has expired.
Mr. Turner [continuing]. And I would appreciate your
response. I believe my staff has a copy of the time line which
they can also provide to you.
Secretary Salazar. Mr. Turner, if I may, Mr. Chairman,
respond, even though the gentleman's time has expired.
The fact is the U.S. Department of the Interior has a major
mission to protect and preserve the natural resources of
America, both onshore as well as offshore, as well as being the
custodian of America's history; and in that mission we work on
the set of issues relating to Native Americans and all of the
other assignments that we have within the Department of
Interior.
Specifically, with respect to many of the things that you
cite in there, I have spent probably more time on the
comprehensive energy program for the Nation that the President
and I have been championing than on almost any other issue. But
I can tell you that within that comprehensive energy plan,
which we are confident we will see unfold for this Nation, that
you will have a broad energy portfolio that will include oil
and gas and, at the same time, include the new energy frontier
of solar and wind and geothermal, which we have worked on very
hard.
Now, I will say this to you, Mr. Turner, that, without
equivocation, we have spent a huge amount of time with respect
to all of the issues relating to MMS, and they have included
changing the ethics culture, moving forward with a new
direction on the Outer Continental Shelf from what was left
over from the prior administration, and moving forward standing
up a renewable energy program.
So we work hard, we cover a lot of ground, and we have a
lot of ground to cover in the future.
Chairman Towns. Thank you very much. The gentleman's time
has expired.
I now yield 5 minutes to the gentlewoman from California,
Ms. Chu.
Ms. Chu. Thank you, Mr. Chair.
We know that the blowout preventers failed with BP and with
enormously tragic consequences. Now, it is my understanding
that an inspector does not actually have to witness in person
the blowout preventer test, but can simply review paperwork
from the oil company operators, and they can basically take
their word for it. We know that these tests can be successfully
faked, as illustrated by several cases. This practice is just
unimaginable, and it cuts corners and compromises the oversight
mechanism and validity of the test.
So how will the reorganization of MMS work to improve these
inspection practices and what specific improvements do you
anticipate making to make this BOP test actually effective? And
what are your thoughts about having these types of tests
certified as safe by independent third-party inspectors that
are selected by Federal regulators, and not the oil companies?
Secretary Salazar. Congresswoman Chu, it is a very good
question and it is something which we have been working on. It
really relates to two parts of the reforms within the OCS. The
first of those is having the right standards in place, and many
of those standards were set forth in the 30-day report which
President Obama directed that I deliver to him. Many of those
standards are now being implemented with respect to the notice
to lessees that Director Bromwich spoke about a little bit
earlier.
And then, finally, with respect to the enforcement of those
standards, there needs to be a significantly beefed up effort
with respect to the agency's inspection capabilities, because
right now it is a fool's errand to think that 60 inspectors can
essentially go out and inspect all of the different OCS
facilities, including production facilities, that are out
there.
Ms. Chu. So you will be coming forth with new regulations
pertaining to this particular practice?
Secretary Salazar. Yes.
Ms. Chu. Well, then it leads to another question, which is
about new regulations. One of the problems with the current
regulatory system is that it takes a long time for any
improvements. In fact, it took 9 years for regulations related
to pipeline safety to work its way through the process and take
effect. So how will the reorganization of MMS work to resolve
this issue of this delayed implementation of new and necessary
regulations?
Secretary Salazar. Well, the reorganization itself, there
will be two parts to essentially dealing with the Outer
Continental Shelf beyond the revenue side, and one of them will
be to manage the resource; the other unit will be to provide
the safety and enforcement. And we will make sure that we are
moving forward to address all the issues and all the lessons to
be learned from this tragedy.
Ms. Chu. But my question is how long will it take and what
will you do to make sure that it is accelerated?
Secretary Salazar. Congresswoman Chu, I think some people
might say that we should have waited for another 6 months, 8
months until we found out exactly all of the results of all the
investigations. Our view from day one has been that we would
work on the issue as fast as we can, so the 30-day report that
was delivered to the President is a report that has many rules
and requirements and standards which are already being
implemented, some of them through notice to lessees and some of
them through rulemaking that will be conducted by Director
Bromwich.
Ms. Chu. And, finally, let me ask this. Under Interior
Department regulations, oil companies use models developed by
MMS to predict the likelihood of oil reaching the shore
following a spill. In the Deepwater Horizon case these models
incorrectly predicted that there was a zero percent likelihood
of oil reaching most shores in Florida, Alabama, and Louisiana.
It suggests, of course, that these models are outdated and that
the regulations relating to the oil response plans need to be
revisited.
So my question is does MMS need to reexamine all of these
oil spill response plans, particularly with regard to these
kinds of predictions, which are clearly incorrect and way off?
And how will the MMS reorganization help this process?
Secretary Salazar. The answer is yes on drilling safety and
containment measures and oil spill responsibilities, and I
would like Director Bromwich to comment on it as well.
Mr. Bromwich. You are quite right, Congresswoman, that the
oil spill response plans are plainly inadequate, and that is
one subject on which I am going to be gathering information on
the public forums that we are going to be holding over the next
month and a half, with an eye toward not only insisting in the
short-term, before any new regulations are implemented, that
those oil spill response plans be substantially revised if they
are going to pass muster, but also, with an eye toward getting
out new regulations in the future, we will make sure that is
the standard from now on.
Ms. Chu. And you are reviewing all the oil response plans?
Mr. Bromwich. Yes.
Chairman Towns. The gentlelady's time has expired.
I now yield to the gentleman from Tennessee, and let me
also wish him happy birthday.
Mr. Duncan. Well, I have the honor of sharing a birthday
yesterday with the chairman, and he sent me a note saying that
he thinks we should make it a national holiday, and that was a
very nice note.
Mr. Secretary, thank you for coming here. I have sat
through hearings in the Transportation Committee and the
Resources Committee on the BP oil spill, and in both of those
hearings witnesses have mentioned that over 40,000 wells have
been drilled in the Gulf since 1960, and my staff got some
information from your Department earlier today saying since
1947 more than 50,000 wells have been drilled in the Gulf of
Mexico.
Would you not agree it is almost an astonishingly safe,
clean history that we have there in the Gulf? I mean, there has
never been anything even close to this BP spill. In fact, I am
told there are more spills out of ships than there are from
these rigs.
Secretary Salazar. Congressman Duncan, I agree with you. In
fact, I think it was that history of safety over all of those
times, 50,000 wells, which essentially was the empirical
foundation upon which the national framework has been built
with respect to oil and gas production in the Outer Continental
Shelf.
Mr. Duncan. And I am told that there are now 3,600
structures in the Gulf right now.
Governor Engler wrote a column for the Washington Times a
few weeks ago, and the headline says, Drilling Moratorium Is A
Jobs Moratorium. And he said this, he said, the moratorium
immediately shut down 33 deepwater rigs in the Gulf, including
22 near Louisiana. This action could cost 3,000 to 6,000
Louisiana jobs in the next 2 to 3 weeks, and potentially 20,000
by the end of next year. For every one employee on an oil rig,
there are nine employees onshore supporting that one employee.
That is my main concern, because not only did I read this
by Governor Engler, but repeatedly I have seen on the news
reports these oil workers in the Gulf area almost in a panic
situation about all the thousands of jobs that are being
destroyed or potentially could be destroyed.
Secretary Salazar. Congressman Duncan, let me just say that
we too are concerned, and we are aware of the issues. Our view
and my view in issuing the moratorium is that it was the right
way to move forward, to put the pause button in place until we
can answer three fundamental questions: drilling safety,
blowout containment capability, as well as oil spill response
capability.
If we were to have another blowout in the Gulf of Mexico
today or next week, we could not have the oil spill response
capability to deal with those blowouts. The effort which Exxon
and Shell and Chevron and Conoco Phillips came up with
yesterday is a beginning point of that conversation relative to
how we address one of those three fundamental issues, and
Director Bromwich's set of meetings and hearings around the
country will help us answer those three fundamental questions
so that we can determine how to move forward with respect to
the pause button in place.
Mr. Duncan. On another point, Charles Krauthammer, the
columnist and commentator who I think almost everybody agrees,
even if they don't agree with him, they think he is one of the
smartest men in this city, he wrote recently, he said,
``environmental chic has driven us out there.'' He asks the
question why we were drilling in 5,000 feet of water in the
first place, and he says, ``Environmental chic has driven us
out there. Environmentalists have succeeded in rendering the
Pacific and nearly all the Atlantic coast off limits to oil
production and, of course, in the safest of all places, on
land, we have had a 30-year ban in the Arctic wildlife
refuge.''
I have seen articles that say something like 83 or 84
percent of the Outer Continental Shelf is off limits to oil
production, and that also is a concern of mine.
Then, finally, before my time runs out, I see the yellow
light on, I would say to Mr. Bromwich I am concerned we have
changed the name and there seems to be a goal of emphasizing
enforcement, and I am just wondering are we going to have a
gotcha type agency now? Let's forget about BP; let's consider
them a bad actor. But most of these companies are doing a good
job and complying with all the laws.
Mr. Bromwich. I agree with you. We are not going to have a
gotcha culture, but we are going to have clear rules and we are
going to have aggressive inspections, and violations of those
clear rules will be dealt with severely. I think that is the
right kind of regulatory regime to have.
Mr. Duncan. And if you find a violation, are you going to
give the company a chance to correct it, or are you going to
immediately come down on them and just shut them down?
Mr. Bromwich. That is a very fact-specific determination.
We will have to take it on a case-by-case basis.
Mr. Duncan. All right.
Chairman Towns. The gentleman's time has expired.
I now recognize the gentleman from Maryland, Congressman
Cummings.
Mr. Cummings. Thank you very much, Mr. Chairman.
Secretary Salazar, I head up the Coast Guard Subcommittee
on the Transportation Committee and one of the things that we
were concerned about is what role do you all see the Coast
Guard playing in the future. You know, the legislation passed
by the Committee on Transportation and Infrastructure will
require a much more significant role for the Coast Guard in
their approval of oil spill response plans, which is crucial
given that the Coast Guard is responsible for managing the
response to the spills.
So what steps, if any, are MMS and the Coast Guard taking
now to strengthen the role of the Coast Guard? And, by the way,
that has been one of their complaints, that they are asked to
be responsible for overseeing the cleanup, but they don't have
enough say in creating the plan. Did you know that? They have
actually testified to that. Either one of you.
Secretary Salazar. Congressman Cummings, if I may, the role
that we have seen playing out with respect to the response to
the Deepwater Horizon blowout and the BP oil spill has been one
where we have been working hand-in-hand with Admiral Allen as
the national incident commander, and it has been continuous.
You know, we will look back at the Deepwater Horizon tragedy
and look at the lessons learned, including the capacities that
are out there with respect to the Coast Guard and others, but
the fact of the matter is that the relationship in terms of the
structure that has been set up to respond to the oil spill
response has worked well between Interior and the Coast Guard
and other agencies that are also involved.
Mr. Cummings. Well, I have to tell you, again, we have had
testimony within, I would say, the last 3 weeks, and I will get
you that information, and this is not Admiral Allen, where they
have told us that they want they want more say in the
development of the emergency response plan because they just
feel like, by the time you are going to call on them to oversee
the cleanup, they should be more involved in it at the
beginning. So I will get that to you. You might want to take a
look at that.
Secretary Salazar. Let me just say----
Mr. Cummings. I am surprised you didn't know that.
Secretary Salazar. No, I do know it. Let me just say this,
Congressman Cummings. The fact is that the oil spill response
issue is one of the three most central issues that we are
looking at, and that issue will necessarily involve, should
involve and will involve, I will make sure that it happens, a
close collaboration with the Coast Guard, because we are not
going to move forward until we have an assuredness with respect
to the adequacy of oil spill response plans.
Mr. Cummings. Now, Mr. Secretary, although the Deepwater
Horizon was registered in the Republic of the Marshall Islands,
Captain Hennin, the Deputy Commissioner of Maritime Affairs
with the Republic of the Marshall Islands, is reported to have
testified before the joint MMS-Coast Guard panel examining this
accident that the RMI, as a flag state, did not inspect the
drilling equipment and systems on the Deepwater. He reportedly
indicated that such inspections are left up to the MMS. And we
understand that MMS often relies on offshore facility operators
to perform key safety tests and that MMS inspectors only review
the paperwork associated with the test.
How can we make sure that we have adequate approval of
these reports, because there is a question of inspection, that
some of the inspections are not actually done by our people,
but they are done by the Marshall Island folks and people that
they contract. So how can we guarantee that those inspections
which are so important are properly done?
Secretary Salazar. Let me say first there were inspections
that were conducted of the Deepwater Horizon, including
inspections in April and testings, including of the oil
preventer, that occurred in the days leading up to the
explosion. Second, we will have a significantly more robust
inspection regime and is part of what Director Bromwich will be
working on, and he may want to comment on that.
Mr. Bromwich. No, that is absolutely right. That is one of
the things we are going to be focusing on most intently.
Important inspections can't be paper inspections; they need to
be done by human beings and they need to be done by human
beings with experience, demonstrated competence, and an arm's
length relationship, at least, to the entities that own the
facilities.
Mr. Cummings. I see my time is up. Thank you very much.
Ms. Norton [presiding]. The Secretary has to leave at 12,
and I am going to try to get in as many Members as we can
before they have to leave to go to vote.
Mr. Burton, 5 minutes.
Mr. Burton. Mr. Secretary, you know, 50,000 wells have been
drilled in the Gulf without a problem, and yet the President
put a moratorium on the drilling. As a result, you have had
some of the rigs go to Egypt, to the Congo, Brazzaville. In
Canada they are talking about new wells being drilled up to
6,500 feet in the Arctic waters.
So we are going to lose a lot of those rigs and they
probably won't come back, at least not for a long, long time.
It makes no sense to me to cutoff the drilling in the Gulf when
you have not had any real problems except for this one
catastrophe, and I just don't understand why the administration
is taking this carte blanche approach. Can you explain that?
Secretary Salazar. Congressman Burton, having been involved
in this matter in response to the Deepwater Horizon blowout
every single day since the blowout, I can tell you that there
are three fundamental questions that have to be answered before
we take our hand off the pause button, and those are the issues
of drilling safety, oil well blowout containment, as well as
oil spill response capacities. And that is what we are working
with Director Bromwich, as well as with a whole host of other
efforts.
Mr. Burton. Well, you have already stated that there is
more of a chance of a leak from a tanker than there is from one
of these rigs. It just doesn't make any sense, with a 50,000
drilling of wells in the Gulf and you have one spill, that you
are going to cutoff everything. And the rigs are already moving
to Brazzaville and the Congo.
In Brazil, we just sent $1 billion down to Brazil to help
them drill in deepwater areas. So what we are doing, in effect,
is shoving oil production away from the United States and we
are costing us jobs when there is really no reason for it
except for this one exception. And what you are talking about,
in my opinion, really doesn't make a great deal of sense.
Now I want to ask a couple other questions real quick. I
have a video I would like to show to you real quick; it is
about 15 seconds long.
So can you cue up that video?
[Video played.]
Mr. Burton. This is Deano Bonano, who is the Homeland
Security Director down there and the fire chief, Mark Scardino.
They said that you have never been down to that parish, and it
is one of the most toxic areas that has been hit since this
spill took place. Why haven't you been down there?
Secretary Salazar. Congressman Burton, first of all, I
believe that the last count that I saw had 11 times that I have
been in one of the Gulf Coast States or in Houston.
Mr. Burton. Have you been to this parish? This is one of
the hardest hit.
Secretary Salazar. I have been through Louisiana,
Alabama,----
Mr. Burton. Have you been to this parish?
Secretary Salazar [continuing]. Mississippi, Florida. I
don't know the exact parish-by-parish, but let me just say that
since April 20th, and even before that, I spent a lot of time
in the Gulf Coast, and I continue to spend a lot of time down
there, and will, and we will work relentlessly on this problem
until we get it fixed and we chart the ways forward. And I will
just say, Congressman Burton----
Mr. Burton. It seems like this would have been one of the
top priorities. I don't understand why you weren't there. And
they were complaining very vigorously that you had ignored
their problems there.
Secretary Salazar. The President, the Vice President, and
members of the Cabinet have been down there countless times. My
Assistant Secretary----
Mr. Burton. Well, you are the guy.
Secretary Salazar. My Assistant Secretary for Fish and
Wildlife has taken 17 trips down into that area to deal with
these issues.
Mr. Burton. Well, Mr. Secretary, you are the guy. You
should have been there, in my opinion.
Now, the last thing I want to ask is I know the Jones Act
was referred to. There were a number of countries that wanted
to bring skimmers in as soon as this thing took place. We could
have eliminated an awful lot of these ecological problems if
those skimmers had been brought in. Why in the world didn't we
let all these other countries bring those skimmers in as
quickly as possible?
Secretary Salazar. Mr. Burton, I disagree with you. The
fact is the Jones Act has not kept a single vessel from coming
into the country, No. 1.
Mr. Burton. Well, then why weren't the skimmers brought in?
Secretary Salazar. The shortage of skimming vessels has not
been an issue and the Jones Act has not been an issue.
Mr. Burton. Why weren't those skimmers brought in from
other countries? Why weren't they allowed in?
Secretary Salazar. They were brought in as they were
required, and Thad Allen and the national incident commander
have been in charge.
Mr. Burton. After, what, 70 days?
Ms. Norton. The gentleman's time has expired.
Mr. Driehaus, 5 minutes.
Mr. Driehaus. Thank you, Madam Chair.
My intent wasn't to rebut my Republican colleagues in this
hearing, but given what was just said about the exception of
this disaster, it is like suggesting that 9/11 was an exception
to air traffic control regulations and that we shouldn't react
to that. The fact is this has been an environmental disaster,
and the fact is that we should look at the regulation
appropriately of oil wells in the Gulf, and I think it is very
appropriate that the administration take the steps that it has
to make sure that all of the wells are safe.
I further heard my Republican colleagues suggest that it is
limitations on onshore drilling in other parts of the country
that is driving BP and others to go to the Gulf. I assume that
they are making money in the Gulf; that the reason we have all
these wells in the Gulf is because there is oil there and they
are making money. Is that correct?
Secretary Salazar. That is correct.
Mr. Driehaus. So the reason that BP and the other oil
companies are in fact drilling is because they are making a
profit in the Gulf.
Secretary Salazar. That is correct.
Mr. Driehaus. I would like to move on. And I think the
issue here is one that is important, and it dates back to the
2005 Energy Act and the issue of categorical exclusions. I am
concerned, as are others, with regard to the number of
categorical exclusions that we have seen for wells in the Gulf,
and I would appreciate if you would help us better understand
how categorical exclusions are determined and whether or not BP
advocated aggressively for categorical exclusions for its
drilling operations in the Gulf.
Secretary Salazar. Congressman, let me just say, first of
all, just back on the moratorium, it is a prudent position that
we have taken, and I appreciate the support that you echo for
that moratorium because of these fundamental issues that we do
need to have addressed.
Second, with respect to your question on categorical
exclusions, they appear at a time, after significant
environmental analysis has been done because the process is
that, in developing a 5-year plan, you do an environmental
impact statement. Before you have a lease sale, there is
another environmental impact statement that is reviewed. So
there are a series of reviews that happen.
Now, the categorical exclusions, in part, in the Gulf of
Mexico, which have been granted more than BP, those occur in
large part because there is a 30-day window of approval
required by statute when an exploration plan itself is filed as
part of the leasing and development process. So we have asked
the Congress to extend that 30-day window to a 90-day window,
and I hope that it is something that you enact in the oil spill
legislation that is before you.
Mr. Driehaus. When you say that 30-day window is in
statute, when was that 30-day window implemented and why was it
implemented, why was it only 30 days, and who advocated for the
30-day window?
Secretary Salazar. I do not have the specifics on when that
requirement was put into the law, but I can get that for you.
Mr. Driehaus. What is your opinion as to how long it should
be for the review? You said 90 days. Is 90 days appropriate?
Secretary Salazar. Thirty days I believe is too short, and
I do think that what we need to do, especially in places like
the Gulf of Mexico, you have tremendous environmental
information and reviews that have already been conducted, so we
just need to make sure that the environmental reviews that are
being conducted are worthwhile and that we are doing the right
thing in terms of the aim of the environmental analysis, which
is to understand what impacts there will be to the environment
from the activity.
Mr. Driehaus. Do you believe that there has been an overuse
of categorical exclusions under the previous administration and
the 30-day window is a primary cause of that?
Secretary Salazar. I do believe that there was an overuse
of the categorical exclusions and, indeed, with respect to what
we have already done on the onshore under the Bureau of Land
Management is we have changed that practice, and obviously we
are now conducting a comprehensive review with the Council of
Environmental Quality relative to the environmental reviews and
changes that need to happen with respect to OCS.
Mr. Driehaus. Thank you, Madam Chair. I yield back.
Ms. Norton. Mr. Murphy.
Mr. Murphy. Thank you very much, Madam Chair. I know we are
about to go to votes and, Secretary Salazar, you have been
great to spend so much time with us. I appreciate your measured
response to Mr. Burton's question. I think we could be here for
days on end if we were going to play videos of single
individuals who are upset that one particular Federal official
didn't visit them. I think we are very lucky to have you in
this position. So many of us have been impressed by your
immediate and robust response to this tragedy.
Mr. Bromwich, you have a reputation as a no-nonsense
administrator in everything you have done, and I think you are
the right guy for the job.
I just have a couple quick questions, one relevant to
funding sources moving forward. The reorganization, as you
split into three different entities, is going to require more
people in and of itself; three directors, maybe three offices
of congressional relations. We know that we need more people to
do the inspection work. As you look down the road at how you
think the agency should be funded and you look at a potential
diminishing reliance on royalty payments, how do you expect
that, moving forward, the new functions of these agencies are
going to be funded?
Secretary Salazar. Congressman Murphy, thank you for your
comments. We are in the midst of working with the appropriators
in developing the budget amendments to make sure that the
funding is there to be able to do the job. The funding sources
themselves and where they will come from, that will be part of
that discussion that we will engage with Congress on.
Mr. Murphy. And with respect to royalty payments, do you
have ideas today as to what components will continue to be
funded by royalty payments or what components you no longer
want to be funded with respect to royalty payments?
Secretary Salazar. That is part of the review that we
currently have underway in the implementation programs that we
are developing.
Mr. Murphy. Maybe I will direct this question to Mr.
Bromwich, but I would be happy to have the Secretary weigh in
as well. One of the things that has been a great frustration to
us is the technology that we are using right now to deal with
this spill, and the fact that we have had a fairly slow pace of
innovation within the industry in developing new technologies
to address spills. Maybe it is moving a lot faster right now as
we speak, but over a long period of time it has been relatively
slow given the threat.
Can you talk a little bit about how you foresee, either
within your agency or in putting pressure on the industry, how
do we more quickly advance oil spill disaster mitigation
technology, oil spill response technology going forward?
Mr. Bromwich. Yes, it is a very good question. I think one
of the things that this disaster has focused people's attention
on generally is the lack of advances in containment
technologies, as well as in oil spill response technologies.
That has not only been recognized by Secretary Salazar and me
and many others; it has been recognized by players in the
industry, and I think that is one of the reasons why,
yesterday, we saw the four largest majors come forward with the
outlines of a plan to deal with oil spill containment in the
Gulf of Mexico.
I think that this disaster has focused people's energies;
it will stimulate innovation. We will obviously be directly
involved in that process. The proposal that was made yesterday
is an interesting one, it is an intriguing one, but we are
going to want to review and study it carefully. We will ask for
more elaboration on it by the companies. It is one that not
only we, but you and the American public is going to need to
have confidence in.
Ms. Norton. Mr. Issa for 5 minutes.
Mr. Issa. Thank you, Madam Chair.
Just one quick question. You know, Mr. Secretary, that your
decision was, by definition, for 6 months of a moratorium,
arbitrary. In light of what you said earlier today, would you
say that resources that are freed up at the time of the kill of
this well could just as easily be the end of the moratorium? As
you said earlier, clearly there were resources that you didn't
want to have not available if something, one in 50,000 wells,
happened a second time, but wouldn't a target of the killing of
this well be just as appropriate for considering limited well
supervised rolling back into exploration of the existing 22
rigs?
Secretary Salazar. Congressman Issa, I appreciate your
observation and I also appreciate the sense of urgency that you
have that these issues be addressed, but let me say there is a
tremendous amount of work that is unfolding. I will have a
report back from the Oversight Safety Board, which I
established, which includes great work from the Inspector
General and her staff that are focused in on some of these
safety issues. That is due, I believe, on August 15th.
The National Academy of Engineering arm of the National
Academy of Sciences will have an interim report for me by
October 31st; and obviously the multiple investigations that
are underway are informing us. So if there is a point in time
between now and November 30th where the three fundamental
questions that I have already addressed are addressed to our
satisfaction, we will revisit that time line for the
moratorium.
Mr. Issa. I appreciate that.
I yield the balance of the time to Mr. Fortenberry.
Mr. Fortenberry. Thank you, Mr. Secretary, for joining us
today, and Mr. Bromwich. This oil spill is an environmental
catastrophe. BP was a reckless actor and clearly all of us must
work together to ensure three things: that this leak is
continued to be stopped, that the environment is cleaned up,
and that we work with all the resources we have to ensure that
this never happens again.
In that regard, I think Mr. Issa has made a reasonable
point and you have answered it reasonably, that your reasoning
for the moratorium is that our resources are currently deployed
and perhaps depleted, and in case there was a second spill or
catastrophe like this, we would not have the sources to work
against it. But given that there is the potential for this leak
to be permanently stopped in the near term, your consideration
of that factor in terms of the moratorium deadlines I think is
reasonable.
The second point, though, being given that the resources
that are applied are under intense pressure to potentially move
overseas, and that this would cause more imported oil to come
into our waters, more tankers, which are inherently more
environmentally dangerous than the drilling itself, is the
moratorium time line potentially more risky?
A related point is that all drilling is not the same. Now,
BP was clearly engaged in the riskiest type of drilling. There
is partial drilling, there is development drilling. Is there a
consideration that those may be exempted as well, given that
their risk profile is lower?
Secretary Salazar. Congressman, the answer to that is yes,
and that is part of what Director Bromwich will be gathering
information on. There may be different activities and different
zones of risk that might be allowed to go forward. We have
already made one of those findings with respect to the shallow
water drilling and there may be others as we move forward.
Mr. Fortenberry. So a segmentation of risk, risk profiling
based upon the actual historical analysis of risk based upon
the type of drilling, rather than a blanket moratorium----
Secretary Salazar. There may be, for example, Congressman,
the differentiation between the exploration wells in the
deepwater and wells that are being drilled into already
developed reservoirs, where you know exactly what it is that
you are drilling into, as opposed to the exploratory type of
wells which the Macondo well was one. So those are the kinds of
distinctions that we will be taking a look at in the months
ahead.
Mr. Fortenberry. Well, I think the last thing we want to do
is increase pressures for more imported oil, which puts more
tankers into our water, which, again, traditionally has a
higher environmental risk of spillage than the drilling
operations.
With that said, I also would like to point out that I
visited the area recently, one of the coastal communities.
These people are exhausting themselves trying to save their
land, save their way of life, and save the environment. I think
you have heard----
Ms. Norton. The gentleman's time has expired.
Mr. Fortenberry. I have a good video for you, Mr.
Secretary, but we will have to do it another time.
Ms. Norton. Mrs. Maloney.
Mrs. Maloney. Thank you, Madam Chair.
And I thank Secretary Salazar and Mr. Bromwich for your
testimony. The devastation of the BP oil spill has highlighted
many problems in worker safety and containment and oversight,
but it has especially highlighted the mismanagement of the MMS,
the Minerals and Management Service agency, which, if managed
appropriately, could literally bring in millions, if not
billions, to our Treasury from oil extracted from land owned by
the American people.
Under the current structure, the Government Accountability
Office has found that the MMS should do a great deal more to
improve the accuracy of the data used to collect and verify the
oil royalties. I have a bill in, H.R. 1462, which would require
the National Academy of Engineering to study and come forward
with improvements and recommendations of ways that we could
more accurately collect the royalties on the production of oil.
I would like, Mr. Secretary, if you would review it, and
certainly this could be helpful in defining it in a way that we
could be more successful in giving the American people, the
taxpayers, their just reward or their just revenues from this
oil.
According also to the Government Accountability Office
report that was given to this committee, the revenue share that
the Government collects from oil and gas produced in the Gulf
ranks 93rd, among the lowest, of the 104 revenue collection
regimes around the world. Is that an accurate statement? Are we
93rd in collection?
Secretary Salazar. I cannot comment on that statistic, but
I will say this, that we have been implementing many of the
recommendations from the Government Accountability Office, as
well as recommendations that came forth from the Kerry-Garns
Commission, that addressed many of these issues, and at the end
of the day what we are looking at is to achieve the objective
which you outlined, which is to make sure that we are getting a
fair return back to the American taxpayer, and we would be
delighted to take a look at your bill.
Mrs. Maloney. Did you testify earlier that this has not
been updated since the 1920's, in your statement?
Secretary Salazar. No, I did not. That was a referral to
the royalty rate that is established under the 1920 Mineral
Leasing Act with respect to onshore oil and gas leasing, and
that is something which we have been reviewing and do believe
it should be changed.
Mrs. Maloney. So that has not been updated since the
1920's. We certainly should look at that and bring it into the
21st century.
Also, the GAO report reported that MMS does not audit oil
and gas company royalty numbers. Is that correct? At this
point. That was the GAO report.
Secretary Salazar. There are auditing functions that do
occur and, in fact, that is why we go back and do collections
from companies where they have underpaid, and that does happen
on an ongoing basis. But, as I said, we are in the process of
implementing numerous recommendations that have come from GAO,
the several commissions, as well as recommendations from our
Inspector General.
Mrs. Maloney. But is it fair to say that we could be under-
collecting by millions, possibly billions in this royalty
program?
Secretary Salazar. I think it is fair to say that there is
under-collection that is taking place, and it really revolves
around two key issues. One of them is the measurements relative
to the oil and gas that is being produced against which the
royalties are being levied; and, second, the royalty level
itself, and whether or not that is the appropriate royalty
level.
Mrs. Maloney. And that is what my bill would look at, to
look at more accurate measurements and compare with other
countries.
They are calling me to a vote, but this is an important
area and we need to move into the 21st century. Why in the
world are we rated so low, 93rd in the world, in the royalty
payments coming from the Gulf? And did you testify earlier that
you had written BP for royalty payments of $5 billion? Is that
what you said?
Secretary Salazar. No. There was an underpayment by BP with
respect to onshore activities in the West. The royalty program
now in effect in the----
Mrs. Maloney. How much was their underpayment?
Ms. Norton. The gentlewoman's time has expired.
Mrs. Maloney. Can he answer that question? May I ask for--
--
Secretary Salazar. As I recall, and it has been several
weeks ago, I think for that particular issue it was about $5
million.
Mrs. Maloney. $5 million. Thank you.
Ms. Norton. Mr. Salazar, I announced that you had to leave
at noon, and I will abide by that and not even ask my own
question. I know that you understand, as a former Member of
Congress, when bells ring, but I know I speak for the chairman
when I thank you and Mr. Bromwich for very important testimony
here today.
The hearing is in recess until after the vote.
[Recess.]
Chairman Towns [presiding]. I would like to reconvene and
welcome our distinguished second panel. As with the first
panel, of course, it is committee policy to swear in all of our
witnesses, so before you sit, Ms. Randolph, let me have you
stand and raise your right hands.
[Witnesses sworn.]
Chairman Towns. You may be seated.
Let the record reflect that all the witnesses answered in
the affirmative.
Mr. Frank Rusco is the Director of the Government
Accountability Office of the Natural Resources and Environment
Team. Mr. Rusco has been at GAO for 11 years and his work there
focuses on energy issues, including oil and gas royalty
collection and policy. We want to welcome you to the committee.
Ms. Mary Kendall has been at the Department of Interior
Office of the Inspector General since 1999, when she first
served as Deputy Inspector General. Ms. Kendall became Acting
Director in 2009. Before joining the Inspector General's
Office, Ms. Kendall served as an attorney at the Environmental
Protection Agency for over a decade. We welcome you to the
committee.
Ms. Danielle Brian has been the executive director of the
Project On Government Oversight since 1993. Ms. Brian has led
numerous investigations that have exposed wasteful government
spending and helped bring policy reform to government programs.
We also welcome you to the committee.
Ms. Randolph is the parish president for Lafourche. As well
as serving as parish president, Ms. Randolph is the owner of a
public relations and advertising company and was previously an
editor at the Lafourche Gazette. We welcome you.
At this time, I ask that each witness deliver their 5
minute testimony, which will allow us an opportunity to raise
questions with you.
Let me just sort of go through the procedure. You start
out, the light is on green; then it goes to yellow, which means
you have a minute to sum up; and then, of course, it is on red.
Then, at that time, the Members will raise questions with you.
So I would like to begin with you, Mr. Rusco, for your 5
minutes, and just come right down the line. Again, we welcome
you to the committee, Mr. Rusco. You may begin.
STATEMENTS OF FRANK RUSCO, DIRECTOR, NATURAL RESOURCES AND THE
ENVIRONMENT, GAO; MARY L. KENDALL, ACTING INSPECTOR GENERAL,
OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF THE INTERIOR;
DANIELLE BRIAN, EXECUTIVE DIRECTOR, PROJECT ON GOVERNMENT
OVERSIGHT; AND CHARLOTTE RANDOLPH, PRESIDENT, LAFOURCHE PARISH
STATEMENT OF FRANK RUSCO
Mr. Rusco. Thank you, Chairman Towns, members of the
committee. Thank you for the opportunity to speak today about
Interior's reorganization of the Minerals Management Service.
This reorganization takes place in the context of the
disastrous Deepwater oil spill, and it is hoped that some of
the proposed changes to Interior's management of oil and gas
will reduce the risks of future spills. It is also important,
however, to recognize that Interior faces multiple challenges
in effectively and efficiently managing its Federal oil and gas
program.
Over the past 5 years, GAO and others have evaluated many
aspects of Interior's management of oil and gas production on
Federal lands and waters and have found many deficiencies. As a
result, we have recommended numerous changes to the program.
In fairness, Interior has responded to many of these
recommendations with actions that we hope will result in
improved efficiency and effectiveness. Many specific challenges
remain, however, and we hope that Interior will keep its focus
on addressing the deficiencies we have found, even as it
undergoes organizational change.
The findings and recommendations from GAO's recent
evaluations are detailed in my written statement for the
record. In the remainder of my oral comments, I want to discuss
three key examples that illustrate a fundamental challenge for
Interior. While each of the examples come from separate
evaluations and will require separate actions to resolve, I
hope that my discussion will make it clear that all three share
an important common thread. Specifically, each of these
problems illustrates the importance to Interior of keeping up
with and adapting to change.
First, until recently, Interior had gone over 25 years
without fundamentally reevaluating its approach to leasing oil
and gas properties. When we evaluated Interior's lease
management practices, we found that Interior did less than
other resource owners to encourage diligent development.
Specifically, other resource owners did more than Interior to
require or incentivize rapid development of promising oil and
gas leases, while offering more time for development of less
promising or more speculative leases.
Second, until recently, Interior had gone for over 20 years
without fundamentally reevaluating its approach to collecting
revenue for oil and gas production. When we evaluated
Interior's approach in the context of what other resource
owners do, we found that the Federal Government collected among
the lowest levels of revenue from over 100 systems evaluated.
Further, we found that because Interior's revenue
collection system was inflexible to changes in oil and gas
prices, that Interior was at an increased risk of succumbing to
ad hoc changes to royalties in response to price changes. For
example, in the mid-1990's, low oil and gas prices and pressure
from oil companies led to royalty relief for deepwater leases.
With the subsequent increase in oil and gas prices, this
royalty relief will cost the Federal Government billions of
dollars of lost revenue over the lifetime of the affected
leases.
Finally, in recent evaluations, we found that Interior's
oil and gas program utilizes data systems that are mutually
incompatible, lack key functionality, and lag far behind
similar systems used by industry. This poses risk to the
effective and efficient management of the oil and gas program,
and the collection of revenues. Part of the cause of these
problems is that the IT systems were developed in a piecemeal
fashion over a long period of time, with little to no
centralized oversight or planning.
We are encouraged that Interior has begun recently to
reevaluate its leasing policies, its revenue collection, and
that Interior recognizes it faces significant IT challenges.
However, the potential for future management problems will
remain until and unless Interior adopts an effective risk-based
approach that periodically evaluates and adapts to changes in
the oil and gas industry, the practices of other resource
owners, the IT environment, as well as other significant facets
of oil and gas management.
There is risk inherent in all activities, and completely
eliminating the risk associated with oil and gas development is
not possible. However, if Interior builds risk management into
its internal structure and applies it consistently to important
management decisions over time, it can do much better at
identifying risk and mitigating that risk to the extent
possible. This is true regardless of how Interior is ultimately
restructured, and Interior will not be fully successful until
it addresses this fundamental challenge.
This concludes my oral statement. I would be happy to
answer any questions the committee may have.
[The prepared statement of Mr. Rusco follows:]
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Chairman Towns. Thank you very much for your statement.
Ms. Kendall.
STATEMENT OF MARY L. KENDALL
Ms. Kendall. Mr. Chairman, thank you for the opportunity to
testify today about the proposed reorganization of the Minerals
Management Service. As you well know, we have identified in MMS
programmatic weaknesses and some egregious misconduct.
In the report released in May of this year, we found more
of the same. Although the misconduct is considerably less
salacious than that in our report issued in 2008 about
misconduct in the Royalty-in-Kind program, both highlight a
challenge that the successor agencies to MMS face, that is, the
potential conflicts of a regulatory body that is inherently
tied to the industry it regulates.
I am concerned about the environment in which these Federal
employees operate and the ease with which they move between
industry and Government. I am also concerned about the conduct
of industry representatives. That they should think it
permissible to fraternize and provide Federal Government
employees with gifts after all the media coverage about this
practice is somewhat hard to fathom, but may be informed by the
environment as well.
While not included in our May 2010 report, we discovered
that the individuals involved in the fraternizing and gift
exchange, both Government and industry, have often known one
another since childhood. Their relationships were formed well
before they joined industry or Government. MMS has relied upon
the ability to hire employees with industry experience.
With the announcement that MMS will be reorganized, the
Department is poised to reconsider some of our recommendations
for programmatic improvement. These must, however, be bolstered
with an emphasis on ethics to include controls and strong
oversight.
Let me focus on the last element of strong oversight. In
the fall of 2008, Inspector General Earl Devaney testified
before the House Committee on Natural Resources, which is a
correction to my written testimony, describing what was then a
fledgling office within the Office of Inspector General, now
called our Royalty Initiatives Group. Since that time, we have
also established an investigative unit dedicated to energy
issues and have expanded our oversight coverage beyond MMS to
the energy and minerals programs at the Bureau of Land
Management.
Until recently, these two offices have been dedicated to
royalties-related oversight and improvements. Since the events
of April 20th, however, it has become increasingly clear that
we must expand their scope to provide oversight of the
operational, environmental, safety, inspection, and enforcement
aspects of energy production on Federal lands and in the Outer
Continental Shelf.
We are also hopeful that the newly created Investigation
and Review Unit will provide an additional element of oversight
to the successor MMS agencies. The OIG is, to a significant
degree, reactive in our investigative efforts. We hope that the
IRU will provide continuous compliance review of the program
offices to identify potential weaknesses before they become
serious problems. We also rely on the bureaus to conduct
internal investigations and reviews of allegations which simply
do not rise to the level of OIG attention. The IRU will be a
dedicated point of contact to which we can refer such matters.
Presently, the Office of Inspector General is well into a
multi-pronged effort to address multiple areas of concern
relative to offshore drilling. We have dedicated most of our
Central Region staff to this undertaking. We are also
participating in the investigations being led by the Department
of Justice into the events that led to the disaster on the
Deepwater Horizon and the catastrophic events following. In
addition to these efforts, we will continue building our
oversight capacity beyond royalties, into the areas of safety
and oversight of drilling operations both on- and offshore.
The ongoing OIG efforts regarding OCS safety and
environmental concerns are also addressing a two-pronged
request from Secretary Salazar. First, to the Outer Continental
Shelf Safety Oversight Board, a body created by secretarial
order on April 30th of this year, the Secretary requested that
the Board make recommendations to improve and strengthen the
Department's overall management regulation and oversight of OCS
operations.
Second, the Secretary asked the OIG to address specific
deficiencies in MMS policies or practices that need to be
addressed to ensure that operations in the OCS are conducted
safely, protective of human life, health, and the environment.
Since these two requests were so similar in scope, the OIG
effort will respond twofold to these requests by the Secretary.
While we will provide the Safety Oversight Board our findings
and recommendations by mid-August, we have already found
several areas that call for further review and we will continue
to pursue these to conclusion.
Mr. Chairman, that concludes my prepared testimony today
and I would be happy to answer any questions.
[The prepared statement of Ms. Kendall follows:]
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Chairman Towns. Thank you very much. Appreciate your
testimony.
Ms. Brian.
STATEMENT OF DANIELLE BRIAN
Ms. Brian. Thank you, Chairman, for inviting me to testify.
I also want to thank Ranking Member Issa and Representative
Maloney for their unrelenting oversight of this troubled
agency. We have been working with Representative Maloney for
about 15 years on this issue.
MMS was created in 1982 because royalty collections had
been buried inside the USGS. Yet, the oversight functions again
were buried in MMS, beneath their other mission of promoting
oil and gas production. If there is any small silver lining to
the Gulf disaster, it is that it has called attention to long-
needed reforms. And while the reorganization is a good step, we
have real concerns about its implementation and whether those
who are planning it are really consulting the appropriate
stakeholders.
We also have to fix the frequency with which officials have
gone through the revolving doors, as has been discussed many
times this morning, but I really think the egregious example of
the two recent MMS directors going to become presidents of an
offshore drillers association needs a little bit further
discussion, because the MMS director was joining a trade
association whose explicit mission was to secure ``a favorable
regulatory environment'' for offshore oil and gas drillers;
yet, they were the very regulators, when they had been working
in the public sector. So you have to ask whose interests were
they actually serving when they were the regulator.
There have been several major improvements to ethics at
Interior, and further steps to slow the revolving door are in
legislation passed by both the Senate Energy and House Natural
Resources Committees. We do hope the House's stronger provision
is soon passed into law.
The second problem is that MMS has always been dependent on
industry for technical knowledge and allowed industry to
operate largely on what the GAO described as an honor system.
Representative Maloney's legislation will significantly help
MMS gain back some of its upper hand.
When it comes to inspectors, it is hard for Interior to
attract and keep the talent it needs when inspectors are
starting as a GS-7, and this is a very important point. There
is so much emphasis on the revolving door, which is very
important for us to be focusing on, but if we only look at that
and not on how we are compensating those who are working as
inspectors, I think it is a huge problem. POGO has learned of
one inspector, for example, who, after 3 years on the job, has
still had no training.
So we need to be investing in these inspectors. The last
inspection conducted on the Deepwater Horizon was performed by
an inspector who was still in training. The Government must
establish Federal training academies, like those for mine
safety and the FBI, to ensure that inspectors, both on- and
offshore, are receiving regular training not paid for or run by
industry.
So changing the culture requires more than reorganization
and it requires more than new leadership; they will need to dig
deep into the management of the agency. And no matter what
reforms are put in place, they can only be effective with
increased transparency about MMS's operations. Despite the
administration's Open Government Directive, which has focused
on each agency providing new information to the public,
Interior, for example, has only focused on disclosures of
things like the Nation's national treasures, which were already
online anyway, rather than information about oil and gas
leases.
The kind of information we all need to know coming from
Interior are the kinds of things that policymakers would learn
if we actually started investigating and talking to some of the
people online. For example, even after the Deepwater Horizon
explosion, inspector concerns are still being ignored. For
example, an MMS inspector discovered that a deepwater
production facility was operating days after he had issued a
cease and desist order because he believed it was in dangerous
noncompliance. When he contacted his supervisor for approval to
issue another order, his supervisor overruled him. And this is
in the wake of the Gulf crisis.
We have learned that this incident is not unique, but has
become a common practice where inspectors feel they need to ask
permission from their supervisors because they are more likely
to get in trouble for issuing an incident of noncompliance than
for not issuing one. This is where the real work will have to
happen, changing that culture.
MMS inspectors are just beginning to speak out, despite the
fact that they have no real whistleblower protections. And I
can tell you with experience that MMS has been a hostile place
for whistleblowers. If there is another takeaway from the
disaster, it is that whistleblower protections for Federal
employees are urgently needed and would be offered through the
legislation sponsored by Representative Van Hollen and Platts,
the Whistleblower Protection Enhancement Act.
Ultimately, MMS must reorganize its priorities to serve
taxpayers and protect their resources, and not industry. As an
important first step, Congress must enact H.R. 3534 and S.
3516.
Thank you again for your oversight of MMS, and I look
forward to answering your questions.
[The prepared statement of Ms. Brian follows:]
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Chairman Towns. Thank you very much for your testimony.
Ms. Randolph.
STATEMENT OF CHARLOTTE RANDOLPH
Ms. Randolph. Thank you, Mr. Chairman.
On May 8th, oil first appeared on the shores of our parish
from the Deepwater Horizon blowout, an event caused by
reckless, tragic, disastrous decisions made by BP personnel who
obviously did not follow established safety guidelines. We have
now endured 74 days of relentless effort to protect our
wetlands and our wildlife. Birds don't fly, fish don't swim,
and fishermen can't make a living.
Then came the moratorium on deepwater drilling, literally
adding insult to injury.
Research conducted by the LSU Center for Energy Studies has
revealed that this moratorium, suspension, pause, ban, whatever
the term du jour is, will not only impact a few parishes in
Louisiana, 43 in Florida, 42 in Texas, Louisiana 32, and
Mississippi 7. In the Department of the Interior's own report,
DOI estimated about 120,000 jobs would be lost.
Nine of the top 10 taxpayers in Lafourche Parish are
located at Port Fourchon, which services all 33 rigs singled
out in the initial moratorium. The spill has decimated the
fishing industry. The moratorium will essentially end life as
we know it in our parish. No business can survive a 6-month
pause and this much uncertainty.
Up to 40 percent of our property tax base could be lost by
2012 as a result of the drilling ban. Rig owners have stated in
testimony to the President's Commission on the Oil Spill that
they intend to leave the Gulf for other opportunities elsewhere
in the world. Some service company employees have been offered
transfers to locations in other States. Families are now making
decisions as to whether the husband and father or the wife and
mother will live elsewhere, with the rest of the family staying
behind to finish schooling. These are the lucky ones; the rest
will be terminated. In Lafourche, that could be 10,000 people.
This ban is sending a mixed message. In April 2010, the
unemployment rate in our parish was 4.4 percent, the lowest in
the Nation. By November 30th, the stated end of the moratorium,
the number of unemployed will increase dramatically. In this
country, a whole lot of money has been borrowed to create jobs
to stimulate the economy. People in Lafourche Parish and those
associated with the oil and gas industry and its support
services are not expendable Americans; we fuel this country.
On May 28th, I had the opportunity to personally ask
President Obama to reconsider his decision based on the
devastating economic blow we would suffer. He declined, but he
did offer to send down an economic team to assess the
moratorium's impact on our parish. Again, that was May 28th.
The team will arrive July 26th.
President Obama, in early May, announced that no permits
for drilling new wells will go forward until the 30-day safety
and environmental review I requested is complete. That was the
first intense scrutiny of the industry. Some of these
commissioners disagreed with the moratorium decision; yet it
was established anyway. The President formed another
commission, with its members asked to restudy this for at least
6 months. We will die a slow death.
Statistics indicate that an oil tanker has a four times
greater chance of spilling its cargo than an oil well has of
blowing out. Tankers from around the world carrying up to 3
million barrels of oil traverse the Gulf all the way to Port of
Houston daily. Eleven thousand tankers traversed the Gulf last
year. The moratorium's own language emphasizes a shortage of
resources available to respond to another spill in the Gulf as
a reason for pause. In order to resume activities, operators
must submit evidence that they have the ability to respond
effectively to a potential spill.
There are those who call for an immediate halt to oil and
gas. What is being overlooked in the rationale behind the
suspension is that all of these tankers traverse the Gulf.
Based upon the rationale behind the new moratorium on
deepwater drilling, issued July 13th by the Secretary of the
Interior, I am today challenging the President, Secretary
Salazar, and the Federal Government to protect all Gulf States
from another spill as completely as possible. Stop all oil
tanker traffic in the Gulf of Mexico.
Mr. Chairman, I await your questions.
[The prepared statement of Ms. Randolph follows:]
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Chairman Towns. Thank you very much. I really appreciate
your testimony.
Let me begin with you, Ms. Brian. You said something I want
to make certain I understand. You said ``dig deep into the
management.'' What do you mean by that?
Ms. Brian. I am concerned that what we are dealing with
right now is really sort of the top layer, and what we have
learned over the many years of looking at MMS is that a bulk of
the problem is still there just because you change the people
at the top. We have known for years about the auditors who had
been stifled by their supervisors, and now we are learning
about inspectors with the same kinds of problems, where the
mid-management is still in line and nothing has really changed
from that perspective.
Chairman Towns. So changing the name doesn't get us there?
Ms. Brian. Breaking it apart and changing the name is just
not enough.
Chairman Towns. OK.
Ms. Randolph, before I move any further, I want to know in
terms of how big is a parish. How many people?
Ms. Randolph. We have 95,000 people, sir.
Chairman Towns. How many?
Ms. Randolph. We have 95,000 people, sir.
Chairman Towns. Is that an elected position?
Ms. Randolph. Mine? Yes, sir.
Chairman Towns. OK. That sounds like mine. You have to run
for it.
Mr. Rusco and Ms. Brian, I want to ask, and you too, Ms.
Kendall, do you think that the proposed reorganization plan can
successfully reform MMS?
Mr. Rusco. I am sorry, the current proposed plan?
Chairman Towns. Yes.
Mr. Rusco. Well----
Chairman Towns. And get us where we need to go. I sort of
heard Ms. Brian on it, but----
Mr. Rusco. Yes. Our position on that is that there have
been, in the last 5 years, dozens, over 100 recommendations to
address specific deficiencies that have been identified, and we
have looked deeply at the process and found deficiencies
everywhere we look. So all of those must be addressed for
Interior to effectively manage oil and gas program. But that is
true no matter what the organization is. Changing the
organization will not implement automatically those needed
reforms, so they are going to have to do both. If they are
going to reorganize, they are also going to have to implement
all of the reforms.
Chairman Towns. Ms. Kendall.
Ms. Kendall. I share the sentiment of both Mr. Rusco and
Ms. Brian that reorganization, in and of itself, is not an
answer to resolving profound management challenges. It will be
in the implementation and the other reforms that the Department
makes relative to the management of oil and gas, leasing,
oversight, and royalty collection.
Ms. Brian. If I could add a little more meat to my overall
comment on that. While we certainly agree that splitting up
that conflict and mission is an essential change, it also could
create more problems, because what we now have are three
smaller agencies inside a bureaucracy and, as we know, we are
all sort of students of government, it is all about how big you
are in the government and how powerful you are. So now you have
smaller entities.
And we are particularly worried from the audit perspective.
We have been thinking for some time that there may be some
efficiencies created by looking at those small audit shops
across the Federal Government and thinking about housing them
in one place, where you would actually create an efficiency and
have them actually be an entity where there is more value
placed on their role as auditors, for example.
The other thing that worries us is that some of the people
who really need to be at the table as we are talking about this
reorganization aren't there. The States and tribes that MMS is
responsible for collecting royalties from are not adequately
being consulted and participating in the process, and that is
of great concern to us as well.
Chairman Towns. Does the Department of Interior have the
expertise to be able to do the kind of monitoring and oversight
that we are really expecting? Because I am looking at a GS-7.
That is, what, $38,000 a year?
Ms. Brian. Isn't that awful, yes, to think of the
responsibility that we are placing on them and we are so
undervaluing them by how much we are paying them.
The other part of what we think is important that hasn't
been on the table at all yet is BLM at Interior also is
conducting these inspections, and we are not talking about
them. So shouldn't there be some conversation about at least
merging those missions in one entity as well?
So I think there are a lot of important things that should
be part of the conversation that haven't been yet.
Chairman Towns. Right.
Do you think they have the expertise?
Mr. Rusco. No. We have found many cases in which the level
of expertise, the level of training, and just the sheer number
of people to do the job are inadequate, especially in the
inspection area and in the area of petroleum engineers to
evaluate drilling plans and to evaluate processes.
Chairman Towns. I guess my 5 minutes is up. I don't think
they started the clock.
Mr. Issa. Mr. Chairman, I would ask unanimous consent you
have all the time of the other Members here on your side.
Chairman Towns. I would be delighted to take it, but I will
yield 5 minutes to you before we do that.
Mr. Issa. Thank you, Mr. Chairman.
Like the chairman, I think there is no limit to the amount
of questions we would like to ask each of you. I will start
with Ms. Randolph. I asked Secretary Salazar, a moment ago, an
hour ago, now, about why an arbitrary 6 months, rather than
when the existing well, which is certainly a danger until it is
killed, once it is killed, why he couldn't reconsider, at that
moment, changing; and he gave me an answer that, over the next
6 weeks, 8 weeks, he was going to have all these studies come
back.
You have seen the President make a personal promise to you.
You have sat there watching people be laid off in an industry
that is not being compensated at all for being laid off; they
are not like the fishermen. The oilmen themselves are just on
their own if they get laid off; they cannot go to Mr. Feinberg
to ask for any money because they are not part of the
``affected directly.''
What do you need to see from this administration in order
to have the confidence that they care enough about Louisiana to
actually put people back to work?
Ms. Randolph. Well, the immediate response would be to lift
the moratorium and----
Mr. Issa. But do you agree with the premise that if
Secretary Salazar were to reconsider a date shorter, that when
the well is actually killed, which hopefully will be in a
matter of weeks, that might be the appropriate time to say, OK,
it no longer is a danger; therefore, resources could be
available; therefore, we could lift the ban? Would you be
satisfied if he used that instead of 6 months and then we will
re-look at it with no expectation that would be a hard
reopening?
Ms. Randolph. We would be very satisfied with that. There
would be a finite date. The industry itself could make
decisions based upon that date and, therefore, we would not
lose all the service company jobs that are associated with it.
Yes. But my concern this morning is Mr. Bromwich talked about
another study that begins or additional hearings that begin on
August 4th and end on September 15th, with a report due on
October 31st. So it is another study that doesn't provide us
any direction.
Mr. Issa. Well, unfortunately, that will be 2 or 3 days
before the mid-term elections. I suspect no one is going to
look at them until after that date, too.
Ms. Brian, you and I have worked together on transparency,
and we will continue to. Ms. Randolph particularly has
experience about ghost assets, all the parishes do, where there
are claims in writing that X amount of skimmers, X amount of
various assets are brought to bear, and then we find out they
actually weren't there; and we, to be honest, do not know if
the total number of skimmers that each were claimed is greater
than the total number of skimmers ever contracted.
Do you have any better transparency at all? Have you been
able to get any better information on what the real assets that
brought to bear were? And if not, why do you think you are not
seeing it?
Ms. Brian. We have not had any better access to information
and we do think that there is a tremendous problem with the
lack of transparency in this entire cleanup operation. I think
part of the problem is there has been an acceptance that BP was
in charge for a long time, and sort of leaving it to the
private sector, which we really believe this is something where
the Government should be in charge and making all information
public to the general public, and that just hasn't been the
case.
Mr. Issa. Well, you know, one of the interesting things
that I discovered with the chairman when we went down there is
that they run consensus management, which is a nice way of
saying one group is in charge except, really, they are not in
charge; it takes everyone to have a decision. Therefore, nobody
is really accountable. Therefore, the decision to release is
probably beyond the expertise of everybody. It is no way to run
a railroad.
I guess I am going to sort of pose to both of you for a
second, and I think Mr. Rusco, because of your past studies I
think you see it, but you both have been asked. This
reorganization, if you will, moving the deck chairs on the
Titanic, doesn't it inherently delay the ability of the
organization, while they are busy reorganizing, from getting to
the various failures that both of you have seen in past
inspections and studies?
Mr. Rusco. That is a concern that we have. We know that
organizational change is very difficult; it is disruptive and
it takes a lot of agency resources. At the same time, they are
dealing with this catastrophic oil spill. They are also dealing
with trying to do the work that they feel they need to before
they can lift the moratorium, and then they have this backlog
of recommendations that they are trying to address to improve
their systems. It is a concern.
Mr. Issa. Ms. Kendall, the same for you. I assume that it
is very hard for your various IGs and so on, the people that
work for you, to actually figure out who you are supposed to
look at and what you are supposed to oversee if the chairs are
moving around. I am assuming that one of the problems right now
is you really don't know which one of these three entities to
focus on. Is that correct? Just during the reorganization.
Ms. Kendall. During the reorganization?
Mr. Issa. Yes, ma'am.
Ms. Kendall. What we are really trying to do is focus on
issue areas. But following those issue areas as they are being
moved around has not yet become a challenge because the actual
movement hasn't taken place, but I imagine it would be in the
future.
Mr. Issa. One quick last question, if I could, Mr.
Chairman.
The chairman and I enjoy the title of Oversight and Reform,
and the theory of that is that Congress has an absolute right
to, if you will, intervene in the organization of Government.
Congress actually authorizes who gets to be a cabinet or not;
we created the cabinet position for Homeland Security and so
on. If the GAO were tasked, in combination with this committee,
to look at the various revenue entities, not just in the
Department of Interior, but primarily in the Department of
Interior, well, maybe include the IRS, they would clearly be
outside, the various parts of inspection that go on throughout
the Government, but particularly Department of Interior.
And, of course, contracting, and ask the bigger question of
should this entity really be truly consolidated with other
areas of, if you will, cultural excellence by comparison, do
you believe that is something you could deliver at least a
preliminary report back to us during this Congress? In other
words, are the basic facts of these other entities, their
existence for consideration by this committee, something that
we could begin working on before the lights go out at the end
of December?
Mr. Rusco. I think it is something we would be willing to
talk to your staff about. I would hate to commit at this point
to anything without further information.
Mr. Issa. Well, Mr. Chairman, there is more than enough if
there is a second round, but that would be something that I
would like to have our staffs explore, is whether we could take
an active role in looking at a much larger reorganization,
particularly when it comes to the following, which is I heard
the GS-7, and I appreciate that, but I happen to know that the
inspectors go up to about $100,000, GS-13s and 14s. So there
are some that are paid relatively well and, in fact, paid
better than their counterparts in the Corps of Engineers who
oversee public construction, including NASA.
So, with that, I yield back, Mr. Chairman.
Chairman Towns. And I would also like to add maybe we need
to look in terms of stability, in terms of how long people
actually stay with the agency. I think that is another issue
that we need to consider as well.
Mr. Issa. Absolutely.
Chairman Towns. At this time, I would like to recognize the
gentleman from Ohio, Mr. Jordan.
Mr. Jordan. Thank you, Mr. Chairman.
All of you were here for the first panel; you listened in
on the questioning. I wanted to ask Secretary Salazar some
questions, but just because of votes was unable to get back in
time before he was dismissed. But I was intrigued by
Congressman Turner's time line prior to the terrible accident
in the Gulf with the Deepwater Horizon. So I want your
thoughts.
Obviously, BP is at fault here, and we understand that, but
do you believe--well, let me go back to this. In Mr. Turner's
time line he referenced four different occasions where standard
inspections were not performed. So I want your thoughts. Do you
believe that this accident could have been prevented if MMS
would have done those inspections? And we will just go down the
line.
Mr. Rusco. It is difficult to say, but I think that there
is a bit of a misconception about what these inspections are
about. Most of the inspections that take place on the rigs
offshore are dealing with safety of equipment, such as
railings, stairways, slippery surfaces; they are dealing with
environmental issues, such as any noticeable leaks of
hydrocarbons; and they are dealing with production verification
issues, looking to make sure that the metering is done
correctly and that there are no bypasses of meters and that
everything is accounted for.
Mr. Jordan. So you are saying, those inspections, people
aren't actually out on the facility, in the equipment itself?
Mr. Rusco. They are out there and they also do look at
records; they look at records to ensure that the approved plans
are being followed and they have----
Mr. Jordan. Well, but certainly the fact that if those
inspections would have been done, there would have been a
better chance to detect those problems. Fair statement?
Mr. Rusco. I can't argue with that.
Mr. Jordan. Ms. Kendall.
Ms. Kendall. I would echo everything Mr. Rusco said, but I
would also add that, based on what I know, and I am far from a
petroleum engineer, but I believe that what is coming sort of
to the fore is that things like the well design and review and
approval of that, the actual practices of when to pull the mud
and replace it were the kinds of things that there are any
number of sort of decision points along the way that may have
prevented what we are dealing with now. But I don't know that
inspectors are the answer to that sort of issue, that there has
to be some much more careful review of those kinds of issues.
Mr. Jordan. Not disagreeing. We are talking about
restructuring and reorganization. That all is probably
necessary, but the law said do these inspections and they were
not done, and a bad thing happened that could have been maybe
prevented if in fact those inspections had been done. It seem
pretty logical to conclude maybe we would have caught
something. They didn't even do their job.
Ms. Kendall. I think maybe is certainly reasonable.
Mr. Jordan. And you can cut to the chase. They didn't do
their job, and because now we have this terrible incident where
lives were lost, where economies are affected, Ms. Randolph
knows that firsthand, people's lives, families' lives, small
business owners, and now we have the President saying because
our people screwed up and didn't do what they are supposed to
do and now we have this terrible accident, we are going to stop
drilling everywhere, and make a bad situation even worse. That
is where we are at, and maybe it could have been prevented if
in fact they would have done what they were supposed to do.
Ms. Brian.
Ms. Brian. I also don't really know enough about those
inspections. I think in general there is no question that MMS
has been not doing its job for many, many, many, many years. So
I think there is no doubt that if MMS was held accountable,
these are issues that have been raised by the Congress, by the
GAO, by the IG, by POGO for 15 years, so there is no question
that if MMS had reformed in the many times it was told it
needed to, then we wouldn't have seen what we have in this
accident.
Mr. Jordan. Thank you.
Ms. Randolph.
Ms. Randolph. I think it is a shared responsibility. Not
only did MMS not do its job; BP didn't do its due diligence.
Mr. Jordan. I yield back.
Thank you, Mr. Chairman.
Chairman Towns. I thank the gentleman for yielding.
I now yield to the gentleman from California, Congressman
Bilbray.
Mr. Bilbray. Thank you, Mr. Chairman.
Chairman Towns. I am sorry. I am sorry. I yield to
Congressman Welch.
Mr. Welch. [Remarks made off mic.]
Chairman Towns. I now yield to you.
Mr. Bilbray. Thank you.
Mr. Rusco, I would like to talk about the response to the
crisis. Does anybody have any information at all, did the Army
Corps use the spillways upstream from New Orleans to divert
water into the Pontchartrain to try to get that flow to keep
the oil out of the Pontchartrain and Lake Borgne?
Mr. Rusco. I am sorry, that is something we have not
studied.
Mr. Bilbray. OK.
Madam President, I was a county chairman myself, so I kind
of relate to the frustration that when you want to do things,
those who are always saying no continue to say no, even though
things need to be done.
Do you have a clip of what happened? Does staff have a clip
of that piece about the berm in Grand Isle? Can we play that?
[Video played.]
Mr. Bilbray. Madam President, I married a girl from your
part of the world and the fact of the frustration of the people
down there when they want to do something, being told, no, no,
we have to study it. Grand Isle is over where Jean Lafitte used
to hang out. It is not your part of the world, but did you have
any kind of situations like that where you basically ran into
this issue where everybody said stop, we have to study
something, don't do things, and basically we are always telling
the locals no; or did we get a lot of support saying, go ahead
and we will work it out later?
Ms. Randolph. It was very similar to what David was
describing in this video. They are our neighbor, so these berms
are very important to us. And now I am watching a storm that
may be coming into the Gulf. Our response in those situations
is from the bottom up. We do what we know best. We respond
naturally, instinctively, as humans should, with plans in
place. This has been a very unique situation and a very
frustrating one, yes.
Mr. Bilbray. I mean, I really related to the fact that the
Army Corps always love to say we need to study the
environmental impact of building a sand berm, and not realizing
that there are times that you have to call an audible.
Leadership means dropping the rule book and doing what you can,
where you can, in the best common sense way, and this one was
really kind of an interesting one of, well, we have to make
sure that a berm doesn't hurt the environment while the oil is
coming in over the top of it; and it is almost as if inaction
is justifiable and less of a concern to bureaucracy than the
possibility of possibly doing something wrong. And I guess that
is the part that I really think we have to talk about. We have
to not only empower people to make those calls.
I have spent a lot of quality time over in Coca Tree on
Bayou Terrebonne at the camp there, so the family loves that
area. But to sit there and have somebody that basically the
system rewards those for inaction, and it is safer for a
bureaucrat to say no than to say yes, we accept that most of
the time, but during a crisis there should be a way of burning
a fire that says, look, if you don't call an audible, if you
don't do extraordinary things, if you don't throw the play book
away and use innovation, you are going to get in more trouble
than if you do something wrong. I think we have to figure out
how do that.
Ms. Brian, do you have any comments or any concerns about
that? I have been waiting to call on you, anyway, just for your
name.
Ms. Brian. I know, you love my name.
Well, what you are describing is very similar to what we
saw happening with these inspectors, where their supervisors
are making them scared to actually assess noncompliance orders,
because they are afraid if they do something they are more
likely to get in trouble than if they don't do something, and
that is even after this incident. So it is really insight to
me.
Mr. Bilbray. Mr. Chairman, I will just tell you I
personally witnessed the results of Hurricane Katrina; I was in
Louisiana and I was in Mississippi, and I saw the difference
between the mind-sets. The feeling seemed to be in New Orleans
of don't do anything because you may do something or not have
something done approved, and when I went over to Picayune, just
on the other side of the Pearl River, it was, look, do what you
can do, we will worry about whose jurisdiction it is later, and
I saw a real difference.
I just hope, somewhere down the line in our Federal
responses, we can sort of adopt that Mississippi mentality that
I saw during that disaster, rather than what I saw down south.
And no offense, Madam President, but there was a distinct
difference; it was astonishing that two different political
jurisdictions could respond so absolutely different to crisis,
and I think there is a lot to learn there.
So thank you very much for your testimony.
Chairman Towns. I thank the gentleman from California for
his statement.
Just before I call on Congressman Welch, I would like to
ask unanimous consent that I include Mr. Luetkemeyer's
statement in the record.
[The prepared statement of Hon. Blaine Luetkemeyer
follows:]
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Chairman Towns. Now I yield to Mr. Welch.
Mr. Welch. Mr. Chairman, thank you.
I am concerned about a lapse in the royalty collection for
the period of leases between 1996 and 2000, and I just want to
ask a few questions about that.
Ms. Kendall, the Department of Interior, you probably have
become aware of this, there was a set of leases that were
issued between 1996 and 2000. They were under a law that was
passed by Congress that was intended to try to encourage
domestic drilling, but it was when oil was under $25 a barrel.
As I understand it, the law said there would be no
royalties until a trigger price of, I think, $26 a barrel was
hit. Oil now is, I don't know, $75 or $80 a barrel; at one
point it was $140 a barrel. According to the report that I have
seen from the GAO, unless we change this so that we can collect
the royalties on what would be due on these leases for the oil
that is above the trigger price, the taxpayers could be out
about $60 billion. Are you familiar with that?
Ms. Kendall. Yes, sir, I am.
Mr. Welch. And are there any specific actions? The question
of the loophole was litigated by Anadarko Petroleum. They
argued that the way the law was written, there was not explicit
authority to charge the regular royalty rate above the trigger
price. Many Members of Congress who voted on that legislation
had no idea that there was going to be an exemption no matter
how high the price went. But the court decision was that the
law has to be changed in order for the taxpayers to collect the
royalties that was the intention of that act. Is that your
understanding?
Ms. Kendall. Yes, sir.
Mr. Welch. So is it your understanding that in order for
there to be a collection on these royalties, we would have to
pass a law to make that permissible?
Ms. Kendall. Congressman, I am familiar with the case that
you are talking about and I am familiar with the act generally.
I am not familiar specifically to any degree. I don't know if--
and this is just my thinking off the top of my head--whether
Congress could successfully go back and pass a law that
addressed those years specifically retrospectively. I would
just guess that there would be a challenge for that as well.
Mr. Welch. Well, we would have to get our legal advice and
do it right, but I think all I am asking you to indicate is
whether there appears to be any administrative remedy to what
appears to be essentially a loophole by which the companies
that are drilling on public lands are doing so without paying
royalties to the public for that profit-making privilege.
Ms. Kendall. I am going to have to rely on fairly limited
memory, but I don't believe that there are administrative
remedies when there was a fundamental flaw in the law as found
by the court.
Mr. Welch. All right, then I think, Mr. Chairman,
Congressman Markey and I will be introducing legislation that
would be designed to remedy that loophole and provide to the
public the royalties that they are due for drilling on the
public lands.
Ms. Brian, are you aware of this?
Ms. Brian. I am certainly aware of the problem, and I think
it would be terrific if legislation were passed to correct it.
Mr. Welch. You do?
Ms. Brian. I do.
Mr. Welch. All right.
Ms. Randolph, I just want to welcome you. I think all of us
are heartbroken. I went down to the Gulf, and as heartbreaking
as it was for me to fly out over that magnificent, beautiful
marshland at the Delta, what was the hardest was coming back
and meeting people who were fishermen in the oil industry and
just seeing how lives down there have been turned upside down.
So I just want to express to you my heartfelt sadness about
what the people of the Gulf Coast are enduring, and will long
after Congress has moved on to other things. So thank you for
coming and all you do down there.
Ms. Randolph. Thank you, sir. And as a recipient parish of
some of those royalty revenues, I look forward to you
increasing that.
Mr. Welch. All right, thank you.
Mr. Chairman, I yield back. Thank you very much.
Chairman Towns. I thank the gentleman for yielding back.
Let me just sort of, I guess, again, Mr. Rusco and, of
course, Ms. Brian, and Ms. Kendall, how has this cozy
relationship between the industry and MMS impacted oversight
and safety standards? Do you think it has interfered with it?
Mr. Rusco. I would like to just second what Ms. Brian said,
that there are sort of two problems. There is one that you
could describe as a revolving door issue. That may be a bigger
problem at higher levels of management than it is at the level
of inspectors and engineers. But there is a second problem, and
that is that they, by and large, don't pay a competitive wage
with industry.
So when the industry is in good shape, they can pay a lot
more than what Interior is paying the people with comparable
skills; then, when times are bad, Interior can hire people. So
there is sort of a structural problem that could be dealt with
by addressing the amount that they can pay people; and there
are other compensations as well. But I think that is part of
the problem. It does, though, the lack of the proper number and
amount of expertise that they can bring to bear does affect
their ability to do their job.
Chairman Towns. Ms. Kendall.
Ms. Kendall. I would also say that some of the exceptions
in the ethics regulations have allowed folks to kind of get
away from the intent of the regs, for instance, the acceptance
of gifts because of a personal friendship. These people are all
friends. The folks in industry and in MMS that grew up
together, they married each other's sisters or cousins, they
have been playing on the same teams since they were in high
school. So the exception to the gift rule, which says if it is
based on a personal friendship, could be exploited.
On the other hand, if someone were to say I am accepting
this on the basis of a friendship, they should also be
prohibited or recused from inspecting the rigs or the
facilities of the people who they have this friendship with.
I go back to the ethics regs. These are the floor, not the
ceiling of conduct, and I think MMS has an opportunity to make
stricter rules apply to a very unique and a very specific
problem that they have.
Chairman Towns. They could do it administratively; they
don't need us.
Ms. Kendall. They could do it administratively.
Chairman Towns. Ms. Brian.
Ms. Brian. Mr. Chairman, I have the benefit of having
looked across the Federal Government for many years, and I
continue to think MMS is probably the worst in the Government
when it comes to its coziness between the regulator and the
regulated. As I mentioned when the Congress people were voting,
Mr. Issa certainly has known that, he has been working on this
for years, and Mrs. Maloney, I have been working with her for
15 years on this issue. I mean, I think that there is no
question that the coziness in this particular agency has been
sort of extraordinary across the Federal Government. There is
no comparison, in our experience.
Chairman Towns. Right. Even in the Congress, when you
leave, you have to stay out a certain amount of time before you
can come back and lobby the Congress. That is the Congress. So
I am wondering if maybe something along those lines shouldn't
be instituted here.
Ms. Brian. Oh, there is absolutely no question we need to
change the rules when it comes to the revolving door, and there
is strong legislation that has been worked through the House
Natural Resources Committee that would be addressing this
particular issue, and I certainly hope the committee members
support that legislation.
Chairman Towns. I notice you didn't start the clock, so
that is good.
I now yield to----
Mr. Issa. Mr. Cao hasn't gone.
Chairman Towns [continuing]. Mr. Cao, the gentleman from
Louisiana, who is really familiar with this subject.
Mr. Cao. Thank you very much, Mr. Chairman.
I want to focus on the issue of shallow water permitting. I
was reading one of the articles from Louisiana today, and they
were saying about the slow process of shallow water permitting,
and this is the question to President Randolph of Lafourche:
How has this permitting process affecting the shallow drilling
industry in your parish?
Ms. Randolph. The Department of the Interior and MMS's
ability or charge to issue permits can create a defacto
moratorium, and MMS has done so because the response to the
request for permits has been very, very, very slow in the
shallow waters. In the deep waters what has been addressed in
media, but shallow waters, there is a defacto moratorium there
as well.
Mr. Cao. And how has this defacto moratorium affected some
of the industry in your parish, how has it affected the people
who are being employed by this industry, some of the businesses
that are directly or indirectly related to this industry?
Ms. Randolph. The shallow water defacto moratorium
essentially has put independent contractors out of business.
The fact that they cannot get permitted or re-permitted under
the new guidelines affects a lot more the small business owners
in the community. We talk about the four or five major
companies in this country, the oil companies.
But when we talk about the shallow water, that is where the
independents are, and the majority of the exploring companies
are independents; they don't have the resources or the
resources to sustain any type of long-term moratorium. They
cannot survive that long and, therefore, they have begun to lay
off people, yes.
Mr. Cao. Well, do you know of any rigs or any low drilling
companies that either have moved rigs or have shut down because
of this slow permitting process?
Ms. Randolph. In the shallow waters?
Mr. Cao. Yes.
Ms. Randolph. Yes, sir.
Mr. Cao. Do you have the names of them?
Ms. Randolph. No, I don't have the names for you, but I
can----
Mr. Cao. But based on your knowledge, there have been rigs
that have moved out of Louisiana or companies that have shut
down because of this moratorium, or at least defacto
moratorium?
Ms. Randolph. Yes, sir.
Mr. Cao. Ms. Kendall, are there ways under the new rules
and regulations implemented by MMS that would allow greater
speed of permitting to some of the shallow water rigs?
Ms. Kendall. I am sorry, I couldn't hear much of your
question.
Mr. Cao. Are there ways or procedures to expedite some of
the permitting process through the MMS within the new rules and
regulations that were implemented after Deepwater Horizon?
Ms. Kendall. I simply don't know the answer to that
question. I am not familiar with the newly implemented
regulations; I can just speak to sort of in general terms. I
know, in having discussions with people, I think part of the
contributing factors MMS has now become a little gun-shy and is
being extraordinarily cautious in their review and their
processing. Not that excuses them. And I know that it puts a
toll on the folks who are reliant on those permits, but I just
don't know if there is anything in the new regs that would
speed that up.
Mr. Cao. Thank you, and I yield back.
Chairman Towns. The gentleman's time has expired.
I now yield to the gentlewoman from New York who has done a
lot of work in this area, Congresswoman Carolyn Maloney.
Mrs. Maloney. I want to thank the chairman for focusing on
this important area of Government, an area that clearly needs
reform and I believe an area that would not have had this focus
if we hadn't had the catastrophe in the Gulf with BP, and it is
long overdue.
I wanted to mention that earlier today in our hearing with
Commissioner Salazar we were talking about a recent GAO report
that was really developed for this committee on the revenue
share the Government collects from the oil and gas produced in
the Gulf, and this report ranked our country 93rd, one of the
lowest of the 104 revenue collection regimes around the world.
I find this absolutely scandalous. He also testified that the
revenue royalty collection system had not been changed since
1920. I would like to ask Ms. Brian to respond to this.
I know that we worked together to end the Royalty-in-Kind
program and have been trying to have one set of books, not two
or three, and to really get a fair deal for the taxpayer. Could
you comment on this? With our technology, our expertise, why do
we rank 93rd? We should be first. Ms. Brian.
Ms. Brian. I absolutely share your outrage, Mrs. Maloney.
It is ridiculous and there is certainly no excuse for it. I
think this has, for reasons I have never been able to
understand, as we have said, we have been working on this for
so many years, this is not news to us. This is an agency that
has been sort of left to fester by itself, without really
breaking it open and fixing it, and I am hope that, as I
mentioned before, if there is a small silver lining in the
catastrophe, it is that the long-needed reforms will finally
happen.
Mrs. Maloney. How will this change take place and how long
will it take before the royalties increase and we have more of
an accurate reflection of the value that is extracted from
publicly owned lands?
Ms. Brian. Well, at the moment there is nothing pending
that will actually change the collection of royalties at all.
None of the reforms that we are hearing about today will
actually fix that; that is something that is still up to the
Congress to tackle.
Mrs. Maloney. Well, also in the GAO report that we have
had, it found that the MMS area should do more to improve the
accuracy of data used to collect and verify oil royalties, that
it really hasn't been changed or updated. And I have put in a
bill, H.R. 1462, and this bill would require a National Academy
of Engineering study regarding improving the accuracy of
collection of royalties on production of oil.
Literally, the first panel testified that they need better
indicators, and I feel personally that this would be an
important step forward. I would like to make sure that all of
the panelists have a copy of the bill, and if you would get
back in writing whether or not you support it, it might be a
way to move this legislation forward so that we actually can
increase the royalties from these publicly owned lands.
Exactly what will the reorganization do to help improve the
accuracy of this data? Is there anything that will improve the
accuracy of the data that is taking place now?
Mr. Rusco. The reorganization itself says nothing about
that. There are many, many things that need to happen in order
to improve the accuracy of the data, including rationalizing
data bases across the many units of the oil and gas management
program so that they are actually compatible; fixing the
functionality of these data bases so that they are collecting
the data they need to do audits and oversight. And all of this
needs to be done with some sort of central vision of bringing
the IT system up to date, because it is horribly behind what
the industry uses.
Mrs. Maloney. Well, why in the world aren't we updating it?
I would invite all panelists to submit in writing ways that we
can update it.
Another important GAO report said that there are no audits
of the oil and gas company royalty numbers, that the audits are
done by the companies themselves; and in so many cases MMS is
probably under-collecting by hundreds of millions of dollars.
Can you comment on the lack of audits of the oil and gas
company royalty program?
Mr. Rusco. We found that there were problems with the self-
reporting of data and the fact that there weren't automatic and
very quick checks of that, or the use of third-party data as
one would expect in a system like this. For example, the IRS,
you voluntarily provide your tax return, but your employer
sends in information and your bank sends in information, and
the IRS looks at that and compares them. In the case of
royalties, often there is an absence of third-party
verification.
Now, what the industry does is they use metering technology
that reports every 1 second on volumes and they look at each
other's data when there is a dispute between a pipeline
company, say, and an oil producer, they look at each other's
data and they resolve it based on data. However, Interior has
not adopted the kinds of technology it would need to collect
those sorts of data, and they could; they could collect it
directly from lessees.
Mrs. Maloney. Mr. Chairman, we need to look at that, we
need to move into the 21st century, and we need to protect the
taxpayers in this area. I find it scandalous that we haven't
moved to modernize, to have audits, to have third-party
verification, and that we haven't updated this law since 1920.
Chairman Towns. I agree with the gentlelady from New York,
and her time has expired.
I now yield 1 minute to the ranking member.
Mr. Issa. Thank you, Mr. Chairman.
Very quickly, in closing, for Mrs. Maloney, we did publish,
last October, something on this with the GAO's help on this
absence of audit.
Ms. Kendall, you were mentioning the too cozy and the
various rules related to these friends, but in the case of
Colorado, where, you know, these people didn't know each other
before they got there, but they got to know each other so well
that one of the women ended up pregnant. They very clearly
exchanged gifts at a very high level with people that were not
their friends, completely in violation, and then felt that they
needed even more leniency. To a great extent, isn't this really
simply an organization who justifies that somehow, because they
do the revolving door, they are all friends and, therefore,
they have a special relationship? Isn't that a culture that has
to be changed, period?
Ms. Kendall. Oh, absolutely.
Mr. Issa. OK. I think we have made our point on that. I
will mention that Mr. Waxman, when he was chairman, held an
interesting hearing, and that was the analysis of the
difference between fuel at temperature and wanting to hold our
retailers accountable for the differences in the temperature of
the fuel being delivered to the retail point, because on a 90
degree day versus a 60 degree day, the amount of fuel you get,
the BTUs available expand or contract. And the amazing thing
was that the technology does exist to do this sort of
comparison to ensure that the density that you buy equals the
density that you agree to pay for BTUs.
So I would suggest strongly that if we get an organization
that cares about the American people getting the revenue they
deserve, getting the safety they deserve, we will get there.
And I would like to close by, Ms. Brian, I appreciate your
wanting to have the transparency, and Ms. Randolph, but for the
GAO and the IG, I want to personally thank you for time and
time and time again doing the studies, doing the reports,
pointing out these failures and staying with it even when
administration after administration, at least three that I have
been around for, failed to do what you asked them to do, and I
am glad to see that we are all united getting it done today.
But I want to thank you for sticking with it. Probably, if
there is anyone who has pay should be increased, perhaps it
should be the people who did their job during this period of
time, rather than those who didn't.
Thank you, Mr. Chairman. I yield back.
Chairman Towns. Thank you very much.
Let me thank all the witnesses for their time.
It is not every hearing where the witnesses and the Members
on both sides of the aisle agree on the issues, but I think
this is one of those rare days in the U.S. House of
Representatives. Federal oversight of offshore oil drilling has
for decades been inadequate and ineffective. The agency
formerly known as MMS suffered from an institutional conflict
of interest, and repeated regulatory and ethical failures, as
my colleague from California just described some of the things
that went on.
All that has to change. The recipe for reform is not
complicated at all: Offshore oil drilling can no longer be
regulated on the ``honor system.'' That is No. 1. There must be
rigorous Federal oversight and effective enforcement.
Conflicts of interest must be eliminated. The royalty
collections must be separate from regulation and enforcement.
Sham environmental reviews cannot be tolerated any longer.
I don't want to see environmental assessments that talk about
protecting, but the point is we have to make certain that from
this point on that we do that.
Oil spill response plans must be realistic and we must
understand that. The entire world now knows that we were not
prepared for the BP oil spill.
There must be an effective and proven technology available
to prevent blowouts in deepwater before we allow deepwater
drilling to resume.
I want to thank you again for your testimony. You have been
extremely helpful.
And let me just say to the Department of Interior we want
to help them in terms of their reorganizing the Department, and
I think that sessions like this, where we can extract
information from people who have worked on these issues for so
long, I think would be very, very helpful to the Department.
So thanks again for your input.
I want to thank the Members who attended today and on that
note the hearing now adjourns.
[Whereupon, at 1:37 p.m., the committee was adjourned.]
[The prepared statement of Hon. Gerald E. Connolly
follows:]
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