[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
EXAMINING ACCESS TO OIL AND GAS DEVELOPMENT ON FEDERAL LANDS
=======================================================================
OVERSIGHT HEARING
before the
SUBCOMMITTEE ON ENERGY AND
MINERAL RESOURCES
of the
COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
Thursday, June 29, 2017
__________
Serial No. 115-13
__________
Printed for the use of the Committee on Natural Resources
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Available via the World Wide Web: http://www.fdsys.gov
or
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______
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COMMITTEE ON NATURAL RESOURCES
ROB BISHOP, UT, Chairman
RAUL M. GRIJALVA, AZ, Ranking Democratic Member
Don Young, AK Grace F. Napolitano, CA
Chairman Emeritus Madeleine Z. Bordallo, GU
Louie Gohmert, TX Jim Costa, CA
Vice Chairman Gregorio Kilili Camacho Sablan,
Doug Lamborn, CO CNMI
Robert J. Wittman, VA Niki Tsongas, MA
Tom McClintock, CA Jared Huffman, CA
Stevan Pearce, NM Vice Ranking Member
Glenn Thompson, PA Alan S. Lowenthal, CA
Paul A. Gosar, AZ Donald S. Beyer, Jr., VA
Raul R. Labrador, ID Norma J. Torres, CA
Scott R. Tipton, CO Ruben Gallego, AZ
Doug LaMalfa, CA Colleen Hanabusa, HI
Jeff Denham, CA Nanette Diaz Barragan, CA
Paul Cook, CA Darren Soto, FL
Bruce Westerman, AR Jimmy Panetta, CA
Garret Graves, LA A. Donald McEachin, VA
Jody B. Hice, GA Anthony G. Brown, MD
Aumua Amata Coleman Radewagen, AS Wm. Lacy Clay, MO
Darin LaHood, IL
Daniel Webster, FL
Jack Bergman, MI
Liz Cheney, WY
Mike Johnson, LA
Jenniffer Gonzalez-Colon, PR
Greg Gianforte, MT
Todd Ungerecht, Acting Chief of Staff
Lisa Pittman, Chief Counsel
David Watkins, Democratic Staff Director
------
SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES
PAUL A. GOSAR, AZ, Chairman
ALAN S. LOWENTHAL, CA, Ranking Democratic Member
Louie Gohmert, TX Anthony G. Brown, MD
Doug Lamborn, CO Jim Costa, CA
Robert J. Wittman, VA Niki Tsongas, MA
Stevan Pearce, NM Jared Huffman, CA
Glenn Thompson, PA Donald S. Beyer, Jr., VA
Scott R. Tipton, CO Darren Soto, FL
Paul Cook, CA Nanette Diaz Barragan, CA
Vice Chairman Vacancy
Garret Graves, LA Vacancy
Jody B. Hice, GA Raul M. Grijalva, AZ, ex officio
Darin LaHood, IL
Jack Bergman, MI
Liz Cheney, WY
Rob Bishop, UT, ex officio
------
CONTENTS
----------
Page
Hearing held on Thursday, June 29, 2017.......................... 1
Statement of Members:
Gosar, Hon. Paul A., a Representative in Congress from the
State of Arizona........................................... 1
Prepared statement of.................................... 2
Lowenthal, Hon. Alan S., a Representative in Congress from
the State of California.................................... 3
Prepared statement of.................................... 5
Statement of Witnesses:
Flynn, Ryan, Executive Director, New Mexico Oil and Gas
Association, Santa Fe, New Mexico.......................... 13
Prepared statement of.................................... 14
MacGregor, Katharine, Acting Assistant Secretary, Land and
Minerals Management, Department of the Interior,
Washington, DC............................................. 7
Prepared statement of.................................... 8
Questions submitted for the record....................... 12
Nelson, Laura, Governor's Energy Advisor, Utah Governor's
Office of Energy Development, Salt Lake City, Utah......... 27
Prepared statement of.................................... 28
Questions submitted for the record....................... 31
Squillace, Mark, Professor of Law, Natural Resource Law,
University of Colorado, Boulder, Colorado Law School,
Boulder, Colorado.......................................... 17
Prepared statement of.................................... 19
OVERSIGHT HEARING ON EXAMINING ACCESS TO OIL AND GAS DEVELOPMENT ON
FEDERAL LANDS
----------
Thursday, June 29, 2017
U.S. House of Representatives
Subcommittee on Energy and Mineral Resources
Committee on Natural Resources
Washington, DC
----------
The Subcommittee met, pursuant to notice, at 10:04 a.m., in
room 1324, Longworth House Office Building, Hon. Paul Gosar
[Chairman of the Subcommittee] presiding.
Present: Representatives Gosar, Lamborn, Wittman, Pearce,
Tipton, Westerman, Graves, Cheney, Bishop; Lowenthal, Brown,
Tsongas, Beyer, Soto, and Barragan.
Dr. Gosar. The Subcommittee on Energy and Mineral Resources
will come to order. The Subcommittee is meeting today to hear
testimony on examining access to oil and gas development on
Federal lands.
I ask unanimous consent that the gentleman from Arkansas,
Mr. Westerman, be allowed to sit with the Subcommittee and
participate in the hearing.
Without objection, so ordered.
Under Committee Rule 4(f), any oral opening statements at
the hearings are limited to the Chairman, the Ranking Minority
Member, and the Vice Chair. This will allow us to hear from our
witnesses sooner, and help Members keep to their schedules.
Therefore, I ask unanimous consent that all other Members'
opening statements be made part of the hearing record, if they
are submitted to the Subcommittee Clerk by 5:00 p.m. today.
Without objection, so ordered.
I ask that there not be any type of disruption regarding
the testimony given here today. It is important that we respect
the decorum and the rules of the Committee of the House, and to
allow the Members and the public to hear our proceedings.
Today, the Subcommittee will examine access to oil and gas
development on onshore Federal lands. Our Subcommittee is
holding a hearing in several weeks to discuss offshore Federal
oil and gas development, and we ask the Members to reserve all
offshore questions for the next hearing.
STATEMENT OF HON. PAUL A. GOSAR, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF ARIZONA
Dr. Gosar. Federal mineral estates are owned by all
Americans, and the Bureau of Land Management is obligated to
responsibly manage and develop these valuable resources.
Onshore Federal oil and gas accounts for roughly 20 percent of
America's production, and is integral to our Nation's energy
independence and security.
However, non-Federal production far outpaces Federal
production figures, due in large part to the overwhelming
administrative burdens of the Federal mineral development
process. Not only has the new Administration inherited a
backlog of 3,000 drill permit applications, but an incredibly
burdensome regulatory scheme that discourages investment and
development. It is critical that we evaluate these obstacles to
access, to ensure a fair return to the American people.
There are many factors that influence an operator's
decision to lease and develop hydrocarbons, including oil
price, geology, and transmission infrastructure. While some may
point to a low commodity price as a reason to withhold leasing
and production, market conditions are no excuse for poor
policies, or for the Federal Government failing to uphold its
statutory obligations. In fact, many operators avoid Federal
lands due to unquantifiable risk and level of uncertainty
associated with the leasing and permitting schematic.
The current Federal oil and gas leasing and permitting
processes are fraught with uncertainty, duplication, and delay.
Designating lands for development can take years, and parcels
nominated for lease were often explicitly retracted from the
auction. Although the Mineral Leasing Act requires the BLM to
hold quarterly lease sales of eligible lands, this requirement
has not been enforced for years.
Furthermore, once an operator has successfully navigated
the Federal leasing scheme, the lessee must still proceed
through the Application for a Permit to Drill, or ``APD,''
review process, which could set drilling back over a year. The
uncertainty, delay, and risks presented throughout the process
make operational and financial planning nearly impossible, and
is a detriment to the locality, state, and the American people.
Despite the complications and inefficiencies of leasing and
permitting under the previous administration, we are confident
that the new Administration will take the time to carefully
examine and optimize the BLM's processes. Secretary Zinke, a
friend and former member of this Committee, testified before us
last week and shared some of the steps he is taking to recommit
the BLM to upholding its mission.
In addition to increasing program funding, Secretary Zinke
is committed to improving field office performance. We are
grateful for the Department of the Interior's initial steps in
the right direction, and look forward to finding practical
solutions that optimize the responsible developmental process.
[The prepared statement of Dr. Gosar follows:]
Prepared Statement of the Hon. Paul A. Gosar, Chairman, Subcommittee on
Energy and Mineral Resources
Today, the Subcommittee will examine access to oil and gas
development on onshore Federal lands. Our Subcommittee is holding a
hearing in several weeks to discuss offshore Federal oil and gas
development, and we ask that Members reserve all offshore questions for
the next hearing.
Federal mineral estates are owned by all Americans, and the Bureau
of Land Management is obligated to responsibly manage and develop these
valuable resources. Onshore Federal oil and gas accounts for roughly 20
percent of American production, and is integral to our Nation's energy
independence and security. However, non-Federal production far outpaces
Federal production figures, due, in large part, to the overwhelming
administrative burdens of the Federal mineral development process. Not
only has the new Administration inherited a backlog of 3,000 drill
permit applications, but an incredibly burdensome regulatory scheme
that discourages investment and development. It is critical that we
evaluate these obstacles to access to ensure a fair return to the
American people.
There are many factors that influence an operator's decision to
lease and develop hydrocarbons, including oil price, geology, and
transmission infrastructure. And while some may point to low commodity
prices as a reason to withhold leasing and production, market
conditions are no excuse for poor policies, or for the Federal
Government failing to uphold its statutory obligations. In fact, many
operators avoid Federal lands due to the unquantifiable risk and level
of uncertainty associated with the leasing and permitting scheme.
The current Federal oil and gas leasing and permitting processes
are fraught with uncertainty, duplication, and delay. Designating lands
for development can take years, and parcels nominated for lease were
often inexplicably retracted from auction. Although the Minerals
Leasing Act requires the BLM to hold quarterly lease sales of eligible
lands, this requirement has not been enforced for years. Furthermore,
once an operator has successfully navigated the Federal leasing scheme,
the lessee must still proceed through the Application for a Permit to
Drill, or ``APD,'' review process which could set drilling back over a
year. The uncertainty, delay, and risks presented throughout the
process make operational and financial planning nearly impossible, and
is a detriment to the locality, state, and American people.
Despite the complications and inefficiencies of leasing and
permitting under the previous administration, we are confident that the
new administration will take the time to carefully examine and optimize
the BLM's processes. Secretary Zinke, a friend and former member of
this Committee, testified before us last week and shared some of the
steps he is taking to recommit the BLM to upholding its mission. In
addition to increasing program funding, Secretary Zinke is committed to
improving field office performance. We are grateful for the Department
of the Interior's initial steps in the right direction, and look
forward to finding practical solutions that optimize the responsible
development process.
______
Dr. Gosar. With that, I now recognize the Ranking Member
for his statement.
Thank you.
STATEMENT OF HON. ALAN S. LOWENTHAL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Dr. Lowenthal. Thank you, Mr. Chairman. First, I want to
compliment you, and I want to compliment all the Members on
both sides of the aisle of this Committee, as we have been
doing so well in our last few meetings. They have been
bipartisan, they have been cooperative, and they have been
constructive. I think today is going to be a little bit more
contentious, and I hope that that doesn't end that spirit.
Mr. Chairman, I do not oppose oil and gas development on
public lands. But I do oppose letting the oil and gas industry
call all the shots on how to manage those lands that are owned
by all Americans.
An all-of-the-above policy does not mean that we do not set
priorities, and I am concerned about our priorities.
It has only taken 5 months, and nearly every move on energy
that this Administration has made could have come right out of
the executive boardrooms of the American Petroleum Institute or
the National Mining Association. And that may actually be the
case, given the number of oil, gas, and coal lobbyists that now
occupy high-ranking positions at the Interior Department, at
the Energy Department, at the Environmental Protection Agency,
and in the White House.
Rules to protect public health? Gone. Rules to protect our
land, air, and water, and cut down on pollution? Gone. Rules to
protect fish and wildlife? Gone. Rules to make sure that
companies are paying their fair share? Gone. The standard seems
to be: did the Obama administration put it in place, and did
one oil, gas, or coal company complain about it? If so, it is
gone.
In no place is it more important to balance multiple uses,
environmental protection, as well as economic development, than
on America's public lands. But this idea of balance, this idea
that some areas should be protected while others can be
developed, is at least endangered now. And soon that could be
gone, too.
To quote the statement of the Acting Assistant Secretary,
``America's free markets will help determine where and when
energy development on public lands is feasible.'' That means
that the idea that these lands, which belong to all Americans,
should be managed in a way that will ensure that they are here
for our children and our grandchildren, that idea is now gone.
Instead, the Administration is operating under the idea
that the Department of the Interior should become a service
station for the oil and gas industry. Which lands would you
like to lease? Where and how fast do you want to drill? What
regulations do you want us to repeal? Are these national
monuments getting in your way? Just let us know. The Department
of the Interior is apparently here to keep you happy.
Secretary Zinke paid lip service to the idea of supporting
all forms of energy, to be in favor of the ``all-of-the-above''
policy. But if we look at his budget, it increases oil, gas,
and coal programs by $34 million, while renewables suffer a
$15.3 million cut. In fact, the fossil fuel program increase
seems to be the only one in the entire Interior budget that has
an increase.
We have seen this movie before, we have seen an
administration where energy policy was literally written by big
oil. During the 8 years of the Bush administration, the only
measure of success for the Bureau of Land Management was how
many drilling permits it could issue.
But what did we get? Interior Department officials thrown
in jail, regulators doing drugs and literally getting into bed
with the people they were supposed to be regulating, and a
thirst for mineral revenues that put safety standards on the
back burner, and helped to contribute to the Deepwater Horizon,
according to the Presidential Oil Spill Commission.
When it comes to giving the keys to our public lands to the
oil and gas industry, President Trump has made the Bush
administration look bush league.
The fact is that oil and gas companies are doing just fine
on our public lands and in our oceans, despite the misleading
statistics that they are going to throw around today.
Oil statistics really show that oil production on public
lands is up 59 percent since 2008. Offshore production is at a
record high. Companies have more than 7,500 approved drilling
permits that they are not using, and 26 million acres of public
land under lease to be developed. It shows you from 2008, right
through 2015, the Federal onshore oil production has increased
every single year up to 2015. And 2016 was slightly below 2015,
but above all the other years.
So, kind of in closing, I just want to say our new quest
for energy dominance, whatever that means, is not going to be
enough. Nothing is ever going to be enough. We must do more.
Hunting, fishing, camping, hiking, boating, off-roading,
grazing, and all other uses of our public lands, are now
second-class. Oil and gas are dominant.
Mr. Chairman, we have an opportunity on this Subcommittee
to ensure that energy policies reflect the multiple uses of our
public lands, for the benefit of all of our constituents, not
just for the special interests of a few billionaires. Let's not
squander that opportunity.
Mr. Chairman, I just want to say in closing that I
understand your desire--and you sent out a few days ago--that
the title of this hearing would be focusing on onshore, and I
will try to abide by that. However, the title to the hearing
was really, ``Examining Access to Oil and Gas Development on
Federal Lands.'' And, as you know, our Outer Continental Shelf
is really defined as submerged lands lying seaward of the coast
line.
Ms. MacGregor is responsible for overseeing both offshore
and onshore development, so there may be some questions that
come up because people did not know. I am just letting you know
that, even though we understand.
[The prepared statement of Dr. Lowenthal follows:]
Prepared Statement of the Hon. Alan S. Lowenthal, Ranking Member,
Subcommittee on Energy and Mineral Resources
Thank you, Mr. Chairman.
You know, we have been doing so well in our last few EMR hearings--
they have been bipartisan, cooperative, and constructive. I hope that
it is not coming to an end today.
Mr. Chairman, I don't oppose oil and gas development on public
lands. But I do oppose letting the oil and gas industry call all the
shots as to how to manage these lands owned by all Americans. It's only
taken 5 months, and nearly every move on energy that this
Administration has made could have come right out of the executive
boardrooms of the American Petroleum Institute or the National Mining
Association. And that might actually be the case, given the number of
oil, gas, and coal lobbyists that now occupy high-ranking positions at
the Interior Department, at the Energy Department, at the Environmental
Protection Agency, and in the White House.
Rules to protect people's health? Gone.
Rules to protect our land, air, and water, and cut down on
pollution? Gone.
Rules to protect fish and wildlife? Gone.
Rules to make sure companies are paying their fair share? Gone.
The standard seems to be: did the Obama administration put it in
place, and did one oil, gas, or coal company complain about it? If so,
it has to go.
In no place is it more important to balance multiple uses--
environmental protection as well as economic development--than on
America's public lands. But this idea of balance--the idea that some
areas should be protected while others can be developed--is gone.
To quote the statement of the Acting Assistant Secretary,
``America's free markets will help determine where and when energy
development on public lands is feasible.'' That means the idea that
these lands, which belong to all Americans, should be managed in a way
that will ensure they are still here for our children and our
grandchildren--that idea is gone.
Instead, the Administration is operating under the idea that the
Department of the Interior should become a service station for the oil
and gas industry.
Which lands would you like to lease? Where and how fast do you want
to drill? What regulations do you want us to repeal? Are these national
monuments getting in your way? Just let us know. The Department of the
Interior is apparently here to keep you happy.
Secretary Zinke pays lip service to the idea of supporting all
forms of energy, to being in favor of ``All of the Above.'' But his
budget increases oil, gas, and coal programs by $34 million while
renewables suffer a $15.3 million cut. In fact, the fossil fuel program
increase seems to be the only one in the entire Interior Department
budget.
We've seen this movie before. We've seen an administration where
energy policy was literally written by Big Oil. During the 8 years of
the Bush administration, the only measure of success for the Bureau of
Land Management was how many drilling permits it could issue.
What did we get? Interior Department officials thrown in jail.
Regulators doing drugs and literally getting into bed with the people
they were supposed to be regulating. And a thirst for mineral revenues
that put safety standards on the back-burner and helped contribute to
the Deepwater Horizon, according to the Presidential Oil Spill
Commission.
When it comes to giving the keys to our public lands to the oil and
gas industry, President Trump has made the Bush administration look
bush league.
Look, the fact is that oil and gas companies are doing just fine on
our public lands and in our oceans, despite the misleading statistics
that are going to be thrown around today. Here are some statistics: Oil
production on public lands is up 59 percent since 2008. Offshore
production is at a record high. Companies have more than 7,500 approved
drilling permits they're not using, and 26 million acres of public land
under lease waiting to be developed.
But in our new quest for ``energy dominance,'' whatever that means,
this is not going to be enough. Nothing is ever going to be enough.
Hunting, fishing, camping, hiking, biking, boating, off-roading,
grazing, and all other uses of our public lands are now second-class.
Oil and gas are dominant. The oil barons want everything, and this
Administration is trying to serve it to them on a silver platter.
Mr. Chairman, we have an opportunity on this Subcommittee to ensure
that energy policies reflect the multi-use nature of our public lands,
for the benefit of all our constituents, not just the special interests
of a few billionaires. Let's not squander that opportunity.
I yield back the balance of my time.
______
Dr. Gosar. I thank the gentleman for that clarification.
I am going to now introduce our witnesses.
The first one we see is a familiar face, Ms. Katharine
MacGregor, who is the Acting Assistant Secretary, Land and
Minerals Management, U.S. Department of the Interior.
And now I am going to yield time to the gentleman from New
Mexico to introduce the next witness.
Mr. Pearce. Thank you, Mr. Chairman. I would like to
introduce Ryan Flynn, who is the Executive Director of the New
Mexico Oil and Gas Association. As the director of that, he has
watched the permitting times on our wells increase from around
200 man days to get to a permit to something over 400, and he
was formerly the Secretary of New Mexico Environmental
Department, where he has a strong reputation for balancing
energy development with responsible environmental stewardship.
Ryan, we appreciate you being here to testify today. I
yield back.
Dr. Gosar. I thank the gentleman. Our next witness is Mr.
Mark Squillace, Professor of Law, the University of Colorado,
Boulder, Colorado Law School.
And Dr. Laura Nelson, Governor's Energy Advisor, Utah's
Governor's Office of Energy Development.
Let me remind the witnesses that under our Committee Rules,
they must limit their oral statements to 5 minutes, but their
entire statement will appear in the hearing record.
Our microphones are not automatic, so you will have to
press that little button. And if you will kind of watch up
front, when it goes to the first 4 minutes it is green, then it
will turn yellow. And when you see red, please summarize.
I will let the entire panel testify before we ask
questions.
And now I will recognize Ms. MacGregor for her testimony.
Welcome back.
STATEMENT OF KATHARINE MacGREGOR, ACTING ASSISTANT SECRETARY,
LAND AND MINERALS MANAGEMENT, DEPARTMENT OF THE INTERIOR,
WASHINGTON, DC
Ms. MacGregor. Thank you, Chairman Bishop, Chairman Gosar,
Ranking Member Lowenthal, and members of the Subcommittee. I
have to say it is very good to be back here today. I absolutely
loved working here, with both Majority and Minority staff.
My name is Kate MacGregor, and I am currently serving as
the Acting Assistant Secretary for Land and Minerals Management
at the Department of the Interior, where our responsibility is
the management of four bureaus: the Office of Surface Mining
Reclamation and Enforcement; the Bureau of Ocean Energy
Management; the Bureau of Safety and Environmental Enforcement;
and the Bureau of Land Management. I appreciate the opportunity
to testify on the BLM's onshore oil and gas program, which
plays a critical role in our Nation's energy economy.
The BLM manages 245 million surface acres and 700 million
subsurface acres, most of which are located in 12 western
states, including Alaska. Production on BLM-managed lands
accounts for 7 percent of our Nation's onshore oil, 10 percent
of our natural gas, and 41 percent of coal-produced
domestically, as well as approximately 18,000 megawatts of
renewable energy.
Last year, the BLM oil and gas program generated over $1.56
billion in royalties, rental payments, and bonus bids, all of
which were shared with states. States and counties, in turn,
use these funds for roads, schools, and other important
municipal needs. Public lands are integral to the
Administration's America First energy agenda, and Secretary
Zinke's priority to maintain U.S. energy dominance by growing
domestic energy production, generating revenue, and creating
and sustaining jobs throughout our country.
Access to responsible energy development on these lands
begins with the planning and leasing process. Ten years ago,
the BLM had nearly 45 million acres under oil and gas lease.
Today, we are at 27 million acres. This is nearly identical to
the total area currently designated as areas of critical
environmental concern, also known as ACECs, which stand at over
24 million acres. This is nearly 10 percent of all BLM-managed
lands in the United States.
In 2016, the BLM designated 8.2 million acres, the most
ACEC acreage since 1980. This is one example of designations
that limit how public lands may be used. Responsible energy
production and conservation need not be mutually exclusive.
That is why it is vitally important to Secretary Zinke to
restore our multiple-use mission and strike the appropriate
balance in onshore leasing that allows for job creation in
rural America. This is about restoring balance.
Under Secretary Zinke's leadership, the Department and the
BLM have been proactive in prioritizing responsible energy
production on public lands, including by Secretarial Order.
Order 3349 aims to remove duplicative burdens on energy
production while promoting job growth for hard-working American
families. Order 3352 will jump-start Alaskan energy production
in the National Petroleum Reserve Alaska, helping to unleash
Alaska's energy potential and increase throughput in the Trans-
Alaska Pipeline.
These efforts have already shown to be effective. Under
Secretary Zinke's leadership, the BLM has had more lease sales,
offered more acreage, and generated more revenue in the first 6
months of 2017 than the same time last year. And we are only
just getting started. The BLM plans to hold 14 additional lease
sales this year.
Still, promoting access to public lands does not come
without its challenges. I am sure that all members of this
Committee are in close contact with their state and local
leaders who do not hesitate to communicate their frustrations.
It is the Secretary's goal to restore trust and improve
relationships with our state and local partners, many of whom
rely upon the economic activity and revenues that come from
responsible oil and gas production on public lands in the West.
For example, the U.S. Census Bureau has found that rural
New Mexico has one of the highest poverty rates in the country.
Yet, rural New Mexico is also home to some of the most
promising oil and natural gas deposits in the entire world.
These resources are a tremendous source of jobs, economic
growth, and revenue for these rural communities. This is why
the Administration remains committed to promoting responsible
oil and gas production that create jobs, promote a robust
economy, and contribute to America's energy security.
There are a multitude of factors that affect access to
Federal oil and gas resources, and the Department and the BLM
are reviewing all of these and taking action where possible to
encourage development opportunities and improve efficiencies
without cutting corners on our duties to ensure that these
activities are done in a smart and environmentally responsible
way.
Thank you for the opportunity to testify today, and I will
be happy to answer any questions.
[The prepared statement of Ms. MacGregor follows:]
Prepared Statement of Katharine S. MacGregor, Acting Assistant
Secretary, Land and Minerals Management, U.S. Department of the
Interior
Chairman Gosar, Ranking Member Lowenthal, and members of the
Subcommittee, I am pleased to join you today to discuss the Bureau of
Land Management's (BLM's) onshore oil and gas program and our efforts
to advance the program to help secure American energy independence,
create jobs, and build a strong economy.
background
The BLM manages about 245 million surface acres and 700 million
subsurface acres, located primarily in 12 western states, including
Alaska. This diverse portfolio of lands is administered by the BLM on
behalf of the American people as part of the agency's multiple-use
mission--including energy and mineral development, livestock grazing,
timber production, recreation, and conservation, among others. The BLM
manages approximately 30 percent of the Nation's minerals. In Fiscal
Year (FY) 2016, onshore energy production on Federal lands accounted
for 7 percent of oil, 10 percent of natural gas, and 41 percent of coal
produced domestically, and another 17,963 megawatts of renewable energy
projects are approved. Public lands support the Administration's
America First Energy Agenda and Secretary Zinke's priority to maintain
our Nation's energy dominance by advancing domestic energy production,
generating revenue, and creating and sustaining jobs throughout our
country.
America First Energy Plan is an ``all-of-the-above'' plan that
includes oil and gas, coal, and renewable resources. Public lands are
integral to the development of these important energy resources.
Through this plan, America's free markets will help determine where and
when energy development on public lands is feasible. In order to
respond to our Nation's energy needs, the BLM is engaged in a variety
of efforts to support domestic production. These efforts include
predictable leasing; reducing barriers to accessing energy resources on
BLM public lands; reviewing and streamlining the BLM's leasing and
permitting processes to serve its customers and the public more
efficiently and effectively; and improving coordination among key
stakeholders, including state and local governments, other Federal
agencies, and the public. The BLM is also committed to supporting
improved electricity transmission and pipeline development--key areas
of our Nation's energy infrastructure that stabilize the U.S. electric
grid and keep energy prices low for American families.
The BLM oversees onshore oil and gas development on Federal lands
and lands held in trust for the benefit of various tribes.
Collectively, these lands contain world-class deposits of energy and
mineral resources which power millions of homes and businesses. BLM-
managed public lands provide a diverse marketplace for industry and
play a significant role in creating jobs for hardworking Americans.
Last year, the BLM economic study estimated the Federal onshore oil and
natural gas program alone provided approximately $50 billion in
economic output and supported approximately 188,000 jobs nationwide.
The BLM is also a key revenue producer for the Federal Government by
providing a significant non-tax source of funding to state and Federal
treasuries and is an important economic driver for local communities
across the country. For example, while Congress appropriated about $135
million to the BLM's oil and gas program in FY 2016, the program
generated more than $1.56 billion in royalties, rental payments, and
bonus bids--all of which were split between the U.S. Treasury and the
states where the development occurred. States and counties in turn use
these funds to support roads, schools, and other important community
needs.
The BLM is providing access to our diverse energy resources across
our public lands while also adhering to key environmental laws and
regulations. We remain committed to the safe and responsible
development of these resources alongside our state and local neighbors.
public lands' contribution to energy independence
Onshore oil and gas production on BLM-managed public lands is a
significant part of this strategy and makes an essential contribution
to the Nation's energy supply. The BLM has 27 million surface acres
specifically under lease for oil and gas development, including
approximately 94,000 active wells and 40,000 leases. Under Secretary
Zinke's leadership, the BLM has scheduled a quarterly lease sale in
nearly every office. To date, the BLM has held 13 lease sales,
including the February 2017 Wyoming lease sale, which garnered nearly
$129 million--the second largest amount generated from an onshore lease
sale in the last 30 years.
While we are proud of the BLM's contribution to domestic energy
production, we also recognize that there is a significant amount of
work to be done. At the Secretary's direction, the BLM established
ambitious 90-day targets to approve oil and gas Applications for Permit
to Drill (APDs), shifting resources to the more active offices of
Carlsbad, New Mexico; Casper, Wyoming; and Dickinson, North Dakota.
While the first 90-day goal BLM set was to process 711 APDs, the BLM
approved an impressive 758 APDs. The BLM remains committed to
completing reviews on all pending APDs and to work with operators to
match their rig schedules.
access to energy resources and multiple-use considerations
There are a number of factors that may open, limit, or close
Federal lands to oil and gas development, including land use planning,
statutory and regulatory requirements, consideration of potential
impacts to public land resources, and whether the resources in question
are located on lands that have been withdrawn from mineral leasing. The
Department and the BLM are reviewing all of these factors, and we are
taking action, where possible, to encourage development opportunities
and improve efficiencies.
Identifying Lands Available for Oil and Gas Leasing/Land Use Planning
The BLM's land use planning process provides--among many other
resource considerations--a standardized procedure for analyzing the
opportunities for oil and gas development on public lands, while also
ensuring that such development is done in a way that minimizes
environmental impacts and considers the public interest. Resource
Management Plans (RMPs) contain general resource allocations and other
decisions that reflect the BLM's efforts to weigh the many resources
and competing uses within a planning area, and they often include
reasonably foreseeable development (RFDs) scenarios that analyze the
known and potential oil and gas resources of the planning area. For
purposes of oil and gas leasing, lands within a planning area are
identified as fitting into one of three categories--lands open under
standard lease terms, lands open with restrictions, and lands closed to
leasing.
While the RMPs identify appropriate uses of public lands, generally
it is industry and the public who will nominate lands for leasing in
the form of expressions of interest (EOIs). Upon receipt of an EOI, the
BLM determines where lands are eligible for leasing under the RMP.
Following applicable laws and regulations, with limited exceptions the
BLM holds competitive lease sales quarterly in each of the state
offices where lands are nominated and available. After the lease sale
is held, any protests are resolved, and leases are issued, a lessee may
then submit an APD for a specific area within their lease. The BLM then
works with the lessees on final surface use and downhole drilling
plans. Often, however, operators will assess drilling targets based on
ongoing data analysis of resource potential and determine where and
when to develop based on a variety of business model decisions.
Regulatory Limitations
When industry is considering whether to develop Federal onshore oil
and natural gas resources, current regulations can serve as a
significant barrier. The Department is committed to the
Administration's priority of eliminating unnecessary or duplicative
regulations, thereby reducing burdens that may unnecessarily encumber
responsible energy production. As directed by Secretary Zinke's March
29, 2017, Secretarial Order 3349, American Energy Independence, the BLM
is currently reviewing all regulations related to domestic oil and
natural gas development on public lands. The BLM has proposed a rule to
rescind the final rule titled Oil and Gas; Hydraulic Fracturing on
Federal and Indian Lands and has reviewed the Waste Prevention,
Production Subject to Royalties, and Resource Conservation Rule,
postponing the implementation of any rule provisions that have not yet
gone into effect. Finally, the BLM is working with industry to identify
areas to adjust the technical requirements for the new regulation
updates on-site security, metering, and measurement standards. This
effort is designed to ensure that production accountability is
maintained, but does not deter the successful development of oil and
gas resources or lead to premature abandonment of marginal wells.
Stipulations on Oil and Gas Leasing
During the land use planning process, the BLM determines if lease
stipulations are needed to ensure that development is done in an
environmentally sound manner. Lease stipulations may include no surface
occupancy (NSO), controlled surface use (CSU), and timing limitations
(TL). Areas identified as NSO open to fluid mineral leasing, but
surface-disturbing activities cannot be conducted on the lease;
however, the lease may potentially be developed by directionally or
horizontally drilling from nearby lands that do not have NSO
limitations. CSU areas are also open to fluid mineral leasing but, in
contrast, allow surface-disturbing activities, subject to special
operational constraints to protect the specified resource or value.
Finally, areas identified for TL are closed to fluid mineral
exploration and development, surface-disturbing activities, and
intensive human activity during identified time frames.
Mineral Withdrawals
Public land withdrawals are formal land actions that reserve or
withhold public land by statute or proclamation, or in more limited
cases by administrative order, from operation of public land, mining,
mineral leasing, and geothermal leasing laws. Withdrawals are
established for a broad array of public purposes, including for
military reservations which account for approximately 16 million acres
of currently withdrawn BLM-managed public lands. In addition, on lands
where the Federal estate is split with other Federal agencies, the
Federal surface management agency may require withdrawal of the Federal
mineral estate.
Wilderness, Wilderness Study Areas and Areas of Critical Environmental
Concern
Many conservation designations lead to withdrawals from the mineral
leasing laws through legislation, presidential proclamation or
administrative determinations. Each of these special designations is
subject to valid existing rights, and some include exceptions for
specific types of mineral leasing. The BLM currently manages nearly 8.8
million acres of wilderness and 517 WSAs comprising approximately 12.6
million acres across the West. In addition to these designations, the
BLM also manages approximately 1,100 Areas of Critical Environmental
Concern (ACECs) spanning over 24 million acres. An ACEC designation by
itself does not automatically prohibit or restrict other uses in the
area; rather, the BLM determines as part of the land use planning
process which activities or uses are consistent with the resources and
values for which the area was designated.
putting america first by building a strong energy economy
Under Secretary Zinke's leadership, the Department and the BLM have
taken many proactive measures to reduce the burdens associated with
developing onshore oil and gas resources on public lands. Following is
a discussion of some of these efforts.
Secretarial Orders
Improving access to oil and gas resources is an important component
for ensuring energy independence. As discussed earlier, Secretarial
Order 3349 provides guidance for removing unnecessary impediments to
oil and gas leasing while fostering the creation of good jobs for hard-
working American families. Secretarial Order 3348 overturned the
Federal coal leasing moratorium enacted by the last administration. On
May 31, 2017, Secretary Zinke signed Secretarial Order No. 3352 to
jump-start Alaskan energy production in the National Petroleum
Reserve--Alaska (NPR-A) and update resource assessments for areas of
the North Slope, helping to unleash Alaska's energy potential. The
Order calls for the review and development of a revised Integrated
Activity Plan for the NPR-A that strikes an appropriate balance of
promoting energy development while protecting surface resources. The
order also aims to maximize the tracts offered for sale during the next
NPR-A lease sale.
Online Leasing and Other Technological Process Improvements
The BLM is proactively streamlining its business processes to
better serve its customers and the public. In addition to the 13 lease
sales conducted to date, the BLM plans to hold 14 additional sales
throughout 2017 using the new authority to conduct onshore oil and gas
lease sales via Internet-based bidding. The BLM is also committed to
continuing the National Fluids Lease Sale System (NFLSS) automation
effort, which standardizes many leasing functions while providing
additional EOI transparency to the nominator and the public. Finally,
the BLM is adding features to enhance the new electronic APD processing
system, the Automated Fluid Minerals Support System II (AFMSS II), and
plans to decommission parts of the prior APD processing systems--
established nearly 20 years ago--to improve the automation capacity and
better match the BLM resources to permit activities. These improvements
increase transparency and reduce overhead costs and processing times,
leading to increased competition and revenue for states and the
Treasury.
Building Stakeholder Relationships and Being a Better Neighbor
The BLM has also sought to improve interagency coordination during
the oil and gas permitting process, which is instrumental in removing
communication barriers, providing an efficient means for dispute
resolution, and eliminating delays during the NEPA process. In order to
achieve results, the BLM has focused on restoring full collaboration
and coordination with state and local governments, tribes, individuals,
and other stakeholders to resolve issues, develop productive
relationships, and build consensus.
Establishing BLM's Energy and Minerals Task Force
The BLM is also looking at establishing an Energy and Minerals Task
Force to assist BLM state and field offices with expediting the leasing
and permitting process. In order to decrease backlogs, the BLM intends
to expedite the completion of planning efforts, collaborate with other
bureaus within the Department as well as external surface management
agencies, and coordinate resource needs among BLM offices. The Task
Force will monitor significant actions and resource needs in the field,
identify trouble spots, and resolve resource challenges.
Prioritization and Capacity Building
To address the high-priority energy demands of our Nation, the
President's FY 2018 Budget Request includes an additional $16 million
for the BLM's oil and gas program. This includes an increase of about
82 full-time-equivalent employees to enhance the core capacity for
processing APDs, EOIs, and rights-of-way. In the past, funding
increases provided by Congress, along with substantial improvements in
the BLM's approval process, have enhanced the BLM's capacity to process
and issue leases and permits.
conclusion
The BLM and the Administration remain committed to promoting
responsible oil and gas production that helps create jobs, promotes a
robust economy, and contributes to America's energy independence, while
also protecting consumers, public health, and sensitive public land
resources and uses. The BLM's oil and gas leasing program is a critical
component of the Nation's energy infrastructure and is an important
Federal revenue generator. Thank you for the opportunity to present
this testimony. I will be glad to answer any questions.
______
Questions Submitted for the Record by Rep. Lowenthal to Katharine
MacGregor, Acting Assistant Secretary, Land and Minerals Management,
U.S. Department of the Interior
Ms. MacGregor did not submit responses to the Committee by the
appropriate deadline for inclusion in the printed record.
Question 1. Ms. MacGregor, please provide the following information
to the Committee:
a. The number of onshore oil and gas drilling permits approved but
unused as of September 30, 2016, broken down by BLM State
Office and Field Office, indicating how many are on Federal
land and how many are on Indian land.
b. For the APDs pending as of September 30, 2016, a breakdown of the
length of time that those APDs had been pending (i.e. the
number that have been pending for less than 30 days, the
number pending between 31 and 60 days, and so on), broken
down by BLM State Office and Field Office.
c. The number of APDs received and approved for each month in Fiscal
Year 2017 for which data is available, as well as the
number of pending APDs at the end of each month, broken
down by BLM State Office and Field Office.
d. The number of wells on public land that have been drilled but
uncompleted (or drilled but have not reported first
production to the BLM), broken down by BLM State Office and
Field Office, as well as by the number of months since
those wells have been spud.
Question 2. Certain witnesses supported the idea of granting states
the primary responsibility for managing Federal oil and gas operations
within their borders? Under such a system, how would the Federal
Government assure compliance with the myriad Federal laws and other
requirements that apply to public lands including, for example:
The Mineral Leasing Act and its regulations, which charge
the Secretary of the Interior and BLM with managing Federal
minerals leasing and permitting. See 30 U.S.C. Sec. 226(a);
43 CFR Sec. 3162.3-1(c).
The National Environmental Policy Act and its requirements
for environmental impact analysis;
The Endangered Species Act including its requirements for
consultation with the FWS;
The National Historic Preservation Act including its
requirement for consultation with State Historic
Preservation Officer and the Advisory Council on Historic
Preservation;
The Secretary's trust responsibility to Native American
tribes;
The Federal Land Policy & Management Act and it
requirements for land use planning, for management of the
public lands to ``protect the quality of scientific,
scenic, historical, ecological, environmental, air and
atmospheric, water resource, and archaeological values,''
and for the prevention of unnecessary and undue degradation
of public lands.
Question 3. Several witnesses testified about the need to
``streamline'' oil and gas permitting on public lands? How would you
streamline the process in light of the myriad legal requirements that
apply to activities on public lands as noted in Question 2 above.
Question 4. The Energy Policy Act of 2005 sets out five categories
of categorical exclusions from NEPA for certain limited types of oil
and gas activities. In 2011, the GAO found that the BLM was abusing
these exclusions by using them for activities that were outside their
scope. How has the BLM responded to this report and what more, if
anything, should be done to avoid the abuses of these categorical
exclusions as found by the GAO?
______
Dr. Gosar. Thank you, Ms. MacGregor.
I now recognize Mr. Flynn for his 5 minutes. Thank you.
STATEMENT OF RYAN FLYNN, EXECUTIVE DIRECTOR, NEW MEXICO OIL AND
GAS ASSOCIATION, SANTA FE, NEW MEXICO
Mr. Flynn. Thank you, Chairman Gosar, Chairman Bishop,
Ranking Member Lowenthal, members of the Subcommittee, and
staff. My name is Ryan Flynn, I am the Executive Director for
the New Mexico Oil and Gas Association. Prior to taking over
NMOGA, I was the Secretary of Environment and Natural Resource
Trustee in the state of New Mexico, and worked in state
government for approximately 6 years prior to taking this role.
I want to thank Representative Pearce for recognizing me. I
want to recognize Representative Pearce, as well, who just had
to step out of the room. But he has been a tremendous leader,
and his district is home to one of the most resilient and
productive oil and gas plays in the world, the great Permian
Basin.
I want to talk to you a little bit about New Mexico's oil
and gas industry, and talk to you about some challenges to oil
and gas development on Federal lands in New Mexico, and suggest
some opportunities for improving BLM's operations in New
Mexico.
I want to be very clear that my goal here today is not in
any way, shape, or form to criticize BLM individually. We have
had a tremendous working relationship with BLM staff and
leadership, and we look forward to continuing that working
relationship, moving forward. But like any large agency, there
are several opportunities for improvement. I believe Secretary
Zinke has inherited a difficult situation, but he is more than
capable and up to the task of turning things around in a
positive direction.
New Mexico's oil and gas industry is the most important
economic industry to the state of New Mexico. Last year, in
2016, New Mexico's oil and gas industry contributed $1.6
billion to the state's general fund, our budget. That equaled
roughly 25.8 percent of the budget last year, in 2016. The
total budget was about $6.2 billion. In the last 10 years, oil
and gas typically contributes about a third directly to the
state's general fund. This money goes directly to roads,
hospitals, schools--that infrastructure in the state would
simply not be possible without the oil and gas industry's
contributions.
Our industry also employs over 100,000 people in the state
of New Mexico, a state with about 1.8 million people. New
Mexico also has one of the highest poverty rates in the
country, with almost a quarter of our population living below
the Federal poverty line. So, oil and gas jobs are extremely
attractive in our state, given that the average wage on an oil
and gas rig is about $75,000 a year.
Nationally, New Mexico is one of the top energy-producing
states in the country, ranking fifth in crude oil production
and eighth in natural gas production. Even during a prolonged
period of low prices, New Mexico's oil and gas industry has
remained resilient. In the last 8 months, we have seen major
acquisitions and purchases in New Mexico, totaling over $13
billion. The New Mexico portion of the Northern Delaware Basin
has recently been the focal point of some of the most expensive
acreage-basis oil and gas acquisitions in the world.
In calendar year 2016, New Mexico was the largest producer
of oil and gas from Federal lands, accounting for over 78
million barrels of oil, and over 770,000 cubic feet of natural
gas.
The biggest challenge to oil and gas development on Federal
lands in New Mexico remains regulatory uncertainty at BLM. And
I think the best illustration of this issue is to look at the
Permian Basin and to look at the development in west Texas,
compared to the development in New Mexico.
As of June 16, 2017, there were 59 rigs running in the New
Mexico Permian, versus 309 in the Texas Permian. The main
difference is the Bureau of Land Management. BLM's Farmington
field office takes approximately 1 year to process a drilling
permit, an APD. BLM's Carlsbad field office also takes
approximately 250 days to process a drilling permit. Right-of-
ways take approximately a year or more, depending on the field
office.
Overall, BLM suffers from a lack of staffing, a poorly
designed and cumbersome new system, the AFMSS 2 program, and
systematic irregularities in the permit processing protocols.
These delays translate directly into lost revenue for Federal
and state stakeholders alike.
Our estimates are that approximately $1.4 million in
Federal royalty and $831,000 in state severance tax is deferred
each day, based on the current backlog at BLM's offices in New
Mexico. This financial impact is huge in a state like New
Mexico, where we face prolonged budget issues in light of the
low market pricing for oil and gas.
I will conclude by just noting that there are many
opportunities to improve BLM's operations in New Mexico, such
as simple edits to the AFMSS 2 program; agreements with state
regulatory authorities to transfer some of the tedious work of
processing permits from BLM to state offices like our oil
conservation division; and BLM making use of existing laws,
such as categorical exclusions, to allow for expedited review
and approval of permits.
Thank you very much, Mr. Chair.
[The prepared statement of Mr. Flynn follows:]
Prepared Statement of Ryan Flynn, Executive Director, New Mexico Oil
and Gas Association
introduction
Chairman Gosar, Ranking Member Lowenthal, members of the
Subcommittee, thank you for the opportunity to provide testimony today
about oil and gas development on Federal lands in New Mexico. My name
is Ryan Flynn and I am the Executive Director of the New Mexico Oil and
Gas Association (``NMOGA''). Founded in 1929, NMOGA represents over
1,000 members who account for 95 percent of the oil and gas activity in
New Mexico.
Before leading NMOGA, I worked in New Mexico Governor Susana
Martinez's administration for almost 6 years, where I served as
Secretary of Environment and the Natural Resource Trustee. My
experience in state government gave me firsthand experience dealing
with the sort of problems inherited by Secretary Zinke and his staff at
the Department of the Interior's Bureau of Land Management. For
example, when Governor Martinez took office in 2011, inconsistencies
and delays plagued New Mexico's environmental permitting and
enforcement programs. In one extreme case, a permit application was
pending for over 18 years. Permit applications typically took years to
review and permit conditions varied wildly depending on the individual
permit writer. Enforcement decisions were at times were driven by
political agendas with supplemental environmental projects occasionally
being used to fund pet political projects. These permitting and
enforcement issues gave the state a reputation for being a difficult
place to conduct business, which in turn hindered investment in New
Mexico. Beginning in 2011, under the leadership of Governor Martinez
and with bipartisan support, we successfully implemented a series of
regulatory reform efforts focused on various energy and environmental
issues, including revisions to environmental permitting and enforcement
programs. Permitting times decreased dramatically. For example, New
Mexico air quality permits are issued in 45 days or less, and
applications for permits to drill (``APD'') are issued in 10 days or
less. While permitting programs became more efficient, the state's
enforcement programs remained strong. During my tenure, we collected
approximately $250 million in fines for violations of environmental
regulations, the overwhelming majority of which were collected from
Federal agencies operating in New Mexico, such as the U.S. Department
of Energy.
While Secretary Zinke and his staff inherited some major challenges
at the BLM, I believe he is the perfect fit for leading the Department
of the Interior and I have no doubt he will turn this situation around.
His success in this regard will have a profound impact on the state of
New Mexico. In the past year, major acquisitions and purchases in New
Mexico have totaled over $13 billion and oil production has
dramatically increased on non-Federal lands. While the rest of New
Mexico's economy struggles to gain a foothold, the state's oil and gas
industry remains a bright spot. Strong leadership at the state level
has helped New Mexico's oil and natural gas industry remain strong over
the past few years, yet the state has not fully realized its resource
development potential due to problems at the BLM. Specifically, delays
for approving permits and rights-of-way is costing New Mexico and the
Federal revenue millions of dollars each day. NMOGA estimates
$1,473,000 in Federal royalty and $831,325 in state severance is
deferred each day due to BLM's administrative problems. With early
projections showing the state facing a potential deficit of $200 to
$250 million for the Fiscal Year 2018, the lost revenue associated with
administrative issues plaguing development on Federal lands in New
Mexico is a critical issue that must be addressed immediately.
new mexico's oil and gas industry
The oil and gas industry is New Mexico's most important industry.
In 2016, the oil and gas sector contributed more than $1.6 billion to
the state's general fund for schools, hospitals, and roads, and
employed over 100,000 people. For context, New Mexico's total budget
for 2016 was $6.2 billion, making the oil and gas industry's
contribution approximately 25.8 percent of the total budget in 2016.
Nationally, New Mexico is one of the top energy producing states in the
entire country, ranking fifth in crude oil production and eighth in
natural gas production. New Mexico is also a leader in other forms of
energy production, such as renewables.
New Mexico's oil and gas industry remains resilient even through a
prolonged period of low prices. In the last 8 months, major
acquisitions and purchases in New Mexico have totaled over $13 billion,
and the New Mexico portion of the Northern Delaware Basin has recently
been the focal point of the some of the most expensive acreage-basis
oil and gas acquisitions in the world.
The Oil Conservation Division and the State Land Office are
primarily responsible for regulating the oil and gas industry at the
state level while BLM is charged with leasing, selling, and generally
managing oil and natural gas reserves on Federal land. BLM's field
offices in New Mexico are among the busiest in the Nation. In calendar
year 2016, New Mexico was the largest producer of oil and gas from
Federal lands, accounting for 78,646,829 bbls of oil (53 percent of NM
oil production) and 771,601,140 mcf of natural gas (65 percent of NM
gas production).
challenges to oil and gas development on federal lands in new mexico
While New Mexico's oil and gas industry has been resilient during
this difficult period of low prices, challenges to the industry's
ability to capitalize on the recent investments remain. The greatest
challenge today is regulatory uncertainty at BLM. Although there is a
distinct advantage to operating on the New Mexico side of the border in
terms of royalty rates (12.5 percent for New Mexico Federal vs. 25
percent for Texas fee land), the fact remains that operators are
willing to pay a premium to develop in areas where regulatory certainty
can be relied upon as a matter of course. For example, the Baker Hughes
rig count from the week of June 16, 2017, indicates the discount
economic factor associated with the Federal royalty rate for New Mexico
production is not much of an incentive, with only 59 rigs running in
the New Mexico Permian versus 309 in the Texas Permian. While some of
this may be due to the majority of surface acreage defined as the
Permian Basin being on the Texas side of the line, it cannot account
for the fact that New Mexico has some of the most sought-after geology
and development potential, yet consistently trails Texas where
development is concerned. The oil and gas industry invests millions of
capital budget dollars in development projects when presented with a
level playing field, and a lack of regulatory certainty is driving more
investment to Texas than New Mexico.
Operators working through BLM's Farmington Field Office (``FFO''),
which regulates all production in New Mexico's San Juan Basin, have
seen drilling permit wait times approach the 500-day mark, with an
average wait time of nearly 1 year for a standard application for a
permit to drill (``APD'') without revisions. By contrast, New Mexico's
Oil Conservation Division, the state agency handling drilling permit,
approves APDs in 10 days or less. Better management practices are
required to remedy a lack of procedural uniformity, which often leads
to multiple, differing interpretations of policies and protocols for
document review. While industry appreciates the efforts of some
individual staff members to create workarounds in this cumbersome
system, there is no regulatory certainty in APD processing from the
FFO. Additionally, the FFO does not use tools already at its disposal,
such as categorical exclusions and pre-established protocols for NEPA
review, that would go a long way toward getting projects initiated and
revenue flowing to the Federal Government and the state of New Mexico.
The rights-of-way (``ROW'') process at the FFO is likewise
inefficient, with operators waiting up to a year for approvals. By
contrast, the state approves ROWs in 45 days or less. Recent internal
changes to the determination of the ROW starting point have hindered
infrastructure projects, and constitute a drastic departure from the
FFO's previous interpretation of lease rights and product transport
guidelines. Additionally, poor coordination between BLM, the Bureau of
Indian Affairs and various other tribal authorities has resulted in
severe delays for ROW approvals. In addition to these difficulties in
the ROW process, new interpretations of threatened and endangered
species requirements have curtailed development on Federal lands in the
San Juan Basin due to a lack of regulatory flexibility and a seeming
unwillingness to work with industry in this regard.
The Carlsbad Field Office (``CFO'') is responsible for processing
applications for development in New Mexico's portion of the Permian
Basin, a region witnessing a drastic uptick in development from the low
point of severely depressed commodity pricing in early 2016. While it
might seem that one of the most prolific oil and gas plays in the world
should merit additional resources to alleviate a permitting bottleneck,
this was not the case at the CFO until recently. Fortunately, Secretary
Zinke and his staff have recently begun giving the Permian Basin the
attention it deserves. Currently in the Permian Basin, operators wait
an average of 250 days for an APD, and over a year for a ROW. Companies
that diligently follow up on applications with CFO staff can achieve
shorter wait times, but this is not an optimal solution for either
industry or the CFO staff, especially as the area sees a resurgence in
activity associated with major recent merger and acquisition activity.
The biggest challenges facing the CFO include a lack of personnel
in key positions, and a cumbersome and relatively unworkable permit
processing system, referred to as the Automated Fluid Minerals Support
System 2 (``AFMSS 2''). AFMSS 2 was designed to expedite and automate
permit processing, but has so far failed to deliver on either of these
promises. Concurrent processing of different portions of APDs and ROWs
by specialists responsible for independent sections of the permitting
process was replaced by a completely linear system that does not allow
for even simple edits by the CFO staff. The rigidity of the system has
resulted in 70 percent of submissions being rejected for deficiencies,
when historically there were very few deficiencies reported at the CFO.
In short, AFMSS 2 has failed to deliver on its promise of greater
efficiency and the system needs to be fixed or replaced.
Overall, BLM suffers from a lack of staffing, a poorly designed and
cumbersome new system in the AFMSS 2 program and systematic
irregularities in permit processing protocols. The APDs and ROWs
processed by both the FFO and CFO are generated in spite of the
organizational structure, rather than as the natural output of the
organizational structure. While APDs and ROWs are the most significant
instruments in terms of volume, BLM is also responsible for other
important permits--such as unitizations, communitizations and
commingling agreements--that also experience similar delays while
moving through the current maze of the BLM approval process. These
delays translate directly into lost revenue for Federal and state
stakeholders alike. NMOGA estimates $1,473,000 in Federal royalty and
$831,325 in state severance is deferred each day based on an April,
2017, count of 491 APD backlog (assuming wells were drilled and
producing at conservative rates). In a state like New Mexico, where oil
and gas revenue typically constitutes roughly one-third of the state's
budget, fixing BLM's permitting issues will provide immediate economic
benefits.
opportunities to improve blm's operations in new mexico
While there are many challenges to overcome on the path to a more
efficient regulatory process at BLM, several identifiable opportunities
for improvement exist. Simple edits to the AFMSS 2 program to allow BLM
staff to edit permits moving through the application corridor will
greatly enhance the workability of the system. Additional staff
dedicated to permit processing (at the CFO in particular) will
essentially guarantee a good return on investment for both state and
Federal entities, as expediting drilling permits and ROWs translates
directly into severance tax and royalty dollars that can be put to good
use for the taxpayers. Agreements with state regulatory authorities
could transfer some of the more tedious work of processing permits from
the BLM to local authorities. For example, even a small, focused pilot
program aimed at allowing the New Mexico Oil Conservation Division to
process the downhole engineering portions of APDs would free up much-
needed time for BLM staff to focus on multi-use land management on the
surface and expedite the entire application process. Last, BLM should
make use of existing laws, such as categorical exclusions that allow
for expedited review and approval of permits.
conclusion
New leaders at the Federal Government, including President Trump
and Secretary Zinke, are enacting good policies and regulations that
are breathing fresh air into American energy production, and helping
ensure the United States leads the way in safe and responsible energy
production. Addressing the administrative issues at BLM, which are
currently restricting access to Federal lands, is critical issue that
must be addressed immediately if the United States is going to fully
realize the development potential of our oil and gas resources.
______
Dr. Gosar. Thank you, Mr. Flynn.
The Chair now recognizes Mr. Squillace for his 5 minutes.
STATEMENT OF MARK SQUILLACE, PROFESSOR OF LAW, NATURAL RESOURCE
LAW, UNIVERSITY OF COLORADO, BOULDER, COLORADO LAW SCHOOL,
BOULDER, COLORADO
Mr. Squillace. Thank you, Chairman Gosar and Ranking Member
Lowenthal, for this opportunity to testify today. My name is
Mark Squillace, I am a professor of law at the University of
Colorado Law School. I want to first note that I began my
written testimony by asking that we each commit to each other
that we will engage in a meaningful way on the important issues
that are the subject of this hearing, and I am offering this
testimony today in the hope that we can have a constructive
dialogue.
I want to make three points regarding oil and gas programs
on Federal lands.
First, oil and gas production on Federal lands remains
strong, despite a weak market and lackluster interest in new
leases and development.
Second, efforts to accelerate leasing and development under
current market conditions are misguided, because what they
could do is lock up Federal oil and gas resources, even as they
deny the public a fair return on these valuable assets. In this
regard, by the way, the Committee's focus really should be on
improving and reforming our royalty and revenue policies at the
Federal level, which are much in need of reform.
Finally, if we are going to have oil and gas development on
our public lands, it has to be preceded by appropriate
environmental analysis and planning. In my judgment, it is
entirely inappropriate to use our Federal lands for industrial-
scale oil and gas development.
Let me turn to the first question about oil and gas
production. As I acknowledged in my written testimony, the
number of Federal leases, the amount of acreage under lease,
and the number of new leases issued have all declined in recent
years. But here is the thing: Federal onshore oil production
more than doubled between Fiscal Year 2008 and 2015. The number
of Federal producing leases has never been higher. And if you
look just at the year 2016, the amount of Federal land
producing oil and gas was higher in only 1 year out of the last
10.
What is remarkable about these statistics is that it is all
happening at a time of weakening demand. Just a few figures
here to support that claim. First of all, Federal land under
production amounts to less than 47 percent of the Federal land
that is under lease. And in 2016, the industry did not even bid
on two-thirds of the leases that were offered by the BLM. I
should note, by the way, that in 2015 they bid on only 15
percent of the leases that were offered.
Right now, we have 7,500 APDs that have been approved and
that are not being drilled upon, and that is the most that we
have ever had at the BLM. If you just look at 2016, the BLM
issued 2,184 drilling permits, but industry drilled on fewer
than 39 percent of these permits. By the way, that contrasts
with most other years, when the number of drilling permits that
were drilled upon was in the 70 and 80 percent range.
So, what is going on here? Well, that takes me to my second
point, which regards market conditions. And here I just want to
make two observations. One, when I last looked at the market
price for oil on Monday, the price was at a very low level. On
Monday, West Texas Intermediate was at $42.46 a barrel. That,
obviously, has an impact on the interest of the oil and gas
industry.
But there is another important point here which the
Committee needs to recognize. The major plays for oil and gas,
which have really driven development in recent years, happen
not to be found on Federal land. There are exceptions; the
Permian Basin, which Mr. Flynn talked about is one of them.
But, for the most part, these plays are on private lands and in
other areas.
So, what happens is if the government tries to sell these
leases under these current market conditions, we are going to
get low-ball kinds of prices. Essentially, we are going to be
giving away these valuable Federal resources, and that just
doesn't make sense. What we ought to be doing is looking at
leases and improving the APD, rather than approving more APDs.
We need to reform our policies. We now charge just $2 an
acre for leases that do not otherwise receive a bid, $1.50 an
acre in rental. That does not generate much revenue, but it
encourages speculation, and that needs to be reformed. We have
not reformed our royalty rates since 1920, when the Mineral
Leasing Act was passed. We need to increase those royalty rates
to reflect market conditions.
The state of Texas, by the way, charges 25 percent in
royalties on oil, twice what the Federal Government charges. In
my home state of Colorado it is 20 percent. And, as most of you
know, on offshore lands it is 18.75 percent.
Finally, if we are going to use our public lands for oil
and gas development, we really need to be smart about it. I do
not oppose oil and gas development on our public lands. But for
now, at least, all of us rely, to some extent, on oil
production, on gas production for power generation, but we need
to recognize that we could accommodate these interests without
doing damage to our public lands.
If we could, show the slides that I think are on the
scheme.
[Slide]
Mr. Squillace. Mr. Flynn talked about the Permian Basin,
and this is a picture of the Permian Basin in Texas. And for
those of you who have not been there, I would urge you to go.
This kind of development goes on for miles and miles in every
direction, and it is not the kind of thing that I think we want
for our public lands.
This is private land. But on our public lands we ought to
be doing things like doing appropriate planning, doing
appropriate environmental analysis. And if it takes more time,
well, we owe that to the American people, to make sure that if
we are going to have development, we do it right. I do not
oppose development of our public lands for some oil and gas
development, but it is different from our private lands. These
are our multiple-use lands, and we need to make sure that we do
better than we have often done on our public lands.
And, by the way, we cannot do this if we are denying the
BLM adequate resources in funding and in personnel. Good
management requires proper funding.
Thanks very much. I look forward to your questions and to
the discussion of these issues.
[The prepared statement of Mr. Squillace follows:]
Prepared Statement of Professor Mark Squillace, University of Colorado
Law School
Chairman Gosar, thank you for the opportunity to appear before the
House Subcommittee on Energy and Mineral Resources to offer my views on
oil and gas development on our public lands. I am a professor of law at
the University of Colorado Law School. I teach and work primarily in
the fields of environmental, natural resources, and water law and I
have written extensively on all of these subjects. My professional
experience with public lands issues also runs deep. As a law student at
the University of Utah, I worked in the Utah State Office of the BLM as
a land law examiner--a position that allowed me to review all manner of
public lands activities and gain firsthand knowledge about the
operation of our public land laws. Following law school, and before
entering law teaching, I was hired into the Solicitor's Honor's Program
at the U.S. Department of the Interior where I gained significant
additional experience on public lands and mineral law issues. I took a
leave from teaching and returned to the Solicitor's Office in the year
2000 as a Special Assistant to the Solicitor where I worked on a wide
range of special projects involving public lands. All of this
experience both inside and outside of government has helped to inform
my understanding about how best to manage oil and gas development on
our public lands.
Before sharing my views on this subject, I wish to make an
observation about congressional testimony. Over the last decade, I have
had the distinct honor and privilege of appearing before House and
Senate Committees to lend my expertise on many occasions and on a wide
range of issues. Increasingly, however, the hearings at which I have
appeared have seemed largely unproductive. They often devolve into
efforts to score political points at the expense of learning about and
trying to solve the complex but important problems that are the subject
of the hearings. Members often choose to engage only with those with
whom they agree or think they agree, and a process that is supposed to
shed light on a problem, often serves instead to harden ideological
positions in a way that is unlikely to lead to the creative policy
solutions that are often available if we allow ourselves to see them.
I appear today with an open mind and a willingness to learn from
you and from the other witnesses. But we cannot learn if we do not
engage with each other in a meaningful way. In addressing the hard
questions before this Committee, we must begin with the facts as best
we can know them. Information will always be imperfect, both because of
scientific uncertainty and the time lag between the collection of
information and the decision point. But we must accept the findings of
those who by training and expertise provide us with the information
essential to good government decision making. Once we assemble the best
information, policy will still play an important role. But good policy
is stymied if we cannot even agree on the basic facts that inform it.
My substantive remarks begin with a review of basic data about the
Federal onshore oil and gas leasing program. This is followed by a
detailed look at other factors that help to explain this data including
the economics of public land oil and gas development.
federal oil and gas development and current blm data
Federal onshore oil and gas development on our public lands
involves a multi-stage process. It begins with land use planning
whereby the BLM determines, among many other things, which lands should
be made available for possible oil and gas leasing.\1\ This is followed
by a process for nominating tracts for leasing. Industry, the public,
and the BLM itself may nominate lands that are then made available
through an open, competitive auction process. Auctions are typically
held by individual BLM state offices on a quarterly basis. Leases are
generally awarded to the highest bidder but if no bids are received the
BLM makes these lease tracts available for purchase for 2 years at
$2.00/acre.\2\ Lessees usually have 10 years to develop the lease
before it expires but leases are automatically extended beyond the 10-
year primary term so long as oil and gas is being produced in paying
quantities.\3\ Leases may also be extended for 2 additional years
beyond the primary term where actual drilling is occurring on the
site,\4\ and they may be suspended for an unlimited period of time ``in
the interest of conservation.'' \5\ Lessees may drill on a lease site
for either exploration or development purposes but they must first file
and receive BLM approval for an application for a permit to drill
(APD). Environmental analysis in accordance with the National
Environmental Policy Act is required at most stages of this process and
is particularly important at the APD approval stage because it is at
that stage where the government is able to assess site specific impacts
of development.
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\1\ Under current land use plans, more than 90% of BLM-managed
minerals are open to new oil and gas leasing. http://wilderness.org/
open-business-and-not-much-else-analysis-shows-oil-and-gas-leasing-out-
whack-blm-lands.
\2\ 30 U.S.C. Sec. 226(b)(1)(A).
\3\ Id. at Sec. 226(e).
\4\ Id.
\5\ Id. at Sec. 209. During the period of suspension, the lessee
does not pay rentals. See also Copper Valley Machine Works, Inc. v.
Andrus, 653 F.2d 595 (D.C. Cir. 1981) where the court held that
``conservation'' was not limited to conservation of the oil and gas
resources but included measures deemed necessary to protect the
environment.
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Those who support increased oil and gas leasing activities on our
public lands will likely point to the fact that the total number of
extant Federal leases, the total number of acres leased, and the total
number of new leases issued during the year have all declined in recent
years.\6\ What they may not tell you, however, is that a similar trend
exists for leasing of state-owned minerals in the West.\7\
Additionally, the number of producing leases on Federal land has never
been higher and, when compared to 2016 fiscal year, the amount of
Federal land producing oil and gas was higher in only 1 year out of the
last 10, and only three times in the last 20 years.\8\ According to the
Congressional Research Service, Federal onshore oil production
increased by more than 70 percent between Fiscal Year 2006 and 2015.\9\
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\6\ BLM Oil and Gas Statistics, Table 1, available at https://
www.blm.gov/programs/energy-and-minerals/oil-and-gas/oil-and-gas-
statistics. State lands leasing, like federal lands leasing, has also
declined significantly over the past several years. ECONorthwest, Oil
and Gas Leasing and Permitting on State Lands: Recent Trends in the
Rocky Mountain West (Aug. 2016) available at http://
westernvaluesproject.org/wp-content/uploads/2016/09/Final-WVP-State-
Lands-Report.pdf.
\7\ See ECONorthwest, supra note 6.
\8\ See BLM Oil and Gas Statistics, Table 1, supra note 6.
\9\ Congressional Research Service, ``U.S. Crude Oil and Natural
Gas Production in Federal and NonFederal Areas'' (June 22, 2016) at p.
3, Table I available at https://fas.org/sgp/crs/misc/R42432.pdf.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Moreover, even as production has increased a large surplus of
unused oil and gas leases and permits on Federal lands remains. Current
Federal land under production is less than half (46.9 percent) of the
leased land.\10\ Put another way, more than 14 million acres of Federal
land currently under lease are not producing any oil or gas.\11\
Furthermore, during the 2016 fiscal year, the industry bid on less than
one-third of Federal acreage offered for lease at auction.\12\ As a
result, the BLM leased only 577,000 acres for oil and gas development
during that year, which is substantially less than in prior years.\13\
In light of slack demand this reduction in leased acreage is not at all
surprising and it is actually remarkable that during this period the
number of producing leases on Federal lands has grown to 23,926--its
highest level ever.\14\
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\10\ See BLM Oil and Gas Statistics, Table 1, supra note 6.
\11\ Id.
\12\ Data available upon request.
\13\ See BLM Oil and Gas Statistics, Table 1, supra note 6.
\14\ Id.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
As for approved drilling permits, at last count in September of
2015, the BLM had approved more than 7,500 APDs that were not being
used.\15\ This is an all-time record.\16\ As the number of unused APDs
grew it should surprise no one then that in 2016 only 2,184 new
drilling permits were issued by the BLM. This is certainly well below
the record numbers of approvals from 2007 and 2008 when the BLM
approved 7,124 and 6,617 permit respectively, but that was a time when
the industry was applying for far more permits.\17\ But these numbers
are consistent with the growth in unused drilling permits because
industry commenced drilling or ``spud'' only 847 new wells in 2016,
which is less than 39 percent of the number the BLM approved.\18\ By
contrast in 2007 and 2008, industry spud 75 percent and 76 percent of
the approved drilling permits respectively.\19\ Ramping up the issuance
of drilling permit during a time when so many approved permits are not
being used would thus seem to be irresponsible.
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\15\ BLM Oil and Gas Statistics, Table 13 ``Approved Applications
for Permit to Drill--Not Drilled'' (Sept. 30, 2015) available at
https://www.blm.gov/sites/blm.gov/files/oiland
gas_ogstatistics_t13AAPD%20Report.pdf.
\16\ BLM News Release, BLM Releases Statistics on Oil and Gas
Activity on Federal, Indian Lands, (April 11, 2016) (``[T]he number of
approved drilling permits that have not yet been put to use by industry
is at a record high of 7,500.'') available at https://www.blm.gov/or/
news/files/2015_Oil-GasStats_PR_FINAL_BLM.pdf.
\17\ Id. See also Congressional Research Service, U.S. Crude Oil
and Natural Gas Production in Federal and NonFederal Areas, R42432
(June 22, 2016), at pp. 9-10, available at https://fas.org/sgp/crs/
misc/R42432.pdf. As this report notes, industry requested 12,200 more
drilling permits between 2006 and 2008 than it requested from 2013 to
2015.
\18\ Id.
\19\ Id.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
the policy choices facing the administration
A key question before this Committee is whether it should support a
policy to accelerate lease issuance and drilling permit approvals in
the face of the existing glut. Leasing and permitting activities
require the BLM to expend considerable time, money, and resources.
Given the surfeit of existing leases and permits that are going unused
due to low demand the prudent course, and the only responsible course,
is to limit leasing and permitting until there is sufficient demand to
ensure higher bonus bids and a fair return to the public on our
valuable oil and gas resources. Notwithstanding these facts, the
Administration's proposed Interior budget would increase funding for
energy and minerals development while starving other Interior programs
such as our national parks and other public recreation lands where
demand is soaring.\20\
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\20\ See ``President's Budget FY 2018--Appendix--Detailed Budget
Estimates by Agency--Department of the Interior'' available at https://
www.whitehouse.gov/sites/whitehouse.gov/files/omb/budget/fy2018/
int.pdf.
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the economics of oil and gas development
So what explains the lackluster demand for Federal oil and gas
resources? Well, much of it can be traced to low market prices. The
Energy Information Administration's daily report on the price of West
Texas Intermediate light crude was $42.46/barrel this past Monday, June
26, 2017.\21\ While the price dipped to below $30/barrel in the early
part of last year, it has hovered around or below the $50/barrel mark
for most of the past year.\22\ Natural gas prices have also remained
low, ranging from $1.81 in the Mid-Atlantic states to 3.12 in northern
California.\23\ At these prices, oil and gas companies can still make a
decent profit, but in many cases, enhancing production at existing
wells may be more attractive than developing new wells or stockpiling
more leases.
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\21\ U.S. EIA, Today in Energy, June 26, 2017, available at https:/
/www.eia.gov/todayinenergy/prices.php.
\22\ Id.
\23\ U.S. EIA, ``Henry Hub Natural Gas Spot Price'' available at
https://www.eia.gov/dnav/ng/hist/rngwhhdd.htm.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Commodity prices for oil and gas are notoriously difficult to
predict, but significant increases in price seem unlikely, and a
decrease in price is perhaps just as likely as an increase. The U.S.
Energy Information Administration currently forecasts that Brent crude
oil prices will increase from an average of $53/barrel to $56/barrel
during the 2017-2018 fiscal year. The Henry Hub natural gas spot price
is projected to increase from an average of $3.16/MMBtu in 2017 to
$3.41/MMBtu.\24\ These modest increases are unlikely to have a
significant impact on the demand and use of Federal oil and gas leases
and permits. Devoting more money and resources to public lands oil and
gas development simply cannot change the global market forces that are
the primary factor behind whether companies choose to develop.
---------------------------------------------------------------------------
\24\ U.S. EIA. ``Short Term Energy Outlook'' (June 6, 2017) at
Table 2 (Energy Prices) available at https://www.eia.gov/outlooks/steo/
tables/pdf/2tab.pdf.
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the implications of slack demand for the federal oil and gas leasing
program
As described above, market forces suggest slack demand for Federal
oil and gas. Nonetheless, the government can certainly sell some
additional leases if it is prepared to accept low bids. But pushing oil
and gas leases at a time when the markets are down will inevitably
result in far lower revenues for both the state and Federal coffers.
Oil and gas revenues are generated in three ways--through auction bids,
royalty payments on production, and annual rental fees.\25\ When oil
and gas prices are low, bids on Federal leases are also low. Those that
are sold are often bought by speculators who pay little up front for
the lease in the hope that the market price will rise and make the
lease more valuable. But if the market does turn around it is the
speculator who profits rather than taxpayers. Furthermore, nearly 90
percent of government revenue from Federal oil and gas development
comes from royalty payments \26\ and the government receives no
royalties when low market prices disincentivize production. And as with
low bonus bids, very little revenue is generated from the modest rental
payments charged under the current Federal policy.\27\ From a strictly
revenue generating perspective the government would be wise to wait for
commodity prices to rise again before even thinking about increasing
the level of Federal oil and gas leasing. To the extent that leasing is
allowed to proceed the government should set higher minimum bonus bids
and higher annual rental fees as a means to increase revenues and
discourage speculation.
---------------------------------------------------------------------------
\25\ See Government Accountability Office, Raising Federal Rates
Could Decrease Production on Federal Lands but Increase Federal
Revenue, at pp. 10-11 (June, 2017), available at https://www.gao.gov/
products/GAO-17-540.
\26\ See Congressional Budget Office, Options for Increasing
Federal Income from Crude Oil and Natural Gas on Federal Lands, at p.
2, (April, 2016).
\27\ Id. at p. 11, Figure 1.
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the need to reform federal royalty policies
Federal royalty rates, which were set in the 1920s, are currently
well below market rates and the government would realize significant
additional revenue if it increased those rates. Earlier this month, the
General Accounting Office issued a report that found that increasing
royalty rates for oil and gas would increase Federal revenue with only
minimal impacts on production.\28\ The Interior Department itself had
recognized this problem by issuing final rules in 2016 that were
designed to bring about much needed reforms to the Federal mineral
royalty program.\29\ Unfortunately those rules were stayed by the Trump
administration, which has further announced its intention to repeal
these rules entirely.\30\ That would be a serious mistake and the
Administration should reconsider its position before taking final
action.
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\28\ Id. at 16-24.
\29\ 81 Fed. Reg. 43338 (2016).
\30\ The Office of Natural Resources Revenue postponed
implementation of the 2017 valuation reform rule on February 27, 2017.
82 Fed. Reg. 11823 (2017). The rule had taken effect on January 1,
2017. On April 4, 2017, Interior further proposed to repeal these rules
in their entirety. 82 Fed. Reg. 16323 (2017).
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While I understand that this hearing is focused on the Federal oil
and gas leasing program, the Committee should not overlook the parallel
need to reform Federal royalty policies for coal. For a host of reasons
including the dire economic circumstances of the domestic coal
industry, the arguments for reforming the entire coal leasing program
including royalty policies are even more compelling than they are for
oil and gas.\31\ One simple but important step that would allow the
government to assess the options for reforming the coal program would
be to resume preparation of the programmatic EIS on coal that was begun
at the end of the Obama administration. This step, which would help
both the government and the public to better understand their options
for coal reform, was inexplicably abandoned by the Administration in
March of this year.\32\
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\31\ See Federal Coal Program, Programmatic Environmental Impact
Statement: Scoping Report, available at https://eplanning.blm.gov/epl-
front-office/.../CoalPEIS_RptsScoping_ Vol1_508.pdf.
\32\ Secretarial Order 3348 (March 29, 2017).
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federal oil and gas leasing and multiple use
In addition to negative market forces, oil and gas production on
Federal lands also faces multiple use constraints that govern Federal
land management.\33\ Aerial photographs from certain parts of the
country, such as the Permian Basin in west Texas and the Bakken fields
of North Dakota, which are readily available on the Internet, have seen
industrial scale oil and gas development, with little advance planning.
Development at this scale and intensity is antithetical to the notion
of multiple use. While intensive oil and gas development has sometimes
occurred on Federal public lands, such as in the Jonah field in
Wyoming, and near Farmington, New Mexico, such development often
generates significant opposition from the public beyond what might be
expected with private land development because it imposes significant,
long-term costs on our wildlife, water, and recreation resources that
might otherwise be accessible to the public for activities such as
hunting, fishing, and hiking. This is especially true when oil and gas
development threatens our most precious national conservation lands.
When the BLM proposed to lease lands near the western boundary of Zion
National Park earlier this year, it received more than 40,000 public
comments in opposition, including letters of opposition from Governor
Herbert of Utah, county commissioners and town councils and numerous
local businesses.\34\ In total, our national parks hosted 330 million
visitors in 2016, the third record-setting year in a row.\35\ Park
visitors spent an estimated $18.4 billion in local gateway regions
while visiting national parks across the country.\36\ Our national
parks form the backbone of a burgeoning outdoor recreation industry
that generates hundreds of billions of dollars in consumer spending
every year.\37\ Oil and gas development puts at least some of this
economic activity at risk. And even putting aside the aesthetic values
and moral arguments for preserving our public lands for future
generations, the significant economic values associated with the
protection of our conservation lands is sustainable over the long term,
without compromising the use of those lands for other purposes sometime
in the future.
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\33\ Multiple use management is required by the Federal Land Policy
and Management Act (FLPMA). 43 U.S.C. Sec. 1732(a) (2017).
\34\ DOI/BLM Memorandum, ``Recommendation to Defer the St. George
Oil & Gas Lease Parcels'' (May 25, 2017) available at https://
eplanning.blm.gov/epl-front-office/projects/nepa/69396/108022/132359/
Deferral_recommend_memo_to_SO_052517.pdf.
\35\ See National Park Service, ``Visitor Use Statistics''
available at https://irma.nps.gov/Stats/.
\36\ See National Park Service, ``Visitor Spending Effects--
Economic Contributions of National Park Visitor Spending'' available at
https://www.nps.gov/subjects/socialscience/vse.htm.
\37\ See Outdoor Industry Association, ``The Outdoor Recreation
Economy'' (2017) available at https://outdoorindustry.org/wp-content/
uploads/2017/04/OIA_RecEconomy_FINAL_Single.pdf.
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geologic factors and their relevance to federal oil and gas development
Another important factor in explaining slack demand for Federal oil
and gas resources has to do with simple geology. The Congressional
Budget Office, the Congressional Research Service and the Government
Accountability Office have all reached the conclusion that the major
shale plays in the United States are located primarily beneath state
and private, and not on Federal lands.\38\ A GAO report issued just
last week found that of the six major tight oil and shale gas plays in
the United States, Federal lands comprise 38, 15, 9, 7, 8 and 0.4
percent of land ownership within their boundaries.\39\ Put another way,
the vast majority of all six of the major oil and gas plays in the
United States are on state and private lands. Increasing Federal
leasing and permitting activity obviously cannot change the location of
oil and gas resources relative to Federal lands.
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\38\ See Congressional Budget Office, ``Options for Increasing
Federal Income From Crude oil and Natural Gas on Federal Lands'' (April
19, 2016) at p. 3 (``. . . shale resources are found primarily on lands
owned by state governments and private landowners.''), available at
https: / / www.cbo.gov / sites / default / files / 114th-congress-2015-
2016 / reports / 51421-oil _and_gas_ options-2.pdf; Congressional
Research Service, ``U.S. Crude Oil and Natural Gas Production in
Federal and NonFederal Areas'' (June 22, 2016) at p. 4 (``Any increase
in production of natural gas on Federal lands is likely to be easily
outpaces by increases on nonFederal lands, particularly because shale
plays are primarily situated on nonFederal lands and are located where
most of the growth in production has occurred in recent years and where
future growth is projected to occur.'') available at https://fas.org/
sgp/crs/misc/R42432.pdf; GAO Report, supra note 24 at Figure 2,
available at https://www.gao.gov/products/GAO-17-540.
\39\ See GAO Report, supra note 24 at Figure 2.
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climate change and federal oil and gas development
Finally, the Committee should not ignore concerns about climate
change that are raised by decisions to accelerate Federal oil and gas
development. To be sure, the climate-related impacts associated with
oil and gas development on public lands are complex. Foregoing oil and
gas development on public lands may result in some decrease in
CO2 emissions as, for example, where it incentivizes a shift
toward low carbon transportation fuels such as biodiesel. On the other
hand, less Federal land oil and gas development might also be
compensated at least in part by additional development on private lands
in this country and in other countries. The point, however, is that
these are issues worthy of critical analysis before major decisions are
made to increase oil and gas production on Federal lands. Courts have
begun to require such analysis in other contexts, including for example
in the related context of Federal coal leasing.\40\ The government
would be wise to learn from these cases and get out in front of this
issue. If they fail to do so, it seems likely that courts will require
it.
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\40\ See e.g., Ctr. for Biological Diversity v. Nat'l Highway
Traffic Safety Admin., 538 F.3d 1172, 1217 (9th Cir. 2008); High
Country Conservation Advocates v. United States Forest Service, 52 F.
Supp.3d 1174, 1190-91 (D. Col. 2014).
To summarize, a wide range of factors influences Federal oil and
gas production but probably none more so than the commodity markets.
The sharp decline in the market price for oil and gas over the last
several years has led to a decline in private sector interest in
Federal oil and gas development. Nonetheless, Federal oil and gas
production remains at historically high levels, notwithstanding the
fact that the BLM has issued and companies have utilized far fewer
Federal leases and drilling permits. Other complex factors associated
with managing our public land resources, including the multiple use
mandate, the protection of conservation lands, the relatively minor
role of Federal lands to the shale oil and gas boom, and climate change
all suggest the need for a more cautious approach toward pushing new
oil and gas development on public lands, and they further suggest that
the BLM's leasing and permitting policies have not been stifling oil
and gas development on our public lands. On the contrary, public lands
oil and gas development remains robust even as the Federal Government
is receiving far less revenue from our public oil and gas resources
than the market will bear. Artificially stimulating Federal oil and gas
development at the present time and under present market conditions
would not be a rational response and could adversely impact long-term
government revenues even as it leads to more environmental degradation.
Thank you again for the opportunity to appear before the Committee
today. I wish the Committee well as it seeks to address the important
issues that surround the development of oil and gas on our nation's
public lands.
______
Dr. Gosar. I thank the gentleman.
The Chair now recognizes Dr. Nelson for her 5 minutes.
Welcome.
STATEMENT OF LAURA NELSON, GOVERNOR'S ENERGY ADVISOR, UTAH
GOVERNOR'S OFFICE OF ENERGY DEVELOPMENT, SALT LAKE CITY, UTAH
Dr. Nelson. Good morning. Thank you, Chairman Gosar. And I
also want to thank Chairman Bishop and Ranking Member Lowenthal
for the opportunity to be here today. I serve as the Energy
Advisor to the Governor of Utah, Governor Gary R. Herbert, and
I want to say this morning that I am going to be focusing
primarily on our energy resources.
Utah is a natural resource state. This includes mining and
agriculture, as critical natural resources, but it really also
includes our national and state parks, as well. So, we truly
believe in balancing both use and conservation, and we think
that this is the best approach to leveraging all of our
resources to generate revenues and create jobs.
Focusing on energy in particular, though, this is an
important aspect of our economy. It contributes 9 percent to
our gross state product. It is 2.2 percent of the state wages,
although it is only 1.1 percent of our employment number. So,
it indicates that these are very high-paying jobs, as has
already been discussed, and it contributes $673 million in
revenues, most recently in 2015.
These revenues are really important to Utah. They help to
provide education to our students, and they also provide many
other critical community services, which have also already been
mentioned.
Utah, like I think much of the country that is dependent on
natural resource development, experiences booms and busts in
natural resource development. Since 2014, Utah has, in fact,
been experiencing a decline in production activity specifically
related to oil and gas. As has been mentioned, this is in large
part driven by lower commodity prices, which are really a
function of market conditions.
Just to give you an example of the impact, oil production
in 2014 was around 41 million barrels a year in Utah. In 2016,
it was 31 million barrels, so matching our 2012 levels. Natural
gas production has also been on the decline since 2012, but we
believe, nonetheless, that if we can access our resources, we
can create new opportunities for development of these
commodities. And as commodity prices rationalize, this is going
to be critical.
What we need to do is create a regulatory path forward that
allows for sustained growth in jobs, especially in those
communities that have been impacted by the past year's decline
in oil and gas activities.
For example, in Utah, our overall rate of unemployment as
of May 2017 was 3.2 percent. But in our oil and gas counties,
Duchesne and Uintah, they are very dependent on jobs in these
sectors, and their unemployment rates are 5.9 percent and 6.6
percent, respectively. So, we truly believe that access to our
resources, coupled with what we call an all-of-the-above energy
strategy, can create sustained growth in the development
activity and in the associated jobs and revenues.
Utah is a public land state, 70 percent of our land is
federally owned. So, really getting it right when it comes to
leasing and permitting is key if we are going to deliver on the
promise of energy and minerals opportunities.
In Utah, as I mentioned, 70 percent is federally managed.
This leads, oftentimes, to lengthy permitting schedules, and
especially when they are compared to the permitting schedules
for applications for permits to drill of our Utah Division of
Oil, Gas, and Mining. And we are just not convinced that the
Federal process, in fact, delivers results that are more robust
than those that are provided through our effective and
efficient state agency.
The Energy Policy Act of 2005 specifies that the Bureau of
Land Management must approve applications for permit to drill,
APDs, within 30 days. But we understand that the average permit
time is closer to 220 days and, depending on the field office,
it is not uncommon for it to take years.
Our recommendation is very simple to resolve the lengthy
time it takes to approve applications to drill, to allow for
the primacy to be allocated to our Division of Oil, Gas, and
Mining, or generally, to states where they are willing and have
shown that they are capable of taking over this process. This
in no way is meant to be disparaging to BLM or to the
Department of the Interior, in particular, but really just to
provide an opportunity for those agencies to focus on their
broader mandate of multiple land use.
We do recognize currently that DOI and BLM do not have
authority to delegate primacy for regulation, in particular for
permitting inspection and enforcement of oil and gas production
to the states for production that is occurring on Federal land.
However, we recognize that the primacy may be accomplished by
one of two actions: first of all, congressionally directed
legislation; or application of the Federal permit streamlining
pilot project that was, in fact, established as part of the
Energy Policy Act of 2005.
In fact, in September of 2014, the U.S. Senate approved S.
2440, the BLM Permit Processing Improvement Act of 2014, that,
among other things, makes permanent the Federal streamlining
project program.
So, we believe that assigning primacy of delegation of oil
and gas development where appropriate to states would allow for
better efficiency and better environmental outcomes, and would
also free up the resources----
Dr. Gosar. If the gentlelady will suspend, you are over
your time.
Dr. Nelson. Thank you.
Dr. Gosar. Remember, your testimony will be in full, en
bloc.
[The prepared statement of Dr. Nelson follows:]
Prepared Statement of Dr. Laura Nelson, Energy Advisor to Governor Gary
R. Herbert
I appreciate the opportunity to testify as Governor Gary R.
Herbert's Energy Advisor and on behalf of the Utah Governor's Office of
Energy Development. This morning I will be focusing primarily on oil
and gas leasing and permitting on federally managed lands, and make
recommendations for how areas of the process might be improved to
increase efficiency, environmental outcomes, and increased regulatory
certainty. However, I would be remiss if I did not mention the
importance of natural resources overall to the state's economy. As a
natural resource state, our goal is to provide for economic
opportunities with sound environmental outcomes across all of our
resources. These include our energy, minerals and agricultural sectors,
as well as our state and national parks. Each of these represents
unique and important sectors, providing jobs and revenues for the
state.
Energy jobs in particular in Utah account for 1.1 percent of the
state's jobs, or a total of almost 16,000 direct employees in this
sector. And these jobs provide some of the highest wages in the state
accounting for 2.2 percent of the state's total wages. The average
energy job in Utah pays 194 percent of the state's average wage. With
respect to the state's energy revenues, they flow through the following
means: Federal mineral leases, severance taxes, royalties from the
School and Institutional Trust Lands Administration permanent fund,
property taxes, sales tax, income tax, and conservation tax. Of these,
most significant are the property taxes, sales taxes, and Federal
Mineral Leases, which in 2015 made up over 68 percent of the $673
million dollars in energy revenue to the state. These revenues support
the state budget, particularly our state school system. At the local
level, sales and property taxes fund police, fire, and other essential
services.
Utah has seen energy booms come and go in recent decades, and since
2014 Utah has been experiencing a decline in production activity, in
significant part related to low commodity prices for oil and gas driven
by market conditions fueled by a technological revolution in well
drilling and well-stimulation techniques. To give you an idea of the
impact, oil production in 2014 was approximately 41 million barrels; in
2015 production declined to roughly 37 million barrels; and in 2016 it
was at 31 million barrels, matching 2012 levels. Gas production has
declined since 2012, when it peaked at 490 million MCF. In 2016
production was about 365 million MCF. However, we believe that to the
extent that we can access our resources, we can create a new
opportunity for development as commodity prices rationalize. This will
be critical for building sustained growth and jobs, especially in those
communities have been most impacted by the past years' decline in oil
and gas activities. While Utah's overall unemployment rate as of May
2017 was 3.2 percent, the unemployment rates in Duchesne and Uintah
counties, which are more dependent on oil and gas, were 5.9 and 6.6
percent, respectively.
In addition to Utah's core oil, gas and coal industry, Utah
supports an all-of-the-above approach to energy development and we have
seen a boom in solar activity in recent years. However, this has been
limited to state and private lands, largely due to the same onerous
leasing and permitting conditions that face our hydrocarbon resources.
Delivering on the promise of all our energy and minerals opportunities
requires getting regulation right.
Unfortunately, in a public lands state with close to 70 percent of
land federally owned, the ability to access and responsibly develop our
natural resources is dramatically impeded by complex processes and
lengthy timelines for leasing and permitting, resulting in a general
reduction in leasing activity. The total number of active onshore oil
and gas leases in the country has declined over recent decades, and
that pattern has continued without interruption since 2008.
Utah is 11th among states in oil production, 12th among states in
natural gas production, and 13th among states in coal production. When
it comes to oil and gas development in the state today, regulatory
compliance on federally managed lands is significantly more difficult
than what occurs through processes overseen by Utah's highly qualified
staff at the Utah Division of Oil Gas and Mining. And we have not seen
evidence that Federal process deliver results that are more robust than
those provided through our state agency.
The Energy Policy Act of 2005 specifies that the Bureau of Land
Management (``BLM'') within the U.S. Department of the Interior
(``DOI'') must approve Applications for Permit to Drill (APD) within 30
days, yet the average permit time is 220 days. In fact, depending on
the field office, it is not uncommon for APDs to take years.
Our recommendation to resolve lengthy delays in leasing and
permitting is that a process be established for delegating primacy to
Utah, and to states generally, for the regulation of oil and gas
operations on federally managed public lands. We are not alone in
making this recommendation. This year the Interstate Oil and Gas
Compact Commissions (IOGCC) passed resolution 17.051 titled ``Urging
the Congress of the United States, the U.S. Departments of the
Interior, and the U.S. Bureau of Land Management to Establish Processes
for Delegating Primacy to the States for the Regulation of Oil and Gas
Operations on Federal Public Lands.'' The purpose of the resolution is
to urge the establishment of an administrative process to delegate a
portion of BLM's responsibilities (specifically the regulation of oil
and gas activities) through an appropriate primacy delegation mechanism
to the states that may desire such delegation. The intent of the
resolution is not to disparage or minimize the current role of the U.S.
Bureau of Land Management to authorize development on Federal land, but
it is an attempt to optimize the operations of government at both the
Federal and state level.
The IOGCC has a long-established interest in oil and gas resource
development and the regulation of such activities on public lands
within the borders of individual states. As evidence of this interest,
IOGCC has for many years included a Public Lands Committee as one of
its seven business-related Standing Committees--specifically to
identify and address issues relevant to the states' interests in public
lands. The state of Utah became a member state of IOGCC in 1957.
The initial Utah Oil and Gas Conservation Commission evolved over
time to become the present-day Division of Oil, Gas, and Mining
(``DOGM'') within the Utah Department of Natural Resources. DOGM's
guiding principles include the facilitation of the responsible
development of oil and gas resources within the state of Utah.
Specifically, DOGM is the counterpart to the Federal Government's BLM
in the regulation of oil and gas operations. BLM is tasked to oversee
the development of oil and gas resources on Federal lands throughout
the Nation. And like DOGM, BLM performs this task by analyzing,
approving, and monitoring the drilling, completion, operation, and
final plugging of wells located on Federal mineral leases.
We suggest that Utah's DOGM provide the permitting for wells on
both state and federally managed lands. Today, DOGM permits wells that
are co-located with other wells on Federal lands. If DOGM is permitting
similar wells in a similar location, what limits the state from doing
both?
Utah's DOGM has a performance measure goal of permitting at least
80 percent of state or fee APDs within 60 days. Targets may not always
be realized because approval time is dependent on a number of factors
that can prolong the approval process. For example, in 2016, the
average time for approval of state land APDs was 131 days and for
approval of fee land wells was 81 days. However, in the 8 years prior
to 2016, average approval time ranged from 66 days to 121 days for
state lands and 81 to 108 days for fee lands. Our understanding is that
this is significantly more timely than BLM, which we have heard has an
approval time in Utah ranging from 150 to 240 days.
Based on our examination of the relevant statutes, the Department
of the Interior (DOI) and the Bureau of Land Management (BLM) do not
currently have statutory authorization to delegate regulation
(permitting, inspection, and enforcement) of oil and gas production to
the states for production occurring on Federal land. The primacy
delegation may be accomplished by one of two actions: (1)
Congressionally directed legislation, or (2) Application of the Federal
Permit Streamlining Pilot Project established as part of the Energy
Policy Act of 2005. In September 2014, the U.S. Senate approved S.
2440, the BLM Permit Processing Improvement Act of 2014 that among
other things, makes permanent the Federal Streamlining Project program.
Examples of primacy delegation of the Federal Government to states
exist with certain environmental programs of the U.S. Environmental
Protection Agency and even the coal-mining regulation responsibilities
of the U.S. Office of Surface Mining, Reclamation, and Enforcement
within the U.S. Department of the Interior. States have a proven track
record of success under these delegations, and would do so under
similar delegation from BLM--if such opportunity were granted.
History has shown that states have successfully addressed the
effective and efficient development of hydrocarbon resources, and this
resolution seeks for continued primary roles for the states in
conservation of resources, prevention of waste, and promotion of
responsible development within their jurisdictions. One should note
that even if a legislative process for primacy delegation for oil and
gas development were to exist, it would be voluntary for states to
obtain such primacy, and it would also free up the resources of the BLM
to focus on its responsibilities of multiple use and appropriate
leasing of minerals on Federal land.
In addition, the Utah BLM Mineral Leasing schedule is currently
structured in a manner that is not conducive to encouraging investment
and developing resources. The majority of leases offered in Utah are
currently deferred. Leases that are deferred are not offered again
until a year has passed. According to the Mineral Leasing Rules under
CFR 43-3120 this time frame is not necessary and is at the discretion
of the state BLM Director. Our recommendation is that BLM require a
quarterly mineral leasing schedule for leases on Federal western lands
that have been deferred in order to encourage investment and
development of resources across all available western lands on an
equitable basis. Consistent BLM practices from state to state would
also allow efficiencies for companies that operate in multiple states.
In conclusion, our experience has been that Federal regulation in
the realm of energy development is steered equally by science and by
controversy. This unfortunate approach leads to over-zealous regulation
that is not reasonable from a cost-benefit perspective, and that puts
an undue burden on companies hoping to invest and create jobs in our
rural communities. States like Utah, on the other hand, tend to base
their regulations on a sensible ``best practices'' approach that leads
to comparable outcomes at far less expense. We urge the Federal
Government to recognize states with good regulatory track records,
judging by environmental outcomes not environmentalist outcries, and
should be prepared to delegate regulatory authority accordingly.
______
Questions Submitted for the Record by Rep. Lowenthal to Dr. Laura
Nelson, Energy Advisor to Governor Gary R. Herbert
Question 1. Under a system where state governments had primary
responsibility for managing Federal oil and gas operations within their
borders, how does the state envision working with the Federal
Government to assure compliance with the myriad Federal laws and other
requirements that apply to public lands including, for example:
The Mineral Leasing Act and its regulations, which charge
the Secretary of the Interior and BLM with managing Federal
minerals leasing and permitting. See 30 U.S.C. Sec. 226(a);
43 CFR Sec. 3162.3-1(c).
The National Environmental Policy Act and its requirements
for environmental impact analysis;
The Endangered Species Act including its requirements for
consultation with the FWS;
The National Historic Preservation Act including its
requirement for consultation with State Historic
Preservation Officer and the Advisory Council on Historic
Preservation;
The Secretary's trust responsibility to Native American
tribes;
The Federal Land Policy & Management Act and it
requirements for land use planning, for management of the
public lands to ``protect the quality of scientific,
scenic, historical, ecological, environmental, air and
atmospheric, water resource, and archaeological values,''
and for the prevention of unnecessary and undue degradation
of public lands.
Answer. The proposal outlined in my June 29 testimony is focused on
permitting. Under this proposal, Utah's Division of Oil Gas and Mining
(DOGM) would provide the permitting for wells on both state and
federally managed lands. Through DOGM, Utah already permits wells that
are near similar wells on Federal lands. Numerous efficiencies would be
achieved by extending Utah's authority to permit wells to Federal lands
in Utah. DOGM's expertise and familiarity with the unique attributes of
Utah's oil and gas resources and industry could be leveraged to drive
more efficient and effective permitting. As mentioned in my testimony,
congressional legislation would likely be required to delegate
regulation (permitting, inspection, and enforcement) of oil and gas
production to the states for production occurring on Federal land.
Under a primacy delegation for permitting of oil and gas, leasing
authority would remain with the Secretary of the Interior and Bureau of
Land Management (BLM). Although Utah would continue to advocate for and
support the provision of timely and high quality Federal leases to the
oil and gas industry, a Federal agent is generally needed to properly
represent Federal interests in leasing Federal lands.
Utah's proposal for establishing primacy in the oil and gas sector
would be initially limited to permitting. As Utah established a
successful permitting program on Federal lands within Utah, it would
work closely with its Federal partners to enhance effective, timely and
affordable industry compliance with all environmental, historic
preservation, Native American and other Federal requirements.
Permitting primacy on Federal lands would enable Utah to better
coordinate with Federal partners to streamline industry compliance with
the diverse Federal requirements mentioned in your question.
Furthermore, as state permitting primacy on Federal lands was
successfully implemented, opportunities for state administration of
some or all of the Federal requirements mentioned in your question
could be explored.
A primacy delegation of Federal responsibilities to a state
government entity can be creatively crafted in various ways to ensure
compliance with other applicable Federal laws. The Federal agency
granting primacy may consider granting all responsibilities or only a
partial set of duties. Once the Federal agency designates a discrete
transfer of responsibility to a state, then the primacy granting agency
retains solely an oversight role, and the state is then required to
perform any additional necessary functions within the implementing
Federal statute. A primacy delegation is not a unilateral decision to
pass all critical decision making from one party to another party. It
is more of a cooperative partnership to allow each party to recognize
their strengths and to efficiently and effectively apply their
resources to mutually acceptable outcomes.
The functions of oil and gas operations regulation has been
historically and effectively performed by many states since the early
20th century. It was decades later that Federal land managers assumed
the oil and gas regulatory role for Federal lands that states had
conducted for many years. A negotiated primacy delegation under a
mutually acceptable cooperative agreement may take time to develop in
order to satisfy both parties, but still represents an efficient
delineation of duties with successful outcomes for each party.
Ultimately, a carefully prepared and executed cooperative agreement
can be the basis to identify that all Federal needs are met by the
programs and processes being offered by the states. Either party can
deny the execution of primacy if they are unsatisfied that their
individual needs remain unmet. The process models for primacy
delegation already exist and they can be tailored to suit the roles of
the Federal Government and states for oil and gas regulation.
Specifically within the Utah Division of Oil, Gas and Mining, there are
already two Federal primacy delegations that have been in effect for
nearly 35 years--these are the primacy delegation from the U.S. Office
of Surface Mining, Reclamation and Enforcement for coal mining
regulation and the primacy delegation from the U.S. Environmental
Protection Agency for oil and gas Class II injection well regulation.
We understand that there may be interest in ``testing'' this process
before advancing full primacy delegation to the state for oil and gas
permitting. This could be accomplished with a pilot project where there
is a single operator, with a group of similar wells located on both
state and Federal land. In this pilot study, DOGM would provide oil and
gas permitting for the test wells located on both state and Federal
lands. Activities and results could then be used to study the
effectiveness of the state process.
DOGM has demonstrated that it can responsibly use delegated primacy
powers to develop Utah's natural resources, protect the environment,
prevent waste and work effectively with its Federal partners. We
recommend improving oil and gas permitting through delegating primacy
to Utah, and to states generally, for the regulation of oil and gas
operations on federally managed public lands. This recommendation is
not intended to disparage or minimize the current role of the U.S.
Bureau of Land Management or any other Federal agency, but rather an
effort to identify an effective pathway for optimizing the operations
of government in the responsible development of oil and gas resources.
______
Dr. Gosar. I thank the panel for their testimony. Reminding
the Members that the Committee Rule 3(d) imposes a 5-minute
limit on the questions, the Chairman will recognize Members for
any questions they may wish to ask. I will start with myself.
Mr. Flynn, leasing policy changes put in place in 2010,
Internal Memo 2010-117, has resulted in a situation in which
the BLM is not fulfilling the Mineral Leasing Act's requirement
to hold a lease sale in every oil and gas state at least
quarterly. Only one lease sale was held in the state of New
Mexico in 2016, and sales in lower interest areas of the state
were canceled and not replaced by sales in the highly
prospective areas of the Permian and San Juan Basins.
What impact does the rotational lease sale schedule have on
oil and gas development in New Mexico, considering the Texas
Permian is right across the border? And how does this affect
the budget of the state of New Mexico?
Mr. Flynn. Mr. Chair, thank you for the question. The
impact is profound, from both an economic and a jobs
perspective. As I mentioned before, approximately one-third,
give or take a couple of percentage points, in a given year of
our budget is derived directly from severance taxes paid by the
oil and gas industry. So, when the state of New Mexico is not
attracting activity, we are suffering, from an economic
perspective.
Of the Federal royalty, nearly 50 percent of the Federal
royalties paid come back to the state of New Mexico, as well.
So, we derive benefits both from our severance tax, as well as
from our share of the Federal royalties that are paid.
Each drilling rig constitutes approximately 50 to 100 high-
paying jobs. So, each rig that is drilled on the Texas side of
the border means 50 to 100 high-paying jobs that average about
$75,000 a year are going to Texas instead of New Mexico, and
that trickles down and has an impact throughout our economy.
Those workers are spending money in restaurants, they are
buying goods, and they are paying more taxes to the state when
they are buying different goods and paying for services.
So, New Mexico's budget is dependent on the oil and gas
industry. We certainly, as an industry, support efforts to
diversify our budget. However, the fact remains that we are the
foundation of the budget, and when we suffer the state suffers.
And, from a budget perspective, we just had a special
session to deal with the shortfall because of the low-market
prices, where we had to account for about a $100 million
deficit. And next year we have current projections which are
inherently inaccurate at this point that show that we are
facing another budget deficit of perhaps $2 to $250 million.
So, this impact is profound in a state like New Mexico,
where our jobs and economy are dependent on the oil and gas
industry.
Dr. Gosar. Yes, you had said 50 percent. It is 48 percent
since the Murray-Ryan budget.
Mr. Flynn. It is nearly 50 percent.
Dr. Gosar. Ms. MacGregor, in your written testimony you
state that, since taking office, Secretary Zinke has scheduled
quarterly lease sales in nearly every office. You also
highlight the successful February 2017 Wyoming lease sale that
generated nearly $129 million.
What, in your opinion, precluded quarterly lease sales
during the previous administration?
Ms. MacGregor. Thank you for the question, sir. I cannot
speak to the previous administration's decision on whether to
hold lease sales or not hold lease sales.
Dr. Gosar. Isn't it statutorily required?
Ms. MacGregor. It is in the Mineral Leasing Act to conduct
quarterly lease sales in each state office. I can speak to the
fact that we have had more lease sales this year than last
year. Eleven lease sales were canceled or postponed last year
alone. We are hoping to continue forward with our schedule of
lease sales. And, of course, we believe that leasing can be
done economically, even in these price conditions.
Just to touch back on Mr. Squillace's comments, I think it
is important to note that there is no low-balling that goes on.
The Department, when we conduct leases, actually ensures that
every lease that is sold is reaching a fair market value
threshold. And yesterday, I believe, the Bureau of Ocean Energy
Management announced that we rejected 10 bids and $10 million
for bids that were made that just did not reach fair market
value thresholds.
So, we will conduct our lease sales in accordance with
Federal law, and we will make sure that the taxpayer is getting
fair market value.
Dr. Gosar. Thank you. My time is short, so I will
acknowledge the Ranking Member for his time.
Dr. Lowenthal. Thank you, Mr. Chair.
Ms. MacGregor, as I mentioned earlier when I quoted your
testimony, where you said, ``America's free markets will help
determine where and when energy development on public lands is
feasible''--to me that is a troubling statement because it
sounds an awful lot like an admission that the oil, gas, and
coal industries will control the location and the timing of
energy development on our public lands.
And then the energy counselor today, through the Secretary,
is quoted as saying that we are moving toward ``an energy-
dominant public policy.''
My first question is, do you agree with the policy
statement in the Federal Land Policy and Management Act that
states, ``It is the policy of the United States that public
lands be managed in a manner that will protect the quality of
scientific, scenic, historical, ecological, environmental, air,
and atmospheric water resources, and archeological values?'' Do
you support that statement?
Ms. MacGregor. Absolutely, and I also support the area of
FLPMA that speaks to managing and balancing multiple use of
those lands.
Dr. Lowenthal. Thank you. But do you also believe, though,
in that balance that you point out, that balance between that
and also exploration and production of oil leases, that there
are times that it is necessary to over-ride the wishes of the
free market?
Ms. MacGregor. Just to speak to that, I believe that the
statement that anyone aside from the Secretary and the Bureau
of Land Management will control where and when leases are held
is not true. It will be a measured development that, of course,
preserves the multiple use of the lands, and the varied uses
that----
Dr. Lowenthal. So, you do believe that there will be times
when you will overstay or protect those values, to over-ride
the wishes of the----
Ms. MacGregor. Mr. Lowenthal, I absolutely do. And I know
that there are areas that are going to be more treasured and
special than others, but I think that we can strike that
appropriate balance and find ways----
Dr. Lowenthal. I think that is what we are trying to find
on this----
Ms. MacGregor. Absolutely.
Dr. Lowenthal [continuing]. Because we have real concerns
that the policy has moved us away from that balance, and not
toward that balance.
Ms. MacGregor. I understand your concerns, and I think that
the entire planning process done through RMPs at the Bureau of
Land Management will ensure that we manage well and that we
find that balance.
Dr. Lowenthal. Talking about that balance, let's talk about
that according to the BLM budget--there were 2,552 drilling
permits currently pending at the end of the last fiscal year,
and it seems like taking care of this backlog and issuing
permits as quickly as possible is a high priority for the
Department.
I believe that is true, it is good to be efficient. Permit
processing should not take longer than it needs to, and I think
some of those issues have been raised. But we do not need to
tell people out there that there is a huge backlog of permits
that need to be addressed, and potentially at the risk of not
doing thorough environmental reviews, not evaluating protests,
not dealing with other activities, because is it not true that
the number of unprocessed permits is currently the lowest is
has been since 2005?
Really, we have the smallest backlog that we have had in
over a decade. Is that not true?
Ms. MacGregor. I am sure that it true, but a backlog is
still a backlog. And taking care of----
Dr. Lowenthal. Thank you for stating that it is true. And
at the end of 2015, there were over 7,500 of those--this is the
most in a decade--7,500 drilling permits that companies have
still not used, which is the most. So, we have the most
drilling permits and the smallest backlog that have not been
used. Is that not true?
Ms. MacGregor. It is correct that we have 7,950 APDs
approved but not yet drilled in this year.
Dr. Lowenthal. And that is also the most we have had in
this decade.
Ms. MacGregor. I am not sure if it is the most or not. I
can get back to you on that.
Dr. Lowenthal. Well, let's get back to that data, and I
will finish up. Ranking Member Grijalva wrote to the Secretary
in April, looking for the number of permits that have been
approved, but not used at the end of Fiscal Year 2016. That is
what he has done, he has written to that.
And last week the Secretary said there was no need to
answer letters, because he will simply call us with the
information. I am asking you, will you please ask the Secretary
to either call me or Ranking Member Grijalva with the 2016
data? Or you can call me with that data, or you can text me.
Ms. MacGregor. So, you are going to give me your number?
Dr. Lowenthal. Yes, I am.
[Laughter.]
Ms. MacGregor. I would be more than happy to work with your
office on fulfilling that data request.
Dr. Lowenthal. Thank you, and I yield back.
Dr. Gosar. I thank the gentleman. I now recognize the
Chairman of the Full Committee, Mr. Bishop from Utah.
Mr. Bishop. Would you call me if I gave you the number,
too?
Ms. MacGregor. Sure.
Mr. Bishop. In the past, I got calls, but just no
information was forthcoming. So, if you could actually add the
information to it, it would be nice.
[Laughter.]
Mr. Bishop. Let me ask Mr. Flynn and Dr. Nelson, just for a
second, because there are some questions. If 39 percent of the
leases that are out there, the bids are not being taken, why
would a company not bid on something an administration--either
this one or a previous one--would actually put out for bid? Why
would they not go for that? Very quickly.
Mr. Flynn. Chairman Gosar, Chairman Bishop, it is too
difficult to provide a single answer. It would really depend on
the geology and----
Mr. Bishop. You have 16 seconds to give me a couple of
answers.
Mr. Flynn. Well, I think it depends on what you are bidding
on, first and foremost. So, they would be considering the
productive potential----
Mr. Bishop. Are you telling me that there is a possibility
that bids for lease would not have enough resources there to
make it practical?
Mr. Flynn. Yes.
Mr. Bishop. Or that those lands would actually be so
litigation-prone that it would not be worth actually going for
them?
Mr. Flynn. Yes, absolutely.
Mr. Bishop. And that may be one of the reasons why bids
were--would it actually be possible for any administration,
past or present, to be so devious that they would actually put
out bids for a lease that they knew would not be acceptable?
Mr. Flynn. Mr. Chair----
Mr. Bishop. You can't answer that. You don't have that
vision of their heart. I will let that go down there. OK.
Dr. Nelson, let me go to you, then. We have been talking
about how cheap the royalties are on Federal lands. Why would a
company not go to the Federal lands just to pay those cheaper
royalty rates? Why would they go to state or private lands to
pay more money?
Dr. Nelson. I think the question can be answered pretty
simply. First of all, what we have seen in terms of leases that
are offered is that there are very few parcels that are offered
at a single time. And, as I know you are well aware, Chairman
Bishop, the companies really look to maximize a resource play.
And if they cannot block up a resource play, then they are
simply not going to bid, irrespective of what the royalty
requirements are. So, thank you for the question.
Mr. Bishop. So, the only reason somebody would actually bid
on Federal lands is if they can make money. And the longer it
takes to permit, the longer it takes to go through litigation,
the longer it takes to try and get those areas--it simply means
it is not profitable. They are willing to pay more money if
they could actually be in production, which should be an idea
for the Federal Government, that if we can actually guarantee
you are going to be in production, and the permitting process
goes further faster, that people would be willing to pay more,
simply to do that.
Dr. Nelson, are there other examples of how land can be
stopped from production? For example, would there be projects
that could be established, shown that they are worthy, but then
all of a sudden they need, let's say, some electricity or power
to go into that plant, and the Federal Government could block
rights-of-way to that power, to make the entire project
worthless? Would that actually ever happen?
Dr. Nelson. Yes.
Mr. Bishop. And in my district?
Dr. Nelson. Yes. Infrastructure is critical, and oftentimes
must cross federally managed lands. So, it does sometimes
inhibit the ability to develop a project, even after a lengthy
leasing process followed by a lengthy APD process, then the
need to secure leasing for the infrastructure.
Mr. Bishop. Ms. MacGregor, let me go to you. As you know,
there are some Native American tribes who rely upon energy and
development. They do not have gaming opportunities. Southern
Utes in Colorado are one. Were there examples in prior
administrations where they were prohibited from actually
implementing the programs they want, the tracking devices, the
programs that they had which inhibited their ability to do
that?
Ms. MacGregor. I think there are several examples where
energy-producing tribes did reach out and issue public comment
on some of their concerns for responsible production on their
lands.
Mr. Bishop. And it is not just DOI that was dealing with
that, as far as permitting. Sometimes the EPA got involved,
which basically shut down any kind of production they would
have, going forward.
Is DOI considering reforms that would delegate permitting
process and regulatory authority to states? Kate?
Ms. MacGregor. It is something that I would be more than
happy to talk to your staff in your office about. That sounds
like an interesting idea that we would be willing to discuss.
Mr. Bishop. Dr. Nelson, maybe I can come back to you,
because I do know there was a bill out there that talked about
this.
If, indeed, a company was held to Federal standards, but
the state actually did the permitting process, could such a
system actually work, and facilitate faster permitting?
Dr. Nelson. We believe that it would, and we would like to
move forward with assigning that primacy for approval of
applications for permits to drill to our Utah Division of Oil,
Gas, and Mining, and also to other states that have proven the
capability.
Mr. Bishop. All right, I was unfair. I asked you that
question with less than 30 seconds remaining, so I am over.
That is my rule that I violated.
[Laughter.]
Dr. Gosar. That is all right.
Mr. Bishop. Thank you for your answers. Thank you for
actually being here and spending the time and talking about
this. This is a significant issue. I yield.
Dr. Gosar. I thank the Chairman----
Mr. Bishop. I yield what I don't have.
Dr. Gosar. Before I recognize the gentlewoman from
Massachusetts, Mr. Flynn, we are having a hard time hearing
from you. Can you take your microphone and move it a little bit
closer to you, and just kind of speak in the microphone? Kind
of get closer to it, please?
Mr. Flynn. Is that better, Mr. Gosar?
Dr. Gosar. That is a little bit better, thank you. I now
recognize the gentlewoman from Massachusetts, Ms. Tsongas.
Ms. Tsongas. Thank you, Mr. Chairman. And welcome to our
guests.
While the oil and gas industry wrestles with changing
market conditions, as you all have testified to, our Nation
also happens to be in the midst of a clean energy revolution.
In Massachusetts alone, jobs in the clean energy sector have
grown by 75 percent since 2010, and it is now an $11 billion
industry across the entire Commonwealth.
Nationally, we have reached a significant milestone this
past March, when over 10 percent of all electricity came from
wind and solar. In many individual states, the percentage of
electricity generated by wind and solar is even higher. Our
Nation's public lands stand to play a significant role in this
transition to clean energy.
The Obama administration's Bureau of Land Management
approved permits on public lands for utility-scale solar
facilities, wind farms, and geothermal plants, and set a goal
of approving projects that would generate 20,000 megawatts of
clean energy by 2020. I believe this Committee and the new
Administration should also be working to ensure that our public
lands are supporting renewable energy development where it is
appropriate, and in an all-of-the-above framework to help
decarbonize our electric grid, support job creation, and
increase royalty payments to Federal taxpayers and local
communities.
Ms. MacGregor, welcome back to the Committee. On this issue
of supporting renewables, the Bureau of Land Management's
Fiscal Year 2018 budget request includes a $13 million cut to
renewable energy programs. This is money that was budgeted for
activities such as public outreach and stakeholder engagement,
lease sales, and making sure that permits are reviewed in a
timely manner. Your written testimony outlines the many steps
that this Administration is taking to rush approvals of oil and
gas development, but no similar steps for renewable
development.
How will you ensure that renewable energy projects have the
proper funding and staff levels to ensure similarly timely
reviews, and are you considering setting similar targets, as
the Obama administration did, for renewable energy development?
Ms. MacGregor. Thank you for the question. We are
definitely supportive--this Administration--of all energy jobs.
We are not engaged in picking winners or losers in any way.
When it comes to clean energy, which, of course, is very
important to you, we are remaining supportive of those projects
that have already been permitted and will continue to be
permitted on Federal land in the appropriate areas where it has
already been determined.
In my opening statement, when I said that we have 18,000
megawatts of approved renewable energy, much of that is still
remaining to be installed. So, we are aware that there will be
permitting on continued work with the Bureau of Land Management
to allow these projects to move forward in a responsible
manner.
I believe, by focusing on our permitting process in
general, and making sure that we are looking at efficiencies
across the board, it will benefit all energy producers on
Federal lands, including renewable energy producers.
Ms. Tsongas. So, you are abiding by the Obama
administration's goals, is that correct?
Ms. MacGregor. We will ensure that renewable energy is
permitted in an appropriate and smart time frame.
Ms. Tsongas. Are you setting new goals for the Trump
administration in this area?
Ms. MacGregor. The Trump administration and the Secretary
have been very clear on their priorities, moving forward. I
think it is restoring balance on Federal lands, which includes
all energy. And, based on some of the acreage and numbers that
we are looking at that were taken care of in the last
administration when it comes to oil and natural gas, we are
still trying to dig out of a little bit of a hole there to
restore that balance. But yes, we will prioritize all energy
jobs on Federal lands.
Ms. Tsongas. The Trump administration has touted its all-
of-the-above energy strategy, but renewables are frequently
omitted. And, I think, even though you are looking to see
through the Obama permits, you are not aggressively looking for
additional ones. I do think a responsible energy production
calls for a more thought-through plan as to how to maintain
some balance, given the extraordinary job opportunities that we
have certainly seen in Massachusetts, and that I am sure
present a real opportunity across this country.
Professor Squillace, in your experience, are fossil fuels
given preferential treatment in terms of development on public
lands?
Mr. Squillace. Well, it varies from administration to
administration----
Dr. Gosar. Push your button, please.
Mr. Squillace. Oh, thank you. Sorry about that. It varies
from each administration, I would say. But I think the budget
proposal from the Trump administration seems to clearly favor
fossil fuels over renewable energy. So, that is one indication.
What I would say about that more broadly is that the United
States has a responsibility to address the problem of climate
change in the long term, going forward. If it is going to do
that, it needs to manage the decline of fossil fuels. Fossil
fuels are going to decline because of market conditions,
irrespective of the other issues that we have been talking
about. But we need to manage that decline in a responsible way,
because if we don't, we are going to see the kinds of economic
dislocations that we have seen already with the coal industry,
and that we are likely to see, going forward, with oil and gas.
As I said----
Dr. Gosar. The gentlewoman's time has expired. I now
acknowledge the gentleman from Colorado, Mr. Lamborn, for his 5
minutes.
Mr. Lamborn. Thank you, Mr. Chairman. Ms. MacGregor, I have
a couple of questions for you. But before I ask that, let me
just go on the record and say that when you were on this side
of the dais as a professional staff member, I found you to be
one of the hardest working, most dedicated people I have ever
met, and I think the country is fortunate to have you doing
what you are doing now. So, keep that up.
You said in your testimony, the BLM is adding features to
enhance the new electronic APD processing system, the automated
fluid minerals support system, and plans to decommission parts
of the prior APD processing systems to improve the automation
capacity and better match the BLM resources to permit
activities. And that was what you said.
So, using Internet-based bidding and enhancing the
electronic processing of APDs is exactly what this Subcommittee
has been pushing the BLM to do for a long time, as you know.
Could you tell us just a little bit more about these efforts?
Ms. MacGregor. Sure, I would be more than happy to talk
about that. And speaking of AFMSS 2, which is the more enhanced
Internet-based program that we are talking about when it comes
to filing APDs, I do recognize that New Mexico, in their field
offices, has a different program. We are still working out the
details of how these programs can work better together to make
sure that, overall, we have a better program to process APDs.
But processing APDs through Internet-based means is going
to help us in many different ways, especially in eliminating,
hopefully, a lot of the discrepancies that we see when industry
files their permits.
Right now, the BLM actually has a permitting time frame of
257 days. In my testimony, I said that we are trying to get to
90 days. And, by statute, we recognize that we are supposed to
be at 30 days. But we think that utilizing this Internet-based
means and harnessing that, we will be able to find ways--our
staff compares it to TurboTax, but allowing folks to fill in
the data and make sure that data does not get filed until it is
fully complete.
So, that is one of the areas I think will be helpful, and
also will increase transparency for folks on the Committee and
the general public, who want to have a better understanding of
what the absolute workload, what our folks on the front lines,
out in the field, are facing on a daily basis, especially in
areas like Casper, Wyoming and Carlsbad, New Mexico.
When it comes to Internet-based leasing, that is something
that Congress allowed the Bureau of Land Management to do in
the 2015 NDAA, I believe. We are moving to that model, and our
folks internally are noticing that, through online-based
bidding, we are seeing an uptick in participation, as more
people can attend the lease sales online and perhaps increase
revenues coming in.
But we are still analyzing all of the details of what we
are seeing in those lease sales, and hoping to get something up
to the Hill eventually that provides more information on that.
Mr. Lamborn. OK, thank you. At the end of Fiscal Year 2016,
the BLM oversaw a little more than 40,000 leases across the
country. This may sound like a lot, but it is actually the
lowest number of Federal leases since Fiscal Year 1985, 30
years ago. And, despite the fact that the Mineral Leasing Act
requires lease sales to be held in each state at least
quarterly--or more frequently, if the Secretary deems that is
necessary--the BLM has repeatedly canceled or failed to hold
the required lease sales.
So, what will the current Administration do to correct
this?
Ms. MacGregor. We are committing to making sure that we
find--to be respectful of Ranking Member Lowenthal, we are
going to find the appropriate areas to conduct lease sales, and
we will conduct those lease sales. And we are aiming to be
doing quarterly lease sales.
I think it is important to talk about leasing, because in
the example that 2014 was one of our highest-producing years,
in that year alone, in North Dakota, an example of a project
that came online that initially produced 4,200 to 6,000 barrels
of oil a day in 2014, a great project, got through the process,
more wells might be drilled there, it was leased 15 years
before, in 2001. There are long lead times to get from lease to
production.
That is why leasing and having certainty in the leasing
process is so key, because companies take time to develop these
resources, and have to allocate their own economic resources to
do that.
Mr. Lamborn. Thank you for being here today, and thank you
for your testimony.
Mr. Chairman, I yield back.
Dr. Gosar. I thank the gentleman. The gentleman from
Florida, Mr. Soto, is recognized for his 5 minutes.
Mr. Soto. Thank you, Mr. Chairman. I appreciate the
discussion today. Obviously, we need to make sure we are not
just focusing on 20th century jobs, but 21st century jobs. And,
in our state, we have avoided trying to have just an oil and
gas economy. I realize there is a big push among a lot of
states who are addicted to oil and gas jobs because they have
not diversified their economy like Florida and a lot of other
states, and so there is a big pressure to try to maximize this
as much as possible.
But we know we still have gas and oil that we will need for
homes and cars and for goods. So, obviously, for the near
future we will need to keep up the demand. But if we look to
the future, we need to make sure that we are addressing climate
change, that we are pushing renewable energy, that we are
making sure that we are conserving our parks, and conserving
our natural resources, and protecting our coastline.
In Florida, it is much more about tourism and agriculture
than it is about oil and gas, and that has been something that
has hurt our economy, particularly with the disastrous BP oil
spill in the Gulf that wrecked the western part of the state
for a year plus. And we are still getting reimbursed for that.
But I want to focus on the issues that have been addressed
by our speakers here. According to our information, the leasing
times from about 2005 to 2015 have been about 190 to 220 days
under both the Bush and the Obama administrations, and now it
is at 250. What specifically, Ms. MacGregor, are you
recommending to get us from 257 or 250-something that you
mentioned, back down to that average range of 190 to 220?
Ms. MacGregor. Thank you for your question. I know that
there are very few BLM lands in Florida, but I know this is an
important issue to you.
But what we are doing is prioritizing, again, areas where
there is a good return on investment to the American taxpayer.
One of those areas is an America First energy agenda. What we
have done so far is simply create priorities and start looking
at vacancies out in the field.
Two weeks ago, I was in Carlsbad, New Mexico and Casper,
Wyoming, visiting with some of the folks out there who are
processing these permits, and talking to them about what
exactly they need to help move these permits in a more
responsible time frame.
Mr. Soto. So, just to be clear, there are efficiencies that
will be forthcoming to us, but there are none today.
Dr. Squillace, I see that we have 192 out of our 213
million acres that are already eligible for leases, so we are
talking 10 percent left. Is this 10 percent of land that is
really even feasible for leases, or is this something that we
really do not need to be pursuing?
Mr. Squillace. Let me answer that in a little bit different
way, Congressman. The concern is that when you are deciding
whether you want to lease oil and gas or any other resource on
our public lands, you go through a land use planning process.
And the land use planning process is what has made so much of
the land available for leasing, so there is that initial
judgment that has to be made.
But then the way that the leasing actually occurs is
primarily from nominations from industry. It is industry that
decides what lands they want put up for leasing, and then they
come in and bid on them. That process, of course, has not
worked very robustly in recent times, simply because there has
not been that much interest, frankly. I know we are talking,
there are certain areas where there is interest, but------
Mr. Soto. Let's get to that. So, if there is a reduction in
leasing----
Mr. Squillace. Yes?
Mr. Soto [continuing]. Is it a supply, demand, or
regulatory issue?
Mr. Squillace. I would say it is primarily a demand issue.
Mr. Soto. So, Americans in the world are reducing their
demand on oil, and that is leading to less desire for leases.
Mr. Squillace. Yes, but I want to emphasize one important
point about the regulatory issue, because there has been a lot
of discussion today about the regulations and the ways in which
government regulation might limit development.
As I tried to point out in my original testimony, the
problem here is that we are dealing with public lands, and it
is necessary. It is not just that it is legally required, it is
necessary that we focus on what the consequences are of full-
field development of oil and gas resources on our public lands.
That kind of development can be devastating, and it has
happened a lot on our private lands. But, I think, it is much
more problematic when it happens on public lands.
So, there is a regulatory component, but it is a necessary
component that is designed to make sure that we are protecting
all the resources that we have talked about, and that FLPMA
requires that we protect----
Mr. Soto. Well, right now it is taking 257 days, so it
looks like we will have plenty of time to review them. Thank
you so much.
Dr. Gosar. I thank the gentleman. The gentleman from
Virginia, Mr. Wittman, is recognized for his 5 minutes.
Mr. Wittman. Thank you, Mr. Chairman. I would like to thank
our witnesses for joining us today.
Mr. Flynn and Dr. Nelson, I wanted to get your perspective.
You both come from states that have significant acres of
Federal lands. And, obviously, that does have an impact on your
state. The question is, what type of impact?
You spoke earlier about the economic impacts of what
happens on those lands, and lack of activity there that
generates economic activity does have a significant impact. You
spoke about that, but I wanted to get a little more detail
about not only how does that affect the state, but how does it
affect local economies?
And what do you see, from a standpoint of having to deal
with, as you talked about, Mr. Flynn, budget deficits keeping
economies going? How do you deal with these massive amounts of
public lands, looking at ways to make sure that they generate
some revenue, and then, looking at the regulatory hurdles that
are there for energy development on those lands?
So, I wanted to get both you and Dr. Nelson's perspective
on it from your state viewpoints.
Mr. Flynn. Chairman Gosar, Representative Wittman, let me
give you two quick answers, one that would not really go into
the economic.
But from an economic perspective, really, it just boils
down to infrastructure projects. From a local development
perspective, roads and sewers are the bread and butter of city
and council local government officials. They are really on the
front lines of governing. I know you all interact with them
constantly in your districts, and I interact with them in my
prior role and in my current role. And less revenue means less
infrastructure projects for roads, sewers, for drinking water
systems, period.
The second issue I would point out--we have already talked
about the economic issues, but in processing right-of-ways, if
climate change is an issue that you believe is important, like
I do, then one of the key infrastructure challenges we see to
reducing emissions from venting and flaring is related to
infrastructure to reduce flaring events. So, right-of-way
approvals not being processed actually contributes to the
problem that we see when it comes to greenhouse gas emissions.
So, beyond the economic issue, there are profound
environmental impacts that are associated with the difficulties
processing not only permits to drill, but also right-of-way
approvals.
Mr. Wittman. Very good. Dr. Nelson?
Dr. Nelson. Thank you so much for the question. I guess I
understand and agree with the thing that Mr. Flynn has said,
and I will just add that in Utah we have 29 counties, and about
23 to 24 of those counties are rural counties. This is where
the preponderance of federally managed lands are.
And to the extent that access to development of those lands
is limited where it is appropriate really has significant
impact. This is where we see the high levels of unemployment,
and limited opportunities for even diversification, because
natural resources are the backbone for allowing for that
economic development which, in turn, does drive the diversity.
The infrastructure that is required to meet the needs for
that natural resource development also lends itself to other
industrial and commercial development. So, basically, you are
creating a conundrum when you limit access to those resources
for those communities that are dependent on that initial
development.
Mr. Wittman. Very good, thank you.
Ms. MacGregor, I will go to you. You have heard concerns
here from both of these states from the state and local level
about making sure that there is the highest and best use of
those lands that are now under Federal control. Give me your
perspective on what the Department of the Interior can do to
help address these concerns and make sure that these states
have these Federal lands producing to help them deal with the
issues that they have to deal with.
Ms. MacGregor. Thank you for the question, sir. Every state
has their different infrastructure needs and different
economies and goals. These states being represented here today
clearly would like to see responsible Federal oil and natural
gas development on their lands.
The good news for them is that is a priority of this
Administration, very clearly, from the top down, starting with
the White House. So, we are allocating our resources and making
sure that we are addressing not only planning issues, and
making sure on the planning side of things that we are finding
and striking the appropriate balance to find the right acreage
to lease, but also, when it comes to permitting, addressing
backlogs not just for APDs, but also for rights-of-way, and
making sure we can get through those in a responsible time
frame that folks who invest on Federal lands, whether it is any
building project--it does not have to be oil and gas--can get
through and have a reliable permitting process and, last,
regulatory certainty, which I believe other folks have already
touched upon.
Mr. Wittman. Very good. Thank you, Mr. Chairman, I yield
back.
Dr. Gosar. I thank the gentleman. The gentlewoman from
California, Ms. Barragan, is recognized.
Ms. Barragan. Thank you, Mr. Chairman. I have spent the
last several years sitting as a City Council member where I had
an oil company that wanted to come into my town, Hermosa Beach,
to drill 34 oil and water injection wells on land and then out
into the Santa Monica Bay.
I have seen time and time again where big oil tries to come
in and take over urban areas and take over areas that are just
causing more environmental pollution. We read about spills
happening all the time, whether they are on land or offshore.
I was very disturbed to hear that the President wanted to
open up the coastlines again to drilling. And I think today we
have heard, I would say, an assault on our Federal lands.
Sometimes I take a look at that stuff and I think that this
Administration's talking points are coming right out of big
oil.
One of the things I am hearing about is something called
energy dominance. Mr. Squillace, they have talked a lot about
this. Can you explain what that means? And do you think it is
something we should strive for on our public lands?
Mr. Squillace. It is an interesting question. I don't know
that I can answer what exactly an energy-dominance means, but I
think it is the wrong word. I don't think any of us should be
looking at dominance. We ought to be looking at being energy-
smart. And energy-smart, to some extent, is about what we have
been talking about today, an all-of-the-above strategy, but one
that recognizes the perils of climate change and the risks that
we face if we continue to develop fossil fuels at a pace that
is simply not sustainable, given the challenges of climate
change that we have talked about.
I think that if we think about it in that way, then it is
appropriate to allow fossil fuel development to decline in an
appropriate way, manage that decline in a responsible way, and
shift our economy so that we are relying more and more on
renewable and other forms of energy that do not cause the
problems that we have seen.
Ms. Barragan. What do you think the impact is going to be
if we start doing more oil drilling on public lands, both to
the environment and to the global climate change problem that
we have?
Mr. Squillace. As I mentioned in my original testimony, I
am not opposed to oil and gas development on public lands, but
it is fundamentally different from oil and gas development on
private lands, because these are our public lands. If we are
going to have it, we need to have appropriate planning to make
sure that we are doing it responsibly.
With all the great technologies that we have right now--we
can do horizontal drilling in ways that allows multiple wells
to be put on a single pad and minimize the footprint on the
public land. But if we do not do sufficient advance planning,
and if we do not do the kinds of environmental analyses that
are required for appropriate development of those resources,
then we lose that opportunity to sort of make these advantages
available to us.
So, I think there is an appropriate way to do it. I do
think we need to recognize it cannot go on forever, that we do
have responsibilities, globally, to deal with the fossil fuel
issue in a timely way. But I think, if we are going to have it,
we can do it responsibly.
Ms. Barragan. Well, thank you. I am proud to be from
California, where we have been leading the charge in moving
toward renewable energies and investing, and knowing that there
is great economic development in that, as opposed to the fossil
fuel industry.
Thank you, I yield back.
Dr. Gosar. The gentleman from New Mexico, Mr. Pearce, is
recognized for his 5 minutes.
Mr. Pearce. Thank you, Mr. Chairman. And I appreciate the
conversation that we are having today, thanks to each one of
our panelists.
Mr. Squillace, you have comments on the second page of your
testimony about the leasing, $2 an acre.
Mr. Squillace. Right.
Mr. Pearce. That section is in there because you feel like
it is inappropriate? You feel like it is sort of a giveaway?
Why is that section there?
Mr. Squillace. So, you are asking about the bonus bids and
the----
Mr. Pearce. No, the $2 an acre if they don't sell a lease,
then it is available for $2 an acre.
Mr. Squillace. Right.
Mr. Pearce. Is that sort of a giveaway to oil and gas, in
your opinion?
Mr. Squillace. If you look at the revenues that come in
from Federal----
Mr. Pearce. No, that is not what I am asking. I am asking
on the $2, is that a giveaway to oil and gas?
Mr. Squillace. I think it is, yes.
Mr. Pearce. Yes, it is value that is available for almost
nothing. So, I wonder, $2 is pretty achievable to people like
you and me. Did you ever go and bid $2 on any of these? It is a
giveaway. Have you bid on these, personally?
Mr. Squillace. No. I know Terry Tempest Williams did bid on
one.
Mr. Pearce. OK, thank you. I appreciate that. It might not
be as big a giveaway, because it was going to require
tremendous investment downstream to actually do something with
that lease, that what you feel like is a giveaway might not be
as much of a giveaway. And if it were, I suspect people--maybe
not you, but people who could afford $2 an acre, which is
almost all of us--might be out doing that, instead of putting
money in the lottery. You have a lot better chance of payoff in
this, rather than on a lottery ticket.
And you had made a comment just a second ago that the
decrease in permitting, the decrease in lease sales, is a
demand issue, and I would point out that the American Energy
Institute just put out that 2016 was the highest use of
gasoline in our record. So, it does not sound like a demand
issue. It sounds like we have drilled enough that we are
producing enough oil that the price of gasoline is coming down,
even though the use is going up. Usually, increased use would
drive the price up, but instead we have increased the amount of
supply. So, I think that maybe your insertion into the record
that it was a demand issue should be rethought at some point.
Now, New Mexico has about 40 percent, somewhere between 30
and 40 percent of its revenues to the government established by
oil and gas. Mr. Flynn, I would like your opinion on the BLM
APD delays that we are seeing there in the state. And I have
worked very much with BLM on those. But from the business
perspective?
Mr. Flynn. Representative Pearce, I think you know it
better than anyone, but just very bluntly, it has a huge impact
on our ability, from a state, to provide basic infrastructure
needs.
Mr. Pearce. How much of the delays?
Mr. Flynn. Well, the delays, as I mentioned in my
testimony, we believe, about $1.5 million in lost Federal
royalty is deferred each day, as a result of the backlog. And
approximately $800,000 deferred in state severance----
Mr. Pearce. Yes. Just the interruption in a lease sale that
stopped $70 million from coming to the state because of a
protest filed by one of the environmental groups. It was
eventually thrown out, but that $70 million was 10 percent of
our shortfall. Ten percent of the shortfall for the state of
New Mexico--so, yes, we get a little bit energetic when we are
talking about the issues.
Now, many people are saying in the agency that they just
need more staff. Can you address that question for New Mexico?
Mr. Flynn. Sure. Representative Pearce, I think briefly,
first of all, a previous study showed that a pilot program that
had been enacted a few years ago to provide Federal permit
streamlining pilot project created additional funding that
allowed 140 additional staff members to be hired for seven
pilot offices, including two offices in New Mexico: the
Farmington office and the Carlsbad office.
And while they were able to increase the amount of
applications, the APDs that they processed, by 10 percent, the
number of days it took to actually process the APDs increased.
So, they got less efficient by 40 percent.
Mr. Pearce. And the same people working in the same agency
took much longer. My study showed it took about double.
Ms. MacGregor, I know that you recently--and whatever Mr.
Lamborn from Colorado said about your performance, it seemed to
go well, so I am going to identify with that also, but thanks
for visiting our state. I look forward to working with you,
because these delays really do affect us.
I live 3 miles from the Texas border. I can see all those
rigs running over there in Texas that should be running in New
Mexico, but they cannot get the APDs permitted. Just the
companies that got the option to drill there are here. And I
can see the effect of the permitting delays.
So, it is not quite a level playing field. People just
choose the best economic opportunity. That is, we will go drill
on private land instead of trying to wrestle around with the
government. And that hurts states like New Mexico, and it hurts
the Federal Government, and it hurts our job base in New
Mexico.
Mr. Chairman, I have extended past my time. Thanks for your
indulgence. I yield back.
Dr. Gosar. I thank the gentleman. The gentleman from
Virginia, Mr. Beyer, is recognized for his 5 minutes.
Mr. Beyer. Thank you, Mr. Chairman, very much.
Ms. MacGregor, I have seen reports that the Interior
Department is considering recombining the Bureau of Ocean
Energy Management (BOEM) with the Bureau of Safety and
Environmental Enforcement (BSEE). The reason BOEM and BSEE
exist was because of the Deepwater Horizon tragedy of 2010. The
agency that existed at that time was the Minerals Management
Service, and when that agency was not mired in scandal, it was
dealing with a sharply conflicting mission: both promoting and
regulating offshore drilling.
So, the creation of a dedicated offshore safety regulator
separate from a leasing agency was one of the key
recommendations of the President's Oil Spill Commission.
Senator Bob Graham, who is one of the co-chairs of the
Commission, was quoted as saying, when he heard of this news of
the potential BOEM-BSEE combination, ``I have heard no
indication of why we are doing this. It is just 7 years after
this enormous disaster, and this was one of the key steps in at
least mitigating the chances of repetition.''
And I believe it cannot be to address problems with
permitting. Just look at the first 5 months of this year,
January through May--BSEE has approved 324 permits with only 20
permits pending, so it sounds like firing on all cylinders.
What is the evidence that you have that shows that
combining BOEM and BSEE would be in the public's interest?
Ms. MacGregor. Sir, thank you for that question. When it
comes to the offshore, we obviously want to make sure that we
are ensuring that the bureaus that both lease and conduct
inspections are doing their jobs and doing them well.
When it comes to the split of the former MMS into,
actually, three agencies, the original split broke out the
Office of Natural Resources Revenue, known as ONRR, which was
split, and then left BOEMRE, which eventually was itself split
into two separate agencies.
As we look at reorganization broadly within the Department,
the discussion on splitting BOEM and BSEE, and whether or not
they should be recombined is still ongoing and internal. But I
hear your comments and I am more than happy to take those back
with me today.
Mr. Beyer. Great, thank you. And Secretary Zinke, when he
was here last week, talked about thinking massive
reorganizations, and everything should be on the table. But
please remember the reason they were split in the first place,
because you do not have the fox guarding the hen house.
Utah Governor Gary Herbert sent a letter to Ed Robertson,
the Utah Director of the BLM, asking the Bureau not to sell
certain oil and gas leases next to Zion National Park. In his
letter, Governor Herbert said, ``Visitors come from around the
world to see the lush landscape surrounded by towering, iconic
sandstone slips at Zion National Park. And the preservation of
this unique experience is important to the surrounding
communities. Their economy is dependent upon recreation and
tourism.''
So, Dr. Nelson, do you believe that other local communities
and economies and communities in Utah that similarly depend on
recreation and tourism should have a say in how the oil and gas
leases in their local communities are made?
Dr. Nelson. Thank you for that question. Yes. I provided in
both my written testimony and my opening remarks today, Utah is
a natural resource state, and that includes our national and
state parks. We absolutely believe in balancing use and
conservation, and we also are a very collaborative state,
working with local communities.
I think our key position here is that this occurs best when
permitting happens at the state level, that you have that local
interest, you have that local control. So, assigning primacy
for the permitting process associated with APDs is best managed
through the state. And not to diminish the importance of BLM or
DOI in the overall management of multi-use of our Federal
lands, but just to provide for that more efficient, local
assessment for these permitting processes.
Mr. Beyer. Well, I heartily agree with you on the need for
local input and local engagement. How do you balance the rights
of Americans who live across the country, the other 49 states,
who own that land and have, essentially, their rights
represented by the Federal agencies?
Dr. Nelson. That is a big question to answer. I guess that
one thing I would point out is that federally managed lands,
the preponderance of those lands are different across the
country. Utah is 70 percent; you go up to Alaska, it is even
higher. So, we are limited in our ability to create revenues
across those federally managed lands. It is a condition that
does not exist for all states across the country. I think that
we have to take that into consideration, as well.
Mr. Beyer. And part of that taking into consideration is
those lands were federally owned at the time Utah was admitted
as a state, and Alaska, too.
Thank you, Mr. Chairman. I yield back.
Dr. Gosar. I just want her to answer the gentleman's
question that it is also multiple use, and that was one of the
dictations on behalf of having public lands in the West that
are very different than east of the Mississippi.
The gentleman from Colorado is recognized for his 5
minutes.
Mr. Tipton. Thank you, Mr. Chairman, and thank the panel
for taking the time to be able to be here.
Ms. MacGregor, I would like maybe you to be able to speak a
little bit to Dr. Nelson's suggestion of having some of the
permitting going over to the states.
Right now, when the Department of the Interior or the BLM,
when you issue a permit, do all environmental requirements have
to be complied with if there is a choice to be able to move
forward with drilling?
Ms. MacGregor. Absolutely.
Mr. Tipton. So, Dr. Nelson, if you had the right to be able
to do what you are suggesting, that would still be applicable
to you, as well, wouldn't it?
Dr. Nelson. Absolutely.
Mr. Tipton. So, we would still have the responsible energy
development, making sure that we are doing it in an
environmentally sensitive way.
I was interested when I was reading your testimony, Ms.
MacGregor, talking about some of the multiple use. I have the
bill, ``Planning for America's Energy Future Act,'' which
enumerates all of the above, literally, in the bill. Chairman
Gosar has a bill for streamlining some of the permitting that
we are seeing. We are seeing now multiple use, not just
traditional fuel sources, but also, as I believe you noted,
some of the non-traditional sources being developed on the
public lands, as well.
But I do find it interesting, listening to some of the
comments from our colleagues. The Ranking Member is an example,
talking about multiple use on the lands. If you lease 1,000,
5,000 acres, do they put up a big fence so that nobody can
hike, hunt, or fish on those lands?
Ms. MacGregor. Not to my knowledge.
Mr. Tipton. So, there is still multiple use, even while we
have a responsible energy development, be it traditional or
non-traditional resources?
Ms. MacGregor. Yes, there is, sir. And I think some of the
witnesses can speak more to the technologies that are available
from multi-well pads to do extended-reach drilling and minimize
impacts to surface acreage.
Mr. Tipton. Dr. Nelson, maybe you would like to be able to
speak to that, as well, in terms of lessening the impact. My
friend from Colorado, a fellow Coloradoan, was talking about
lessening the impact. Have we developed technologies to be able
to not only responsibly access resources, but to be able to
minimize the impact on public lands?
Dr. Nelson. Yes. I would say the same technologies that
really have led to the oil and natural gas revolution that we
have today significantly limit surface impacts. In fact, Utah
is currently looking at how it applies rules for horizontal
drilling to, of course, assure we have all of those same
environmental standards in place. But what we are seeing is
absolutely fewer drilling rigs required, and fewer pads being
developed for drilling, as a result of the advent of these
technologies.
Mr. Tipton. And I appreciate that. I had an opportunity to
be on the Piceance in Colorado. And we were looking up to BLM
land. They said, ``We have a lease up there.''
And I said, ``Well, when are you planning on drilling?''
They said, ``We are already producing.'' But it was from
one well pad. No surface development was going on, but still
being able to responsibly develop that resource.
Ms. MacGregor, on a little different topic here, it is
going to the MLPs, Master Leasing Programs. Essentially, that
is viewed as a narrow RMP, intended to be able to address some
of the specific land-use conflicts prior to leasing and
drilling.
Would you maybe describe a little bit for us in what ways
are the MLPs duplicative of the RMPs?
Ms. MacGregor. What I can say, sir, is in the wake of the
U.S. Congress making a determination and passing legislation to
throw back the Planning 2.0 regulation, we are taking an in-
depth look at our planning process, because we recognize, no
matter what project members have on either side of the aisle,
the planning process at the Department takes, on average, 5 to
7 years, often more.
As we look at planning in the Department, and consider how
we can do things more efficiently, we are evaluating whether
the Master Leasing Program is an added step on top of an
existing planning process. Does it actually increase
efficiencies, or is it another step? And we are looking at
that, as well as many other issues.
Mr. Tipton. Well, great. And I was a little encouraged,
because that is one thing that we have heard out of a number of
our constituents, in terms of some of the different time
frames. We have duplicative regulations, Mr. Chairman, that I
believe your bill that I am co-sponsoring will be able to
streamline those regulations, look at the duplicative overlap,
and be able to do that in a responsible way.
I appreciate all of you taking the time to be able to be
here. My time has expired.
I yield back.
Dr. Gosar. I thank the gentleman from Colorado. The
gentleman from Louisiana, Mr. Graves, is recognized for 5
minutes.
Mr. Graves. Thank you, Mr. Chairman.
Ms. MacGregor, I would like to clarify some comments that I
made earlier from the dais up here. The contribution of Federal
lands to our overall energy production, particularly in the oil
and gas portfolio, it is my understanding that we have seen a
reduction--and I want to be clear in what I am saying--in the
percentage of oil and gas that our Federal lands are providing
to the overall domestic energy production.
Is that your understanding, for example, over the last
several years?
Ms. MacGregor. Specifically in Fiscal Year 2016 we did see
a downtick in both natural gas and oil production on Federal
lands.
Mr. Graves. I am looking at the memo here for the
Committee--between Fiscal Year 2010 and Fiscal Year 2015,
Federal crude production fell from 36 percent of total
production to 21 percent of total production.
Number two, again, just want to make sure I am getting this
right. I am making reference to the memo. At the end of Fiscal
Year 2016, the BLM oversaw a total of 41,143 leases across the
country. This is the lowest number of Federal leases since
Fiscal Year 1985. Is that your understanding?
Ms. MacGregor. That is correct.
Mr. Graves. Thank you.
Mr. Flynn, changing gears a little bit, could you comment
or respond perhaps to comments I have heard in the past about
folks saying that Federal lands are something that all
Americans should enjoy, therefore states that host energy
production on Federal lands should not benefit from the Mineral
Leasing Act revenue-sharing formula?
Mr. Flynn. Mr. Chair, Representative, I think states that
are burdened with the production should absolutely be deriving
benefits from it. In all honesty, while everyone should be part
of the debate, I think that people who are living closest to
the activity should have the loudest voice, in moving forward.
I think, from an industry perspective, we wholeheartedly
respect and work collaboratively with the communities that we
operate in.
Mr. Graves. So, the communities that host it and those that
are closest should have the biggest voice and should share in
the revenues. Is that accurate, I am restating what you said?
Mr. Flynn. Yes.
Mr. Graves. Ok. And number two, the United States benefits,
I think, to the tune of approximately 10 percent under the
Mineral Leasing Act, because of the 40 percent that goes to the
reclamation fund. Do you think that that is an appropriate
return on investment for the Federal Government?
Mr. Flynn. Mr. Chair, it is really not my place to
determine. I will leave it up to you to figure it out.
Mr. Graves. All right. That is fine.
Mr. Flynn. We want to do our fair share to make sure you
are getting a fair return on the investment.
Mr. Graves. All right. Dr. Nelson, do you care to comment
on that same question?
Dr. Nelson. I think I share the same sentiment as Mr.
Flynn. I guess the one thing I would add is that in states that
are heavily burdened with Federal lands--and I say burdened
because just often the economic opportunities are limited
because of those lands--that consideration needs to be given to
how royalties are assigned to states that have more limited
economic opportunities.
Mr. Graves. But you also have benefit from tourism and
other things, as a result of national parks and other Federal
facilities.
Dr. Nelson. Correct, yes.
Mr. Graves. OK. And, by the way, the entrance fees from
those national parks, as I understand, go right back into those
national parks, and are reinvested in maintaining those
resources.
So, Ms. MacGregor, can I ask you a question? I think that
Mr. Flynn and Dr. Nelson just made very convincing comments
about the relationship between production and revenue sharing.
Can you help me understand or distinguish between offshore
production and onshore?
Just applying Mr. Flynn's comment about proximity and
hosting and the loudest voice, should offshore states be
treated in a disparate manner?
Ms. MacGregor. Congressman Graves, I think I know where you
are going with this.
[Laughter.]
Mr. Graves. I am pretty sure you recognized it about 5
minutes ago, but go ahead.
Ms. MacGregor. Federal revenues from oil and natural gas
development are absolutely critical to our budget, and in so
many different ways lend themselves to various initiatives
throughout the government. I believe also with the Land and
Water Conservation Fund, acquisition of Federal lands, as well.
Mr. Graves. Which is derived from offshore energy
production, which means that other states are benefiting more
from offshore energy production off the coast of Louisiana than
actually the state of Louisiana.
Ms. MacGregor. I think the entire United States benefits
from offshore energy production.
Mr. Graves. And other states disproportionately benefit
from it.
Ms. MacGregor. I can't speak to that. But, tough choices
were made in this budget. This is what a balanced budget looks
like. But I am aware that revenue sharing is really important
to coastal restoration and a variety of activities in the state
of Louisiana, and we are committed to----
Mr. Graves. Under our state's constitution, any revenue
sharing dollars are committed to the restoration of the coast.
And I know that you are sitting there smiling, because that
red light is on----
[Laughter.]
Mr. Graves. I have so much more to talk about, but I want
to thank you all for your comments. I yield back.
Dr. Gosar. I thank the gentleman. I like the tact that he
eventually got back to where we thought he was going to go with
that question.
The gentlewoman from Wyoming is now recognized for 5
minutes.
Ms. Cheney. Thank you, Mr. Chairman. I would like to thank
all the witnesses for being here today. And, in particular, Ms.
MacGregor, I wanted to thank you. I can't tell you how
refreshing it is to have somebody who is in the executive
branch, who clearly has such a firm understanding of these
issues, and to know that you have been out in Casper and in
Carlsbad, looking at the challenges we are facing, that is very
appreciated.
As you well know, we have spent a large part of the last 8
years, and even beyond, dealing with a real disconnect between
Washington and the policies that were made here and what is
happening on the ground.
I wanted to ask if you could continue a little bit in terms
of the question that Mr. Soto asked, but then you were cut off,
and that is I appreciate hearing both from Secretary Zinke and
from you today about the steps that are being taken to deal
with the backlog of APDs. Could you talk about, in terms of in
the field offices, as you are looking at the electronic
permitting process, some of these Internet-based solutions, how
is that translating on the ground? What steps will also include
perhaps moving people?
In Wyoming, in particular, I know we have shifted folks
from our Buffalo office to the Casper office. We really
appreciate the change in policy, but have yet to see a real
breaking of the backlog. Could you talk a little bit more
specifically about, on the ground, how this will affect the
movement of the APDs?
Ms. MacGregor. Absolutely. And getting out there was so
helpful, to see what our folks and what the state is doing--you
know, Wyoming is an energy powerhouse, and we want to see it
stay that way. But we recognize that we need to work better
with our state and local partners to make sure that we are
reducing time frames when it comes to the permitting backlog,
and dealing with a variety of the different processes we deal
with that manage the lands that border your state and local
communities.
When it comes to staffing, I think that is part of the
recipe to dealing with some of this. BLM-wide, we have 325
people working on permitting across all BLM offices, but there
are currently 90 vacancies.
So, what we are doing, in accordance with the Secretary's
priorities when it comes to energy exploration and production
on Federal lands, we are looking right now at our top-five
busiest offices, and one of those is Casper. Casper, I think,
is perhaps close to number one. And we are recruiting right now
to fill vacancies that are needed, to make sure that we are
getting staffing out to the front lines--another one of
Secretary Zinke's priorities. We are trying to hire out where
we need the individuals to get through this workload.
And, I find the workload to be inspiring, because that is
just good news for the people of Wyoming and for our entire
country. But we also recognize that when folks talk about
permits not being used, they do expire after 2 years, and we do
receive a $9,500 fee for every single permit that is filed.
So, we are looking to make sure those resources stay where
they are needed, and that we have some mobility within field
offices so that, if we are doing things online, maybe Buffalo
folks who might not be as busy can help folks in Casper, or we
could maybe grow that to even more nationwide movement, so that
folks do not have to fly in just to help fix backlogs, and we
can be more nimble to the variety of development that occurs in
accordance with the economics and geology of a different area.
Ms. Cheney. Thank you. And in terms of a related issue, the
planning process--I was very pleased that we were able to pass
the repeal of Planning 2.0 and have the President sign it.
Could you talk a little bit more about how that planning
process is going to be focused on ensuring we get more local
voices into the whole land use management process, as well?
Ms. MacGregor. Absolutely. Another priority of the
Secretary is restoring trust, especially in the West, for state
and local communities that we have to work with, day in and day
out, because they actually feel the brunt of the choices made
in Washington on lands out in the West.
The Planning 2.0 process aimed to do a lot of things, but
did reduce some of the time frames for those communities to
have public comment. So, I think, from the get-go, we are going
to work with our state and local communities, get their
feedback--they clearly will have thoughts on how we can improve
our Federal planning process.
But we are also asking our team to think broadly and think
differently, and come up with bold new ideas that we can take
and get help with other Federal partners to make things happen
a little bit more quickly.
I am hoping that we can be successful here, because,
frankly, having a planning process that takes 5 to 7 years--and
in some cases there are examples of much more--that is not a
workable solution for anyone. We need to be better at working
with these communities, so that we can get these uses up and
have the land managed better.
Ms. Cheney. Great. Thank you very much.
Thank you.
Dr. Gosar. I thank the gentlewoman from Wyoming, and thank
you for bringing up, Ms. MacGregor, that there are plenty of
vacancies that need to be filled. In order to do the work
properly we need to get those filled, so I would nudge a notice
to our Senate colleagues to get those actually confirmed and
filled.
I thank the witnesses for their valuable testimony and the
Members for their questions. The members of the Committee may
have additional questions for the witnesses, and we will ask
you to respond to those in writing.
Under Committee Rule 3(o), the members of the Committee
must submit witness questions within 3 business days following
the hearing, and the hearing record will be held open for 10
days for these responses.
If there is no further business, without objection, the
Subcommittee stands adjourned.
[Whereupon, at 11:49 a.m., the Subcommittee was adjourned.]
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