<DOC>
[105th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:44388.wais]
OVERSIGHT FIELD HEARING ON BUREAU OF LAND MANAGEMENT AND U.S. FOREST
SERVICE OIL AND GAS REGULATIONS REGARDING ACCESS AND PERMITTING ISSUES
=======================================================================
OVERSIGHT HEARING
before the
SUBCOMMITTEE ON ENERGY
AND MINERAL RESOURCES
of the
COMMITTEE ON RESOURCES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
FIRST SESSION
on
__________
MONDAY, JUNE 30, 1997, CASPER, WYOMING
__________
Serial No. 105-50
__________
Printed for the use of the Committee on Resources
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44-388 CC WASHINGTON : 1997
------------------------------------------------------------------------------
For sale by the U.S. Government Printing Office
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COMMITTEE ON RESOURCES
DON YOUNG, Alaska, Chairman
W.J. (BILLY) TAUZIN, Louisiana GEORGE MILLER, California
JAMES V. HANSEN, Utah EDWARD J. MARKEY, Massachusetts
JIM SAXTON, New Jersey NICK J. RAHALL II, West Virginia
ELTON GALLEGLY, California BRUCE F. VENTO, Minnesota
JOHN J. DUNCAN, Jr., Tennessee DALE E. KILDEE, Michigan
JOEL HEFLEY, Colorado PETER A. DeFAZIO, Oregon
JOHN T. DOOLITTLE, California ENI F.H. FALEOMAVAEGA, American
WAYNE T. GILCHREST, Maryland Samoa
KEN CALVERT, California NEIL ABERCROMBIE, Hawaii
RICHARD W. POMBO, California SOLOMON P. ORTIZ, Texas
BARBARA CUBIN, Wyoming OWEN B. PICKETT, Virginia
HELEN CHENOWETH, Idaho FRANK PALLONE, Jr., New Jersey
LINDA SMITH, Washington CALVIN M. DOOLEY, California
GEORGE P. RADANOVICH, California CARLOS A. ROMERO-BARCELO, Puerto
WALTER B. JONES, Jr., North Rico
Carolina MAURICE D. HINCHEY, New York
WILLIAM M. (MAC) THORNBERRY, Texas ROBERT A. UNDERWOOD, Guam
JOHN SHADEGG, Arizona SAM FARR, California
JOHN E. ENSIGN, Nevada PATRICK J. KENNEDY, Rhode Island
ROBERT F. SMITH, Oregon ADAM SMITH, Washington
CHRIS CANNON, Utah WILLIAM D. DELAHUNT, Massachusetts
KEVIN BRADY, Texas CHRIS JOHN, Louisiana
JOHN PETERSON, Pennsylvania DONNA CHRISTIAN-GREEN, Virgin
RICK HILL, Montana Islands
BOB SCHAFFER, Colorado RON KIND, Wisconsin
JIM GIBBONS, Nevada LLOYD DOGGETT, Texas
MICHAEL D. CRAPO, Idaho
Lloyd A. Jones, Chief of Staff
Elizabeth Megginson, Chief Counsel
Christine Kennedy, Chief Clerk/Administrator
John Lawrence, Democratic Staff Director
------
Subcommittee on Energy and Mineral Resources
BARBARA CUBIN, Wyoming, Chairman
W.J. (BILLY) TAUZIN, Louisiana CARLOS ROMERO-BARCELO, Puerto Rico
JOHN L. DUNCAN, Jr., Tennessee NICK J. RAHALL II, West Virginia
KEN CALVERT, California SOLOMON P. ORTIZ, Texas
WILLIAM M. (MAC) THORNBERRY, Texas CALVIN M. DOOLEY, California
CHRIS CANNON, Utah CHRIS JOHN, Louisiana
KEVIN BRADY, Texas DONNA CHRISTIAN-GREEN, Virgin
JIM GIBBONS, Nevada Islands
------ ------
Bill Condit, Professional Staff
Sharla Bickley, Professional Staff
Deborah Lanzone, Democratic Counsel
C O N T E N T S
----------
Page
Hearing held June 30, 1997....................................... 1
Statements of Members:
Cubin, Hon. Barbara, a Representative in Congress from the
State of Wyoming........................................... 2
Prepared statement of.................................... 4
Statements of witnesses:
Abbey, Robert, Acting State Director, Bureau of Land
Management, Colorado....................................... 10
Prepared statement of.................................... 107
Basko, Donald, Supervisor, Oil and Gas Conservation
Commission................................................. 34
Letter from Mr. Basko to Mr. Al Pierson.................. 155
Belton, Terry, Rocky Mountain Oil and Gas Association........ 57
Prepared statement of.................................... 190
Carter, James W., Chairman, Public Lands Committee,
Interstate Oil and Gas Compact Commission.................. 39
Prepared statement of.................................... 161
Fancher, George H., Jr., Owner, Fancher Oil Company.......... 63
Prepared statement of.................................... 94
Flora, Gloria, Supervisor, Lewis and Clark National Forest,
Forest Service, U.S. Department of Agriculture............. 12
Prepared statement of.................................... 92
Guy, Gina.................................................... 14
Prepared statement of.................................... 93
Hoskins, Robert, Member of the Board of Directors, Wyoming
Wildlife Federation........................................ 76
Prepared statement of.................................... 211
Magagna, Jim, Director of Federal Land Policy, State of
Wyoming.................................................... 36
Prepared statement of.................................... 152
Martin, John W., President, McMurry Oil Company, Independent
Petroleum Association of Mountain States................... 60
Prepared statement of.................................... 202
Nance, Robert, President and CEO, Nance Petroleum Corporation 54
Prepared statement of.................................... 101
Pierson, Alan, State Director, Bureau of Land Management,
Wyoming.................................................... 7
Prepared statement of.................................... 99
Smith, Robin M., Senior Environmental Specialist, Chevron USA
Production Company......................................... 51
Prepared statement of.................................... 186
Throop, Tom, Executive Director, Wyoming Outdoor Council..... 78
Prepared statement of.................................... 97
Tipton, Tim N., Production Manager, Rocky Mountain Region,
Marathon Oil Company....................................... 49
Prepared statement of.................................... 166
Additional material supplied:
Briefing Paper--Oil and gas regulations regarding access and
permitting issues.......................................... 5
Dept of the Interior, Office of the Solicitor, letter to
Director, Bureau of Land Management........................ 115
OVERSIGHT FIELD HEARING ON BUREAU OF LAND MANAGEMENT AND U.S. FOREST
SERVICE OIL AND GAS REGULATIONS REGARDING ACCESS AND PERMITTING ISSUES
----------
MONDAY, JUNE 30, 1997
U.S. House of Representatives, Subcommittee on
Energy and Mineral Resources, Committee on
Resources, Casper, WY.
The Subcommittee met, pursuant to notice, at 10 a.m., at
the Basko Building, 777 West First Street, Casper, Wyoming,
Hon. Barbara Cubin [Chairwoman of the Subcommittee] presiding.
Mrs. Cubin. If the first panel would please take your
places at the table.
Sorry we're starting late. I had every intention of getting
here early. And my son and I set the burglar alarm off at our
house and had trouble trying to get it fixed so that the police
wouldn't take us up to jail, instead of here.
The Subcommittee on Energy and Mineral Resources will come
to order. I want to thank everyone for being with us today.
First, I'll introduce myself. I'm Barbara Cubin, Chairman
of the Subcommittee on Minerals and Energy of the Committee on
Resources; Bill Condit, and Sharla Bickley.
I have my staff here. Patty McDonald is my chief of staff.
And then my district representatives who are stationed here in
Casper, Vivian Stokes and Mantha Phillips.
So if you have any questions throughout the day and you
see--and you see staff around, feel free to ask anyone for
anything that you might need.
I'm not--I want to get the hearing started and go straight
through as quickly as we can. We have a lot of witnesses to
hear from, and all of their testimony is quite pertinent.
I thank everyone for submitting their testimony earlier. I
have, in fact, read everyone's testimony and feel prepared to
go on.
I will--after the first two panels, I will call a recess
for about 15 to 20 minutes. And then we'll get right back at
it. So if you want to plan around that somehow, that will be
fine. So I figure that recess will be from 12:30--roughly--
around 12:30 to 1. We'll be gone 20 minutes and then start
right back up.
I also wanted you to know that, as a matter of rule, I
always swear in all the witnesses that testify in front of this
Committee. So I--and I always tell people that because I don't
want them thinking that--that we think anyone isn't going to
tell the truth. We know everyone is going to tell the truth.
But it's just good practice, in my opinion, to swear in all of
the witnesses.
STATEMENT OF THE HON. BARBARA CUBIN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WYOMING
Mrs. Cubin. Today, the Subcommittee on Energy and Mineral
Resources meets to continue oversight of Federal oil and gas
leasing programs. During the last Congress, the Subcommittee
held two hearings on our Nation's energy policy, or lack
thereof, I should say, and began a review of the role that our
public lands and the Outer Continental Shelf play in providing
a domestic supply of crude oil and natural gas.
The Committee on Resources, of which this Subcommittee is a
part, is the panel of jurisdiction within the House of
Representatives which oversees Federal land management by the
Department of the Interior agencies and by the Department of
Agriculture's Forest Service.
The Subcommittee has jurisdiction over the laws governing
the disposition of the Federal mineral estate, from leased
commodities like oil and gas, coal and trona, to metallic
minerals like gold, silver, copper claimed under the mining
law.
We are what I call an upstream Subcommittee. What I mean by
that is that the legislation that--we have jurisdiction over
the legislation that involves mineral leasing issues and access
to one's lease for exploration and production. But downstream
issues such as pipeline rights-of-way and EPA-imposed
regulation of emissions and so on, for example, are not under
the jurisdiction of this Subcommittee.
Obviously, it is the total regulatory framework that we
live under which impacts public resource use decisions. And
often the tail wags the dog. For example, someone might choose
not to develop a mine site because of future potential
liability that might come with reworking the mine; And
therefore, some of our good mineral deposits are never, ever
developed. And the Congress, as a whole, is the one that has to
address the issues of the minerals and of the access to them.
But this Committee will focus on the piece of the action
that we have--namely, should this part of public lands or that
part of the OCS be open to mineral leasing, and if so, under
what type of regulation of access and permitting.
And that's why I've called this hearing, to further our
inquiry in finding ways to decrease our dependency on foreign
sources of oil and gas. And where better to look than our
public lands?
These issues facing both Congress and the executive branch
are not easy to resolve. Finding and maintaining a proper
balance in the exploitation of mineral resources versus
potentially competing uses for the surface estate is an age-old
problem. Ownership of the subsurface rights was dominant in
such--in a lot of disputes over history, as a matter of fact,
as is evidenced by the corollary to the biblical passage, ``The
meek shall inherit the earth, but not the mineral rights.''
Clearly, attitudes have shifted toward requiring oil and
gas operators to do more to protect surface values in the
exercise of their mineral rights. I think that's a good thing.
And I don't think that anyone involved in the entire issue
would say that that wasn't a good thing.
But at what point has the pendulum swung too far? The
combination of de facto wilderness areas established in the
circumvention of the public participation process mandated by
Congress and the extraordinary costs associated with
environmental assessments that ripen into full-blown
environmental impact statements at the drop of a hat, or at the
drop of a well-placed comment, together with ever-increasing
mitigation requirements, proliferation of no surface occupancy
lease stipulations, and other costly measures, sum to a high
hurdle for our domestic producers to jump over in order to
invest in our public lands.
Are there ways to achieve the same, or even better, level
of protection of wildlife, air and water, and important
cultural resources without scaring away investment and pricing
the independent producer out of the picture?
I, like many others, was skeptical, to say the very least,
when Secretary Babbitt first announced the Green River Basin
Advisory Committee idea 2 years ago. But he, of course, went
right ahead, anyway. He often doesn't call me for my opinion on
what he does, and I often don't call him.
[Laughter.]
Mrs. Cubin. Now, although a full consensus was reached for
the recommendation of eco-credits against one's royalty
obligation for going above and beyond the call of duty, so to
speak, Mr. Babbitt seems quite reluctant to support the idea of
a pilot project to test out the concept.
But this idea was agreed to by Colorado's Governor as well
as Wyoming's. Why? Because the Department of Energy's economic
model calculates increased revenues to the States and the
Federal treasury, with eco-credits production coming on-line
sooner than it might otherwise.
Instead, the Interior Secretary and his solicitor appear to
be ready to formally reject the recommendation, signaling that
the Mineral Leasing Act constrains his ability to offer this
relief administratively.
But mind you, the Secretary is poised to stretch his
authorities to the breaking point when it suits his policies.
For example, he's ready to sell Federal oil rights right out
from underneath existing leases, escrow those funds, and buy up
old-growth redwoods threatened by the chainsaw and call it a
FLPMA-authorized exchange. It didn't wash in Congress. There
was no public input on it, but he proceeded, anyway. It shows
you the length to which the Secretary will go to have creative
interpretations when it so suits his mood.
So rather than hiding behind the so-called cost-recovery
mandates, let's get the job done. If we need to amend the
Mineral Leasing Act, or any other Federal statute, for that
matter, to implement consensus good ideas, then we can do that.
I'm hereby putting the ball in the Secretary's court. He
should send Congress a draft bill, and then the GRBAC folks
will have done something truly praiseworthy. Their investment
in time, energy, and good will truly should reap dividends
because it was done by very bright people who know the issue
and everyone involved agreed on the results.
[The prepared statement of Hon. Barbara Cubin follows:]
Statement of Hon. Barbara Cubin, a Representative in Congress from the
State of Wyoming
Today the Subcommittee on Energy & Mineral Resources meets
to continue oversight of Federal oil and gas leasing programs.
During the last Congress the Subcommittee held two hearings on
our Nation's energy policy, or lack thereof, and began a review
of the role that our public lands and Outer Continental Shelf
play in providing a domestic supply of crude oil and natural
gas. The Committee on Resources, of which this Subcommittee is
a part, is the panel of jurisdiction within the House of
Representatives which oversees Federal land management by
Department of the Interior agencies and the Department of
Agriculture's Forest Service.
The Subcommittee has jurisdiction over the laws governing
the disposition of the Federal mineral estate--from leased
commodities like oil and gas, coal and trona, to metallic
minerals like gold, silver and copper claimed under the mining
law. We are an ``upstream'' subcommittee in that legislation
involving mineral leasing issues and access to one's lease for
exploration and production are in our bailiwick, but
``downstream'' issues such pipeline rights-of-way and EPA-
imposed regulation of refined emissions, for example, are not.
Obviously, it is the total regulatory framework that we
live under which impacts public resource use decisions, and
often the tail wags the dog, so to speak. For example,
potential Superfund liability years hence may well influence a
mining company to stay away from reworking an old mining
district, despite good potential for further ore discoveries.
And the Congress, as a whole, addresses these issues
ultimately. But, this committee must focus on the piece of the
action we do have--namely, should this part of the public lands
or that part of the OCS be open to mineral leasing--and if so,
under what type of regulation of access and permitting?
And that's why I've called this hearing, to further our
inquiry in finding ways to decrease our dependency on foreign
sources of oil and gas--and where better to look than to our
public lands. This issue facing both Congress and the executive
branch, are not easy to solve. Finding and maintaining a proper
``balance'' in the exploitation of mineral resources versus
potentially competing uses of the surface estate is an age-old
problem. Ownership of the subsurface rights was dominant in
such disputes over much of history, as evidenced by the
corollary to the biblical passage, ``The meek shall inherit the
Earth . . . but not the mineral rights!'' Clearly, attitudes
have shifted toward requiring oil and gas operators to do more
to protect surface values in the exercise of their mineral
rights. And, for the most part, that's a good thing. Just look
at the oil patch today versus thirty years ago.
But, at what point has the pendulum swung too far? The
combination of ``de facto'' wilderness areas established in
circumvention of the public participation process mandated by
Congress, and the extraordinary costs associated with
environmental assessments that ``ripen'' into full-blown
environmental impact statements at the drop of a hat (or a
well-placed comment), together with ever-increasing mitigation
requirements, proliferation of ``no surface occupancy'' lease
stipulations, and other costly measures, sum to a high hurdle
for our domestic producers to jump over in order to invest in
our public lands.
Are there ways to achieve the same, or even better, level
of protection of wildlife, air and water, and important
cultural resources without scaring away investment and pricing
out the independent producer? I, like many others, was
skeptical (to say the least) when Secretary Babbitt first
announced the Green River Basin Advisory Committee idea 2 years
ago, but of course he went ahead anyway. Now, although a full
consensus was reached for the recommendation of ``eco-credits''
against one's royalty obligation for going ``above and beyond
the call of duty'' so to speak, Mr. Babbitt seems quite
reluctant to support the idea of a ``pilot project'' to test
out the concept. But, this idea was agreed to by Colorado's
Governor as well as our own. Why? Because, the Department of
Energy's economic model calculates increased revenues to the
States and Federal treasury. With eco-credits production comes
on-line sooner than it might otherwise, if at all.
Instead the Interior Secretary and his Solicitor appear to
be ready to formally reject the recommendation signaling that
the Mineral Leasing Act constrains his ability to offer this
relief administratively. But mind you, the Secretary is poised
to stretch his authorities to the breaking point when it suits
his policies. For example, he's ready to sell Federal oil
rights out from underneath existing lessees, escrow those
funds, and buy up old-growth redwoods threatened by the
chainsaw, and call it a ``FLPMA-authorized exchange.'' It
didn't wash in Congress, but it shows you the length to which
creative interpretations can be had in the Department of the
Interior when the boss wants one.
So, rather than hiding behind so-called cost-recovery
mandates, let's get the job done. If we need to amend the
Mineral Leasing Act, or any other Federal statute for that
matter, to implement consensus good ideas, then we can do so.
I'm hereby putting the ball in the Secretary's court. He should
send Congress a draft bill, and then the GRBAC folks will have
done something truly praiseworthy.
As Governor Jim Geringer said at the Western Governors'
Association meeting last week, ``I'm tired of being up-dated. I
want to do something.''
------
Briefing Paper--Oversight field hearing on June 30, 1997
Casper, Wyoming
Oil and gas regulations regarding access and permitting issues.
The Subcommittee is holding an oversight hearing in Casper,
Wyoming to hear from the regulators, the regulated community
and the public about project-specific and general policies that
effectively prohibit or delay oil and gas exploration and
development on public lands. The Department of the Interior's
Bureau of Land Management (BLM) and the Department of
Agriculture's Forest Service (USFS) are charged with proper
management of these lands in the public interest. But, is the
public well-served by the continuing trend away from promoting
development through a long-standing multiple-use policy toward
one of strict preservation?
Expected Witnesses
The Subcommittee has invited representatives from the
Administration, including a DoI Regional Solicitor, the State
Directors for BLM in Wyoming and Colorado, and the Lewis &
Clark National Forest Supervisor. State interests will be
represented by the Wyoming Office of Lands and Investments, the
Wyoming Oil and Gas Commission and the Interstate Oil and Gas
Compact Commission. Industry and public panels will include
major and independent oil and gas producers and associations
and Wyoming environmental organizations.
Issues
Wilderness
The Federal Land Protection and Management Act of 1976
(FLPMA), Section 603 provided a process for identification of
wilderness study areas (WSAs) on BLM-managed public land by
1991. Since then, the Secretary of the Interior has interpreted
this mandate to include managing all WSAs--whether recommended
suitable or not suitable--as wilderness, in order to maintain
the status quo with respect to a WSA's ``wilderness character''
until the Congress has had opportunity to legislate such areas
as ``designated wilderness,'' (i.e., components of the National
Wilderness Preservation System initially established by the
1964 Wilderness Act). Generally, candidate areas for wilderness
study by BLM had to be greater than 5,000 contiguous
``roadless'' acres or they were dropped from the initial
inventory. Controversy over definitional terms arose during the
winnowing process and were dealt with via BLM policy
directives, principally during the Carter and Reagan
Administrations that led to ``final'' state-by-state
recommendations by BLM and the Secretary through then President
Bush to Congress, few of which have been acted upon.
Now, at the direction of the Secretary, the BLM has
effectively set aside ``faux'' wilderness study areas in
Colorado, at the urging of the Colorado Environmental
Coalition, and without opportunity for public input. Some of
these lands had previously been identified as suitable for oil
and gas leasing with specific surface-disturbance stipulations.
Additionally, under color of ``in-aid-of-legislation'' policy,
Secretary Babbitt has directed BLM not lease public lands
outside WSAs which would be designated Wilderness if H.R. 1500
(Hinchey, D-NY) were enacted. The Subcommittee is concerned
with the effective withdrawal of additional lands in Colorado
and Utah (and likely elsewhere, but not yet identified) outside
of the FLMPA-mandated process.
Because the Mineral Leasing Act of 1920 makes the lease-or-
not-to-lease decision wholly at the discretion of the
Secretary, oil and gas interests which would like to bid at
competitive auction for leases on such lands may lack standing
to sue in court despite the obvious lapses in fair and unbiased
administrative procedures in the creation of the ``faux'' WSAs
policy. Because judicial remedies are thus constrained, a
legislative check on possible abuse of power by the executive
branch is all the more timely. Given the fiscal austerity of
the times and the attendant limitations on BLM's resources, is
the public best served by an agency acting outside the clear
legislative mandate of its organic act (FLPMA) and thereby
increasingly ignoring its legitimate tasks and responsibilities
as a land (and minerals) manager?
Permitting Delays
Uncertainty plagues the Federal leasing and post-lease
permitting process alike. The domestic industry's continued
survival is dependent upon smart investment decisions and
responsible development. Producers that choose to invest in and
develop Federal lands over private lands or prospects overseas
need defined time-frames and consistent, cost-effective
regulations in order to succeed and thereby provide the public
fair its share of revenues. The National Environmental Policy
Act (NEPA) is the framework by which permitting for these
activities is decided. The NEPA process requires an
environmental evaluation, usually in the form of an
Environmental Assessment (EA) for proposals likely to have
little or no impact, or an Environmental Impact Statement (EIS)
for major Federal actions affecting the human environment, and
is undertaken to document the likely impacts of development on
Federal lands.
One example of permitting and process delays is the is Cave
Gulch-Bullfrog-Waltman Natural Gas Development Project in
Natrona County, Wyoming. The estimated production potential
from the field ranges from 600 billion to one trillion cubic
feet of natural gas and planned development would indude about
160 gas wells drilled in the next 10 years. Although the field
was discovered in 1959, industry interest heightened in 1994 at
which time two separate EAs were initiated. One of the EAs was
completed with a Finding of No Significant Impact (FONSI) after
8 months of review. The other EA was suspended after twelve
months later. Because industry's interest in the field
continued to grow as the gas discovery was delineated, BLM
initiated an EIS. Eighteen months and over one-half million
dollars later, the EIS was finalized with the same mitigation
measures required by the first EA. The Final EIS was published
on June 19th and focused on managing raptor nesting and on air
quality issues associated with natural gas processing. Issues
of interest to the Subcommittee include questions of
``balance'' by the agency in reviewing the Nation's needs and
desires for ``clean'' natural gas as a fuel, the huge reserve
potential of this field, and sensitive wildlife habitat in the
area. In other words, would implementation of the stipulations
derived from the initial EA allowed more timely development of
a resource which this Administration professes to be in favor
of utilizing over less clean burning fuels?
Another area of concern is the Draft EIS for oil and gas
leasing in the Lewis and Clark National Forest in Montana. The
Forest Service has released a draft EIS with an alternative
which would outright preclude exploration and development of
almost one-quarter of the available acres (those not in
designated wilderness or wilderness study areas), with the
remaining acreage restricted by a no surface occupancy
stipulation or other restrictive conditions. The Governor of
Montana has requested the Forest Service select a more balanced
approach to the alternative selected in the draft EIS. A record
of decision (RoD)is expected early this fall.
Cost Recovery and Eco-royalty Relief
The Department of the Interior Solicitor has issued a
memorandum opinion on BLM's mandate for recovery of agency
costs associated with permissive uses of public lands,
specifically minerals development. Cost recovery is the method
by which the Federal Government establishes fees with respect
to transactions involving the public lands to recover the
reasonable processing costs of services. A recent speech given
by a Solicitor's office representative to a BLM workshop
compared the cost recovery initiative to that of owning,
licensing and driving a car. The analogy recognized that if you
follow all the requirements and pay the fees for registering,
inspecting and licensing a car, then government sanctions your
activity, i.e. you get to drive your car! However, this facile
comparison fails to recognize the common practice of industry
paying fees and costs associated with environmental studies,
then facing uncertainty and inordinate delays for oil and gas
leases and permits, not to mention the proportion of projects
that are denied. Would the public accept such treatment from
automobile insurers and state governments if the analogy to
minerals permitting cost recovery were exact? Clearly, not,
with the possible exception of long suffering residents of the
District of Columbia who have become used to inordinate delays
and ineffective government. Does the cost recovery formula
consider the current practice whereby industry pays for the
costly studies associated with the EIS or EA? The oil and gas
industry should expect to pay their fair share of these costs
for the right to lease, explore and develop public lands, and
shouldn't the Federal Government be expected to provide a fair
and cost effective regulatory process for the industry to
participate?
The ``eco-credits'' royalty relief proposal grew out of
recommendations from the Green River Basin Advisory Council
(GRBAC), established by Secretary Babbitt to study ways to
develop southwestern Wyoming and Northwestern Colorado's
natural gas potential while protecting the environment. The
GRBAC was a 17-member panel including representatives from the
county governments, oil and gas industry, state and Federal
resource agencies, and the environmental community. Although
initially criticized as ``another layer of bureaucracy'' by
some, the GRBAC idea eventually was embraced by representatives
from all facets of the debate.
Upon completion of the project in February of this year,
three recommendations were forwarded to Secretary Babitt
including the eco-royalty relief, or eco-credit, proposal with
unanimous baby the panel (as was required by its charter for
``consensus''). The proposal would allow an oil and gas
operator a royalty credit against previous expenditures for
certain environmental studies which are the responsibility of
the Federal agency (as per NEPA), monitoring studies and
mitigation measures that go beyond ``standard operating
procedures.''
The GRBAC saw this initiative as one that would promote
environmental protection yet allow operators to recoup some
costs which industry believes to be extraordinary to rational
NEPA compliance. The GRBAC transmittal letter to Secretary
Babbitt stated:
``In particular, eco-royalty relief is critical to the success
of the NEPA streamlining recommendations and the successful
mitigation of potential impacts, whether they be direct,
indirect, or cumulative.''
Conclusion
The Subcommittee on Energy & Mineral Resources will take
testimony in Casper from representatives of all sides in the
oil and gas development ``equation.'' Oversight of BLM/USFS
policy in this area is a principal function of the
Subcommittee, which may ripen into legislative initiatives to
balance Federal Government land management policies with
respect to mineral development with non-mineral uses, and
thereby potentially reverse the trend of investment capital
leaving our onshore public lands for more favorable business
climates.
Mrs. Cubin. Let me remind the witnesses that, under our
Committee rules, they must limit their oral arguments to 5
minutes, but that their entire statement will appear in the
record. We will also allow the entire panel to testify, before
questioning any of the witnesses.
Now I will introduce our first panel of witnesses. Mr. Al
Pierson--thank you, Al, for being here--the State Director, the
Bureau of Land Management for Wyoming; Mr. Robert Abbey, Acting
State Director, Bureau of Land Management for Colorado; Ms.
Gloria Flora, Supervisor of Lewis and Clark National Forest,
USDA, Forest Service; and Ms. Gina Guy, Department of the
Interior Regional Solicitor.
Again, I would like to swear in the witnesses. If these
witnesses would please rise and raise your right hands, we'll
do it panel by panel.
[Witnesses sworn.]
Mrs. Cubin. Then we will just go right into the testimony.
And Mr. Pierson, if you'd start for us today.
I have to tell you, I know there are only two microphones,
and you have to talk right straight into them or you can't be
heard.
STATEMENT OF ALAN PIERSON, STATE DIRECTOR, BUREAU OF LAND
MANAGEMENT, WYOMING
Mr. Pierson. OK. Good morning, Madam Chairman.
I appreciate the opportunity to come before you today to
discuss the Bureau of Land Management's role in Federal
resource management in Wyoming.
We have made a number of significant accomplishments and
have many projects and initiatives in progress which reflect
our commitment to an open and cooperative process.
Within the State of Wyoming, the BLM manages 18.4 million
acres of public lands. Of that, 17.9 million acres are
available for oil and gas leasing and about 8 million acres are
currently under lease. We also manage an additional 11 million
acres of subsurface estate where we do not have jurisdiction
over the surface.
Since the earliest days, our government has recognized that
public lands should be managed for the local, as well as the
national, interest. Statutes have created a balance so that
revenues from public lands in Wyoming are shared with the
State. Wyoming communities benefit from this arrangement. Each
year, Federal mineral revenues amount to about $500 million
from the public lands. Almost $250 million of these revenues go
directly to the State to fund a number of its programs.
Our most recent oil and gas lease sale, held on June 3rd,
resulted in $5.1 million in receipts with almost 85 percent of
the tracts being sold. This suggests that our decision, in
August of a year ago, to offer only tracts nominated by
industry is paying off. Generally, the buyers nominate
desirable tracts for inclusion in the sale. This process helps
us reduce the number of properties that get offered repeatedly
but not bid on.
BLM Wyoming is responsible for administering oil and gas
minerals management laws on all federally owned minerals in
Wyoming and Nebraska. Major operational responsibilities on
Federal and Indian lands include processing Applications for
Permits to Drill, unit agreements, and suspensions of
operations and production, and so forth. We are also
responsible for drainage protection and enforcement, inspection
and enforcement of oil and gas operational and reclamation
activities, and production accountability.
BLM-Wyoming is first in the Nation in generating Federal
onshore oil production and royalty revenues. We are second only
to New Mexico in natural gas production and gas royalty
revenues received from the Federal onshore minerals. Southwest
Wyoming is one of the leading gas producing regions in the
United States.
The following information, current as of the end of this
last fiscal year, provides the status of wells and completions
on Federal and Indian lands in Wyoming, and outstanding unit
and communitization agreements.
In the interest of brevity, Madam Chairman, I believe I'll
just skip the table. It's in tabular form.
Mrs. Cubin. Sure.
Mr. Pierson. In addition to our operational
responsibilities in developing mineral resources, we are also
charged with, or share with other Federal agencies, the charge
of protecting other resources. This is part of an overall
process which begins with a Resource Management Plan. Our
planning system is designed for multiple use and sustained
yield and is tiered from general guidance to site specific
elements. With the help of other Federal agencies, State and
local governments and the public, we prepare plans for the
overall land use and resource management in an entire resource
area. The Resource Management Plan specifies general criteria
for managing such resources as riparian areas, cultural sites,
wildlife habitat, historic trails, livestock grazing, as well
as minerals development on the public lands. This plan is
followed by more specific activity planning which provides
detailed analyses and decisions on specific sites. BLM is able
to manage oil and gas development alongside other types of land
uses by stipulating protective measures in the oil and gas
lease document. These protective measures are developed in part
during the land use planning process, which includes extensive
public participation. Protective stipulations allow oil and gas
development to coexist with other surface uses on the public
lands.
That brings us to the subject of Cave Gulch. The Cave
Gulch-Bullfrog-Waltman project area is located in Natrona
County. It encompasses 25,093 acres of mixed Federal, State and
private lands. Although the BLM only manages 7,375 surface
acres in the area, 76 percent of the mineral estate is Federal.
Following the discovery of a rich natural gas field in the
Cave Gulch Unit in 1994 by Barrett Resources, the BLM prepared
an environmental assessment to address Barrett's development
proposal. Based on potential environmental impacts contained in
the Barrett environmental assessment, we determined that
impacts were not expected to be significant; therefore, an
Impact Statement would not be required. In 1995, we issued
approval for Barrett and Chevron Production Company to develop
the field.
Subsequent to this initial decision, we received additional
development proposals from Barrett and Chevron. Upon review, we
found that the mitigation measures to protect raptors could not
be carried out with the new proposals in hand.
In January 1996, we decided to reevaluate the decision to
allow Barrett to develop the field because of Barrett's
expanded development proposal and because of the inadequate
raptor protective measures in the Barrett proposal. We
determined that the analysis required an environmental impact
statement to assess all of the direct and cumulative impacts
from the combined Cave Gulch-Bullfrog-Waltman project area
development proposals. We suspended further work on the Chevron
environmental assessment, which was being prepared for the
Bullfrog Unit adjacent to Cave Gulch.
Following that decision, the BLM established criteria for a
moderate amount of development activities while the final EIS
was being prepared. An interim agreement, involving numerous
parties, including conservation groups and the affected
companies, has led to some development in the interim. As of
February 1st of this year, 42 gas wells have been drilled.
BLM issued the Final EIS earlier this month. Comment period
ends July 20th. The Record of Decision is expected to be
completed and signed no later than August 4th.
The preferred alternative in the final EIS addresses a
number of issues raised in response to the draft EIS. It
provides for increased natural gas production in the project
area by allowing the operators to drill and develop 160--
approximately 160 wells over the next 10 years, from 107 new
pads and 24 existing pads, in addition to existing drilling and
production operations. Any impacts to the raptor population and
habitat can be effectively mitigated with artificial nest
structures and buffers around those nests. As a result of a
cooperative effort between the BLM, Fish and Wildlife Service
and the operators, we can immediately begin to implement these
mitigative measures.
The final EIS also has an expanded socioeconomics and
cumulative impacts analysis for air quality.
The total State severance tax for the 30- to 40-year life
of this project is estimated to be $63 million. Total Federal
mineral royalties are estimated at $116.8, half of which goes
over to the State of Wyoming. In addition, the State will
receive an estimated $6 million over the life of the project
from mineral royalties, and the ad valorem property and
production revenues from the lands for the life of the project
are estimated at $76 million.
One final subject I would like to touch on is the Green
River Basin Advisory Committee recommendations.
The advisory committee reached consensus on five
recommendations and, in March 1997, forwarded these
recommendations through the BLM to the Secretary of Interior
for approval. They include road standards, NEPA streaming--
streamlining, eco-royalty relief, transportation planning, and
opportunities for partnership. To date, all but one of these
recommendations can or are being implemented.
Eco-royalty relief is currently under review by the
Department's Solicitor's Office. This recommendation would
establish a 5-year pilot project for eco-royalty relief in the
Greater Green River Basin. Under the pilot, producers in
Wyoming would be allowed to take a royalty reduction on
production of up to $4 million per year. Half of that could go
toward NEPA implementation and development and half of it could
go to monitoring and mitigation above and beyond the required
standard operating procedures, required stipulations, or
standard conditions of approval for mitigation.
Madam Chairman, I welcome the Subcommittee's continued
interest in BLM programs and their effect on the State of
Wyoming. I appreciate this opportunity to provide information
on the activities we are involved in, and I look forward to
responding to any questions that you may have.
[The prepared statement of Mr. Pierson may be found at end
of hearing.]
Mrs. Cubin. Thank you, Mr. Pierson.
Mr. Abbey?
STATEMENT OF ROBERT ABBEY, ACTING STATE DIRECTOR, BUREAU OF
LAND MANAGEMENT, COLORADO
Mr. Abbey. Good morning.
Madam Chairman, members of the staff, I too appreciate the
opportunity to discuss with you the oil and gas program for the
Bureau of Land Management in the State of Colorado. I would
like to give you a general overview of our program and also
briefly discuss the BLM's Colorado State office policy
concerning actions within non-wilderness study area lands
included in the Colorado Environmental Coalition's wilderness
proposal for BLM lands.
The BLM-Colorado is responsible for administering oil and
gas minerals management laws on all federally owned minerals in
the State. Within the State of Colorado, the BLM manages 8.3
million acres of surface and minerals and 5.3 million acres of
reserved mineral estate, where we do not have jurisdiction over
the surface. In cooperation with the Forest Service, the BLM
also administers mineral leasing on approximately 12.8 million
acres of national forests. This totals over 26 million acres of
Federal mineral estate within the State of Colorado, of which
3.3 million acres, I've been told, is currently under lease and
nearly 20 million acres are available for oil and gas leasing.
During fiscal year 1996, 255 oil and gas leases, covering
nearly 218,000 acres, were sold at competitive sales. This
amounted to 70 percent of the offered tracts sold, generating
$1.9 million in revenue. We too credit our high sale rate to
the fact that we do not roll-over or re-offer dead leases. In
Colorado, we offer only those lands requested by the public or
where drainage either is occurring or determined likely to
occur. Of the $78 million in total oil and gas revenues
generated in fiscal year 1996, in accordance with the Mineral
Leasing Act approximately 35 million went directly to the State
of Colorado.
One of BLM-Colorado's most significant accomplishments
during 1996 involved streamlining the way we process operating
rights transfers. These transfers allow the holder of the lease
to enter the lands and conduct oil and gas operations. In May
1996, BLM-Colorado had an 18-month backlog in processing these
transfers. We developed new, streamlined procedures, which
remain consistent with the requirements of the Mineral Leasing
Act and national BLM policy, that allowed us to eliminate this
backlog within 6 weeks, greatly improving our customer service.
We have also entered into Memorandums of Understanding with
the Colorado Oil and Gas Conservation Commission relative to
hearings and spacing and are currently looking at ways to apply
the State's Orphan Well Fund to wells on public lands. We look
forward to continuing our joint efforts to become more
efficient and effective.
Congresswoman Cubin, if I could, I've provided information
summarizing oil and gas activities on Federal lands in the
State of Colorado as part of the record. I'm going to forego
restating those facts at this point in time and move on.
If I may, I'd like to briefly discuss our Office's policy
regarding conservationists' proposed wilderness areas and how
we're dealing with this issue in Colorado.
In 1994, the Colorado Environmental Coalition, a consortium
of 47 environmental groups in Colorado, published the
``Conservationists' Wilderness Proposal for BLM Lands in
Colorado.'' The proposal recommended wilderness protection for
300,000 acres of BLM-administered lands and an additional
250,000 acres of Forest Service lands outside existing
wilderness study areas. Since that time, the BLM-Colorado State
office has, as a matter of practice, not offered oil and gas
leases within the CEC proposed areas while a policy for
handling discretionary actions within these areas was being
developed.
Overall management direction for public land use is
established by the BLM through the land use planning process.
The Resource Management Plan, as Al pointed out, identifies
which lands are appropriate and eligible for various uses and
under what terms and conditions uses can take place. With
regard to the management of all public lands in Colorado,
including the lands proposed for wil-
derness designation by CEC, where there is substantial public
concern that a discretionary action could harm a resource value
that may not have been sufficiently analyzed in this plan, the
BLM has the authority to postpone approving that action for a
reasonable period of time to allow the issue to be resolved
through the planning process.
In light of evolving changes in public land use patterns,
on-the-ground conditions, and an increase of legitimate, yet
conflicting, uses, we in the BLM-Colorado State Office
determined that it would be prudent to take another look at the
CEC proposed areas. We have, therefore, initiated a review to
determine if there are roadless tracts of at least 5,000 acres,
or roadless tracts contiguous to existing wilderness study
areas that may require further evaluation, prior to allowing
certain resource development to occur.
Attached to my testimony that I submitted to the
Subcommittee is a copy of my May 19th, 1997, Instruction
Memorandum, issued to managers in Colorado, entitled ``Policy
for the Management of Lands Described in the Colorado
Environmental Coalition's Wilderness Proposal for BLM Lands.''
I, or my representative, provided feedback to our, Colorado's,
three Resource Advisory Councils at meetings in early May to
describe whatever procedures we would be following to address
this issue in Colorado.
After my other cohorts up here get through with their
introductory remarks, I, too, would be happy to respond to any
questions you may have.
[The prepared statement of Mr. Abbey may be found at end of
hearing.]
Mrs. Cubin. Thank you.
Ms. Flora?
STATEMENT OF GLORIA FLORA, SUPERVISOR, LEWIS AND CLARK NATIONAL
FOREST, FOREST SERVICE, U.S. DEPARTMENT OF AGRICULTURE
Ms. Flora. Thank you, Madam Chairman and members of the
staff. I appreciate the opportunity to discuss the Forest
Service's Northern Region oil and gas program and the draft
environmental impact statement for oil and gas leasing on the
Lewis and Clark National Forest.
In response to the Secretary's oil and gas resources
regulation of 1990, the Forest Service developed a schedule for
analyzing all areas under its jurisdiction where industry had
expressed a high interest in leasing. The analyses and
decisions for 90 percent of the areas which were scheduled are
now complete. In 1998, environmental impact statements
addressing oil and gas leasing will be completed for all high
potential oil and gas areas in the Northern Region.
Thus far, EISs have been completed in North Dakota, the
Little Missouri Grasslands EIS, in Montana on part of the
Custer National Forest and Beaverhead National Forest. Final
EISs for the Helena and Lewis and Clark National Forests will
be released this fall. The Custer National Forest will complete
the EIS on high potential areas in South Dakota in 1998. As a
result, the Northern Region has processed 1,039 leases since
1991.
We are proud that we've been able to meet the challenge of
providing oil and gas development opportunities in an
environmentally sound manner. It should be noted that many of
these high potential oil and gas areas also have high values
for threatened and endangered species habitat, cultural
resources, recreation, and water resources. Through mitigation
efforts and some restrictions on leases, we've been able to
lease approximately 450,000 acres, bringing in approximately
$10 million in bonus bids to the United States Treasury. In
addition, 5.5 billion cubic feet of gas and 3.7 million barrels
of oil were produced from National Forest System lands in the
Northern Region in 1996.
Specifically regarding the Lewis and Clark oil and gas
program, this forest has been analyzing the opportunities for
leasing for oil and gas through an EIS process that began in
February 1994. The area being analyzed in this EIS encompasses
some 1.86 million acres, located on the Rocky Mountain Front,
north and west of Great Falls, and six isolated mountain ranges
in central Montana, east and south of Great Falls.
In addition to being a high potential area for oil and gas,
21 percent of the area is congressionally designated
wilderness, 9 percent is in the Montana wilderness study areas
also designated by Congress, and another 3 percent has been
recommended for wilderness through the forest planning process
under the National Forest Management Act. Sixteen percent of
the area is already leased for oil and gas, but not without
controversy. For instance, the Badger-Two Medicine Area has an
approved Application to Drill and a pending APD. However,
leases in this area have been suspended until resolution on a
traditional cultural property.
The history of oil and gas leasing on the Front is complex
and heated. Minimal development has taken place on the 52
existing leases. Ten lease applications are pending because at
the time of their submittal the areas were under consideration
for wilderness designation by Congress. Another 19 leases
involving 26.6 thousand acres have been canceled due to court
order.
Issues such as protection for a traditional cultural
district which may be eligible for listing on the National
Register of Historic Places, protection of the grizzly bear,
strongly conflicting social values, and the economics of oil
and gas development where leases may require no surface
occupancy stipulations are examples of some of the difficult
issues affecting decisions both on existing leases and future
leasing options.
Regarding the status of the Lewis and Clark Oil and Gas
Leasing EIS, the draft EIS was released in August 1996 and the
public comment period closed in December 1996. The preferred
alternative identified in the draft EIS proposes oil and gas
leasing for approximately 52 percent, nearly a million acres,
of the forest. In response to the draft, the public provided
1,495 comments, and we are in the process of analyzing those
comments and incorporating information provided in the comments
into the final EIS. The final EIS and the Record of Decision
are scheduled to be issued in August of this year.
Let me close by saying that there has been extensive
involvement by individuals, environmental groups, the petroleum
indus-
try, the tribes and the agencies at the Federal, State and
local level in this EIS process. It has been very open and very
public.
That concludes my prepared testimony, and I, too, would be
pleased to answer any questions the panel might have.
[The prepared statement of Ms. Flora may be found at end of
hearing.]
Mrs. Cubin. Ms. Guy?
STATEMENT OF GINA GUY
Ms. Guy. Thank you, Madam Chairman. It's a pleasure to be
here, especially to be back home in Wyoming.
I was asked to testify today in connection with the cost
recovery opinion that was issued by the Office of the Solicitor
in Washington, DC, having to do with the legal authorities that
the BLM has relative to recovery costs for mineral processing
documents. This opinion was issued on December 5, 1996, and is
attached as an appendix to my opinion. It's very lengthy. So I
didn't want to--certainly couldn't possibly read it in 5
minutes. But my effort would be to explain why it happened and
to outline the most basic elements of that.
It was issued after BLM came to the Office of the Solicitor
in response to two separate reports by the Department's Office
of Inspector General, suggesting that BLM had not maximized the
authorities which it had in terms of recovering the costs in
connection with permit applications or processing for various
types of mineral documents which would have conferred a benefit
on a private person.
The theory that the government has cost recovery authority
was first expressed in a statute called the Independent Offices
Appropriations Act, passed in 1952, and sort of reduced to
binding government policy in 1959 by an OMB Circular No. A-25,
published first in 1959 and last updated in 1993. That circular
provides that it is the policy of the U.S. Government that,
where the government provides a service providing a benefit to
an identifiable person, then the government has the authority
to recover all of those costs.
The theory of that was also incorporated into the Federal
Land Management Policy Act, which became effective in 1976,
following extensive meetings over a period of years by the
Public Land Law Review Commission.
And in FLPMA, as the acronym is called, there are what are
called reasonableness factors that governed why, under what
circumstances, and when the government should exercise that
cost recovery authority, how they are weighed, and whether or
not some, but not all, of the costs should be recovered,
depending on whether, and how private the benefit is versus the
public one.
The actual FLPMA reasonableness factors are the monetary
value of the rights and privileges sought, exclusive of
management overhead, the monetary value of the right and
privileges sought by the applicant, the efficiency to
government process, the public service provided as apportioned
between the general public interest and the exclusive benefit
of the applicant.
The law provides that BLM has the authority to recoup all
of its costs. And it's a judgment call on the part of BLM,
which has been exemplified in some regulations incident to
FLPMA, about how that authority should be exercised.
There's a case from the 9th Circuit that requires BLM to
consider all of those factors, particularly, for example, the
public versus private benefit. The BLM believes that it has the
authority to exercise cost recovery authority with respect to
basic FLPMA actions such as rights-of-way as well as actions
under the Mineral Leasing Act.
The Office of the Solicitor, as you know, Congresswoman
Cubin, is the legal advisor to the Department of the Interior.
And our office will be advising BLM, as it requests, with
respect to the development of the rulemaking, to incorporate
some of the principles in the cost recovery opinion. But until
that happens, it is just that, an opinion.
One of the things that's very important about this
rulemaking action is that there will be extensive public
hearings seeking public input about how that weighing exercise
should happen with respect to the reasonableness factors.
Touching just for a moment on the recommendations of the
Green River Basin Advisory Committee, John Leshy, the
Solicitor, has asked me to explain to the Committee that the
issue of the eco-royalty (eco-credits) was in the office and
that he expects to issue an opinion within the next several
weeks.
This concludes my formal testimony. I'd be happy to answer
your questions. Thank you.
[The prepared statement of Ms. Guy may be found at end of
hearing.]
Mrs. Cubin. Thank you.
Where do you start?
Well, obviously, there are several different topics going
on here. And so I think I'll just start asking you, Mr.
Pierson, and just kind of go down the line.
In your testimony, you stated that the original Barrett
environmental assessment for Cave Gulch was inadequate for
raptor protection, and this is a quote, ``mitigation measures
to protect raptors could not be carried out.''
Could you describe to me the difference in that proposal
and the requirements for raptor protection that came out in the
final EIS?
Mr. Pierson. Yes. The proposal in the Barrett EA decision
that was vacated was for artificial nest structures onsite, on
the project area. The final EIS, as it is issued--and while the
Record of Decision is not signed yet, the EIS is out for final
review--has the establishment of artificial nest structures
offsite, in a low potential development area, where the birds
will have secure nesting and hunting areas, versus onsite,
where a lot of development activity was--or is scheduled to
occur.
Mrs. Cubin. OK. So are the number of nests--is the number
the same?
Mr. Pierson. Actually, I think the potential numbers of
sites offsite is greater. There's 40-some, I believe, which
will allow us to pick and choose among those 40. The number of
birds hasn't changed that need to nest out there.
What we're trying to do is find a secure nesting site where
they will not be disturbed and still allow the development to
occur.
Mrs. Cubin. What I am kind of trying to get around to in
this questioning is we have cost recovery on the table.
Certainly, that is, at the very least, controversial. And now
there was an EA that recommended this mitigation for the
raptors, 2 years and some months before, and maybe three-
quarters of a million dollars later, and that doesn't count
lost revenues to the State, to the Federal Government, taxes
for schools.
What I'm trying to get at is, is there really that much
difference for the enormous cost in between, and how are we
going to get this regulatory process to become more realistic
so that there isn't this constant fighting and so that we don't
have this enormous problem we have. I mean the difference
between the EA and the recommended--the EIS seems negligible
compared to the enormous cost.
Could you comment on that for me, Al?
Mr. Pierson. I'll try. You've covered a lot of ground, but
I will try.
The--one major difference in the EIS, as it is now
produced, versus the original Barrett environmental assessment
is the kind of decision that you can make. You can make one of
two decisions with an environmental assessment, an EA, either
that there is no significant impact or that you need to go on
and do an EIS. You have the ability in an EIS to tradeoff some
resources, to accept some significant impact, or at least the
potential for some significant impact, in the EIS, where you do
not in the EA.
What we found, after first--after approving the first
Barrett EA, was that companies were drilling, they were
learning more, the proposal was changing, and they had
essentially drilled themselves right out of the ability to
mitigate as they had agreed to do in the environmental
assessment. Chevron was on-line to----
Mrs. Cubin. In what way?
Mr. Pierson. Placing wells in secure artificial nest sites.
Mrs. Cubin. How many changes actually were proposed?
Mr. Pierson. I don't have those numbers. But they--but the
area that was originally set for mitigation sites now had wells
proposed on them. And you can't very well build a well pad on a
raptor nest site. It just won't work, particularly for 6 or 8
weeks in the spring, when they're nesting.
So at that point we didn't have the options that we had
available to us at the time we approved the environmental
assessment. The company's needs had changed, their proposal had
changed, the project had grown. The companies had learned much
more about the area as they drilled wells. The find was bigger
than predicted and many more wells. So it was a different
project at that point than what was initially approved.
Mrs. Cubin. OK. Well, I wasn't implying that, necessarily--
maybe I was, but not definitely, that an EIS shouldn't have
been done. I don't think that was my point.
It just seems to me that with such a little change from the
original EA to the final opinion there has to be a more
effective way, there has to be a less expensive way, to do this
process.
There's nobody here who wants to degrade the environment.
There's nobody here that wants to cause raptors to, you know,
have problems or become extinct, or even close to that.
But can you make any suggestions for the future? I mean,
did we learn anything from this Cave Gulch deal at all?
Mr. Pierson. I think we did. We spent, we, the companies,
the conservation community, the county, and other interested
parties, spent a lot of time trying to get ourselves on some
kind of an agreement that we could all live with on this one.
Had we done that up front, we maybe would have reached the
same conclusion faster.
But as you well know, Madam Chairman, the gas development
production business is not an exact science. And had the BLM
said no, we will not allow you to change your proposal that we
approved in the EA, we're going to hold you exactly to what you
said you would do, then we wouldn't have had--we wouldn't have
had to go to an EIS, but it would not have helped the company
in any way.
Companies, as they develop a field, they don't know exactly
what they're going to need to do when they first go into it.
You have to remain flexible enough to accommodate changes,
based on what you learn as you drill wells. Unfortunately, in
this case, the changes were great enough that we could no
longer say there is no significant impact, based on the laws
that we have to operate under.
Mrs. Cubin. Speaking of the companies not knowing exactly
what they're going to run into and how changes and alterations
and amendments have to be made, it's my understanding that, as
of September 15th of this year, approximately 120 customers
that are currently serviced with dry gas from Cave Gulch will
have to switch to use propane, which will, in effect, double
their monthly fuel bill. This switch comes about, as I
understand it, because of the increased production from Cave
Gulch and the use of the current line changing to wet gas that
will subsequently be processed at Douglas.
At what point in the process did the BLM hear from the
producers about changes in that transportation line? And at the
same time, did the BLM consider the effect on customers along
this line when they were looking at the socioeconomic impact?
Mr. Pierson. I'm not aware of that switch, Madam Chairman.
If I could research that and submit it for the record, I would.
Mrs. Cubin. I'd appreciate that.
The thing is that it bothers me. I'm concerned that--first
of all, that enough emphasis wasn't put on the socioeconomic
issues. And I kind of see that--as a personal opinion, I kind
of see that throughout the minerals leasing and the patenting
process.
Mr. Pierson. Uh-huh.
Mrs. Cubin. As I said, that's just an opinion. But I think
that sometimes a certain segment isn't heard enough.
And I'm going to switch now to Mr. Abbey, since this kind
of goes along with his point.
It's my understanding that the Colorado Environmental
Coalition--is that what it is, the name of the organization
there? It's my understanding that that----
Mr. Abbey. (Nodding.)
Mrs. Cubin. [continuing] organization was given access to
the BLM data base to insert the CEC's designation of wilderness
areas on BLM records. Certainly, I have never heard of any
other in-
volved party having that kind of access or input. And wouldn't
you consider that a rather unbalanced collection of
information?
Mr. Abbey. Madam Chairman, I guess, as far as data bases
are concerned--and I'd like for you, if you could, to be a
little more specific about what data base.
Certainly, the inventory information that we collected in
our inventory, that was completed in 1980, is a matter of
public record, and that information is available to anyone.
It is my understanding, too, that when the Colorado
Environmental Coalition was involved in going back to the
public lands, and going back to regarding that, is that they
did have--did use that information to come back in and state
that they did not believe BLM in Colorado did a very good job
of inventorying public lands.
Mrs. Cubin. Excuse me. Who was that?
Mr. Abbey. The Colorado Environmental Coalition, when they
were preparing their own wilderness evaluations.
Mrs. Cubin. And they said they didn't do a good job?
Mr. Abbey. That's correct.
Mrs. Cubin. And that's when they were allowed to go to the
data base?
Mr. Abbey. If that's the data base you're questioning. They
were allowed to look at our records, as well as anyone who
needs that information.
Mrs. Cubin. Were they allowed to make entries?
Mr. Abbey. Not at all. There would be no purpose in them
making entries into our earlier inventory.
Mrs. Cubin. And maybe, Ms. Guy, you can answer this. I
don't care who answers it.
Wilderness study areas were to be identified and then,
according to the original law, then the Congress would act upon
making some areas wilderness and others not.
Well, I think that that expired in 1991, is that right,
this identification process ended in 1991? Is that right?
Ms. Guy. I believe that's pending in the Federal Court in
Utah, that question of whether or not the Secretary of
Agriculture, Secretary of the Interior, having the authority--
on an ongoing basis, to make recommendations.
Mrs. Cubin. So there's----
Ms. Guy. I'd be happy to respond for the record. I believe
that's pending now. I have no personal knowledge of it, but
what I would ask the Chairman is if I could respond on it.
Mrs. Cubin. Yes, I'd appreciate that. Because what it seems
to me has happened throughout this process is that Congress
passed a law asking for wilderness study areas to be
identified, at which point they would evaluate those wilderness
study areas. Some would be made wilderness, and probably some
wouldn't.
What has essentially happened is that all of those areas
are now treated as wilderness areas. There's no activity
allowed on those that is outside the area of what is allowed in
a wilderness.
Mr. Abbey. Yeah. In Colorado, the BLM completed its
wilderness inventory in 1980. Subsequently, we studied those
800,000 acres that were identified as wilderness study areas to
determine existing rights that were in there, conflicts in
uses, other values that would be affected by wilderness
designation. And we followed up in our studies with some
recommendations to the administration where we recommended----
Mrs. Cubin. When was that?
Mr. Abbey. That was in 1991, where we recommended to the
administration 400,000 acres of the 800,000 acres that had been
identified as wilderness study areas should be recommended to
Congress for possible wilderness designation.
In 1993, the administration's recommendations were
forwarded to Congress.
There has not been any action by Members of Congress
regarding public lands in the State of Colorado. So we are
required, under law, to manage all 800,000 acres of wilderness
study areas under what we refer to as the Interim Management
Policy, and that's to protect any existing wilderness values
that may exist out there until action by Congress to either
designate those acreages or to release those acreages.
Mrs. Cubin. I think that's questionable. I don't think that
you can say that as a statement of fact. I think that this is a
policy that has been adopted by the Interior Department, but I
don't believe that's law. Is that correct or not?
Mr. Abbey. Well, you have----
Mrs. Cubin. That you have to manage all 800,000 acres as
wilderness areas, isn't that stretching it a bit much? Because
what should happen is if Congress wanted to make a wilderness
area the Congress would in fact do it.
Mr. Abbey. You would hope. But the fact is that 800,000
acres of public lands in the State of Colorado are wilderness
study areas, and so they are being managed, particularly the
IMP, to protect any values that exist out there.
Now, hopefully, you can convince your--the delegation from
Colorado to introduce wilderness legislation for public lands
in Colorado so that we can resolve this issue once and for all.
Mrs. Cubin. Staff just helped me clear up this question.
Mr. Abbey. OK.
Mrs. Cubin. You're talking about the legal wilderness study
areas, not the CEC's recommendations.
Mr. Abbey. That's correct.
Mrs. Cubin. That's what I'm talking about.
Mr. Abbey. OK.
Mrs. Cubin. The CEC's recommendation.
Mr. Abbey. The CEC's recommendation is basically--and how
we're managing those is based upon guidance that was issued in
1994 by Assistant Secretary Bob Armstrong, which basically told
BLM offices to pay careful and particular attention to
development proposals that could limit Congress's ability to
designate certain BLM areas as wilderness, even though these
areas are not designated formally as wilderness study areas.
So you're absolutely correct. That is not addressed by law.
That is their own policy.
Our inventory which we are conducting right now provides
for a second look to ensure that the information regarding the
presence or absence of wilderness characteristics in Colorado
is entirely current and accurate.
The inventory also will serve the public interest because
the results are going to be made public, and if any land
management recommendations or decisions are made in the future
regarding changing the way we're managing those CEC-proposed
areas, then such actions will be subject to full public
participation, in following the language of the planning
process that we have in place.
So that is, in fact, an internal policy.
Mrs. Cubin. So CEC was able to establish these areas that
now nothing can take place on them.
And what if the Rocky Mountain Oil and Gas Association
wanted access to your computers? Would you allow them to go in
and say, OK, this and this and this has to be done and that
would affect everyone, no public input, just open your mouth
and take it?
Mr. Abbey. Yeah, we're--you know, again, as far as access
to our computers, they can have access to our information and
data, which is public information.
The way the Colorado Environmental Coalition and the
conservation interests in Colorado addressed wilderness and
came up with their own proposal certainly was outside the
spectrum of public involvement. And that's why we are having to
go back and revisit these areas. It was our intentions to raise
this flag, to bring this information to the public and use our
planning process, which will certainly involve opportunities
for public comment and recommendations on how these areas
should be managed in the future.
Mrs. Cubin. So here we are with a situation of extreme
budgetary constraints, and the BLM has a certain mission, and
it costs money to fulfill that mission. But now you are using
money that is being given to fulfill that mission to redo
what's already been done.
Mr. Abbey. That was done in 1980, yes, ma'am. So it's been
17 years.
The key thing here is that we are directing funding out of
our wilderness program to revisit these Colorado Environmental
Coalition proposed wilderness areas. We estimate that the cost
from our budget is going to be around $25,000. It's money that
was normally going to be used to monitor existing wilderness
study areas that we're having to direct toward this inventory
of wilderness areas, or whether or not they're wilderness is
what the determination will make here shortly.
We're using individuals from the public to assist us in
that wilderness review. These members represent a broad
spectrum of interests, from the environmental interest to the
industry interest. So that is helping us offset the cost of
this wilderness inventory.
Mrs. Cubin. One thing maybe I should know, but I don't
know. How did it work out that CEC was able to just go in, no
input, no nothing, just get BLM to identify psuedo-wilderness
study areas or whatever you want to call them? How did that
happen?
Mr. Abbey. We didn't identify these psuedo-wilderness
areas. Again, this is a conservationists' proposal.
We have never sanctioned their recommendations or actually
formally acknowledged the fact that these areas do possess
wilderness character. That's the whole purpose for our review
right now, is to go back in and determine whether or not these
areas are, in fact, wilderness and whether or not they would
meet minimum wilderness criteria. As you know the
conservationists' proposal for Colorado is just one groups'
opinion.
Mrs. Cubin. Is that--did this happen because Dave
Alberswerth told you to do it or said that it should happen? I
have a memo that seems to indicate that to me.
Mr. Abbey. This whole issue thing kicked around since 1994,
shortly after the conservationists printed their wilderness
proposal for Colorado. Then State Director Bob Moore had agreed
not to lease public land tracts within the conservationists'
proposed wilderness until we had a policy, either from
Washington or the State of Colorado, identifying how we would
proceed in dealing with the conservationists' proposal.
So since 1994, we have been under the assumption that the
BLM, since Colorado is not the only State where there are
conservationists who hold this opinion, that the BLM overall
would issue a bureau-wide policy telling us or giving us some
guidance on how best to address these conservationists'
proposals.
The best we got was a written memorandum in 1994 from
Assistant Secretary Bob Armstrong telling us and instructing us
to pay careful and particular attention to these types of
proposals.
So we were told by our Washington office that we could
expect a policy on how to deal with these types of issues
sometime in 1996.
In November 1996, when there wasn't any bureau-wide policy
and when it did not appear that there was going to be a bureau-
wide policy addressing this issue, we in the Colorado State
Office put out our own.
Our policy was reviewed by the Solicitor's Office in
Washington; it was reviewed by the Assistant Secretary's
Office, which Dave Alberswerth is a member of or a staff member
of; it was reviewed by our Washington office. And based upon
all their comments and suggested changes, we did finalize our
policy in May, which we're using to guide our actions.
Mrs. Cubin. And that policy is?
Mr. Abbey. The policy that we're using is to--where we have
proposals pending, that approvals that could have irreversible
or irretrievable impacts within the conservationists' proposed
areas, that we would go out and review these areas to determine
whether or not they have wilderness character.
If we determine that these areas are, in fact, roadless and
they possess wilderness character, then we would use our land
use planning process to address different management
prescriptions on those lands that are not currently being
advocated in our current land use plans.
If we find that those areas do contain roads, then we would
look at those areas to determine whether or not our current
land use prescriptions for those areas are still adequate, and
therefore we could use our existing land use plans to guide
future management actions.
Mrs. Cubin. So let me see if I understand.
Mr. Abbey. OK.
Mrs. Cubin. If it--if you go out and find out it's a
roadless area, it will be treated as wilderness.
Mr. Abbey. No, ma'am. What we would do, if we find these
areas are roadless, then what we will do is use our land use
planning process to do further scoping to look at other
alternatives for managing these lands.
A wilderness--a designation of wilderness study area
certainly is one option, but it is not the only option. We have
other management prescriptions that are available to us that
would protect any values that are found out there on those
tracts.
And so we could take a different approach. Or we could
actually just stay with our current land use plans and continue
to manage those tracts under the current prescriptions.
Mrs. Cubin. You know, it's a--it's a constant mixed message
that I get. I believe, and I know it to be true, that the
Congress of the United States is the only entity that can
establish a wilderness.
Mr. Abbey. That's true.
Mrs. Cubin. I know that to be true. But it seems to me that
regulators can establish what is something that is basically a
wilderness area because I would say what a wilderness area is
is what you can do with it, on it. So regulators establish
wilderness areas and call them something else. I've seen things
like this happen throughout my time that I've been in Congress.
It's interesting. I'm thinking now of the eco-credits, that the
Secretary just doesn't think he quite has the authority to do a
pilot project.
I mean this is not at you.
Mr. Abbey. Yeah.
Mrs. Cubin. I know the Secretary is the Secretary.
But then a contradiction I'd like to tell you about is
there were some proposed rules that were brought out just
recently, in 1996. The public input was given in 1991 and put
on the shelf. And there was a recommended course of action.
This is for a hard rock mining, bonding.
And there was a person named Dave Alberswerth that
testified on behalf of an environmental organization.
Well, Dave Alberswerth now is the guy who's going to
decide--who has decided what the final regulations will be. And
guess what? They're 95 percent of the testimony that he gave
back in 1991. And nobody else's--I don't say nobody, but maybe
5 percent of other people's opinions are in there.
I think I see this throughout--throughout the government.
And I realize that all of you have people that you work for and
that there are certain things that you have to do.
But I--I think that your jobs are more than to try to find
a way around the letter of the law, around the concept of the
law, just to establish somebody else's agenda. I think that is
one of the biggest problems that we have between the public and
the government.
Back to you for a second now. As part of your discussions
with the States regarding the transfer of inspection and
enforcement functions, BLM and the States agree that the
individual States would submit a proposal by August. Wyoming
submitted their letter to take over these responsibilities and
establish a single regulatory program for oil and gas on June
13th, 1997.
Can you tell us how you're going to proceed now in
responding to that letter, and do you have an idea what the
timetables are going to be to implement that transfer?
Mr. Pierson. Yes. I do intend to respond to the letter. The
letter is not a proposal. We've had numerous discussions and
some correspondence with the State Oil and Gas Commission.
This--the letter that you're referring to I recently received
is, again, a statement about--kind of a position statement. I
don't have a proposal in hand to evaluate in terms of costs or
effectiveness or standards that would be applied or any of
that. And it would be real helpful if I had something like that
to evaluate.
The idea of transferring the inspection and enforcement
responsibilities has been with the Bureau and with the State
since the passage of the Federal Oil and Gas Royalty Management
Act. And I believe in that, too. This was discussion--that's
what was offered a year and a half ago. That's been expanded
greatly by some States in terms of desiring to take on the
responsibilities, at least operations responsibilities, far
beyond inspection and enforcement. So we need to get past that.
And then I need to see a proposal that deals with how
enforcement and inspection would be taken on, are there cost
savings, how will it be paid for, will it meet the standards,
including independent production verification. That has been a
big issue. And the primary reason that the Bureau has a rigid,
stringent IME program now is to ensure that the Federal
royalties are reported properly and collected properly. There
needs to be an element in there dealing with environmental
surface protection. I've not seen anything in that, in the
proposal except, I believe, a statement saying they were not
interested in it.
And I need to see some specifics. I stand ready to do that.
Just haven't seen it, Madam Chairman.
Mrs. Cubin. I think a huge part of the problem with Cave
Gulch was a result of poor communication. And so I implore you,
please, don't let that happen with this particular issue. Even
if you think it shouldn't be your responsibility to call and
say, hey, I don't have this yet, maybe it would be nice if you
did. And I'll ask the same of Jim Magagna.
Mr. Pierson. That would be good because those calls have
been made and we're ready to sit down and talk with him.
There's just, at this point, not a proposal to evaluate.
Mrs. Cubin. We had a hearing of this Subcommittee on March
4th where BLM Assistant Director Ward Tipton testified. And
then in a followup letter on April the 9th, I asked him if he
would provide the State of Wyoming numbers that the State had
been requesting for some time, quite some time, on how BLM
spends its money to carry out its oil and gas program in
Wyoming.
And what I specifically asked for was Wyoming's
contribution to the net receipts sharing cost. That's been 3
months, and we still have no reply.
Mr. Pierson. Yeah. That was requested of our Washington
office?
Mrs. Cubin. It was requested of Ward Tipton, yes, twice.
Mr. Pierson. And it's a----
Mrs. Cubin. At a March 4th hearing and then a reminder on
April 9th. And certainly that will help the State be able to
get the information to you that you need.
Another question that I submitted to the BLM on April 9th
concerns the Green River Advisory Committee precedent. Are
there other advisory committees working now? Do you know?
Mr. Pierson. None that I'm aware of at this point. And the
Green River Basin Committee has--the charter has expired. It
was chartered for one year, and they did complete their work
timely.
Mrs. Cubin. Do you have plans to establish any more
committees?
Mr. Pierson. I'm not aware of any at this point.
Mrs. Cubin. Give me your opinion of the whole process, the
results, and just the whole process.
Mr. Pierson. Of the Green River Basin?
Mrs. Cubin. Right.
Mr. Pierson. I, as you probably know, was very skeptical of
that committee, going in.
Mrs. Cubin. We both were, for different reasons.
Mr. Pierson. I was asked for my advice. I gave it. And the
decision was made to go ahead with it. And at that point it
became my job to make it happen, and we did that.
The first meeting, as you may recall, there were some 1,200
people that attended that meeting, and most of them were angry.
They felt like there was not a process in place for them to
participate in discussions about gas development in southwest
Wyoming and other impacts that were occurring nor to be a part
of it. People, service companies in particular, were
unemployed. There was a lot of misinformation around. There was
some truth in that the gas drilling was slowing down and the
NEPA process and the appeals and all this other stuff was going
to result in the shutdown of drilling and oil and gas activity
in southwest Wyoming.
So that was the purpose of the advisory committee, to see
if we could sit down as Federal, State, local, private
landowners, environmental groups, industry, and try to--try to
sort out among the various interests in the two States a course
of action or some recommendations that could help us get on
with some development in a environmentally responsible way,
that people could agree to.
Over the course of 12 months, I believe we had nine or ten
meetings. The first one was very contentious, went on forever
with public comment. People were sort of staking out their
positions. And you know how all of that works.
Mrs. Cubin. I do.
Mr. Pierson. At the end of the process, we had arrived at
five recommendations that we had consensus on. There were about
20 people that attended the last meeting, and I believe three
wanted to speak. And they all spoke very much in favor of the
work that had been done and the process that had been used,
versus at the first meeting a lot of people spoke. I can't even
remember how many. And they, almost by the numbers, were
opposed to even trying this process.
So in that respect, I think it was very successful. It
concluded with five recommendations, four of which are underway
right now. And the fifth is the eco-royalty relief issue. That
remains under review in the Secretary's office, and I don't
know where it's going to come out.
But I think we did learn that people meaning well, but
having very much different opinions about how things should be
done, can work together. And given that this was chartered for
one year and it didn't go on forever, I'd say it was a success,
a very big success.
Mrs. Cubin. Well, and certainly, I think that four of the
five recommendations are going to be--or are being implemented
speaks well for the process.
Frankly, I--never mind.
Ms. Flora, I know that you have an early flight to catch.
Ms. Flora. Well, I think I'm probably too late for that. So
let's just take our time.
Mrs. Cubin. When I read the background information on Lewis
and Clark National Forest, the bottom line appears to me to be
that the Forest Service has concluded that oil and gas
development is in conflict with all other resources.
Why don't you believe that these alleged conflicts can be
mitigated and that there can be some development?
Ms. Flora. Well, I don't share your conclusion, but I'll
attempt to answer your concern.
We have spent many years, not just in working on this EIS,
but also on various oil and gas issues across the forest. We
have conducted very public and open processes, as well as using
the best resource information available and the best resource
information that we could obtain from the oil and gas industry.
In conclusion, when we look at the resource issues and we
look at the socioeconomic issues involved, we have put forth a
proposal that we feel is most responsive to the concerns that
have been expressed and will result in the capability to
develop this. As I said in my earlier testimony, over 50
percent of the forest would be open for leasing and potential
development.
I don't think that that speaks to or supports the
conclusion that we find that oil and gas exploration
development is in conflict with all resources and not possible.
Mrs. Cubin. What I'm fumbling for are my notes on exactly
how much of the forest is to be used for different things.
Ms. Flora. If you pause, I'll fumble for mine.
Mrs. Cubin. OK. I think I found this.
OK. Let's see. OK. The draft EIS analyzes 1,862,453 acres
of which 610,634 are legally unavailable due to their
classification of wilderness, or wilderness study areas. This
leaves about 1.2 million acres subject to review for oil and
gas leasing. And the Forest Service's preferred alternative
makes 60 percent of this area either administratively
unavailable for leasing or unavailable for surface occupancy,
while the remaining 40 percent is subject to severely
restricted stipulations.
So in practical terms, the preferred alternative allows for
oil and gas leasing on an extremely limited area containing a
high potential for discovery, one-mile corridors along existing
roads in certain basins and one-mile no surface occupancy stip
along the eastern boundary of the Rocky Mountain National
Forest, and that's out of 1.8 million--over 1.8 million acres.
Ms. Flora. That's--the figures that you were just using, as
far as describing the preferred alternative, is focusing on the
Rocky Mountain front. We're looking at the entire forest. The
figures that you mention as far as acreage----
Mrs. Cubin. Excuse me for a second. I need to respond to
your first statement.
But the area that I'm referring to is where the high
potential production is, and the rest of the forest has a much,
much lower potential for production.
Ms. Flora. That's correct.
Mrs. Cubin. So I think that bears out my point, that this
is one of those things that, you know, call something--decide
what something is, and then call it something different, and
people won't know that it's the same.
Ms. Flora. I hardly think people are that easily fooled.
Mrs. Cubin. Well, nor do I. But nonetheless, your statement
that, what was it, 60 percent is there for production, or
possible production, I mean it just simply isn't true when you
consider where the high potential for production is.
Ms. Flora. Well, I don't think it's a fact that it's not
true. If we're talking about high potential areas, then we
can't talk about the whole forest; we're talking about the
Rocky Mountain front. If we're talking about the whole forest
we can talk about the whole forest.
Mrs. Cubin. If I--well, we don't need to--obviously, we
agree to disagree about this.
However, if I have a yard and half of it is full of flowers
and the other half has two flowers in it and I can't pick any
flowers from the big side, you can't expect me to get a good
bouquet. That's basically what we have here, the potential for
production is extremely limited by the decisions that are being
made.
And maybe you can't answer this question, since we aren't
operating off the same foundation. But how do you--how do you
explain fulfilling your mandate of multiple use when--and your
obligation of producing the minerals to the best extent
possible--how do you explain that you're doing that?
Ms. Flora. Well, the multiple use mandate is really quite
well crafted, and it's quite well stated, not only in the
Multiple Use Sustained Act, but also the Federal Land Policy
Act.
Mrs. Cubin. I'm talking about what you do as opposed to
what you're supposed to do.
Ms. Flora. I thought I was doing what I was supposed to do.
The multiple use concept is that you attempt to provide the
most beneficial uses possible to the widest range of people
possible over a very large scale of land, but not to the point
such that you cannot make different choices as conditions
change, and also for present and for future generations. So in
implementing that multiple use policy and the plethora of laws
that accompany it, one also needs to balance what the public
has to say about the situation.
In the case of the oil and gas EIS, as you know, we have
received about 1,500 comments. Eighty percent of those
supported less development than in the preferred alternative.
Ten percent supported--didn't specify a level of development,
just expressed specific concerns about certain resources. And
10 percent supported greater development.
Mrs. Cubin. How do you treat public input where you have a
certain organization mobilized and they all send in the same
postcard with their names signed or the same letter with their
names signed? Do those all have equal weight in decisionmaking
with letters that are written by people from varying
backgrounds and varying interests?
Ms. Flora. No, we segregate those comments out. What we
look at, when we're analyzing the comments--you know, it's not
a voting contest. We're not counting up votes and whoever gets
the most wins.
When we do our comment analysis, we segregate those
signatures that have arrived on a petition, and we also
segregate out those letters that are either on a preprinted
form or they obviously use language that is very structured and
follows solicitation letters that organizations and industries
have sent out, so we know exactly how many comments have--or
how many of those numbers of the 1,500 have been identified in
the petition format or what we call an organized letter writing
campaign. It was a very small percentage, and there were
petitions and letter campaigns on both sides of the issue.
But the majority of comments received--and I'm sorry, I
don't have the figures with me. But the majority of comments
received were from individuals or on letterhead of some nature
that were substantive personalized comments.
Mrs. Cubin. So the 1,500 that you were talking about did or
did not include the names on petitions?
Ms. Flora. It does include that, but I would say we had
about 300 names on petitions and organized letters on both
sides of the fence.
Mrs. Cubin. None of those are important?
Ms. Flora. No. You get a sense of where people are coming
from, if you will, but it does perhaps indicate that those
persons have not spent a great deal of time in analyzing the
issues themselves.
Mrs. Cubin. What is the Forest Service's response to
Governor Racicot in his request for a more balanced
alternative? He certainly, in all the statements that's he's
made, publicly and privately, feels that--that mineral
development has taken the real short end of the stick there in
Montana. So how have you responded to him, and do you intend to
do anything?
Ms. Flora. We have not responded to his comments
individually. What we have done are taken his comments and
segregated them out in development of the responses in the
final EIS. And so each issue that he raised is similar to other
comments, and we're grouping those comments and responding to
each particular comment and point individually.
Mrs. Cubin. So does a Governor, for example, have--do you
weigh his testimony or her testimony heavier than someone else,
or is it just in the mix? And I don't have any opinion what's
right.
Ms. Flora. Yeah, and that's a different question. We do
try--we do recognize that the Governor represents, certainly, a
majority of the people in the State who bothered to vote and
put that Governor in position. And the--also, the Governor's
letter attempted to incorporate responses from various
agencies, State agencies, although it did not include all State
agencies. So we recognize that it's a broad-
er scope and that there are certainly vested interests and
concerns and a great wealth of knowledge behind that.
So besides, a letter from Bob P. Jones, public at large,
versus a letter from the Governor, we certainly put a lot more
weight on the letter from the Governor.
Mrs. Cubin. Because some of the elected officials,
Congressman Rick Hill from Montana and Governor Racicot, and
maybe other folks from Montana who would like to know more
information about this, I'm sure we're going to have another
hearing on the Lewis and Clark National Forest situation. So I
don't need to ask you any more questions.
What time did you say your plane left?
Ms. Flora. It leaves at noon.
Mrs. Cubin. I think you can make it.
Ms. Flora. If my cab can get me and my luggage together in
the same place, I possibly can.
Mrs. Cubin. Well, you know, if I had a staffer around here
that could take you out there, that would be all right.
Ms. Flora. You bet.
Mrs. Cubin. Is anybody here? OK. Yeah.
Ms. Flora. Great. I thank you very much, and certainly
would welcome any more questions. It's a most interesting
subject and, as I say, been going on for decades, not just
during the duration of this EIS process.
Mrs. Cubin. That's certainly correct. And if we have any
further questions, we'll submit them in writing.
Ms. Flora. Thank you.
Mrs. Cubin. So if you hurry----
Ms. Flora. Well, I always love an adrenaline rush.
Mrs. Cubin. By the way, I just wanted you to remember your
plane runs on petroleum products.
[Laughter and applause.]
Mrs. Cubin. I have all these different testimonies and
questions. And a lot of them--I don't want to drag this on
forever, but if I get some of this out of the way, I can get
organized.
Mr. Pierson, I just want to go back, just for a minute, to
the decision to do the environmental impact statement, as well
as the environment assessment.
Are there documents--was this just decided verbally? Are
there documents that are available that you could send us about
that decision?
Mr. Pierson. Sure. Those would be in our Casper district
office here. I could either supply them through your office
here or----
Mrs. Cubin. That would be fine.
Mr. Pierson. OK. Yes, there were documents. There were a
lot of meetings occurring at the time with companies and
everybody else.
Mrs. Cubin. I have to ask you this for the Natrona County
commissioners. And of course, this goes to local input for
socioeconomic issues. And the decision was made that the county
commissioners could not have cooperating agency status.
Mr. Pierson. Uh-huh.
Mrs. Cubin. Would you just give me an explanation of that?
Mr. Pierson. Sure. Cooperating agency status is granted to
an agency, usually a Federal agency, who has--who has
jurisdiction. An example of that is--or could be a State agency
in the case of our DEQ, for example, where OSM delegates
authority to DEQ to manage mining and reclamation.
Mrs. Cubin. So who determines that jurisdiction?
Mr. Pierson. Usually by law. For example, the State has
primacy in air quality. It comes from the EPA--the President to
the EPA to the State. Same is true with water quality, with
water rights, those kinds of things.
In the case of Natrona County and their request to become a
cooperating agency, it implies that there is decisionmaking
authority and that the county would have to concur with and
actually make the same decision that BLM arrives at on public
lands. It simply was not the case.
Mrs. Cubin. Would you repeat that for me?
Mr. Pierson. Would imply some decisionmaking authority over
the decisions that were made in Cave Gulch, that is whether
we're going to mitigate for raptors, whether we're going to
comply with the National Environment Policy Act, as opposed to
where they do have--where they do have jurisdiction, and that
is over health and law enforcement in the county, any work
permits, licenses that would be required.
Mrs. Cubin. They wouldn't--they wouldn't have an opinion on
whether or not you were going to comply with NEPA?
Mr. Pierson. Certainly have an opinion whether we should
mitigate for raptors or not and what that might cost and what
birds are worth. That's all important information, but it
doesn't have anything to do with complying with the Federal law
that we have to comply with.
Mrs. Cubin. OK. I want to understand this a little bit.
When you have your team and, you know, I assume there are--
there are some different folks that have cooperating agency
status, is every decision to be unanimous? I mean it wouldn't
be OK for them to disagree and still have the process move on?
I just don't understand the exclusion.
Mr. Pierson. The difference is jurisdiction and signing the
record of decision. Yes, you have to have----
Mrs. Cubin. OK, jurisdiction. Explain that to me.
Mr. Pierson. The question--the question here in this case
was does the county have the authority or jurisdiction to make
the decisions in Cave Gulch on Federal minerals.
Mrs. Cubin. That implies that the county would be the only
one making the decision, and that's not what cooperating agency
status is.
So tell me frankly, nuts and bolts, real specific reasons
that they could not have cooperating agency status.
Mr. Pierson. For the reasons I just described. The county
would need to have signed the Record of Decision, that they--
and become a signatory to the EIS.
Mrs. Cubin. They never had the opportunity for that.
Mr. Pierson. That's right.
Mrs. Cubin. So how do you know they wouldn't?
Mr. Pierson. Because----
Mrs. Cubin. So you're saying, well, you can't do it because
you can't do it.
Mr. Pierson. Because there's no jurisdiction there.
Mrs. Cubin. That's what I'm asking.
Mr. Pierson. Right.
Mrs. Cubin. Explain what that is to me.
Mr. Pierson. Does the county have decisionmaking authority
on Federal resources on Federal lands, that's the real
decision.
Mrs. Cubin. The county has the expertise that is absolutely
essential----
Mr. Pierson. I don't think anybody questions that.
Mrs. Cubin. [continuing] for producing a good document.
Mr. Pierson. Do they?
Mrs. Cubin. Of course, they do.
Tell me why they don't, Al. Tell me why they don't. Tell me
what you--what you just said was they couldn't have cooperating
agency status because they wouldn't agree to the final
document, they wouldn't sign it. Well, they didn't have the
opportunity to sign it. So that isn't a good reason.
Mr. Pierson. I didn't jump to the conclusion that they
wouldn't sign it. I just said they do not have jurisdiction and
couldn't sign it.
Mrs. Cubin. Well, that's what I want you to explain to me.
I want you to tell me exactly why they don't have jurisdiction.
Mr. Pierson. Because they do not have management
jurisdiction over Federal resources, just because they happen
to fall within a certain county. That is the responsibility of
the Secretary of the Interior in this case and on down to the
Bureau of Land Management.
Mrs. Cubin. List some cooperating agencies, some entities
that have cooperating agency status.
Mr. Pierson. Oh, Bureau of Reclamation over in the
Fontenelle EIS.
Mrs. Cubin. And do they have anything to do with the
mineral resources of this country?
Mr. Pierson. They manage the surface of part of the
Fontenelle EIS area and yes, they do, they make the decisions
on what's available for lease. We just lease it for them. We
just provide the service--provide the service of lease
operations once it is leased. Yes, that is Federal land
withdrawn to the Bureau of Reclamation for reclamation
purposes. So they have management responsibility on that land.
Mrs. Cubin. Go on.
Mr. Pierson. The U.S. Forest Service on the grasslands
where we develop coal and oil and gas.
Mrs. Cubin. OK. Let's shorten this, because I know this.
Is there any entity ever that has not been a Federal
Government agency or subagency or something that has had
cooperating agency status?
Mr. Pierson. Yeah. I think Wyoming DEQ on mining and
reclamation has it.
Mrs. Cubin. And what is their authority over Federal
minerals?
Mr. Pierson. Their authority is delegated through the
Office of Surface Mining to the State, with the recognized
State--they are a recognized regulatory agent to administer
subsurface mining and control on the Reclamation Act. They have
primacy, for example, in reclamation plans and mining plans.
They are the approval authority in that instance.
Mrs. Cubin. So since the expertise of the county
commissioners would be socioeconomic factors, it seems to me
that, just by definition, those socioeconomic factors don't
have the same weight that the other aspects have.
Mr. Pierson. No, I don't think that's the case. The
difference is the BLM doesn't manage the socioeconomics. We
certainly have an impact on it. And that's why we went to----
Mrs. Cubin. What do you mean they don't?
Mr. Pierson. We don't manage the socioeconomics.
Mrs. Cubin. No, you don't manage it. Do you consider it?
Mr. Pierson. Certainly, we do.
Mrs. Cubin. How much? Heavily?
Mr. Pierson. We went to great lengths in the Cave Gulch EIS
to include the county in that part of the analysis, to use
every piece of information that they chose to provide to us, to
verify it, just like we do every other piece of information
coming from anyplace else, and to expand greatly the
socioeconomic section in that EIS. I referred to it in my
testimony.
Mrs. Cubin. I don't think they would feel they had a lot of
input. But you know what this reminds me of? The blind people
that are told to describe an elephant, and they're at different
ends. That's what this reminds me of. I guess it's a
perspective that, as government officials, we have to be as
inclusive as possible. I can't see--I can't understand the
reason that that status was denied.
Mr. Pierson. Well, I believe I have explained that. We
researched that. We asked our solicitors to provide us help on
it. And it basically boils down to the county not having
jurisdiction in the decisions that were to be made in the EIS.
Now, that does not--that does not relieve us or the county
of our responsibilities to cooperate, to be a part of the
process all the way through. And in those cases that really do
have an impact and the county has good information to provide
into their analysis, such as socioeconomic, it is--regardless
of what you call it, you still have to have it in there, and
the cooperation is necessary, desirable, and I believe was here
on Cave Gulch.
Mrs. Cubin. OK. I want to talk a little bit about cost
recovery. And certainly, this is probably one of the most
controversial things we're going to be dealing with.
Is the Department of Interior now drafting regulations for
cost recovery?
Ms. Guy. I don't believe so, but I need to verify that. If
so, it would be done in Washington, that the Solicitor's Office
would not be involved unless the BLM regulations staff had
specific questions. And ordinarily, they don't review it until
the whole thing is done.
Mrs. Cubin. So you don't know?
Ms. Guy. Yes, that's correct, but I will attempt to
respond.
Mrs. Cubin. Would you do that?
And also I'd appreciate it if you could furnish a timetable
for me as to when those proposals might come out.
If administrative costs are currently deducted from
royalties collected on Federal lands, would it be a duplicate
charge by them assessing industry for minerals document
processing?
Ms. Guy. I guess I--the answer is I don't know what you
mean by administrative costs versus document processing. But
it's possible that they would be the same thing.
Mrs. Cubin. I think they're paying administrative costs
right now, and then--then document processing on top of that
would be--would be----
Ms. Guy. This would all be addressed in whatever rulemaking
emerges.
Mrs. Cubin. And you don't have any idea of any of the
proposed services that will be assessed charges?
Ms. Guy. No, I don't, Madam Chairman, because the
Solicitor's opinion was requested by BLM in a way to give it a
lot of options, where the Office believed that it had authority
to proceed. But it's up to BLM to choose how it wants to go.
And the BLM would be the agency to make that decision about
what sorts of things it wanted to include. And then there would
be the notice and comment period and ask for the public to
provide input on those factors, how it should weigh the
reasonableness factors. The courts have said that the BLM has
to include all the factors. But how those are weighed is
something that would be initiated to be considered in the
rulemaking process.
Mrs. Cubin. I can see how this cost recovery might become
very difficult for the BLM because I should think the people
who pay the money would expect a good return. They would expect
more because they're paying more. And I think they rightfully
ought to be able to expect that.
I have observed personally, and I have been told with
documentation, of circumstances where, frankly, industry's
money has just been poured down a rat hole. It has been wasted
in terms of time, in terms of delays in being able to start
your project. And because I don't want to embarrass anybody
here today, some of them are pretty egregious.
When money is handled that way, on the EAs and on the EISs,
why--why would the government think that they could ask for
more money when they don't even handle the money that they--
well, that is spent on their function, that they don't even
handle that well?
Ms. Guy. Madam Chairman, all the Solicitor's opinion says
is they have the authority. What the agency does with it, that
authority, is really a question I'd have to defer to BLM.
Mrs. Cubin. So basically, I guess we're not going to get
any more information today about cost recovery, other than the
fact that the Solicitor says that it's OK for the government to
assess costs.
Ms. Guy. If the criteria set out in the Independent Offices
Appropriation Act, the OMB circular are met, along with those
in FLMPA (if aplicable). If a private individual is receiving a
benefit not available to the general public, the policy is that
the government may recover those costs. And the IOAA indicated
that, to the extent possible, such service provided is to be
self-sustaining. But you'll also recall that one of the FLPMA
reasonableness factors is efficiency of government process.
This speaks to that, whether it's BLM or some other government
agency.
Mrs. Cubin. Then the remedy for that--if one of the
businesses didn't think that their money was being handled
responsibly, then the remedy would be go to Court?
Ms. Guy. They could proceed to administrative challenge or
negotiation.
Mrs. Cubin. So spend more money on top of that. So the
remedy might be worse than the illness.
Ms. Guy. Maybe not.
Mrs. Cubin. You have a comment?
Mr. Abbey. If I may, Madam Chairman, your comment regarding
cost recovery is certainly on the mark.
A proponent who is paying the bill deserves a quality
document in a timely manner. The cost recovery program as
administered by the BLM is subject to audit. If a company
believes that they're contributing funding to a particular
product and they're not getting quality service and sort of
inefficient service, then our records are subject to being
audited to determine how we had to use that money. So that's
already available to the company or to the proponent.
Mrs. Cubin. I've seriously considered, as chairman of this
Subcommittee, asking the GAO for an audit on the permitting
access to public lands. I don't know how soon that will be able
to be done; however, I think it's something that the truth--the
facts need to be brought out into the light of day so that--you
know, by an unbiased agency, so that we have a better idea of
exactly what is going on because the perception is sure there
that this administration has an agenda for the public lands
that doesn't necessarily coincide with what the laws for public
lands say.
I want to ask one question about the net sharing receipts
formula that is in the law. I think it says that the States pay
one-fourth of the total of the bill and Forest Service and MMS
costs for onshore mineral leasing. Do you have any idea how
that would affect the States?
Ms. Guy. I do not, depending on what BLM proposes.
Mrs. Cubin. Well, what I would really appreciate a lot is
if you could get the answer for me soon as to whether or not
rules and regulations are being drafted and, if they are, what
that timetable is.
Ms. Guy. Certainly.
Mrs. Cubin. Do either of you know?
Mr. Pierson. I believe late 1997 is when we expect to have
the regulations out for public review.
Mrs. Cubin. I didn't hear what you said.
Mr. Pierson. I said I believe that late 1997 is when the
regulations are due to come out for public review.
Mrs. Cubin. So they are being drafted; right?
Mr. Pierson. So far as I know. They're probably in the very
early stages of being drafted.
Mrs. Cubin. OK. Thank you.
I don't have any further questions. Thank you very much. I
appreciate your patience.
If the second panel would please come forward.
If you wouldn't mind standing, I'll give you the oath.
[Witnesses sworn.]
Mrs. Cubin. And Mr. Basko, I understand this is your very
last day of work. And I--I mean of full-time work. And I just
want to thank you so sincerely for the years of service that
you have blessed the State of Wyoming with. You truly are one
of the stalwarts in this industry and in this State. And you
are a person that I am proud to know professionally and
personally. And I think this beautiful building is the least we
could do, to name it after you, for all the work you have done.
I know you're going to work half time for 6 months or so.
But I just hope you will hang around for a long time because we
still need--we need your brain, and we need your good common
sense.
So if you will start the second panel testimony.
STATEMENT OF DONALD BASKO, SUPERVISOR, OIL AND GAS CONSERVATION
COMMISSION
Mr. Basko. Thank you, Madam Chairman.
You've already covered some of what I was going to say, but
I'll read it to you one more time.
My name is Donald Basko, the supervisor of the Wyoming Oil
and Gas Commission. I have been employed with the Commission
for the last 37 and a quarter years. Today is my last day of
full-time employment; however, the Commission was kind enough
to give me a contract for six more months at half time.
I wish to touch on three concerns: The first, the
assumption of enforcement and inspection responsibilities from
BLM; the Cave Gulch EIS, specifically, and statewide delays of
opportunities to drill caused by the general EIS process; and
third, the recent field inspections of oilfield inspections by
Wyoming--or the U.S. Fish and Wildlife Service and EPA,
particularly the detailed checklist and the high-handed
attitude of the Fifth Team from the Criminal Investigation
Group, and the misleading purpose of those inspections.
For several years now, the States have been negotiating
with BLM regarding the takeover of enforcement and inspection
responsibilities. In my view, in spite of the face-to-face
meetings, very little progress has been made. The problem has
been that at least Wyoming is unwilling to replicate the
activities of the BLM. Site security is a particular concern.
There are also a number of other unresolved issues the
State--between the State and BLM. I have attached a copy of the
letter--of my letter of June 13, 1997, which was referenced
earlier, to Mr. Al Pierson with BLM because it sets out some of
the provisions I feel should be a part of the agreement. This
letter was prompted by a request from BLM to respond by August
1st of 1997. In essence, I believe that there should be one
program, that the State is not interested in the NEPA process,
that savings in running the program should result in lower
administrative costs to the State, and that reimbursement for
running the program should become--should come from the
royalties stream.
Further, our program of regulations is a good one. At some
point we would consider taking over the Application for Permit
to Drill, and realizing that this may not be feasible without a
change in the law, we stand ready to support that legislation.
Finally, I am still waiting for a detailed breakdown of the
cost to BLM for E and I in Wyoming. I feel that this is a
requirement, so we can see where we can make some savings. I am
not interested in taking over the program only to be reimbursed
for what we do. However, if we can save a significant number of
dollars and the State would be the beneficiary of half that
savings, then the program is worthwhile looking at.
As you recall, the second issue, regarding the Cave Gulch
EIS, is as follows:
The Green River Basin Advisory Committee made several
recommendations to the Secretary of the Interior, Bruce
Babbitt. One of those was to streamline the NEPA process by
reducing the timeframe from approximately 26 months down to 16
months. The second was the required road standards consistent
with the ultimate use of the road; in other words, to require
construction of a road to a wildcat well that could be either
rehabilitated, if the well were dry and abandoned, or upgraded
if it became a producer. Both of these recommendations could
have been introduced by BLM without the prompting from GRBAC.
To industry and the environmental community, the third and
most important recommendation was the concept of eco-credits.
Eco-credits would provide reimbursement through royalty
reduction to the company paying for the EIS or other
environmental documents and an equal amount for mitigation to
environmental concerns--for mitigation of environmental
concerns. This recommendation was rejected by Interior as being
contrary to law, and no apparent way around the decision was
offered. The two other recommendations were of lesser
importance.
My purpose in bringing this issue up is I am wondering if
BLM has employed the streamlined NEPA process at Cave Gulch,
and if they are using the road standard recommendation for
roads, or is everything business as usual.
The final issue I'd like to bring up is to discuss the fly
over inspection of pits in Wyoming.
On January 9, 1997, the U.S. Fish and Wildlife Service and
EPA was asked for a meeting with the Commission staff and the
DEQ. Also in attendance were representatives from the BIA and
the Forest Service. The meeting was to discuss oilfield pits
and their impact on migratory birds. They were informed--we
were informed that the U.S. Fish and Wildlife Service, with
help from the EPA, was going to fly the State and make note of
any pits they thought were a threat to the migratory birds.
Aerial surveys were conducted in April 1997. On May 19th,
1997, we received a list of 213 pits U.S. Fish and Wildlife
Service and EPA had identified as problem pits. This list was
subsequently reduced to 210 sites, of which 91 were the
responsibility of the Commission, 86 BLM, 20 DEQ, and 13 BIA.
We immediately sent our technicians into the field to check on
all the State and fee mineral pits. We were informed by U.S.
Fish and Wildlife Service that we had 30 days with operators--
to work with operators in solving the problems. At that point
U.S. Fish and Wildlife Service intended to put four teams in
the field to do a ground inspection of the pits. We were under
the impression that these folks were looking for problems that
were a threat to migratory birds. However, at the last minute,
after a number of phone calls, we received a checklist that
they'd planned to use, which was 12 pages long and constituted
a full-blown audit of all Federal regulations. This was not
just to protect migratory birds, but a power grab by EPA to
assume regulation of oilfield pits. This has traditionally been
the State's responsibility.
In addition, EPA put a fifth team in the field, without any
notice, from their Criminal Investigation Group. This group had
no State or BLM representation, nor did they want any. They
took the position that they did not have to ask anyone for
permission to do anything, including going on operator's leases
without permission or prior warning.
This last item may not be germane to this committee, but I
wanted you to know how other branches of our government
perform.
My secretary's spellcheck was on vacation, I guess, because
``germane'' is spelled wrong.
In conclusion, I think the BLM is less than sincere about
delegating E and I to the States that are unwilling to take
every step that they take in all activities. Second, the delays
in Cave Gulch were unconscionable, cost people jobs, the
government tax dollars, and companies the opportunity to
develop their leases. Finally, the attitude of EPA,
particularly in inspections of oilfield pits in Wyoming, is a
demonstration of government at its worst.
I'd be happy to answer any questions, Madam Chairman.
I did note that Mr. Pierson told you that he's waiting for
a proposal from the State. Let me turn that around. It would be
helpful to me if he sent me a proposal of what he expects. And
then we can see what we're willing to do.
[The prepared statement of Mr. Basko may be found at end of
hearing.]
Mrs. Cubin. Thank you.
Mr. Magagna, welcome.
STATEMENT OF JIM MAGAGNA, DIRECTOR OF FEDERAL LAND POLICY,
STATE OF WYOMING
Mr. Magagna. Thank you. Thank you, Madam Chairman. And
first, on behalf of Governor Jim Geringer, let me welcome you
and your staff to Wyoming and express our gratitude for your
scheduling this hearing on an issue that is so critical to the
socioeconomic viability of the State of Wyoming.
I'd like to take this opportunity to expand on two or three
of the issues that I addressed in my written testimony.
You are certainly well aware of the land ownership pattern
in Wyoming, as well as the mineral ownership pattern. Due to
this intermingled pattern, we often find that State trust lands
and private lands are really, in many areas of the State, held
hostage to mineral development that takes place on the Federal
land.
Oil and gas, for example, is usually developed on a field
basis, and most of those fields are going to contain scattered
tracts of State land and in many areas scattered tracts of
private lands, if any, together with the Federal lands.
So while we have, particularly in the case of State trust
lands, an obligation to produce revenue from those lands, which
means being active in the development of our mineral resources,
we often find ourselves thwarted by policies in the Federal
land agencies that discourage surrounding mineral development.
Even in those cases where it would seem apparent that we
should be able to proceed--and Cave Gulch again stands out as
an example. There a well, successful well, was completed on
State lands, and yet production and revenues to the State from
that well were delayed by several months because of BLM's
refusal to allow the laying of a gathering line from that well
to carry gas to a transportation pipeline, to remove it from
the State land. So we're hurt in many ways there.
Once each month, I have the opportunity to sit in the very
chair that you're sitting in today chairing the Oil and Gas
Conservation Commission. And our charge there is to promote
conservation through development, careful development, of our
oil and gas resources in the State as well as protect the
correlative rights of the various parties holding mineral
rights in the State.
One of my greatest frustrations, and I believe I can speak
for my fellow commissioners as well on this matter, is when
parties appear before us and there would seem to be an obvious
resolution to an issue, a decision that this Commission could
issue, that would protect the interest of all the parties.
We're told, no, we can't go that route because the BLM has said
that they will not accept it.
Unfortunately, they're not a party that comes before the
Commission. They're not subject to our jurisdiction. So it's
like we're attempting to balance the relative interests with
one of the key parties not subject to our jurisdiction, not
before us in a formal sense as we're acting on these matters.
The implications are very broad.
Cave Gulch, I know, is going to be talked about a lot of
times today because it's such a fine example of many of the
issues we're addressing.
Let me move back, though, to 2 years ago, when Governor
Geringer held his first partnership conference in Wyoming. It
was entitled ``The Wyoming Partnership: Minerals, Energy, and
the Future,'' held right here in Casper, with representatives
of the mineral industry and related groups.
Among the consistent items that came out of that conference
and through the workshops in that conference were the
frustration over access to Federal lands, over permitting
delays on Federal lands and over restrictions on production
from those lands. In fact, and not stated in my written
testimony, but certainly apparent in the outcome of that
conference, was the call for the State to look at ways that
they could expand their ability to assume control of those
particular functions.
This ties in, I believe, very much with Mr. Basko's
comments on inspection and enforcement because that's one major
part of the regulatory process that is involved there.
I continually hear in my position as Director of the Office
of Federal Land Policy is from producers who are frustrated in
their attempts to do business on Federal lands in Wyoming.
Wyoming, particularly in the oil segment, is highly dependent
on our independents. Excuse the pun there. They don't have the
resources finan-
cially to withstand a one- or two- or three-year delay process
while permitting takes place, while the need for process is
played out and appeals subsequent to that are carried forward
before they are finally able to operate on Federal lands and
receive a revenue therefrom. And of course, we in the State, as
a primary beneficiary of those revenues, are suffering at the
same time.
In the case of larger producers, the major companies
operating in Wyoming, what I hear constantly from their local
people employed and stationed here in Wyoming is their
frustration that they can't compete successfully for their
company's resource dollars for development and production
because at the corporate level the companies are looking at
where can they receive the best return in the shortest
timeframe, time being money in this case, from the investment
of their limited budgets. Repeatedly they are finding that
Wyoming and some of the other heavily Federal Rocky Mountain
States are not a good place to put those limited dollars
because of the delays that are involved in getting a return on
those investments.
The Green River Basin Advisory Committee has been discussed
earlier by Mr. Pierson. Let me just comment briefly on two
items there, having served on that Committee. One, while I know
there are five recommendations and four of them are going
forward to some degree, my observation would be that the
success of those recommendations is relative to the level
within the agency at which they can be implemented. Those, for
example, on transportation planning that lent themselves to
implementation at the district level within the Bureau of Land
Management are moving forward quite well. The one on shortening
the NEPA process, which is subject to a broader level of input
and guidance, is being tried in a field test in the Jonah field
development in Wyoming. Based on the conversations that I have
had, both with industry and with agency employees, I'm led to
believe that, while some progress is being made, we're likely,
as members of the GRBAC, to be very disappointed in the final
results of that trial of significantly shortening and
simplifying the NEPA process.
Finally, let me talk just briefly about the socioeconomic
standards and analysis that's done by the Federal agencies, and
in this case, particularly, by BLM.
My observation would be that, even when as in the final
Cave Gulch EIS, BLM does make a significantly improved effort
to do socioeconomic impact analysis, that analysis is always
going to suffer from the perspective that's brought to them. We
need to know if this action is going to have a negative
socioeconomic impact or a positive impact relative to the
status quo.
We at the State level are looking at economic development
for the State of Wyoming. It makes little sense for us to
project forward and have an economic development plan for a
State whose economy is heavily mineral dependent when 68
percent of our gas production and 60 percent of our oil
production is coming from Federal minerals because, while we
can develop the best plan in the world; we cannot guide the
implementation of that plan, given that heavy Federal presence.
In doing socioeconomic analysis, the Federal agencies do
not look at what the impacts of a particular project or a land
use plan will be on the State's economics goals or on local
government's economic goals. They're simply looking at them in
absolute terms, relative to the status quo. That's not adequate
to allow the State government to build an economic future that
is going to be based on our federally controlled natural
resources.
Finally, in closing, I feel compelled to enter into the
fray on the discussion of cooperating agency status.
In my office, we have done a rather thorough analysis of a
wide array of Federal environmental land management laws, which
make reference to State and local governments as having the
ability to have cooperating agency status. I fail to find in
that analysis the requirements outlined by Mr. Pierson, that
they have to be in a decisionmaking position relative to the
Federal resource before they can have such status. And in fact,
and quite frustratingly, we're getting very mixed signals from
one Federal land agency to the other and extremely mixed
signals between the agencies at the Wyoming level and some of
the leaders within the administration at the national level.
We've repeatedly been assured, in fact, personally by Katie
McGinty, who's the head of the Council on Environmental
Quality, that cooperating agency status is available to State
agencies, to County governments.
I believe that this issue, whatever the current law
provides, needs to be resolved. There needs to be some
consistency in the application of the law as it's been adopted
by Congress toward the role of State agencies, local
governments, conservation districts, any of those governmental
entities, into these decisionmaking processes. And we do
believe that they should be entitled to, in many circumstances,
cooperating agency status.
I would submit, Madam Chairman, that very likely it's going
to take your assistance and the assistance of Congress to
finally provide some definitive, consistent answers to that
question, which has really taken on a life of its own. I
believe whether or not they're willing to listen to a County
commission just as much without giving them that status, it's
become a barrier to the communication that you referenced
earlier that is so critical between local governments and the
Federal managers in the oil and gas arena.
With that, again I want to thank you for this opportunity
today and express our appreciation to you for the fine work you
do in these areas as Chair of the Subcommittee that's so
important to the State of Wyoming.
[The prepared statement of Mr. Magagna may be found at end
of hearing.]
Mrs. Cubin. Thank you very much.
Mr. Carter, would you----
STATEMENT OF JAMES W. CARTER, CHAIRMAN, PUBLIC LANDS COMMITTEE,
INTERSTATE OIL AND GAS COMPACT COMMISSION
Mr. Carter. Thank you.
Madam Chairman, the Interstate Oil and Gas Compact
Commission appreciates this opportunity to address you on oil
and gas regulatory issues. I'm Jim Carter. I'm the Director of
the Utah Division of Oil, Gas and Mining, but I'm appearing
before you today as Co-chair of the IOGCC's Public Lands
Committee.
The Public Lands Committee has set out for itself an
ambitious plan of work to study and make recommendations on a
series of oil and gas matters relating to public lands,
including land withdrawals, royalty in kind, idle wells,
regulatory reform and cost recovery, among other issues.
Although the Committee is in the early stages of work on those
issues, I can share with you the gist of our discussions to
date.
IOGCC Public Lands Committee members are supportive of the
recommendations made by the Green River Basin Advisory
Committee, particularly with regard to eco-credits. And I won't
go into making any further comments on that because that's been
well discussed.
The Public Lands Committee's thoughts on cost recovery are
mixed. To the extent that cost recovery can facilitate timely
BLM review and permitting processes, the State would generally
be supportive; that is, to the extent that cost recovery is
utilized to purchase higher levels of service. If, however,
cost recovery is simply an alternate revenue source for the
BLM, the States would not be likely to be supportive,
particularly in light of the fact that the States are
contributing to the administrative cost share of the overall
expenses of operating the minerals program.
The issues surrounding access to oil and gas reserves on
federally managed property generally fall outside the
regulatory purview of the IOGCC states. Access issues do
relate, however, to the conservation mission of State
regulators to see that maximum economic recovery of oil and gas
resources is achieved, consistent with other law, regulation
and public policy. From the conservation standpoint, the IOGCC
states believe that lands deemed to be suitable for oil and gas
development by the BLM's public land planning and environmental
review processes should not be made unavailable unilaterally or
by decisions or processes which are other than the public
processes by which BLM is required to make such decisions. The
Public Lands Committee looks forward to providing the Committee
with additional analysis and recommendations as our work
progresses.
With regard to general regulatory issues, you are well
aware that one of the major items of work of the Public Lands
Committee for the past months has been the proposal by the BLM
to transfer certain oil and gas regulatory functions to the
States and tribes. I have appeared before this Subcommittee
before. I'd like to thank you again for the Subcommittee's
support of, and the encouragement of, this ongoing discussion
with the Bureau of Land Management.
I don't have any specific progress to report to you today.
I'll spare you discussing where we have been and what we have
done over the last few months.
But based on the discussions held and the input we've
received to date, the IOGCC sees three areas of opportunity for
improvement of State and Federal oil and gas regulatory
programs, along the lines suggested by the Subcommittee.
The first is improvement of coordination and communication
between existing State and BLM regulatory programs. Simple,
improved coordination and communication will go a long way.
A second opportunity is for delegation of inspection and
enforcement functions from the BLM to the States pursuant to
existing statutory authorities. Mr. Basko has addressed that in
some detail. I'll skip over my detailed discussion of that,
except to say that there are several States, in addition to the
State of Wyoming, that are putting together proposals and will
finally have them submitted to the BLM. As I said, the IOGCC
does see some opportunity, given that limited delegation of
authorities. We think we can save some money and make things
work out.
The IOGCC States remain convinced, however, that the
greatest opportunities for streamlining, simplification and
improvement of regulatory programs lie in consolidation of
State and Federal oil and gas regulatory programs in each
State. The IOGCC States see several opportunities for
congressional action to simplify implementation of the existing
BLM regulatory programs, and to broaden opportunities for the
BLM and the States to work better together to optimize
regulatory programs.
A good example is BLM's program for ensuring production
accountability. Site security was one of those aspects. As
Assistant Secretary Bob Armstrong put it in a letter to the
IOGCC, dated June 5th of this year, ``The Bureau of Land
Management''--I'm quoting here. ``The Bureau of Land
Management's oil and gas inspection and enforcement program has
been carefully scrutinized by the Office of the Inspector
General, the General Accounting Office, and the Senate Select
Committee on Indian Affairs. Recommendations made by those
organizations have resulted in the evolution of BLM's program
into its current form.''
Unfortunately, those outside organizations have focused on
changing the processes the BLM utilizes to ensure production
accountability, rather than on the actual results of program
implementation itself. The BLM finds itself constrained to
insist that the States perform production accountability
activities on Federal lands in the same manner--in the same
manner it does to make a delegation of Federal production
accountability responsibilities to the States. The States are
not willing to replicate Federal processes. Congress could
clarify and simplify its charge to the BLM with regard to
production accountability, and direct the BLM and the Minerals
Management Service to collaborate in developing a simpler, more
cost-effective program for ensuring production accountability
based on bottom-line results rather than the techniques BLM
currently uses to achieve its objectives.
Another approach which could resolve this quandary, and
other problems as well, would be to modify the Secretary of the
Interior's delegation authority with regard to oil and gas
regulatory programs. The model created by the Surface Mining
Control Reclamation Act is instructive. Under SMCRA, the
Federal Office of Surface Mining Reclamation and Enforcement
does not delegate regulatory authority to the States. Instead,
the States develop their own regulatory programs for coal
mining as a matter of State law. OSM must then make a
determination that the State regulatory program is no less
effective than the Federal program. If it is no less effective,
OSM defers to State regulation of coal, under the State's own
program. OSM retains an oversight role to ensure that the on-
the-ground results mandated by SMCRA are achieved by limitation
of the State by its own program.
If the Secretary and the Director of the BLM had similar
authority with regard to oil and gas regulation, the long-
standing debate over the meaning and scope of the term
``delegation'' could be mooted.
The IOGCC States are committed to continuing the work--to
work more closely with the BLM to identify opportunities for
streamlining and regulatory program improvement. As well,
several IOGCC States, as I mentioned, will be making delegation
proposals under existing FOGRMA delegation authorities. The
IOGCC believes, however, that the BLM and the States must have
broader authority to allow application of State regulations to
Federal properties if significant cost savings and economies
are to be achieved. The IOGCC also believes that continuing
work toward consolidation of regulatory programs will benefit
the regulated community and provide more efficient and better
service to all our customers.
Thank you.
[The prepared statement of Mr. Carter may be found at end
of hearing.]
Mrs. Cubin. Thank you very much.
There are some questions that I'm going to ask that will be
brief just because I wanted them to be on the record. Then I
would like to have a little bit of a dialog with you.
Mr. Basko, I'll start with you.
You indicated that you support a single regulatory program
in each State for oil and gas activities. Could you explain
what the current situation is and why your proposal would be
better for the State, the country and the industry?
Mr. Basko. Well, obviously, the BLM does things differently
than we do, particularly in the arena of site security. I've
suggested to the BLM several times that, rather than have
people run to the field and check valves and rattle chains and
whatever else they do, that that same level of comfort could be
achieved by comparing with computers the gross production, the
sales and what is reported as production for the purpose of
taxation. And I haven't gotten very far with it.
They feel that the presence of an inspector in the field
has the same impact as a highway patrolman that keeps people
from speeding. And yet you see people speeding all the time.
And so I think if somebody is going to steal oil or whatever
from a lease, as soon as the inspector leaves the field he's
going to take it, and that really isn't a deterrent.
Certainly, it would be of benefit to the operators if they
were operating under one set of rules, rather than two,
especially where there are adjoining Federal, State and fee
leases. And I think that's what I meant by a uniform regulatory
program.
As I said in my testimony, we haven't gotten very far with
BLM in resolving any of these issues. The biggest thing that
I'm concerned about is, if there is a savings to be had, that
the State be the beneficiary of half of that savings. And
although that's implied, it hasn't come back as a firm
commitment that that's what would happen. Otherwise, I'm--I
guess I must say that I'm not interested in the program just to
do it for a fee.
Mrs. Cubin. Right. So it is fair for us to say on the
record that you are confident that the State can properly
protect the environment; is that right?
Mr. Basko. Yeah, I believe so.
We're a little different than some of the other States.
Some of the States duplicate activities that the BLM does with
their own people on Federal lands. And I think of North Dakota
right off the bat, where they witness plug and abandonment
procedures on all wells regardless of ownership. And we don't
do that. So there's a greater opportunity in some of the States
to eliminate that duplication. And we're spread so thin that we
don't have that luxury of being able to go out on a Federal
lease and witness anything. Oh, I suppose on rare occasions we
might do something like that, but generally speaking, that's
not true.
Mrs. Cubin. Do you think this Subcommittee ought to
consider legislation to implement eco-royalty relief or eco-
royalty credits?
Mr. Magagna. I'll make an attempt to answer that. I'll say
that the Secretary has not committed to me that everything has
been placed back on the shoulders of the Solicitor's office,
but I believe--I believe, if we want that to go forward, that's
where it needs to come from.
The caution I would note, though, is in the provision that
comes out of the Green River Basin Advisory Committee can't be
implemented without the agreement of the States of Wyoming and
Colorado.
I think it is critically important that we believe in the
proposal, and we would like to see it go forward, so long as it
doesn't become the excuse you used earlier, the high cost of
some of these documents that industry is now paying.
Eco-relief is designed to provide some opportunities for
reimbursement to industry there. If it is truly that, it can go
forward. It needs safeguards to make sure it doesn't become an
added cost burden and you end up with the industry as well as
the States as well as the Federal Government being financially
impacted further by this. But I believe it's a concept that
ought to be explored by the Congress with appropriate
safeguards.
That was the benefit. It was a 2-year trial, and it was
based in a very localized area. I'm not sure, as the State of
Wyoming, we're ready to have it legislatively mandated. I think
it needs to be tested.
Mrs. Cubin. Were the environmental organizations supportive
of that part of the GRBAC report?
Mr. Magagna. I don't want to pretend to speak for them. But
yes, they were. It was a consensus recommendation. It has
something for everyone. The industry stood to receive some
financial relief in terms of NEPA, the environmental
opportunity, and the enhanced litigation beyond that that's
mandated. And the State, even though we would be giving up 50
percent of the moneys going into the program, stood to benefit
from enhanced rate of development, assuming that it, in fact,
led to an increased development scenario. If it fails to lead
to the increased rate of development, then certainly we, as a
State, would not remain supportive of it because of its direct
impact on our share of royalty dollars.
Mrs. Cubin. And certainly, that would be the problem if it
did require legislation for a pilot project because it's a lot
easier to implement rules and regulations, have public input,
than it is to get an act of Congress to approve something or
take it off the books once it's there. So ideally, it could be
formulated by the BLM, by the Secretary of Interior, as a pilot
project. In my opinion, that seems to be ideal.
Mr. Magagna, you said that you did an evaluation of the--or
an assessment of the cooperating agency status, that you've
gone through it. And I wondered if you could supply a copy of
that to us for the record.
Mr. Magagna. Be pleased to.
[The information referred to may be found at end of
hearing.]
Mrs. Cubin. I would appreciate that very much.
Do you think--does it seem to you, Jim, that the State
governments, that industry, is more in an adversarial position
with the Federal agencies? And I want to make just a little bit
more of a delineation here.
It has been my experience that the land managers on ground,
in whatever State it is, tend to be much more open-minded, to
want to work with the local folks and to want to get things
done, rather than delay them, whereas in Washington that is not
the way it is. What kind of relationship is it? Is it truly an
adversarial relationship with Washington, with the local
managers?
Mr. Magagna. I would say it is certainly not an adversarial
relationship with the local managers for the most part. I think
the State of Wyoming has a very good, open communication with
the Federal resource managers and generally a good working
relationship. In fact, I would go so far as to say especially
good, given the fact that their direction from Washington is so
often inconsistent with the needs and the goals of the State of
Wyoming.
They're put in a very difficult position. Oftentimes, when
we see opportunities for cooperation, we're not able to
cooperate because to do so, to move in a direction that would
be acceptable with the State of Wyoming, would simply not be
consistent with the direction that they're being given at that
point in time from Washington.
And I might add that, certainly, resource management
suffers I believe that the people that are on the ground are
looking at what's best for the resource and as are the people
of Wyoming, where so often the people in power in Washington at
any given point in time, in administration, are looking to
implement a philosophy rather than manage a resource.
Mrs. Cubin. I absolutely agree with that. That is the
picture that I get both from Washington and from here. And the
frustrating thing is that many times the person in Washington
who ultimately makes the decision may never even have laid eyes
on the situation, on the ground, or know very little about the
area. I know that you are aware, and Congressmen, too, people
in Washington have the idea that all of our public lands look
like Grand Teton National Park. And so, when we are mining and
drilling for oil and gas, they are convinced that we are
polluting the water and there are horrible scenes of these rigs
going up and dead animals laying in the water. And that is the
truth. I am not exaggerating.
So in August it's already been reported, but there will be
about 20 to 30 Congressmen coming out to look at coal mines,
look at public lands and look at some oil and gas exploration.
And I can't wait, because I can't wait until they see it. I
think it's beautiful, the sagebrush and alkali where you can
look and look and look and there is no water there, but--and to
me it is beautiful. But they aren't going to find it to be what
they think they're going to find.
Education and communication is the most important job that
I have. And I honestly think that it's the most important job
that everyone in this room has.
And speaking of communication, Don, I just heard two things
here today that I'd sure like to see get off the ground and
going. Mr. Pierson is saying they didn't do anything because
they don't have this and this and this from the State, and the
State says we don't know what to submit because they haven't
told us what they want. And so if that could just be opened up.
I don't know how, but it seems that ought to be easy. That
ought to be the easy part. And so I hope that can happen.
One proposal--Mr. Carter, you brought this up, and I think
it's really worth looking into. I don't want to have this
hearing just so everybody can complain, you know, and other
people defend themselves. I really would like to be able to
find some solutions that we could implement in the short term
at least, and we could be planning for solutions in the long
term. One of those suggestions was setting up the regulatory
access permitting process in the same structure as SMCRA, where
the State--Federal Government has certain requirements and the
State has to meet them. The State devises their own plan and
their own enforcement and inspection and so on, and then the
Federal Government approves the plan, and from then on the
State has primacy to enforce, manage and so on.
How realistic do you think something like that really is?
Mr. Carter. In my own view, here's what it would take. And
let me background.
As you know, one of the things that my agency in Utah does
is operate the State of Utah's coal-regulatory program under a
primacy program under the Office of Surface Mining. So I'm
familiar with that process. I also worked on a steering
committee on oversight process.
And what we found we needed to do to get away from being
more stringent or less stringent was to agree upon what the
objectives were. When you're finished, everything else is some
aspect of that.
My idea is, for a similar process to be successful, BLM is
going to need to be willing to depart from a discussion just of
their processes. And I understand the production accountability
is a classic: We do it this way and we've always done it this
way and we have all these pressures to do it this way. What is
it you're trying to achieve? Trying to get all the money. How
much money are you spending to get all the money?
This is a roundabout answer, but I think it's a realistic
one, if we are able to convince the BLM and ourselves of what
the objectives of our programs are and State what success is in
each of those categories and then be willing to look at a
variety of a different methods for achieving those results.
There's a concern in a centralized environment, that you
can't turn the field folks loose too much. And I think this
relates to how we work with BLM. They look at an on-the-ground,
common sense solution to achieve the goal, whereas if you're
three steps removed you want to try to steer the outcome
through the process. So you create these increasingly detailed
processes to reduce their problems.
But if we can agree on objectives and agree on measures and
agree on the results or what the quality is if you fail to
achieve the objectives, then that would provide a basis for
having the states implement their long-standing and successful
programs.
Mrs. Cubin. I think that that approach is one that would
help. Certainly, it isn't one without its own drawbacks.
I introduced a bill relating to SMCRA, because the Federal
Government kept coming in and issuing notices of violations on
10-day notices over and above the State's. And there would even
be arguments between the State and the Federal Government
whether or not there was a violation. And just because the
legislation was pending, I believe--I think the number of those
things decreased like three or four hundred percent. So
sometimes babysitting helps.
[Laughter.]
Mrs. Cubin. Another proposal or possible option--and any of
you climb in and say anything--as you know, MMS does the
permitting and regulating of offshore drilling. How--would it
be much better, or how much better would it be, to have one
agency, rather than the Forest Service, the Park Service,
Bureau of Reclamation, everybody who gives input, what are the
pros and cons of having one agency do it like the MMS does it
for the offshore?
Mr. Carter. Any takers there? I'll take a stab.
Let me repeat to you some of the things I have heard in
discussions and pros and cons that emerge. There's an argument
that an agency that does a number of things is always at odds
with itself about what it's trying to accomplish and is not
able to develop a clear mission and it's struggling with
itself. One school of thought would be that's a good thing.
Another school of thought would be that's not.
My sense would be it's more important to have it in an
agency that has a fairly narrow focus. Whether that's MMS, I
don't know. But I see other land managing agencies that
successfully manage their lands, like the Forest Service,
without having oil and gas regulatory responsibilities, and
that tells me BLM could also.
And whether the accounting for the royalties should be
administered as it currently is I'm not sure. There's a field
presence, as was pointed out. But if we see discrepancies, we
go out or if we have complaints, we have suspicious activity,
then we go out and do a field inspection. But whether that's
two functions or it could be designed into a single agency I'm
not sure.
Mrs. Cubin. It seems like a single agency would be cheaper
and maybe more efficient, although it may be too one-sided. But
if an agency did that using scientists from another agency,
there could be a certain amount of protection and make sure
that all the aspects were looked at.
Mr. Magagna. I would offer one more comment. I would
certainly agree with everything Mr. Carter said, but would
offer a note of caution, that that would need to be accompanied
by very, very clear direction of that responsibility because,
as the land management's agency, it's going to be very
difficult. I expect that for BLM to say OK, when we get to the
point of a decision to lease or a lease being listed, probably
a decision to lease once a land use plan is done, then we're
going to give that up. The interrelationship between the
multiple uses doesn't stop. And if you had MMS trying to do
that with a more focused procedure, I think it would have more
viability. But at the same time they need to be constantly
relating back to the land agency. I guess you've got
cooperating agency status, although I would be somewhat fearful
you would have non-cooperating agency status in that scenario,
simply being put in the position of having to deal on the same
issue with two agencies where now they're dealing with one, at
least on those circumstances.
Mrs. Cubin. You know, another thing I have learned since I
have been in Washington is that lots of times it isn't the law
that is causing the problems, it is the rules and regulations
and the interpretation of those by different managers as they
come in. I wonder, were the problems with access and the
problems with permitting as severe before President Clinton was
elected to office? I have to be up front here. You know how I
am.
[Laughter.]
Mrs. Cubin. Secretary Babbitt does have a different agenda,
does have a different philosophy. He would like to blow up
every dam on the Colorado River system. He was angry with Helen
Chenoweth because of an exchange we had. So the next week or
two he went to her district and donned himself with fire-
fighting clothes and took a match and threw it on there. I mean
if that wasn't an in-your-face Chenoweth wish I don't know what
is. I think, as a general rule, when you pass a law based on a
person or a particular situation it's generally not going to be
a very good law. I think you have to base laws on good sound
policy and then have to work within those parameters.
So, Don, you've been around. Help me with this. Is it
different than it used to be, and why? You can't be fired.
Remember that.
Mr. Basko. No, not really. I think it's become more
difficult and more divisive. And to give you an example, we
have nine district offices--I guess they call them district
offices--for BLM in Wyoming. And operators tell me that
operating in one district is not the same as in another one.
They interpret things differently, even across county lines or
section lines where the division between the two exists. And so
there's that frustration in interpreting these laws, even
between the different offices within BLM, which is--you know,
that becomes a problem for operators. What is acceptable in one
district is not necessarily the way it is in the next one.
Mrs. Cubin. And that indicates lack of leadership, it would
seem to me.
Mr. Basko. Well, you know, I guess you have to say that. We
entered into a memorandum of understanding with the BLM about
who would do certain downhole functions several years ago. And
at that time Bob Bennett was the acting director. And I said if
we sign that does that mean that's the law of the land? He said
not necessarily; they're all independent. And I said why are we
doing this if we're not all going to agree this is a way it's
going to be?
Mrs. Cubin. I think it's an accurate statement to say there
is confusion in the leadership in the Department of Interior.
I wanted to point out that three of the four Federal
witnesses are still here today, learning today. And in
Washington they come in and testify for 5 minutes and split.
They don't even want to hear what's going on. They don't even
want to know. They have a different agenda. And I'd like to
thank you for staying. I think that that indicates that things
are better on the ground than in Washington.
I don't think I have any other questions.
Mr. Basko. Just one more comment on the eco-credit topic. I
was--had the opportunity to sit next to Bob Armstrong at an
executive committee meeting of the Interstate Oil and Gas in
Washington in March. This subject of eco-credits came up. And
he turned to me and said we can't do it; it's contrary to law.
So unless he's changed his position, that's the official
position of the Secretary of the Interior.
Mrs. Cubin. That's interesting. We just had a hearing and
passed a law that allows penalty for legally kill a polar bear
in Canada to legally bring the pelt to the United States. Well,
the agencies, the Department of Interior, didn't want that to
happen. And so when they promulgated their rules and
regulations they especially denied that to happen. What
happened was this. As Don Young, the chairman of the
committee--it was his bill in the first place. So we had a
hearing because we now have a mechanism through the Congress
where we can eliminate rules and regulations that we feel are
not consistent with legislative intent. So at this hearing, I
believe it was Ward Tipton, when I was questioning him on how
can you get this rule from this law, he said we interpret it as
we want it to be.
[Laughter.]
Mrs. Cubin. And I just think that that happens an awful
lot.
One last remark. Don, you talked about EPA coming in the
pits. And this committee does not have jurisdiction over the
EPA or those issues. But fortunately, I'm on the Commerce
Committee, and we do have jurisdiction over the EPA on the
Subcommittee I'm serving on. And I will be inquiring more as to
what action and what justification and authority for that
action was there.
Mr. Basko. They didn't tell the Governor they were putting
that 15 in the field. They said, no, there is no 15, when in
fact they were out there already.
Mrs. Cubin. Thank you very much. We will break until
quarter after one. So everybody go have a nap.
[Recess.]
[Witnesses sworn.]
Mrs. Cubin. Thank you all very much for being here. I
really do appreciate it. I think it will be very beneficiary
for everyone involved.
So we will start Panel No. III with Mr. Tipton, please.
STATEMENT OF TIM N. TIPTON, PRODUCTION MANAGER, ROCKY MOUNTAIN
REGION, MARATHON OIL COMPANY
Mr. Tipton. Thank you, Madam Chairman. I'm Tim Tipton,
Region Production Manager for Marathon Oil Company's Rocky
Mountain Region, which covers all Western States.
We produce approximately 35,000 barrels of oil and
approximately 70 million cubic feet of natural gas per day.
Marathon holds over 900 Federal leases in Wyoming, Colorado,
and Utah.
Southwestern Wyoming and northwestern Colorado have one of
the largest remaining natural gas accumulations in the
continental United States. Integrated, independent oil and gas
companies have recently renewed their interest in exploration
and development activity in these areas. Hydrocarbon
accumulations have been identified on land owned by the United
States and managed by the BLM. Timely access to these lands is
critical to each State's economy.
While the example I'm about to cite occurred in Colorado, I
believe it's a pattern which is spilling over to other Western
States and is symptomatic of the inordinate delays and
unjustified barriers to access to public lands.
In August 1996, Marathon filed an Expression of Interest in
BLM-managed lands in northwestern Colorado. BLM withdrew some
of the parcels from the November 1996 sale, even though a
Resource Management Plan identified them as suitable for oil
and gas leasing with certain surface stipulations. The parcels
had been the subject of an Environmental Impact Statement and a
final Record of Decision.
Colorado BLM withdrew the nominated parcels because they
were in areas suggested by the Colorado Environment Coalition
(the CEC) as having wilderness characteristics. Marathon did
not know that, in 1994, the Colorado BLM had agreed with the
CEC to manage hundreds of thousands of acres of additional
public lands as wilderness. The agreement was reached without
public notice or participation. The BLM had earlier inventoried
all public land in Colorado and found the CEC-identified lands
to not have wilderness characteristics.
In FLPMA, Congress specifically mandated that public land
be managed for multiple use and sustained yield and that
management practices recognize the nation's need for domestic
sources of minerals. Development of energy resources and
protection of the environment including Wilderness Areas are
specifically governed by FLPMA.
Section 103 of FLPMA required the inventory of public lands
for wilderness characteristics to be accomplished within a 15-
year period, between 1976 and 1991. BLM inventoried lands and
had made recommendations to Congress for Wyoming, Colorado,
Utah, and other States. As I understand it, these
recommendations remain pending, although those lands identified
by the BLM as Wilderness Study Areas are being managed as
wilderness. FLPMA requires an Act of Congress before the
designation of wilderness can become effective.
I want to make it absolutely clear that Marathon is not
advocating oil and gas operations on public lands that have
been legitimately designated as Wilderness Study Areas via the
603 process, nor are we proposing that the BLM direct
legitimate Wilderness Study Areas to be open for oil and gas
leasing. Marathon believes in the protection of Wilderness
Areas if they are properly designated and have wilderness
characteristics. Just as importantly, Marathon believes in and
supports appropriate public participation in land use
decisions, as required by FLPMA. We have a good relationship
with State BLM staff and find them very cooperative in oil and
gas leasing efforts.
Colorado BLM, however, has recently finalized a policy to
reinventory public lands for potential Wilderness Areas. This
policy was made final after Marathon brought legal action
against the BLM challenging their agreement with the CEC. I
understand that the BLM is also dedicating additional resources
in Utah for the reinventory of lands at the insistence of the
Southern Utah Wilderness Alliance. I have also seen a
publication by the Sierra Club advocating designation and
reinventory of additional lands in Wyoming as wilderness lands.
The experience in Colorado is not isolated.
Marathon is concerned that FLPMA-mandated public input and
resource management planning has become sidetracked and is
being ignored to the detriment of responsible mineral
development. BLM resources are being directed to duplicate an
inventory process that was previously ordered by Congress and
carried out to completion by the BLM. Section 603 of FLPMA is
the exclusive source of authority for the Secretary to conduct
wilderness inventory processes. That authority expired in 1991.
Congress declared that the BLM wilderness inventory process
would not be open-ended. The State Directors in Utah and
Colorado have been directed by the Washington office of the
Department of the Interior to pay particular and careful
attention to management of lands identified by environmental
groups as having wilderness characteristics. These actions
represent the de facto withdrawal of lands from other
appropriate public use, lands which have been identified
through the public process as being appropriate for uses other
than wilderness designation.
As an example of the kind of problems we are faced with,
the CEC was given access to the BLM data base to insert the
CEC's designation of wilderness areas on BLM records.
In Utah, the Southern Utah Wilderness Alliance gave legal
advice to the State Director about the Director's power to
inventory, identify and manage lands as wilderness outside of
the Section 603 FLPMA process.
Marathon's lawsuit against the BLM questioning the legality
of the government's actions was recently dismissed on the
narrow ground of standing. Marathon intends to appeal the
decision, as the merits of the case were not reached.
But irrespective of the outcome of any legal challenge,
Marathon believes that Congress is the best arbiter of
Congress's intent.
Interior has ordered its employees to act to preserve
Congress's actions--options for designation of Wilderness
Areas--yet has made no proposal outside of Section 603 to
Congress.
The Department of Interior intends to be--appears to be--
managing public lands to satisfy a narrow constituency, to the
exclusion of legitimate and necessary mineral development. In
the instance I have mentioned, the Department is not carrying
out its congres-
sionally mandated policy to manage lands for multiple use,
sustained yield, and protection of domestic mineral resources.
Thank you for allowing me time to bring this matter to your
attention.
[The prepared statement of Mr. Tipton may be found at end
of hearing.]
Mrs. Cubin. Thank you very much.
Mr. Robin Smith, with Chevron.
STATEMENT OF ROBIN M. SMITH, SENIOR ENVIRONMENTAL SPECIALIST,
CHEVRON USA PRODUCTION COMPANY
Mr. Smith. Thank you, Madam Chairman. My name is Robin
Smith. My family and I are residents of Casper, and for more
than 18 years I have worked throughout Wyoming as a petroleum
geologist for Chevron USA Production Company. For the past 2
years, I have been the Waltman Area Project Coordinator for
Chevron here in Casper.
The Waltman-Bullfrog field is adjacent to the Cave Gulch
field, which has been mentioned many times this morning.
I appreciate the invitation to relate my company's recent
experience in developing this world-class resource.
You've heard this over and over again this morning, but I'm
going to say it again. Projects which occur on our nation's
Federal lands are extremely important, not only important to
Chevron, but important to every citizen in Natrona County, the
State of Wyoming, and ultimately, all American citizens.
Investments for natural gas development on Federal lands are
important to the country because they provide clean-burning
fuels, they are domestically produced energy sources, they
generate thousands of American jobs, they help sustain and
improve the economy, and they generate badly needed revenue for
the local, State and Federal Governments.
This morning I want to share with you Chevron's experiences
at Waltman-Bullfrog Field as examples of what is, and what is
not, working in the Bureau of Land Management's permitting and
National Environmental Policy Act compliance processes. Since
we have been producing oil and gas at the Waltman and Bullfrog
units since the 1950's, I feel Chevron is in a unique position
to comment on the merits of the varying degrees of governmental
oversight that this field has experienced.
I'm going to skip a lot of my written testimony, again
because it's already been covered. But just in a nutshell, a
latest round of proposed development by a number of operators
in the field area has led to increased analysis by the BLM of
the operators' activities and their potential associated
impacts. This analysis was initiated in late 1994, and to date
it's consisted of one complete EA, one nearly complete EA, and
an EIS that is in the final comment period.
The BLM announced in January 1996 that the EAs that were
either completed or being completed were not acceptable and
that a full-blown environmental impact statement would be
required. And I'd like to state for the record here that
Chevron did not alter our development proposal that was
originally proposed in the Chevron field development EA.
Though it was recognized that it would add cost and result
in significant delays in responsible development of this field,
the operators did agree to fund the EIS, as is almost always
the case, to try to speed the process along.
As I mentioned, we are now in the final comment period of
the EIS for the Cave Gulch-Bullfrog-Waltman Natural Gas
Development Project. And the final EIS is scheduled to be
issued around August the 4th. BLM's preferred alternative in
the final EIS is essentially the same decision that was made
over 2 years ago in Barrett's initial EA.
The oil and gas industry is held to unprecedented standards
on Federal lands in States such as Wyoming. In most cases
imposition of these standards result in an extreme case of
overregulation whereby the industry and the Federal Government
both expend huge sums of money and effort in the pursuit of
NEPA compliance that, in my opinion, generally results in
little benefit to the environment.
These costs, as you've also heard this morning, are set to
increase as initiatives for cost recovery are introduced. And
in my experience again, the delay is increased because of
understaffing of the BLM offices to current--to handle the
current workload.
But at the Waltman-Bullfrog fields, NEPA compliance has
come at a great cost to almost everyone that was involved in
the process. The operators have funded nearly three-quarters of
a million dollars of NEPA analysis to date, and approximately
two and a half years have been expended compiling these
studies. And I'm not trying to be melodramatic, but this is a
part of those studies that we've done at the Cave Gulch-Waltman
field. And I want you to remember that at the beginning of my
testimony I said we've been producing oil and gas out there
since the 1950's. So this is a field that's seen 40 years of
development.
Of course, that three-quarters of a million dollar figure
does not include the salaries or expenses of the numerous oil
and gas company employees, BLM employees, Wyoming State
employees, Federal, State and county employees, Federal, State
and county elected officials and their staffs, or the private
citizens who have been involved in the process. When you add to
that the lost revenues associated with the delay in natural gas
production out there, the figure is easily several million
dollars of lost or delayed revenues.
Over the last several months, BLM and industry have begun
working together in a much more constructive fashion on this
project. But in the beginning that wasn't necessarily the case.
Representatives from the BLM, the city, the county, the State,
congressional delegation, industry and conservation groups all
sat at the table and endeavored to understand each other's
viewpoints and concerns. Unfortunately, some of the
participants used what they had learned at those meetings to
try to publicly undermine the entire consensus process. This
only served to pit BLM against stakeholders and proponents of
the action, and each entity felt that their trust had been
betrayed.
In order for the NEPA process to proceed smoothly, in my
opinion, there has got to be a basis of mutual trust and
respect among the members of the parties involved. It's
absolutely impossible to proceed in a consensus-building effort
if the participants' goals are mutually exclusive and if one or
another group has an agenda which they are not willing to
honestly reveal and discuss. I think you heard that again, over
and over, this morning.
I want to point out, though, that BLM does deserve credit
for recognizing that there was a problem and taking the
necessary steps to restore trust in communication among the
parties who were willing to work with them toward solutions.
As you also heard over and over again this morning, Wyoming
is a State whose economy depends heavily on revenues from the
minerals extraction industry. And I've got some figures in my
written testimony that I won't go over.
But I think the point that I want to make is that with 50
percent of the lands and two-thirds of the mineral estate in
Wyoming under the control of the Federal Government and the
heavy dependence on these industries for Wyoming's economy,
that we've got to try to find some solutions to the problems
that we've heard about this morning.
Wyoming citizens, the people who live, play and work here,
overwhelmingly support the responsible development of the
State's great natural resources. According to public opinion
polls conducted by the Wyoming Heritage Society, 80 percent of
those surveyed believed that oil and gas development could
coexist with recreational uses and wildlife.
Chevron understands and appreciates the need for protecting
all resources on Federal lands. We also believe that
improvements in BLM's permitting and NEPA's compliance
processes is absolutely critical.
We believe that the costs and the current timeframes for
many oil and gas operations in conducting NEPA studies can be
greatly reduced without compromising protection of the
environment. We believe these improvements can be accomplished
in great part by widely implementing all of the NEPA
streamlining recommendations made by the Green River Basin
Advisory Committee, which we've also heard about this morning.
The outcome of the process could be so much more practical if
timeframes and costs could be reduced. And instead of wasting
dollars on repetitive environmental studies, moneys could be
diverted to monitoring projects or mitigations or eco-royalty
relief that would create or improve habitat.
In closing, I'd like to say, in agreement with the comments
that Mr. Carter made on the previous panel, I believe that
we've lost sight of our goals. The NEPA process needs to focus
on producing benefits to, and protection of, the environment,
instead of focusing on the process itself and making sure that
the process complies with the process. Otherwise, it just
becomes a classic case of form over function.
I believe much of the problem appears to have occurred from
the fear of threatened or real litigation by the conservation
groups on almost every Federal decision made approving
development in Wyoming in the last several years.
Thank you again for the opportunity to share Chevron's
views. And I'll be glad to answer any questions after the rest
of the panel members speak.
[The prepared statement of Mr. Smith may be found at end of
hearing.]
Mrs. Cubin. Thank you very much.
Next, I'd like to call on Mr. Robert Nance, President of
Nance Petroleum.
STATEMENT OF ROBERT NANCE, PRESIDENT AND CEO, NANCE PETROLEUM
CORPORATION
Mr. Nance. Thank you, Madam Chairman.
I'm Bob Nance, President and CEO of Nance Petroleum
Corporation, from Billings, Montana.
And I guess my being here contradicts an AP story that
appeared in yesterday morning's Billings Gazette, that the
people of Montana were barred, I think the way that headline
said, from this hearing.
We have Federal production in Montana.
Mrs. Cubin. I've been in a lot better bars than this.
Mr. Nance. Pardon me?
Mrs. Cubin. I've been in a lot better bars than this.
[Laughter.]
Mr. Nance. Yeah, that's it.
We have Federal production on--or Federal production on
leases in Montana, North Dakota, South Dakota and Wyoming.
I am here also today on behalf of the Independent Petroleum
Association of America, IPAA, which represents nearly 6,000 of
America's oil and gas producers.
I'd like to thank you for holding this hearing to increase
revenues for the Treasury, States, and the education from
public land activities.
Frankly, independents resist doing business on many Federal
lands because of the hassle and the red tape. That's true even
though we know that one of the last frontiers for unexplored,
major oil and gas reserves is onshore public lands. The lack of
access, the uncertainty of permits, the costly regulations have
chilled the Wildcatter spirit for developing public lands. To
restore a can-do attitude for public lands, the IPAA is
proposing a six-point reform program for consideration.
I'd like to go--and some of these things have been talked
about this morning.
No. 1, increase public lands available for development. We
can do this by restoring multiple use as a mandate for Federal
lands requiring risk management and restricting unilateral land
withdrawals.
No. 2, eliminate Federal activities which duplicate State
activities. The IPAA advocates the legislative transfer of
regulatory responsibilities to the States wherever possible. We
believe that that saves money for everybody. The way producers
look at it, if we have to pay for the cost of government, then
we want the most cost-effective government to provide those
services. Most likely, that's going to be the States.
No. 3, establish an advocate for onshore development. We
need to study ways to consolidate those government functions
not transferred to the States to a single Federal agency with a
clear mul-
tiple use mandate. I think that's being done now in the Federal
offshore.
No. 4, increase certainty. Last August, I attended
President Clinton's signing of the royalty fairness law in
Jackson Hole, Wyoming, and I had the opportunity to discuss
with the President the excessive amount of time it takes to
obtain a permit or lease and the uncertainties of doing
business on the public lands. I suggested to the President that
the government should streamline the permitting and leasing
process and, within a date certain, make leasing, permitting
and appeal decisions. The President expressed support for these
concepts.
No. 5, reduce costly regulatory burdens. We'd like to
streamline programs and prevent the shift of regulatory costs
to oil and gas producers. My written testimony contains a
number of suggestions regarding cost recovery and offsetting
costs against royalty payments. So I won't get into those right
now.
No. 6, implement incentive programs. We need to continue
the royalty enhancement program for stripper oil wells, royalty
incentive for marginal gas wells, and investment credits for
frontier areas.
This is a very aggressive reform program. Many of these
initiatives may have to be accomplished via a legislative
vehicle. But the IPAA stands ready to work with this committee
and with the administration to develop the comprehensive
blueprint for reform.
I would like to take a couple of minutes of the Committee's
time to discuss another example of land preservation right in
my own back yard, and that's the draft EIS prepared by the
Forest Service for the Lewis and Clark Forest in Montana.
The Rocky Mountain division of the forest is in the over-
thrust belt and has the potential to contain a minimum of two
trillion cubic feet of gas or perhaps as much as 11 trillion
cubic feet of gas, and that's according to the Forest Service's
own study. There have been other studies done by industry and
other organizations that put that potential a lot higher than
that.
The Montana thrust belt is rated third in the entire
country for potential conventional gas reserves and second for
potential deep gas reserves. Unfortunately, I must report that
the independents believe that under the current circumstances
and attitudes of the government, these reserves won't be
explored and produced.
And I can point to the fact that the reason that we feel
that way is that there's been no lease issues on forest lands
in the State of Montana for 17 years--16 years, I'm sorry.
Nineteen eighty one was the last time a Forest Service lease
was issued in Montana.
The Forest Service maintains that 52 percent of the Lewis
and Clark, or about 1.2 million acres, will remain open for
leasing under their preferred alternative; however, the plain
fact is that these leases would be so severely restricted in
stipulations, including no service occupancy, that for all
practical purposes the 1.2 million acres have been taken out of
play.
We can't wish oil and gas out of the ground. We have to go
on the land to evaluate it, drill it and produce it.
The Forest Service plan is an empty promise that does not
provide a meaningful opportunity to explore for or produce oil
and gas. This is extremely disappointing.
The Forest Service itself estimates that if the oil and gas
industry were turned loose, with no restrictions, standard
lease terms, that we would drill only 30 wells and, in fact,
only 300 acres of that forest. I can't comment on that, because
that's their estimate. But if you have a calculator, you'd see
we're talking about less than one quarter of 1 percent of the
entire forest.
I'd also like to point out some concerns we have with the
Forest Service analysis. Even though the Forest Service claims
otherwise, there is no question it gave more weight to
environmental impacts than to the socioeconomic impacts. It
assumed that mineral resource development is in direct conflict
with all other resources and that these conflicts cannot be
mitigated. It did not take into account the many technical
advances which allow drilling to be conducted in sensitive
areas with minimal impact to the environment. It ignored the
impact that these reserves would have on the national security
and trade balance, which is contrary to their own program
policy documents.
We agree with Governor Mark Racicot of Montana, who stated,
in response to the Forest Service, that with regard to the
Rocky Mountain front, ``resource protection and leasing for oil
and gas potential can occur in a more balanced manner.''
The Governor recommended additional leasing within this
Rocky Mountain division. He recognizes that oil and gas
development occurs in phases and that the Forest Service has
the ability to control the process.
Madam Chairwoman, time is running out. Our latest report
from the Forest Service is that they are planning to issue a
record of decision sometime this fall. I'm not sure there's
much we can do about it. However, we do urge this committee to
intervene to help convince the Forest Service to adopt the
recommendations of Governor Racicot. And I would hope, in the
least, they would respond to him, rather than not, as they have
in the past.
In the long term, we believe that the only permanent
solution for giving mineral development a fair and reasonable
chance on public lands is to reconfirm a multiple use mandate
and require the Federal Government to equally weigh the
importance of socioeconomic impacts and the views of State
officials in its land use decisionmaking process.
Again, I want to thank you, Madam Chairwoman, for coming
out here to listen to the challenges we face on public lands
and to offer assistance in changing the current operating
environment. We can no longer afford to ignore needed mineral
revenues lying dormant beneath public lands. Through reform of
the Federal oil and gas regulatory program, oil and gas
producers can begin to bring these revenues to the surface for
the use of the nation, the States, and most importantly, those
educating the children of the West. We stand ready to help in a
blueprint for reform, or however you think we can be.
Thank you very much.
[The prepared statement of Mr. Nance may be found at end of
hearing.]
Mrs. Cubin. Thank you, Mr. Nance.
Now call on Mr. Terry Belton from RMOGA.
STATEMENT OF TERRY BELTON, ROCKY MOUNTAIN OIL AND GAS
ASSOCIATION
Mr. Belton. Madam Chairwoman, my name is Terry Belton. I am
here today representing the Rocky Mountain Oil and Gas
Association. I also work for Texaco and was a member of the
Green River Advisory Committee.
I'd like to discuss several issues of importance to the oil
and gas industry in the Rocky Mountain States.
RMOGA is extremely troubled by the growing trend in the
Department of Interior's policies in recent years which
threaten future prospects for oil and gas exploration and
development on public lands.
Specifically, I will discuss DOI's unwillingness to adopt
and implement GRBAC's eco-royalty relief recommendations;
development of new, comprehensive cost recovery measures in
DOI's minerals program; lack of consideration given
socioeconomic factors by Federal land management agencies when
making decisions pursuant to NEPA, as well as some other NEPA
concerns, particularly the delays, costs and uncertainty which
accompany the NEPA process; and some thoughts on GRBAC's NEPA
streamlining recommendations.
We were going to spend a lot of time talking about the de-
facto wilderness land withdrawals by BLM, but I feel that's
been well-covered today by Marathon Oil. So I think we'll
probably minimize our time on that issue.
On eco-royalty relief, industry initially opposed
establishment of GRBAC due to concerns over potential
additional permitting delays and greater uncertainty already
associated with the already lengthy and cumbersome NEPA
process. However, when DOI moved ahead with this initiative, we
endeavored to make the best of it. After much hard work and
dedication, GRBAC members developed a consensus-based
innovative solution to reduce conflicts in the Green River
Basin and to ensure reasonable development of oil and gas while
protecting, and in many cases enhancing, the environment
through the use of eco-royalty relief.
This is a voluntary, two-pronged approach which balances
oil and gas development with the need to protect the
environment by allowing a credit to be taken against royalty
payments in situations where operators pay for NEPA
documentation and related activities, which are BLM's
responsibility, and in instances where project mitigation or
monitoring go above and beyond lease and regulatory
requirements. The final GRBAC report included a Department of
Energy final analysis which indicated application of eco-
royalty relief would actually help accelerate royalty payments
to the States and Counties in the Green River Basin.
Unanimously agreed upon by industry, environmental groups
and affected States and counties, the ERR recommendation
proposed a 5-year pilot project. I'm not going to go into the
details of that. I think they were probably covered by one of
our speakers earlier.
But we have yet to receive an official response on the
Final Report/Recommendations, but all the indications are that
it's been killed by the Solicitor's office. We are convinced
Secretary Babbitt has the authority to implement eco-royalty
relief but are extremely disappointed that the Department has
failed to adopt this concept and particularly disappointed that
they haven't assumed leadership in finding ways to make it
work. GRBAC has done its job. Unfortunately, the Department of
Interior has dropped the ball, and a win-win opportunity has so
far been lost.
Cost recovery. In December 1996, the Solicitor's Office
issued its M-36987 opinion, which claims that BLM not only has
the authority to recover all costs associated with minerals
document processing, including NEPA documentation, but it is
also legally mandated to do so. And I stress this ``legally
mandated'' because, as I heard it earlier in the solicitor's
testimony, this was shifted back to the BLM to make a decision
on whether to implement this or not. This was not the thrust of
the opinion. The opinion basically said that BLM has to do it.
So BLM is kind of between a rock and a hard place.
We believe that this opinion is politically motivated by an
administration that is more interested in creating an off-
budget source of funding and constraining mineral development
on public lands than allowing such development to proceed in an
environmentally sound manner. We are concerned the
administration's intent is to balance the Federal budget and
reduce the deficit by increasing fees for public land users,
such as oil and gas producers. New cost recovery measures must
not be aimed at providing alternative or supplementary funding
for BLM programs.
We especially take exception to the concept of DOI charging
additional fees for minerals processing without assurances that
BLM service will be commensurate with fees paid. We have no
guarantee that customer service will be enhanced, permits
expedited. We predict the majority of these fees would go to a
general fund, not be redirected back to programs in the
geographical areas that generated these fees. This could lead
to an unprecedented revenue collection by the agency. If these
additional funds are retained by BLM, the revenue windfall, and
I stress ``windfall,'' could lead to further BLM budget cuts by
Congress. This, in turn, would expand the ever-increasing
burden on industry and other public land users to fund the
Federal Government.
A coalition of industry associations, many of whom are
represented here today, have submitted a FOIA request to
determine the extent of this cost recovery effort and its
financial impact on oil and gas operations on public lands.
Madam Chairman, you earlier in the testimony discussed the
idea of a GAO inquiry. We support that. We believe that's a
great idea. We believe that this would provide an objective
analysis and come up with some reasonable recommendations. GAO
could also compare the revenue generated by the onshore oil and
gas program with the cost of the administration.
Industry already pays its own way. According to the MMS,
industry paid about $650 million in bonuses, rents and
royalties in 1996 to the Federal Government. It is our
understanding that a significant portion, about 25 percent, of
this revenue is used to pay for the administration of its oil
and gas program before MMS disperses to the States the net
receipts share. It would seem that the Department of Interior
intends to charge industry twice for the administration costs
of the onshore oil and gas program.
There is a limit to what industry is able and willing to
pay. Oil and gas operators, regardless of their size, have
finite resources available to them and will cease to invest in
the exploration and development of Federal lands if additional
operating costs imposed by the Federal Government render
projects uneconomical. Further decline in domestic exploration
and development due to a cost recovery program would also have
a significant socioeconomic impact on Western States and their
citizens who rely on such activities as a critical component of
their economic well-being.
But it's been covered in earlier testimony. I was going to
discuss the de facto wilderness at length. The only thing I
will say here is that we support everything that's been said
about the BLM policy of withdrawing lands from leasing, both in
Colorado and Utah. We believe that a process has been utilized
through the FLPMA, a wilderness review process and land
management review process and so forth. And we, industry,
bought into that. We have accepted the results, and we believe
the administration should do the same thing.
NEPA concerns. In the two decades since FLPMA, NFMA and
NEPA were enacted, it is plainly evident that socioeconomic
needs and impacts and values have played little or no role in
the Federal decisionmaking process. When the lack of adequate
analysis of socioeconomic impacts and benefits in the NEPA
process is raised as an issue to Federal land managers,
industry is often told that NEPA merely requires an analysis of
environmental impacts of decisions. The cursory socioeconomic
analysis included in the NEPA documentation is of little value
in making decisions which affect the immediate and future
economic conditions of user groups, States and local
communities. The conspicuous lack of attention to socioeconomic
benefits stemming from commodity development and the adverse
economic impacts of severe limitations on uses due to aesthetic
or other reasons is of tremendous concern to the Western States
who are adversely affected because they hold 90 percent of the
Federal lands within their borders.
Delays, uncertainty and costs associated with the NEPA
process are also primary industry concerns. While the
Department of Interior has formally adopted the GRBAC NEPA
Streamlining recommendations, we are concerned that little has
been done outside the application of the Jonah project in
Wyoming regarding its implementation. GRBAC's goal was to
improve the quality of documentation while cutting delays and
paperwork associated with the process by 50 percent. Even
though the committee's focus was on the Green River Basin, the
elements of NEPA streamlining should be implemented Bureau-
wide. To do so would be in the best interest of the Department
of Interior, industry and the public. The Subcommittee could
ensure and monitor DOI's implementation of NEPA streamlining
recommendations by requiring an annual report from BLM that
identifies time, manpower and cost savings realized by the
agency.
The following RMOGA recommendations are designed to provide
for a balanced policy that encourages environmentally
responsible exploration and development of oil and gas
resources on public lands:
No. 1, subcommittee support in the advocacy of GRBAC
eco-royalty relief recommendations.
No. 2, subcommittee advocacy in support for marginal
gas royalty relief and renewal of the stripper oil
royalty relief program.
No. 3, GAO study of the potential effects of the
Department of Interior's cost recovery measures on the
domestic industry.
No.4, review of DOI de facto wilderness policy
discussed earlier.
No. 5, advocacy of greater consideration of
socioeconomic impacts in NEPA documents and the Federal
decisionmaking process.
And finally, an annual progress report from BLM
detailing implementation of GRBAC's NEPA streamlining
recommendations.
One final note. I just wanted to stress the importance that
we feel of renewing the stripper oil program. We feel this has
been a critical program in lengthening the economic life of
many fields in the Rocky Mountain region. And as far as I've
been able to ascertain, the target set by BLM in instituting
the program has been reached. The statistics bear that out. So
I think the program has been successful. We think it's critical
to renew that program.
We appreciate the opportunity to provide you with our
views. I'll be glad to answer any questions at this time.
[The prepared statement of Mr. Belton may be found at end
of hearing.]
Mrs. Cubin. Thank you very much.
And I guess our next witness will tell us how well those
GRBAC things are being implemented. John Martin, McMurry Oil
Company.
STATEMENT OF JOHN W. MARTIN, PRESIDENT, McMURRY OIL COMPANY,
INDEPENDENT PETROLEUM ASSOCIATION OF MOUNTAIN STATES
Mr. Martin. Thank you. Madam Chairwoman and Committee,
thank you for having me here today.
I represent IPAMS' hundreds of members that are independent
oil and gas producers in the Rocky Mountain region. And I'm
here as well to represent my company, McMurry Oil Company.
We're probably the tail of the dog here today, 17 employees and
strong. And I want you to know that we're glad to be able to
report from the foxhole about how this EIS procedure is
working.
Our Jonah field project is the test case for the GRBAC
streamlined environmental impact statement process.
What I'd like to do quickly is--I want to thank IPAMS first
for the staff and the people that helped contribute the remarks
that are contained in the written testimony. And I certainly
concur and will heartily support everything that is presented
there.
However, I wanted to spend my 5 minutes to tell you some of
the day-to-day, real life things that we face as we try to
develop oil and gas on Federal leases. And so to that end, I
want to talk briefly about the environmental impact statement
process that we've been undergoing for some time, and in so
doing talk about the legislation by regulation, which is alive
and well, talk about the Endan-
gered Species Act as it relates to that, and talk about air
quality, which are the--these are the topics that hit me the
hardest in our process.
I've heard, since the beginning of testimony today, that
legislation by regulation really is the problem, and I couldn't
agree more. Congress passes a well-intentioned law, and the
Federal agencies do with it as they will in many cases. And
that's difficult for us to live with and to understand what we
have to do.
Agencies tend to microregulate. I've seen a trend in the
past 5 years where--you asked the question was it better 4
years ago. Yeah, it was. It certainly was. And it's tough now
because every single thing that occurs in any environmental
impact statement across the board, you see it show up
everywhere else. It's kind of like a magnet. If it shows up in
Cave Gulch, we'd better put it in Jones, just to be safe. And
it's a lousy precedent, but it's the way it's working.
The APD process, the permit to drill process that we go
through from the BLM, I think, is unreasonably long. It takes
forever, and it's 30 days if it's a miracle. It's more likely
60 to 90 days, if there are no problems, and God knows how long
it will be if you find an arrowhead or half an arrowhead or
somebody thinks there might be an endangered species nearby.
So at Waltman, there's a Federal APD. Thirty days if it's a
miracle. A hundred and eighty days, who knows. You can go to
the State of Wyoming and get permission to drill an oil and gas
well on a State lease or a fee lease and be out of there in two
or three days, and you're going to be bound by some mighty
tough regulations. They don't cut you any slack, but they give
you the ability to get going and get on with your life.
I think that the BLM should take heed of how Wyoming has
its processes going. Lease stipulations are growing every day.
If you've ever seen the book that comes out, look at the small
print, lease stipulations. The stipulations take up more print
space than the documents in the actual Federal parcels do. And
I see that same little tendency there, well, gee, if we've got
a stip for that over here, maybe we'd better put it on anything
within 50 miles. You can mark my words. That's the trend that I
see that is alarming.
We've had drilling delays and restrictions in Jonah field
for some of the doggonedest [sic] reasons. Most of them have
had to do--a lot of them have had to do with archeology.
Archeology is a growing field of interest in there. You know,
we have to arch-check anything. If they even think there's a
sign or whatnot, we're delayed. We shut a rig down this winter
because of frost restrictions. For frost restrictions we put 14
guys out of work? Yeah, frost restrictions. Well, you can't
separate topsoil when the ground is frozen. OK, so topsoil is
more important than jobs. OK, if that's the way. The other
reasons are archeology. You can't really look for arrowheads
and you can't see pot parts very well if you dig it up in
chunks, rather than have the ground unfrozen.
I mean, those are the reasons, and that's real. That
happened to us this winter.
I concur with Robin's comment, and I think the Federal
agencies generally are in fear of lawsuits by environmental
agencies and they react and make decisions accordingly. I've
seen it. I can't prove it. But I tell you that's my opinion.
The environmental impact statement process that's supposed
to be streamlined, it really isn't. We're going to get a record
decision, if we're lucky, in November. It's been delayed. It
should have come out in August. It's been delayed, and I'll
tell you why it's been delayed, because the air quality
provision of it is being argued among Federal agencies. They
can't decide what protocols to use and how to tell whether air
quality is good, bad or indifferent. And so we sit there, I
guess, with our arms crossed, waiting for them to decide how we
address air quality.
Here's what we have so far. And it's not as impressive as
Robin's stack, but it's getting there. But the air quality part
is not here yet. We don't know what it will do, what it will
say. And air quality is a critical issue to me. I've lived in
Wyoming for 23 years. Nobody can argue wanting good air quality
more than I will.
But the problem is air quality is being used as an excuse.
It's being used as the issue to drag this process on and
perhaps delay us, for whatever reason.
Quickly, because I know I'm running out of time, on the
Endangered Species Act, I've got a couple of things. It's a
well-intentioned Act gone astray. It needs to be changed. It's
a tool--it's a tool for stalling or delaying. The listing
criteria, I think, is flawed.
I have a solution. I say that no species can be listed
unless 50 percent of the Congress can identify it from a
picture out of 50 choices.
[Laughter.]
Mr. Martin. Yeah, that's pretty funny, but you think about
it. I had it suggested to me that we have flip cards for our
field personnel so we could recognize a Rocky Mountain clover,
when I asked what's a Rocky Mountain clover. It's not
endangered, but it's a candidate. So we have to worry about the
100 million species that exist plus candidates, plus subspecies
and whatnot. The law has gone astray, and it needs to be fixed.
And I will quickly say that our project at Jonah is the
solution, not the problem.
One important thing about socioeconomic impacts, I agree
that they are not given the weight they deserve. But there's
another aspect of it that I think is very important to be
considered. We've identified probably a trillion cubic feet of
natural gas that we can produce out of our Jonah field. Nobody
will take the time, despite my constant harping and carping, to
determine the air quality, whether it will be better or worse
if that trillion cubic feet stays in the ground or is delayed
or an alternative fuel is burned somewhere else in the United
States that might not be as good for the air as natural gas.
Nobody will sit and talk to me about that. It's a lot of work,
but it's a heck of a valid point. So I lay that on the table.
And with that, I thank you for caring. I thank you for
being kind enough to come and listen to us. And I'd be happy to
answer questions when you finish.
[The prepared statement of Mr. Martin may be found at end
of hearing.]
Mrs. Cubin. Thank you, John.
Next is George Fancher, Jr., Fancher Oil Company.
STATEMENT OF GEORGE H. FANCHER, JR., OWNER, FANCHER OIL COMPANY
Mr. Fancher. Thank you, Madam Chairman, for the privilege
of appearing before you and your staff on Energy and Mineral
Resources. It is time we examine the issues which are adversely
affecting our industry. You are to be complimented on your
interest in listening to some of the problems that producers in
the Rocky Mountain region are having with governmental agencies
such as the BLM.
The goal of government should be to encourage and help
industry be more efficient and to economically develop and
produce the domestic oil and gas reserves that are available in
the United States.
My name is George Fancher, and I am the owner of Fancher
Oil Company, a small independent producer located in Denver,
Colorado. I have been active in Wyoming and the Rocky Mountain
region since 1969. I am a member of IPAMS, WIPA, and so forth.
However, today I am not representing any organization, and
my comments reflect only my concern about the procedures used
by the BLM in approving the environmental impact statement for
the Express Pipeline Project. As a result of my experience with
the Express Project, I am concerned about the lack of a
comprehensive process to evaluate the need for and impact of an
international pipeline on local and State economies and to the
domestic oil and gas industry.
The Express Pipeline has been in operation for only a few
months, and its impact upon crude oil prices has already been
felt. Prices for crude oil have fallen by approximately $2.50 a
barrel and have virtually wiped out the bonus over posted price
which Wyoming crude oil producers were receiving. I expect that
by the end of the year that bonuses will no longer exist. This
is due to the fact that Express Pipeline will be shipping
172,000 barrels a day of crude oil from Hardisty, Alberta, to
its connection with the Platte Pipeline here at Casper,
Wyoming. I anticipate that substantial quantities of crude oil
being shipped on Express will be used to compete with oil
produced by Rocky Mountain producers in markets which include
Wyoming, Colorado and Utah. The balance of Express's crude will
be shipped eastward on the Platte Pipeline to its terminus at
Wood River, Illinois.
In my view, the BLM did an inadequate job of evaluating the
impact of this pipeline. In fact, the BLM capitulated to
Express after Express's attorneys objected to the consultants'
analysis which resulted in dramatic changes to their revised
report.
While the initial report concluded that there would be a
price reduction of $2.50 per barrel for all types of Wyoming
crude as a result of the pipeline, the revised report concluded
that there would be a price reduction of only $.35 a barrel.
The initial report concluded that the potential total
cumulative loss of income to Wyoming producers resulting in the
lower prices could be as much as $2.1 billion. In the final
report, the BLM consultants concluded the potential loss of
income resulting would be a $.35 reduction, but by 2005 would
be only $196 million. Thus, the consultants changed their
evaluation of cumulative impact to local producers from $2.1
billion to $196 million, a change of over $1.9 billion.
Now, because of the radical changes between the two
reports, the Wyoming State office of the BLM should have been
very concerned about this shift and sought independent review.
The Wyoming State office never independently challenged or even
questioned this dramatic $1.9 billion change and the
consultants' reversal of its initial conclusion. The WSO never
disclosed the presence of the two radically different
socioeconomic analyses and never disclosed why it rejected the
initial report and accepted the revised report. They made no
attempt to quantify the loss of nonrenewable natural resources
which will result from the construction and operation of the
pipeline. Thus, the Wyoming State office of the BLM, breached
its obligations under NEPA to independently review and analyze
the consultants' work on socioeconomic impacts and failed to
ensure the professional integrity of the analysis contained in
the consultants' final report. The first time the public had an
opportunity to review the analysis performed by the consultants
was when the FEIS was issued.
In particular, on June the 13th, 1996, I learned that the
consultants had new information which would have caused them to
reach different conclusions from those in the final report. On
or about June the 20th, 1996, I spoke to Mr. Ogaard of the BLM
about the consultants' new information. Mr. Ogaard informed me
that he did not really care if there was new information or if
the consultants' opinion may have changed, that he had to draw
the line somewhere and the WSO was not about to reopen the case
to consider the impact the pipeline would have on domestic
crude oil production and related socioeconomic impacts.
It was, and is, reasonably foreseeable that the inundation
of large volumes of Canadian crude oil in the Rocky Mountain
region would cause the price of oil in Wyoming to fall and
wells to be shut-in, resulting in a loss of otherwise
recoverable domestic natural resources, which violates one of
the fundamental purposes of the National Environmental Policy
Act, which is the prevention of waste of nonrenewable natural
resources. The WSO was obligated to evaluate and disclose ``any
irreversible and irretrievable commitments of resources which
would be involved in the proposed action should it be
implemented,'' including the loss to domestic oil reserves
resulting from the project.
As many as two-thirds of all marginal properties (including
non-heavy oil properties), could be lost during a period of
sustained low oil prices. The danger in losing the marginal
wells is that, although production from individual wells may be
small, their collective production is significant, accounting
for one-third of all domestic production excluding Alaska.
Nowhere in the analysis of the socioeconomic impact of the
pipeline did the Wyoming State office address the impact of
these regulations which were promulgated by its own agency.
Neither the draft EIS nor the final EIS contained any analysis
of the economic limits of domestic oil production or any
quantification of the domestic oil reserves which will be lost
as a result of the proposed pipeline.
The failure of the BLM to adequately assess the impact of
Express on local prices violates NEPA, which provides that it
is the responsibility of the Federal Government to enhance the
quality of renewable resources and approach the maximum
attainable recycling of depletable resources. Crude oil is a
natural resource, but it is depletable. If fields or wells have
to be abandoned before the resource has been produced to its
maximum attainable limit, then waste will occur. The prevention
of waste of natural resources is a fundamental purpose of NEPA.
The broad aim of NEPA is well established.
Here, economic and environmental effects are clearly
interrelated. It is reasonably foreseeable that the pipeline
will cause a substantial number of domestic oil wells to be
shut-in, resulting in the loss of otherwise recoverable
domestic natural resources.
In summary, the process must ensure that the socioeconomic
aspects of the NEPA process receive more comprehensive
treatment than was done with the Express Pipeline Project. The
failure to disclose the radical shift in the analysis of the
socioeconomic impact of this pipeline to the public must be
prevented in the future, especially where the lack of a truly
independent analysis may lead to the waste of natural
resources.
In the future, our industry will be faced with similar
situations involving foreign oil and gas projects that will
directly impact the domestic energy industry. The Express
Pipeline Project illustrates the fact that no State or Federal
Governmental agency has the final or overall authority to
evaluate the need for and the impact of an international
pipeline on local and State economies and the domestic energy
industry in general.
Because of the many questions that the Express Pipeline has
raised, I recommend that the government, in conjunction with
industry, develop a comprehensive approval process for foreign
pipelines transporting foreign crude oil, natural gas and/or
refined products into this country which will evaluate the
viability and effect of the project on all concerned.
Thank you.
[The prepared statement of Mr. Fancher may be found at end
of hearing.]
Mrs. Cubin. Thank you, Mr. Fancher.
There's just a common thread through everyone's testimony
today that has had dealings with trying to get permitting
accomplished for exploration and production.
I talked a little bit about an adversarial relationship
between the parties involved in the process. And certainly,
another party that is involved in the process was referred to
by a couple of you on the panel, is that the government, or the
BLM, or the permitting agency, sometimes makes decisions based
on whether or not they think they are going to be sued by an
environmental organization.
I don't--I don't believe that today there are companies
that are willing to pollute the land or the water or the air. I
honestly, in my heart, believe that everybody in this room
wants to reach some kind of balance between the environment,
jobs in the economy, and producing energy. I really do believe
that.
And, you know, everyone might have a--different groups
might have a different take on where that is. But I do believe
that.
I wonder if just a couple of you from the panel would
describe to me what you think a win-win situation would be. Is
there such a thing as a win-win situation in today's
environment?
Terry?
Mr. Belton. Well, ironically, I think the GRBAC eco-royalty
relief recommendation was just that. I mean, I think what it
did--one of the reasons we came out with our recommendations
was we threw off the table all the controversial issues. All
the things we couldn't agree on we just threw off the table.
And what we did was we said let's look for things we all want.
And, you know, one of our big issues was the added cost of NEPA
documentation, cultural surveys, inventories, you've heard the
litany today of the problems we're having.
We need some way to offset those costs. Those are not our
responsibility; they're BLM's responsibility. But we're paying
for it.
And if those costs increase--if those costs continue to
increase, it will put us out of business, essentially, because
operators are faced with the choice between operating on
private land versus Federal land. How long are they going to
endure these kinds of delays and costs? So this is one of our
main concerns.
One of the main concerns of the environmental groups was to
try to mitigate potential impacts and to have a better way of
assessing those impacts.
I was surprised in the process to find that there were--
there was a lot of commonality. In other words, a lot of the
conclusions we drew were the same. We all felt the process was
flawed, that the documentation was flawed. And I found the
environmental groups--although this may sound naive, I always
felt previously that all they wanted was the longer it takes
the better it is. But that's not what played out on the
Committee. What played out on the Committee is not the quantity
of the paper and time, but the quality of the analysis.
And so I think, once we stressed improving the quality of
the documentation while cutting the time and cost, it made
sense to everybody.
So what you have is a tool that will enable operators to
discuss controversial issues fairly early on and put those
issues to rest. But you can do one of two things. One of the
things it can do is it can keep the project at the EA level and
not into the EIS level, which is time and money. The other
thing is, even if there is an EIS, you can settle those
controversies early enough where you can move on. You can get
on with it.
The reason eco-royalty relief is so important it that it
provides an incentive for operators to come to the table and
say, OK, we really don't want to have to go out and do a block
survey on raptor nests, but if we can reduce our royalties by
those costs then maybe we'll agree to it. That's not going to
guarantee it's going to solve all the problems, but it's a move
ahead. One incentive that might enable that process to move on.
So these are just some of the things that I think were win-
win's that came out of that process and that I think are good.
I think eco-streamlining is another one.
Mrs. Cubin. My reaction to that is that in theory it sounds
great, but we just heard from John Martin, of McMurry Oil
Company, that it isn't working.
Mr. Martin. Right, right.
Mrs. Cubin. So I guess that's what I'm asking. How do we
facilitate a win-win situation, given what we have today?
Mr. Nance. Madam Chairwoman, I think we have to get back to
the basics, and I think it has to be--somebody has to mandate,
and it probably is going to have to be Congress, mandate a
multiuse attitude on Federal lands. I think if we could come to
that, everybody could come to a point where we start there and
all the agencies are focused in on that, then we can sit down
and work out our differences. But I think until that happens I
don't see it happening. And I think it's going to have to be
mandated.
Mrs. Cubin. Thank you. Mr. Tipton, you stated that Marathon
intended to appeal the lawsuit, Marathon vs. Babbitt, at this
point; is that right?
Mr. Tipton. That's right. Those are our intentions.
Mrs. Cubin. And it was thrown out. Would you refresh my
memory? It was thrown out because they said Marathon didn't
have standing because you weren't entitled to bring--you didn't
have the right to a permit or something?
Mr. Tipton. As it was explained to us, the reason it was
thrown out is the judge felt like he did not have the authority
to grant us a decision that would satisfy what he interpreted
our request to be. In other words, he said he did not have the
power to force the Department of Interior to grant us leases,
which is not what we were after to begin with. We just wanted
the existing process to be enforced as it was intended to be.
Mrs. Cubin. It seems to me that industry as a whole is
harmed, if you will, by being unable to bid on certain tracts
of land. Has Marathon sought out any other organizations that
might want to join with them in pursuing this action?
Mr. Tipton. You bet. We've publicized our efforts. We've
gone through PAW, RMOGA, and different agencies. As Terry
indicated, a lot of people are encountering the same type
problems. There's general, widespread support for our cause,
and it's disappointing to see the decisions that have been made
so far.
And in the end, it's not just the oil companies that are
suffering. Every delay in a well drilled on Federal lands is
money that the State loses in revenues. And as we stand now,
battling money and needs for school funding, all we're doing is
compounding the problem by continuing to delay access on
Federal lands.
Mrs. Cubin. I've heard some other common threads through
this discussion today. The NEPA process seems to be more
involved with the process than the result. Certainly, that's
true of the super fund, where more than half of the money
that's paid into the super fund goes to litigation, and
actually there's very little cleanup of toxic sites.
The Endangered Species Act, Mr. Martin brought up the
problems with that. In California, during the floods this year,
there were some levees that the Corps of Engineers said these
levees will fail, and when they fail, human life will be lost,
but it would re-
quire a whole environmental impact statement to maintain
existing levees.
There were elderberry bushes on those levees. No elderberry
beetles, which is the endangered species, but the bushes.
The water came. The levees failed. And six people died.
And I don't think that is what--I know that's not what the
law is intended to do. And I think it's just incumbent on
everyone in government, from the Congress to the people that
work for State and Federal agencies, to get a grip. This is
just out of control. It is just ridiculous.
Another point that I want to make that I picked up from a
lot of your testimony is that not only is it harder to invest
in places like Wyoming when you want to produce some wells,
it's easier to invest in Oklahoma or Texas where you don't have
to deal with all the Federal problems, but it's easier, even
yet, to take your business overseas.
Now, environmental organizations, their main objection to
the production and exploration are possible degradation to the
environment. Well, what kind of regulations are there overseas?
Is this a world environment or is this just a Wyoming
environment because it's got public lands in it? I mean, we
just have to get some common sense into some of this.
Mr. Smith, I worked with you throughout the environmental
impact statement process there at Cave Gulch. I understand you
don't have a record of decision signed yet.
Mr. Smith. No. It's due.
Mrs. Cubin. So will you be real nice until it's signed, or
can I ask you some mean stuff?
[Laughter.]
Mr. Smith. Go ahead. I'll take my chances.
Mrs. Cubin. Could you give me some examples of the
breakdown, I don't care whether it was communications, but just
the frustrations you faced and kind of a time line on some of
those things so that I can have a good understanding, and an
understanding in the record, of the sort of things that we're
talking about here? Because I think if we don't have specifics
it isn't going to help. So would you mind doing that?
Mr. Smith. Well, one example that Mr. Magagna brought up
this morning was a situation where we had State leases that
were within the Bullfrog unit. So the leases were committed to
the unit. However, they weren't Federal minerals; it wasn't
Federal surface, and so the BLM didn't administer our
activities on those leases.
We wanted to drill a couple of wells on those leases and
run a gathering line from those leases, from those wells on
those leases, to a central sales point in the field. That
gathering line system, primarily, would run from the wells
along existing access roads to an existing County highway, down
to the metering station.
We were told that--well, let me first say what our position
was. Our position was that because these gathering lines were
in the unit that we didn't have to file a right-of-way
application, that we could request approval from BLM with a
sundry notice.
The determination at the local level was that no, we had to
file a right-of-way application, which we did, and in the
interest of trying to speed things along, once again, because
we wanted to get these wells drilled and on-line so that we
could start seeing some revenues from them.
After we complied with that request and filed the right-of-
way application, we were then told that the approval of that
application would have to be withheld until the wells were
drilled because, until the wells were drilled and there was a
need shown by the production from those wells, we didn't need
to put the gathering lines in. So they couldn't answer right
away.
Time frame on that was--I think we filed the right-of-way
application in July. We had a February 1 raptor stipulation out
there that we were fighting. I think we got approval in
December, if I'm not mistaken, to lay those lines. And it was
approved through the application of the sundry notice, rather
than the right-of-way application.
I think this goes back----
Mrs. Cubin. So that was about 5 months?
Mr. Smith. Yeah, about 5 months. Now, there were----
Mrs. Cubin. For a right-of-way.
Mr. Smith. Yes, for a right-of-way, less than two miles of
gathering lines.
It didn't delay the production of the wells. I think there
was a misstatement this morning. We were able to drill the
wells at the time that we wanted to and get the wells on-line
before the raptor stipulations kicked in. So we didn't have
delayed production of those wells.
But a tremendous amount of effort and frustration went into
trying to resolve that issue, which I think that you're aware
of because we involved you in that.
Again, I want to say that many times the problem is the
interpretation of the regulations. Like John said, it's not the
act; it's the interpretation of those regulations that creates
many of these problems.
Another example, I guess, would be the--I hate to even
bring this up, but the Chevron Waltman No. 43 well.
Mrs. Cubin. I hate for you to bring that up. So does Tom.
Mr. Smith. You heard this morning that we were allowed some
moderate interim development by the BLM. They were in a
consensus process, whereby a number of wells, I think 14 wells,
were allowed to be drilled while the EIS was being conducted,
which was a very nice thing for, I think, everyone concerned.
We got some production. We got some more wells drilled. We
understand better the geology of the field, which is very
complicated. We understand better how many wells we need to
drill because of that.
One of the wells that we proposed was the Chevron Waltman
No. 43. We proposed that well in the interim package because we
felt that we had a royalty rights issue or a drainage problem
by an offsite operator. In the consensus process a number of
locations for that well were proposed, and I felt like, matter
of factly, and without any analysis, that might be a problem,
that this might be a problem. So we're not going to approve
that well.
I kept trying to raise the issue of drainage. And we still
were denied permission to drill that well.
At that point, we felt we had a problem that we had to
resolve then and there. So I went back to the BLM and sat down
and said we have to resolve this; it's not all right to have
``no'' as an answer because we're--our rights are being
infringed on.
A number of solutions were discussed. And eventually, what
happened was the 43 well location was approved to be drilled
directionally. We gave up another well that had been approved
in the interim development package in order to keep the impacts
of that package at that same level. And that timeframe for all
of that was probably another 4 months, 5 months, of a lot of
letter writing, meetings and discussion, and finger-pointing
and raised tempers and other things.
Those are two of the best examples I think I can give you.
Mrs. Cubin. I think you mentioned also that understaffing
at the BLM was a problem.
Mr. Smith. Uh-huh.
Mrs. Cubin. Could you go into that a little more for me,
please?
Mr. Smith. Yeah. It's a situation that I think we're facing
in another part of the State, rather than the Platte River
Resource Area. In southwest Wyoming, we have a unit called the
Birch Creek unit, and we're trying to get some wells approved
over there. We scheduled onsites with the BLM personnel, who
canceled on us twice due to scheduling conflicts. We had a
meeting with the district manager, and she suggested that we
get someone else in there to--rather than somebody from that
resource area office, but from another resource area out, to
sort of fill in for the people because they were so overwhelmed
by the APDs and onsites that they had to come back. And what's
happened in that situation is that person did work with us, but
he won't make a decision without talking to the person that
wouldn't--or wasn't able to come in the first place.
So we have a situation where the BLM personnel are just
literally not able to handle the work load that they're faced
with. That's a seasonal thing over there because of the winter
range restrictions that we have, too. I need to point that out.
They go months, I think, without a lot of APD activity and
then, in the spring, get hit with tons of them all at once.
So it's difficult to solve. You can't add staff and have
them sit around all winter waiting for the APDs to get in. But
it is a problem that impacts the business.
Mrs. Cubin. And did it impact--I mean, it seems to me I
recall having a meeting with BLM where they didn't have a
biologist that they really needed to move Cave Gulch along
expeditiously.
Mr. Smith. They do have a biologist in the Platte River
Resource Area, but Cave Gulch isn't his only project that he's
working on, although they did move the Cave Gulch to the list--
to the top of the priority list. Everything else can't stop
just because of that. He still has to do other things, and that
impacted his list somewhat, too.
Mrs. Cubin. Were you satisfied with industry's role in
assisting the BLM develop the mitigation for raptors?
Mr. Smith. If you'd asked me that question 6 months ago,
the answer would have been no. But, as I said in my testimony,
I think that our relationship has improved dramatically, and I
believe that there's a lot better communication between BLM and
industry on this project, and I think we are working
constructively together now toward cost efficiency and
effective mitigation, which has been our goal. Our goal has not
been to avoid mitigation, but to make sure that the mitigation
that we pay for doesn't cost us more than it should and that it
actually works, that it impacts--that the impacts that we're
trying to mitigate are mitigated. That's what's important to
us.
Mrs. Cubin. Well, speaking about paying for it, would you
explain to me exactly how the money bid is handled with all of
this? Do you just give money to BLM and they have the work
done? When you do a NEPA study or an EIS, how does that money
transaction work?
Mr. Smith. It's between industry and the contractor, the
consultant that produces these reports. In this case it's Gary
Holsan. BLM determines that the study needs to be done. We go
to them with the proposal. They respond to us and say you're
going to do an environmental assessment.
It's our responsibility. If we're not budgeted to do it, if
we don't have people to do it, if you want us to do it it will
be x-number of years, generally an unacceptable number of years
to industry. So we say we will fund the study in order to
expedite this process.
It's a very strange relationship because the consultant is
paid by industry but works for BLM, which creates some
concerns.
Mrs. Cubin. OK. It's paid for by industry, but they work
for BLM?
Mr. Smith. For BLM. They are doing the analysis at the
direction of and for the benefit of the Bureau of Land
Management.
Mrs. Cubin. ``At the direction of,'' explain that to me a
little more. BLM tells them what information they want or do
they tell them how to document it or what?
Mr. Smith. Both. They--what industry's role is--I think
it's easier to describe what that is, is we propose an action.
In the case of Waltman-Bull Frog-Cave Gulch, we proposed
drilling a number of wells from a number of well pads.
The consultant then begins gathering information and
working with an interdisciplinary team within the BLM that's
comprised of a number of individuals with different areas of
expertise. And the consultant has an interdisciplinary team
that basically mirrors what the BLM has. And those team members
exchange information, ideas, and discussions on their areas of
expertise, and, generally, over time, produce a document like
this.
Mrs. Cubin. Is there much disagreement ever between the
consultant and the BLM?
Mr. Smith. I'm not sure that I can comment on that. We're
not generally privy to all of those discussions. So I'm not
sure what takes place. I'm sure there are disagreements. I'm
sure there are.
Mrs. Cubin. As time goes on, do you get--I mean, do they
say, well, we need more; we need more or--up front, or do they
say these are the things we're going to need and these are the
professionals we need to study them?
Mr. Smith. In the case of Cave Gulch and Waltman and
Bullfrog, it's been involving a data base. We have started out
monitoring small areas for raptor nesting, habitat and
activity. And as the EAs progressed and the EIS progressed,
that area of monitoring has grown and grown to the point that
we are now monitoring an area of about 273 square miles, around
the project area of about 40 square miles.
Mrs. Cubin. So would you say that the uncertainty--or that
uncertainty with your investments and how much it's going to
cost up front and--you know, is that a factor in when the
company decides where they're going to invest their money?
Mr. Smith. Certainly. As you mentioned this morning, we
have budgetary constraints. There's only so much money in the
pot. And the companies are going to invest that money where
they can see the fastest and the best return on their
investments. A lot of economic analysis takes into account the
risk. And the risk in operating on Federal lands is whether or
not you're going to be able to operate this year or next year
or the year after that. It's very difficult to plan your
business.
Mrs. Cubin. Not even considering the risk of not getting
oil or gas when you drill.
Mr. Smith. Yeah, that's right.
Mrs. Cubin. Mr. Nance, you mentioned in your testimony that
technology was not considered in the EIS for the Lewis and
Clark Forest. What kind of technology were you referring to?
Mr. Nance. Well, evaluation technology primarily, but also
the ability to drill wells more efficiently and in a more
environmentally friendly manner. Nobody is going to go in to a
high risk area like Lewis and Clark and drill expensive wells
without a fair amount of data being required beforehand. And
that data, in today's world, is probably going to be 3D-
seismic. That can be done in a very environmentally friendly
way now. It can be very costly. It would probably be hand-held
drills that would have to be walked through the forest and you
could drill a hole that is not very deep to--for the charges
for the seismic that comes out with a pile of dirt about this
high that is very easily filled back in and very little
problems with the surface. That can be done. A primacord can be
used on the surface. That may be a little noisy for wildlife
around here. I'm not sure. But there are several ways to do 3D-
seismic in there to give us an evaluation.
And while we think that there's an awful lot of reserves
there, it's all not going to be productive. So we have got to
be pretty specific about our evaluation process.
But that's going to be awfully expensive. And nobody is
going to be willing to go in there and spend that kind of money
without the assurance that you're going to get a lease or, when
you get a lease, that your permit to drill is going to be acted
upon.
I think probably Robin can speak maybe to that better than
anybody. I think Chevron, as I understand it, has had a permit
to drill pending in the Lewis and Clark for about the last 16
or 17 years. So nobody is going to do that sort of thing
without the assurance that they can do something with it. So
it's sort of like the chicken and the egg thing. But it can be
done.
And you said awhile ago that we all are concerned about the
environment. And there's not a soul here that's sitting at this
table, I don't think, that is choosing to live in the Rocky
Mountains without concern about the environment. We're going to
do it in a sensible way.
And there are ways to do it. We can drill wells from a
single pad. Locations can be small, contained mud pits. There's
a lot of things that can be done that was not considered at
all.
Mrs. Cubin. I think in your testimony that was related to
the Lewis and Clark Forest, National Forest.
Mr. Nance. Yeah.
Mrs. Cubin. Are you aware of other instances where that
technology has been taken into consideration?
Mr. Nance. Well, I believe down in Wyoming, in the Thrust
Belt of Wyoming, and in Utah. I can't specifically tell you
what fields, but I'm sure that there--well, I know there is.
There is Wyoming and the Thrust Belt in Utah that have been
done that way, and Canada.
Mrs. Cubin. So maybe just depends on the regulator that is
looking at the proposal than it is actual policy?
Mr. Nance. I don't know. I don't know whether the regulator
in Montana really wants to look at the ability of industry to
do that. I think it's the motivation behind why they're making
the regulations that they're making.
Mrs. Cubin. It would seem to be.
Would you support legislation transferring--all of you or
any of you, transferring the responsibilities to the States?
Mr. Nance. Absolutely. I think in one of IPAA's
recommendations that we do recommend the transfer of that kind
of regulations to the States. I think it would be much more
effective.
Mrs. Cubin. Mr. Fancher, I was very interested in your
testimony about the Express Pipeline. I have wondered, and I've
asked people, haven't really been able to get a good answer.
I think it took 9 months to permit the Express Pipeline
coming down from Canada, across the international border. It's
my understanding it crossed seven rivers or----
Mr. Nance. In Montana.
Mrs. Cubin. [continuing] in Montana, and then it came down
through Cave Gulch. It was permitted in 9 months?
Mr. Fancher. Uh-huh.
Mrs. Cubin. And Cave Gulch itself took a couple of years,
and it isn't quite done yet.
Do any of you have any idea why that is?
Mr. Fancher. I can explain. Well, I think they used the
Altamont right-of-way to some extent.
Mrs. Cubin. And what did that entail then? What did that--
--
Mr. Fancher. You know what the Altamont----
Mrs. Cubin. Yes, I do.
Mr. Fancher. That was a gas line they had proposed to
built, but they never did build. But they did acquire the EIS
environmental work on that prior to that.
Now, the Altamont line didn't end up in Casper. It was
going down in western Wyoming. So they had to do some
additional EIS work. And we were amazed at how fast they got it
done.
Mrs. Cubin. So did the Express Pipeline buy that
information, if you will?
Mr. Fancher. I don't know whether they were given that
information or whether they bought it. I don't know how they
acquired it, but they did use it. And I think that's fine. I
think they should be able to use whatever was available to
them. There's no sense in reinventing the wheel, when you're
trying to do it again.
But regardless of that, just the size of the project and
the fact that they had to do additional EIS work, it was
amazing to us, comparing it to some of the projects that we
have tried to get approval on in the past, much smaller
projects, as to how fast they were able to act on that.
Mrs. Cubin. I think the thing that really just sort of
makes me want to laugh is that it went through Cave Gulch. It's
just hard to understand that.
Mr. Fancher. Strange things do happen.
[Laughter.]
Mrs. Cubin. Well, they do. That's right. And there may very
well be some other good reasons, but I have not been able to
find anyone that could give them to me, other than the
information from the EIS about Altamont. I was aware of that.
What do you recommend as a solution to the problems that
you pointed out with the environmental impact statement and the
decision that was made for Express Pipeline? Where do we go
from here?
Mr. Fancher. I think that we need to develop it. We're
going to have other pipelines that are going to be proposed. I
think there's six or seven new pipelines proposed from Canada
into the United States on the drawing board right now.
I think that the study that was done was inadequate, as I
mentioned, and they didn't really consider the impact that the
line would have on the economy in the States and on the
domestic oil and gas industry. And it seems like that
government doesn't care what--if a--if a line or more imported
oil has a negative effect on our industry. They don't care
about that.
In other words, all that the American people care about,
and I perceive the government too, all they care about is they
have cheap energy, and they don't care where it comes from.
And we're losing our infrastructure. We're not going to be
here, when they need us down the road, if they don't keep us in
business. And when I say keep us in business, we don't want any
subsidies as such. We just want a level playing field.
We can't compete with all the other countries around the
world because our standards are much higher. It costs us more
to operate, yet we get paid a lower price, too.
Mrs. Cubin. So am I correct in this summary of your
testimony, that you aren't asking for any change or any action
on the Express Pipeline and that whole issue, but you would
like to have some sort of legislation protection, if you will,
for future international pipelines that might be built?
Mr. Fancher. Well, I think that the impact of Express
should be analyzed for the benefit of the people in Wyoming,
the municipalities and so forth, that are going to be severely
impacted, as well as the State, because they have to figure out
where they're going to make up the difference.
Mrs. Cubin. I missed a little bit of your testimony. You
said that there was a big change in the report, and at one
point a $9 billion change in estimates. Who made that?
Mr. Fancher. Well, the--the BLM had a consultant that did
an analysis on the socioeconomic impact of the pipeline. It's a
consulting firm they use by the name of Petroleum Information
Corporation. And they did this at the 11th hour. There wasn't
any socioeconomic study done until the initial scoping analysis
that was a report which was done on Express pipeline. And so
they hired this firm at the 11th hour. And they did an initial
report that said there was going to be a significant impact.
Express didn't like that. They made comments to the BLM.
And in 10 days they changed the report to reflect that there
was only going to be a small impact and only on sweet crude,
not on sour crude.
All of that is in my written testimony.
And so the reporting process was kind of a farce. And
really, the BLM considers that they don't need to consider
socioeconomic impacts. In other words, that's not their job.
Their job is only to look at what effects something like that
has on the environment.
And that was the point I'm trying to make, is that there
needs to be somewhere in the process that we think that the BLM
through the NEPA process, that they should fairly review that
sort of thing. But if they don't, I don't know who else will or
who else would want to. And that's something that I think you
need to look into.
Mrs. Cubin. Thank you.
Mr. Martin, what do you perceive from all your years of
experience to be the biggest threat to the oil and gas industry
in terms of land management policy? Is it access? Is it ESA? Is
it air? What is it?
Mr. Martin. Well, in southwest Wyoming, which is where most
of my experience falls from, it's--the air quality issue is the
one that's arisen to the forefront.
Mrs. Cubin. Would this be Utah, Grand Canyon?
Mr. Martin. Yes, it's the same area. It's air quality as it
relates to any and every environmental impact statement that
has been done or is underway or that will be done because
that's the new, difficult issue--I think that's the most
difficult issue to come to grips with.
And to that end, I would like to clarify, in case there is
any misunderstanding, yes, we have had great difficulty with
our environmental impact statement process, as most of them
are. But I think the BLM managers are as frustrated with it as
I am. And I think, to their credit, they have done an enormous
amount--I will give them an A+ for effort. I think they are
trying, to the best of their ability, to make it work.
But I have seen the breakdown and the arguments over how do
you measure air quality, how do you get a baseline, what's it
going to mean. And you can't answer those questions. The data
doesn't exist, or doesn't exist in sufficient quantity, to
allow for a decision that you're absolutely confident is
correct.
And so what happens is the Federal agencies have not been
able to get together on a protocol. I think that they have now,
but it's--I really don't know what it's going to be, what it's
going to turn out.
And so that issue alone has delayed our EIS. Now, maybe
that's a growing pain. Maybe that's something that can, and
should, and ought to be eliminated in the future ones, but it's
certainly a big problem for us.
But air quality in southwest Wyoming. You know, there's the
matter of the 977 tons of NOx issue that came out. We don't see
any legal basis for it. We think that if you study it and look
at what it really means, that it only includes our industry,
doesn't include other sources. It was thrown out on appeal,
thank goodness, but it's still there. It's going to trigger
something, and I'm not sure what, but it's going to trigger
something. And when it occurs, and it's going to occur sooner
or later, because now anybody that has any kind of a permit is
rushing to the gate to get permits that use up that 977, and
one day a bell might ring somewhere, and I'm not sure where
we're going to be or what we're going to do.
Mrs. Cubin. I am in complete agreement with you, especially
when you look at the new proposal that Carol Brown has made
that the President has since come out in support of. I think
that you're right. I think that's going to be one of the
problems.
I know you have to go, Terry. So I'm going to ask you one
quick question.
Talking about the de facto wilderness areas withdrawals, in
your testimony you said it was done in secret, secret
agreements. Was that with the CEC? Is that what you were
referring to?
Mr. Belton. Yes, that's what I was referring to.
Mrs. Cubin. OK. That's what I thought. Thank you.
Mr. Belton. Thank you.
Mrs. Cubin. I don't think I have any more questions for the
panel. I thank you for being here. I know some of you have
planes to catch, and I appreciate your being here. Thank you.
Thank you all for waiting. Would you raise your right
hands?
[Witnesses sworn.]
Mrs. Cubin. It has been a long day. Again, I thank you for
bearing with us all day.
And we'll start this panel by asking Mr. Robert Hoskins,
who's a member of the board of the Wyoming Wildlife Federation,
to talk to us.
STATEMENT OF ROBERT HOSKINS, MEMBER OF THE BOARD OF DIRECTORS,
WYOMING WILDLIFE FEDERATION
Mr. Hoskins. Thank you, Representative Cubin, Members of
the Committee.
As you said, my name is Robert Hoskins. I serve on the
board of directors for the nonprofit Wyoming Wildlife
Federation. Our members are 4,000 hunters, anglers, and
wildlife enthusiasts who share an unwavering commitment to
wildlife and the protection of public lands in our State to
benefit all citizens.
As you know, our executive director, Dan Chu, served on the
GRBAC. So if you have any specific questions about the GRBAC, I
would request that you direct those to him, since I was not on
that Committee.
In any case, today I will discuss what we expect from the
GRBAC's recommendations to the Secretary of the Interior, as
you requested. In particular, I wish to address our one
expectation that GRBAC failed to meet, assessing and mitigating
the cumulative impacts of industrial development on wildlife
and wildlife habitat in the Green River Basin.
What the GRBAC faced was the unprecedented intensity and
scope of natural gas development proposed for the Green River
Basin over the next 20 years. The GRBAC's charge was to reach
consensus on managing two world class resources, the Basin's
massive natural gas reserves and its incomparable wildlife
resource.
The GRBAC held its first meeting in March 1996 under a
cloud of misinformation spread by industry groups, not to
mention Wyoming State officials. Nevertheless, GRBAC members
developed recommendations for the more efficient management of
natural gas development: NEPA streamlining, updated road
standards, eco-royalty relief, transportation planning, and
partnership opportunities.
Unfortunately, in our opinion, the GRBAC dropped the ball
on protecting the Green River Basin's incomparable wildlife
resource. It failed to address the Federation's primary
concern, the identification, analysis and mitigation of the
cumulative impacts of industrial development on wildlife. Given
our willingness to reach consensus, particularly on the
controversial eco-royalty relief, we are deeply disappointed
with the GRBAC's failure to develop recommendations for dealing
with the undeniable threat of cumulative impacts. Therefore, we
consider the work of the GRBAC unfinished and we intend to
vigorously press the issue until it is resolved to our
satisfaction.
What are cumulative impacts? Simply, and getting away from
the legal jargon, they are the disruptions, displacements,
degradation, and destruction of natural resources by
unsustainable human economic activities that occur over a very
long period of time.
The historical and scientific record of the cumulative
impact of man's economic activities on the environment is
unassailable. Developing case law and legal scholarship on NEPA
and watershed protection--and the Green River Basin is clearly
a major watershed--indicate that cumulative impacts analysis is
necessary, especially when development on Federal land triggers
substantive legislation like the Clean Water Act, the Clean Air
Act, the Endangered Species Act, or the Migratory Bird Treaty
Act.
Historically, no industry has remained unscathed from
scientific findings that its activities produce long-term,
harmful impacts on the environment. That's what environmental
laws are about.
Nevertheless, industry refuses to acknowledge the
cumulative impacts of its activities, claiming that we do not
have adequate information that demonstrates those impacts, nor
the technology to mitigate them even if we did. From our
standpoint, this claim makes as much sense as would a claim
that deferred equipment maintenance has no cumulative impact on
industry operations and earnings.
The oil and gas industry cannot deny the facts. Over the
last decade and a half, the scientific disciplines of
conservation biology and restoration ecology have produced much
research into the long-term harmful impact of human economic
activities. Activities that fragment and degrade wildlife
habitat, or create opportunities for exotic species to invade
disturbed land, have severe, long-term impacts. This research
has been widely published.
Industry's primary objection to cumulative impacts analysis
and mitigation is the cost and the requirement that
development, and thus profits, be spread out over a long period
of time. We don't believe those complaints are good enough for
the Green River Basin's incomparable wildlife resource. For the
privilege of using publicly owned resources for profit, we
expect industry to accept full responsibility for its actions
and pay for its impacts on the Green River Basin. Nevertheless,
in the spirit of compromise we tried to meet industry's
concerns over cost by supporting eco-royalty relief. If eco-
royalty relief comes about, we fully expect cumulative impact
analysis to be funded.
We believe it would be easier for industry to embark on
cumulative impacts analysis and mitigation if it would
integrate with its operations an innovative, science-based
management scheme called adaptive management. Such an approach
would treat all operations as scientific experiments; that is,
operations would be designed to produce scientific information
on cumulative impacts as a necessary operational output.
In closing, I wish to make clear our expectations. We are
committed to the GRBAC's recommendations. Nevertheless, in
return, we expect the Federal Government and the oil and gas
industry to acknowledge their unqualified responsibilities to
identify, analyze, and mitigate cumulative impacts on wildlife,
wildlife habitat, and other public lands values. We believe
that if development is prudent and carefully managed over the
long term, such impacts can be mitigated if properly funded.
Thank you for this opportunity to present our views.
[The prepared statement of Mr. Hoskins may be found at end
of hearing.]
Mrs. Cubin. Thank you.
Next witness is Mr. Tom Throop, of the Wyoming Outdoor
Council.
STATEMENT OF TOM THROOP, EXECUTIVE DIRECTOR, WYOMING OUTDOOR
COUNCIL
Mr. Throop. Thank you, Madam Chair, and thank you for the
invitation to participate and the opportunity to testify today.
Robert, you certainly were well-rehearsed ahead of time.
That was right on 5 minutes.
Mrs. Cubin. Take your time. We've listened to a lot.
Mr. Throop. My name is Tom Throop. I'm executive director
of the Wyoming Outdoor Council, and we go by the acronym of
WOC. And we are all Wyoming, as we're unaffiliated with any
regional or national organizations. And we do appreciate the
opportunity and the invitation.
At the same time I need to tell you that the public
interest organizations from our sister States of Montana and
Colorado are very upset with this hearing, as you may know. The
scope of the hearing directly relates to issues that are being
dealt with in those States. Witnesses have been here
representing seats in industry that hear from both of those
States, who have been here from both of those States, yet there
was no notice or invitation to the public interest groups in
Colorado or Montana.
Our phones rang off the hook all last week. And I promised
them that I would relay that concern. They view this hearing
and process as extremely unfair and do believe that if you're
going to discuss issues that affect their States, hearings
should be held in those States. And you may well plan to do
that, but they are not aware of that, nor am I, and that public
interest witnesses from those States should be invited to
testify. And again, I promised I would tell you that.
Let me begin by reminding the Committee that the lands in
question are public lands, owned jointly by all the citizens of
the United States. By law, these public lands must be managed
and, in fact, are mandated to be managed for multiple use.
In the definition of multiple use, it states the resources
are not to be managed for the greatest economic return or the
greatest unit output. Increasingly, however, we are seeing a
fundamental shift away from a multiple use to a dominant use
for energy and mineral development, which I think this has been
aptly demonstrated today, often at the expense of the public
lands' uses for wildlife and habitat, open space, historic
recreation opportunities, clean air, clean water and overall
environmental quality.
The BLM's management plans for the public lands in Wyoming
that are, in part, the subject of this hearing today, authorize
oil and gas leasing on an astounding 98 percent of the total
lands available, including crucial big game wintering, areas of
critical environmental concern, and areas having high scenic
routing.
Presently, oil and gas leases cover the vast majority of
the areas under discussion, approximately 90 percent, and do
not carry stipulations sufficient to protect the surface
resources on these lands.
There are, in fact, a multitude of uses and very
significant environmental issues to be dealt with on the public
lands of the Green River Basin and at Cave Gulch. For example,
Federal law requires that there be careful review prior to
development activities on these lands. For example, there are
cumulative impacts to a host of wildlife species and their
habitat.
Let me assure you that the air quality and visibility
issues are a very real and legitimate issue, not an excuse. And
there are a host of groups that are working on these issues.
These groups have not reached consensus on how to protect Class
I wilderness areas from emissions, nitrogen, and volatile
organic compounds, VOCs. Maintaining historic recreation
opportunities, implementation of the Clean Water Act on public
lands, protecting significant cultural and archeological
resources are also significant environmental and land use
considerations that must be dealt with before these lands are
developed.
Concerning the GRBAC, we did request the formation of this
process, and appreciated the Secretary's appointment and
Assistant Secretary Bob Armstrong's personal attention to the
Committee in this process. The GRBAC, as Terry Belton aptly
described, was a collaborative process that we enthusiastically
endorse. Certainly, Mr. Hoskins was correct that many of the
issues that we wanted to be dealt with were not dealt with. But
one of the ground rules is that issues that we could all agree
on would be dealt with and those we didn't agree on would be
set aside.
Most of the recommendations can be implemented
administratively. For example, the excellent work that was done
by the committee on transportation issues. We certainly hope
that the Secretary will approve the primary, outstanding issue,
which is the eco-royalty relief. If the Secretary does not
approve eco-royalty relief, there is a readily available
alternative that will accomplish the same objective that you
ought to be aware of. The BLM can change its policy for Wyoming
and give Wyoming BLM the authority to authorize offsite
mitigation, like is done in other Western States.
And finally, I wanted to mention on this issue that, though
this issue is not resolved, we feel strongly that the
government should not pay for industry's NEPA analysis. This is
their responsibility. It should be a cost of their development
proposals.
We are surprised and disappointed that Cave Gulch was
characterized as field development delays. And we obviously
have some intense personal experience with that issue, as you
know. We were involved throughout the process.
Cave Gulch is on a fast track the likes of which we've
never witnessed before for a major, full field development
project. While a fast-track EIS has been underway during the
past year, industry was given virtually everything it wanted in
the interim development agreement, that we clearly agreed to
and clearly supported, but even though, such a far-reaching
interim development agreement was unprecedented. Even though
the interim development agreement was a collaborative process,
it was agreed to by all the parties. BLM broke the agreement
when one of the companies wanted one more well that was
specifically excluded because it was deemed to violate NEPA.
We've been around that one before.
The final EIS is on the street. The BLM openly admits that
their decision sacrifices other resources on the public lands
in this area. For example, because industry didn't like it, BLM
deleted the raptor recovery area for a species that is in
Canada for USA listing, the Ferruginous hawk.
Though most people believe we should be taking actions to
prevent listing of threatened and endangered species, BLM takes
an action at Cave Gulch that cumulatively adds one more step
toward listing.
Cave Gulch operators can say that they have some--Cave
Gulch operators say they have somehow experienced obstructions
at Cave Gulch. From our perspective, it's the best
demonstration yet that Wyoming is still viewed by some of those
companies as a Third World resource colony, where quick and
easy is all that matters.
The best gauge to demonstrate whether we have a problem or
not are the numbers. To quote from the April 9th edition of the
Star Tribune, the rig counts for Wyoming and the Rocky Mountain
region have soared over the figures from last year. According
to the Petroleum Information Corporation, Wyoming had 15 rigs
in the State at the same time last year. This year, there are
35, or a 133 percent increase. Wyoming had the largest increase
in the nation, twice the increase in No. 2 Louisiana. For the
Rocky Mountain region, the rig count is up 36 percent. In
addition, there are hundreds, if not thousands, of wells that
have been approved that are not being developed by the
companies who hold approvals to develop it, because of market
problems, higher priority projects and a host of other economic
reasons. Examples are 72 wells at Stage Coach Draw, 750 wells
at Wamsutter 2, 1,300 wells at Fontenelle, and 1,300 wells at
Moxa Arch have all been approved, just to name a few.
Things are pretty busy here in Wyoming. And if allegations
of access and regulatory issues are any kind of inhibitor to
development in the State, it's nothing more than a thinly
disguised attempt by some, certainly not all, oil, gas and
mineral companies to commandeer this nation's land to their own
use.
In closing, the single most important factor in expediting
development, and I'd like to echo precisely what Terry Belton
said, but in my own words, is industry's willingness to come to
the table early in the process to participate in identifying
key issues early and to work in good faith to resolve issues
early with the U.S. Forest Service, EPA, the U.S. Fish and
Wildlife Service, the Wyoming Game and Fish Department, to name
a few, as well as the citizens of Wyoming.
Historically, industry has instead ignored the pleas for
collaboration and, as a result, has forced many of the
significant issues to be dealt with in appeals and litigation.
Fortunately, we are beginning to see the culture of
decisionmaking change--for example, GRBAC and a host of quality
air quality processes that are currently underway. But we still
have a long journey ahead of us.
And, Representative Cubin, I plead with you to play a
constructive role by working to help bring the parties together
to find solutions to the problems that we face. Now, I must
admit today has felt a little bit more of a witch hunt.
[The prepared statement of Mr. Throop may be found at end
of hearing.]
Mrs. Cubin. Thank you very much for your comments, Mr.
Throop.
I first will respond to the out-of-State folks who wished
that they had been invited.
We encouraged for many weeks the Democrats on the Committee
to identify the people that they wanted us to invite. I guess
they didn't care whether or not people came, because they never
did do that. I knew the people in my State that, you know, I
thought would present a good picture, you being one. And so
that's why these folks were invited.
And as I said earlier, we will have more hearings. This is
just one of several. So no one ever will be barred from the
process as long as I have the chairmanship of this Committee. I
think it's very important.
You and I have worked together earlier. I want to ask you
something. It's kind of a--I hope it's not a personal question,
but maybe.
When we talked out at the BLM building, at that time you
were very upset about something that happened. And I'm not
passing judgment on who was right or wrong because, frankly, I
don't know. But I wonder, now that this time has passed, are
you still willing to hang in there and try to get solutions
made, like you were doing at that time, and so that one
incident there, that No. 43, didn't sour you on the whole
process of cooperation?
Mr. Throop. Absolutely. Let me be very clear about this.
Our primary method of problem resolution is through
collaboration and cooperative decisionmaking among all the
parties.
I want to be equally candid with you and tell you that,
most of the time when we seek collaborative processes with many
of the multinational corporations that do business in this
State, we are told clearly that they aren't going to give us
the time of day unless we can stop their project or slow their
project down to a timetable that's not acceptable to them. And
unfortunately, the culture, historically, has been appeal and
litigate first and then you can begin discussions.
That is not the way we want to do business. We would like
to collaborate on every issue and are absolutely sincere that
the solution is getting the parties together early in the
process, identifying issues, and trying to resolve those
issues.
They're not always going to work. And I think, by and
large, the Cave Gulch interim development process was, over
all, a positive. There was a problem as time has passed, and I
think the primary problem was between our organization and
Chevron. And I still consider Robin Smith, you know, an
acquaintance, a friend, and somebody I respect, and harbor no
personal animosities or resentment.
But I think the primary problem we have here is companies
who want to work through a regulatory process that's as minimal
as possible with as few distractions as possible. We are a
distraction, and collaboration is a distraction, and they won't
do it unless they're forced to do so.
But from our perspective that's our No. 1 approach. We will
always do it first. It's a sad commentary that we have two
attorneys full-time on our staff, but that's the way we've been
forced to do business in this State, appeal, litigate first,
and then you get their attention and they'll give you their
attention and then you can begin to find some collaborative
solutions. Even when we have an appeal or even when we have
litigation, we are always looking for that opportunity, get the
parties to the table and try to collaboratively come up with
something that will work for all of us.
But unfortunately, until very recently, those opportunities
have been very few and far between, and hopefully that climate
is changing.
Mrs. Cubin. Are you satisfied with the final EIS on Cave
Gulch?
Mr. Throop. We are unequivocally not satisfied with the
final EIS on Cave Gulch.
Mrs. Cubin. Do you think that you could be and still have
development?
Mr. Throop. Oh, absolutely, absolutely.
Mrs. Cubin. What would those--what changes would there be?
Mr. Throop. Well, we strongly believe--let me say, first of
all, we are not going to appeal the final EIS, even though
we're dissatisfied with it. From our perspective, we believe
that that area, for lack of a better way to describe it, will
become a national sacrifice area, that the other resources will
be sacrificed. It will be converted to a dominant use for oil
and gas. And we believe that there's nothing that we can do to
prevent that from occurring.
Now, specifically to your question, there are a number of
steps that the industry, in collaboration with the Federal
agencies, could have taken to have protected the raptors. They
chose not to do so. As I mentioned--I think, as I mentioned in
my testimony, I actually made a good note of that piece, but
there was--let's see if I have that. No, I did mention that the
raptor recovery area was originally proposed. That is something
that would have--if that had remained in the document, that
would have resulted in a better decision. One has to understand
the Ferruginous hawk. They're very susceptible to human
activities. And we believe extremely strongly the consultants
that we've been consulting with. We believe very strongly that
the land will not be adequately protected for Ferruginous hawk
and other species. And again, we believe that in this area
we're moving to a dominant use.
And that's a scenario that we're seeing throughout Wyoming,
where you have 98 percent of the available lands in the Green
River Basin that are available for oil and gas leasing and
development. That's not multiple use. That's dominant use. Many
other resources will be sacrificed in that process. Very
special areas that should be protected, critical habitat, areas
of environmental concern, are not being adequately protected.
So again, we think that if we had had the parties together
there truly would have been a collaborative process. There was
a collaborative process in the interim. Coming out of that
interim development at Cave Gulch, there was the--kind of
theory or thought that there may be some collaborative efforts
toward the final EIS. None of that happened. There was zero
collaboration. But again, we're folding the tent on that one.
We think that that's a lost area, and we're going to let it go.
Mrs. Cubin. You know, I think balance--balance has to be
the most important word to each and every one of us.
You know, I talked to you a little earlier about the levees
in California that were not repaired. There was an amendment on
the--offered to the Endangered Species Act. And what it said
was in order to save human life or prevent substantial property
loss you can maintain existing levees without doing an
environmental impact study. That was defeated in the Congress
because the Sierra Club and a lot of the environmental
organizations came in and lobbied against that. People voted
and have subsequently said let's have another revote on that, I
didn't understand that six people were going to die.
And I know those kinds of things hurt what you believe in,
just as much as somebody polluting an area hurts what these
producers believe in.
And so I'm glad to hear that you do want to continue to
talk about these issues and try to get them worked out so we
don't have to deal with those extreme things and say, see,
that's your fault and, see, that's your fault. I think
assessing blame is certainly not a constructive thing to do and
it certainly is a waste of time.
Would you tell me a little bit about what you meant in this
statement. In your testimony you said BLM can change its
policies for Wyoming and give Wyoming BLM the authority to
authorize an offsite mitigation, like it's done in other
Western States. What were you referring to there, Tom?
Mr. Throop. If, let's say, for example, there's a full
field development that is approved and APDs are approved where
we have, let's say, 8 wells per section or 16 wells per
section. I think it gets very obvious at that point that, with
a well every 40 acres or a well every 80 acres on a leasehold,
that the opportunities to do onsite mitigation for the loss of
other natural resources are nonexistent; and if there is going
to be mitigation, it's going to have to be offsite. There are
other Western States where BLM is given the authority and, in
fact, does use offsite mitigation as a way to mitigate impacts
to development on BLM lands. I know New Mexico is an example of
one State where BLM in that State uses offsite mitigation.
In Wyoming, there's a decision, and I think it's at the
Washington, DC, level, but there's a decision that Wyoming
could not use offsite mitigation in order to mitigate impacts
on a leasehold. If that policy were to be changed and BLM was
given the authority to authorize and utilize offsite mitigation
in the decisions that they make in this State, in large measure
eco-royalty relief may not be as necessary.
Mrs. Cubin. That's just what I was thinking, wouldn't eco-
royalty relief address that?
Mr. Throop. Eco-royalty relief would clearly address that,
and we clearly support that. We were part of the process that
made that recommendation, and we unequivocally support that.
But it sounds like it's going to be difficult to get it through
the executive branch, and if it is to be adopted it's going to
have to be done by the legislative branch. And I thought your
comments were particularly insightful about the advantages and
disadvantages in doing that legislatively.
Mrs. Cubin. It's hard to know, isn't it?
Mr. Throop. It's hard to know and, if it's not possible to
do that, a fall-back position, clearly a second strategy, may
be to do the offsite mitigation.
Mrs. Cubin. You said that BLM in New Mexico can do offsite
mitigation, but the BLM in Wyoming can't. Who makes that
decision, who can and who can't?
Mr. Throop. I'm not--and, in fact, if Dan Heilig, who's our
associate director and the head of our legal department, was
here, he could tell you that. I'm a little bit unclear. Mr.
Pierson may be able to answer that question.
But my understanding was that that was a policy decision
that was made by BLM in Washington, DC. And I do not know why
there would be a difference between policy decisions for
implementation between New Mexico versus Wyoming. And I will,
for myself, figure that one out.
Mrs. Cubin. Some of those things are a mystery.
Mr. Throop. Yes.
Mrs. Cubin. You referred to a 90 percent figure of land
that is available. Are you saying that the oil and gas industry
impacts 90 percent of the land? Is that what you meant?
Mr. Throop. What I meant here was, of the BLM lands that
are available for leasing in the Green River Basin and in the
Cave Gulch-Bullfrog area, it's my understanding that
approximately 90 percent of those lands are under lease, of the
BLM lands.
Mrs. Cubin. You were on the GRBAC, weren't you?
Mr. Throop. I was not. Dan Heilig, our associate director,
was. I followed the process pretty closely. So, like Robert, I
can't definitively respond to specific questions.
Mrs. Cubin. I asked the other panel what would--and I think
you've answered it partially, but just so you have the
opportunity to add more, if you wish, what would you consider
to be a win-win situation for minerals development from where
you sit today?
Mr. Throop. And I want to make it very clear that I fully
agree with you. The most important word is balance, you know,
is multiple use, is balance, in the allocation of how resources
are used and protected on public lands. And I believe strongly
that there is a win-win situation in virtually every issue that
we face. And I think what it takes is it takes parties who are
willing to invest in the collaboration. I think it takes
parties who are willing to leave their egos and their
predetermined positions at the door, be willing to identify
issues early on in the process, be willing to compromise, be
willing to work with the other parties, to try to walk in one
another's shoes and resolve each other's issues. And I believe
strongly that that can be done.
And specifically, in oil and gas development of minerals,
it's very important to the economy and the future of Wyoming. I
have two children in schools in this State and they're getting
a good education, and I know where the resources are coming
from, and I appreciate it.
But we don't have to, to a frenzy, destroy the other
crucially important public land resources in the wake of that
development, where we have crucial winter range, wildlife
habitat, calving areas, migration corridors. There can be
protection for those areas.
Where there are raptor concentration areas and there are
sensitive seasons, I think we can put on seasonal restrictions
that will work for industry as well as work for the other
resources. Where there are soils problems or where there are
air quality concerns or where there are water quality problems,
we can work together to try to find solutions that allow
development to go forward but not sacrifice those other
resources.
And I clearly believe that that can be done in a balanced
fashion that brings all parties to the table and gives
collaborative solutions. We just haven't quite arrived there
yet. I think the GRBAC is a good start.
I'd like to mention that on the Jonah 2 project I was very
surprised to hear John Martin say that that process is not
working.
We have been very involved in that Jonah 2 project. And I
will tell you clearly that one of the biggest problems that we
had in Jonah 2 and other projects in southwest Wyoming is that
BLM was very late in the process to bring other cooperating
agencies to the table. They knew the Forest Service was going
to be involved. They knew the EPA was going to be involved. But
they tried to shut them out of the process until it was obvious
they could not do so.
Industry and BLM were very late in getting the scope and
the details of the project in Jonah 2 to the other agencies so
it could be modeled, in the first place, and determinations
could be made as to what kind of air quality impacts there
would be. There has been a delay from August to November. But
frankly, the primary reason for that delay is BLM and industry
was very late getting the scope and details of the project to
the other agencies so they could model and provide input.
Mrs. Cubin. Well, I think Mr. Martin's testimony was that
the problem was they disagreed. So even as we speak, there's a
stalemate, and they can't move forward. And the success was,
the way I would interpret it, to be measured by whether or not,
in fact, going through the steps they did would reduce the
amount of time to complete the NEPA process. And I think his
assessment, what I understood him to say, was that it wasn't
working because it wasn't achieving the goal they set out to
achieve.
Mr. Throop. And I'm telling you I believe strongly that it
is definitely achieving the goal that GRBAC set out to achieve.
The process is not stalemated. The process is moving forward.
I've attended those same meetings. In fact, I didn't see him at
the last meeting, and I was at the last meeting. But I'm here
to tell you I think the process is going forward very well and
that could be a model.
If you also look at Mr. Martin's testimony, he also talked
about how he felt that the air quality requirements they're
going to face in that project were unfair and that we should be
able to pollute a little here so we can possibly have some
beneficial impacts on air quality maybe in some larger area
somewhere else. That's not the law. This is the largest Class I
clean air shift in the lower 48 States that is potentially
going to be impacted here. There are Class I wilderness areas
that have been designated by Congress. The Clean Air Act is
very clear that those wilderness areas cannot be degraded. And
that's what this process is all about now, is trying to
determine how do we facilitate development but at the same time
not negatively impact one of the single most significant
resources that we have in the State. And that's the largest
block of clean air in the entire lower 48 States.
Mrs. Cubin. I think I'll let you take that up with Mr.
Martin.
Mr. Throop. Sure.
Mrs. Cubin. That would be a good place to work it out, to
start.
What is your response to the fact that, because of the
difficulty that is experienced in dealing with the Federal
Government in trying to get permits, that investment goes to
Texas, Oklahoma, places where they don't have public land to
deal with, and then, on top of that, maybe worse, to other
countries. What is your reaction to that?
Mr. Throop. Well, let me be very clear with my reaction. I
don't believe it.
Mrs. Cubin. Oh, that's interesting. I sure do.
Mr. Throop. Oh, well, we may have a difference of opinion
on that. But you look at the number of companies, you look at
the number of operators that are actively involved in
development in this State, and you look at the time lines for
the processes, you know, here compared to other Western States,
and my understanding is all of the information indicates that
there's nothing out of the norm here, that what we're
experiencing----
Mrs. Cubin. I'm not talking about just Wyoming. I'm talking
about public land States.
Mr. Throop. And there may well be an issue there. But I
think we do, again, need to remember that these are public
lands that are owned by every single citizen of the United
States and Wyoming, and that there are other extremely
important resources on those lands.
And GRBAC, I guess I heard earlier that the number of
months was 16 months, was the target for getting an EIS
completed. I think if we look at the Cave Gulch EIS process,
it's probably pretty close to 16 months. And I don't think it
was many more than that. If we count back and look at those
dates, I don't think it will be many more than that. And again,
that process and project was very definitely fast-tracked, and
many of the other public interests not adequately considered.
You know, again, I don't believe that these large companies
who are doing business here are disadvantaged in this State.
Mrs. Cubin. Even over Louisiana or Alaska?
Mr. Throop. No.
Mrs. Cubin. You don't think that it's a disadvantage to
have to do the environmental impact statement and go through
all of the things required to get that when you don't have to
do any of it in Louisiana?
Mr. Throop. I definitely do not, because these are
different lands, these are different resources. These are
public land resources. And the numbers speak for themselves.
You know, again, what are we, the No. 2 natural gas-producing
State, behind New Mexico? We have a very active oil industry in
this State that certainly has had more impacts--in fact, they
both have had far more impacts by market price and access to
transportation of product than any other factor. And if you
look at the amount of product that we're producing in this
State and you look at the number of companies that are doing
business in this State and, if they are truly, in fact, here
for the long-term, they should be willing to roll up their
sleeves and work for the citizens of Wyoming. You can certainly
get access to that resource for the national benefit, but also
to protect those other crucially important land resources that
are on those lands, some of the most spectacular wildlife herds
in the country, the cleanest air in the country.
Mrs. Cubin. I love it.
Mr. Throop. We all love it. So let's have balanced
decisions that protect those resources while developing oil and
gas for this State and its nation's future. It's all very
obtainable.
Mrs. Cubin. Didn't mean to leave you out of this whole
thing.
Would you give me your response to my question about
companies going out of the State dealing with the Federal
Government and also going out of the country as well?
Mr. Hoskins. Well, first of all, I will point out that
these are, in fact, public lands and they are part of the
sovereignty, sovereign ownership of the people of the United
States. As Tom said, they're not going elsewhere. If they make
that decision, that's a business decision.
I think one of the things that truly bothers me, when I
hear a lot of talk about the socioeconomic impacts and the
failure to analyze those, we should ask ourselves what true
benefits are we getting from the oil and gas industry in this
State. Obviously, most of our tax revenues come from mining,
but also oil and gas. And you have to ask yourself what benefit
to the State is such a reli-
ance on a small and narrow range of economic development. And
when I think about the issues of companies deciding to go
elsewhere, I have to think it might be something like when the
military bases closed around the country. And a lot of people
might--you can talk to those who say one of the best things
that ever happened to them was that the military base closed,
because it forced the community to think about its long-term
economic development in terms of diversity, rather than relying
on one resource to fund their areas.
Economic extraction of minerals from the West over the last
few years has been associated with a number of things. One of
the big problems, when the boom started in 1970's, was the
impact on--the socioeconomic impact, alcoholism, drugs, crime,
additional impacts on infrastructure and those kinds of things,
and that's why Wyoming passed the industrial siting act, to try
to deal with some of those things.
I think the issue then comes down to what degree will the
oil and gas industry be a part of a diversified economy in the
West, and I think right now it is not. And so my personal
belief--and I'm not going to say this is the Wyoming Wildlife
Federation's, but my personal feeling is that we need to look
at controlling the development of oil and gas in this State and
the West to allow communities to sit down and do the hard work
that's necessary to look to the future and diversify their
economies, because it is simply not happening now.
Mrs. Cubin. Why isn't it happening now?
Mr. Hoskins. It would be just a personal opinion. I believe
that it's largely cultural, that we have been doing extraction
in the West for over a hundred years now and we're just
addicted to it. It's an addiction, like an addiction to alcohol
and drugs. We are addicted to the easy money that comes out of
the minerals industry. You know, we in Wyoming don't have to
pay income tax. That's great. What happens when the oil and gas
industry goes into a bust, like it did in the 1980's?
Mrs. Cubin. Where are you originally from?
Mr. Hoskins. I'm from North Carolina, and I grew up raising
tobacco, and so all of my friends who stayed in tobacco were
looking at the same kinds of things that I think that people in
the West who are involved in the extraction industries are
looking at. And in North Carolina, people simply don't want to
think that things will be different. And right now they are
learning that it is going to be different, although they're
probably going to be able to ship everything overseas to--
because people smoke quite a bit overseas.
Mrs. Cubin. You know, just the response that you've given,
as compared to the response that Tom gave us, it seems to me
you have different goals. Tom would like to achieve some
balance and be able to produce the resources, and you would
like to not produce the resources.
Mr. Hoskins. What I'm saying is I would like to see more
diversity in the economics of the West, and we simply don't
have that now.
Mrs. Cubin. I find it interesting that lots of times people
move here because they love it. Then the first thing they want
to do is change it to how it was where they came from or
something and eliminate what they came here for in the first
place. I'm not saying that's you, but I find that a lot.
Are you satisfied, Robert, with the EIS on Cave Gulch?
Mr. Hoskins. Well, once again, the Federation hasn't gotten
involved in this. My primary concern with the EIS is the
political--the politics of it. I was not here when the original
scoping meeting was held. I was living in Laramie at the time.
I did come up and I attended the March 11th hearing. And I'm
deeply concerned with the political atmosphere, circus
atmosphere that I saw at the BLM meeting.
Mrs. Cubin. And what was that date?
Mr. Hoskins. That was on the 11th of March, I think. It was
right after the legislative session.
And my primary concern with that was the issue that
everybody seemed to be heating up on was that that was a
conflict between birds and jobs. And in particular, virtually
everyone who stood up and spoke was talking about how the 6-
month stipulation, that it was absolutely--that they treated it
as if it was absolute, that there was 6 months where nobody
could do anything around in the areas, around the raptor areas.
And if you look carefully at the draft EIS where they talk
about that, those were extremely limited to buffer zones, a
quarter mile or half mile buffer zones around various nesting
sites and, of course, applied to the raptor--key raptor area,
and that area was bound by BLM. And there was a lot of
disagreement over that. It was not--did not have much potential
for gas exploration or drilling in that area. People might
disagree with that, but that's what the issue was.
And so I was concerned, when everybody stood up and berated
the BLM and environmentalists for causing, quote unquote,
delays in the Cave Gulch development, that they sort of keyed
in on this 6-month stipulation, by claiming it was an absolute
stipulation where nobody could do anything during that 6
months, which was false.
So I have to ask the question when I look at the political
process that's involved around Cave Gulch is that, if everybody
has his ducks in a row, why is it necessary to sort of resort
to that kind of misinformation.
It was also clear that many people who spoke simply hadn't
read the draft EIS and were simply going on what they had been
told to say. I don't call that public participation.
So as far as----
Mrs. Cubin. So if you had it to do yourself, you'd make all
the decisions?
Mr. Hoskins. No. The decisions--this brings up another
question. The decisions are the Federal Government's. Seems to
me if we were to look for, you know, closing down the delays,
quote unquote, it seems to me we'd have to make an amendment to
recognize that the final authority belongs to the Federal
Government. Doesn't belong to Natrona County, doesn't belong to
Wyoming, doesn't belong to the oil and gas industry. It belongs
to the Federal Government.
And I think that these constant challenges to the authority
of the Federal Government over Federal lands is probably just
as much responsible for political delays as anything else, if
we spent a lot less time trying to do end runs around with the
lawyers and complaining about interpreting--how regulations are
interpreted.
When I was in the military, that's the most rigid
organization in the Federal Government. We all interpreted
regulations based upon our own knowledge and our own
experience. If it happens in the military you know it's going
to happen in the BLM. I think that's something that obfuscates
the issue. We need to recognize that the Federal Government is
the final authority on Federal lands and start dealing with
that and accepting that and going forward from there.
Mrs. Cubin. Thank you. I appreciate your testimony from
both of you.
You know, I think another solution that we need to start
working toward is I think we need to make land exchanges. It
would be so much more economically feasible for the Federal
Government to manage a larger portion of land and get rid of
some of these parcels where there's Federal land in between all
private and State and so on. If we could just accommodate
larger blocks of land, I think everybody would be happier.
There would be better recreational use on the Federal land.
They wouldn't even have to allow mining or drilling.
Mr. Throop. We would agree with you entirely. We think
that's a really good future solution, land exchanges.
The problem we're seeing right now is there's such
inequality in the two land exchanges that are the focus of the
attention.
Mrs. Cubin. You mean the two now?
Mr. Throop. The Two Trails in the Big Horn Basin and then
the Elk Mountain-Seminole in the south central.
And I guess our primary concern is if we have such
inequitable land exchanges that sacrifice the public interest
to such an alarming degree, the public is going to react by
saying land exchanges are the same as selling our public lands,
and they're going to oppose those as well.
In a former life, I was a chairman of a board of county
commissioners and was involved in two very large land exchanges
that included two Federal agencies, a State agency, and a
County government. And those had public support because all of
the interests worked jointly to try to make certain that
private interests were protected, but also public interests
were protected as well. And that's something--that's a message
that you can send to the BLM, if you're going to exchange,
let's make sure there's something in it for the public.
Mrs. Cubin. And I guess, if those decisions were easy and
those exchanges were easy and everyone agreed, we probably
wouldn't be here today talking about this problem that we have.
Thank you.
Mr. Hoskins. Let me--could I just make one other quick
mention?
Mrs. Cubin. Sure.
Mr. Hoskins. I think there is a lot of middle ground that
we can work with. I wanted to mention a couple of areas where I
totally agree with Robin Smith.
Inadequate resources within BLM, you know, that's something
that industry and the conservation community strongly agree on.
Also this bizarre relationship between BLM and industry and
independent consultants, that's one that's troubling to us as
well, and maybe for slightly different reasons. But I thought
Robin's description of that issue was a very good one.
There's a lot of common ground here.
And I think one--a point I'd like to leave you with is,
certainly, the parties have to be willing to come to the table,
but we also need to establish a climate in this State where the
decisionmaking bodies, both legislative and executive branch
decisionmaking bodies, establish a climate where there's an
expectation that the parties will come together and try to find
common ground. I strongly believe at this point the feedback
from the agencies, both the legislative and executive branches
of the State and Federal Government, is go ahead and do your
end runs; you'll get away with it, and not requiring or
establishing a climate where collaboration is something that
has a high value and is a requirement of the decisionmaking
process.
Mrs. Cubin. Certainly can keep working for that.
Thank you very much. Thank you, all of you, for being here
today.
This Subcommittee stands adjourned.
[Whereupon, the Subcommittee was adjourned.]
[Additional material submitted for the record follows.]
Statement of Gloria Flora, Forest Supervisor, Lewis and Clark National
Forest, USDA, Forest Service
Madam Chairman and Members of the Subcommittee:
Thank you for the opportunity to discuss the Forest
Service's Northern Region oil and gas program and the Draft
Environmental Impact Statement (HIS) for oil and gas leasing on
the Lewis and Clark National Forest.
In response to the Secretary's Oil and Gas Resources
Regulation of 1990, the Forest Service developed a schedule for
analyzing all areas under its jurisdiction where industry had
expressed a high interest in leasing. The analyses and
decisions forgo percept of the areas which were scheduled are
now complete.
Background
The Northern Regional Forester has been analyzing the
opportunities for oil and gas leasing on areas with high
mineral potential on National Forests and Grasslands in
Montana, North Dakota, South Dakota, and Northern Idaho in
accordance with the Secretary's regulations (36 CFR 228). In
1998, Environmental Impact Statements (EIS) addressing oil and
gas leasing will be completed for all ``high potential'' oil
and gas areas in the Northern Region.
Thus far, EIS's have been completed in North Dakota (Little
Missouri EIS), and in Montana on the Beartooth Ranger District
of the Custer National Forest and Beaverhead National Forest.
Final EIS's for the Helena and Lewis and Clark National Forests
will be released this fall. The Custer National Forest will
complete the EIS on high potential areas in South Dakota in
1998. As a result, the Northern Region has processed 1,039
leases since 1991.
We are proud that we've been able to meet the challenge of
providing oil and gas development opportunities in an
environmentally sound manner. It should be noted that many of
these high potential oil and gas areas also have high values
for threatened and endangered species habitat, cultural
resources, recreation, and water resources. Through mitigation
efforts and some restrictions on leases, we've been able lease
approximately 450,000 acres, bringing in approximately $10
million in bonus bids to the United States Treasury. In
addition, 5.5 billion cubic feet of gas and 3.7 million barrels
of oil were produced from National Forest System lands in the
Northern Region in 1996.
Lewis and Clark Oil and Gas Program
The Lewis and Clark National Forest has been analyzing the
opportunities for leasing for oil and gas through an EIS
process that began February 24, 1994. The area being analyzed
in this EIS encompasses some 1.86 million acres, located on the
Rocky Mountain Front north and west of Great Falls and several
isolated mountain ranges in central Montana, east and south of
Great Falls.
In addition to being a high potential area for oil and gas,
21 percent of the area is Congressionally designated
wilderness, 9 percent is in the Montana Wilderness Study Areas
also designated by the Congress, and another 3 percent has been
recommended for wilderness through the forest planning process
under the National Forest Management Act. Sixteen percent of
the area is already leased for oil and gas, but not without
controversy. For instance, the Badger-Two Medicine Area has an
approved Application to Drill (APD) and a pending APD. However,
leases in this area have been suspended until resolution is
reached on a traditional cultural property.
The history of oil and gas leasing on the Front is complex
and heated. Minimal development has taken place on the 52
existing leases. Ten lease applications are pending because at
the time of their submittal, the areas were under consideration
for wilderness designation by the Congress. Another 19 leases
involving 26,653 acres have been canceled due to court order.
Issues such as protection for a traditional cultural
district which may be eligible for listing on the National
Register of Historic Places, protection of the grizzly bear,
strongly conflicting social values, and the economics of oil
and gas development where leases may require No Surface
Occupancy stipulations are examples of the difficult issues
affecting decisions both on existing leases and future leasing
options.
Status of Lewis and Clark Oil and Gas Leasing EIS
The draft EIS was released in August of 1996 and the public
comment period closed in December, 1996. The preferred
alternative identified in the Draft EIS proposes oil and gas
leasing for approximately 52 percent--nearly a million acres--
of the forest. In response to the draft, the public provided
1,495 comments and we are in the process of analyzing those
comments and incorporating information provided in the comments
into the final EIS. The final EIS and the Record of Decision
are scheduled to be issued in August, 1997.
Conclusion
Let me close by saying that there has been extensive
involvement by individuals, environmental groups, the petroleum
industry, the tribes and agencies at the federal, state and
local level in this EIS process. It has been a very open and
public process.
That concludes my prepared testimony. I would be pleased to
answer questions you may have.
------
Statement of Gina Guy, Regional Solicitor, Rocky Mountain Region,
Department of the Interior
Good morning Madam Chairman and Members of the
Subcommittee, Ladies and Gentlemen. It is a pleasure to be with
you today.
I. Cost-recovery Opinion.
As the members of the Subcommittee are aware, the Office of
the Solicitor recently issued an opinion to the Director,
Bureau of Land Management (M-36987; December 5, 1996) on the
subject ``BLM's Authority to Recover Costs of Minerals Document
Processing.'' A copy of the Opinion is appended for the record.
The Opinion was intended to assist BLM in its cost recovery
efforts in response to two separate reports from the
Department's Office of Inspector General, which concluded that
BLM's delay in undertaking certain cost recovery actions
pursuant to existing authorities had resulted in the loss of
significant sums.
It is important to distinguish cost recovery from royalty
payments, lease rentals, and bonus bids which are monies paid
to the United States (and in some cases shared with states) for
the privilege of exploring for and producing federal minerals.
Costs which may be subject to recovery in the minerals area
refer only to the processing costs incurred by the BLM. BLM is
authorized to recover its reasonable processing costs from
identifiable beneficiaries who receive a special benefit beyond
the benefits received by the general public.
The policy of the Federal government to recover costs for
services resulting in private benefits has been in force at
least since the Eisenhower Administration. The Independent
Offices Appropriation Act (IOWA), passed in 1952, provided
generally for cost recovery by federal agencies so as to make
the services furnished as nearly self-sustaining as possible.
This statute was interpreted in 1959 by the Office of
Management and Budget in OMB Circular A-25, last updated in
1993. The circular stated that it is the general policy of the
United States Government to assess user charges against ``each
identifiable recipient for special benefits derived from
Federal activities beyond those received by the general
public.''
Conversely, the circular also provided that no costs could
be recovered when the identity of the beneficiary is obscure,
and the service primarily benefits the general public at large.
An example of this would be the preparation of a programmatic
environmental impact statement in support of a general agency
program, such as a Resource Management Plan for a BLM district
or a General Management Plan by the National Park Service for a
particular park.
The circular also provides that even when the public
benefits as a ``necessary consequence'' of the service provided
to an identifiable recipient, the agency is not required under
the IOAA to allocate any cost to the public and may seek to
recover the full cost of the service. Thus, even if the public
derives some incidental benefit, such as contribution to the
general knowledge base as a result of environmental studies, in
connection with processing of a federal permit or license or
other document sought by or issued to an identifiable party,
the government has the authority under the IOAA to recover all
its costs. This could also be described as a ``but for'' test:
if the agency would not have incurred the cost but for the
service to an identifiable recipient, the agency may recover
the full cost irrespective of the incidental benefit to the
public. This policy has been incorporated in Interior's
Departmental Manual, which allows some exceptions, most notably
in cases where the cost of collection would consume an unduly
large amount of the money collected, and if the recipient is
engaged in a non-profit activity devoted to the public safety,
health or welfare.
Agency efforts to pursue cost recovery and the
reasonableness of the fees sought have spawned a great deal of
litigation over the years. At the same time, the Congress has
not hesitated to enact new laws or expand existing statutes
with respect to cost recovery authority. Much of that
litigation and the statutes pertinent to today's healing are
discussed in detail in the Opinion.
One of the most important sources of BLM's cost recovery
authority is found in the Federal Land Policy and Management
Act (``FLPMA''), enacted in 1976 after years of debate and an
exhaustive report from the Public Land Law Review Commission.
FLPMA (Section 304) addresses two types of fees: filing fees
and processing fees. Filing fees are basically nominal fees
intended to limit filings to serious applicants. Processing
fees reimburse the government for reasonable processing costs.
The statute provides authority for BLM to recoup reasonable
costs which include, but are not limited to, the costs of
special studies; environmental impact statements; monitoring
construction, operation, maintenance, and termination of any
authorized facility; or other special activities. In
determining what costs are reasonable under FLPMA, BLM may
decide that less than all costs should be recovered.
Statutorily identified reasonableness factors include actual
costs (exclusive of management overhead), the monetary value of
the rights or privileges sought, the efficiency to government
process, the public service provided, and an apportionment
between the general public interest and the exclusive benefit
of the applicant. The Congress has provided that BLM has the
authority to recover up to its full processing costs. Case law
requires that BLM, in determining what is reasonable, consider
all of the FLPMA reasonableness factors, such as the benefit of
the project to the public. BLM can consider, for example,
whether the project provides a specific public service, such as
better road access, in reaching its decision on cost recovery
pursuant to FLPMA.
Subject to the reasonableness factors, the BLM may exercise
cost recovery authority under FLPMA when it processes actions
taken pursuant to the Mineral Leasing Act in situations where
an identifiable beneficiary receives a benefit or privilege
beyond those received by the general public. Therefore, many of
the BLM's costs incurred in the competitive leasing process for
both coal and oil and gas are recoverable.
The Office of the Solicitor will continue to offer such
assistance as BLM may request in the development of cost-
recovery rulemakings. The rulemakings will be designed to
implement the Solicitor's Opinion, and will include the
opportunity for public comment about how the BLM should weigh
the various reasonableness factors.
II. Green River Basin Advisory Council Report
At the request of Assistant Secretary Armstrong, the Office
of the Solicitor is examining the recommendations with respect
to royalty ``ecocredits''. An opinion is in progress, but is
not yet complete.
This concludes my prepared statement. I would be happy to
answer any questions the Subcommittee may have.
------
Statement of George H. Fancher, Jr.
Thank you Madam Chairman for the privilege to appear before
you and the subcommittee on Energy and Mineral Resources. It is
time we examine the issues which are adversely affecting our
industry. You are to be complimented on your interest in
listening to some of the problems that producers in the Rocky
Mountain Region are having with governmental agencies such as
the BLM. The goal of the government should be to encourage and
help private industry to be more efficient and to economically
develop and produce the domestic oil and gas reserves that are
available in the United States.
My name is George Fancher and I am the owner of Fancher Oil
Company, a small independent producer located in Denver,
Colorado. I have been active in the Rocky Mountain area since
1969. I am a member of the Independent Petroleum Association of
Mountain States (IPAMS), the Wyoming Independent Producers
Association (WIPA), and the Independent Petroleum Association
of America (IPAA). From 1991 through 1996, I served as Chairman
of IPAMS Crude Oil Committee and last year I was a member of
Governor Geringer's State and Industry Negotiating Committee
for the Express Pipeline Project State Land's Right-of-Way
issue.
However, today, I am not representing any organization and
my comments reflect only my concern about the procedures used
by the BLM in approving the Environmental Impact Statement
(FEIS) for the Express Pipeline Project which is projected to
deliver 172,000 BPD of Canadian crude oil from Hardisty,
Alberta to Casper, Wyoming. As a result of my experience with
the Express Project, I am concerned about the lack of a
comprehensive process to evaluate the need for and impact of an
international pipeline on local and state economies and to the
domestic oil and gas industry.
The Express Pipeline has been in operation for only a few
months and its impact upon crude oil prices has already been
felt. Prices for crude oil have fallen by approximately $2.50 a
barrel and have virtually wiped out the premiums (bonus) over
posted price which Wyoming crude oil producers were receiving.
I expect that by the end of the year the premiums will no
longer exist. This is due to the fact that by the end of the
year Express Pipeline will be shipping approximately 172,000
barrels of crude oil per day from Hardisty, Alberta to its
connection with the Platte Pipeline at Casper, Wyoming. I
anticipate that substantial quantities of crude oil being
shipped on Express Pipeline will be used to compete with oil
produced by Rocky Mountain oil producers in markets which
include Wyoming, Colorado, and Utah. The balance of Express'
crude will be shipped eastward on the Platte Pipeline to its
terminus at Wood River, Illinois.
Initial studies commissioned by the BLM of the socio-
economic impact of the pipeline predicted the effect which is
now being felt. The initial studies concluded that there would
be a price reduction of approximately $2.50 per barrel for all
types of Wyoming crude as a result of the pipeline. The initial
report by the BLM's consultants concluded that the potential
total cumulative loss of income to Wyoming producers resulting
from foregone production (accelerated decline) and lower prices
through 2005 would be as much as $2.1 billion. The initial
report also found the total impact on Wyoming state and local
tax revenues would be about $23.3 million in 1997. These
initial reports directly contradicted conclusions reached by
the BLM in the Draft Environmental Impact Statement for Express
Pipeline (``DEIS'') stating that the pipeline would not
directly affect oil production in Wyoming and Montana. The
initial report described above confirmed comments made by
producers which were received by the BLM after the DEIS was
published, that there would be a substantial impact on crude
oil production in Wyoming.
In my view, the BLM did an inadequate job in evaluating the
impact of this pipeline. In fact, the BLM capitulated to
Express after Express' attorneys objected to the consultants
analysis which resulted in dramatic changes to their revised
report.
While the initial report concluded that there would be a
price reduction of $2.50 per barrel for all types of Wyoming
crude as a result of the Pipeline, the revised report concluded
that there would be a price reduction of only $1 per barrel for
just Wyoming sweet crude, and that since ``sweet crude only
comprises 35 percent of Wyoming's total production, the overall
income and tax revenue effects would be similar to a $0.35 per
barrel decline for all Wyoming production.'' The initial report
stated that ``the total impact on Wyoming State and local tax
revenues would be about $23.3 million in 1997.'' Ten days after
receiving criticisms from Express' attorney, however, the BLM
consultant revised its report and concluded that ``[t]he total
impact on Wyoming State and local tax revenues would amount to
$3.4 million in 1997.''
Also, the initial report concluded that ``[t]he potential
total cumulative loss of income to Wyoming producers resulting
from foregone production (accelerated decline) and lower prices
through 2005 could be as much as $2.1 billion.'' Ten days
later, BLM's consultant concluded that the Pipeline ``is not
expected to accelerate the overall rate of decline in
production of Wyoming oil'' and that ``[b]ased on the projected
annual rate of decline of 4.0 percent for the next ten years,
the potential loss of income resulting from the $1 per barrel
reduction in sweet crude through 2005 could be as much as
$195.8 million.'' In the span of ten days, the BLM's consultant
changed its evaluation of the cumulative impact to local
producers from $2.1 billion through 2005 to $195.8 million
through 2005 (a change of over $1.9 billion).
The Final EIS incorporated the conclusions of the revised
report issued ten days after Express's attorney criticized the
initial report.
The final EIS report recognized that the premiums or bonus
being paid at that time for sweet crude were in the range of
$2.25 per bbl and up to $4.50 per bbl for general sour crude.
With refineries in the region operating at capacity, the impact
of an additional 100,000 BPD of crude via Express was only
expected to reduce the price of sweet crude by $1 per bbl and
would have no effect on Wyoming general sour crude.
The final report contains numerous flaws including, but not
limited to 1) the use of the same production decline rate to
forecast what would happen without the Pipeline and what would
happen with the Pipeline; 2) the failure to adequately support
its conclusion that even though a bonus in the range of $2.25
to $4.50 per barrel is being paid for Wyoming crude oil because
of purported shortages of oil, and even though the consultants
assumed that the Pipeline would more than adequately meet local
demand for crude oil, that somehow the Pipeline would
effectively reduce the price of Wyoming crude by only $.35 per
barrel; 3) the failure to specifically identify the sources
upon which the consultants relied for material assumptions; 4)
inconsistent assumptions concerning transportation costs; and
5) an inadequately supported assumption that Canadian crude
will not displace Rocky Mountain oil production; 6) failure of
the WSO to include information based on regional historical
retail gasoline prices and, whether or not a crude oil
oversupply has ever resulted in lower gasoline prices at the
pump.
Because of the radical changes between these two reports,
the Wyoming State Office of the BLM (WSO) should have been very
concerned about this shift and sought independent review. The
WSO never independently challenged or even questioned this
dramatic $1.9 billion change and the consultant's reversal of
its initial conclusion. The WSO never disclosed the presence of
the two radically different socio-economic analyzes and never
disclosed why it rejected the initial Report and accepted the
revised Report. The WSO made no attempt to quantify the loss of
non-renewable natural resources which will result from the
construction and operation of the Pipeline. Thus, the WSO
breached its obligations under NEPA to independently review and
analyze the consultant's work on socio-economic impacts and
failed to ensure the professional integrity of the analysis
contained in the consultant's Final Report. The first time the
public had an opportunity to review the analysis performed by
the reports was when the FEIS was issued.
The WSO refused to extend the FEIS comment period to allow
the Governor of Wyoming an opportunity to address the final
report which was disclosed to the public for the first time in
the FEIS. The WSO failed to adequately address and consider
relevant information submitted to it during the commenting
process on the FEIS which put into question the validity of key
assumptions upon which the final report was based, including
the transcript of a March 20, 1996 hearing held before the
Wyoming State Senate Select Committee on Mineral Transportation
which was submitted to the WSO, and other information
concerning domestic oil production and related socio-economic
impacts this Pipeline would cause. The WSO should have treated
the final report as new information not previously disclosed in
the DEIS and afforded the public the same commenting
opportunity which was provided on other areas originally
covered in the DEIS.
On June 13, 1996, I learned that the consultant had new
information which would have caused them to reach different
conclusions from those in the final report. On or about June
20, 1996, I spoke to Mr. Ogaard of the WSO about the
consultant's new information. Mr. Ogaard informed me that he
did not really care if there was new information or if the
consultant's opinion may have changed, that he had to draw the
line somewhere and the WSO was not about to re-open the case to
consider the impact the pipeline would have on domestic crude
oil production and related socio-economic impacts.
It was and is reasonably foreseeable that the inundation of
large volumes of Canadian crude oil in the Rocky Mountain
region would cause the price of oil in Wyoming to fall and
wells to be shut-in, resulting in a loss of otherwise
recoverable domestic natural resources which violates one of
the fundamental purposes of NEPA which is the prevention of
waste of non-renewable natural resources. The WSO was obligated
to evaluate and disclose ``any irreversible and irretrievable
commitments of resources which would be involved in the
proposed action should it be implemented'' including the loss
to domestic oil reserves resulting from the project.
``In order to encourage the greatest recovery of oil and in
the interest of conservation,'' the BLM announced new
regulations reducing the rate of federal royalties for heavy
grades of crude oil. 61 Fed. Reg. 4748 (February 8, 1996).
These new rules were designed to ``provide an economic
incentive to implement enhanced oil recovery projects, and
delay the plugging of [marginal] wells until the maximum amount
of economically recoverable oil can be obtained from the
reservoir or field.'' 61 Fed. Reg. at 4748. The BLM explained
why it felt royalty relief was needed:
As many as two-thirds of all marginal properties (including
non-heavy oil properties) could be lost during a period of
sustained low oil prices (Marginal Wells, a Report of the
National Petroleum Council, 1994, p.3). The danger in losing
the marginal wells is that, although production from individual
wells may be small, their collective production is significant,
accounting for one-third of onshore domestic production
excluding Alaska.
Nowhere in the analysis of the socio-economic impact of the
Pipeline did the WSO address the impact of these regulations
which were promulgated by its own agency. Neither the DEIS nor
the FEIS contained any analysis of the economic limits of
domestic oil production or any quantification of the domestic
oil reserves which will be lost as a result of the proposed
Pipeline.
The failure of the BLM to adequately assess the impact of
Express on local prices violates NEPA which provides that it is
the responsibility of the Federal Government to Enhance the
quality of renewable resources and approach the maximum
attainable recycling of depletable resources. Crude oil is a
natural resource, but it is depletable. If fields or wells have
to be abandoned before the resource has been produced to its
maximum attainable limit, then waste will occur. The prevention
of waste of natural resources is a fundamental purpose of NEPA.
The broad aim of NEPA is well established.
The National Environmental Policy Act contains no exhaustive
list of so-called ``environmental considerations'' but without
question its aims extend beyond sewage and garbage and even
beyond water and air pollution. The act must be construed to
include protection of the quality of life . . . (citations
omitted).
When economic and environmental effects are interrelated,
the EIS must discuss all of the effects of the proposal on the
human environment, including social and economic. The scope of
effects to be considered under NEPA is expansive. Under NEPA,
the term ``effects'' includes:
Indirect effects, which are caused by the action and are later
in time or farther removed in distance, but are still
reasonably foreseeable. Effects and impacts as used in these
regulations are synonymous . . . Effects includes . . .
economic, social, or health, whether direct, indirect or
cumulative. Effects may also include those resulting from
actions which may have both beneficial and detrimental effects,
even if on balance the agency believes that the effect will be
beneficial.
A cumulative impact is defined in NEPA regulations as:
[T]he impact on the environment which results from the
incremental impact of the action when added to other past,
present, and reasonably foreseeable future actions regardless
of what agency (Federal or non-Federal) or person undertakes
such other actions. Cumulative impacts can result from
individually minor but collectively significant actions taking
place over a period of time.
Here economic and environmental effects are clearly
interrelated. It is ``reasonably foreseeable'' that the
Pipeline will cause a substantial number of domestic oil wells
to be shut in, resulting in the loss of otherwise recoverable
domestic natural resources.
In summary, the process must ensure that the socio-economic
aspects of the NEPA process receive more comprehensive
treatment than was done with the Express Pipeline project. The
failure to disclose the radical shift in the analysis of the
socio-economic impact of this pipeline to the public must be
prevented in the future, especially where the lack of a truly
independent analysis may lead to the waste of natural
resources.
In the future, our industry will be faced with similar
situations involving foreign oil and gas projects that will
directly impact the domestic energy industry. The Express
Pipeline Project illustrates the fact that no state or federal
governmental agency has the final or overall authority to
evaluate the need for and the impact of an international
pipeline on local and state economies and the domestic energy
industry in general.
Because of the many questions that the Express pipeline has
raised, I recommend that the government, in conjunction with
industry, develop a comprehensive approval process for foreign
pipelines transporting foreign crude oil, natural gas and/or
refined products into this country which will evaluate the
viability and effect of the project on all concerned.
------
Statement of Tom Throop, Executive Director, Wyoming Outdoor Council
My name is Tom Throop and I'm the executive director for
the Wyoming Outdoor Council (WOC). WOC was established by
Wyoming citizens 30 years ago in 1967 and today remains the
leading voice for the conservation of Wyoming's natural
resources and the protection of its environment. WOC is a non-
profit membership organization governed by a 17-member board of
directors comprised of Wyoming citizens and has a staff of
four. WOC is all Wyoming, as we are unaffiliated with any
regional or national groups.
Throughout its history, WOC has played a leading role in
helping to resolve some of the state's most difficult natural
resource challenges, from coal strip mining in the Powder River
Basin, to unsustainable timber harvests and clearcutting on the
Bridger-Teton and Shoshone National Forests and now energy and
mineral development in the Green River Basin and the southern
Big Horn Mountains.
I thank you for the invitation and the opportunity to
testify. At the same time, I need to tell you that the public
interest organizations from our sister states of Montana and
Colorado are very upset with this hearing. The scope of this
hearing directly relates to issues that are being dealt with in
those states. Witnesses representing public agencies and
industry are here from both those states. Yet there was no
notice nor invitations to public interest groups in Colorado
and Montana. They view this hearing and process as extremely
unfair and believe that if you are going to discuss issues that
affect their states, hearings should be held in those states
and public interest group witnesses from those states should be
invited to testify.
Let me begin by reminding the Committee that the lands in
question are public lands owned jointly by all the citizens of
the United States, and Wyoming. By law, these public lands must
be managed for multiple use. In the definition of multiple use,
it states that resources are not to be managed for the greatest
economic return or greatest unit output. Increasingly, however,
we are seeing a fundamental shift away from multiple use to
dominant use for energy and mineral development, often at the
expense of the public land's uses for wildlife and habitat,
open space, historic recreation opportunities, clean air, clean
water and overall environmental quality. The BLM's management
plans for the public lands in Wyoming that are the subject of
this hearing authorize oil and gas leasing on all lands outside
witness study areas; or an astounding 98 percent of the total
lands available, including crucial big game winter range, areas
of critical environmental concern and areas having high scenic
value. Presently, oil and gas leases cover the vast majority of
the areas under discussion, approximately 90 percent, and do
not carry stipulations sufficient to protect the surface
resources.
There are a multitude of uses and very significant
environmental issues to be dealt with on the public lands of
the Green River Basin and Cave Gulch. Federal law requires that
there be careful review prior to development activities on
these public lands. For example, there are cumulative impacts
to a host of wildlife species and their habitat, including
antelope, deer, elk, raptors and sage grouse. Air quality and
visibility are major issues and the groups working on these
issues have not yet reached consensus on how to protect Class I
wilderness areas from emissions of nitrogen and volatile
organic compounds (VOCs). Implementation of the Clean Water Act
on the public lands, maintaining historic recreation
opportunities, and protecting significant cultural and
archaeological resources are also significant environmental and
land use considerations that must be dealt before these lands
are developed.
Concerning the Green River Basin Advisory Committee
(GRBAC), we requested the formation of this FACA process and
appreciated the Secretary's appointment and Assistant Secretary
Bob Armstrong's personal attention. GRBAC was a collaborative
process and product that we enthusiastically endorse. Most of
the recommendations can be implemented administratively, for
example the excellent work done by the Committee on
transportation issues. We sincerely expect and hope that the
Secretary will approve the primary outstanding issue, eco-
royalty relief. If the Secretary does not, there is a readily
available alternative that will accomplish the same objective.
BLM can change its policy for Wyoming and give Wyoming BLM the
authority to authorize off-site mitigation like is done in
other western states. It is obvious that if development occurs
at 8 or 16 wells per section, there is no remaining opportunity
for on-site mitigation. Any mitigation must occur off the
lease. And finally, though this issue was not resolved, we feel
strongly that the government should NOT pay for industry's NEPA
analysis. That is their responsibility and a cost of their
development proposals.
We are surprised and disappointed, Representative Cubin,
that you would characterize Cave Gulch in your letter of June
18th as ``Cave Gulch field development delays.'' We have been
involved in Cave Gulch throughout the entire process. Cave
Gulch is on a fast track the likes of which we have never
before witnessed. In fact, the process has been so bad that the
district manager has been driven off, the area manager
corrupted, and staff morale at an all-time low and the worst in
the state. While the fast-track EIS has been underway during
the past year, industry was given everything it wanted in an
interim development agreement, even though such a far-reaching
interim development agreement was unprecedented. Even though
the interim development agreement was a collaborative process
that was agreed to by all the parties, BLM broke the agreement
when they discovered Chevron wanted one more well that was
specifically excluded because it was deemed to violate NEPA.
The final EIS and Record of Record of Decision are on the
street. BLM openly admits that the decision sacrifices the
other resources on the public lands of this area. For example,
because industry didn't like it, BLM deleted the raptor
recovery area for a candidate species for ESA listing, the
ferrugenous hawk. Though most people believe we should be
taking actions to prevent listing of threatened and endangered
species, BLM takes an action at Cave Gulch that cumulatively
adds one more step toward listing. That these multi-national
corporations headquartered outside Wyoming can say that they
have somehow experienced obstructions at Cave Gulch is the best
demonstration yet that Wyoming is still viewed by some of these
companies as a third-world resource colony where quick and easy
is all that matters.
The best gauge to demonstrate whether we have a problem or
not are the numbers. To quote from the April 9th edition of the
Casper Star Tribune, ``The rig counts for Wyoming and the Rocky
Mountain region have soared over the figures from . . . last
year.'' According to the Petroleum Information Corporation,
Wyoming had 15 rigs in the state at the same time last year.
This year, there are 35, or a 133 percent increase. Wyoming had
the largest increase in the nation, twice the increase of #2
Louisiana. For the Rocky Mountain region, the rig count is up
36 percent.
In addition, there are hundreds, if not thousands, of APDs
that have been approved, but are not being developed by the
companies who hold approvals to develop, because of market
problems, higher priority projects, and a host of other
economic reasons. Examples are 72 wells at Stagecoach Draw, 750
wells at Wamsutter II, 1,300 wells at Fontenelle, and 1,300
wells at Moxa Arch have all been approved, just to name a few.
Things are pretty busy here in Wyoming and the allegation that
access and regulatory issues are any kind of inhibitor to
development in this state is nothing more than a thinly
disguised attempt by some, certainly not all, oil, gas and
minerals companies to commandeer this nation's public lands for
their own use.
In closing, the single most important factor in expediting
development is industry's willingness to come to the table
early in the process, to participate in identifying key issues
early and to work in good faith to resolve issues early with
the U.S. Forest Service, EPA, U.S. Fish and Wildlife Service,
Wyoming Game and Fish Department, to name a few, and the
citizens of Wyoming. Historically, industry has instead ignored
pleas for collaboration, and as a result, has forced many of
the significant issues to be dealt with in appeals or
litigation. Fortunately, we are beginning to see the culture of
decisionmaking change, for example, the GRBAC and a host of air
quality processes that are currently underway, but we still
have a long journey ahead of us. Representative Cubin, I plead
with you to play a constructive role by working to help bring
the parties together to find Wyoming solutions to Wyoming
problems. Thank you.
------
Statement of Alan Pierson, State Director, Bureau of Land Management,
Wyoming
Good Morning, Madam Chairman. I appreciate the opportunity
to come before you today to discuss the Bureau of Land
Management's (BLM) involvement with Federal resource management
in Wyoming. We have made a number of significant
accomplishments and have many projects and initiatives in
progress which reflect our commitment to an open and
cooperative process.
Overview
Within the state of Wyoming, the BLM manages some 18.4
million acres of public lands. Of that, about 17.9 million
acres are available for oil and gas leasing and about 8 million
acres are currently leased. We also manage 11 million acres of
minerals where we do not have jurisdiction over the surface.
Since the earliest days of our country, our Government has
recognized that public lands should be managed for the local,
as well as the national interest. Statutes have created a
balance so that revenues from public lands in Wyoming are
shared with the State. Wyoming communities benefit from this
arrangement. Each year, Federal mineral revenues amount to
about $500 million from Wyoming's public lands. Almost $250
million of these revenues go directly to the State to fund a
number of its programs. Our most recent oil and gas lease sale,
held on June 3, 1997, resulted in $5.1 million in receipts with
85 percent of the tracts sold. This suggests that our August,
1996 decision to offer only nominated tracts is paying off.
Generally, buyers nominate desirable tracts for inclusion in
the sale. This process helps to reduce the number of properties
included repeatedly in lease sales and minimizes the amount of
personnel required to conduct sale activities.
BLM Oil and Gas Program in Wyoming
BLM Wyoming is typically responsible for administering oil
and gas minerals management laws on all federally owned
minerals in Wyoming and Nebraska. Major operational
responsibilities on Federal and Indian lands include processing
applications for: permits to drill, unit agreements, and
suspensions of operations and production, etc. We are also
typically responsible for drainage protection enforcement
responsibilities, inspection and enforcement of oil and gas
operational and reclamation activities, and production
accountability. BLM Wyoming is first in the nation in
generating Federal onshore oil production and royalty revenues.
BLM Wyoming is second only to New Mexico for natural gas
production and gas royalty revenues received from Federal
onshore mineral leases. Southwest Wyoming is one of the leading
gas producing regions in the United States.
The following information, current as of the end of last
fiscal year, provides the status of wells and completions on
Federal and Indian lands in Wyoming, and outstanding unit and
communitization agreements activity:
BLM Wyoming (Historical Data through end of FY 96)
7,124 producing oil wells
2,978 producing gas wells
1,174 shut-in oil wells
519 shut-in gas wells
2,801 service wells (this includes injection and disposal
wells, water source wells, etc.)
17,457 plugged and abandoned wells
19,179 oil and gas leases under supervision encompassing
12,478,659 acres
726 exploratory and secondary unit agreements
512 enhanced recovery unit agreements
1,290 communitization agreements
8 gas storage agreements
3 development contracts
476 APD's (Applications for Permit to Drill) approved in FY
96
Protecting Environmental Resources
In addition to our operational responsibilities in
developing mineral resources, we are also charged with or share
with other Federal agencies the charge of protecting other
resources. This is part of an overall process which begins with
a resource management plan (RMP). BLM's planning is designed
for multiple use and sustained yield and is tiered from general
guidance to site specific elements. With the help of other
Federal agencies, State and local governments and the public,
we prepare plans for overall land use and resource management
to serve an entire resource area. The RMP specifies general
criteria for managing such resources as riparian areas,
cultural sites, wildlife habitat, historic trails, and
livestock grazing, as well as minerals development. This plan
is followed by more specific activity planning which provides
detailed analyses and decisions on specific sites. BLM is able
to manage oil and gas development alongside other types of land
uses by stipulating protective measure requirements in the oil
and gas lease document. The protective measures are developed
in part during the land use planning process, which includes
extensive public participation. Protect measure stipulations
allow oil and gas development to coexist with other surface
uses of public lands.
Cave Gulch
That brings us to the subject of Cave Gulch. The Cave
Gulch-Bullfrog-Waltman project area is located in Natrona
County and encompasses 25,093 acres of mixed Federal, State,
and private lands. Although the BLM manages only 7,375 surface
acres in the area, 76.5 percent of the mineral estate is
Federal.
Following discovery of a rich natural gas field in the Cave
Gulch Unit in 1994 by Barrett Resources Corporation, the BLM
prepared an environmental assessment (EA) to address Barrett's
development proposal. Based on potential environmental impacts
contained in the Barrett EA, we determined that impacts were
not expected to be significant, therefore, an environmental
impact statement (EIS) would not be required. In 1995, the BLM
issued approval to Barrett and Chevron USA Production Company
to develop the field.
Subsequent to this initial decision, we received additional
development proposals from Barrett and Chevron. Upon review, we
found that mitigation measures to protect raptors could not be
carried out. In January 1996, the BLM decided to reevaluate its
decision to allow Barrett to develop the field because of
Barrett's expanded development proposal and because of the
inadequate raptor protection measures in Barrett's proposal.
The BLM determined that the analysis required an EIS to assess
all of the direct and cumulative impacts from the combined Cave
Gulch-Bullfrog-Waltman project area development proposals. We
suspended further work on the Chevron EA which was being
prepared for the Bullfrog Unit adjacent to Cave Gulch.
Following that decision, the BLM established criteria for a
moderate amount of development activities while the final EIS
was being prepared. An interim agreement involving various
parties, including conservation groups and the affected
companies, has led to some development. As of February 1, 1997,
42 natural gas wells have been drilled.
BLM issued the Cave Gulch-Bullfrog-Waltman Final EIS
earlier this month for public comment. The comment period ends
July 20, 1997. The Record of Decision is expected to be
complete and ready for signature by August 4, 1997.
The preferred alternative in the final EIS addresses a
number of the issues raised in response to the draft EIS. It
provides for increased natural gas production in the Cave
Gulch-Bullfrog-Waltman project area by allowing the operators
to drill and develop approximately 160 natural gas wells over
the next 10 years on 107 new and 24 existing well sites, in
addition to existing drilling and production operations. Any
impacts to the raptor population and habitat can be effectively
mitigated with artificial nest sites and buffers around the
nests. As a result of a cooperative effort by the BLM, U.S.
Fish and Wildlife Service and the operators, BLM can
immediately begin to implement these mitigative measures.
The final EIS also has an expanded socio-economic and
cumulative impacts analysis of air quality. The total State
severance tax for the 30 to 40-year life of the project is
estimated to be about $63 million. Total Federal mineral
royalties are estimated to be $116.8 million, half of which
goes to the States. In addition, the State will receive
royalties of $6 million, over the life of the project. Total
estimated ad valorem property and production tax revenues from
their lands for the life of the project are about $76 million.
Green River Basin Advisory Committee
One final subject I would like to touch on is the Green
River Basin Advisory Committee recommendations.
The Green River Basin Advisory Committee reached consensus
on five recommendations and, in March 1997, forwarded these
recommendations through the BLM to the Secretary of the
Interior for approval. They include road standards, NEPA
process streamlining, eco-royalty relief, transportation
planning, and opportunities for partnership. To date, all but
one of these recommendations can and are being implemented.
Eco-royalty relief is currently under review by the
Department's Solicitor's Office. This recommendation would
establish a 5-year pilot project for eco-royalty relief in the
Greater Green River Basin. Under the pilot, producers in
Wyoming would be allowed to take a royalty reduction on
production of up to $4 million ($2 million for NEPA
implementation and $2 million for monitoring and mitigation)
annually to be used for monitoring studies and any mitigation
measures which go above and beyond standard operating
procedures, required stipulations, or standard conditions of
approval for mitigation.
Madam Chairman, I welcome the subcommittee's continued
interest in the BLM's programs and their effect on the State of
Wyoming. I appreciate this opportunity to provide information
on the activities we are involved in, and I look forward to
responding to any questions you may have.
------
Statement of Bob Nance, President and Chief Executive Officer, Nance
Petroleum
Dear Madam Chairwoman and members of the Committee:
I am Bob Nance, president and CEO of Nance Petroleum, an
independent producer who has federal production in Montana,
North Dakota, and Wyoming. I am here today on behalf of Nance
Petroleum and the Independent Petroleum Association of America
(``IPAA''), a national trade association representing nearly
6,000 members of America's oil and gas producing community.
The IPAA has increased its efforts at the national level in
the last couple years in the areas of federal onshore and
offshore oil and gas issues. The association has a very active
Land and Royalty Committee specifically dedicated to creating a
business environment that encourages producers to explore and
produce on federal lands. I've been appointed to be the Vice-
Chairman of Lands for this IPAA committee.
Why has IPAA stepped-up its efforts on public lands? The
reason is simple. We must make public lands accessible to the
independent oil and gas community if we are going to increase
domestic production. Each year the IPAA surveys its membership
to determine if independents are increasing their activities on
onshore federal leases. Year after year the answer comes back
the same--no! This is alarming, especially given that
government reports, supported by private and industry studies,
indicate that one of the last frontiers for unexplored onshore
oil and gas reserves lie beneath public lands.
We need to open these potential reserves to independents
who drill over 85 percent of the wells in the U.S. and produce
nearly 45 percent of America's oil and two-thirds of its
natural gas. We thank you and the Committee for coming to the
West to advance the cause of removing impediments to sound and
safe exploration of the federal lands spread throughout the
Rockies. If independent producers are successful in developing
public lands, then everyone benefits by creating more jobs,
stimulating the economy and increasing federal and state
revenues, especially for education. To accomplish this goal,
reform of the federal government's oil and gas federal land
programs is needed now, not ten years from now, after the
government concludes another series of studies and pilots.
To move ahead with reform, we need to identify the barriers
prohibiting independents from drilling on federal lands:
1. Lack of access. The vast majority of high-potential, federal
lands remain unavailable for leasing. And if they are leased,
stipulations, such as no surface occupancy, are added,
precluding any drilling or seismic evaluation. The Department
of Interior has neutralized an advocacy for onshore development
and has replaced multiple-use with land preservation.
2. Uncertainty. Once making a financial commitment to develop a
federal prospect, you are likely to experience indefinite
delays in obtaining a lease and a permit to drill. The delays
result in independents walking away from potential reserves.
3. Costly regulations. If you do obtain your lease, and
hopefully your drilling permit, the cost to drill and operate a
federal lease far exceeds a private lease transaction. Many
federal requirements duplicate state processes. Unnecessary
regulatory requirements kill plausible projects. More and more,
the government is deferring its costs by shifting burdens onto
industry.
How can we encourage independents to drill and produce from
federal lands?
The IPAA is proposing a six-point reform plan:
1. Increase public lands available for development. This reform
goal can be accomplished in a number of ways: restoring
multiple-use as a mandate for federal lands, requiring risk
management for decision making, restricting unilateral
withdrawal of lands by the executive branch and stopping
Secretarial policies which prohibit multiple-use of lands
already determined to be outside the scope of a wilderness
area. We support efforts to legally challenge the Secretary's
authority to create ``de facto'' wilderness areas (e.g.,
Marathon v. Babbitt).
2. Eliminate federal activities which duplicate state
activities. If the state and federal governments are performing
similar oil and gas regulatory activities, we support
consolidation of the two programs and having the single program
administered by the state. States, and its citizens, who
receive 50 percent of all royalty streams, must have a more
direct role in federal oil and gas regulatory programs.
3. Establish an advocate for onshore development. Oil and gas
responsibilities are spread throughout the U.S. government. For
programs not transferred to the state, we recommend studying
the benefits and drawbacks of consolidating all oil and gas
regulatory programs into a single agency, such as the Minerals
Management Service's Offshore Program.
4. Increase certainty. Set definitive time-frames, a date
certain, for issuing leases and development approvals. This is
a concept that appears to have the support of the President.
Additionally, similar to what was accomplished under the
Royalty Fairness Law for royalty appeals, have the IBLA decide
oil and gas BLM appeals within a date certain.
5. Reduce costly regulatory burdens. Implement recommendations
to streamline regulatory processes like issuing drilling
permits. Prevent the shift of regulatory costs to oil and gas
producers who already pay rents, royalties, and bonuses
totaling more than approximately $650 million a year for
onshore properties. There are a number of ways to proceed with
cost recovery: 1) give the Secretary clearer authority to
offset environmental and other related costs against royalty
payments; 2) clarify that cost recovery is not appropriate for
oil and gas activities due to the rents, royalties and bonuses;
or, 3) dedicate a portion of the revenue from oil and gas
royalty streams going to the Reclamation Fund (approxi-
mately $350 million per year) to cover the government's costs
to administer these programs. This reallocation of proceeds
would save the states millions of dollars by eliminating the
need for states to pay a quarter of the government's costs.
6. Implement incentive programs. Such programs are critical for
encouraging development and/or sustaining production from
marginal wells. Examples of such programs include continuation
of the royalty enhancement program for stripper oil wells,
royalty incentives for marginal gas wells and investment
credits for frontier areas. An incentive program could also be
created for abandoned well sites.
This is a very aggressive reform program. Many of these
initiatives may have to be accomplished via a legislative
vehicle. The IPAA stands ready to work with the Committee in
developing a comprehensive blueprint for reform.
I will now expand further on three of the six reform
initiatives:
1. Consolidating federal and state regulatory activities.
Even though this project seems to be slow moving, IPAA, for
the record, continues to support state transfer to the fullest
extent possible if significant cost savings can be realized for
both the government and industry. We need to begin to quantify
potential cost savings. If this type of reform is able to save
real dollars, we believe a legislative effort will be
necessary.
This legislative initiative may absolutely be necessary if
the BLM is successful in implementing a program to recover its
costs. If we are going to pay for the cost of the government to
do business, we want the entity who is most cost-effective to
provide those services. If given unencumbered authority, it
appears that the states can perform federal oil and gas
regulatory activities at a fraction of the cost. Lower
government costs equate to lower cost recovery which reduces
the impact on producers.
2. Public land access and the Lewis and Clark Forest.
There are many recent examples, which demonstrate that
multiple-use has been replaced with land preservation (e.g.
Escalante National Monument, re-inventorying Wilderness Study
Areas and not allowing development of lands determined to be
outside the scope of wilderness study areas). I want to discuss
another example of land preservation right in my own backyard--
the draft EIS prepared by the Forest Service for the Lewis and
Clark Forest.
The Rocky Mountain Division of the Forest is in the over-
thrust belt and has the potential to contain as much as 2.5 to
11.1 trillion cubic feet of gas, as estimated by the Forest
Service. Less conservative estimates reveal that approximately
83 trillion cubic feet of gas could be remaining in the over-
thrust belt largely in Montana, as estimated by the Geological
Survey of Canada. Governor Racicot estimates that gas from this
area could heat 369,000 residences in Montana for a period of
60 to 275 years. The Montana Thrust Belt is rated third in the
entire country for conventional gas reserves and second for
deep gas reserves. Unfortunately, the Forest Service has turned
its back on this world class gas reserve to favor the desires
of those who prefer to place public lands off limits for
multiple-use.
When the Forest Service issued its draft EIS August 9,
1996, it is our conclusion that its preferred alternative
essentially eliminates oil and gas development in the Rocky
Mountain Division. These reserves will be abandoned for a
minimum of 10 to 15 years, if not indefinitely. The draft EIS
analyzes 1,862,453 acres, of which 610,634 acres are legally
unavailable due to their classification as wilderness or
wilderness study areas. This leaves 1,230,612 acres subject to
review for oil and gas leasing. The Forest Service's preferred
alternative makes 60 percent of this area either
administratively unavailable for leasing or unavailable for
surface occupancy, while the remaining 40 percent is subject to
severely restrictive stipulations. In practical terms, the
preferred alternative allows for oil and gas leasing on an
extremely limited area containing high potential for
discovery--one mile corridors along existing roads in certain
basins and a one mile, no surface occupancy strip along the
eastern boundary of the Rocky Mountain Division of the Forest.
The preferred alternative does not provide a meaningful
opportunity to explore for and produce oil and gas from the
Lewis and Clark Forest. This is extremely disappointing. The
Forest Service's own analysis of an unconstrained development
scenario projected that only 30 wells would be drilled,
impacting only 300 acres if leasing were allowed throughout the
entire Forest. Yet, with an impact of less than a quarter of
one percent on the entire forest, the Forest Service is
promoting land preservation by requiring no surface occupancy
or other very restrictive surface use conditions.
I'd like to point out some flaws in the analysis which
seems to falsely support their conclusions. One of the most
important flaws is the insignificance given to the socio-
economic impacts of oil and gas development. For education
alone, Governor Racicot has highlighted this fact by pointing
out that the Forest Service's preference will cost the state $2
to $7 million per year in lost revenue.
The Forest Service claims that it did evaluate the
biological, physical, social, and economic impacts of oil and
gas leasing. They claim that the authorized officer weighed
each of these effects when arriving at a decision as to which
lands should be made available or offered for lease. We believe
that the Forest Service did not equally weigh the socio-
economic impacts against alleged environmental impacts. It
appears that much more weight was given to biological and
physical impacts of oil and gas leasing.
The Forest Service assumes that mineral resource
development is in indirect conflict with other resources and
that these conflicts cannot be mitigated. This view results in
the authorized officer giving a preference to land preservation
over multiple use. The Forest Service ignores a number of tools
the government has available to protect resources during the
leasing and permitting phases of oil and gas development. In
fact, in many cases, mitigation measures related to oil and gas
resources can improve other resources, such as wildlife
habitat.
Additionally, we believe the Forest Service failed to take
into account the many technical advances which allow drilling
to be conducted in sensitive areas with minimal impact to the
environment. The Forest Service acknowledges that it assumed
the ``basics'' when it comes to oil and gas exploration and the
use of new technologies was not considered in its analysis.
Sound science and the advancements in technology allow for the
effective management of all resources in the Rocky Mountain
Region.
The Forest Service ignores its own Minerals Program Policy
(revised August 8, 1995) which states, ``. . . the national
forests and grasslands have an essential role in contributing
to an adequate and stable supply of mineral and energy
resources.'' One of the policy objectives is to, ``Maintain
opportunities to access mineral and energy resources that are
important to sustain viable rural economies and to contribute
to the national defense and economic growth.'' With regard to
the Lewis and Clark Forest, the Forest Service readily admits
that, ``. . . trade balance and National security is beyond the
scope of this analysis.'' This is very unfortunate. As I stated
early, the future of domestic production is dependent on the
development of potential vast oil and gas reserves which lie
beneath federal land.
We agree with Governor Racicot who stated in a letter dated
December 12, 1996, to Gloria E. Flora; Supervisor of the Lewis
and Clark National Forest, that with regard to the Rocky
Mountain Front, ``. . . resource protection and leasing for oil
and gas potential can occur in a more balanced manner.'' He
goes on to urge the Lewis and Clark Forest to reconsider
adoption of the preferred alternative in favor of an
alternative that provides additional opportunity for leasing
within the Rocky Mountain Division, consider the phased nature
of the oil and gas development process and the ability of the
Forest to control individual activities and location, and
develop creative stipulations and mitigation measures to
accomplish resource protection.
We hope the Forest Service is seriously considering the
views of the Governor and his constituency--the citizens of
Montana. The Governor's view should outweigh the hundreds of
letters submitted via an environmental lobbying campaign.
Through the use of alerts and form letters, environmentalists
were able to have ``concerned citizens,'' from across the
country, despite the unfamiliarity with the Lewis and Clark
Forest, send in letters of opposition to multiple-use. If the
views of the state are ignored, it further exemplifies the need
to return more power to the state when it comes to deciding how
best to manage the public resources contained within their
boundaries.
Madam Chairwoman, time is running out. Our latest report
from the Forest Service is that they are planning to issue a
record of decision sometime in the fall. I'm not sure there is
much we can do. However, if the Committee can intervene to help
convince the Forest Service to consider other alternatives
before making a final decision, this would be helpful. At a
minimum, before making a final decision, the Forest Service
should allow seismic testing to be conducted in the area. There
are a number of techniques, other than just heliport, that can
provide for 3D seismic with minimal surface disturbance. In
this way, we can delineate areas with the highest potential for
development and conduct a more accurate analysis of impacts.
In the long-term, we believe that the only permanent
solution for giving mineral development a fair and reasonable
chance on public lands, is to reconfirm a multiple-use mandate
and require the federal government to equally weigh the
importance of socio-economic impacts and the views of state
officials in its land use decision making process. This
legislative mandate could require the federal government not to
discard mineral development before conducting a risk assessment
and at-
tempting to mitigate conflicts. Environmental impacts must be
on a level playing field with the impacts on humans, the
economy, and the state in general.
3. Certainty for the leasing and permitting processes.
On behalf of IPAA, I attended the presidential signing of
the Royalty Fairness Law last August in Jackson Hole, Wyoming.
Now that I have mentioned Royalty Fairness, on behalf of IPAA,
I want to thank the Chairwoman and the entire Committee and
staff for passage of this important reform initiative.
Hopefully, we can accomplish similar reform of the BLM's and
Forest Service's oil and gas regulatory practices.
Prior to signing the bill, President Clinton met with
representatives from the oil and gas industry to discuss a
number of issues. The issue I personally raised with the
President was the excessive amount of time it takes to obtain a
permit and the uncertainty associated with doing business on
public lands. I suggested to the president that the government
should, within a date certain, notify a producer if it is going
to issue a lease or a drilling permit. If the government's
answer is no, set forth a timetable for determining how the
alleged conflicts can be mitigated.
The President responded to these comments by stating the
following: 1) He was frustrated with the fact that the drilling
permit process had not been streamlined. He has asked the
department to accomplish this goal; and, 2) He can understand
the need for certainty when attempting to develop public lands.
It appeared that he supported the idea of establishing specific
time-frames for the BLM's oil and gas processes.
The President's remarks were very encouraging. We would
like to work with the committee and the administration in
developing bipartisan legislation to accomplish this type of
reform. There a number of details that would have to be worked
out, but, certainly, we should be able to develop a legislative
package that results in a more efficient leasing, permitting,
and appeals process. By adding certainty, independents will be
more likely to commit capital to public land projects, as this
capital will not be tied-up indefinitely in a never-ending
decision making process.
Conclusion
Again, I want to thank you Madam Chairwoman and the entire
committee for coming out West to listen to the challenges we
face on public lands and offer assistance in changing the
current operating environment. We can no longer afford to
ignore needed mineral revenues lying dormant beneath public
lands. Through reform of the federal oil and gas regulatory
program, we can begin to bring these revenues to the surface
for use by the nation, states, and most importantly, those
educating the children of the West. We stand ready to help
develop a blueprint for reform. With your leadership and
through hearings like the one today, we can make a difference
on public lands. Thank you.
------
Answers to questions from Chairman of the Committee by Ms. Gina Guy
U.S. Department of the Interior
Office of the Solicitor
Rocky Mountain Region,
755 Parfet Street, Suite 151,
Lakewood, Colorado 80215
July 16, 1997
The Honorable Barbara Cubin,
Chair, Subcommittee on Energy and Mineral Resources,
Resources Committee,
U.S. House of Representatives,
Washington, DC 20515
Re: Proposed Rulemaking; Bureau of Land Management; Cost Recovery for
Mineral Document Processing
Dear Mrs. Cubin: At your Subcommittee's Field Hearing in Casper on
June 30, you asked about the relationship between the cost recovery
opinion and the state's one-fourth share of administrative costs. I
responded that it was my understanding that such costs would be
addressed in the proposed rulemaking.
I believe I misunderstood your question. The cost recovery
rulemaking will apply to amounts applicants reimburse BLM for BLM's
processing of documents in order for the applicant to receive a benefit
or privilege not available to the public at large. What you may have
been referring to is the allocation of administrative costs against the
royalties payable to states pursuant to the Mineral Leasing Act, as
amended, 30 U.8.C. Sec. 191(b)(1). The 1993 amendment to that section
(Public Law 103-66) removed the provision that payments to states would
not be reduced by administrative costs incurred in royalty collection.
This statutory cost-sharing program with the states benefiting from the
federal on-shore mineral leasing program was discussed in the cost
recovery M-opinion:
Receipts retained by the United States under this section are
paid into the Treasury and do not directly fund program
operations. This section provides no new source of recovery for
administrative costs and merely ensures that states share the
burden of such costs for a program from which they benefit.
This section has no bearing on fees charged to recoup the costs
of agency services.
M-36987, at 24 n.27 (Dec. 5, 1996). Therefore, the rulemaking will
not address the issue of revenue and costs shared with the states.
I apologize for any confusion my remarks might have caused, and
request that this clarification be added to the record of the hearing.
Sincerely,
Gina Guy,
Regional Solicitor
______
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