SPEAKERS CONTENTS INSERTS
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70–888 DTP
2001
A NATIONAL ENERGY POLICY
OVERSIGHT HEARINGS
before the
COMMITTEE ON RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
March 7, 2001, The Role of Public Lands in the
Development of a Self–Reliant Energy Policy; and
June 6, 2001, The National Energy Policy
Serial No. 107-1
Printed for the use of the Committee on Resources
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Available via the World Wide Web: http://www.access.gpo.gov/congress/house
or
Committee address: http://resourcescommittee.house.gov
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Mail: Stop SSOP, Washington, DC 20402–0001
COMMITTEE ON RESOURCES
JAMES V. HANSEN, Utah, Chairman
NICK J. RAHALL II, West Virginia, Ranking Democrat Member
Don Young, Alaska,
Vice Chairman
W.J. ''Billy'' Tauzin, Louisiana
Jim Saxton, New Jersey
Elton Gallegly, California
John J. Duncan, Jr., Tennessee
Joel Hefley, Colorado
Wayne T. Gilchrest, Maryland
Ken Calvert, California
Scott McInnis, Colorado
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Richard W. Pombo, California
Barbara Cubin, Wyoming
George Radanovich, California
Walter B. Jones, Jr., North Carolina
Mac Thornberry, Texas
Chris Cannon, Utah
John E. Peterson, Pennsylvania
Bob Schaffer, Colorado
Jim Gibbons, Nevada
Mark E. Souder, Indiana
Greg Walden, Oregon
Michael K. Simpson, Idaho
Thomas G. Tancredo, Colorado
C.L. ''Butch'' Otter, Idaho
Tom Osborne, Nebraska
Jeff Flake, Arizona
Dennis R. Rehberg, Montana
VACANCY
George Miller, California
Edward J. Markey, Massachusetts
Dale E. Kildee, Michigan
Peter A. DeFazio, Oregon
Eni F.H. Faleomavaega, American Samoa
Neil Abercrombie, Hawaii
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Solomon P. Ortiz, Texas
Frank Pallone, Jr., New Jersey
Calvin M. Dooley, California
Robert A. Underwood, Guam
Adam Smith, Washington
Donna M. Christensen, Virgin Islands
Ron Kind, Wisconsin
Jay Inslee, Washington
Grace F. Napolitano, California
Tom Udall, New Mexico
Mark Udall, Colorado
Rush D. Holt, New Jersey
James P. McGovern, Massachusetts
Anibal Acevedo-Vila, Puerto Rico
Hilda L. Solis, California
Brad Carson, Oklahoma
Betty McCollum, Minnesota
Allen D. Freemyer, Chief of Staff
Lisa Pittman, Chief Counsel
Michael S. Twinchek, Chief Clerk
James H. Zoia, Democrat Staff Director
Jeff Petrich, Democrat Chief Counsel
C O N T E N T S
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Hearing held on March 7, 2001
Statement of Members:
Calvert, Hon. Ken, a Representative in Congress from the State of California, Prepared statement of
Cubin, Hon. Barbara, a Representative in Congress from the State of Wyoming, Prepared statement of
Gallegly, Hon. Elton, a Representative in Congress from the State of California, Prepared statement of
Hansen, Hon. James V., a Representative in Congress from the State of Utah
Prepared statement of
McGovern, Hon. James P., a Representative in Congress from the State of Massachusetts, Prepared statement of
Pallone, Hon. Frank, Jr., a Representative in Congress from the State of New Jersey, Prepared statement of
Radanovich, Hon. George, a Representative in Congress from the State of California, Prepared statement of
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Rahall, Hon. Nick J., II, a Representative in Congress from the State of West Virginia
Prepared statement of
Rehberg, Hon. Dennis R., a Representative in Congress from the State of Montana, Prepared statement of
Udall, Hon. Mark, a Representative in Congress from the State of Colorado, Prepared statement of
Statement of Witnesses:
Bowles, Jim L., President, Americas Division, Phillips Petroleum Company, on behalf of the American Petroleum Institute
Prepared statement of
Geringer, Hon. Jim, Governor, State of Wyoming
Prepared statement of
Hocker, Christopher, President, National Hydropower Association
Prepared statement of
Response to questions submitted for the record
Hogan, Leland J., Rancher, Stockton, Utah
Prepared statement of
Response to questions submitted for the record
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James, Leslie, Executive Director, Colorado River Energy Distributors Association
Prepared statement of
Judd, Robert L., Jr., Executive Director, USA Biomass Power Producers Alliance
Prepared statement of
Knowles, Hon. Tony, Governor, State of Alaska
Prepared statement of
Martz, Hon. Judy, Governor, State of Montana
Prepared statement of
O'Connor, Terry Vice President, External Affairs, Arch Coal, Inc., on behalf of the National Mining Association
Prepared statement of
Response to questions submitted for the record
Stanley, Neal A., President, Independent Petroleum Association of Mountain States
Prepared statement of
Additional materials supplied:
Alberswerth, David, Director, The Wilderness Society, Letter submitted for the record by Hon. Donna Christensen
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Mason, Tad, Vice President, TSS Consultants, Letter submitted for the record by Hon. Scott McInnis
C O N T E N T S
Hearing held on June 6, 2001
Statement of Members:
Flake, Hon. Jeff, a Representative in Congress from the State of Arizona, Prepared statement of
Hansen, Hon. James V., a Representative in Congress from the State of Utah
Prepared statement of
Kind, Hon. Ron, a Representative in Congress from the State of Wisconsin, Prepared statement of
McInnis, Hon. Scott, a Representative in Congress from the State of Colorado, Prepared statement of
Rahall, Hon. Nick J., II, a Representative in Congress from the State of West Virginia, Prepared statement of
Solis, Hon. Hilda L., a Representative in Congress from the State of California, Prepared statement of
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Udall, Hon. Mark, a Representative in Congress from the State of Colorado, Prepared statement of
Udall, Hon. Tom, a Representative in Congress from the State of New Mexico, Prepared statement of
Statement of Witnesses:
Norton, Hon. Gale A., Secretary, U.S. Department of the Interior
Prepared statement of
Response to questions submitted for the record
OVERSIGHT HEARING ON THE ROLE OF PUBLIC LANDS IN THE
DEVELOPMENT OF A SELF-RELIANT ENERGY POLICY
Wednesday, March 7, 2001
House of Representatives,
Committee on Resources,
Washington, DC
The Committee met, pursuant to notice, at 10:02 a.m., in Room 1324, Longworth House Office Building, Hon. James V. Hansen (Chairman of the Committee) presiding.
STATEMENT OF THE HON. JAMES V. HANSEN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF UTAH
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The CHAIRMAN. The Committee will come to order. We appreciate your presence. This very important meeting we are having today will be regarding energy policy. Between this Committee and the Commerce Committee, we hope to be coming up with a policy that will determine the energy policy of America for the next few years.
Around the country this winter, Americans have opened their utility bills with dismay to see their costs double and sometimes triple from last year. Many Americans have written to ask, ''Who fell asleep at the switch? How can there be an energy shortage in one of the most prosperous and technologically-advanced countries in the world?''
Our current situation is the direct result of the lack of a coherent national energy policy and policies that have restricted the development of our domestic energy resources on public lands, thereby increasing reliance on foreign energy. To keep our economy prosperous and reinforce our national security, we must have reliable energy supplies at a reasonable cost. We have called this congressional hearing to explore how we may structure natural resource policy to help achieve a sustainable and self-reliant energy policy.
Over the last 150 years, the Federal Government retained land to hold in trust for the people. The principle guiding public land policy was multiple use and sustainable yield. Public land was a resource to be used in maintaining our national health, environment, and wealth.
Some time ago, we lost that vision and today we are paying the price. Currently, while national energy costs skyrocket, billions of barrels of oil and natural gas are locked beneath public lands, including the Arctic National Wildlife Refuge. Using public lands responsibly includes environmentally sensitive resource extraction. These two goals are not mutually exclusive. We have produced more than 13 billion barrels of oil since 1977 from Alaska's North Slope in a manner that has allowed wildlife to thrive and the caribou herds to increase five-fold.
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Clean oil remains untouchable in many parts of the United States and hydroelectric generation has been reduced. In one case, generating capacity at a Federal hydropower facility was reduced by one-third to comply with environmental regulations. That is enough energy to power 400,000 homes.
I recall the debate in Utah several decades ago when we first set out to develop resources on the upper Colorado River. After extensive study, the Bureau of Reclamation ultimately identified two sites that were most feasible— Echo Park Canyon, in Dinosaur National Monument, and Glen Canyon.
Once that was done, we went through months and months of additional study and debate. Strong feelings were expressed on all sides. Both sites proposed were beautiful, rugged, and largely unexplored, and yet both sites were unique in that they shared the geological characteristic that made it possible to build one of the largest man-made structures at the time, to harness one of the wildest and untamed rivers in the hemisphere. After a long period of debate and negotiation, Congress ultimately decided that Glen Canyon was the best place to dam the upper Colorado River.
We used to hear former President Clinton say from time to time, ''you can't have mines everywhere,'' and I agree with that. You can only have mines where the minerals and resources are. Likewise with a dam, you can't have dams everywhere. You build dams on sites which are capable of accomplishing the purpose for which they are built.
In this instance, Glen Canyon was designed for three purposes: water storage, flood control, and to generate electricity for the growing population in the Southwest. You know, it has got another one now; it is called recreation. In fact, more people go there for more than one day than probably any other place in our whole park system.
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Once the site was proposed, opponents of the project cried out and said, ''This dam is too big. We will never be able to use all that power. You will upset the laws of supply and demand,'' et cetera, et cetera. Besides, why do we need hydropower when we already have all of that great coal in the Kaparowits plateau?
Thirty years later, when former President Clinton designated the Grand Staircase-Escalante National Monument, we were told that the Kaparowits coal would never be used, that markets would never be able to use all that coal, and that there was a glut of cheap power that would make the development of the coal resource uneconomical.
My, how times have changed. Let's not repeat the short-sightedness of the past. We have been given a sacred trust by the people to develop our natural resources wisely and maintain a healthy environment. It is time to return to the original concept of multiple use of access to our public grounds.
I will look forward to hearing from our witnesses.
[The prepared statement of Chairman Hansen follows:]
Statement of The Honorable James V. Hansen, Chairman, Committee on Resources
Around the country this winter, Americans have opened their utility bills with dismay to see their costs double and sometimes triple from last year. Many Americans have Written to ask, ''Who fell asleep at the switch? How can there be an energy shortage in one of the most prosperous and technologically advanced countries in the world?''
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Our current situation is the direct result of (1) lack of a coherent national energy policy over the past eight years, and (2) policies that have restricted development of our domestic energy resources on public lands, thereby increasing reliance on foreign energy. To keep our economy prosperous and reinforce our national security, we must have reliable energy supplies at a reasonable cost. We have called this Congressional hearing to explore how we may structure natural resource policy to help achieve a sustainable and self-reliant energy policy.
Over the last 150 years, the Federal government retained land to hold in trust for the public. The principle guiding public land policy was multiple use and sustainable yield. Public land was a resource to be used in maintaining our national health, environment and wealth.
Some time ago, we lost that vision and today we are paying the price. Currently, while national energy costs skyrocket, billions of barrels of oil and natural gas are locked beneath public lands including the Arctic National Wildlife Refuge. Using public lands responsibly includes environmentally sensitive resource extraction. These two goals are not mutually exclusive. We have produced more than 13 billion barrels of oil since 1977 from Alaska's North Slope in a manner that has allowed wildlife to thrive and the caribou herds to increase 5-fold.
Clean coal remains untouchable in many parts of the United States and hydroelectric generation has been reduced. In one case, generating capacity at a Federal hydropower facility has been reduced by 1/3 to comply with environmental regulations. This is enough energy to power 400,000 homes.
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We have been given a sacred trust by the people to develop our natural resources wisely and maintain a healthy environment. It's time to return to the original concept of multiple use on our public lands.
I look forward to hearing from our witnesses.
I now recognize the distinguished gentleman from West Virginia, the ranking Democrat on the Committee.
STATEMENT OF THE HON. NICK J. RAHALL, II, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WEST VIRGINIA
Mr. RAHALL. Thank you very much, Mr. Chairman. I join with you in welcoming our distinguished Governors of Alaska, Montana, and Wyoming to the Resources Committee this morning for this very important hearing on the role of public lands in the development of a national energy policy.
I approach this issue perhaps slightly differently, perhaps a lot differently than Chairman Hansen and our distinguished panel that is going to be testifying this morning. That is certainly no surprise to the Chairman. We have worked together on this Committee for a number of years, or decades perhaps.
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Certainly, Federal lands have a role to play in producing energy for our Nation. For instance, almost 23 million acres of these lands are currently subject to Federal onshore oil and gas leases. Now, this happens to be greater than the size of my home State of West Virginia. It is the size of Indiana and just slightly less than the size of States like Ohio, Kentucky, Tennessee, and Virginia. Now, when you toss in the geothermal and coal leases, well, you start to get to the size of these States.
Acreage aside, energy production from Federal lands, both onshore and offshore, is making a sizable contribution to our energy needs. Oil production from Federal areas account for 27 percent of the U.S. total, natural gas 38 percent of the total, and coal 23 percent of the total, to the pleasure, I am sure, of the governors from the Powder River Basin.
And here is something I am sure that certain people do not want you to know, but it is worth stating today, and I am going to repeat it. Natural gas and coal production from Federal leases was at an all-time high during the Clinton administration, surpassing the amount produced during the Reagan years, let alone Bush the First. And let me repeat that. Natural gas and coal production from Federal leases was at an all-time high during the Clinton administration, surpassing the amount produced during the Reagan years, let alone Bush the First.
With this noted, I become somewhat puzzled when I hear talk about opening more Federal lands to energy development. Now, which areas are we talking about here? The big production comes from offshore oil. Yet, exploration for new fields is constrained by drilling moratorium bans supported by the President during the campaign, as well as the governors of those coastal States. And when it comes to onshore, certainly a viable energy policy should not include opening Federal park and wilderness areas to new oil and gas drilling.
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So does it all boil down to little old Alaska, opening up a national wildlife refuge so that 10 to 15 years in the future oil may begin flowing to the lower 49 States, if it is not first exported to Japan, an undetermined amount of oil at that? Does that represent the hope and the salvation of our Nation's energy security? That, in my view, is quite a roll of the dice approach to addressing our energy needs.
Certainly, Alaska has a role to play. An issue I intend to examine is whether we have fully explored the potential for the 23-million-acre National Petroleum Reserve in Alaska to not only contribute to our energy needs, but to Alaska's thirst for shelling out a $2,000-per-year check out of its $27 billion North Slope oil kitty to every man, woman, child, and infant residing in the State, a State, I might add, with no income tax and no statewide sales tax. I notice there is a little rumbling in the audience. Everybody is trying to find out where to sign up for this check.
But rather than becoming bogged down in controversy over the Arctic Refuge, I also think it would be constructive if we have more dialogue over the potential of constructing the North Slope gas pipeline already authorized by Federal law. We ought to examine more fully the contribution that that can make in providing a more immediate return in meeting America's energy needs.
With that, I again welcome our Governors this morning and look forward to your testimony.
[The prepared statement of Mr. Rahall follows:]
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Statement of The Honorable Nick Rahall, a Representative in Congress from the State of West Virginia
Thank you, Mr. Chairman. I would like to welcome the distinguished governors of Alaska, Montana and Wyoming to the Resources Committee for today's hearing on the role of public lands in the development of a national energy policy.
I approach this topic from perhaps a different perspective than does Chairman Hansen and the governors who are with us this morning.
Certainly, Federal lands have a role to play in producing energy for our Nation. For instance, almost 23 million acres of these lands are currently subject to Federal onshore oil and gas leases.
That is greater than the size of my home State of West Virginia. It is the size of Indiana, and just slightly less than the size of States like Ohio, Kentucky, Tennessee and Virginia. Toss in Federal geothermal and coal leases, and you start to get to the size of those States.
Acreage aside, energy production from Federal lands, both onshore and offshore, is making a sizable contribution to our energy needs. Oil production from Federal areas account for 27 percent of the U.S. total. Natural gas, 38 percent of the total. And coal, 33 percent of the total...to the pleasure, I am sure, of the Governors from the Power River Basin.
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And here is something I am sure certain people do not want you to know: Natural gas and coal production from Federal leases was at an all time high during the Clinton Administration, surpassing the amount produced during the Reagan years, let alone Bush the First.
With this noted, I become somewhat puzzled when I hear talk about opening more Federal lands to energy development.
Which areas are we talking about? The big production comes from offshore. Yet, exploration for new fields is constrained by drilling moratoriums; bans which President Bush supported during his campaign, as well as by the governors of the coastal States. And when it comes to onshore, certainly a viable energy policy should not include opening Federal park and wilderness areas to new oil and gas drilling.
So does it all boil down to little 'ole Alaska, to opening up a national wildlife refuge so that 10 to 15 years in the future oil may begin flowing to the lower 48 unless it is first exported to Japan? An undetermined amount of oil at that. Does that represent the hope and salvation of the Nation's energy security?
That, in my view, is a roll of the dice approach to addressing our energy needs. Certainly, Alaska has a role to play. An issue I intend to examine is whether we have fully explored the potential of the 23 million acre National Petroleum Reserve-Alaska...to not only contribute to our energy needs...but to Alaska's thirst for shelling out a $2,000 per-year check out of its $27 billion North Slope oil kitty to every man, woman, child and infant residing in the State. A State, I might add, with no income tax and no statewide sales tax.
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I notice the audience is getting restless, governor, they want to know where to sign up.
Rather than becoming bogged down in controversy over the Arctic Refuge, I also think it would be constructive if we have more dialogue over the potential constructing the North Slope gas pipeline—already authorized by Federal law can make in providing for a more immediate return in meeting America's energy needs.
With that, I welcome our witnesses and look forward to hearing the testimony. Thank you.
The CHAIRMAN. I thank the gentleman from West Virginia.
As you know, the policy of the Committee is if you are present when the gavel falls, you will be recognized by seniority and after that in the order in which you arrived. But in the interests of time, we are going to go straight to our three distinguished Governors. We are very honored to have you with us at this particular time.
We understand that Governor Knowles, of Alaska, has an airplane to catch, and so we will go to you first, Governor, if that is all right.
Governor Knowles, we will turn to you, sir.
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STATEMENT OF HON. TONY KNOWLES, GOVERNOR, STATE OF ALASKA
Governor KNOWLES. For the record, I am Tony Knowles, the Governor of Alaska, and I welcome this opportunity to testify on the vital issue of developing a self-reliant national energy policy and the central role that America's public lands play in that effort. I applaud you and the national administration for focusing on this issue which is so important to America's jobs and families.
I address you today in two capacities, first as Governor of a State which serves as America's energy storehouse. Since completion of the trans-Alaska oil pipeline nearly 25 years ago, Alaska has been supplying a significant portion of this nation's domestic oil production. And now, with development of our natural gas, North America's largest proven reserve, we will continue to help meet America's energy needs.
Second, I represent my fellow governors of oil- and gas-producing States as Chairman of the Interstate Oil and Gas Compact Commission (IOGCC). These 37 States produce more than 99 percent of the oil and natural gas produced onshore in the United States, and are committed to the conservation and maximum utilization of America's oil and gas reserves.
My message today is simple. To continue America's prosperity which I believe is threatened by a looming energy crisis, we must meet our nation's energy needs through a combination of conservation and increased supply. The key to increased energy supply is the environmentally-responsible development of this nation's enormous energy resources, most of which lie beneath our public lands. Our access to those lands obligates us to accept the profound responsibility for enlightened stewardship. No longer can access to public lands be an excuse for environmental destruction.
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As this Committee knows well, this country is suffering from a combination of high energy prices and energy shortages. We need to look no further than the news video of senior citizens being pried from stopped elevators during California's rolling blackouts or subsequent plant closures and layoffs to know that.
New energy supplies will come from many sources, but our obligation for jobs and families of Americans is to look at home first. America's public lands hold the vast majority of those new energy resources. In my own State of 375 million acres, one-fifth of the land mass of the rest of America, we have no choice but to look to public lands, as they constitute 88 percent of our land mass.
Mr. Chairman, I submit that we need to look no further than the 49th State for a national model on how to find and produce energy resources on public lands, while protecting the wildlife and the environment. We in Alaska apply a simple standard to development issues, whether producing oil from a newly discovered reserve or harvesting America's best tasting wild organic salmon, and that standard is we do development right.
By that, I mean development must be based on three principles: sound science and technology, enlightened stewardship, and a thorough, open public process. Using that standard, we have in Alaska supplied up to a quarter of America's domestic oil production from the nation's two largest oil fields. We have done so while protecting the nation's most pristine environment inhabited by more caribou, grizzlies, bald eagles, and mosquitoes than the rest of the country combined.
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Nationally, the vast majority of our energy resources are on public lands. The U.S. Geological Survey estimated that 67 percent of the nation's undiscovered oil and 40 percent of its undiscovered natural gas resources lie beneath onshore public lands. And along our coastlines, only 2 percent of total Federal offshore acreage, including that in Alaska, has been leased for energy development. At the same time, the amount of public lands available for oil drilling has shrunk from 73 to 17 percent in the past 25 years.
The best promise for new natural gas development, which we know is the clean-burning fuel of the 21st century, is on the public lands in the Gulf of Mexico, the Rocky Mountains, and Alaska's Arctic Slope. As we seek to develop these energy resources on public lands, I believe those of us from Western public lands States have a special obligation to adhere to the ''doing it right'' standard, and we are doing exactly that in Alaska.
During my roughnecking days on the North Slope in the 1960's, a drill pad could be as big as 65 acres. Today, they are a tenth that size. In using new technology, up to 50 wells can be drilled from the same smaller pad and tap into oil identified by 3-D seismic technology into oil 20,000 feet deep and 5 miles away, under sensitive areas such as ice-choked ocean or sensitive wildlife habitat. That is like running a well through this Committee room floor to Ronald Reagan National Airport and we could determine which gate the drill bit would emerge from.
With this ''doing it right'' approach to development, we successfully convinced the Clinton administration to permit exploration and development in a portion of the 23-million-acre National Petroleum Reserve (NPRA), a promising Indiana-sized area to the west of Prudhoe Bay. We did so by imposing the strictest environmental constraints of any oil and gas lease in America or the world.
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These 79 conditions are specifically designed to protect caribou, polar bears, and birds particularly during sensitive periods of calving, migration, molting, denning, and hibernation. They were the result of a collaboration of world-class experts in science and engineering from all levels of government and industry. This is the only acceptable way to combine the needs for jobs and energy development with the protection of the land and wildlife we love.
To continue meeting this nation's energy needs, we urge the Congress to permit exploration in America's best prospect for a major oil and gas discovery in the Arctic National Wildlife Refuge (ANWR). Just a small portion of this South Carolina-sized refuge is believed to contain up to 16 billion barrels of oil, enough to produce 2 million barrels a day for at least 25 years, about a third of the current domestic production. In addition, it is believed to hold substantial new discoveries of natural gas.
Environmentally-responsible development in the Arctic Refuge would be good for America, producing thousands of jobs, lessening our dependence on imported oil, reducing prices at the pump, providing environmentally-friendly natural gas to produce our nation's electric supply, improving our nation's trade deficit, and a host of other reasons.
As enlightened stewards, we must and can take special precautions to protect caribou, musk ox, geese, polar bear, and other wildlife that inhabit the Arctic Refuge. As we did in the NPRA, we will work with the industry to mitigate impacts such as limited activity during the 6 to 8 weeks when the Porcupine caribou herd often uses the coastal plain for calving. We must be sensitive to the subsistence needs of Native people on both sides of the border whose culture, nutrition and economy are dependent on the area's healthy wildlife.
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To bring oil from ANWR and other North Slope development to American consumers, we are working with the Bush administration to reauthorize the right-of-way lease for the 800-mile trans-Alaska oil pipeline. The Federal right-of-way administered by the Bureau of Land Management expires in 2004, but the environmental review and renewal process is projected to take at least 2 years. I welcome this Committee's oversight and encouragement of that process.
Alaskans are working to continue as the nation's energy storehouse by delivering our enormous natural gas reserve to thirsty American markets. Alaska's North Slope has 35 trillion cubic feet of discovered natural gas, most of which is being reinjected to increase Prudhoe Bay oil production. Yet, geologists estimate we are sitting on perhaps triple what we have already discovered, more than 100 trillion cubic feet.
The most viable way to get that gas to market is through a 1,800-mile pipeline from Alaska's North Slope through Fairbanks and along the Alaska Highway into the North American gas distribution system. This route has already been approved by Congress in 1977 and international agreement. This development would be one of America's largest privately-funded construction projects, creating jobs and delivering environmentally-friendly energy for a generation or more. I am pleased that the nation's governors unanimously endorsed the Alaska Highway natural gas pipeline project at last month's National Governors' Association conference.
In closing, Mr. Chairman, let me note that conservation must be a cornerstone of America's energy policy. It is not purpose here today to describe this critical component in detail, but I note that conservation alone cannot address the challenge before us. We must increase our supply to stabilize prices and prevent shortages. America's energy security depends on access to public lands.
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With new technology and strengthening our resolve to protect the environment, we can go beyond the old approach of either development or the environment to the 21st century paradigm of recognizing the necessity and interdependence of both.
On behalf of the IOGCC, I recommend several steps to improve responsible access to our public lands: complete the inventory of oil and gas resources on public lands, as required in last year's Energy Policy Conservation Act; expedite processing of applications to drill and offers to lease; conduct extensive research on the technologies of extraction and alternative energy; repeal roadless plans and new roadless initiatives that should already be a part of comprehensive land use management plans; and streamline the National Environmental Protection Act process.
Mr. Chairman and Committee members, Alaska, my administration, and the IOGCC stand ready to assist you and our national administration in crafting a sensible national energy policy that provides greater access to public land for domestic oil production and natural gas, that encourages conservation and recognizes the important partnership with our private oil and gas industry to get the job done.
Thank you.
[The prepared statement of Governor Knowles follows:]
Statement of The Honorable Tony Knowles, Governor, State of Alaska
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Good morning, Chairman Hansen and distinguished members of the Committee. For the record, I am Tony Knowles, Governor of Alaska.
I welcome this opportunity to testify on the vital issue of developing a self-reliant national energy policy and the central role America's public lands play in that effort. I applaud you and the national administration for focusing on this issue so important to American jobs and families.
I address you today in two capacities: First, as governor of a state which serves as America's energy storehouse. Since completion of the trans-Alaska oil pipeline nearly 25 years ago, Alaska has been supplying a significant portion of this nation's domestic oil production. And now with development of our natural gas—North America's largest proven reserves—we'll continue to help meet America's energy needs.
Second, I represent my fellow governors of oil and gas producing states as chairman of the Interstate Oil and Gas Compact Commission. These 37 states produce more than 99 percent of the oil and natural gas produced on-shore in the United States and are committed to the conservation and maximum utilization of American oil and gas resources.
This time of year as the snow continues to fall across most of my state, I have a personal policy to try to stay within about a 10-degree temperature variation from the bulk of my constituents. I was looking forward to a real Alaska-style snowstorm, but am honored nonetheless to join you here in our nation's temperate capital.
My message today is simple: to continue America's prosperity which I believe is threatened by a looming energy crisis, we must meet our nation's energy needs through a combination of conservation and increased supply.
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The key to increased energy supply is the environmentally responsible development of this nation's enormous energy resources, most of which lie beneath our public lands. Our access to those lands carries with it the responsibility for sound stewardship. That access can never be considered a green light for the irresponsible destruction of those lands.
As this Committee knows well, this country is suffering from a combination of high energy prices and energy shortages. We need look no further than news video of senior citizens being pried from stopped elevators during California's rolling black-outs to know that.
New energy supplies will come from many sources, but our obligation for the jobs and families of Americans is to look at home first. America's public lands hold the vast majority of those new energy resources.
In my own state of 375 million acres, public lands constitute 88 percent of our land mass, with 40 percent of our state in Federal forests, wildlife refuges and national parks. Development of the resources on public lands in Alaska is a critical part of our economic future.
Mr. Chairman, I submit we need look no further than the 49th state for a national model on how to find and produce energy resources on public lands, while protecting the wildlife and environment.
We in Alaska apply a simple standard to development issues, whether producing oil from a newly discovered reserve or harvesting America's best-tasting, organic wild salmon. That standard is—we do development right.
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By that, I mean development must be based on three principles: sound science, good stewardship and a thorough, open public process.
Using that standard, we in Alaska have supplied up to a quarter of America's domestic oil production from the nation's largest oil fields. We've done so while protecting the nation's most pristine environment inhabited by more caribou, grizzly bears, bald eagles and mosquitoes than the rest of the country combined.
Nationally, the vast majority of our energy resources are on public lands. The U.S. Geological Survey estimates that 67 percent of the nation's undiscovered oil and 40 percent of its undiscovered natural gas resources lie beneath on-shore public lands. And along our coastlines, only 2 percent of total Federal offshore acreage, including that in Alaska, has been leased for energy development.
At the same time, the amount of public lands available for oil drilling has shrunk from 73 to 17 percent in the past 25 years. It's worse for natural gas development, which we know is the clean-burning fuel of the 21st century.
A recent report by the National Petroleum Council showed that the most promising regions for future gas production in the Rocky Mountains and Gulf of Mexico are either closed to exploration or have significant access restrictions. And even if we can obtain access to these resources, public lands must be crossed by pipelines or other methods to deliver the energy to homes, power plants and factories.
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As we seek to develop these energy resources on public lands, I believe those of us from western public lands states have a special obligation to adhere to the ''doing it right'' standard.
We're doing exactly that in Alaska. During my rough-necking days on the North Slope in the 1960s, a drill pad could be as big as 65 acres. Today, they're a tenth that size.
And using new technology, up to 50 wells can be drilled from the same, smaller pad and tap into oil identified by 3–D seismic technology into oil 20,000 feet deep and five miles away, under sensitive areas, such as an ice-choked ocean or sensitive wildlife habitat. That's like running a well through this Committee room floor to Ronald Reagan National Airport and we could determine which gate the drill bit would emerge from.
With this ''doing it right'' approach to development, we successfully convinced the Clinton administration to permit exploration and development in a portion of the 4-million-acre National Petroleum Reserve, a promising Indiana-sized area to the west of Prudhoe Bay.
We did so by imposing the strictest environmental constraints of any oil and gas lease in America. These 79 conditions are specifically designed to protect caribou, polar bears and birds, particularly during sensitive periods of calving, migration, molting, denning and hibernation.
They were the result of collaboration of world-class experts in science and engineering from all levels of government and industry. This is the only acceptable way to combine the need for jobs and energy development with protection of the land and wildlife we love.
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To continue meeting this nation's energy needs, we urge the Congress to permit exploration in America's best prospect for a major oil and gas discovery—in the Arctic National Wildlife Refuge. Just a small portion of this South Carolina-sized refuge is believed to contain up to 16 billion barrels of oil, enough to produce 2 million barrels a day for at least 25 years, about a third of the current daily domestic production. In addition it is believed to hold substantial new discoveries of natural gas.
Environmentally responsible development in the Arctic Refuge would be good for America—producing thousands of jobs, lessening our dependence on imported oil, reducing prices at the pump, providing environmental friendly natural gas to produce our nation's electrical supply, improving our nation's trade deficit, and a host of other reasons.
I believe we must, and can, take special precautions to protect the caribou, musk ox, geese, polar bear and other wildlife that inhabit the Arctic Refuge. As we did in the NPRA, we will work with the industry to mitigate impacts, such as limiting activity during the six to eight weeks when the Porcupine caribou herd often uses the coastal plain for calving.
We must be sensitive to the subsistence needs of Native people on both sides of the border whose culture, nutrition, and economy are dependent on the area's healthy wildlife.
To bring oil from ANWR and other North Slope development to American consumers, we are working with the Bush administration to reauthorize the right of way lease for the 800-mile trans-Alaska oil pipeline.
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The Federal right of way administered by the Bureau of Land Management expires in 2004, but the environmental review and renewal process is projected to take two years. I welcome this Committee's oversight and encouragement of that process.
Alaskans are working to continue as the nation's energy storehouse by delivering our enormous natural gas reserves to thirsty American markets.
Alaska's North Slope has 35 trillion cubic feet of discovered natural gas, most of which today is being re-injected to increase Prudhoe Bay oil production. Yet geologists estimate we're sitting on perhaps triple what we're already discovered—more than 100 trillion cubic feet.
The most viable way to get that gas to market is through an 1,800-mile pipeline from Alaska's North Slope, through Fairbanks and along the Alaska Highway into the North American gas distribution system.
This development would be America's largest privately funded construction project, creating jobs and delivering environmentally friendly energy for a generation or more. I'm pleased the nation's governors unanimously endorsed the Alaska Highway natural gas pipeline project at last month's National Governors' Association conference.
In closing, Mr. Chairman, let me address two issues: conservation and access.
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Conservation must be a cornerstone of America's energy policy. Improved mileage for vehicles, efficiencies in manufacturing and electricity use can substantially expand the efficiency in using our energy supply.
Yet conservation alone cannot address the challenge before us. We must increase our supply to stabilize prices and prevent shortages. America's energy security depends on access to public lands.
With new technology and strengthening our resolve to protect the environment, we can go beyond the old approach of either development or the environment, to the 21st century paradigm of recognizing the necessity and interdependence of both.
On behalf of the IOGCC, I recommend three steps to improve access to our public lands which hold the key to our future energy independence.
First, let's complete the inventory of oil and natural gas resources on public lands required in last year's Energy Policy Conservation Act. The BLM must have adequate resources to complete this study in a timely manner.
Second, let's expedite action in the agency processes that will lead directly to exploration for energy resources, such as applications to drill and offers to lease.
Third, let's better share with independent energy producers and others the results of state and Federal research so that resources developed on public lands are maximized. The Federal government could make a strong commitment to research by reinvesting a part of the revenue received from royalties on gas production.
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Mr. Chairman and Committee members: Alaska, my administration and the IOGCC stand ready to assist you and our national administration in crafting a sensible national energy policy that provides greater access to public land for domestic production of oil and natural gas; that encourages conservation; and that recognizes the important partnership with our private oil and gas industry to get the job done.
The CHAIRMAN. Thank you, Governor Knowles. We appreciate your testimony.
I recognize the gentlelady from Wyoming to introduce Governor Geringer.
Mrs. CUBIN. Thank you very much, Mr. Chairman. It is truly an honor for me to represent Governor Geringer. Governor Geringer has excelled nationwide in many, many areas since he has been Governor. He has led the country in many areas, as well, as far as taking his State forward is concerned—telecommunications, the deployment of the infrastructure required for connecting every single school to computers. He has been in the forefront suggesting that we had an energy crisis long before other people recognized that we had an energy crisis.
Governor Geringer represents the least-populated State in the country, but he also represents the only State in the country that has three Senators—they are all men; the Governor is a man—and one Congressman, a woman, but it really only takes one woman to do the work of those three guys.
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The Governor has always been on my side, so it is truly an honor to represent a man that I think has been one of the best governors that Wyoming has ever had, Governor Jim Geringer.
STATEMENT OF HON. JIM GERINGER, GOVERNOR, STATE OF
WYOMING
Governor GERINGER. Thank you, Congresswoman Cubin, and thank you, Mr. Chairman, Ranking Member, and other members of the Committee for your invitation to address you today.
Mr. Chairman, I ask that my written testimony that has been presented and the attachments that are included be made a part of the record.
The CHAIRMAN. Without objection.
Governor GERINGER. I thank you for that. I will not provide all the testimony that is included there, but I ask that it be considered.
As Congresswoman Cubin mentioned, Wyoming has the least population of all States. We are here as Western governors, and we particularly appreciate your invitation that the Western governors join you because of the mineral resource that is in the West and because so much of the public lands that will be debated and considered during this testimony are in the West. And you have heard a very vivid example of that in Alaska.
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In the Western Governors' Association, we have the least populated State in Wyoming; the most populated State is California; the largest States, Alaska and Texas. And as we consider the resources there and the huge numbers that are involved with the oil, gas, coal, hydroelectric power, wind energy, all the variety of renewable and non-renewable resources, we are first to point out that Wyoming had the first National Park in Yellowstone; the first National Monument, Devil's Tower; the first National Forest, the Shoshone.
So we understand the environment and we understand the economy, and we are here to tell you that as we discuss the effect of becoming self-reliant in energy for America, we also understand the balance among environment, the economy, and community, because we as a community cannot ignore the impact that energy may or may not have on our States.
Some of the discussion, I am sure, will center on whether or not something is broken. If it ain't broke, don't fix it, is the common term that is out there. But we ought to recognize that you ought to avoid breaking it. If you do preventive maintenance, you can avoid breaking it and you don't have to recover from a disaster.
The model that we have developed in the West among our Western States is that we work together to prevent the crisis from happening rather than having to deal with recovering from a crisis. We almost didn't make it last year when the fires almost overwhelmed the West, and could possibly again this summer. But we developed a model among ourselves, Republican and Democrat. We don't even use the terms ''bipartisan'' or ''nonpartisan.'' We just get the job done, as Governor Knowles said, because it is far better to have avoided the problem than to have been engaged in the recovery of a disastrous situation.
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Chairman Greenspan has addressed various members of congressional Committees over the last couple of weeks, and even the governors, as to what is happening with our national economy. Our national economy seems to have flattened out and the productivity gains seem to be declining. They don't have to.
One of the things that can dramatically impact that is the availability on time of energy, because energy drives the economy today. The economy in America is referred to as the new economy, and the new economy with its technology base needs the electricity in a reliable, high-quality manner or it will not be able to sustain itself, nor will the productivity gains be able to sustain themselves.
If there is one thing that we very vividly understand, whether you are a Member across the table in your position or a governor in our position, it is that our citizens want economic security. They want jobs, they want opportunity for their children. Their views are intergenerational, so as we debate energy, environment, and community, we deliberate that from an intergenerational perspective. And if we don't have the jobs in the economy, there will be far less that matters to our public.
We learned from the current crisis that energy solutions involve diverse sources and technologies, varying from fossil fuels to solar, from wind energy to biomass, and that we can work on the demand side as well as the production side. But the new economy needs more energy in order to make it.
On page 2 of my hand-out, there is a graphic that illustrates what is happening today in terms of California and how, because California has roughly 12 percent of the entire population pretty much represented by that graphic, the electricity crisis that began in California just recently has spread and has drained literally the entire Western power grid in many ways because the demand created in California has rippled through the rest of our States.
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We need to balance that out with supply, and ironically most of the supply is there. While it is not lying dormant, much of it could if we don't take steps today. The underlying imbalance of supply and demand has been exacerbated by the fact that California did not have a long-term contract approach to their electricity supply. But that is only on electric deregulation; natural gas, of course, has gone through the ceiling.
As Congressman Tauzin said earlier today, with the high energy prices that have come about in natural gas, we are starting to see a rippling through our agricultural economy as well. The very people who put food on the table are going to pay extraordinarily high prices for nitrogen fertilizers this year, or may just choose not to even raise the crops at all, because in the Northwest, in States such as Washington, Oregon and Idaho, it is actually cheaper and more profitable for agriculture to take money to not use electricity to irrigate, to pump their sprinklers and wells, than it is to raise crops because of the high input costs. The same applies to the aluminum manufacturing industry, where selling already committed long-term energy commitments is far more profitable to aluminum manufacturers than it is to produce the aluminum.
But what about the lady in Buffalo, Wyoming, who called her county commissioner who said, ''I don't know how to pay my gas bill. It is $500 this month and I only have $600 a month income.'' This isn't just about the economy and the environment. This is about people in our neighborhoods who don't understand why this developed as it did in the energy crisis.
The Western Governors have worked long and hard to raise citizen awareness to how serious this problem is. We had several meetings, culminating in our Western Governors winter meeting last December where we adopted a call for an energy policy for the Americas. Much will be said about how much of America's energy is imported from other countries, but much of that is viewed as being from the Middle East.
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In fact, of the 4 primary countries who supply the United States with energy, 3 of them are in the Western Hemisphere—Canada, Mexico, and Venezuela. We ought to be working with our neighbors rather than somebody so far away that we don't even know who they are or why they exist. With regard to oil from the Middle East, instead of sending our military men and women to die, send them into the wide-open spaces of the West so that we all might live.
The Western Governors' Association hosted an energy policy roundtable in Portland, Oregon. We had participants from the Department of Energy, from the Federal Energy Regulatory Commission (FERC), from a variety of Federal and State agencies to discuss what we could bring to Vice President Cheney and President Bush to discuss what to do for Federal action. We have attached some of our recommendations to my testimony for your review.
Mr. Chairman, just as you acknowledged in your opening remarks, our neighbors want to know who is in charge. Why didn't somebody wake up sooner so we wouldn't have this uncertainty? Who should be in charge, particularly as it relates to our Federal public lands and how they dominate in the West?
In reality, no one person and no one agency should be in complete charge of production, of access, of distribution or consumption of our nation's energy supply. We are in this together. Partnerships are vital and beneficial. Mr. Chairman, your letter of invitation to me for my testimony asks for my perspective on the role that State governments would have in interacting with Federal land managers. Well, the key word is ''interaction.'' In our view, interaction must be a full, participating partner.
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While partnerships in the legal sense may be limited partners or they may be general partners, we are asking for full general partner status. We have common interests, but we also have shared jurisdictions and shared responsibilities. If State government has a committed partnership with Federal agencies, we will produce the domestic supplies of energy in an environmentally safe manner. It is as simple as that.
The history of energy policy in America has been fragmented, at best. The 25-year history of attempting to write an energy policy has been confused. It has been fragmented. Six attempts have been made formally in 25 years. None of them are comprehensive, particularly as it affects public land management, and not just the resource to be extracted but the other resources there as well for recreation, for wildlife, for clean air and clean water, and the amenities that the next generation ought to benefit from as well.
In the past, policy has been more by paranoia than by purpose. We need to develop better management directives that foster cooperation instead of polarization. Much of the debate today will be over who is in favor of the environment and who is in favor of development. That is not the issue, Mr. Chairman. The issue is how will we assure the future not only of today's generation but the next generation.
Over the last decade, management by litigation and intimidation has prevailed over management based on policy goals, and that has had far more impact on our national energy policy than it should have. The previous Chair of the Council on Environmental Quality, Katie McGinty, put in her 25th anniversary report, ''Our common ground, the environment, has become a battle ground. Somehow, nearly half of the Environmental Protection Agency's (EPA) work is not the product of our collective will on the environment, but rather it is the product of a judicial decree. Somehow, we have become a country in receivership, with the courts managing our forests, our rivers, and our rangelands.''
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It goes back even further. The former Chief of the Forest Service, Jack Ward Thomas, said in a speech in Wyoming 5 years ago that he took his appointment as Chief of the Forest Service believing that he was the chief resource manager of the nation's forests. But he said to us, ''I have the least control of anyone over resource management and allocation.''
So who should manage the land and who does manage the land? If I talk first about the public lands, nearly 75 percent of all Bureau of Land Management (BLM) and Forest Service lands in the United States in total are located in the Western States. Our energy self-reliance through public lands will focus, then, on much of those public lands.
But we, the States, have primary jurisdiction over many of the activities that take place on all lands, Federal, State and private. We have to work together because of those legal obligations, but we should work together because it is for the good of our people. So whether it be wildlife habitat, resource use, mineral extraction, water supplies, flood protection, hunting, fishing, ascetic values, tourism, or whatever, we should be partners. When you tinker with Federal land issues in the West, you affect the economy of all of America, but you particularly affect the livelihood of those people in our communities.
I refer you now to the graphic on page 5 of my formal remarks because it gives a graphic display of the Federal and non-Federal land areas in the lower 48. For whatever reason, and with apologies to my fellow governor from Alaska, it didn't print Alaska's overlay. In Alaska, though, as Governor Knowles has indicated, 375 million acres total; 242 million are Federal. So picture in your mind much of the same pattern of integrated and interspersed and intertwined activities that you see on the rest of that map, but particularly as it affects the West.
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Let me illustrate even further the difficulty of management, and what your Committee can most enable all of us to do is graphically illustrated on page 6 of the hand-out, which is a map of the general area of Wyoming. It shows the 15 ownership categories, each of which has a unique set of management procedures when it comes to developing the resources of energy in the West.
I use Wyoming as an example because Wyoming is not as Federally dominated as some other lands, but yet is dominated enough by Federal agencies, many of whom don't even work together, that it will thwart any action that you might take as a Committee to understand how we might appropriately develop the land in the West. Even that band across southern Wyoming that shows rather hazily in the yellow portion—that is because every other section of land is private land originally developed when the Union Pacific Railroad was extended right-of-way across the Western States and offered alternating sections of land for 20 miles on either side of the railroad right-of-way. The message in that map and the message in the previous map is we have to work together.
As far as the environment goes, in Wyoming we produce, process, or transport all kinds of extracted minerals, but we also have renewable wind energy, hydroelectric power, and others as well. Our water is so clean that we are one of the few States without a fish advisory. We have the toughest clean air laws in the nation. We have proven that a clean environment and a robust energy sector are not at odds with each other because we as governors live where we govern.
As far as the potential, you have heard from Governor Knowles and you will hear from Governor Martz and others about it is not just a matter of the energy that is there; it is how we get from there to where the energy is needed. The huge amounts of coal, natural gas, oil, uranium, and other energy sources that are available in the West are challenged by some of these situations.
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For instance, while Wyoming has enough coal reserves that if we were a country we would be the number three country in the world in coal reserves—not a State, a country —92 percent of all coal produced in Wyoming comes from Federal leases. Seventy-five percent of all natural or methane gas produced in Wyoming is from Federal ownership, and 60 percent of our oil. In other words, the Federal resource is a very considerable resource, and as the Ranking Member mentioned, much of that is already being produced.
But today's energy production is not and will not be sufficient. America needs more energy. We are here to help that need be filled, and to produce it not just from our States but to distribute it where it is needed and consumed. Transmission lines, power lines, gas pipelines will be needed to connect supply with demand.
Governor Hull of Arizona is frustrated with the most recent presidential declaration of yet another national monument in Arizona that appears to have eliminated a long-approved power transmission line that was scheduled to connect energy generated in Arizona with consumers in California. Monumental decisions in Washington have created political misery in the West.
As far as the availability of products and energy in the West, we don't need Organization of Petroleum Exporting Countries (OPEC), we need each other. Just the Wyoming resource alone could totally supplant and replace the entire OPEC production for the next 41 years.
The CHAIRMAN. Governor, may I suspend briefly? You may notice on the clock we have got two lights on. We have to run for a vote, and I apologize. Could we quickly have a recess? I would ask all Members to hurry back and then we will conclude with Governor Geringer.
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Would that be all right, Governor? I apologize for that.
Let me ask unanimous consent that all opening statements be included in the record.
Is there objection?
Hearing none, so ordered.
[The statements of Mr. Gallegly, Mr. Calvert, Mr. Pallone, Mrs. Cubin, Mr. Radanovich, Mr. Udall of Colorado, Mr. McGovern, and Mr. Rehberg, follow:]
Statement of The Honorable Elton Gallegly, a Representative in Congress from the State of California
Mr. Chairman, I have concerns about the fairness of some of the studies that small hydro power plants have been asked to do in the midst of the current energy crisis.
In my district, the operators of the Santa Felicia Dam and hydroplant near Piru Creek, have been asked to do a number of studies by various Federal agencies, including the Forest Service, before they can relicensed. It is estimated that the costs of the studies outweigh the costs of the hydro facility—the hydro facility cost is $1.2 million, the studies are estimated to cost $2 million. Mr. Chairman, the dam currently provides clean hydro-electric power to an estimated 1,500 homes in my district and operates at a profit of only $6,000 a year.
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Although some of the studies are worthy, many are burdensome and unrelated to the hydro facility—a study of noxious weeds, road and trail studies, and an impact study on the Arroyo Frog who's habitat, according to University of California at Santa Barbara Biology Professor Sam Sweet, is located more than three miles upstream from the Dam.
Mr. Chairman, we ought to be aiding small hydro-electric power facilities, not putting them out of business with undue red tape. I urge the Committee to look into the fairness of the relicensing process on these small hydro-electric power plants that provide clean energy to communities throughout the United States.
Statement of The Honorable Ken Calvert, a Representative in Congress from the State of California
The Western States are currently faced with the challenge of striking a balance among the water needs of agriculture growers, urban and environmental communities, industry and hydroelectric power generation. As we have seen with the recent energy crisis in California, our energy and water systems, and therefore our economies, are interdependent.
While hydroelectric generation comprises only 13 percent of the nation's total electricity supply, it is a vitally important component of the Western energy grid. Hydroelectric power is clean, efficient and necessary for maintaining electric transmission reliability.
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This important resource is currently being underutilized. For example, Bonneville Power Administration has lost approximately 10 percent of its capacity due to environmental regulations. This is enough electricity to power 980,000 homes. Over the past years, the ability of non-Federal dams to generate power has been reduced by ambiguous mandatory conditions issued by Federal agencies for dam relicensing. Weather related factors have also decreased the Pacific coast hydro-system capacity. Reservoirs have been drawn down to dangerously low levels that may compromise fish flows and water deliveries.
To prevent further erosion of potential Federal power generation, we must assure that any further reductions be subject to good science and peer review. We need to protect state water rights while improving hydroelectric generation capacity and efficiency. We cannot afford to accentuate one need to the detriment of the others. Instead we must strive for a balance that will guarantee a reliable energy and water supply.
Statement of The Honorable Frank Pallone, Jr., a Representative in Congress from the State of New Jersey
Thank you, Mr. Chairman. Let's be responsive to America's energy needs but let's make sure we are responsible when we discuss self-reliant energy policy in the same sentence as public lands.
Our public lands are not our energy solution; our public lands are recreational opportunities for countless families, habitat protection areas for numerous endangered species, and preservation areas for national historic sites, to note only a few. We must not jeopardize the well being of our public lands from the many functions they serve in the hope of solving our long-term energy needs.
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As we reexamine our nation's energy resources, we should begin by examining public lands that have already been designated as lease areas. Federal public lands now produce 26.6 percent of total U.S. oil production, and 37 percent of our nation's natural gas production. In the past eight years energy production on public lands has exceeded production levels of both the Reagan and Bush years.
A realistic idea to explore—where we can work together for a common sense solution—is to expand production on Alaska's North Slope. Alaska's North Slope has been open for oil and gas exploration and drilling for years—to the tune of 23 million acres or more. 35 trillion cubic feet of natural gas exist in Alaska's North Slope already available for exploration and development. We should find a viable pipeline route for making these resources available.
Mr. Chairman, if we open new public lands for resource extraction, we run the risk of destroying our nation's greatest natural resources forever. The effects of improperly managed public land resources can be disastrous. We run the risk of surface and subsurface water pollution from toxic metals including mercury, lead and cadmium caused by drilling and mining operations. Contamination of this kind can continue for years without being discovered. Industry's improved drilling technology does not preclude the need for roads, drilling pads, housing, oil processing facilities and other infrastructure that inevitably impact the environment.
It's time to fund common sense programs to conserve energy and develop alternative energy sources to reduce our reliance on polluting fossil fuels and oil imports from foreign nations. Instead of discussing only methods of supplying more fossil fuel energy, we have to develop ways to encourage renewable energy use and energy conservation. In the past thirty years technology has helped us place a computer in the palm of our hand, surely we can find ways for technology to provide us with clean, renewable energy that does not place our open spaces, our environment, our nation's public lands in jeopardy.
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Unfortunately, it seems the Republican Leadership is incapable of introducing measures that would conserve energy, promote our long-term energy security, develop alternative energy resources, and protect our environment, without sacrificing our economic growth. Instead, the Republican Leadership wants to drill the Arctic Refuge. They have cut funding for energy efficiency, renewable energy, and alternative fuel programs during the past several years and now want to disrupt the only true wilderness in America.
We should support funding to advance our technological capabilities in the fields of energy efficiency and renewable energy and to advance our economic advantage in exporting these technologies abroad. If we undertake these proactive types of efforts, then we can tell our residents and our children that we're working to protect our nation's pristine resources for them their long-term enjoyment, not our short-term solution.
It's time to stop gutting our environment—time to stop destroying our forests, land, water and air quality. Most Americans want to know why we're not doing more to protect the environment. Most Americans indicate a willingness to pay more for energy efficient appliances and lighting. Most Americans don't want us to drill in ANWR.
I agree that we need to examine the prospect of a more self-reliant energy policy but drilling in the Arctic Refuge will do nothing to increase our energy self-reliance.
Statement of The Honorable Barbara Cubin, a Representative in Congress from the State of Wyoming
Thank you, Mr. Chairman, for holding this important hearing on the role of public lands in the development of a more self-reliant domestic energy policy. Over the past eight years we have seen what amounts to an ''anti-energy'' policy which has discouraged the exploration for and development of oil, gas, coal, and uranium on our public lands, and made coal-fired electricity generation anathema. At the same time, the past Administration was seeking to dramatically reduce hydroelectricity's function as the ''peaking power'' of choice.
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Collectively, it is a wonder the crisis we have seen in California, and to a lesser extent in the northwest, has not occurred sooner. Perhaps it is the ubiquitous ''on-line'' computer presence everyone seems to need these days that is the straw that broke the camel's back, but there simply is no doubt that domestic demand for electricity has risen significantly, despite ''energy star'' ratings on computers and other appliances. And, many experts suggest the real test will be when folks turn on the air conditioners this summer. Rolling black-outs may be back with a vengeance.
Yes, conservation goals are laudable, but efficiency gains alone are insufficient. Our nation must meet the rising demand for energy with new domestic exploration and production. We must produce and conserve all forms of energy in America. And, we can do so in and environmentally sensitive way. Fortunately, we now have an Administration that recognizes our national security depends upon energy security. The Bush Administration, with Vice President Cheney in a leadership role, is working to propose a comprehensive national energy policy for Congress to act upon, as well as to formulate plans for taking administrative action where Congress isn't needed.
My Subcommittee on Energy and Mineral Resources will be examining areas where public land reforms can make a difference in getting domestic energy supplies to market. We kick off this effort next week with an in-depth review of natural gas supplies and constraints. I look forward to working with the Administration and my colleagues here in Congress to begin the process of developing legislation which will help to set this country on a focused course, both increasing energy supply and increasing incentives for conservation.
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Again, Mr. Chairman, I truly thank you for convening this hearing today and look forward to hearing from our distinguished group of witnesses, especially the Governor of my home state of Wyoming, the Honorable Jim Geringer. Wyoming coal, oil, and natural gas (including coalbed methane) and uranium is a treasure trove of energy for our nation. I welcome Governor Geringer's remarks as to how to best utilize these resources.
Statement of The Honorable George Radanovich, a Representative in Congress from the State of California
Thank you Mr. Chairman for holding this hearing on the role of our natural resources in U.S. energy policy. Today, I will focus on two environmentally-friendly energy resources: biomass and hydropower, and discuss how we can better use them to provide more energy for consumers.
My district includes three national forests as well as three national parks, all of which I am proud to represent. Over the past eight years, the previous Administration's policy of closing-off land for roadless areas, designating nineteen new national monuments—comprising five million acres—and adding numerous wilderness areas has led to a decrease in the opportunities to utilize Federal lands to help meet our nation's energy needs.
The Clinton roadless policy to lock-up over 60 million acres of our national forests, for instance, has led to a logging moratorium in many areas of the Sierra Nevada Mountains in California. Such action, combined with the Forest Service's ill-conceived Sierra Nevada Framework plan amendment, has forced the closure of biomass plants in the region. It is true that biomass comprises only about two percent of all energy in California, but amidst our current crisis, every megawatt counts. Biomass is a clean-burning method of producing energy, and it extends the life of our landfills by burning forest waste. I encourage the new Administration to reexamine the roadless policy and the Sierra Nevada Framework plan to allow for extraction of underbrush from the forests to generate green-powered biomass energy.
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On the issue of hydropower, I want to work with the new Administration to streamline the cumbersome Federal regulatory process that is denying us of the full use of existing hydro facilities. In the Pacific Northwest, 10 percent in hydro capacity on Federally-owned facilities is consistently lost due to Federal regulations. Also, Glen Canyon dam has lost a 1/3 of its own capacity ''enough to supply 400,000 homes—because of strict regulations to protect fish. The Federal government last year released the Trinity River decision in California, which diverts 300,000 acre feet of water annually for environmental uses. This action is a great cause for concern since that water will be lost for hydro generation purposes.
My own congressional district is home to about 2,000 megawatts of hydropower. To give you an idea of what this means, 2,000 megawatts is enough to serve approximately 2.8 million people. Long-term licenses for these privately-owned facilities are so difficult and arduous to complete that some facilities have been operating on yearly permits for over a decade. The tremendous red tape involved in relicensing the hydro facilities in the U.S. results in about an eight percent loss in power each year. Such an amount could provide a safety-net during a Stage 3 emergency and be used to help prevent blackouts like those California experienced in January. I will work with the Administration to facilitate a licensing process that works to benefit both the environment and consumers.
As we all know, the U.S. is in dire need of a national energy policy, and our Federal resources must be managed in a manner to support a national energy policy. The Federal government's eight-year ''hands-off'' policy regarding Federal land management has led to an increase in the Federal land base and a decrease in opportunities to meet our nation's energy needs. Our Federal lands must be managed in a reasonable, environmentally-sensitive manner that operates in concert with a national energy strategy. Such consistency will prevent various Federal agencies from implementing far-fetched policies that conflict with a national energy plan. I believe we can achieve balanced, common-sense environmental goals as well as provide desperately needed energy for our nation's citizens.
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Mr. Chairman, thank you again for holding this important hearing. I look forward to working with you to further develop a role for natural resources in our national energy policy.
Statement of The Honorable Mark Udall, a Representative in Congress from the State of Colorado
Thank you, Mr. Chairman. I appreciate your scheduling this hearing on a most important topic. Unfortunately, the Science Committee is holding its organizational meeting this morning, so I will not be able to stay for the entire hearing.
However, I will review carefully the testimony of all the witnesses, and will be particularly interested in Mr. Judd's testimony regarding biomass, an energy source that is of particular interest to me.
I am not sure just what is meant by a ''self-reliant'' energy policy, Mr. Chairman, but I assume that it means a policy that would reduce our dependence on imported energy sources—particularly imported petroleum.
I share the goal of reducing our dependence of imported petroleum—in fact, I think we should reduce our dependence on petroleum, period.
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That is why, along with nearly 170 other members of the Renewable Energy and Energy Efficiency Caucus, I am working to promote development and use of alternative sources and to reduce inefficiencies and waste in the way we use energy.
So I hope that in the Committee's discussions today there will be a recognition of the importance of agreeing on a long-term energy policy—one that requires us to think beyond today's oil and gas prices.
I hope there will be discussion of the real crisis that will develop ten or twenty years from now when oil prices will probably go up permanently as a result of increasing global demand and of passing the peak in global petroleum production.
We haven't done enough to prepare for this eventuality. We very much need to do more, beginning with the recognition that even opening all the public lands to energy development would not provide a long-term solution—and, in areas that should remain offlimits, like the coastal plain of the Arctic National Wildlife Refuge, the costs would exceed the real benefits.
We cannot just drill our way to a sound energy policy. We need balance. And, in particular, we need to recognize that increased efficiency and increased use of renewable energy are vital if we are to make progress in addressing environmental challenges as well as in reducing our dependence on foreign energy sources.
In fact, by reducing air pollution and other environmental impacts from energy production and use, renewable energy and increased energy-efficiency are the single largest and most effective Federal pollution prevention programs.
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And increased development of renewable energy has the potential for creating hundreds of new domestic businesses, supporting thousands of American jobs, and opening new international markets for American goods and services.
We have already come a long way. Solar, wind, geothermal, and biomass technologies have together more than tripled their contribution to the nation's energy mix over the past two decades. But we need to do more, to build on this progress.
All these technologies are very important for our country. But development of biomass-energy through the conversion of cellulosic biomass, which consists of any plant or plant product, is particularly important to Colorado and other western states.
That is because the threat of extreme wildfires in the areas where our national forests are in close proximity to major population centers. To reduce and control this risk, there is a need to thin the fuel build-up. After it is cut, a good part of this underbrush and small-dimension material can and should be left to decompose on the lands. But some will have to be removed from the forests and there is now no effective use or market for much of it.
As you know, Mr. Chairman, last year's Interior appropriations bill established a program for such fuel-reduction projects, and provided funding for it to get underway. That was a substantial appropriation, but the funds could go further and much more could be accomplished if there is a commercial market for this material. The Colorado State Forest Service, the Forest Service Research Laboratory, and the National Renewable Energy Laboratory have all begun to study the possibilities of developing ethanol or other bioproducts economically from this wood fiber.
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We need to support those efforts, as well as other efforts to increase the availability and viability of other renewable energy sources and to increase our energy efficiency. That is the best way to go if our goal truly is a ''self-reliant'' energy policy in the long run.
Statement of The Honorable James P. McGovern, a Representative in Congress from the State of Massachusetts
Thank you, Mr. Chairman. I appreciate the opportunity to offer a statement at today's hearing on the ''Role of Public Lands in the Development of a Self Reliant Energy Policy''.
In the interest of time I would like to get right to the point and say that I think that the issue of increasing oil and gas production on Federal public lands is a red herring. I honestly do not think that we can have a serious discussion about increasing production without addressing the underlying issue of fossil fuel consumption.
According to the Department of Interior, the U.S. consumes over 19 million barrels of oil a day or 7 billion barrels of oil a year. The Natural Resources Defense Council, using Energy Information Administration data, projects that this figure will almost double over the next 50 years. And yet, the U.S. has less than 3 percent of the world's known oil reserves. It just does not seem likely that we could produce our way to energy independence.
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Like most Americans, I am concerned with our reliance on foreign oil. But at the rate we are going, I am frankly more concerned about our reliance on fossil fuels period. Consumption is the long-term issue that we need to address, and I am not yet convinced that increased drilling on Federal lands is anything more than a temporary fix.
The topic of drilling on Federal public lands should not lead the discussion of a long-term comprehensive energy policy. Eliminating the annual freeze on the Corporate Average Fuel Economy (CAFE) law should. If we are going to have tax cuts, lets have tax cuts that will provide incentives for commuters to use mass transit and tax credits to develop alternative energy sources.
The fact is that production levels on Federal government operated oil, gas and coal leasing programs have increased over last eight years. Overall domestic production of oil on Federal lands increased from 13 percent in 1993 to 26.6 percent of all U.S. production in 2000. And Federal lands account over 37 percent of domestic natural gas production. And during that same period, total U.S. petroleum consumption increased by over 2 million barrels a day. Opening up our Federal lands to even more drilling will not solve the long-term national security and environmental problems caused by our reliance on fossil fuels.
Statement of The Honorable Dennis R. Rehberg, a Representative in Congress from the State of Montana
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Thank you, Mr. Chairman. I also want to thank Montana Governor Judy Martz for being here this morning. Governor Martz has really taken a pro-active stance in dealing with the energy problems we are experiencing in Montana, and I thank her for her leadership on this issue.
Mr. Chairman, it is no secret to most of us in this room that the United States does not have a coherent energy policy, either long-term or short-term. Today we are more dependent on foreign oil than ever before. In fact, 56 percent of our oil supply comes from foreign sources, which is a 20 percent increase over the 1973 Arab oil embargo levels. And the Department of Energy predicts that in less than 20 years, America will rely on foreign countries for nearly 65 percent of our energy needs. This is not only a threat to our economy, it is a threat to our national security.
Unfortunately, our energy problems are not confined to oil production. Despite growing demand, our natural gas production has fallen 14 percent since 1973. Yet, nearly 40 percent of our gas resources in the Rocky Mountains are off-limits to production and most of the submerged lands under our Federal waters are off-limits to gas leasing until 2012.
The result: natural gas prices are 20 times higher in some parts of the country than they were just one year ago. This dramatic increase, while hitting all consumers, is hitting those of us in ag country particularly hard because higher natural gas prices mean increased fertilizer costs. So I think it's important that we all understand that this energy problem we are experiencing affects virtually every aspect of our nation's economy. We have got to get a handle on this problem.
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And, as if to add insult to injury, the water levels in the northwest are low—this frustrates our ability to generate hydropower, which provides enough electricity for 98 million homes. But our hydroelectric operations are facing more problems than just low water. Federal rules and regulations have made the process of relicensing these operations expensive and time-consuming, which in turn contributes to the rising cost of electricity in some areas.
These energy problems have real life consequences. In January, the Bonneville Power Administration announced that it is projecting an average 60 percent rate increase over the next five years. And high energy costs have caused a number of Montana businesses to either shut down or cut back operations, which is costing Montana much needed jobs.
And because of increased power costs, some Montana businesses have been forced to produce their own power in-house by using generators, which costs about 5 times the amount of what they used to pay for electricity, yet is still well below current prices on the open market.
Mr. Chairman, the California situation—which we are all so familiar with and which has sort of become the poster-child for our energy problems—combines a lack of generation and transmission capacity with low water levels, and should serve as a real wake-up call to all of us. Consider this, in California—over the last 10 years—generation capability decreased 2 percent while retail sales increased 11 percent. So the current problem California is experiencing should not come as any great surprise.
In short, Mr. Chairman, we must increase our power generation and transportation capabilities. And if we don't start developing some of our natural resources now, the California crisis of today will become the national crisis of tomorrow.
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America has the tools to confront our energy problems, and we must use them. While energy conservation is critical, the U.S. cannot conserve its way out of this energy crunch. It is vitally important that we take steps to increase domestic energy production through access to and exploration of oil and gas prospects such as ANWR, and through new and expanded energy delivery infrastructure, advanced coal technology, nuclear power, and solar and wind power. We also have to explore alternative renewable fuels, such as ethanol, which bums clean and supplies an important market for our agriculture products.
America has huge deposits of natural gas, coal and oil. In Montana alone we have several hundred years worth of natural gas and coal deposits—the eastern front of the Rocky Mountains is rich in natural gas and clean burning coal.
Any national energy policy must include the development of our domestic supplies of oil, such as our oil reserves in the Arctic National Wildlife Refuge, or ANWR. The vast oil reserves in ANWR could replace our Saudi Arabian imports, for example, for the next 30 years. That's why I am a cosponsor of Rep. Don Young's legislation to develop some of this domestic supply in ANWR.
America also has large coal deposits—enough to last us nearly 300 years. And Montana has more coal than any other state, holding approximately one-third of the total strip-mineable coal in the nation. Current estimates place coal resources for eastern Montana at about 50 billion short tons, 34.5 billion of which is low-sulfur, clean-burning coal.
Coal is America's largest and cheapest source of domestically produced energy accounting for nearly 60 percent of our nation's electricity and costing consumers about one-fifth the amount of oil and natural gas. And our abundance of coal includes coal bed methane, which is a source for natural gas. So clean burning coal and the development of coal bed methane as a natural gas resource must play a vital role in any national energy policy. This means we must invest in developing coal technology.
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It is also important to remember, Mr. Chairman, that while we need a national energy policy, we must also seek to include input from our state government officials at every step of the way—just like we are doing here today. This is especially important in Montana because of Montana's vast acreage of checkerboard ownership with the Federal government. So it is imperative the Federal government adopt a good neighbor policy that allows Montana to help solve the nation's energy shortage. Montana Governor Judy Martz has taken the bull by the horns at the state level by encouraging new energy production, streamlining regulations and building a better relationship with Federal land management agencies. Hopefully, today's hearing can allow us all to help improve this good neighbor policy so that we can work together with state governments to solve our current energy shortage.
I guess for me, Mr. Chairman, the bottom line is that we have the natural resources to head off this problem before it gets even worse. But that means we need to develop a national energy policy that encourages the development of our resources in an energy efficient and environmentally friendly manner. And with the technological advancements we've made, I believe we can do it. But it is up to us as elected officials to come up with a plan and get the job done, and I thank you, Chairman Hansen, for holding this hearing today, and for your leadership on this issue, because this is an important step in the right direction.
The CHAIRMAN. We will stand in recess.
[Recess.]
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The CHAIRMAN. The Committee will come to order.
Governor Geringer, we apologize for cutting you off, but we had no choice. Governor, we will turn to you again, sir.
Governor GERINGER. Let me just sum up with a few quick statements. First, to get our attention back to the issue at hand, much of the discussion today as we deal with energy self-reliance from public lands will depend a lot on the deadlock, the gridlock, if you will, or headlock that pits environmental interests against those who would have economic interests. We don't view them as mutually exclusive; they are not and should not be. The interests are compatible and complementary in every sense. Energy policy cuts across so many different jurisdictions, as we illustrated in the graphics that I pointed out to you in my testimony, and it is time to stop litigating and start cooperating.
The Western States have energy that America needs. As we were conversing during the break here, one of the members who is here from Wyoming made the comment, it is like we have an I.V. container. We have the transfusion that is necessary, but not the line to connect it when it comes to the transmission of the energy, whether it be in raw form or in converted form to electricity.
Just let me illustrate a little bit of the challenge that you will face that we already face in the Western States in trying to deal with access to the energy that is in our public lands.
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Back in 1969, the National Environmental Policy Act (NEPA) was enacted with the purpose that we needed to recognize the profound impact that man's activity has on the natural environment. But in the purpose clause in the NEPA, as it is called, the National Environmental Policy Act, it declares that the policy of the Federal Government is to cooperate with State and local governments to create and maintain conditions under which man and nature can exist in productive harmony and still fulfill the social, economic, and other requirements of present and future generations.
What has evolved from that Act, however, has been anything except that harmonious relationship. Implementation of what is a fairly short and relatively simple Act has resulted in such a myriad of regulations and processes that State and local authorities have little or no idea which way the whipsaw of Federal agencies will go next. There is tremendous inconsistency between and among Federal agencies as to how they implement this Act.
What that opens the door to do is allow people to litigate or protest or appeal almost without end an infinite number of methods to avoid or to thwart better planning and better opportunities for energy development. We recommend as Western Governors that streamlining start with the adoption of management principles that we have developed as Western Governors over the years, and that is included as part of the testimony called ''Policy Resolution from the Western Governors 99-13,'' sponsored by Governor Kitzhaber, of Oregon, a Democrat, Governor Leavitt, of Utah, a Republican, and endorsed in full not only by the Western Governors but by the national governors as well.
It lists eight principles of environmental management that can be very effective in resolving the conflict between and among the advocates of whatever side you might feel that you are on. They reflect a practical, common-sense approach to environmental decisions, much along the lines of our native son, Dr. W. Edwards Deming's principles that were established for quality management that enabled a quality revolution for America on the industrial side.
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We have used these principles successfully on several difficult environmental issues, and the call is even greater today because we are in an age of litigation, with the courts not just directly managing our resources, but indirectly managing because of the fear of litigation.
NEPA, in terms of the Act, is not the problem. It is the process. It takes too long; it costs too much; it spawns litigation; it is inconsistently implemented. Every Federal agency requires extra layers of management just for its own unique set of regulations. The difference just between the Bureau of Land Management (BLM) and the Forest Service is dramatic, and yet they are all part of one Government. If you would simply require the Federal Government to be consistent and speak with a unified voice, we would get a long way, and input the States in as partners.
I want to leave you with the message that the current energy crisis is an opportunity to break through the often unproductive deadlock that pits energy needs against environmental protection. They do not have to be mutually exclusive; they should not be.
The current electricity crisis in the West has awakened us as to how much we don't know about the energy resources of our nation and how little we have explored the opportunity to meet the energy needs of a growing economy and still yet protecting our environment. We can have both.
Mr. Chairman, I have included several recommendations. Rights-of-way and transmission lines ought to be looked at. We cannot get the energy out of our States if we don't have the rights-of-way to deliver it, whether it be the pipeline from Alaska or whether it be a transmission line that takes generation from Wyoming to California or to Chicago.
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I recommend that this Committee urge the establishment of cooperating agency status for all States that are affected under any environmental policy review as a routine and regular matter, not just on the occasional basis that it has been doled out in the past. We can even generate more through renewable resources. We have tremendous wind generation capacity in Wyoming. Much of that is on Federal lands.
One young lad from California dropped a note one day and said, ''You know, you don't have to have all those signs warning about high winds the next 5 miles if you would turn off those giant propellers up on the hillside.''
Wind generation, hydroelectric generation; the hydroelectric that we currently have needs to have equipment replaced, replacing 40- to 60-year-old generators with more efficient generation, increasing generation, and certain minimizing the impact on endangered fish when California needs more of Oregon's power. The Bonneville Power Administration, the Western Area Power Administration, the Bureau of Reclamation, and the Corps of Engineers all need to look at opportunities to enhance electrical production even with existing activities.
Ninety-two percent of all coal is taken from Wyoming lands. Wyoming is so good at reclamation that you are holding $3 million of our money. From energy it came, to energy it should return. We would like to develop more effective ways to deliver energy from the West.
Let me make one quick comment about the fires that occurred last year in the West. Those too, because of the lack of coordinated policy on forest health management, severely impacted, such as fires in New Mexico that knocked out a 500-kilovolt transmission line, to fires in Montana that shut down a similar line going from Montana to Seattle. The implication of additional events this summer, with the drought that is already imminent, could lead to even further shortages of electricity.
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Thomas Jefferson maintained the solid belief that the success of our democracy lies in the ordinary citizen being vested with a sense of deep civic responsibility and citizens who would engage each other directly in pursuit of the common good.
We in the American West believe that we should reject the last two decades of bitter debate among environmentalists and resource users that has so polarized us that we have gridlock rather than any public benefit from our public lands. As former EPA Director Bill Ruckelshaus said, ''Business, governments and citizens are frustrated by years of litigation and stalemate. It is time to turn to the common good, and we are turning to that not just out of desperation but more frequently out of hope; hope that our decisions will yield less controversial and more durable results. Jointly-designed decisions will be better and more informed, and the hope that through this process we can actually regenerate public confidence in our institutions, especially government.''
Mr. Chairman, thank you, and I would be happy to answer questions.
[The prepared statement of Governor Geringer follows:]
Statement of The Honorable Jim Geringer, Governor, State of Wyoming
Mr. Chairman and Committee Members, thank you for addressing the subject of how America might and should become energy self-reliant, and in particular what the role of Federal lands might be in that effort. Thank you also for asking for the views of Western Governors. The energy future of this nation is dramatically linked to the energy future of western states. More than that, we consider that the environment, the economy and community are a dynamic balance continually in the making.
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Self-reliance is more than energy
America's long term sustained growth in the economy has been jump started by increases in productivity fueled by innovation, risk and perseverance. We risk losing our economic momentum if we cannot literally provide the fuel for the new economy. Rising energy costs have been a major contributor to the recent slowdown in economic growth.
The future of our national economy depends upon our sustainable energy self-reliance. Public lands are at the forefront in providing the potential to provide much in the form of raw energy or access to produce and deliver that energy. The development of the New Economy in America is heavily inter-dependent upon technology and reliable, high quality electric power. Beyond the new economy, agricultural production and processing, manufacturing, renewable resources, protection of endangered species, recreational opportunities all affect our economy and our society and each of them is affected in part by what happens on the resource of our public lands. Our economic and social opportunities are directly linked to energy solutions. We have learned from the current crisis that energy solutions involve diverse sources and technologies ranging from fossil fuels to solar, from energy production to demand-side management and efficiency.
Energy is affecting everyone, not just California
The electricity crisis that began in California has spread throughout the western power grid, known as the Western Interconnection. See map.
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At its core, the crisis is a result of an imbalance of electricity demand and supply. Electricity demand has grown with the growth in population and a growing economy in the West. Few new powerplants have been built in the past decade in the West and energy conservation efforts declined. This underlying imbalance of supply and demand has been exacerbated by the structure of the electricity market in California that put extraordinary reliance on the spot market at the expense of more stable, long-term contracts. High natural gas prices and a drought in the Northwest are further exacerbating the crisis.
This crisis reaches well beyond California. The Bonneville Power Administration is considering a 100 percent rate increase. Many utilities, such as the City of Tacoma, and industries, such as Phelps Dodge, are reeling from extraordinary wholesale electricity prices. From Montana to Arizona, plants and mines have shut down because of the high cost of electricity. The crisis may deepen with summer peak demand and continuing drought in the Northwest.
The reality of the high energy prices was driven home last month when one of our county commissioners in northeast Wyoming received a phone call from an elderly lady who wanted to know how she was going to pay her $500 heating bill when her monthly income was just $600 per month.
Last December when the price of natural gas hit $10 per MMBTU, almost half of the nation's nitrogen industry shut down for several weeks, since natural gas is the feedstock for nitrogen fertilizer. With significantly reduced supply, farmers this spring will be paying unusually high prices for anhydrous ammonia and other nitrogen assuming not only that it is available but that in the event they can get it they can actually afford it. Much of the manufacture of nitrogen has shifted off-shore and America is paying other countries to produce as much as one third of all our nation's nitrogen. The security and affordability of our food supply will be affected.
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I need not spend much time recounting the difficulties experienced by California citizens with electricity. Our northwest states of Oregon, Idaho and Washington are experiencing one of the driest winters on record which will manifest itself in lower than usual runoff, less hydroelectric power and serious impacts to endangered fish. This will be further exacerbated by the compounding economic effects caused by the shortage of electricity. Farmers can make more money by being paid for not using electricity than by raising crops and livestock. The same is true in manufacturing aluminum.
Western Governors have worked long and hard to raise citizen awareness to the serious nature of the energy situation. On December 1, Western Governors adopted resolutions on energy policy, coal and natural gas. On December 20, Western Governors held an emergency meeting in Denver with and met with former DOE Secretary Bill Richardson and former FERC Chairman Jim Hoecker. By January 9, nine Western Governors approved a Short-term Energy Conservation Strategy aimed at coordinated action to dampen demand. On February 2, the Western Governors' Association hosted an Energy Policy Roundtable in Portland, Oregon. Joining us were Energy Secretary Abraham, all three FERC commissioners, and leaders from major utilities, natural gas and coal producers, environmental groups, academic experts, and small and large retail customers. We adopted several short- and long-term energy policy recommendations. On February 27, Western Governors met with Vice President Cheney to discuss the items requiring Federal action. We requested that an agreement be developed between Western States and the Cheney energy policy team to provide for collaboration on our mutual energy challenges. (See attached information given to the Vice President.)
Finally, energy policy has become a high priority nationally. I commend you and the rest of the Resources Committee for recognizing that management of and access to our Federal public lands will play a pivotal if not critical role in developing energy self-reliance.
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Who's in charge?
Today's power shortages in California may only portend the aftershocks of even greater shortages in other states this summer and compounded next winter. New energy supplies are being developed at only one to two percent per year while energy consumption is forecast to grow at two to three times that rate. Who's in charge of our nation's energy situation? Why didn't someone wake up sooner so that we wouldn't have this uncertainty? We need to increase supply and an infrastructure to transport that supply. Part of the answer is that we have energy policy by default, not by design, policy that is confused rather than coherent. Who should be in charge? In reality, no one person or entity is or should be in complete charge of managing the production, distribution or consumption of our nation's energy supply. We are in this together. Partnerships are vital and beneficial. Your letter of invitation to me for my testimony asked for my ''perspective on the role of state government interacting with Federal land and mineral managers in developing a more self-reliant energy policy for the nation through increased utilization of domestic supplies in an environmentally sound manner.'' The key phrase in your invitation is ''interaction with Federal land managers.'' Interaction must be as full partners progressing towards common goals. If state government has a committed partnership (or interaction) with Federal land managers we will produce domestic supplies of energy in an environmentally safe manner. It is as simple as that.
History of energy policy
Until 1973, the Federal interest in energy policy and production was centered on the primary principle that energy should be cheap and plentiful. The Arab oil embargo reinforced the notion that energy policy was synonymous with oil policy. Conservation of the resource to prevent waste and environmental protection was left to the states, as it should be. The Federal policy by default today is that Americans should be induced to reduce consumption, especially through higher prices brought on by restricted access to production and distribution. This equates to an internal embargo. The current discussion and research concerning global warming has fostered the policy tenet that we should get rid of any fuel that contains carbon. This approach is certainly disjointed and confusing.
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The Federal government in the mid-70's began a series of efforts to write a national energy policy. Six attempts were made in 25 years with none being comprehensive, particularly as it would affect public land management. Any successful new attempt must cut across all resource jurisdictions, public and private, state and Federal. Likewise, any new policy must recognize the balance needed among the economy, the environment and the community. Again, give the states full partnership or ''interaction'' and we will produce energy.
Policy by purpose, not by paranoia—Develop management directives that foster cooperation, not polarization
Over the past decade, management by litigation and intimidation has prevailed over management based on policy goals and has helped define our national energy policy. As one previous chair of the Council on Environmental Quality put it, ''our common ground, the environment, has become a battleground. Somehow, nearly half of the EPA's work is not the product of our collective will on the environment, but rather the product of judicial decree. Somehow, we have become a country in receivership, with the courts managing our forests, our rivers and our rangelands.'' CEQ Chair McGinty, 1997.
Former Chief of the Forest Service, Jack Ward Thomas, lamented during a speech in Wyoming five years ago, that he took his appointment believing that he was the chief resource manager of the nations' forests. But he said, ''I have the least control of anyone, over resource management and allocation. The Fish and Wildlife Service has more say over forest management and health than I, through the Endangered Species Act. Legal challenges consume the majority of my day.''
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Who should manage the land?—Shared responsibility, concurrent jurisdictions
Energy self-reliance through public lands will focus on the West, since nearly 75 percent of all BLM and Forest Service lands in the United States are located in our Western states, particularly those that are rich in environmental as well as energy values. These lands are managed for the general national public benefit, but the laws, policies and management decisions and judicial direction for public lands most directly impact, both socially and economically, the people who live in the West. Our residents and communities depend upon the total resource for recreation, wildlife habitat, resource use, mineral extraction, water supplies, flood protection, hunting, fishing, aesthetic values, tourism and monuments. When you tinker with Federal land issues in the West, you not only affect the economies of all Americans but also the livelihoods of those people and communities living near and relying on our public lands in the west.
As illustrated in the following figure, Federal land ownership in America is not collected all in one place. Much of it is intermingled with state and private ownership. Regardless of specific ownership, public or private, we must recognize that none of our natural resource decisions can be made exclusively and independently of other managers or owners in the vicinity of our public lands. Again, we must interact as partners. States and the Federal government have shared or concurrent jurisdictions over activities on our lands. We are both rooted as constitutional governments, the Federal with enumerated powers and the states with reserved and delegated powers. As a result, activities on Federal lands require state as well as Federal permits and permissions to be successful. Both must respect the rights of private property adjacent to or co-mingled with governmental ownership.
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States own and manage lands that are near, adjacent to, or intermingled with Federal lands. To illustrate, I refer to the next figure in this presentation that shows land ownership patterns just in the State of Wyoming. There are fifteen categories of land ownership, each with its own approach to resource management.
Where Federal land ownership dominates, partnerships are a necessity, not just a nicety to be doled out by a patronizing Federal government.
Environment
In Wyoming we produce, process and/or transport coal, oil, natural gas, wind generation, and uranium. We have some of the cleanest air in the nation. Our water is so clean that we are one of the few states without a fish advisory. We have proven that a clean environment and a robust energy sector are not at odds with each other.
Potential energy—It's not just a matter of physics, it's location, location, location
Energy in the West isn't just electricity. Energy takes many forms, but is most meaningful in generic terms of heat measurement, such as BTU's, or as electrons. Much of that energy is available in and under our Federal public lands. For example, there are 478 billion tons of Federal coal reserves in undeveloped portions of the Powder River Basin in Wyoming and Montana.(see footnote 1) There are another 362 billion tons of Federal coal reserves on the Colorado Plateau.(see footnote 2) Estimated oil in undiscovered conventional fields on Federal lands range from 4.4 to 12.8 billion barrels. Similarly, estimates of technically recoverable gas in undiscovered conventional fields on Federal lands range from 34.0 trillion cubic feet (TCF) to 96.8 TCF. Estimates of technically recoverable coalbed gas 3 on Federal lands range from 13.0 TCF to 19.6 TCF.(see footnote 3)
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Wyoming has enough coal reserves that, if we were a country, we would be number three in coal reserves in the world. Ninety-two percent of all coal produced in Wyoming comes from Federal leases. Seventy five percent of methane gas produced in Wyoming comes from Federal ownership. Sixty percent of our oil production is from Federal lands. But we don't even come close to Alaska in terms of natural gas or petroleum. Highly effective wind generation in the West is situated on Federal lands as is much of the hydroelectric generation. But today's energy production is not and will not be sufficient. America needs more energy. We have the energy but we have a sharp imbalance between where energy can be produced and where it is needed or consumed. Transmission pipelines and power lines are needed to connect supply with demand. Acquisition of rights-of-way is necessary. Governor Jane Hull of Arizona is frustrated with the most recent presidential declaration of yet another national monument in Arizona that will likely eliminate a long-approved power transmission line that was scheduled to connect energy generated in Arizona with consumers in California. Monumental decisions in Washington have created political misery in the West. If we cannot transmit energy it has no utility. If it has no utility we have no incentive. If we have no incentive we have a continuing energy policy based on default.
Over 70 percent of Wyoming's mineral estate is Federally owned. As with many western states, that amount of Federal domination could render us a third-world colony rather than the sovereign states that we are. Wyoming ranks first of all states in the production of coal and uranium. Our natural gas exploration and production has increased our known reserves significantly in recent years so that we now rank fourth, but a distant fourth behind Alaska. Our extractable reserves are equivalent to 374 billion barrels of oil. With OPEC currently producing approximately 25 million barrels of oil per day, Wyoming's energy potential could completely replace the entire OPEC production for the next 41 years.
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We have it, America needs it
With this world-class base of raw resources at our very feet, how come America is in such a critical situation of short supply? The answer is simple: access to the resources has become more difficult and the ability to transport the products in any form remains unpredictable and uncertain. In Wyoming almost any project to develop new production or to transport it to consumers involves a Federal action subject to the processes of the National Environmental Policy Act, or NEPA. The original intent of NEPA was admirable, but the immense body of activities developed in its implementation in particular over the past eight years has elevated process itself over results and has allowed opportunity for political control rather than public disclosure and real protection.
To illustrate, the Bureau of Land Management has been developing an Environmental Assessment for an additional 2500 permits for Coal Bed Methane wells in Wyoming's Powder River Basin. If the wells are not developed on the Federal lands, production on adjacent state and privately owned lands will pull the methane gas out of the Federal ownership. Following its approved procedures, the BLM had completed its work and had given assurances to leaseholders that the additional permits would be available by March 1, 2001. At the last moment the U.S. Fish and Wildlife Service reported that it had not completed its required assessment of impacts and would delay the issuance of permits. The lack of coordination and cooperation between two divisions within the single Department of Interior will delay access to a much-needed supply of gas in a very attractive market. Federal activity is primarily focused on process rather than results and there is no accountability for improper decisions. You have asked for my views on interaction between state government and Federal land managers. One of my views is that as a start ''interaction'' must begin with and between Federal agencies.
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What's a NEPA?—It's not the act, it's the actors
The National Environmental Policy Act was enacted in 1969 with the stated purpose of ''recognizing the profound impact of man's activity on the interrelations of all components of the natural environment.'' Further on in the Purpose Clause, the act declares that ''it is the policy of the Federal Government, in cooperation with State and local governments and other concerned public and private organizations . . . to create and maintain conditions under which man and nature can exist in productive harmony and fulfill the social, economic and other requirements of present and future generations.''
Implementation of this short and relatively simple act, NEPA, has resulted in such a myriad of regulations and processes, that state and local authorities have little or no idea which way the whip saw will go next. Inconsistency between and among Federal agencies is rampant.
The Act is intended to require Federal, state and private actions that are comprehensive, elicit better planning, are inter-generational in their beneficial effect, and strike a wholesome balance between the environment and the economy.
Federal regulations for the implementation of NEPA, must be streamlined and applied in a manner that reduces costs, eliminates interagency conflicts and inconsistencies, and is more efficient and timely. Western Governors recommend that streamlining start with the adoption of management principles such as the eight Enlibra principles we adopted in 1999. These principles, which are attached to my testimony, reflect a practical, common sense way to approach environmental decisions, just as Wyoming's native son, Dr. W. Edward Deming's principles of quality management enabled a quality revolution. We have employed these principles successfully on several difficult environmental issues.
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Earlier I referenced that we are in an age of litigation with the courts directing the management of our resources. But it's not just that the courts are directly managing many of our resources, they are indirectly managing public resources in our states because of the fear of litigation, not just because of actual litigation. Implementation of NEPA is not the problem. It's the process. It takes too long, costs too much, spawns unending litigation and is so inconsistently implemented that each agency requires extra layers of management for its own unique set of regulations. It's not the Act, Mr. Chairman, it's the Actors.
You don't have to amend NEPA, Mr. Chairman, if you would simply require the Federal government to be consistent and speak with a unified voice of management. That should be among the first tasks that your Committee undertakes with Vice-President Cheney in his role as Energy Czar.
Other specific actions that could and should be taken include reallocating Federal resources and personnel to activities that are focused on the near-term need for more energy. For example, Wyoming's Powder River Basin is the nation's largest deposit of clean-burning coal. Over 90 percent of current coal production is developed under Federal leases. More clean-air-compliant coal could be produced by simply increasing the number of LBA's (Leases By Application) from one per year to two per year. The processes do not need to be changed. What's lacking are the people resources needed for processing the applications. As today's coal prices continue to rise, increasing the pace of LBA's with competitive bidding would enhance bonuses paid as well as production bids. Federal agencies are waiting for direction and necessary resources to engage in strategic planning for the enhancement of energy supplies developed efficiently and in environmentally sound ways on public lands.
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Similarly, State resources for participation in and implementation of such activities could be enhanced through the release of the state-share funds, which now total more than $400 million for the western states and energy tribes, from the abandoned mine lands program.
In addition:
The Clinton Roadless Policy threatens to strand over 55 million acres, some of which include significant potential for energy development, both renewable and non-renewable. Four Western Governors asked to ''interact'' by being granted cooperating agency status. We were denied.
The U.S. Forest Service has previously been directed to adopt and revise individual forest plans in an accelerated fashion that is hardly strategic and certainly exclusive of energy development. The fast track plan revision coupled with the Clinton Roadless initiative for 55 million acres is hardly a sound strategy for resource management.
The projected growth in natural gas demand will necessitate a significant increase in pipeline and distribution systems over the next decade, many of which will cross Federal lands. Best estimates are that 38,000 miles of new gas pipelines are needed. The Federal government will have to facilitate this construction by working with each affected state to coordinate rights of way and production.
Natural gas is the fuel of choice for the near term, since well over 90 percent of new electric power generation will be gas fired, even though 60 percent of current generation is from coal.
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Alternatives for construction and maintenance of electric transmission grid must be encouraged. Today's problems focus on California, but significant shortages are imminent in the Midwest.
A myriad of directives and solicitors' opinions which flew out of Washington, D.C. on January 19th regarding multiple use of our BLM lands needs to be reassessed for purpose and benefit.
The recommendation from the West, Mr. Chairman, is that we pursue solutions that focus on results, that symbolize balance and stewardship, that recognize states as partners and, above all, that you resist preempting state laws and jurisdictions. Energy is plentiful within the boundaries of public land jurisdictions.
The opportunities
I want to leave you with the message that the current energy crisis is an opportunity to break through the often unproductive deadlock that pits energy needs against environmental protection. The western electricity crisis has awakened us to how much we don't know about the energy resources of the nation and how little we have explored opportunities to meet the energy needs of a growing economy while protecting our environment. We need to seek out opportunities to promote energy development AND environmental protection.
Below I have outlined several subjects under this Committee's jurisdiction that warrant careful and thoughtful examination. There are undoubtedly other areas where progress can be made in promoting energy development and protecting the environment.
Rights-of-way and permitting
Far fewer new power transmission lines and oil and gas pipelines have been built in the West in the past decade than are needed today. The permitting processes of Federal land management agencies and states are generally rusty and not capable of the rapid action required to meet the energy demands of the West. While some folks may call for the heavy hand of Federal preemption of existing state and Federal agency permitting processes, there is little reason for such draconian action, but much to justify new approaches to integrate and accelerate existing permitting process. For example, in the West we are unaware of any interstate transmission lines that have ever been blocked by lack of a state permit.
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We need to revive the permitting process from the past decade of dormancy. This needs to be done in a manner that reduces overall permitting time and improves the quality of project reviews. Tomorrow, members of my staff will be meeting with Staff of the Western Governors' Association and a major information technology firm to begin exploring how high performance computing can be employed to expedite project assessment and the NEPA review process. This kind of innovative activity needs to become the rule, rather than the exception in the thinking of our agencies: how can we do our jobs better, faster and cheaper without sacrificing the environment or the economy.
I recommend that this Committee:
Urge Federal permitting agencies to include states as cooperating agencies under NEPA reviews of energy projects whenever a state requests cooperating agency status;
Encourage the BLM and Forest Service to work with Western Governors to develop a process that coordinates and synchronizes Federal and state reviews of proposed energy projects; and
Encourage Federal agencies, including the Department of Energy, to work with the states to develop the information necessary for the consideration of alternatives to energy projects that are required under NEPA.
Enhancing electricity production from Federal dams
In the West, two Federal power marketing administrations, the Bonneville Power Administration and the Western Area Power Administration, market electricity generated at dams operated by the Bureau of Reclamation and the Corps of Engineers. We are all familiar with the arguments over the impact of such dams on the environment. The ongoing western electricity crisis is also reminding us how critical the hydro-electric system is to meeting the electricity demand. Let's develop opportunities to use the hydro-electric system to generate more electricity AND protect the environment. For example, a re-regulating dam and reservoir downstream from Glen Canyon Dam could enable greater peak electricity production, protect downstream environmental resources from the problems created by rapid fluctuations in flows and mitigate environmental problems for native species. More effective use could be made of Federal dams for stored generation capacity to even out the power generated by intermittent wind power generation. The BPA in its recent announced solicitation of 1,000 megawatts of wind generation, may use this wind power to balance hydro-electric generation. There are opportunities to replace 40–60 year old generators with more efficient generators thereby increasing electricity generation from the same amount of water (e.g., rewinds and replacements at Bonneville Dam, The Dallas Dam, McNary Dam, Chief Joseph Dam) or build additional power plants at existing dams (e.g., Folsom, Anderson Ranch, Black Canyon, Lewiston, Grand Coulee. We could evaluate opportunities to modify irrigation practices to shift pumping loads off-peak, to use more efficient pumps and to improve the efficiency of water use.
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I urge you to direct BPA, WAPA, BuRec and the Corps to seek out opportunities to use their assets to enhance electricity production while protecting the environment. I recommend that you ask them to report in 10 months on measures to achieve this end and to consult with governors throughout their work.
Abandoned mine land funds
In enacting the Surface Mining Control and Reclamation Act of 1977, a bargain was struck between coal producing states and Indian tribes and the Federal government under which the states and tribes would receive at least one-half of the abandoned mine land fee collections from coal mining within their borders. Over the years, this fundamental agreement has been undercut by limits on appropriations of the state/tribal share of AML collections, and diversion of the funds to the U.S. Treasury and the health benefits of retired coal miners. The result is that nearly every coal mining state and Indian tribe is owed significant amounts of money. For example, the latest annual data (12/31/00) from OSM shows: West Virginia is owed $95 million; Kentucky $101 million; Pennsylvania, $47 million; Montana $36 million; Utah $11 million; the Council of Energy Resource Tribes, $35 million; and for Wyoming, the largest coal producing state, the most recent estimate is nearly $300 million.
As part of the bargain struck in 1977, states that completed their clean-up of abandoned mines could use the funds for other public purposes. Wyoming is in this position. So may be other states and tribes. At this point, our own money is being withheld from Wyoming when these needed funds could be put to work expanding our capability to develop our energy and related resources and enhance the environment of our beautiful state.
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I urge this Committee to enact legislation that will enable states and Indian Tribes to access and use the State-share monies they are due under the Surface Mining Control and Reclamation Act of 1977.
Energy and fires
Until last summer, few made the connection between our forest and range fires and the reliability of the western electric power system. However, the fires of last summer drove home the connection as fires in New Mexico knocked out a 500 Kv transmission line from Four Comers to Albuquerque causing serious blackouts. In Montana, the major fires resulted in the shut down of a major 500 Kv transmission line that moves coal-generated power from eastern Montana to Seattle. You can imagine the implications of these events if they should recur during this summer's peak load.
Last fall, Western Governors negotiated an agreement with then-Interior Secretary Babbitt and then-Agriculture Secretary Glickman to correct the imbalance in land management decisions. The agreement, which the Congress memorialized in the Interior Appropriations Committee Report, makes the states full partners and requires that local expertise and understanding be incorporated into forest management decisions during the extensive forest restoration activities over the next ten years. While the issues addressed in this agreement extend beyond issues of energy, I commend this agreement to the Committee and urge you to support its implementation as a model of the right way to manage our public lands and resources.
I understand that my colleague Montana Governor Judy Martz will be testifying tomorrow to the Forest and Forest Health Subcommittee on these important issues.
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Royalty management and well inspection
I want to thank you and the Congress for acting last year to remove a major irritant limiting state/Federal cooperation on royalty management and well inspection which was the deduction of unsupported Federal agency costs from the states' share of Mineral Leasing Act revenues. With this obstacle removed, we have an opportunity for the thoughtful examination of ways in which the states and Federal government might further cooperate in enhancing the efficiency of how we collect royalties and manage mineral leases, such as by taking royalties in-kind rather than in-cash.
You should encourage new leadership at the BLM and MMS to seek greater efficiencies in the execution of their responsibilities through enhanced collaboration with states. Both BLM and MMS execute responsibilities that parallel those of state agencies. We ought to be able to take better advantage of the synergies between these Federal and state agencies to improve well inspections and simplify royalty management while reducing the burden on lessees.
National parks and gateway communities
Many of the most spectacular lands and waters in the nation are under the jurisdiction of the National Park Service and other Federal land management agencies. The public's interest in experiencing these national treasurers is growing with the resulting increased pressure on the environment and gateway communities.
We need to find and capitalize on opportunities to show how parks and gateway communities can work in harmony with the environment while meeting needs of visitors. We need to use the parks and gateway communities as educational models of our ability to meet our energy needs while protecting the environment.
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I understand that there are examples of steps that can be taken in this direction. For example, in the Chairman's state of Utah, the state, the local utility (PacifiCorp), and the National Park Service have collaborated to replace remote and polluting diesel generation at Lake Powell with photo-voltaic. Zion National Park's pressing need to reduce traffic in the inner canyon has been integrated with the transportation needs of the park's gateway community of Springdale. These types of innovations should be the norm, not the exception.
I urge you to direct the National Park Service, the BLM, the Forest Service and the Fish and Wildlife Service to seek out opportunities with gateway communities and states to meeting the needs of visitors and the gateway communities while providing a showcase of how the needs for energy and environmental protection can be met. I recommend that you direct these agencies to come back with a plan in 10 months that identifies the opportunities for collaboration and necessary resources to implement the plan. These plans must be developed in cooperation with gateway communities and states.
Thomas Jefferson maintained a solid belief that the success of our democracy lies in ordinary citizens vested with deep civic responsibility, citizens who engage each other directly in the pursuit of the common good. The American West can and should reject the last two decades of bitter debate among environmentalists and resource users that has become so polarized that we have gridlock rather than any public benefit from our public lands. Former EPA Director Bill Ruckelshaus has said ''business, governments and citizens, frustrated by years of litigation and stalemate, have begun to turn to the common good, sometimes out of desperation, but more frequently out of hope. Hope that the decisions they yield will be less controversial and more durable. Hope that jointly designed decisions will be better and more informed decisions. And hope that stakeholder processes could actually help to regenerate public confidence in our institutions, including both government and business.''
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Mr. Chairman, thank you. I would be happy to answer any questions.
Suggested Action Plan to Meet the Westerns Electricity Crisis and Help Build the Foundation for a National Energy Policy
1. Permitting energy facilities.—Direct Federal agencies to partner with Western states to expedite regulatory processes governing the operation of existing powerplants and the construction of necessary new energy infrastructure. This includes:
EPA permits governing operation of existing powerplants and new powerplants;
Federal interface with states on fish management and hydro operations;
Interior Department and Forest Service on the processing rights-of-way;
FERC processing of natural gas pipeline applications.
2. Reliability legislation.—Enact before summer Federal electric system reliability legislation, such as last year's Senate bill making reliability standards enforceable.
Delegates to the West authority to devise standards and allows Federal deference.
Governors create state bodies to advise industry and FERC on reliability standards.
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3. Low-income energy assistance.—Increase Federal funding for low-income energy assistance and low-income weatherization.
Increased natural gas and electricity prices have caused major hardship.
Expected high electricity prices this summer will exacerbate hardship in the West.
4. Energy production and efficiency tax credits and Federal R&D.—Federal action is needed to encourage the development of cleaner, more efficient powerplants and more efficient use of energy.
Adopt energy efficiency tax credits to complement the Western state efforts to reduce demand this summer.
Extend and expand wind production tax credit to geothermal, solar, and biomass.
Adopt tax incentives for advanced coal use.
Expand Federal fossil and renewable energy R&D.
5. Federal appliance standards.—Continue development of standards.
Standards adopted by DOE in January (for clothes washers, water heaters, residential air conditioning and heat pumps) are a step in the right direction.
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Grant waivers for stronger state standards, such as California's air conditioner and commercial appliance standards.
6. Administration.—WGA cooperative agreement.—Implement a multi-year cooperative agreement with Western Governors.
Agreement enhances Western states' standing with Federal agencies and serve as a vehicle for Federal funding on key energy issues.
The cooperative agreement would include: expanding electrical generations, building needed energy infrastructure, and improving the efficiency of energy use.
The cooperative agreement would extend to states cooperating agency status for NEPA reviews on energy projects.
Western Governors' Association Policy Resolution 99–013—Principles for Environmental Management in the West
Sponsors: Governors Kitzhaber and Leavitt
A. BACKGROUND
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Vision statement
1. The people of the West face a common challenge. The quality of life we cherish is threatened—in part by our own success—as our rapid growth impacts much of the environmental quality and many of the natural resource systems that characterize our region. A number of factors illustrate the change that is occurring.
Throughout the 1990s, the population growth rate in the Western United States has surpassed that of every other region of the country, in part because of the draw of the Western quality of life and magnificent landscapes. Population mobility and growth and the resulting increased diversity in values are changing both the political dynamics and the region's economy.
While its historic base of natural resource-related industries, such as farming, fishing, mining, and wood products, remains important, the West has diversified dramatically and now counts telecommunications, tourism, recreation services, transportation, information technologies, software and entertainment companies among its larger employers.
Globalization of markets, changing preferences, substitute materials, and availability of natural resources have affected the competitiveness and resiliency of many Western communities. Communities must work to retool, adjust and diversify to remain competitive.
At the same time, the nature of environmental and natural resource problems is changing. As large, easily identified sources of pollution are controlled, the threat to the environment has shifted to diffuse, numerous, and smaller-scale sources. Our sheer numbers and consumption habits make environmental progress increasingly dependent on the daily behaviors and decisions made by every individual.
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Agricultural consolidation and dispersed development have affected land-use patterns resulting in a wide range of economic and environmental impacts. Impacts range from impaired air quality from increasing numbers of commuters and miles traveled, to fragmented habitats and disrupted migration routes for wildlife. Good stewardship born of locally controlled and economically sustainable agriculture may also suffer.
New computer and communications technologies, as well as new environmental monitoring and characterization technologies, create opportunities for innovative solutions to preserve and enhance the environment and communities of the West.
There is a lot at stake. Westerners enjoy majestic mountains, forests, streams and lakes, as well as beautiful deserts, plains and coastlines. This landscape includes the vast public lands—national parks and forests, wilderness areas and refuges, military bases, tribal lands, state and local public lands—and highly productive private lands. This landscape harbors a wide array of plant and animal life and nurtures a diverse population of people both physically and spiritually. The West's natural resource systems are a source of great wealth and beauty for the region, the nation and the world.
Westerners desire to create a region that will provide our children an extraordinary quality of life. This future embraces a shared sense of stewardship responsibility for our region's natural and cultural assets. It strives to ensure for present and future generations clean water and air, open lands that are beautiful, life-sustaining and productive, and proximity to public recreational opportunities. Equally important is an economy where people of any background or age have opportunities for education and high quality jobs and the ability to contribute to the well-being of their families and fellow citizens.
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It must be clear that in implementing this vision, Westerners do not reject the goals and objectives of Federal environmental laws, nor the appropriate role of Federal regulation and enforcement as a tool to achieve those objectives. Westerners respect treaty rights, sovereignty, property rights and other legal rights, and recognize the responsibilities associated with those rights in addressing our common environmental challenges.
Our future includes a belief that we are better off if we can redirect energy away from polarized battles and toward solving our common problems. It is a vision of rebuilding trust, partnerships and community; of better understanding the cumulative effects of our actions; and of enhancing individual and collective environmental understanding and its associated stewardship. It includes individuals being able to pursue their objectives in ways that build community rather than disrupt it, and commitment to looking for win-win solutions sustainable over time.
2. During the 1990s, the Western Governors have experimented with a variety of ways to improve management of the environment of the West through collaborative processes. Valuable accomplishments have been achieved while lessons have been learned from development of the Park City Principles for Water Management, the High Plains Partnership, the Grand Canyon Visibility Transport Commission, The Oregon Plan for Salmon and Watersheds, the Texas Regional Water Supply Planning Process, Trails and Recreational Access for Alaska and the Wyoming Open Lands Initiative. These efforts have built on the collaborative process which has shown repeated promise, and have demonstrated that the environmental strategies that work best have strong commitment from state and local government, vested local support, and Federal collaboration.
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3. In summary, mindful of our rich Western heritage, recognizing the need to sustain a vibrant Western economy, convinced of the importance of protecting and enhancing the environment for the well-being of present and future generations, and acknowledging the benefits of existing and new approaches to environmental management, Governors and other Westerners with diverse experience have agreed to the principles that follow.
B. GOVERNORS' POLICY STATEMENT
1. The Western Governors commit to a new doctrine to guide natural resource and environmental policy development and decision-making in the West. The doctrine is based upon the principles below, each of which is dependent upon the others. The integration of these principles is critical to their interpretation and the success of the new doctrine.
National Standards, Neighborhood Solutions—Assign Responsibilities at the Right Level
There is full acknowledgment that there are environmental issues of national interest ranging from management of public lands to air and water quality protection. Public processes are used to identify and protect the collective values of the nation's public. No existing laws or identified legal rights and responsibilities are rejected. The role of the Federal government is supported in passing laws that protect these values as well as setting national standards and objectives that identify the appropriate uses and levels of protection to be achieved. As the Federal government sets national standards, they should consult with the states, tribes and local governments as well as other concerned stakeholders in order to access data and other important information. When environmental standards have not been historically within the Federal jurisdiction, non-Federal governments retain their standard setting and enforcing functions to ensure consideration of unique, local-level circumstances and to ensure community involvement.
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With standards and objectives identified, there should be flexibility for non-Federal governments to develop their own plans to achieve them, and to provide accountability. Plans that consider more localized ecological, economic, social and political factors can have the advantage of having more public support and involvement and therefore can reach national standards more efficiently and effectively.
Governments should reward innovation and take responsibility for achieving environmental goals. They should support this type of empowerment for any level of government that can demonstrate its ability to meet or exceed standards and goals through locally or regionally tailored plans. The Federal government should support non-Federal efforts in this regard with funds and technical assistance. In the event that no government or community is progressing toward specific place-based plans, the Federal government should become more actively involved in meeting the standards.
Collaboration, Not Polarization—Use Collaborative Processes to Break Down Barriers and Find Solutions
The regulatory tools we have been relying on over the last quarter of a century are reaching the point of diminishing returns. In addition, environmental issues tend to be highly polarizing, leading to destructive battles that do not necessarily achieve environmental goals. Successful environmental policy implementation is best accomplished through balanced, open and inclusive approaches at the ground level, where interested stakeholders work together to formulate critical issue statements and develop locally based solutions to those issues. Collaborative approaches often result in greater satisfaction with outcomes and broader public support, and can increase the chances of involved parties staying committed over time to the solution and its implementation. Additionally, collaborative mechanisms may save costs when compared with traditional means of policy development. Given the often local nature of collaborative processes, it may be necessary for public and private interests to provide resources to ensure these processes are transparent, have broad participation and are supported with good technical information.
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Reward Results, Not Programs—Move to a Performance-Based System
A clean and safe environment will best be achieved when government actions are focused on outcomes, not programs, and when innovative approaches to achieving desired outcomes are rewarded. Federal, state and local policies should encourage ''outside the box'' thinking in the development of strategies to achieve desired outcomes. Solving problems rather than just complying with programs should be rewarded.
Science for Facts, Process for Priorities—Separate Subjective Choices From Objective Data Gathering
Environmental science is complex and uncertainties exist in most scientific findings. In addressing scientific uncertainties that underlie most environmental issues and decisions, competing interests usually point to scientific conclusions supporting their view and ignore or attack conflicting or insufficient information. This situation allows interests to hold polarized positions, and interferes with reconciling the problems at hand. It may also leave stakeholders in denial over readily perceived environmental problems. This in turn reduces public confidence and raises the stridency of debate. Critical, preventive steps may never be taken as a result, and this may lead to more costly environmental protection than would otherwise be required.
A better approach is to reach agreement on the underlying facts as well as the range of uncertainty surrounding the environmental question at hand before trying to frame the choices to be made. This approach should use a public, balanced and inclusive collaborative process and a range of respected scientists and peer-reviewed science. Such a process promotes quality assurance and quality control mechanisms to evaluate the credibility of scientific conclusions. It can also help stakeholders and decision-makers understand the underlying science and its limitations before decisions are made. If a collaborative process among the stakeholders does not resolve scientific disagreements, decision-makers must evaluate the differing scientific information and make the difficult policy choices. Decision-makers should use ongoing scientific monitoring information to adapt their management decisions as necessary.
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Markets Before Mandates—Pursue Economic Incentives Whenever Appropriate
While most individuals, businesses, and institutions want to protect the environment and achieve desired environmental outcomes at the lowest cost to society, many environmental programs require the use of specific technologies and processes to achieve these outcomes. Reliance on the threat of enforcement action to force compliance with technology or process requirements may result in adequate environmental protection. However, market-based approaches and economic incentives often result in more efficient and cost-effective results and may lead to more rapid compliance. These approaches also reward environmental performance, promote economic health, encourage innovation and increase trust among government, industry and the public.
Change A Heart, Change A Nation—Environmental Understanding is Crucial
Governments at all levels can develop policies, programs and procedures for protecting the environment. Yet the success of these policies ultimately depends on the daily choices of our citizens. Beginning with the nation's youth, people need to understand their relationship with the environment. They need to understand the importance of sustaining and enhancing their surroundings for themselves and future generations. If we are able to achieve a healthy environment, it will be because citizens understand that a healthy environment is critical to the social and economic health of the nation. Government has a role in educating people about stewardship of natural resources. One important way for government to promote individual responsibility is by rewarding those who meet their stewardship responsibilities.
Recognition of Benefits and Costs—Make Sure All Decisions Affecting Infrastructure, Development and Environment are Fully Informed
The implementation of environmental policies and programs should be guided by an assessment of the costs and benefits of different options across the affected geographic range. To best understand opportunities for win-win solutions, cost and benefit assessments should look at life-cycle costs and economic externalities imposed on those who do not participate in key transactions. These assessments can illustrate the relative advantages of various methods of achieving common public goals. However, not all benefits and costs can be easily quantified or translated into dollars. There may be other non-economic factors such as equity within and across generations that should also be fully considered and integrated into every assessment of options. The assessment of options should consider all of the social, legal, economic and political factors while ensuring that neither quantitative nor qualitative factors dominate.
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Solutions Transcend Political Boundaries—Use Appropriate Geographic Boundaries for Environmental Problems
Many of the environmental challenges in the West cross political and agency boundaries. For example, environmental management issues often fall within natural basins. These are often transboundary water or air sheds. Focusing on the natural boundaries of the problem helps identify the appropriate science, possible markets, cross-border issues, and the full range of affected interests and governments that should participate and facilitate solutions. Voluntary interstate strategies as well as other partnerships are important tools as well.
2. The Western Governors invite state, local and Native American leaders, environmental organizations, the private sector, Congress and the Administration to embrace these principles in their environmental and natural resources policy work and decision-making.
C. GOVERNORS' MANAGEMENT DIRECTIVE
1. The Western Governors' Association (WGA) shall transmit a copy of this resolution to the President; Vice President; the Council on Environmental Quality; the Administrator of the Environmental Protection Agency; the Secretaries of Interior, Energy, Transportation and Agriculture; the chairmen and ranking minority leaders of the relevant Committees of Congress; the Western delegation to Congress; Western tribal leaders; state, municipal and county government associations; leaders of business associations and environmental institutions; and interested CEOs.
WGA shall incorporate these principles into its projects and activities in environmental and natural resources policy development and shall work with the states to identify specific areas where they have been demonstrated and adopted or may be in the future.
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3. WGA shall communicate the commitment of the Governors to these principles to organizations, institutions and media concerned with environmental protection and natural resources management.
4. WGA shall report to the Governors annually on input received on the content of the Shared Doctrine for Environmental Management. In conjunction with its Enlibra Steering and Advisory Committees, WGA shall use its limited resources to promote the doctrine, and to engage and evaluate appropriate projects that seek to advance its principles. To carry out these activities, WGA will prepare an implementation plan as part of the annual work plan submitted to the Governors.
Originally adopted as Policy Resolution 98–001 in 1998.
Western Governors' Association Policy Resolution 00–033—Natural Gas
Sponsor: Governor Knowles
A. BACKGROUND
1. North America is dependent on reliable, reasonably priced energy supplies to support its economy.
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2. Demand for natural gas is growing faster than any other energy source. Higher than expected recent growth in natural gas use will fully utilize current North American gas production, creating the relatively high prices consumers are paying for natural gas this winter. U.S. natural gas use is currently 21 trillion cubic feet per year and is expected to grow to 30 trillion cubic feet by 2015. More than 90 percent of planned expansion of electric generation capacity in the U.S. is to be fueled with natural gas.
3. Billions of dollars of investment in production, transmission, storage and distribution facilities will be required to ensure that North American natural gas consumers have access to an adequate supply of fuel.
4. The Interstate Oil and Gas Compact Commission's recent Governor's Summit on Natural Gas concluded, with the support of natural gas experts from industry, regulatory and other government officials, that a functional marketplace is capable of delivering natural gas to North America at reasonable prices.
5. The largest single untapped supply of natural gas available to North American is located in Alaska. 35 trillion cubic feet of gas are found in proven reserves. Additional exploration may discover total reserves of more than 100 trillion cubic feet.
6. In the 1970's the United States and Canada agreed to transport Alaska natural gas to the rest of the continent via a pipeline from Prudhoe Bay through Alaska's interior along the Alcan Highway to the existing North American distribution system. This agreement constitutes a treaty-like international arrangement which was specifically authorized by Congress. Key rights-of-way and regulatory approvals are still valid allowing a project to deliver billions of cubic feet per day by 2006 or 2007. A pipeline along the Alcan Highway would parallel an existing highway corridor and would not cross any U.S. national conservation system units. Such a project would be the biggest private construction project in North American history.
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B. GOVERNORS' POLICY STATEMENT
1. Consistent with Federal and state environmental laws and with local community values, Western Governors:
a. Believe Federal and state governments should endorse policies that increase the availability of North American natural gas at reasonable prices to residential, commercial, industrial, and electric generation consumers,
b. Call on Federal and state governments to work together to allow for appropriate access to their public-owned lands for natural gas exploration, production and transmission, while protecting environmentally sensitive areas, and
c. Endorse, pending completion of appropriate environmental review, a project to bring Alaska gas to market via a pipeline from Prudhoe Bay along the Alcan Highway through Canada to the North American distribution system. Any such project must ensure full pipeline safety to protect the public and environment.
2. Western Governors also believe that the nation must continue to identify and develop a full range of economic and efficient alternative energy sources, including energy conservation.
C. GOVERNORS' MANAGEMENT DIRECTIVE
1. The Western Governors' Association (WGA) shall transmit this resolution to the President, elect, Secretary of Energy, Secretary of Energy designee, and members of the U.S. House and Senate Natural Resources Committees.
2. WGA staff shall monitor developments related to the purposes of this resolution and report to the Governors as needed.
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Western Governors' Association Policy Resolution 00–036—Energy Policy for the Americas
Sponsor: Governor Geringer
A. BACKGROUND
1. The United States enjoys the strongest economy in the world and an increasingly clean environment both of which are made possible by abundant and affordable energy and improvements in clean energy and renewable energy technologies. To assure all Americans access to affordable energy, it is necessary to ensure that diverse energy supplies, including coal, hydroelectric, natural gas, petroleum and renewable resources such as biomass, ethanol, wind, solar, and geothermal, remain available, and that energy resources are used efficiently and in a manner that continues the trend to a cleaner environment
2. Since 1973, the Federal Government has attempted, through at least six plans, to implement an effective national energy policy. Despite the Federal government plans, today we: (a) are increasingly dependent on imported energy supplies, particularly transportation fuels, from unstable regions of the world; (b) do not have in place adequate infrastructure necessary to provide our growing technology-driven economy with reliable, high-quality and affordable supplies of energy; (c) have not adequately improved the efficiency with which energy is used or enabled the demand side of the market to more effectively respond to energy price increases; and (d) have flawed wholesale electricity markets in some areas. These shortcomings are particularly apparent in a year when energy prices dramatically increased and western electricity markets are in the midst of fundamental reforms.
3. In order for the U.S. economy to be sustained and to grow, technologies and policies need to be developed to enable all energy resources to be developed cleanly, efficiently and cost-effectively and to efficiently use energy resources and enable demand responsiveness to energy prices.
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4. The West is particularly critical to the implementation of national energy policy because of the significant fossil energy and renewable energy resources of the region. The West already produces almost 65 percent of the nation's natural gas, 64 percent of the nation's oil, more than 50 percent of the nation's coal, and a major portion of the nation's renewable resources.
5. The United States presently relies on fossil fuels (oil, gas, and coal) for approximately 85 percent of its total energy needs and almost 70 percent of its electrical power.
6. Renewable energy should be developed and energy efficiency promoted to provide sufficient affordable and reliable energy as part of a diverse portfolio that includes fossil fuels as sources for electric power, transportation and heating. As efforts continue to develop technologies to enable a transition to renewable energy, it is important to ensure American consumers can reduce demand and utilize clean burning natural gas, oil and coal.
7. In order for the U.S. economy to maintain sustained growth, all sources of energy should be developed cleanly, efficiently, and cost-effectively through the development of a comprehensive energy policy. To accomplish this, an initiative must be developed and implemented to provide energy security, reliability, diversity, and affordability and to ensure environmental protection. Such an initiative must capitalize on current and future opportunities to improve the efficiency with which energy is used.
B. GOVERNORS' POLICY STATEMENT
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1. Western Governors' support a national energy policy that is guided by the goals of secure, reliable, diverse, affordable and environmentally-sound energy for all citizens. The Governors encourage cooperation among states to meet these goals.
2. A national energy policy should be guided by:
a. Effective and functional market-oriented approaches to energy supply and use that enable the above goals to be met;
b. Appropriate government support of energy research in the development of new technologies and commercial applications, with demonstrations by the private sector;
c. Performance-based Federal and state environmental standards implemented by the states;
d. Strategic alliances with our international partners in the Americas; and
e. Conservation by end-users in the transportation, industrial, residential, and commercial sectors.
3. Western Governors believe that an Energy Policy Roundtable is needed to provide a forum for governors, members of Congress, the Federal administration, state agencies, and experts to examine issues, policies and programs necessary to assure secure, reliable, diverse, affordable and environmentally-sound energy into the future.
C. GOVERNORS' MANAGEMENT DIRECTIVE
1. The Western Governors' Association shall transmit this resolution to the President, elect, the Secretaries or Secretaries-elect of Energy, Agriculture, Interior and Commerce, the Administrator or Administrator-designee of the Environmental Protection Agency, appropriate members and Committees of Congress, the National Governors' Association, and the Interstate Oil and Gas Compact Commission and other concerned organizations.
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2. WGA staff shall monitor developments related to the purposes of this resolution and report to the governors as needed. WGA and affiliated organizations shall ensure that all WGA programs and initiatives that affect energy development and use incorporate the principles and program of this policy.
3. WGA will work with other interested organizations to convene the first Energy Policy Roundtable prior to the WGA Annual Meeting in order to prepare a detailed approach to implement the policies in this resolution.
Western Governors' Association Policy Resolution 00–037—Coal Policy
Sponsor: Governor Geringer
A. BACKGROUND
1. Coal mining has a long and proud heritage in the western United States with today's coal-fired power plants generating 56 percent of the electricity in the United States and over 70 percent of the electricity generated in Arizona, Colorado, Montana, Nevada, New Mexico, Utah and Wyoming.
2. The West now mines over half of the coal produced in the United States from less than 6 percent of the total coal mines in the United States. Western coal comprises approximately 55 percent of the nation's reserves and over 80 percent of the low sulfur coal reserves (defined as less than 1.67 lbs. SO2, per million Btu).
3. As the nation's growth in energy demand continues, western coal development is an important part of the fuel mix necessary to assure that U.S. citizens' energy needs are met in an affordable, reliable and increasingly clean manner.
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4. Western and national coal-fired power generation is increasingly clean, with significant reductions in SO2, NOX, and particulate matter during a period of dramatic increase in the demand for electricity. For example, western coal-fired power plants currently produce 23 percent of the coal-fired electricity generated in the country but emit only 13 percent of the SO2 emissions from such plants.
5. The western coal industry is among the safest in the entire world, and has consistently conducted successful reclamation of mined lands.
B. GOVERNORS' POLICY STATEMENT
1. The Western Governors' Association acknowledges the significant contribution of the coal industry to many western states' revenues and local communities' economics. The Governors also strongly support public and private research to reduce emissions from coal-fired generation.
2. Consistent with the Governors' general energy policy resolution 00–036, Western Governors support the concepts for Federal legislation which:
a. Accelerate technology research and development programs for advanced clean coal technology for new and existing coal based electric generating facilities.
b. Encourages appropriate incentives for emission reductions and efficiency improvements in existing coal based electricity-generating facilities.
c. Encourages incentives for early commercial application of advanced clean coal technologies for new generating capacity.
3. Western Governors support the concept of a more comprehensive and coordinated approach to environmental regulation.
4. Western Governors recognize that there are multiple sources of emissions that cause regional haze and an effective emissions-reduction program must treat all sources fairly.
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C. GOVERNORS' MANAGEMENT DIRECTIVE
1. WGA staff shall convey to the Administration, Congress and the U.S. Environmental Protection Agency that the Western Governors' Association supports the concepts of Federal legislation as outlined in Policy Statement No. 2.
2. WGA staff shall convey to Congress and the U.S. Environmental Protection Agency the need to address the multitude of emission concerns in a comprehensive and coordinated approach.
3. WGA staff shall convey this resolution to Mining Associations within the membership states of the Western Governors' Association.
[Maps referred to in Governor Geringer's statement follow:]
The CHAIRMAN. Thank you, Governor Geringer. We appreciate your excellent remarks.
I recognize the gentleman from Montana to introduce the Governor of Montana.
Mr. REHBERG. Thank you, Mr. Chairman. It gives me a great deal of pleasure to draw attention to the last of the three panel members, a woman that I have worked with for many years. Twelve years ago, we began working with Senator Conrad Burns within the State operation.
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If the gentlelady from Wyoming were here, I would make some comment like ''My governor can beat up her governor.'' She is a former Olympic speed skating champion. So, Jim, I wouldn't leg wrestle her if I were you; also a small businesswoman, very successful in that right as well. And in the true tradition of firsts in Montana, we were the first State to have a woman Congresswoman, Jeanette Rankin, and we now have our first woman governor, and we so dearly appreciate the things she is going to try and do to build energy independence for this nation.
Montana's motto is ''oro y plata,'' ''gold and silver,'' and it is appropriate now at this time that we talk about coal, natural gas, and oil being able to free us from the dependence on sources of oil oversees.
So without further ado, I want to introduce a very good friend of mine, a new Governor, Judy Martz of the State of Montana.
The CHAIRMAN. Thank you. We appreciate the introduction.
Governor, we will turn to you.
STATEMENT OF THE HON. JUDY MARTZ, GOVERNOR, STATE OF MONTANA
Governor MARTZ. Thank you. First of all, thank you, Congressman Rehberg. We are very proud to have you here representing Montana.
Mr. Chairman, members of the Committee, for the record I am Governor Judy Martz, representing the Big Sky State of Montana. It is an honor to be here today to testify on the role of public lands in developing a self-reliant energy policy. I appreciate the efforts and interest this Committee has shown in our State and in this issue.
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As Governor Geringer mentioned, we also experienced last summer those horrific fires. We have closed down our only large aluminum plant, which is now selling back their power and closing their doors for the next year. Mines that produce much-needed resources are at risk of closing because of energy prices, and one of our major cements plants. As we lose jobs at 300 and 350 people a crack, that is a huge impact to the State of Montana.
I ask for your consideration of my prior submission of my complete testimony for the record and for your review.
Now, let me begin by putting into context the size of Montana. Overall, Montana has more than 93 million acres of land. That is more than 145,000 square miles. Of the 93 million acres, more than 19 million acres are managed by the United States Forest Service, 8 million by the Bureau of Land Management, and another 1.1 million by the National Park Service. Thirty-three percent of our land mass is managed by the Federal Government.
We must start to utilize the resources that we have. We should not act surprised that after a decade of stopping natural resource development on public lands that we are suddenly faced with an energy shortage. Natural gas prices will continue to rise if we don't focus on the energy that we can provide as a nation. Electricity prices will continue to climb if we continue to say we can't develop clean coal to burn, we can't develop natural gas, and we have to blow up our hydropower dams. We can expand our natural resource development well into the context of environmental stewardship. This is not a zero-sum game.
Montana has a wealth of natural resources, from vast super-compliant coal fields in the east, to thousands of acres of timber land in the west. Montana can contribute to the economic health of this country through responsible and environmentally-sensible development of our resources.
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Unfortunately, the Federal Government has systematically reduced the number of opportunities for reasonable development of our natural resources in the past recent years. At the end of the last administration's term of office, doors were closed on many opportunities to responsible management and development of natural resources. The past President's Roadless Initiative will lock up over 6 million acres of U.S. Forest Service land. Additionally, the Roadless Initiative will prohibit sensible and environmentally-sensitive exploration of natural gas and oil.
Also, just days before leaving office, President Clinton designated nearly half a million acres of land along the upper Missouri River breaks as a National Monument. The past administration permanently set aside one of our State's greatest natural gas reserves due to concerns over a great influx of tourists.
Last year, approximately 420,000 acres along the Rocky Mountain Front were withdrawn from mineral development for the next 20 years. The Rocky Mountain Front has untold reserves of natural gas. In fact, our Canadian neighbors to the north have been responsibly developing natural gas along the Front for years.
But the news for us is not all bad. In fact, despite the previous attempts to lock up the West, we believe Montana still has tremendous potential to meet the demands of a growing nation. Montana anticipates the imminent transfer of Federal mineral rights in super-compliant coal reserves in southeast Montana. This area of land, known as the Otter Creek tracts, is the result of an exchange for the mineral development rights outside Yellowstone National Park.
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While I served as Montana's Lieutenant Governor with former Governor Marc Racicot, Montana successfully negotiated a deal with the Federal Government that resulted in a buy-out of mineral rights and an exchange for the lost economic development. Under the leadership of Senator Conrad Burns and former Congressman Rick Hill, H.R. 2107 was signed into law in 1998 (P.L. 105-83), mandating the transfer of Otter Creek Tracts 1, 2 and 3 to the State of Montana.
The former Secretary of the Interior ignored the law, refusing to make the transfer. I am pleased to say that, working with new Secretary of Interior Gail Norton, I am anticipating Montana will receive ownership of these tracts in the near future, a very important move for Montana. The development of over 533 million tons of super-compliant coal is at stake here. I call it super-compliant because it far exceeds the Federal clean air requirements for high btu values and low sulfur output.
This high-quality coal will be in demand in the Midwest as power generating facilities struggle to improve air quality, as mandated under the Clean Air Act. The development of these tracts is also bringing increased interest from investors who recognize the need for additional power sources in the Western half of our country. We have already have several inquiries about potential coal development, but also coal-fired electric generating facilities that will fuel the power needs of Montana and the West.
Along with the potential coal development, Montana has vast reserves of resources only recently acknowledged as a viable energy source: coal bed methane, or natural gas. Currently, Montana's Department of Environmental Quality and the BLM are working jointly to assess environmental impacts from the proposed development. Wyoming Governor Geringer has had tremendous experience in the development of coal bed methane, and we hope to learn from his efforts in Wyoming.
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Today, nearly 57 percent of our energy needs are supplied by foreign nations. Not only is that a national security risk, it takes good-paying jobs away from hard-working Americans, hard-working Montanans. I believe that is unacceptable.
We have the resources to meet a greater portion of our country's energy needs, and we can do it in an environmentally-sensitive manner. As a nation, we need to reevaluate the role of our public lands and how they can play a part in supplying this country with the energy it so desperately needs.
We ask for every consideration to be allowed, with new technologies, to move forward in our State of Montana and the Western States of this country and to assist in the energy needs of this country. We want to be there. We want to see that environmentally-safe maneuvers or management practices will be used in conservation, in transmission lines or pipelines, regulation changes on the State and Federal level, increasing supply for generation plants, and our immediate long-range needs and our short-range needs would be met through those usages.
We want to be a partner with the Federal Government. We want our opinions to be heard, as we have not had them heard, we believe, in the last 8 years. We appreciate the opportunity to be here with you and we appreciate what is going to be happening in the future.
Thank you.
[The prepared statement of Governor Martz follows:]
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Statement of The Honorable Judy Martz, Governor, State of Montana
Mr. Chairman, Members of the Committee, for the record my name is Judy Martz and I am the Governor of the great state of Montana. It is an honor to be here today to speak on behalf of my state on the Role of Public Lands in Developing a Self-Reliant Energy Policy. I appreciate the efforts and interest this Committee has shown in this issue.
Let me begin by putting into context the size of Montana. Overall, Montana has in excess of 93 million acres of land. That is over 145,000 square miles. Congressman Rehberg, our states sole voice in the House of Representatives has a big job.
Of the 93 million acres, over 19 million acres are managed by the United States Forest Service, 8 million by the Bureau of Land Management and another 1.1 million by the National Park Service.
Adding these public land figures together, and you see that 33 percent of our land mass is managed by the Federal Government.
Montana has a wealth of natural resources. From vast super-compliant coal fields in the east, to miles of timber land in the west, Montana has the natural resources to help quest the thirst for energy across our nation. Montanans are anxious for the opportunity to contribute to the economic health of this country through responsible and environmentally sensible development of our resources.
Unfortunately, we have seen over the past decade, a continual move away from the responsible development of our natural resources. We have continued to increase our reliance on foreign nations to supply us with our energy needs. The result, foreign dependence on energy has reached all time highs, which in turn has led to rising energy costs and power shortages across the nation.
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And while Montana has the potential to help supply this nation with clean, affordable energy, we have seen our ability to responsibly develop those resources grind to a halt through Federal inaction and mismanagement. At the end of President Clinton's term in office, he forced many Federal land grabs through in an attempt to recreate a lasting legacy. In Montana alone, we protested to no avail, President Clinton's Roadless Initiative, which locked up over 6 million acres of U.S. Forest Service land. Never mind the fact that the smoke had barely cleared from devastating summer fires that reduced to ash over 900,000 acres of forest land.
Additionally, the Roadless Initiative will forever prohibit sensible and environmentally sensitive exploration of natural gas and oil.
Also, just days before leaving office, President Clinton designated nearly half a million acres of land along the Upper Missouri River a National Monument. While the state has been promoting tourist activity in Montana in an attempt to replace revenues from resource industries, President Clinton and Secretary of Interior Bruce Babbitt permanently set aside one of our states greatest natural gas reserves due to ''concerns over a great influx of tourists''.
Last year, approximately 420,000 acres along the Rocky Mountain Front were withdrawn for mineral development for the next 20 years. The Rocky Mountain Front has untold reserves of natural gas. In fact, our Canadian neighbors to the north have been responsibly developing natural gas along the Front for years.
But the news is not all bad. In fact, despite the previous Administration's attempt to protect the west from itself, we believe Montana still has tremendous potential to meet the demands of a growing nation.
Montana is in the process of receiving the Federal mineral rights in super-compliant coal reserves in Southeast Montana. This area of land known as the Otter Creek tracts is the result of an exchange for the mineral development fights outside Yellowstone National Park. While serving as Montana's Lieutenant Governor under former Governor Marc Racicot, Montana successfully negotiated a deal with the Federal government that resulted in the buyout of mineral rights, and an exchange for the lost economic development. Under the leadership of Senator Conrad Burns and former Congressman Rick Hill, H.R. 2107 was signed into law in 1998, mandating the transfer of Otter Creek Tracts 1, 2 and 3 to the State of Montana.
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However, always mindful of what was best for the citizens of Montana, former Secretary of Interior Bruce Babbitt refused to follow the Federal mandate and reneged on the Federal government's promise. I am pleased to say that working with the new Secretary of Interior Gale Norton, I believe Montana will receive ownership of these tracts in the near future.
And at stake is the development of over 533 million tons of super-compliant coal. And I call it super-compliant because it far exceeds Federal Clean Air requirements with high BTU values and low sulphur output.
These tracts will most likely be included as part of our school trust land, thus the revenue's from development will add to our state's ability to fund public education.
Additionally, this high quality coal will be in great demand in the Midwestern part of our country as power generating facilities struggle to improve air quality as mandated under the Clean Air Act.
The development of these tracts is also bringing increased interest from investors who recognize the need for additional power sources in the western half of our country. We have already had several inquiries about the potential development of not only the coal, but also coal fired electric generating facilities that will fuel the power needs of Montana and the west.
Along with potential coal development, Montana has vast reserves of a resource only recently acknowledged as a viable energy source. Coal bed methane. Currently, Montana's Department of Environmental Quality and the BLM are working jointly to assess environmental impacts from proposed development. Wyoming Governor Geringer has had tremendous experience in the development of coal bed methane and we hope to learn from efforts in Wyoming.
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In Montana, we have seen increased interest in utilizing traditionally under-valued or no-valued timber byproducts to produce electricity. And this prospect grows increasingly attractive as the United States Forest Service begins to implement The National Fire Plan, a plan that addresses the health of our forests that in part focuses on mechanical treatment of small trees and shrubs that contribute to catastrophic fires. With the General Accounting Office identifying over 40 million acres of interior west forestlands at risk for catastrophic fire, we have a tremendous potential energy resource at our disposal.
We have a tremendous amount of energy reserves on our public lands. From coal to coal bed methane, from natural gas to timber byproduct co-generation, we have the potential to be much more self reliant in terms of energy production.
Today, nearly 57 percent of our energy needs are supplied by foreign nations. Not only is that a national security risk, it takes good paying jobs away from hard-working Americans. It is unacceptable. We have the resources to provide a much greater role in meeting our country's energy needs. And we can do it in an environmentally sensitive manner. As a nation, we need to re-evaluate the role our public lands can play in supplying this country with the energy it so desperately needs.
The CHAIRMAN. Thank you, Governor Martz. We appreciate your excellent testimony.
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We will now turn to members of the Committee for questions for the governors. We will limit the members to 5 minutes each. We will start with the ranking member. Mr. Rahall, of West Virginia, is recognized.
Mr. RAHALL. Thank you, Mr. Chairman. I certainly don't anticipate taking my full 5 minutes. I know of the time constraints on the governors, but I want to ask a question of Governors Geringer and Martz before yielding to my colleague from Massachusetts, Mr. Markey, who just came in.
Since I'm from West Virginia, it should come as no surprise that my first question involves coal, and I do direct it to the two governors I mentioned. I take it that you both support private property rights?
Governor GERINGER. Absolutely.
Governor MARTZ. The same, absolutely.
Mr. RAHALL. Okay. That being the case, you may be interested to know that Federal coal leasing activities in the West are beginning to intrude on the private property rights of my constituents. I believe that Federal coal in the West should not be developed for the sole purpose of competing against coal production produced from private lands in the Midwest and the Appalachian region.
Western coal serving Western markets is fine, certainly. But for publicly-owned resources to be produced simply to displace privately-owned resources—well, you can see I have a problem with that. Let me give you an example of what I am talking about.
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Recently, Morgan Stanley Dean Witter upgraded the two major Western railroads, Burlington Northern-Sante Fe and the Union Pacific, from neutral to out-perform, based on their potential to expand into new Eastern coal markets this year with Powder River Basin coal.
My question is this: How do you reconcile this Federal intrusion into the marketplace through coal leasing activities that you apparently favor, with the fact that this Federal coal is displacing coal produced from private lands in electricity markets they have traditionally held?
Governor GERINGER. Mr. Chairman, I am not exactly familiar with the situation that Congressman Rahall is describing, but I would comment in this way. It is not one versus the other; it is both working together. There is enough demand currently today that both ought to be producing coal in an environmentally sound way.
We are not about in Wyoming to dictate to West Virginia how you ought to manage for environmental considerations, or economic, and we would ask the same in return. I indicated that Federal lands are producing most of the coal from Wyoming. I believe you are correct in the statistics that you have used. In fact, Wyoming and the West, in fact, now out-produce the East in terms of total quantity of coal.
Mr. RAHALL. Displacing our traditional markets in the East.
Governor GERINGER. Well, with all respect, I don't believe it is displacing. I believe that the problem is not what Wyoming is doing. It is what is not happening in West Virginia, and I certainly invite your questions to someone who has coal production in both States; that is, Arch Coal. Terry O'Connor is here and will be on the next panel to discuss that. So perhaps he, because he has economic interests in both States, might be able to give you the very practical, common-sense approach to it.
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Let me illustrate it in another way. Nearly 60 percent of all generation today is from coal-fired generation. Yet, probably close to 90 or 95 percent of all new power generation going online is natural gas. Coal ought to be in the mix somewhere. We have a national energy policy by default that favors natural gas over coal. Yet, coal can be as energy-compliant, as well as environmentally-compliant.
Congressman Rahall, I would suggest that we ought to evaluate why coal is being displaced by national energy policy, not by Wyoming production on Federal lands. It is that lack of policy. And to give you a cost comparison, you can generate electricity from coal at about 20 percent the cost of generation from natural gas at today's prices. That ought to affect and benefit the members in your district, as well as those who produce the coal.
So the issue is over the lack of a policy that would encourage the use of high-quality, clean-burning coal from whatever State it comes from, and we ought to work together.
Governor MARTZ. Congressman, I am not so sure that I have a lot more to add. Coming from the Western States, we have a need out there and the coal is sitting there to be used. I think it is advantageous for us to do that, and I don't see it as a threat to any other State. This country needs the energy right now.
Sometimes, it is not so popular to talk about the jobs involved, but in Montana it is very popular. We need those jobs. We also need to have the energy coming from the coal beds that are there. Coal beds are one of the least expensive ways to produce energy, in comparison to gas. So for that reason, we will continue to pursue this avenue.
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Mr. RAHALL. Thank you. I am aware of the figures you all cited. It is just that overall philosophy that I have a problem with, being for property rights on the one hand, and yet, allowing Federal help and Federal policy to displace private property rights in the East and the production therefrom.
Governor MARTZ. Could I just address that one time, too? In the particular area that I am talking about, the Otter Creek tracts that we are asking to be transferred as the law says they should be, former Governor Marc Racicot has visited most of the people in those areas and most all of them are amiable to having this kind of enterprise go on in that area. I am sure that a lot of the lands that you are talking about in your State are sitting—I shouldn't say I am sure of that, but I would guess some of that is on private property.
Mr. RAHALL. All of our land in West Virginia is private property.
Governor MARTZ. Sure, and is developed, and that is what we want to do, also.
The CHAIRMAN. The time of the gentleman has expired.
On the Republican side, Mr. Duncan.
Mr. DUNCAN. Thank you, Mr. Chairman, and thank you for holding this hearing and for your great leadership of this Committee.
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About 3 weeks ago, in the small town of Englewood, Tennessee, in my district, the mayor there told me that he had senior citizens who were having to choose between paying their utility bills or eating. And I noticed Governor Geringer mentioned something like that in his State.
I can tell you that, first of all, this is not just a Western problem. All over this country, you have groups, usually of very wealthy environmental extremists, who protest anytime anybody wants to dig for any coal, drill for any oil, cut a single tree, produce any natural gas. What I think they are ignoring or they don't care about is that who they are hurting in that process are the poor and the lower-income people because they are destroying jobs and they are driving up prices, and I think it is very, sad.
I read a few years ago that the average member of the Sierra Club had an income over four times that of the average American. And perhaps they are not hurt by some of these policies, but I can tell you a lot of people in my district are. So I certainly appreciate the testimony that each of you has given here today, and I hope that as you pursue these policies—I think people look at a map of the United States on one little page in a book and they forget how big this country is.
I serve on the Forests Subcommittee and I was told that in the mid-1980's the Congress passed a law that was hailed by the environmentalists at the time that we wouldn't cut more than 80 percent of the new growth in the national forests. Today, we are cutting less than one-seventh of the new growth. We are not even cutting half of the dead and dying trees. So what does that do? It destroys jobs and it drives up prices, and people wonder why houses and a lot of other things are costing so much.
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Governor Martz mentioned the dependence on foreign oil. That increases with each passing year, and I think money is behind it because I can tell you that the OPEC countries and many shipping companies—there are a lot of people with big money or companies with big money that benefit if we depend more and more on foreign energy.
So I appreciate your coming here today, and with that I will yield back the balance of my time.
The CHAIRMAN. I appreciate the gentleman.
The gentleman from Massachusetts, Mr. Markey.
Mr. MARKEY. Thank you, Mr. Chairman, very much.
President Bush has made the Arctic Refuge the center of this debate. You can talk about all the environmentally-benign drilling rigs you want. We are supposed to conjure up in our minds Carl Sandburg and little cats' feet on the tundra. But as my mother used to say, the most important question in every situation in life is ''compared to what.'' So when you compare today's rigs to yesterday's rigs, you are missing the point.
Here is the point: today, the Refuge is God-made, unique, roadless, untracked, and undisturbed by man. Nearby is one of the most environmentally-benign oil fields in the world, in Prudhoe Bay. They go as far as to put diapers on the trucks so the amount of oil that leaks from the pans is minimized. Now, that is impressive, but don't tell me it changes the fact that a huge industrial complex has grown up on the tundra on the North Slope that has changed the character of the wilderness forever.
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While the diaper catches drippings, the routine operation of the fields results in gallons of toxic fluids being spilled everyday. Exploring, drilling, producing, connecting, hauling, pumping—it is a very dirty business even when you are trying to be clean. Now, let me show you what I mean.
Poster number 1. President Bush says ''. . . leaving only footprints.'' That is what he is talking about. That is Prudhoe Bay. You can just get an aerial view and just keep going in terms of the impact that the drilling has had on that area.
Poster number 2. Here is the existing footprint. It sprawls over 1,000 square miles, permanently scaring the landscape and oozing ever outward. And, again, this is all permissible, all within the law right now. We are not debating this today.
Poster number 3. This is what my mother was talking about. Right now, the black side is Prudhoe Bay. The Canning River is all that separates the protected area of the Refuge from the blight. On the black side, you have 1,000 square miles of development, 500 miles of roads, 3,893 wells drilled, 170 drill pads, 55 contaminated waste sites, 1 toxic spill everyday, 2 refineries, twice the nitrogen oxide pollution as Washington, D.C., 114,000 metric tons of methane and 11 million metric tons of carbon emissions each year, $22 million in civil and criminal penalties, 25 production and treatment facilities, 60 million cubic yards of gravel mined.
On the other side, you have no industrial development, just as Congress declared in 1980, this Committee declared, Mo Udall and all the Republicans, unanimously in 1980, nothing.
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Now, there is no such thing as a wilderness oil field. It is an oxymoron. Jumbo shrimp, Chevy Chase night life, wilderness oil field—there is no such thing. The sooner that we declare the Refuge a fully protected unit of the Wilderness Act, the sooner we will turn our attention to producing energy such as natural gas, renewables, clean coal.
Looking automobiles and SUVs, after all, we consume 20 million barrels of oil each day, and 13.5 million of those barrels go into gasoline tanks. So is it really a great moment when Chrysler announced its Unimog last week that gets 10 miles a gallon, going further backwards in terms of energy efficiency, or do we really want an SUV to get 25 or 30 miles a gallon so that we don't have to drill in that wilderness? Where would we go first, to the God-made, beautiful Refuge or to the man-made problems of automobiles and SUVs and air conditioners and refrigerators, et cetera, that are increasingly fuel-inefficient?
Why doesn't it make sense, Governor, for us first to try to tap the natural gas in Prudhoe Bay and bring that down through a pipeline, to tap the National Petroleum Reserve in a way that it hasn't been yet? Why don't we first tap all the resources that are legally allowed to be tapped by Democrats and Republicans, and partner that with a deal on fuel economy standards and appliance efficiency standards before we take that pristine area and destroy it forever?
The CHAIRMAN. The time of the gentleman has expired, and I assume the gentleman is going to ask unanimous consent that the Governor of Alaska can respond to your question. Is that correct?
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Mr. MARKEY. I actually need your permission alone, Mr. Chairman. I would ask that.
The CHAIRMAN. The Governor of Alaska.
Governor KNOWLES. Thank you, Mr. Chairman.
Mr. Markey, in response to your question about why don't we look at other areas first, indeed we are looking at all of those possibilities. The infrastructure of the North Slope in developing oil and gas for America's needs will be utilizing all of the opportunities of where the oil is.
Congress, in 1980, determined that in creating the wilderness, the Arctic National Wildlife Refuge, in creating that area, that there was a certain part of it that was going to be set aside for study because even at that time, with limited technology, they knew that it was probably one of the most promising areas for oil and gas development, and that remains today.
So we do utilize the overhead of infrastructure that is in place as we reach out to the west to the National Petroleum Reserve. I would note that in today's technology, it is estimated there may be 5 billion barrels of oil and maybe 5 to 10 trillion cubic feet of gas in an area that 20 years ago they quit holding leases on because no one was interested because they didn't think there was any more there.
So we know today, just as we have reduced the size of the footprint by one-tenth of what it used to be 20 years ago, that we can go to these areas. We can do so in a way that does protect the environment. Nobody pretends that it would be a wilderness where there is development, but we can protect the environment. We can ensure the health of the wildlife and the fish and we can assure in those areas where we do have development that it is done right.
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Mr. MARKEY. But, Governor, it hasn't been economical to drill for the natural gas in Prudhoe Bay for 20 years even though there are 30 to 50 trillion cubic feet of natural gas there. What does that say about the economics of ANWR if the industry can't even figure out after 20 years, with Democrats and Republicans giving you approval—not giving you, but the industry—to bring down the natural gas from Prudhoe Bay? It has been uneconomical.
Governor KNOWLES. Mr. Chairman and Mr. Markey, if I might respond, that has been a very interesting story because Congress again approved a gas pipeline in 1977 under the belief that at that time it was economical to bring it to the lower 48. The market really wasn't there.
At the same time, the gas was being used to repressurize the field to increase the recovery of oil in Prudhoe Bay, and so it has been hard at work. We reinject 8 billion cubic feet a day, recycle it into Prudhoe Bay to increase our recovery of oil. As that is winding down and as Prudhoe Bay is winding down, it truly is time to come and serve the energy market. The price has increased to where an investment in a $10 billion pipeline is economical and can meet and help stabilize the increased price of gas in America today. So it really works out in a win-win situation.
Mr. MARKEY. I think it would be better for the industry to finish that project first, or at least begin it, and I want to help on that and prove that that is economical before we destroy the Refuge. I think that is something we could probably all agree to work upon, but right now no progress has really been made.
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Thank you, Mr. Chairman.
The CHAIRMAN. Governor, if I may, I have got a little question here I am not sure of. According to this map, this area that they would like to drill in is not a designated wilderness area. Is that correct?
Governor KNOWLES. Mr. Chairman, no, sir, that is not. That was designated as a study area which was set aside from the Wildlife Refuge in 1980. It was done as a study area to be determined later by Congress as to whether it would be open for development, and that is the question that we are coming forward with today.
The CHAIRMAN. I appreciate that clarification.
The gentleman from Maryland, Mr. Gilchrest, is recognized for five minutes.
Mr. GILCHREST. I thank the Chairman. I ask unanimous consent for 15. Is there objection?
The CHAIRMAN. Yes, there probably is.
Mr. GILCHREST. Just kidding, Mr. Chairman.
Governor Knowles, I crawled down in a grizzly bear's den one time in Alaska. The Governor from Wyoming, I once got a set of chains for my pickup in Buffalo, Wyoming, in November, in a pretty severe snowstorm. And the Governor from Montana, I used to live in the wilderness in northern Idaho and would come to Missoula once a month for supplies. So it is a beautiful State, it is a beautiful region.
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I would like to boil this down, at least in my terms, to something very simplistic, and that is lung tissue and mortgage payments. We all try to make sure we do both, that we have clean air to breathe and we don't exacerbate lung problems, and we provide safe and secure jobs for people to raise their families and live their lives.
The issue of drilling for oil or mining in the West always arouses a division in the country between East and West. I, from Maryland, can recognize the need for employment and for jobs, and when I ride around the Washington Beltway or the Baltimore Beltway, or I look at places like Tysons Corner, I yearn for the open spaces. It is a necessity for me that I know still exists in the West.
In Maryland, we used to have elk, we used to have wolves, we used to have salmon, we used to have bison, we used to have grizzly bears. We used to have an abundance of otters, of mink, of shore birds. Most of those are either diminished or gone. In Alaska, none of those are diminished or gone or threatened or endangered. They are still there.
So I recognize that people in the West, when someone from the East Coast who drives everyday to work in an SUV on the Beltway and is looking for more jobs, and yet they are opposed to drilling for oil at ANWR—I find it a paradox, almost, if I may, an oxymoron. Even Democratic local elected officials in my district that will change the zoning or land use for an area that is tree-lined or wetlands or open space so they can add an addition to Wal-Mart or another shopping plaza—those people will vote against drilling for oil at ANWR. The governor from my State, the Senators from my State, pursue dredging at all costs, and the reason is for job security, for economic development.
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Governor Knowles, you made a comment about we need a combination of conservation and increase in supplies. Now, I would add one other thing to that list, besides conservation —we need to aggressively pursue that—and increased supply. I understand that. I also understand the idea that jobs in a remote area are important for people, but we need to aggressively pursue alternative sources.
It is my judgment that we cannot ever be energy-independent if we continue to rely on fossil fuels in the manner in which we have done under the present conditions. The cost of fossil fuel will probably never go down because the increased worldwide demand for fossil fuel is not at a level point. It is not going to decrease; it is going to dramatically increase. So our dependence on fossil fuel is to a large extent never going to enable us to be energy-independent.
So what are the alternatives? I think we can pursue aggressively alternatives, and many of them were mentioned here today, whether it is nuclear power; solar power; wind power, which we can produce more efficient lines so the resistance is less and you get more of the electricity through; and fuel cells, what we have been powering our Space Shuttle on for decades now.
I have talked to engineers. In less than 20 years, they say most of our automobiles can be running and operating on fuel cells, where the emission is pure water. Our power plants in about 20 years, a majority of them, if we aggressively pursue this, can operate under this technology.
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The last comment, Mr. Chairman, lung tissue and mortgage payments, the longing and the necessity for open spaces. And so after all that, Mr. Chairman, and my understanding for the West and the need for jobs, I would still oppose drilling for oil at ANWR.
The CHAIRMAN. Let me ask this. Members of the Majority and Minority side, will you raise your hands if you have questions for the governors? If you do, then we will take you by seniority.
We will go to Mr. DeFazio; on the Majority side, Mrs. Cubin and the gentleman from Indiana, Mr. Souder.
Mr. DeFazio, you are recognized for 5 minutes.
Mr. DEFAZIO. Thank you, Mr. Chairman.
To Governor Martz, I have followed with concern the closing of the aluminum plants in Montana, the threat to the mining industry and forest, lumber and wood products industry because of sky-high electric prices. I would note that those sky-high prices come at a time when your State is generating as much electricity as it ever has. It is just under a different structure where you have deregulated electricity and you have deregulated the price that goes to large industrial consumers.
Do you support a cap or temporary cap on wholesale energy prices in the West? The cause of your plants closing is not a shortage of energy, it is an artificial run-up in wholesale prices caused by the deregulation in California. Do you support the cap?
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Governor MARTZ. Congressman, no, I do not support capping them. We need to produce more generation.
Mr. DEFAZIO. Thank you, Governor. Well, if you hadn't allowed Montana Power to sell all its generation to an out-of-state company who is now shipping all the power out of State and marking up the price, you might have enough energy to run your own plants. I am getting tired of people using the energy crisis as an excuse to drill.
There is a real energy crisis in the West. There is an electric energy crisis today. Governor Knowles referred to it, people trapped in elevators. But guess what? It has nothing to do with oil, it has nothing to do with drilling in ANWR. That is being used as a pretty limp excuse to deal with real problems while we ignore the real problem, which is speculative activity going on in California.
California had a price spike and a crisis in their low season. They are a net exporter in the winter, and guess what? This year, they weren't. Guess what? 15,500 megawatts of generation was shut down, not because of clean air, not because of lack of gas, certainly not because of lack of oil, since 1 percent of their energy is generated by burning oil, but because of a market gone nuts, with huge increases in profits for out-of-state energy companies, the same thing that has happened in Montana.
Governor Martz, your own energy commission —you have an Advisory Council on Electricity Prices and they voted on Monday to keep alive a number of options for further study. Your Republican house majority leader has proposed a 3,300-percent—he says here he wants to have an energy transaction tax paid by power companies, and increase the tax phenomenally to raise $116 million a year to help lower the rates for consumers.
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Isn't this kind of nuts? We have got a market where you allow speculators to gouge your consumers and then we are going to try and maybe tax them back to get the windfall. We have another proposal for a windfall profits tax of 45 to 50 percent. Yet, you are coming in here and saying we need to produce more energy.
Yes, there is a long-term energy problem in this country and in the Western United States, but today the crisis is artificially created. Natural gas prices followed electricity. I have met with the largest distributors of natural gas in the West and they have the graphs to prove it. The wholesale prices at the Canadian border didn't go up until the electricity prices went through the ceiling. If we don't deal with the underlying cause today—yes, 10 years from now you can have more energy production from fluid methane, or if Governor Knowles is successful at opening ANWR to add to the production from the National Petroleum Reserve and the natural gas that we can all agree on.
But the point is people are going to go broke in the meantime. Businesses are going to close in the meantime. We need some leadership from Western Governors and other people to deal with this. Now, I know Alaska is not on our grid, so this doesn't directly impact you. But I would ask you to please don't use this and don't use the image of senior citizens trapped in elevators to justify drilling in ANWR. There is no relationship.
Governor Knowles, do you support the continued export of oil from Alaska to China and Japan?
Governor KNOWLES. Madam Chairman and Mr. DeFazio, there is no oil that is currently being exported from Alaska to Asia. At one time, there was a small amount, a relatively small amount, no more than 5 percent, that was exported, just like there is currently crude and crude oil products that are being exported from every other State in the Union.
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As this Congress and the administration and I also personally support many of the free trade aspects that have helped our economy, the fact of the matter is—
Mr. DEFAZIO. Governor, if I could, we have documents showing that the major oil companies on the West Coast of the United States have internal documents showing that they only wanted to export oil from Alaska to drive up wholesale prices in the Western United States.
Would you support reimposing a ban on the export of oil in the future from Alaska? If we are going to develop more oil resources in Alaska, would you agree that every drop of that oil should stay home?
Governor KNOWLES. Madam Chairman, Mr. DeFazio, I believe that Alaska should be treated no different than every other State in the Union. There is no ban on oil exports from any State in the Union except for Alaska, and that was done away with, with bipartisan support, signed by President Clinton, sponsored by him several years ago.
The fact of the matter is that there is no oil being exported today because the market clearly is in need of all of the oil that is had. It has never been a significant amount, as I say, never more than 5 percent when it was passed several years ago, as I say, with the support of President Clinton and bipartisan in Congress.
Mr. DEFAZIO. Well, the oil company execs seem to feel that it got them two to three cents per gallon on the wholesale market in the West, which created a few hundred million dollars of illicit profits. So I would urge you to reconsider your position and perhaps we could support a ban on any oil exports from the United States. If we are in an energy crisis, let's put in place a ban before we find new resources and start exporting them.
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Thank you, Madam Chairman.
Mrs. CUBIN. [Presiding.] Are there any other Members on the Republican side that have questions?
If not, I just wanted to—excuse me.
Mr. Souder?
Mr. SOUDER. You can go ahead, Madam Chairman.
Mrs. CUBIN. No. I would like you to.
Mr. SOUDER. I thank you. I just have a simple question, but I wanted to make a comment that illustrates some of the frustration of the Western Governors and Western members.
In my hometown, you can go 600 miles east without hitting Federal-owned land. You can go 1,000 miles west without hitting Federal land. You can go 250 miles north or 250 miles south. We don't have much public-owned land. We have lots of opinions on what we should do with your land.
I have some sympathy with the argument that we messed up in the Midwest and the East and we need to figure out how to do a better job of environmentally managing. But sometimes the extremist rhetoric that we hear turns people who are looking for reasonable solutions into armed conflict again.
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One of the statements that I heard here—and I just wanted to sort this out for the record—I heard 1,000 square miles at Prudhoe Bay. Governor Knowles, I wondered how many square miles are in ANWR as a whole. Do you have any idea? When we hear a different figure like square miles, square miles is an algebraic number; it is a little misleading.
Governor KNOWLES. Madam Chairman, in response to the question, I am not sure of the square miles. There are about 19 million acres there. I will have to refer to my—
Mr. SOUDER. Of the 19 million, how much is the area that was open for discussion as to whether it could be explored?
Governor KNOWLES. It is approximately 1.5 million acres is the total acres that is left for study.
Mr. SOUDER. So it is approximately—what is that, less than 5 percent, 3 percent?
Governor KNOWLES. Eight percent.
Mr. SOUDER. Eight percent. Is there an argument that in that 8 percent, there isn't enough of a buffer between that and the rest of the 92 percent? In order words, would the development go right up to the edge of the 8 percent?
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Governor KNOWLES. Madam Chairman, no, sir. That is the area in the coastal plain that was believed in a broad-brush sense as to what might be the most probable for oil and gas development. Of that, there would be a relatively small part that was developed. But as I say, it would not encompass all of it.
Mr. SOUDER. Is there an argument that the 8 percent, if it were all used—is that 8 percent more—and I apologize for my relative lack of knowledge in some of these questions, but it is hard to tell when people are going back and forth how to get the actual answers to some of these questions.
Is this area more environmentally significant, and if so how did it not get designated in the beginning as wilderness?
Governor KNOWLES. There is no question it is a unique part of the Wildlife Refuge. As the coastal plain, its primary environmental consideration for wildlife is that much of it is considered to be the core calving area of the Porcupine caribou herd. So there would have to be some very careful mitigations made to ensure the continued health of that herd. It goes there for approximately 3 to 4 weeks for calving, insect relief, and prior to their resuming their normal migration habits in the fall and winter.
Mr. SOUDER. And, in general, are there other things in addition to the calving?
Governor KNOWLES. There is polar bear denning which is of interest. There is also the snow geese, migratory water foul, which are also a point of concern. So those are the three primary concerns. There are also some musk ox, but they are not as environmentally sensitive as the polar bear and the snow geese.
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Mr. SOUDER. I appreciate that. Those of us who are trying to balance the needs for our energy consumption and environmental concerns are going to be interested in how we can address those types of unique questions, not big numbers that try to scare people, but how we can actually address the real substantive questions underneath that and not potential high-risk variables.
Governor KNOWLES. Madam Chairman, if I might just in response, painting a slightly different picture—and I do appreciate Mr. Markey's attempt to paint a picture of industrial development, but I think, in perspective and in line with the questions that were being asked of proportionality, I would note that in Alaska there are 53 million acres of national parks that will not be developed for oil and gas, and that is roughly the complete size of New York and Ohio combined.
There are some 72 million acres of wildlife refuges, three-quarters the size of the entire State of California, put aside that nobody is asking to be part of any oil and gas development. There are wilderness areas of some 58 million acres. So we are speaking of areas that are truly set aside to encompass the wilderness values that people yearn for to be part of our permanent national assets.
The area that is being looked at in ANWR, the 1.5 million acres, is part of a geological structure that is the same called the Barrow Arch that goes across the entire North Slope from NPRA across there to the Canadian border, and is part of a responsible development of a significant part of our Nation's future. I would note it is not just oil, but there is considerable gas, just as there was in the Prudhoe Bay geological formation.
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I would say that the oil and gas development on the North Slope, with the figures that Mr. Markey has put forth, is the most environmentally responsible development anywhere in the world. It is the strictest, and it should be that way and it ought to be that way.
Thank you.
Mrs. CUBIN. Because Mr. Rahall has to leave in just a few moments, I just wanted to make a comment on his behalf, as well as yours. He asked a question of Governor Geringer about Federal coal displacing private coal production. And Geringer, I understand, answered that very well, but there was a point that I wanted to add, also, and that is that that displacement occurred more because of the Clean Air Act Amendments and because of the court's ruling on mountaintop mining and valley fill than it did because of anything that was done Federally.
Then I also know Mr. DeFazio has to go, and then Mr. Markey is moving right over here. President Bush already has the authority to reimpose the export ban.
The Chair now recognizes Mr. Inslee.
Mr. INSLEE. Thank you, Madam Chair.
I want to thank Governor Knowles for coming here. You have, as always, been an articulate, reasonable spokesperson for your State and we appreciate it. But in the spirit of candor, I want to tell you why so many thousands of my constituents are vigorously opposed to drilling in the Arctic Refuge.
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They respect and believe that there would be efforts to make small bulldozers that doze the roads and small injection facilities that inject product below ground and small buildings that emit nitrous oxide and the like. But I will tell you the way my constituents feel about it. They feel the same way about putting a small mustache on the Mona Lisa. Even though it was well-trimmed and well-dyed and well cared for, they think it is a major mistake. It is a major mistake because that is an international asset, as is the Arctic Refuge.
Even though those same thousands of people I represent will never come to the Arctic Refuge, never even get close to the Arctic Refuge, may never go to the State of Alaska, they carry a piece in their hearts today, even though they have never been there. They feel so strongly about this that I predict this is not going to go through the U.S. Congress this year, not just in my State, but in all 50 States.
I want to tell you the other reason they feel that way is not just based on emotion. It is based on practicality. I am going to ask you in a minute about the numbers, but as best as I understand it, under the optimistic projections there would be about 300,000 barrels a day, and that is likely not to really become economically productive for about 10 years. My constituents think that is too little and too late.
They believe we need a solution today, tomorrow, and they recognize that if the U.S. Congress will get off the dime and pass some higher mileage standards to improve the efficiency of our vehicles, we can have equivalent savings next year. We don't have to wait 10 years. I am told that even a minimal increase of those mileage standards, of increasing it, say, 2.2 miles per gallon for light trucks and SUVs, will save more this year and next year than what we get in 10 years out of the Arctic Refuge. So they believe that it is not just a value system in question here, but a practical system that we have a better solution today.
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So I want to ask all three of you, have you lobbied your Senators and Members of Congress to support higher mileage standards, and if so what has been their response?
Governor KNOWLES. Madam Chair, Mr. Inslee, thank you for your comments. In direct answer to your question, I believe that conservation is an important part of the national energy policy, and certainly the reduction in the fuel use of automobiles is an important part of being able to stretch the efficiency and the use of our fuels. But it doesn't make the use of fuels obsolete; we still need those fuels.
In regard to the question about ANWR, just like there may be controversy over the projection that we are going to have a $5.6 trillion surplus in America, it all depends on who is forecasting it. It is estimated that in the Arctic National Wildlife Refuge coastal plain study area that there may well be up to 16 billion barrels, which would mean approximately 2 million barrels a day for 25 years, which would provide a third of our domestic oil production. That is not an insignificant part and I think is part of what could be carefully weighed in a judgment as to whether we can responsibly develop it.
In reference to the portrait, if I might just note that we have, as I have explained, a vast number of areas as part of our national treasury of lands that are not being questioned for development, open for development. And that certainly can satisfy, just as when you make decisions in your States about what needs to be protected and what not, that balance of development and protected areas that we need to look for.
Mrs. CUBIN. The gentleman's time has expired.
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I understand that Governor Knowles—
Mr. INSLEE. The other two governors were not allowed to—
Mrs. CUBIN. I am sorry, Mr. Inslee. Governor Knowles has a one o'clock plane to catch.
Mr. INSLEE. I understand. Could you allow the two other governors to answer that question?
Mrs. CUBIN. That is what I was going to say.
Mr. INSLEE. Thank you.
Mrs. CUBIN. I would like to interrupt at this point and if anyone has a specific question for Governor Knowles, then fine.
Mr. Calvert, do you have one?
Mr. CALVERT. I apologize that I wasn't here earlier. I was at another commitment.
Governor Knowles, regarding the proposed drilling at ANWR, in relationship to the pipeline that already leaves Prudhoe and goes to Valdez, I understand right now there are about a million barrels a day being shipped down to Valdez in that pipeline.
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I also understand that at peak production during the Gulf War, they were transporting about 2 million barrels a day oil down to Valdez. Is that a correct number?
Governor KNOWLES. Yes, sir.
Mr. CALVERT. I also understand that because of declining production within existing oil fields in Prudhoe, we may get to the point of marginal costs. In other words, it costs more to keep the pipeline open than it would to continue to move oil out of Prudhoe, and I understand that number is somewhere between 500,000 to 700,000 barrels a day. Is that the right number?
Governor KNOWLES. I couldn't verify that number, but there is a point, yes, sir, that it would not be economical.
Mr. CALVERT. It is true, then, that oil coming out of Alaska has declined by 50 percent because we are unable to find additional supply to get into the pipeline? So at some point in the foreseeable future if additional supply is not put into that line, is it credible that that pipeline would be shut down?
Governor KNOWLES. Yes, sir, it would be shut down and then it would be dismantled.
Mr. CALVERT. And then we would have no resources at all coming out of Alaska in any significant amount, to add to the oil supply of the United States?
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Governor KNOWLES. Yes, sir, unless there was a gas pipeline built that would bring that. But in terms of oil, after it would be dismantled, it would not be practical to ship any oil from the North Slope.
Mr. CALVERT. And at 2 million barrels a day, if we could get that back up, that would be a significant—you mentioned a third of the total U.S. production?
Governor KNOWLES. Yes, sir.
Mr. CALVERT. Thank you.
Mrs. CUBIN. Thank you, Governor, and if the other governors have time, we would appreciate it if they would stay and answer the questions. But if you need to go, Governor Knowles, the Committee certainly understands that. We don't want you to miss your plane.
Governor KNOWLES. Thank you very much, Madam Chairman and members of the Committee. Thank you.
Mrs. CUBIN. Thank you for being here.
Mr. Inslee, would you like to restate your question?
Mr. INSLEE. Yes, just very quickly if the other two governors could let us know—nice to see you, Governor Martz—has your congressional delegation supported increasing our mileage standards for vehicles in America as part of our energy strategy, and if not do you know why not and have you lobbied them to do so?
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Governor GERINGER. Let me answer first by explaining what the Western Governors did on February 2nd when we met in Portland at the invitation of Governor Kitzhaber and Governor Kempthorne. We adopted several suggested actions that we asked everyone to consider within our States, as well as the Federal Government, including those activities that would enhance efficiency and conservation; in addition to automobile usage, efficiency tax credits to reduce demand in any form; to shift to any other kind of distributed generation where it could be done on an individual basis; Federal appliance standards such as adopted by the Department of Energy for all kinds of appliances.
In other words, we are pursuing every form of energy conservation, whether it be specifically automotive or otherwise. Our goal is not to increase consumption. Our goal is, given the trends that there are in demand and consumption and the demands that will be placed on our States, that we not be treated like colonies, that we be evaluated as equal sovereign States, as each of your States are.
Mindful of Mr. Markey's comments about Boston, whether it be the Boston Tea Party or the Boston Big Dig, each State does things a little bit differently. So when it comes to consumption, our goal in being here at this panel is to elicit partnerships with the Federal Government as we develop ways to better manage the resources and not waste them. So efficiency was at the top of our list on what actions could be taken by the States, by governors, by the Congress, or whoever it might be, automotive or otherwise. We have strongly advocated those and presented those to the energy task force chaired by Vice President Cheney.
Mr. INSLEE. Has your congressional delegation voted for increased Corporate Average Fuel Economy (CAFE) mileage standards in this country recently? Do you know?
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Governor GERINGER. I am not familiar with their voting record on that.
Mrs. CUBIN. What am I, a potted plant?
Governor MARTZ. Congressman, I am not familiar whether ours have voted in that manner, but I am visiting with all of our delegation in the morning and it is something we can talk about. I was at the meeting that we agreed on the same things that Governor Geringer talked about.
I do want to say it doesn't matter whether you believe this is an artificial problem or not. It is real, and to the people that are dealing with it everyday it is very real. So with that, conservation with our entire State right now, we are asking people to conserve. We are coming up with a plan, taking it off of other States' plans who are already in the full mode of conservation to present a plan to entire State of Montana on how we can conserve. That is our first best thing we can do right now. Thank you for the question.
Mr. INSLEE. Do you know if your congressional delegation has voted—
Mrs. CUBIN. The gentleman's time has expired. You can ask the congressional delegation when you see them.
Are there any other questions on the other side?
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If not, the Chair recognizes Mrs. Christensen.
Mrs. CHRISTENSEN. Thank you, Madam Chair. I want to say thank you to the governors for spending so much time with us this morning and answering the questions. I know you are very busy. I have one brief question and it was particularly directed to you, Governor Geringer and Governor Martz.
Your testimonies are in support of opening up more Federal lands for leasing and drilling. Yet, the Department of the Interior reports that 95 percent of lands managed by BLM in several States—Colorado, Montana, New Mexico, Utah, and Wyoming—are currently available for leasing and drilling.
You may or may not know, but if you do I am interested in knowing how much of the lands that are already available are leased and being drilled and have they been exhausted. If you don't know specifically, how do you reconcile asking for more Federal lands to be opened up when already 95 percent of the lands are available for leasing and drilling?
Thank you. That is my only question.
Governor GERINGER. Madam Chairman, if I might respond in part, there seems to be confusion over whether we are asking for opening up more access or asking for greater cooperation on how we develop what is already open. The answer is both.
I will illustrate by saying that in the Powder River Basin of Wyoming, which is one area that has been opened up for coal bed methane development, as I indicated, the Federal agencies cannot seem to understand how each other works. So whatever goals we might have for production, because America wants it, we are willing to help enable that. But in the process of doing that, we quite often run into—even though BLM and other Federal agencies might describe how the lands are open for energy production, in fact, they are not by the way the process seems to work out, by the appeals that are made, by the inconsistent regulations that are applied.
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The economic interest that we have in our States is that jobs depend on it locally, but so does the environmental appeal. We want to protect both. As we view what is happening in America, the demand is starting to draw on our resources. Our question is what is the best way we can enable that development so that we don't destroy jobs; we don't destroy the environment; we enable that on all sides.
But the statistic that all these lands are open is very deceiving when you look at the practicality of how it is applied. In fact, most of those are thwarted in some fashion by those who, I think, simply for the sake of wanting to discourage any development or consumption, manipulate the system rather than engage in constructive and cooperative approaches. That is what we are asking for.
Governor MARTZ. Congresswoman, I don't know if that 95 percent pertains to Montana that you talked about. I don't know if it is 95 percent that is used in Montana, Federal lands, but I will know next time I see you. We do know we have opportunities there, and we are a State that needs those opportunities, and I think the country needs the opportunities we are looking for.
We do know that we are asking for a say in how those lands are used in the State of Montana, other than just sitting there. With pure coal, very good, compliant coal, it seems unreasonable to not want to bring that out to do generation with that in an environmentally-sound way. So we are here to ask for those considerations and allow our voices to be heard in those considerations, as it has not been in the past.
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Mrs. CUBIN. I would like to also ask the gentlelady if she would be willing to meet with me and we could discuss that 95-percent issue of BLM lands because that seems extraordinarily unlikely to me based on the knowledge that I have of access to public lands, whether it is from the Endangered Species Act or the roadless areas in the forests, or whatever.
So I just think that is a very unlikely figure, but we can talk about that.
Mrs. CHRISTENSEN. And perhaps we can ask for more specific information as it relates to the States. Is that 95 percent of all the lands and is it all of it in Wyoming or is it distributed across the States?
Mrs. CUBIN. Right, and I am sure the gentlelady remembers last year the amendment to the Energy Policy Act that asked the USGS to do an inventory of the fossil fuels under the public lands in the lower 48 States, and then do an overlay of all the laws, rules, and regulations that impede production of that energy source. Until we actually know what we are dealing with, I think it will be very difficult to set a figure like that.
I know you governors have been very patient with us and we appreciate it very much. Thank you for your time and for your input. It is truly a pleasure for me to work with Governor Geringer, and I know that with Governor Martz in the future we will have a good working relationship. We really, really appreciate your being here.
Mrs. NAPOLITANO. Madam Chair?
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Mrs. CUBIN. Yes.
Mrs. NAPOLITANO. May I have a comment or two?
Mrs. CUBIN. Certainly, Mrs. Napolitano.
Mrs. NAPOLITANO. Thank you. I apologize, like other Members, because we have conflicting Committee meetings.
In listening to the testimony when I walked in of all three governors, but essentially yours—I haven't had a chance to look at your written testimony, but as a former elected official myself, I feel that we have a very grave responsibility that we do not abuse our land, and leave some of whatever treasure we have for the next few decades, for our children and our grandchildren and our great grandchildren.
I am looking forward to that report Mrs. Cubin was alluding to because I think we need to take a good long look at how we can best ensure that we have the ability to have this planet continue on its course and not deplete ourselves of those beautiful natural resources we have within our reach.
Thank you.
Mrs. CUBIN. Mrs. Christensen?
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Mrs. CHRISTENSEN. Madam Chair, thank you. I see that the acreage is—there is a table in a wilderness report that was sent to Congressman Hansen. I would like to have it entered for the record because it states specifically how many millions of acres BLM is managing in each State and the areas that are open to leasing and the areas that are closed to leasing. Really, the areas closed to leasing are minuscule compared to the total acreage.
Mrs. CUBIN. Without objection.
Mrs. CHRISTENSEN. Thank you.
[The information referred to follows:]
| The Wilderness Society, |
| Washington, DC, March 7, 2001. |
Hon. JAMES V. HANSEN, Chairman,
Hon. NICK JOE RAHALL II, Ranking Member,
House Resources Committee, Longworth House Office Building, House of Representatives, Washington, DC.
DEAR CHAIRMAN HANSEN AND REPRESENTATIVE RAHALL:
The House Resources Committee is to be commended for initiating a review of the ''Role of Public Lands in the Development of a Self-Reliant Energy Policy.'' It is our hope that in exercising its oversight role regarding this important matter, the Committee will seek to be as objective as possible in reviewing the nature and extent of fossil fuel resources on our public lands, and the environmental values that also reside on those lands that can be placed at risk by oil and gas exploration and development activities. For although the oil and gas extracted from our public lands are an important component of our nation's well-being, the environmental, wildlife, watershed, and wilderness values of those lands are equally important to Americans. We ask that this letter with attachments be placed in today's hearing record.
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One fact of central importance that we wish to draw to the Committee's attention is that the vast majority of public lands managed by the Bureau of Land Management (BLM) in the Overthrust Belt states of Colorado, Montana, New Mexico, Utah and Wyoming are presently open to leasing, exploration and development by the oil and gas industry. In fact, information presented to the Assistant Secretary for Land and Minerals Management by the BLM in 1995 indicated that over ninety-five percent of BLM lands in those states (including ''split estate'' lands) were available for oil and gas leasing. I have appended to this letter the BLM's synopsis of the availability of BLM lands in those states for oil and gas leasing, exploration and development.
Other recent data made available by the BLM indicates that the agency has been carrying out a robust onshore oil and leasing program for the past decade. For example, the Clinton Administration issued oil and gas leases on more than 26.4 million acres of public lands during the last eight years (see attachment). According to the BLM publication, Public Rewards from Public Lands, there are nearly 50,000 producing oil and gas wells on the public lands (see attachment). Thousands of new drilling permits have been issued during the past eight years—3,400 by the BLM in FY 2000 alone.
Criticism by some that in recent years too much public land has been made unavailable for oil and gas activities is simply not supported by the facts. Upon close examination, industry criticism of ''lack of access'' really falls into two categories: lands that are off-limits entirely to oil and gas development; and lands available for development if the industry takes special care of the environment. The former areas include wilderness areas, wilderness study areas, and/or areas such as steep slopes, karst areas, and areas where other mineral activities are taking place, in other words, places where oil and gas activities could pose extreme environmental hazards or be incompatible with other values. Currently, such areas comprise roughly 5 percent of BLM-managed lands in the five states.
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The latter category often encompasses areas where evidence indicates the presence of sensitive wildlife habitats, such as elk calving areas, or sage grouse leks, where operations at certain times of the year could pose severe threats to wildlife. In such cases, the BLM may require that operations only occur at certain times of the year, when such areas or not in use by wildlife. In some cases, the BLM imposes ''No Surface Occupancy'' leases, whereby the lessee is required to access the oil and gas resource from off-site. Such ''NSO'' stipulations are also designed to protect wildlife habitats, while making the resource available for extraction. (A fuller explanation of typical special stipulations BLM includes on oil and gas leases is found in the first appended document to this letter.)
The imposition of special, seasonal, or NSO stipulations are an attempt by the BLM to balance the industry's desire for access to oil and gas deposits, while balancing the BLM's responsibility to manage other resources on the public lands. And although industry public relations campaigns frequently emphasize the benignity of contemporary exploration and development technologies, it is apparent that when required by the BLM to utilize these technologies to minimize environmental impacts, the industry is reluctant to do so.
One of the most challenging environmental problems with oil and gas development relates to protection of water quality. Unfortunately there is very little baseline data on water quality in Wyoming, for example, that would allow the responsible agencies to understand the negative impact on water quality for downstream communities from oil and gas development. And since water flows across state lines, ranchers in Montana, for example, are concerned that the water flowing from Wyoming coal bed methane projects does not deteriorate in quality. Given the dramatic increase in drilling permits, the cumulative impacts on water quality have not been, but need to be, examined carefully through long term monitoring. If there is one resource more valuable in the west than oil and gas, it is water.
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The national forests currently supply 0.4 percent of total U.S. oil and gas production, half of which occurs on the Little Missouri Grasslands (Forest Service Roadless Area Conservation FEIS, 2000, pages 3–312 and 3–316). The remaining national forest land account for less than 0.2 percent of total production in 1999 (Ibid.). The vast majority of roadless areas on the national forests subject to the new Forest Service roadless protection policy have been open to leasing for decades, and there has been little interest in exploiting potential resources, even though the real price of oil in the past was much higher than it is today.
In conclusion, it is our hope that the Committee's enthusiasm for a ''self-reliant'' energy policy will be tempered by the realization that a country that consumes 40 percent of the world's oil production, but harbors only two percent of the world's oil reserves, cannot be ''self-reliant'' in energy—even if we make 100 percent of our public lands available to the oil industry and eliminate all environmental protection requirements on them. Instead, policy-makers would serve our nation's interest best by seeking ways to reduce our dependence, not on foreign oil, but on oil itself We cannot drill our way to ''energy independence,'' and we should not ruin the few remaining pristine wild places on our public lands in a vain attempt to do so.
Sincerely,
| David Alberswerth, |
| Director, Bureau of Land Management Program. |
Attachments.
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AVAILABILITY OF PUBLIC LANDS
The vast majority of public lands are available for leasing. In the states with considerable production of 116.6 million acres only 2.9 million acres are not open for leasing. In Colorado 16.2 million acres are open and 600,000 closed to leasing; in Montana out of 19 million acres 400,000 are closed; in New Mexico of 29.9 million acres of lands only 1.3 million is not open to leasing; in Utah 900,000 acres are closed to leasing leaving 21.2 million acres open; in Wyoming 700,000 acres are closed out of 28.6 million.
LEGEND
Acreage data are estimates based on best available data.
Categories of stipulations
1. Standard.—Lands available for leasing generally have no special stipulations, except any that may be included in standard lease terms regarding conduct of operations or conditions of approval given at the permitting stage such as: prohibitions against surface occupancy with 500 feet of surface water and/or riparian area; on slopes exceeding 25 percent; construction when soil is saturated; within 1/4 mile of occupied dwellings.
2. Seasonal and Other.—Prohibits fluid mineral exploration and development activities for specific time periods, i.e., sage grouse strutting areas, hawk nesting areas or calving periods. These restrictions are generally for specific months during the year.
3. No Surface Occupancy.—Prohibits operations because it has been determined that other resource values present on the lease cannot be managed to coexist with oil and gas operations. Operations may be conducted through directional drilling.
4. Off Limits.—Lands that are statutorily unavailable for leasing, i.e., Wilderness Study Areas and Designated Wilderness Study Areas; lands within incorporated cities, towns, villages, and National Parks and Monuments; and areas prohibited temporarily by policy considerations pending analysis of various factors such as social, economic, environmental (Areas of Critical Environmental Concern—ACECs, Wildlife Refuges) and safety concerns, i.e., special project areas, unstable soils. Some restrictions are discretionary and may be excepted by the authorized officer upon application by the operator.
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Mrs. CUBIN. Governors, please feel free to go. Thank you very much for being here.
We do have a vote on the Floor. It is the ergonomics rule. We have 10 minutes left.
The next panel will be Neal Stanley, testifying on behalf of the Independent Petroleum Association of the Mountain States; Jim Bowles, Vice President of Phillips Petroleum Company, who is testifying on behalf of the American Petroleum Institute; and Terry O'Connor, with Arch Coal Company, testifying on behalf of the National Mining Association.
So if those gentlemen would please take their places at the table, we will run over and vote and be back here immediately. Thank you.
[Recess.]
Mrs. CUBIN. I would like to welcome the panel, and I know other members of the Subcommittee will be coming in as they are available.
So, first, I would like to call on Mr. Stanley, as I said earlier, on behalf of the Independent Petroleum Association of the Mountain States.
STATEMENT OF NEAL A. STANLEY, PRESIDENT, INDEPENDENT PETROLEUM ASSOCIATION OF THE MOUNTAIN STATES
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Mr. STANLEY. Thank you, Madam Chair, members of the Committee. I am Neal Stanley, Senior Vice President of Forest Oil Corporation, and President of the Independent Petroleum Association of the Mountain States, both based in Denver, Colorado.
I would like to thank this Committee for focusing its attention on the significance of Government lands in developing a sustainable national energy policy. Policies that limit or encourage energy development on Government lands have very real consequences.
The oil and gas industry can supply the nation's growing natural gas needs, but the costs of natural gas will be dependent upon a number of factors, most notably having adequate access to the land in a timely manner. Policies that promote reasonable access to the nation's abundant supplies of natural gas will bring more gas to market quicker, which will lower the price.
Please turn to Exhibit #1 in my written testimony. This is a map showing Government lands. The various represent the agencies with surface management responsibility. Fifty-two percent of the land in the West is Government land.
Exhibit #2 shows the total estimated natural gas resources in the lower 48 with the corresponding percentage of those resources that are subject to prohibitions on access. In the Rocky Mountains, where abundant supplies of natural gas exist, Federal policies limit access to an estimated 137 trillion cubic feet of natural gas. This is 6 years' supply at current rates of use. Also, in the eastern Gulf of Mexico, 24 trillion cubic feet of natural gas is restricted. Lease Sale 181 is scheduled for December 2001 and should stay on schedule.
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Impediments to gaining access for natural gas development come in many forms. Recent mining designations, road-building policies, and wilderness reviews prohibit access to some areas. Outdated resource management plans and overly restrictive surface use requirements are also preventing access.
A natural starting point for looking at access is with the restrictions that effectively reduce access where oil and gas leasing has already occurred. In order to facilitate the growth of deer and elk herds, land managers prohibit drilling during winter months. My personal experience in over 20 years of sitting on many drilling rigs throughout the Rockies has been that these animals are not in the least bit bothered by our activity. Hundreds of wells could have been drilled this winter alone to help supply natural gas.
For what purpose or benefit do land managers restrict drilling? So that the herd can increase in size, only to be hunted in the fall. So we must decide, should American consumers be paying a higher price for energy to subsidize the elk hunters?
Examples like this point up an important shortfall in land management policy. There has been no clear direction with respect to energy development on Government land. Throughout the gas-rich basins of the Rocky Mountain region, backlogs continue to grow for permits to drill and rights-of-way for pipelines and roads.
Exhibit #3 shows the surface use restrictions on a southwestern Wyoming Federal lease. Please notice the length of time associated with each restriction, and also note the amount of time required to drill an 8,000-foot well. As energy companies explore for natural gas, we have a very short window each year to drill our wells.
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My final point is that the employment of advanced technology must occur if we are to reach our goals. Research and development spending by the oil and gas industry has decreased from $10 billion to $2 billion per year over the past 20 years as the large, integrated companies have shrunk in size. We know that past innovations from this R&D such as horizontal drilling and 3-D seismic have provided significant increases in the recovery of oil and gas. Federal efforts to aid the R&D effort by devoting a portion of Federal oil and gas royalties to a research fund would be a win-win program.
In conclusion, it is important to remember that natural gas resources are not uniformly distributed in the landscape. We must be allowed to drill where the resources exist if we are to supply the maximum available energy. I view the balance between energy supply and its price and access to public land like a teeter-totter. If the industry is shut out from public land, then the price of energy will be much higher. If we have access to public land where the resource exists, then the price for energy will be much lower. The American people and this Congress must decide the balance between access to Government land and the supply and price of natural gas to meet the nation's energy needs.
Madam Chair and members of the Committee, thank you for the opportunity to appear before you today.
[The prepared statement of Mr. Stanley follows:]
Statement of Neal A. Stanley, on Behalf of the Independent Petroleum Association of Mountain States and Independent Petroleum Association of America
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Mr. Chairman, members of the Committee, I am Neal Stanley, Senior Vice President of Forest Oil Corporation, and President of the Independent Petroleum Association of Mountain States (IPAMS). Both Forest Oil and IPAMS are based in Denver, Colorado. Today, I am testifying on the behalf of the Independent Petroleum Association of America (IPAA), and IPAMS. IPAA and IPAMS represent thousands of independent oil and natural gas producers across the nation. Independents drill 85 percent of the wells in the U.S., and produce 40 percent of the oil and two-thirds of the natural gas.
I would like to thank this Committee for focusing its attention on the significance of government lands in developing a sustainable national energy policy. Energy policy cannot be developed in a vacuum. Policies that either limit or encourage energy development on government land have very real consequences. As such, I imagine that we all desire land policies that will provide for human needs, contribute to the sustainability of communities, and concurrently help secure the health of the land for the benefit of current and future generations.
Despite our best conservation efforts, electricity demand in the United States will continue to increase as a function of our growing population and the role of computers in our new economy. The role of natural gas in meeting this new demand cannot be understated. Ninety-five percent of all the new power plants now scheduled to be built will run on natural gas. Electricity produced from natural gas fired generation will increase from 15 percent to 40 percent by the year 2020. Reports from the Department of Energy, Gas Research Institute, National Petroleum Council and American Gas Association show natural gas consumption increasing from 22 trillion cubic feet (TCF) this year to 35 trillion cubic feet (TCF) in 2020.
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The oil and gas industry can meet the nation's growing demand for natural gas, but the price of natural gas will be dependent upon a number of factors, most notably, having adequate access to the resource in a timely manner. Policies that promote reasonable access to the nation's abundant supplies of natural gas will bring gas to market more quickly and also lower the price of this energy.
Exhibit #1 is a map showing government lands. The various colors represent the different agencies with surface management responsibility. A map showing the Federal government's mineral interest in the western United States would encompass an even larger portion of the West than is depicted on this map. Fifty-two percent of the land in the western United States is managed by Federal and state governments.
Exhibit #2 shows the total estimated natural gas resources in the lower 48 states, with the corresponding percentage of those resources that are subject to severe, if not outright, prohibitions on access.
Developing the substantial domestic natural gas reserves in offshore areas of the Eastern Gulf of Mexico, Atlantic Ocean, and California is prohibited by moratoria. President Clinton extended these moratoria for another ten years in 1998 saying, ''First, it is clear we must save these shores from oil drilling.'' This is a flawed argument ignoring the state of current technology. It results in these moratoria preventing natural gas development as well as oil. In fact, both the Eastern Gulf and the Atlantic reserves are viewed as gas reserve areas, not oil. Those coasts are not at risk. Too often, these policies seem to be predicated on the events that occurred 30 years ago. Federal moratoria policy needs to be reviewed. New policies need to be based on a sound understanding, of today's technology.
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Offshore Lease Sale 181 is scheduled for December 2001 and is outside the areas covered by moratoria. The resources contained in this sale area, approximately 7.8 TCF of gas and 1.9 billion barrels of oil, are important to the nation and surrounding coastal states. We strongly recommend the sale stay on schedule. This sale includes much needed gas resources for the Gulf of Mexico to even partially meet this country's natural gas needs.
In the Rocky Mountains, where abundant supplies of natural gas exist, Federal policies prohibit access to an estimated 137 trillion cubic feet of natural gas. Long-term sustainable gas production will be achievable only through the development of frontier areas such as the Rockies. Without access to such areas, industry will not be able to keep pace with steeper decline rates in the mature basins.
Impediments to gaining access for natural gas development come in many forms. Recent monument designations, new policies prohibiting road construction, and continuous wilderness reviews prohibit access to some areas. Administrative withdrawals, inaction, and extensive delays work similarly to restrict access. Outdated resource management plans and overly restrictive surface-use requirements also prevent access. The constraints differ in severity, but in each case, these impediments work individually and cumulatively to prevent the development of natural gas.
A natural starting point for looking at limits on access is with the restrictions that effectively reduce access where oil and gas leasing has already occurred. Take for example a common restriction on drilling during winter months to protect Big Game Winter Range. In order to facilitate the growth of deer and elk herds, land managers prohibit drilling during winter months. My personal experience of sitting on many drilling rigs throughout the Rockies has been that these animals are not the least bit bothered by our activity. Nevertheless, the impacts of this restriction are significant. Hundreds of wells could have been drilled this winter alone to help offset the expected shortages of natural gas that we will encounter this summer. And for what purpose, or benefit, do land managers restrict drilling? So that the herd can increase in size only to be hunted the next fall. If there is any real trade-off between closing an area or opening it to development, the tradeoff seems to be between energy development and hunting. And so we must decide, should American consumers be paying a higher price for energy to subsidize elk hunters?
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Examples like this point out an important shortfall in land management policy. There has been no clear direction for land managers with respect to energy development on government land. Accordingly, each land manager assigns a relative value to the development of energy with no sense of how his or her actions contribute to or detract from the nation's energy sustainability. Mixed messages and a lack of accountability have led to a situation where land managers focus entirely on process with no apparent regard for the outcome. If left unattended, this lack of direction will become even more disastrous.
Another example that illustrates the BLM's failure to recognize the urgency to develop natural gas can be seen in a recent wildcat well Forest Oil drilled in southwest Wyoming. In this case, the BLM's interpretation of field rules ended up costing Forest Oil $120,000, and even more when you consider the opportunity costs associated with delays. The well site was six miles from an improved road with an existing two-track road that led to the location. The BLM required Forest Oil to design and construct an improved road to the location at a cost of $90,000, even though the well was only going to take 20 days to drill. If drilling proved it to be a dry hole, we would not need to continue to go to that location. Indeed, the well was a dry hole that cost the company $800,000 to drill. After we plugged the well, the BLM required Forest to either maintain the road forever, or reclaim the road to its previous two-track status. It will cost Forest another $30,000 to reclaim the road. The money wasted, $120,000, could have been spent drilling more wells.
Natural gas companies rely on Federal land managers to process their permit requests in a timely manner. Without the necessary environmental studies, permits, and authorizations, access to drill on Federal lands is prohibited. Throughout the gas-rich basins of the Rocky Mountain Region, backlogs for issuing permits to drill and rights-of-way for roads and pipelines continue to grow. Many resource management plans are outdated and revisions are being required before any leasing and development can occur. Staffing is short in many offices and the problem seems to get worse with time. The use of sophisticated mapping tools and other technologies could ameliorate some of these problems but, as with many other issues, addressing agency priorities and goals is a necessary first step.
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Exhibit #3 shows the surface use restrictions and seasonal restrictions on a southwestern Wyoming Federal lease. Please notice the length of time associated with each restriction and also note the amount of time required to drill a typical 8,000-foot well and a horizontal well. Companies exploring for natural gas have a very short window to drill wells. If the BLM has not processed the permits in time to meet that window of opportunity, the company will have to release the drilling rig they have contracted and wait another year before drilling. Which brings me to my next point, which is the importance of agency readiness, staffing, and technological sophistication.
Exhibit #4 demonstrates the time requirements associated with operating on private land and Federal land. The right side of the table shows the timeframe, to get a well permitted and drilled. The difference between drilling on private land and Federal lands is 3 months versus 1–3 years.
To further illustrate the pervasiveness of land access problems throughout the Rocky Mountain Region, the following three examples are provided.
Exhibit #5 is a map of the newly designated Canyons of the Ancients National Monument in southwestern Colorado. Canyons of the Ancients encompasses McElmo Dome, one of the Rocky Mountain region's most significant sources of natural gas used for advanced oil and gas recovery in Colorado, New Mexico and Texas. On the map, of the 183,000 acres within the Monument's boundary, there are nearly 155,000 acres of active Federal leases, 141,000 of which are held by production or are included in four Federal production units.
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When the monument was designated, the BLM proposed stringent surface use restrictions on 79,000 acres, including a No Surface Occupancy stipulation. Given the BLM's predilection for restricting access, the Resource Management Plan that will be developed for the monument creates even more uncertainty for producers.
Exhibit #6 is a map of Jack Morrow Hills Resource Area in southwestern Wyoming. The Environmental Impact Statement for the Green River Resource Management Plan, which includes the Jack Morrow Hills area, was started in 1989, with the Record of Decision finally issued eight years later, in October 1997. The decision of whether to lease for oil and gas exploration and development in Jack Morrow Hills area was deferred in the ROD until a Coordinated Activity Plan for the area could be completed, which took another four years. When the Draft EIS for the CAP was issued, the preferred alternative was for ''staged leasing,'' effectively postponing leasing decisions indefinitely. On the map, areas designated as potential Wilderness Study Areas (WSA) are shown in light blue stippling. Note that there are active leases and leases held by production within the new WSAs.
The attached map of the Jack Morrow Hills area shows the BLM-managed mineral estate with active oil and gas leases in yellow. Of the 623,000 acres within the red boundary of the Jack Morrow Hills area, there are 239,000 acres of active Federal leases, 36,000 of which are productive. Also note that within the CAP area, there are 137,890 acres recommended as Wilderness Study Areas.
Exhibit #7 is a map showing the entire state of Utah. Current leases are shown in yellow, a total of 3,567 active Federal leases. Also shown on the map are the BLM's 1990 recommendations for three million acres of new Wilderness Study Areas, as well as former Interior Secretary Babbitt's reinventory of an additional three million acres, described in the map's legend as ''HR1500 Boundaries''. Note that the proposed Wilderness Study Areas include lands that are already leased, making development as difficult as the examples of Jack Morrow Hills and Canyons of the Ancients. Not shown on the Utah map are the nearly 29,000 leases that were previously leased in the past but were not renewed as a direct result of administrative direction from Washington.
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These examples are only a few of many examples of the overzealous application of singular surface uses that preclude other resource development. Other examples, some even more egregious, would include the backlog of drilling permits and rights of way applications in northeastern Wyoming; de facto wilderness management of Wyoming's Bridger/Teton National Forest and Montana's Rocky Mountain Front; and excessively stringent application of NEPA planning documents and subsequent delays in Utah, Colorado, Montana, and the Dakotas.
My final point is that the employment of advanced technology for both land managers and industry must occur if we are to reach our goals. Research and development spending by the oil and gas industry has decreased from $10 billion to $2 billion per year over the past twenty years as the large integrated companies have shrunk in size. Yet we know that past innovations from this R&D, such as horizontal drilling and 3–D and 4–D seismic, have provided significant increases in the recovery of oil and gas. Frontier areas like the Rocky Mountain region will require new and sophisticated technologies to develop a large portion of the unconventional gas resources found in the region. Federal efforts to aid the R&D effort by directing a portion of Federal oil and gas royalties to a research fund would be a significant win-win program. Increased R&D spending will increase oil and gas production, resulting in a commensurate increase in Federal royalties.
In conclusion, I would remind the Committee that natural gas resources are not uniformly distributed across the landscape. Even so, natural gas development can coexist with other values. We do not need to choose between ''this or that'' use of public land. Responsible management can allow for ''this and that'' use. Responsible management can provide for human needs, contribute to the sustainability of communities, and concurrently help secure the health of the land for the benefit of current and future generations.
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I view the balance between energy supply, and hence, price and access to government land as a teeter-totter. If the energy industry is shut out from government lands, then the price of energy will obviously be much higher. If we have access to more land where the resource exists, then the price of energy will be much lower. The American people and this Congress must balance the perceived trade-offs of allowing reasonable access to government land with the tangible benefits of securing an adequate supply of natural gas to meet the nation's near-term energy needs.
Mr. Chairman and members of the Committee, thank you for the opportunity to appear before you today.
Mrs. CUBIN. Thank you, Mr. Stanley.
The Chair now recognizes Jim Bowles, the Vice President of Phillips Petroleum Company, testifying on behalf of the American Petroleum Institute.
STATEMENT OF JIM L. BOWLES, PRESIDENT, AMERICAS DIVISION, PHILLIPS PETROLEUM COMPANY, ON BEHALF OF THE AMERICAN PETROLEUM INSTITUTE
Mr. BOWLES. Thank you. My name is Jim Bowles. I am President of the Americas Division of Phillips Petroleum Company. I represent Phillips and the American Petroleum Institute, which has over 400 members engaged in every aspect of the oil and gas industry in the United States. I appreciate this opportunity to speak regarding access to Government lands underneath which much of the country's known reserves of oil and gas naturally lie. I ask that my full remarks be submitted for the record.
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Today, we import some 57 percent of our crude oil. While we cannot eliminate our dependence on imported oil, there are a number of things we can do to encourage greater domestic production. They all have to do with allowing our companies greater access to non-park Government lands to produce the great energy resources we have in an environmentally compatible manner.
Today, I plan to focus on three regions where the access question is of the utmost importance—the Western United States, Alaska, and the Gulf of Mexico. Demand for natural gas in this country has never been stronger, and it will continue to grow along with the demand for electricity. We have a tremendous natural gas resource base in North America. However, since 1983, access to Federal lands in the Western U.S., where an estimated 40 percent of the natural gas reserves are located, has declined by 60 percent.
Despite the industry's record of sound environmental stewardship, the previous administration barred exploration on vast regions of Government lands, including nearly 60 million acres in the forest system. In the lower 48, some 205 million acres of Federal lands in the Western U.S. are under the control of two Federal agencies with broad discretionary powers—the Bureau of Land Management, the BLM, and the U.S. Forest Service. They administer Federal non-park lands. Both are required to manage these lands under the congressionally-mandated concept of multiple use. Yet, both have used discretionary actions to withdraw lands from leasing, and long delayed other leasing decisions and project permitting.
There are vast reserves of natural gas in the form of coal bed methane beneath Western Federal lands. However, BLM's inability to grant timely permits because of understaffing has greatly hindered development of this gas.
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In Alaska, a new discovery of oil at Prudhoe Bay on the North Slope in the early 1970's offered a significant new source of competitive domestic supply. However, North Slope production has fallen by nearly 50 percent by the year 2000. Alaska still holds much promise for new energy development, not only in the much discussed Arctic National Wildlife Refuge, but also in NPRA, the National Petroleum Reserve-Alaska, that is west of Prudhoe Bay.
Our industry has made great strides in developing fields in these Arctic areas, with less adverse harm to the environment. One of these areas, the Alpine field, is a great example of how technology has minimized any impacts of Arctic oil and gas development. Only 97 acres, an area smaller than the U.S. Capitol grounds, are needed on the surface to produce from 40,000 acres, an area roughly the size of the District of Columbia.
North Slope exploration takes place during the winter using ice pads and ice roads that melt in the spring, leaving no trace of exploration activity. New technologies developed from our experience in the Arctic have tremendously reduced the so-called footprint of our activities and our operations. Despite these examples of the industry's environmentally-sound operations, Congress has refused to authorize exploration on the small section of ANWR that was specifically set aside by law for exploration in 1980.
In the offshore Gulf of Mexico, production is expected to rise to nearly a third of our domestic oil and gas supply within a decade. There, too, new technologies have driven down the cost of finding oil and gas, with much less disturbance to the environment, and allowed us to drill and produce in deep waters off the Gulf.
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However, because reserves are being depleted at an ever-increasing rate, this cannot continue to be offset by future development unless new areas are opened for exploration. We have the technology and the will to explore and produce in these sensitive areas, as is being done in Canada, where oil and gas activities in the Atlantic have been conducted successfully with environmentally-sound development.
America will soon have a great opportunity to augment reserves. Federal Outer Continental Shelf (OCS) Lease Sale 181 in the eastern Gulf of Mexico is slated for December 2001. It was proposed only after comprehensive environmental reviews and consultations with Gulf State governors. The Sale 181 area is estimated to contain 7.8 trillion cubic feet of natural gas and 1.9 billion barrels of oil. Again, these reserves can be produced cleanly with advanced technology.
One potential obstacle to the success of 181 is the Coastal Zone Management Act which has been used by States, contrary to Congress' intent, to cause serious and costly delays to Federal OCS leasing and production that would have no adverse environmental impact on coastal zones. We strongly support Sale 181 to proceed as planned.
To summarize, our industry can explore for and produce our country's reserves of oil and natural gas for national security purposes and family and personal security. We are willing to make enormous investments to meet these ends, but we must have access to our natural resources for exploration and production.
Thank you.
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[The prepared statement of Mr. Bowles follows:]
Statement of Jim L. Bowles, President, Americas Division, Phillips Petroleum, on Behalf of the American Petroleum Institute
My name is Jim Bowles. I am President, Americas Division, of Phillips Petroleum. I represent Phillips Petroleum and the American Petroleum Institute, which has over 400 members, engaged in every aspect of the oil and gas industry in the United States.
While the U.S. oil and natural gas industry has long provided a reliable and affordable supply of energy, the Federal government has always played a pivotal role in determining how well our energy needs are met. And the increasing energy demands of our new economy make it imperative that government and industry work to put forth a new national energy policy.
A national energy policy
A successful national energy policy must be comprehensive in order to be effective. It must seek to ensure enough energy to support economic growth by promoting responsible development of both domestic and foreign resources. It should recognize that sophisticated new technology developed by the oil and natural gas industry greatly reduces adverse impacts on the environment by exploration and production, both onshore and offshore.
A successful national energy policy will recognize that there is no quick fix to our energy problems. It must reflect the reality that we need to increase supplies of all forms of energy to fully support our growing economy. It is important to encourage responsible use of energy and increase supplies of all fuels, including fossil fuels as well as alternative fuels.
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A successful national energy policy must be flexible to allow companies to adapt to new energy and environmental challenges. It should recognize that our refinery and delivery infrastructure continues to be stretched to its limit, restraining the industry's capability to meet new energy demands. It should remove unreasonable and complex regulations on cleaner energy production and transportation to accommodate growth and the continued high demand for energy—and to meet seasonal or unexpected requirements.
A successful national energy policy must rely primarily on the private sector working through free markets, and it must recognize the value of diversified energy sources. To that end, it should encourage competitive trade practices and international investment.
Finally, a successful national energy policy must create a predictable operating and investment environment for energy suppliers. The Department of Energy projects that producers will have to invest some $650 billion through 2015 to meet the growth in natural gas demand alone. That should tell us that government must work to create a more stable regulatory environment so that producers can invest with confidence that they will be able to get a fair return on their investment.
Access to government lands
I am here today to speak to the Committee about access to the government lands that contain much of the country's known reserves of natural gas and oil.
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Today, the U.S. imports 57 percent of its crude oil. Last year's gasoline price volatility was due in part to a cutback in production by foreign oil producing countries. While we cannot eliminate our dependence on imported oil, there are many things that can be done to encourage greater production in this country.
America has vast reserves to help it meet its future requirements. But we must have greater access to government lands to produce this energy in an environmentally responsible manner.
Demand for natural gas in this country has never been stronger. The National Petroleum Council (NPC), a Federal advisory Committee of the Department of Energy, predicts demand, which is now at about 21 trillion cubic feet (Tcf) per year, at about 29 Tcf by 2010. The Energy Information Administration (EIA) now estimates that, due to Clean Air Act requirements, and increased demand for electricity, we will need 35 Tcf annually by 2015.
We have a tremendous resource base of natural gas in North America. Estimates put it between 1,200 and 1,600 Tcf (including resources in coal seams and tight sands formations). But we have a significant problem due to two key factors.
First, volatile energy prices inhibited drilling during the 1998–99 time period. Second, significantly reduced access to some of the most promising areas has suppressed our ability to increase our proven reserves. This has resulted in today's high prices, as demand has continued to grow.
With higher prices this year, oil and gas producers are making good returns on their investments, and plowing additional capital into new exploration. While some increase in supply has taken place, achieving the reserve growth needed to meet expected demand growth over the long term will require sustained growth in drilling activity.
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We recognize that this has been a costly and painful year for consumers. It is, therefore, critical to help consumers understand what the United States must do from an energy policy standpoint to ensure that the U.S. maintains and enhances its long-term supplies. Put simply, increased drilling and stable long-term prices are crucial to future supplies.
Yet, many of the government's multiple use lands have been placed off-limits by the Federal government. Since 1983, access to Federal lands in the western United States-where an estimated 67 percent of conventional onshore oil reserves and 40 percent of our natural gas reserves are located—has declined by 60 percent. Equally important is the fact that discretionary land management policies often unnecessarily restrict or impede efforts to develop resources on public lands. Our ability to search for new domestic offshore oil and natural gas is limited to portions of the Gulf of Mexico and offshore Alaska waters because congressional moratoria have withdrawn most of the rest of our Federal Outer Continental Shelf from consideration.
What is access to government lands? We do not request to drill on parklands or in wilderness areas set aside by Acts of Congress. Rather, we seek access to areas in the American West that have been designated as ''multiple use'' so that numerous activities can take place there.
Most of these areas are simply vast expanses of non-descript Federal lands. However, because they lack the beauty and grandeur of the Grand Canyon or the Grand Tetons does not mean that we treat them with less respect than we do any other lands entrusted to us by the government, or by private landowners. Most people driving near or hiking in one of these multiple-use government land areas would be hard-pressed to locate one of our facilities once the drilling rig is removed. It has become fashionable for editorialists and others to refer to our industry as a ''dirty'' or ''messy'' business. Safety and environmental protection are critical concerns, regardless of their location, and where our contractual lease obligations with the government require us to return the land to its original condition once drilling and production cease.
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Yet, despite our record of sound stewardship, President Clinton used his executive powers under the Antiquities Act to bar oil and gas exploration and other activities on vast regions of government lands.
For example, the designation of the Grand Staircase-Escalante Monument in Utah in 1996 summarily withdrew promising valid oil and gas leases on state lands without even notice or consultation with state and local authorities, or affected communities. Likewise, the U.S. Forest Service recently banned our companies from exploring for natural gas and oil on promising government lands when it published rules to bar road building on nearly 60 million acres in the Forest System.
Offshore, the ''consistency'' provisions of the Coastal Zone Management Act (CZMA), under the guise of due process and consultation, have caused serious duplicative and incredibly costly delays to Federal OCS leasing and production activities that would have no adverse environmental impacts on states' coastal zones. And regulations issued by the National Oceanic and Atmospheric Administration (NOAA) in the last days of the Clinton Administration appear to add impediments to environmentally compatible energy development in the OCS, contrary to the balancing of competing interests directed by Congress when it enacted the CZMA. Both the summary withdrawal of multiple use government lands without stakeholder consultation under the Antiquities Act, and the endless due process used by opponents to block Federal offshore production that does not affect a state's coastal zone are extreme, and must be moderated.
Further, Congress has refused to authorize exploration on the small section of the Arctic National Wildlife Refuge (ANWR) that was specifically set aside by law for exploration in 1980, after a 1987 final environmental impact statement concluded that it could be safely developed.
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We respect, and strictly adhere, to all of the nation's environmental laws. However, many government lands offshore and onshore that should reasonably be open for leasing are, in fact, off limits, or severely restricted from responsible development.
Offshore lands
Offshore, the OCS has assumed increasing importance in U.S. energy supply over the past half century. The Federal portion of the OCS now supplies 19 percent of the oil and 27 percent of the gas produced in the United States. Offshore production promises to play an even more significant role in the future. The Department of Energy forecasts that offshore production will rise to nearly a third of our domestic oil and gas supply within a decade.
In recent years, exploration and development of the offshore has been a major factor contributing to domestic energy supplies. From 1993 to 1997, new proven reserves replaced over 147 percent of offshore oil produced, and over 106 percent of gas produced. In 1997 alone, the Gulf of Mexico accounted for over 79 percent of the new field discoveries of oil in the United States.
The relatively shallow shelf of the Central and Western Gulf was the focus of past development, and is the location of the majority of current oil production and the vast bulk of current gas production. It has been a source of growth in gas production in the United States for nearly three decades.
Technological revolutions, such as 3–D seismic profiling of promising structures, coupled with astounding computer power and directional drilling techniques which allow numerous reservoirs to be accessed from one drill site have driven down the costs of finding oil and gas. And at the same time these technologies allow development with much less disturbance to the environment. Tremendous advances in our ability to drill and produce in the deep waters of the Gulf have also resulted in vast new reserves being added to our resource base. The Deepwater Royalty Relief Act developed by this Committee, and passed by Congress in 1995, has significantly aided that endeavor. Those in the Federal government who are most familiar with our industry have lauded our technological advances.
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A 1999 DOE report, Environmental Benefits of Advanced Oil and Gas Exploration and Production Technology, stated that, ''innovative E&P approaches are making a difference to the environment. With advanced technologies, the oil and gas industry can pinpoint resources more accurately, extract them more efficiently and with less surface disturbance, minimize associated wastes, and, ultimately, restore sites to original or better condition. . . . [The industry] has integrated an environmental ethic into its business and culture and operations . . . [and] has come to recognize that high environmental standards and responsible development are good business.''
However, there is now accumulating evidence that resource depletion is overtaking the effects of technical advances on the cost structure of OCS development. The volume of reserves added per dollar of capital spent in the OCS has been falling steadily since the early 1990s. Due to increased demand, reserves are being depleted at an ever-increasing rate. Due to more efficient extraction technologies, the decline from new gas wells is now estimated to be as high as 40 percent per year.
This does not suggest the imminent collapse of OCS production, but it does suggest that the drilling and capital expenditures required to replace and augment reserves will become increasingly important. We must increase deepwater development, and access to areas presently restricted. Currently, presidential moratoria, and annual Interior Appropriations bill riders preclude leasing in most of the Eastern Gulf of Mexico, the entire Atlantic and Pacific Federal OCS, and portions of offshore Alaska.
As a result, only 200 million acres out of a possible 1.5 billion Federal OCS acreage is available for environmentally compatible exploration and production.
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The National Petroleum Council estimates that more than 76 trillion cubic feet of gas are off-limits in the Federal OCS as a result of the current moratoria. Twenty one Tcf are estimated to lie in the Federal waters beneath the Pacific, 31 Tcf beneath the Atlantic OCS, and about 24 Tcf are projected to lie beneath the Department of the Interior's Eastern Gulf of Mexico Planning Area.
Again, our companies have the technology, and the will to explore and produce in these areas in an environmentally compatible manner. It is already being done in Canada's OCS, where oil and natural gas activities off the Atlantic coast have been conducted successfully in recent years with environmentally sound developments. Those supplies are now becoming available for the energy needs of New England.
America will soon have a great opportunity to augment its reserves. Federal OCS Lease Sale 181 represents a plan for leasing by the Department of the Interior in the Eastern Gulf of Mexico Planning Area. Scheduled since the mid-1990s based on comprehensive environmental reviews, and consultations between former DOI Secretary Bruce Babbitt and then Governors Chiles of Florida and James of Alabama, Sale 181 is slated to be conducted in December 2001. The area available in Sale 181 is estimated by the NPC to contain 7.8 trillion cubic feet of natural gas and 1.9 billion barrels of oil. This means that natural gas from the Sale 181 area could satisfy the current natural gas needs of Florida's 5.9 million households for the next 16 years. Lastly, the crude oil from the Sale 181 area (which is expected to come from the deepwater areas, far removed from the coastline) could fuel 74,000 cars for 20 years.
These potential reserves can be produced cleanly, for advances in technology have made offshore oil and natural gas exploration and production safer than ever. For the 1980–1999 period, 7.4 billion barrels of oil have been produced in the OCS with less than 0.001 percent spilled—a 99.999 percent near perfect record.
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Alaska's North Slope
In the early 1970s, as petroleum production from the Lower 48 states entered a decline, a new discovery of oil at Prudhoe Bay on the North Slope of Alaska offered the U.S. the promise of a significant new source of competitive domestic supply on a world-class scale. The discovery was initially estimated to be 9.6 billion barrels of oil, nearly double the size of the largest field ever previously found in North America. Despite high costs, a hostile climate and major environmental challenges, supply from Prudhoe Bay came online in 1977, offsetting much of the decline in Lower 48 production through the mid-1980s.
By the mid 1980s, Alaska's North Slope was supplying about a quarter of U.S. oil production. Meanwhile, as Prudhoe production grew, the estimated resource potential of the North Slope began to grow as well, as other finds occurred. However, North Slope production has been falling. North Slope production peaked in 1988, and by 1998 had fallen by nearly 40 percent.
Phillips and other companies operating on Alaska's North Slope are actively exploring for new sources of oil in the areas that have become available for leasing. This includes the National Petroleum Reserve-Alaska (NPRA) and the Alpine field, located in state lands west of Prudhoe Bay in an incredibly rich and diverse wildlife habitat. The new Alpine field is a great example of how technology has minimized any impacts of arctic oil and gas development. Only 97 acres, an area smaller than the area covered by the U.S. Capitol grounds, are needed on the surface to produce from an area of 40,000 acres, an area roughly the size of the District of Columbia.
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This winter Phillips will drill 12–15 exploratory wells. Today's North Slope exploration takes place during the winter using ice pads and ice roads that melt in the Spring, leaving almost no trace of the previous Winter's exploration activities. When oil and gas is discovered, new technologies developed from our experience in the Arctic have tremendously reduced the so-called ''footprint'' of our activities in our operations to extract these resources.
The U.S. Geological Service estimates there to be more than 10 billion barrels of oil recoverable from the coastal plain of ANWR, and, perhaps as much as 16 billion barrels. That is equivalent to the volumes we would import, at current levels, from Saudi Arabia for the next 20–25 years. If those volumes are found it would be the largest oil discovery in the world in the last 30 years.
And due to technological advances, the ''footprint'' to develop ANWR, if exploration confirmed the vast reserves predicted there, would be only an estimated 2,000 total acres out of a total area of 19.8 million acres, a tract roughly the size of South Carolina.
The Lower 48
In the Lower 48 states, a 1997 study by the Cooperating Associations Forum found that Federal lease acreage available for oil and gas exploration and production in eight Western states (California, Colorado, Montana, Nevada, New Mexico, North Dakota, Utah and Wyoming) has decreased by more than 60 percent since 1983.
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Approximately 205 million acres of Federal lands in these states are under the control of two Federal agencies with broad discretionary powers. The Bureau of Land Management (BLM), whose land management planning authority is derived from the FLPMA of 1976, and the USFS, whose jurisdiction is derived from the National Forest Management Act, administer these Federal, non-park lands.
Both agencies are required to manage lands they administer under the congressionally mandated concept of multiple use. Yet, BLM and USFS discretionary actions have withdrawn Federal lands from leasing, and long delayed other leasing decisions and project permitting.
Congress has directed the BLM and the Forest Service to allocate non-wilderness lands for resource use, identify areas that are available for oil and gas leasing, and identify important wildlife habitat areas, and inventory wilderness candidate lands among other uses. Each agency has completed land use plans for the lands they administer, including lands that are candidates for wilderness designation. Yet, some lands found unsuitable for wilderness designation are, however, managed as ''wilderness study areas,'' effectively removing these lands inappropriately from consideration for resource development. Further, these agencies often dictate lease stipulations as conditions of approval for exploration and production. Stipulations are intended to protect resource values in conjunction with proposed projects, such as exploratory wells, yet many conditions required, such as ''no surface occupancy,'' essentially preclude exploration and production from occurring.
The NPC study on natural gas referred to earlier also points out that vast reserves of natural gas in the form of coal bed methane (CBM) lie beneath Federal lands, especially in Wyoming and Montana. However, BLM's inability to grant permits in a timely manner has greatly hindered CBM development, and may contribute to further shortfalls in necessary future gas production. In some instances we recognize that individual BLM offices may be understaffed and therefore are simply unable to efficiently process permitting requests. We therefore support increased funding for BLM to adequately address these critical permitting backlogs.
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We applaud this Committee's involvement in legislation enacted in the last Congress directing the Departments of the Interior and Energy and the Forest Service to conduct an inventory of oil and gas resources on Federal lands and the restrictions that prevent access to these critical resources. We urge Congress to fully fund this inventory in the FY 2002 appropriations process so that adequate information will be available on resource availability.
In conclusion, we must recognize that this industry in the 21st Century has the technologies, and sensibilities to explore for, and produce our nation's vast reserves of secure oil and gas—resources that keep factories and offices running, and our homes comfortable regardless of the weather. Oil and natural gas are the key ingredients in thousands of products that we use, from life-saving medical devices to fertilizers that help feed the world.
I am grateful to the Committee for the opportunity to present our views on a national energy policy for the long-term health and continued prosperity of our nation.
Mrs. CUBIN. Thank you, Mr. Bowles.
Mr. O'Connor?
STATEMENT OF TERRY O'CONNOR, VICE PRESIDENT, EXTERNAL AFFAIRS, ARCH COAL, INC., ON BEHALF OF THE NATIONAL MINING ASSOCIATION
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Mr. O'CONNOR. Good afternoon, Madam Chairman. It is good to see you again. For the record, my name is Terry O'Connor. I am Vice President of External Affairs for Arch Coal, the second largest coal producer in the United States. We will produce about 115 million tons of coal this year, we estimate, and about 70 percent of those tons will come from Federal lands in the Western States of Wyoming, Colorado, and Utah.
I am here also on behalf of the National Mining Association, and before commencing my testimony I just want to thank you and ask you to relay to Chairman Hansen our appreciation for both of you scheduling this all-important hearing.
Most of us here in the room today are aware that coal is America's most abundant and reliable domestic energy resource. The coal produced in the United States is used to generate over 50 percent of the electricity generated in this country. We are also probably all aware that coal represents somewhere between 85 percent and 95 percent of the discovered and economically recoverable fossil fuel resources in the United States.
Finally, it is generally known that the Western United States coal fields on Federal lands are blessed with an abundance with some of the lowest-sulfur coal in the United States, if not the world. Western coal, in particular, is quite low in inherent NOx when burned in U.S. power plants.
What may not be quite as generally known is that today a majority of coal production comes from the Western United States. The bulk of that production is actually coming from Congresswoman Cubin's district or a portion of her district, the prolific coal-producing region of northeastern Wyoming and to some extent Montana, called the Powder River Basin, and referred to by many as the Saudi Arabia of coal. If Campbell County, Wyoming, in northeastern Wyoming, were a separate country, it would be one of the five largest coal-producing nations on Earth, with the United States being number two.
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Forecasts show that over 90 percent of expected new coal production in the United States likely will come in the next 20 years from mines on Western Federal lands. However, a group of ominous clouds are on the horizon, in that numerous Federal policies now in effect discourage or in some cases prevent the exploration, development, and investment that will be required to bring additional Federal coal production online. This Congress has a unique opportunity to deal with some of these issues and help us contribute toward the goal of making our country less energy-reliant on unstable foreign sources.
Madam Chairwoman, in the interests of time I will dispense with a discussion of most of the issues that are raised in our written testimony, but I would quickly like to address three of the most serious issues that we hope Congress will take an early look at.
The first issue I would like to address today and take a moment or two on is the U.S. Forest Service Roadless Initiative. In addition to the much publicized restrictions on timbering, as a consequence of this initiative the coal mining industry will also be significantly and adversely impacted.
I refer you to a statement in the Forest Service's own EIS which says that the initiative, quote, '''will preclude further development of leasable mineral resources within inventoried roadless areas, which will result in decreases in jobs, income, and payments to States.'' My company, our employees, and the consumers of our coal will be ultimately adversely impacted by this Roadless Initiative unless it is somehow amended.
For example, in Colorado we operate the West Elk underground mine, the second largest coal-producing mine in the State, where we employ 360 people with an annual payroll of over $26 million. An estimated 200 million tons of very low-sulfur, high-Btu coal is adjacent to our West Elk mine. If this Roadless Initiative is not somehow changed, this will result in the premature abandonment of the mine and the loss of an over $100 million capital investment that we have made.
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Similarly, in Utah, we operate three large underground mines, and actually are the largest coal producer in the State. Our coal represents about 40 percent of the State's coal production. Our coal underlies a large forest service tract. I refer you to a map that is either in the back of the room or back in the Resources Committee room that identifies the enormity of the Roadless Initiative and what it will do.
Ironically, as California attempts to dig out from its energy crisis, one of California's most viable, low-cost, lowest-hanging fruit is the construction of power plants to supply California much-needed electricity. This Roadless Initiative will put in harm's way their capacity to do so. We recommend that Congress, at a minimum, amend this Roadless Initiative somehow to exclude sub-surface leasable minerals, and that includes oil, gas, and coal.
Secondly, and very quickly, an area I would like to address for just a second is an issue you are very familiar with, and I certainly thank you for your past efforts on this—the issue of conflict involving the simultaneous development of coal and coal bed methane in the Powder River Basin. This issue sits as a potential cloud that can impact far more than the very, very small, isolated areas of conflict, and we urge that Congress move quickly in order to free up the much needed coal bed methane, as well as low-cost, low-sulfur coal.
Third, an issue that I would like to second Mr. Bowles, to my right, is the administrative backlog which is occurring in the Powder River Basin, in his case with regard to coal bed methane. In our case, it is the lease by application process for coal.
Because of the dramatic increase in requirements for low-sulfur coal in the West, BLM is simply not keeping up with the processing of lease by applications. If an application were submitted today, because they are only processing one a year, it would be probably 2009 before a lease sale was held, then another 3 years to permit it, another year after that to move the infrastructure. And we would be looking at 2012 before we could be in production on a new LBA. This cries out for congressional oversight.
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Finally, and in conclusion, as important as all of these issues are, the other side of the potentially even more leveraging portion of the energy coin is that as a nation we must authorize the construction of additional coal-fired generation facilities, as well as the equally essential transmission lines to be able to move electricity to places where it is needed.
The United States and the Western United States must escape the banana syndrome, which many of you are familiar with as the next step beyond NIMBY; it is build absolutely nothing anywhere near anything. If the next generation of lower-emitting, higher-combustion-efficiency coal-fired plants are not allowed to be built, constructed and operated, any additional Federal coal which is produced in the West will not be able to help reduce our nation's reliance on unstable foreign sources of energy or to prevent the spread of the California syndrome nationally.
Thank you very much for your time.
[The prepared statement of Mr. O'Connor follows:]
Statement of Terry O'Connor, Vice President, External Affairs, Arch Coal, Inc., on Behalf of the National Mining Association
Mr. Chairman, my name is Terry O'Connor. I am Vice President of External Affairs for Arch Coal, Inc. I am appearing here on behalf of the National Mining Association (NMA) to testify on the important role that energy resources on Federal lands, specifically coal resources, have in the development of strategies and policies to take the United States closer to the goal of being self-reliant for energy supply. Thank you for the opportunity to present the mining industries views on this subject.
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Summary
Affordable, reliable energy is a necessity for economic growth. Domestic, affordable and increasingly clean coal provides over 20 percent of all the energy that is used in the United States and is the fuel of choice for over 50 percent of the electricity generated in our nation today. Nearly 40 percent of our coal production is from mines located on Federal lands. Over one-third of the nation's coal reserve is found on lands owned or controlled by the Federal government. Forecasts show that over 90 percent of new production expected to come on line over the next 20 years will be from mines on Federal lands. However, policies now in effect discourage, or prevent the exploration, development and investments that will be required to bring this new production on line. This Congress has an opportunity to change current policy direction to ensure that the vast resources on Federal lands can contribute towards the goal of energy self-sufficiency while at the same time ensuring that both the environment and the economies of the regions in which these resources are located are protected and advanced.
General introduction
Arch Coal, Inc., headquartered in St. Louis, is the second largest coal producer in the United States. In 2000, our operating subsidiaries mined more than 107 million tons of coal—nearly 10 percent of the nation's production—from surface and underground mines in Wyoming, Colorado, Utah, Illinois, West Virginia, Kentucky and Virginia. Arch shipped coal to approximately 140 power plants in 30 states providing the fuel for 6 percent of the electricity used by Americans last year. Arch owns or controls approximately 3.2 billion tons of coal reserves including reserves on Federal lands.
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In 2000 our company mined nearly 65 million tons of low-sulfur, sub-bituminous coal from our two large surface mines in the Powder River Basin (''PRB'') of Wyoming, Black Thunder and Coal Creek mines. We also produced 3.4 million tons in our West Elk Mine in Colorado and 9.4 million tons in three mines in Utah. This coal is almost exclusively mined on Federal lands. One of Arch Coal's highest priorities is to operate safe and environmentally responsible mines. Our production and reclamation experience on our mines on Federal lands are prime examples of the way that our priorities are met.
The National Mining Association represents producers of coal, metals and non-metal minerals, as well as manufacturers of processing equipment, machinery and supplies, transporters, and engineering, consulting and financial institutions serving the mining industry. The members of National Mining Association produce over 80 percent of America's coal, a reliable, affordable, domestic fuel choice used to generate over 50 percent of the electricity used in the nation.
A balanced national energy strategy is a basic element of our nation's economic future
Mr. Chairman, we would like to commend you for holding these oversight hearings on the need for a balanced national energy strategy. Energy, whether it is from coal, oil, natural gas, uranium or renewable sources, is the common denominator that is imperative to sustain economic growth, improve standards of living and simultaneously support an expanding population. Affordable and reliable energy—much of it from coal produced on Federal lands—has made the last decade of expansion possible. The recent sharp increase in the overall cost of energy along with concerns over current and future supplies together remind us of the importance of affordable energy as these factors are, in part, behind the downturn in the economy that is now occurring.
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The policies of the past eight years have actively discouraged and even prevented investments in domestic energy supplies and in the energy delivery infrastructure on both public and private lands. As a result no energy source be it petroleum, natural gas, coal or uranium is in a position to quickly increase output, to even to meet the new demands that are forecast. Our energy supply industry has not been able to make the investments or develop and maintain the infrastructure that is necessary for the future. The policies that have discouraged or outright prevented development must be identified and reversed. The United States is fortunate to have a large domestic energy resource within our borders but, to even approach energy self-sufficiency our policy direction must be returned to one that encourages environmentally sound development and use of our nation's vast energy resource base.
Forecasts of future energy demand all consider technological advances, conservation and increased efficiency. But all forecasts also point to an increase in energy demand. For example, the Energy Information Administration (EIA) is predicting that energy use will increase by over 32 percent by 2020. Meeting this demand with reliable affordable energy while maintaining our high environmental standards will be a challenge, but a challenge that can be met with the correct policies that consider and enhance the role of all energy sources, including those sources found on Federal lands.
The role of coal in U.S. energy
Coal reserves, which are geographically distributed throughout the US, comprise the greater share of the nation's energy resource base. The demonstrated coal reserve is over 500 billion tons, a reserve large enough to support a growing coal demand for over 200 years. In 2000, 1.1 billion tons of coal were produced in mines located in 26 states. Coal, or electricity generated from coal is used in all 50 states. The coal industry contributes some $161 billion annually to the economy and directly and indirectly employs nearly 1 million people.
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Last year 1.026 billion tons of coal were used to generate over 50 percent of all electricity used in the US. Although this is more than triple the amount of coal used for electrical generation in 1970, emissions have declined by over one-third. The Energy Information Administration forecasts show that electricity use will increase by another 35 percent by 2020 and that coal use for electricity will total at least 1.25 billion tons in 2020, some 250 million tons or 20 percent more than is currently burned. Meeting electricity demands will require construction of new power plants including coal fired power plants. Although beyond the scope of this hearing, a national energy strategy must include provision for incentives that allow companies building these new plants to assume the risks of commercializing new advanced clean coal technologies. The mining industry supports legislation designed to provides a measure of burden-sharing to cushion the cost of improving the environmental performance of existing coal-based generating facilities and to stimulate deployment of advanced technologies to further reduce emissions and improve efficiency in new generating facilities.
Coal fired electricity is and will remain the most affordable electricity available. Electric rates in regions dependent upon coal for electricity average at least one-third lower than rates in regions dependent upon other fuels for electricity. Forecasts show that these differentials will remain in place over at least the next twenty years.
Because coal is a domestic energy resource that is reliable, affordable and, with new advanced clean coal technologies, increasingly clean, coal can and should continue to play a major role in meeting the energy needs of our nation in the future. Coal production will increase and nearly all this new coal will be from reserves located on Federal lands.
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Coal on Federal lands
Coal mined on Federal lands provides a vital portion of the nation's domestic energy supply. In 2000 approximately 405 million tons of coal, 37 percent of national production, were mined on Federal lands. Considering western production only, a full 80 percent came from mines on Federal lands and, considering that the majority of privately held western reserves are on lands that are effectively controlled by Federal land policies one can assume that 85 percent or more of the growing western coal industry depends upon Federal land management policies. Coal mines on Federal lands are found in Colorado (89 percent of production within the state), Montana (46 percent), New Mexico (24 percent), North Dakota (7 percent), Oklahoma (35 percent), Utah (88 percent), Washington (33 percent) and Wyoming (92 percent). Less than 0.1 percent of coal production on Federal lands—365,000 tons—were from lands located in the Appalachian states (Alabama and Kentucky).
Coal produced on Federal lands contributes directly to local economies in a positive way. In 2000, this coal was worth an estimated $3 billion. Production activities provided high paying jobs for over 15,000 workers in 2000, paying wages in excess of $600 million. Considering both direct and indirect economic benefits, coal produced on Federal lands provided employment for nearly 150,000 workers with wages of over $3.5 billion dollars.
Coal produced on Federal lands contributed nearly $400 million to state and local tax revenue. Royalties paid to the Federal Government were an estimated $330 million in 2000.
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The benefits of coal mined on Federal Lands do not remain within the region as this coal is shipped to electric generators in 30 states. Major destinations outside the western region include generators in Michigan, Minnesota, Illinois, Indiana, Iowa, Wisconsin, Texas, Kansas, and Arkansas with some being shipped as far as Alabama, Mississippi and Georgia. Taken as a whole, coal mined on Federal lands is used to generate nearly 40 percent of all electricity generated from coal, or approximately 20 percent of all electricity produced in the US. This is not an insignificant amount being enough to supply electricity to the entire South Atlantic census region or to all the customers in the East North Central and West North Central states combined or to 3.2 Californias.
The Federal Government owns about one-third of the nation's coal resources, which are located on approximately 76 million acres of land principally in the Western United States. Western Federal lands contain approximately 60 percent of the total western coal reserve base. An additional 20 percent of the coal resources in the West are managed or impacted by the Federal Government by virtue of (1) the commingling of State and private coal reserves with Federal leases and (2) trust responsibilities for Indian lands.
It is important to note that the enormous coal reserves on Federal lands include some of the best coal from an environmental standpoint. Many of the reserves, especially those located in Wyoming and Montana, are low in sulfur and also low in inherent NOX when burned in power plants. These coals are ideally suited to meet the increasingly stringent emission requirements of the Clean Air Act Amendments of 1990 and the regulations that EPA has promulgated.
Whether viewed as an environmental, an economic or as a domestic energy security and reliability issue, continued coal production from reserves on Federal lands is critically important to the economy and the well being of the United States. Energy, especially electricity would not be as readily available or as affordable if it were not for coal from Federal lands.
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Coal from Federal lands is projected to increase over the next two decades. The EIA Annual Outlook 2001 forecasts shows that over 90 percent of the expected 250 million tons increase in U.S. coal production will come from coal reserves located on Federal lands. If this forecast is to be realized policy changes must occur.
Policies should encourage, not discourage or prevent responsible development of coal resources on Federal lands
Interpretations of legislation over a long period of time added to the policies of the previous Administration over the last eight years have acted to discourage or actually prevent responsible development of coal resources on Federal Lands. There are several issues that need to be considered the first of which is access to the resources located on Federal lands for responsible exploration and development activities. Large reserve blocks have already been effectively removed from development by actions by the Federal Government. To cite just two examples:
According to the U.S. Geological Survey, the unsuitability provisions under SMCRA (the Surface Mine Control and Reclamation Act of 1977) and land use planning policies under FLPMA (the Federal Land Policy Management Act) have removed some 53 billion tons of Federal coal from future leasing which in effect reduces the National surface mineable reserve base by almost 25 percent.(see footnote 4)
The previous Administrations use of the Antiquities Act to create National Monument designations removed additional blocks of reserves from development. In 1996, this Act was used to create the Grand Staircase-Escalante National Monument removing 23 billion tons of mineable coal reserves in Utah's Kaparowits coalfield.
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Pending actions, such as the Forest Service Roadless Area Conservation Rule will remove even larger portions of the coal reserves located on Federal lands from responsible development.
Forest service roadless conservation areas
This Committee, and its members who serve on the Forest and Lands Subcommittee in particular, know well the history and the effects of the last administration's Roadless Area Conservation rule that was published on January 12, 2001. The lack of available information regarding affected areas of Forest Service administered lands made it extremely difficult for mineral developers to determine the impacts of the rule. Since the Forest Service did not identify or consider mineral resources in its draft environmental impact statement, industry had to create its own maps by identifying proposed roadless areas and areas containing known mineral resources on a forest-by-forest basis. The results of this exercise were particularly staggering, especially for leasable Federal minerals such a coal. In fact, the implementation of this rule could sterilize over 40 percent of the coal production in Colorado and Utah.
According to the Department of Energy:
The roadless initiative will have an impact on coal reserves in Colorado and Utah, including both the expansion of existing mines and tracts of coal of near-term commercial interest. While these resources are recovered using underground mines, roads are needed to build ventilation shafts and for safety, e.g., to fight underground fires. The mines would not be built or expanded if roads cannot be constructed.
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Existing leases may also be affected . . .(see footnote 5)
In Colorado, one of the mines in the Grand Mesa-Uncompahgre Forest is my company's, Arch Coal, West Elk Mine where 200 million tons of coal could become unrecoverable because of the rule. This loss of reserves will result in the premature abandonment of the mine and its $100 million infrastructure. The DOE report predicts that over $10 billion economic activity would be lost as a consequence.
The Bowie Mine in the Grand Mesa-Uncompahgre Forest will be blocked from developing 50 million tons of high quality coal reflecting over 2.5 billion in economic activity. The Oxbow Mine, adjacent to the Bowie leases is surrounded on the east and north by roadless areas. These roadless prohibitions will thwart future development at this operation.
The Forest Services Final Environmental Impact statement for the roadless rule declares that in Utah's Manti-La sal Forest three tracts alone account for 185 million tons of high Btu coal that are prejudiced by the rule. Further investigations of coal resources in the area indicate the impact could be much greater.
The Forest Service chose to accept these severe prescriptions even though mine roads are temporary and the Surface Mining Control and Reclamation Act (SMCRA) mandates that these roaded areas be reclaimed to a condition as good or better than they were before mining. It should be noted that surface coal mines cannot be permitted on Forest Service administered lands unless the Secretary of Interior ''finds that there are no significant recreational, timber, economic, or other values which may be incompatible with such surface mining operations . . .'' In other words, the values the rule is supposed to safeguard have already been considered and protected by an existing statute. Yet, millions of tons of low sulfur coal have been sterilized by this needless and unlawful regulation.
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Federal leasing
In August 1976, the Federal Coal Leasing Amendments Act (''FCLAA'') was enacted. FCLAA's imposed for the first time a series of radically more stringent requirements upon Federal coal lessees, the compliance with which forced such lessees to make a host of major financial and operational commitments, many of which made good policy sense but others were counterproductive. Over the past 25 years, those Federal coal lessees who have managed to stay in business have fully complied with both the rational and the questionable requirements.
Federal coal lessees are not today calling for major reform of the FCLAA program, although over time certain of FCLAA's provisions ultimately may need to be revisited and modified. Even where modifications ultimately may be needed, in most instances, the debate on such modifications can be deferred to a later time when adverse impacts become more focused and imminent. There are two areas that need attention however.
1. Advanced royalty provisions
The first issue that must be addressed is a segment of FCLAA's current ''advanced royalty'' provisions, which call for early legislative reform by Congress. The current advance royalty provisions provide, among other items, that:
Advance royalties may not be paid for more than an aggregate of 10 years,
Advance royalties paid during the initial 20 year term of a lease may not be carried over past the 20th year, and
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The Secretary of Interior may unilaterally cease to accept advance royalties.
With the progressive deterioration of U.S. coal market prices, several Federal coal lessees have been forced temporarily to curtail production or to idle uneconomic mines.
We recommend that narrowly drafted, surgical changes be made to FCLAA's advance royalty provisions which would:
Extend the aggregate entitlement to pay advance royalty in lieu of continued operations from 10 years to 20 years;
Delete the current prohibition on the carry-over of advance royalty payments made during the initial 20–year period of the lease;
Delete the current authorization for the Secretary unilaterally to cease to accept advance royalties in lieu of continued operations; and
Delete the last sentence of Section 39 of the MLLA of 1920 (Section 14 of FCLAA) prohibiting the waiver, suspension, or reduction of advance royalties.
2. Address the need to move expeditiously on lease-buy applications
The Federal Coal Leasing Amendments Act of 1976 (''FCLAA'') requires that all leases for Federal coal be conducted by a competitive leasing process. One of the mechanisms for initiating competitive leasing is through a lease-buy application (''LBA'') procedure, which allows an existing coal mining operation to nominate a tract for the expressed purpose of prolonging the life of the existing mine. The LBA process has been effectively used in Utah, Colorado and Wyoming for over a decade now. In the Powder River Basin (''PRB'') of Wyoming, which is called by many the ''Saudi Arabia of coal'', since that area is producing in excess of 1/3 of all U.S. coal, the LBA process has been critical to the orderly development of Federal coal reserves.
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As pointed out, coal production in the PRB has jumped dramatically since the Clean Air Act Amendments of 1990 primarily because western coals are typically very low in sulfur and also very low in inherent NOx when burned in power plants. With this dramatic increase in demand for low sulfur western coal has come the need for continued access to Federal coal reserves. Western coal producers clearly recognize this need and make their leasing plans accordingly. Unfortunately, the Bureau of Land Management now is only processing and holding one Federal coal lease sale per year in the Wyoming PRB. Thus, the most recent coal lease applications filed may not be offered for sale for eight years. Permitting requirements will then add another approximately three years. As a consequence, it is readily apparent that there is an excessive backlog of Federal coal lease applications on file and that the timeframe for processing LBAs and issuing leases has become unacceptable to orderly development of this most important domestic energy resource.
There are several administrative opportunities to address this backlog. The first opportunity is to consolidate the NEPA process instead of conducting separate EIS's for each lease application. Several LBAs should be combined into one document. Second, and even more importantly, the Department of Interior expeditiously should evaluate the workload of other BLM offices to determine if there are any personnel available to help work through this backlog. Finally, and of relevance to this hearing, Congress should give favorable consideration to supporting additional Federal funding for the processing of these lease applications in order to short the intolerable backlog.
Coal/coal bed methane conflict in the Powder River Basin
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The Powder River Basin of Wyoming and Montana is one of the world' richest energy resource regions and includes the largest reserves of low sulfur coal in the United States. Virtually all of the coal and about 50 percent of the oil and gas reserves in the Basin are owned by the Federal government and managed by the Bureau of Land Management (BLM) under the Mineral Leasing Act of 1920. Problems have arisen, because BLM has issued Federal coal leases and Federal oil and gas leases for the same locations in the Basin. In many cases when these oil and gas leases were issues coal bed methane resource development was not contemplated.
In those areas leased both for coal and oil and gas, disputes over timing of mineral development have arisen. The sequence of development frequently becomes a critical issue, because the production of any one of the minerals can result in the loss of another. For safety and operational reasons, concurrent development typically is impossible. No clear statutory direction exist to resolve disputes over the sequence of mineral development in these areas where the Federal government has ''double leased' its minerals. BLM has not provided effective guidance or included conditions in its leases that would provide a resolution to these disputes.
In order to achieve optimum recovery of the Basin's energy assets, legislation that would provide the missing statutory direction to resolve these mineral development contests should be enacted. Legislation should be used only in the conflict areas of the Powder River Basin and only as a last resort if private negotiations and BLM administrative policies fail.
Mineral management service administrative appeals process
Under Department of Interior (DOI) rules promulgated in 1973, the Minerals Management Service (MMS) is the only DOI agency with an intermediate appeal to the director of the agency. All other DOI agency appeals go directly to the Interior Board of Land appeals (IBLA). The principal purpose of the MMS administrative appeals process should be the expeditious and independent review of cases involving disputed facts, legal issues, or policy upon request of the adversely affected party. This two-stage process can extend 5 to 7 years, even before the controversy can enter the courts.
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In spite recommendations from a Federal Advisory Committee urging Secretary of Interior Babbitt to direct MMS develop a one-stage process for all MMS appeals, the Secretary decided to retain the current two-tier process. He made this decision even though he stated in the decision document that he agreed with the Advisory Committee's report in support of its recommendation.
The current unwieldy appeals process needlessly ties up what may be considerable industry resources with no competing benefit. The Department should revisit Secretary Babbitt's ill-advised decision and implement a streamlined appeal process like that used by all other DOI agencies. This action would save the agency and the industry time and resources.
Revitalizing the abandoned mined lands program
The 1977 Surface Mining Control and Reclamation Act, SMCRA, mandates that lands disturbed by coal mining be restored to their pre-mining conditions. Inactive mines are addressed through the Abandoned Mine land, AML, provisions which require coal operators to pay at fee to the Office of Surface Mining's AML fund of 35 cents per ton for surface mined coal and 15 cents per ton for underground mined coal. The funds are used to clean up pre-SMCRA abandoned sites. The fee has been extended twice and is currently set to expire at the end of FY–2004.
To date $5 billion in contributions have been paid by the coal industry into the fund but only $1.3 billion in Priority 1 and 2 reclamation work has been completed. Approximately $2.5 billion in work remains to be completed and the AML fund currently has an unappropriated balance of $1.5 billion. This has occurred because annual appropriations have been significantly less than the fees paid by industry and the distribution formula is out-of-date and does not reflect significant increases in western production. Further, the fund is paying for excessive Federal and state administrative costs of approximately $45 million annually.
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The coal industry believes that 2001 provides a unique opportunity to reform the AML program. The coal industry would support an extension of the AML program if additional funds are dedicated to clean up of the remaining Priority 1 and 2 areas and IF the current fee structure is reduced beginning in FY–2002. Suggested program reform should include a major reduction in administrative costs and a freeze on the inventory of eligible reclamation projects. These actions would give long-term financial stability to the various state AML programs and would ensure that the Surface Mining Acts original environmental goals are achieved and that reclamation is completed more quickly and effectively.
The Thunder Basin National Grasslands
There is a goal that is stated in the Thunder Basin National Grasslands (TBNG) Draft Management Plan that purports to: ''conserve air quality-related values over Class I and Class II airsheds.''
The U.S. Forest Service claims additional responsibility and authority with respect to air quality-related values on all Federal lands (Class I and Class II) via broad interpretation of the Organic Administration Act of 1897, Wilderness Act of 1964, the Forest and Range Renewable Resources Planning Act as amended by the National Forest Management Act of 1976. Additionally, The Federal Land Managers' Air Quality-Related Values (AQRV) Work Group (FLAG) published a ''guidance document'' on December 29, 2000. This guidance seeks to identify AQRV's and define adverse impacts in Class I areas. This document also purports authority for Class II areas under management by USFS, U.S. Fish and Wildlife Service and the National Park Service via broad interpretations of various Acts delegating authorities to the aforementioned Federal Land Managers.
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Currently, the Wyoming Air Quality Division does not evaluate the effect of new or expanding surface coalmines on Class I (or II) areas with respect to Air Quality-Related Values. This is mainly because these particular facilities do not meet the criteria of major facilities under the Prevention of Significant Deterioration sections of the state or Federal air quality rules and regulations.
However, the Federal land managers have recently begun to require an evaluation of cumulative impacts to air quality-related values (specifically visibility) in Class I and selected Class II areas as part of the NEPA process for Federal actions such as leasing Federal coal. This action is out of the State of Wyoming's direct jurisdiction, as opposed to the permitting program where the Wyoming Air Quality Division is the lead agency.
This practice is especially concerning in light of the fact that six (6) new ''Special Interest Areas'' are being proposed as part of the Thunder Basin Grasslands Draft Management Plan. These areas were originally proposed for ''Wilderness'' designation in the draft plan and are also considered ''roadless''. These areas are located from six to thirty (6) to (30) miles from five (5) existing surface coalmines. Each of these mines has a history of continued leasing interest for Federal coal reserves located adjacent to the existing operations. The additional leases serve to allow the continuation of these operations. Each of these five (5) mining operations submitted applications for additional leases in the year 2000. Representatives of the USFS Douglas Ranger District have noted in past discussions that these Class II ''Special Interest Areas'' would likely be reference points in computer modeling evaluations of Air Quality-Related Value impacts during the leasing process. There is very little doubt that significant impacts will be predicted considering the vicinity of the proposed special areas to the mining operations and the highly conservative nature of the modeling tools used for these purposes.
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Risks: The possibility exists that predictions of significant impacts from existing and expanding coal mine operations within the general area of these proposed ''special'' areas could negatively affect the ability to continue leasing Federal coal reserves.
Five (5) large surface coalmines are located either wholly or partially on the Thunder Basin National Grassland, which is located in the southern Powder River Basin and is managed by the U.S. Forest Service. These five (5) mines produce Federally owned coal with the lowest sulfur content of any coal mined within the Powder River Basin and the United States. Of the 316 million tons of coal produced in the Powder River Basin of Wyoming in 1999, 178 million tons or fifty-six percent (56 percent) were shipped from these five (5) mines. In 1999, these five (5) mines provided over sixteen percent (16 percent) of all U.S. produced coal.
In 1999, the average production rate of the five (5) mines on and adjacent to the Thunder Basin National Grassland was approximately 36 million annual tons each. At these production rates, the mines must periodically replenish reserves by applying for and purchasing new Federal coal leases through the Bureau of Land Management's (BLM) Lease-by-Application, (LBA) process. Historically, the mines on and adjacent to the Thunder Basin National Grassland have applied for new Federal coal leases through the LBA process every five (5) years beginning in 1989 to present.
Impacts: Currently, applications for coal leases in the Powder River Basin filed with BLM and pending sales total nearly 2.3 billion tons of mineable reserves. The pending lease reserves represent one-hundred forty percent (140 percent) of the coal lease sales that occurred for the five (5) years of very active coal leasing from April 1995 through the end of 2000. This indicates the strongest interest in coal leasing in the region since initial establishment of extensive mining operations in the late 1970's and early 1980's.
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The pending lease reserves represent an amount equal to 86 percent of the total Federal reserves of coal leased in the Powder River Basin from 1991 through 2000. The coal volumes in the pending lease applications represent approximately $560 million in bonus bids alone, to be shared equally by the Federal treasury and the state where the lease is located.
The $560 million in potential bonus bids does not take into consideration 12.5 percent production royalty payments. Another $1.1 billion will be generated (assuming an average prices of coal over time of $4.00 per ton). These royalty payments are fifty-fifty (50:50) between the Federal treasury and the appropriate state.
Five (5) of the pending eight (8) Federal leases will be located on or immediately adjacent to the Thunder Basin National Grassland. Future coal lease applications can and will involve USFS managed surface.
Regional haze
EPA's Regional Haze rule has the potential to impact energy production and generation on Federal lands in several different ways:
Siting—modeling of new state-of-the-art sources can show an impact on Class I Areas (national parks, wilderness areas, etc.). This modeling effort can have the result of denial of a permit and force the abandonment of the project.
The Federal Land Managers will have two bites at the apple under the Regional Haze Rule: the first is regional haze Best Available Retrofit Technology (BART) in which targeted emission reductions are met based upon overall technology assumptions in a region. This approach allows for the regulated community to have flexibility in meeting the reductions by over complying in one area to meet the reduction goals. The second bite is reasonably attributable BART, in which an impact in a Class I area is tied to a specific source (based upon modeling). The dual regulatory program virtually eliminates any flexibility and cost effectiveness achieved through a market based program.
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As an example, the western United States is far ahead of the rest of the country in addressing Regional Haze. The modeling analysis showed that throughout the range of potential emission reductions (moderate to extreme), there is no perceptible improvement in visibility.
A review of assumptions made in the western plans needs to be initiated. The plan was developed at a time of low natural gas and oil prices, and at a time when it was believed that virtually all new electric generation plants would be fired by natural gas. Assumptions regarding fuel price and the demand for electricity (growth) need to be reevaluated to ensure that the proposed caps on SO2 do not inadvertently impact the development of new sources.
Electric power plants built near western coal fields can help solve electricity shortfalls, but changes need to be made in permitting transmission lines
An electric transmission system providing operational and investment certainty is a key element in a coherent and effective energy policy. For companies to invest in new power plants providing affordable energy, there must be significant reform of permitting and siting regulations not only for the plants, but for the transmission lines and facilities that follow. The lengthy and uncertain permitting process is the problem, not the environmental protection required. We would recommend Federal action reducing the permitting and review timeframes required. We would further recommend a Congressional or Executive directive fashioned along the lines of the Executive Order addressing California's energy needs. That order gave DOE lead responsibility in ensuring priority focus on siting and permitting action by the various Federal agencies involved, and facilitating those actions with the appropriate state authorities. We also encourage the Congress to put in place an expedited and simple permitting and siting processes for the vast areas of Federal Lands in the West, which need to be crossed by transmission lines.
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In addition to permitting and siting reform, uniform and enforceable rules governing the operation of the transmission system are needed. Our current and arguably antiquated power grid was designed for localized demand and reliability. Electricity today must be wheeled between states and regions. Given the interconnected nature of the nation's transmission system, it is critical to optimize system reliability and consumer benefit by ensuring that the state and Federal governments enter into an effective regulatory partnership. However at present, it is still uncertain who will own or operate the lines, what rate of investment return will be allowed, and what will be the transmission charge. The absence of uniform and enforceable rules has delayed investment in improvements to the grid. The grid must be operated as an integrated entity, not a balkanized confederation.
Mr. Chairman, this concludes my comments. I would be happy to respond to your questions.
[The response to questions submitted for the record by Mr. O'Connor follows:]
Mrs. CUBIN. I thank the panel for their testimony. I have a few questions.
Mr. Bowles, in your oral testimony you said that understaffing of BLM was the problem for permitting coal bed methane drilling, and I think you were talking about in the Powder River Basin area. The Congress got special appropriations for funds on permitting coal bed methane production, for wells and for drilling.
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It is my understanding, and it could be wrong—we tried to verify this and didn't follow through on it—that a lot of that money that we got to hire personnel to do permits was spent on 12 pickup trucks. Another problem that has occurred, at least in that area, as you know, was the cumulative effects of all of the wells having been built.
So I guess what I want to know is are you saying—I know Mr. O'Connor said that Congress needs oversight of this, and I absolutely agree that we do. Are you saying that the Congress needs to appropriate more money to hire more people to permit this, or are you saying that the administration needs to get involved and make sure that the money is spent the way it is intended to be?
After all, the Interior Department really is one of the only, if not the only agency of Government that produces revenue for the Government, and you have to have the permitting done in order to do that.
Mr. BOWLES. For one, BLM does not have a very responsive way of permitting. Whether or not the money has been made available or they have aggressively tackled the problem head-on, we have not seen permits issued in a timely manner.
I might say that in one State that is outside of Wyoming, in Utah, where we do business, we see a State application going through in 30 to 45 days to drill a new well. That same State in BLM applications is taking upwards of 240 days to drill a well. So there is not only a possible manpower issue that is out there, there is also what might be considered a mandate to the BLM as far as their role in handling oil and gas activities for multiple use.
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Mrs. CUBIN. So then your answer would be both?
Mr. BOWLES. Yes, ma'am.
Mrs. CUBIN. Mr. O'Connor, you heard Governor Geringer's testimony, and a lot of your written statement and your oral statement focuses on the problem with the Forest Service's roadless policy and the management of the Thunder Basin National Grasslands.
What do you think of the governor's approach to State and Federal partnerships in that regard? Do you think his ideas will work to undo a lot of the permitting complications that we have now?
Mr. O'CONNOR. Madam Chairwoman, I philosophically and strongly believe that the people closest to the issues are the people who should be empowered and sought out in a collaborative manner to work closely with the State as well as the Federal Government in seeking solutions to these problems.
I think it is inappropriate for the Federal Government to take a one-size-fits-all approach to problems that are regional or local in scope, and I think it is appropriate and necessary and just flat the right thing to do to empower States and to empower communities and the citizens of those communities to be able to work with all levels of State and Federal Government in order to seek out these solutions.
Mrs. CUBIN. You also referred to the problem that you are having with the Forest Service roadless rule at the West Elk mine in Colorado. I wondered, was there any attempt by your company to work with the previous administration, interact with them, or the National Mining Association about the concerns before the rule was promulgated?
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Mr. O'CONNOR. One of the major difficulties we had was when the roadless environmental impact statement and the rules came out last fall, they were so vague and so difficult to comprehend that we had a hard time really identifying with any specificity what areas in the Western United States would be impacted and which areas would not be.
On a number of occasions, we formally as well as informally requested maps of areas in order to make a determination of potential areas of impact, and we were told by the Forest Service that no maps existed. It was not really until the very end of the process, really when the comment periods were over and the initiative was about to be implemented, that we were able to go back and on our own initiative put together maps based upon indirect data that we had gotten through the EIS that would be able to identify specifically what lands would be covered.
We have asked the Forest Service to advise us if they believe that these maps that we have done have been incorrect, and so far all indications are that in almost all cases what we have done appears to be correct. But we had to put it together ourselves. There were no maps by the Forest Service done, and we think that this really did a disservice to the potentially impacted citizens around the area who were not able to really identify during the comment period what might or might not be happening in their areas.
Mrs. CUBIN. So it sounds to me like the rules and regulations—that input didn't really happen or they just rushed it through without considering fully input from the public and from you and from other folks as well.
Mr. O'CONNOR. I agree.
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Mrs. CUBIN. My time is up, but I do have one other question that I wanted to ask Mr. Bowles.
What is the Cooperating Associations Forum? I wonder, is it possible to make a copy of their study available to the Committee?
Mr. BOWLES. We would be pleased to do that.
Mrs. CUBIN. Would you tell me what it is?
Mr. BOWLES. Well, that was a group that—I think you see that in written testimony that listed 7 States that actually did a study to look at what has happened in land access over the course of years. That is one of the unfortunate things that we have in many of our Western State resources, is really getting our hands around what kind of available resource is there. This group did take a stab at that and I would be pleased to make it available to the Committee.
Mrs. CUBIN. Thank you. I would like that for the record.
Mrs. CUBIN. I have quite a few other questions that I wanted to ask the panel, but time is wearing on and I do need to go to another meeting. So I will submit the questions in writing, if you would be so kind as to answer them.
Mrs. CUBIN. At this time, I recognize Mrs. Napolitano for questions.
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Mrs. NAPOLITANO. Thank you, Madam Chair.
This question is for Mr. Stanley, and one of the things you referred to in your hand-out, in the map, was the Rocky Mountain area, that it is closed to industry. I wonder if you can provide a more detailed explanation of what you mean by the restricted areas.
The Department of the Interior has given us information that shows 95 percent of the those lands have been open, and you indicated on this map only 40 percent, because it is restricted. Could you explain or even give us in writing what your industry is referring to so that we can better understand specifically what you are referring to, and also to see how we can understand your claim from the industry that this is happening?
Mr. STANLEY. Yes. The 40 percent is the total restriction from many different sources of restrictions. There are roadless policies, there are the restrictions during the year, there are—
Mrs. NAPOLITANO. Of what kind, sir?
Mr. STANLEY. We are not really talking about national parks and wilderness areas. We are talking about other general restrictions within this. I will be happy to submit in writing the documentation for this. I don't have that with me.
Mrs. NAPOLITANO. Would you, please, sir? I would really like to have it entered into the record so that we have that clarification.
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Mr. STANLEY. Yes, ma'am.
Mr. CALVERT. [Presiding.] The Chair will keep the record open for any additional information to satisfy the gentlelady from Southern California.
Mrs. NAPOLITANO. Thank you.
[The information referred to follows:]
Mr. CALVERT. Any additional questions?
Mrs. NAPOLITANO. No, thank you.
Mr. CALVERT. I just have one quick question for Mr. Bowles, representing API. I understand you are also with Phillips Petroleum.
Mr. BOWLES. Yes, sir.
Mr. CALVERT. For the interest of the Committee, at what capacity are the West Coast refineries operating right at present? I know that is not your—
Mr. BOWLES. It really is not my area.
Mr. CALVERT. Do you have any information that leads you to believe that are operating pretty close to 100-percent capacity? That is what I understand.
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Mr. BOWLES. Generally, in the U.S., refinery capacity is running at or close to maximum capacity.
Mr. CALVERT. At maximum capacity?
Mr. BOWLES. Yes, sir.
Mr. CALVERT. This is really outside the jurisdiction of this Committee, but it does have an interrelationship to supply because as we increase the supply of domestic production in the United States, obviously we want to move that domestic production to refiners. If we increased our domestic production by a particular amount, say 10 percent—and oil is a fungible commodity—what we don't produce domestically we will import, and vice versa.
Do you foresee additional refining capability coming online in the foreseeable future to take care of that increased supply?
Mr. BOWLES. Well, I would say in the near term more likely what you would see is the displacement of the import of foreign crude into the West Coast markets.
Mr. CALVERT. Now, are more and more of the imports coming into the United States refined elsewhere prior to entry into the United States?
Mr. BOWLES. I don't have any good statistics on that, Congressman.
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Mr. CALVERT. I bring that up because obviously the energy issue is beyond just the supply issue. I know in our State of California a significant amount of the refining capability went away when we put in a clean air standard to lower sulfur content in oil, which is a good thing. And now we are doing it nationally. In my previous Committee Chairmanship we wanted to make sure we maintained refining capability in order to make sure we don't have an increase in gasoline prices nationally as we have seen in California. So that is the reason I brought that subject up for the Committee's edification.
Mrs. Napolitano?
Mrs. NAPOLITANO. Mr. Chairman, thank you for recognizing me. There was one question that I neglected to ask.
Mr. CALVERT. The gentlelady is recognized.
Mrs. NAPOLITANO. Thank you.
I believe it was Mr. O'Connor who made the statement that somehow California would be hurt in its ability to recover. I wonder if you would elaborate on that statement. I think you mentioned something to the effect that if production is curtailed, it would hurt California's recovery.
Mr. O'CONNOR. I am sorry that I am unfamiliar with what your reference is. Could you restate it?
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Mrs. NAPOLITANO. There was a statement earlier, I believe, when I walked in that you were speaking to it. I unfortunately didn't continue to make notes on it because I was trying to catch up.
Mr. O'CONNOR. Perhaps it was reference to a large underground coal mine that we have in Colorado that could be adversely impacted by the Roadless Initiative. It is called the West Elk mine. It is the second largest coal mine in Colorado. It is a very high-Btu, very, very low-sulfur coal that is supplying energy into the Midwest.
The Roadless Initiative stands the prospects of preventing us from moving our existing operations into an adjacent 200-million-ton reserve that is adjacent to our existing reserves. And if we are not able to do so, the 360-some employees, the $100 million investment, and the annual payroll of $26 million, as well as the major impacts that would occur in west central Colorado, would be drastically impacted as a result of our premature closure of this mine because of our inability to move into an adjacent reserve.
Mrs. NAPOLITANO. How would that affect or impact California?
Mr. O'CONNOR. Now, I understand the question.
Mrs. NAPOLITANO. That is what your statement included.
Mr. O'CONNOR. I am sorry for the redundancy.
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With all of the controversy and publicity that has occurred in California in the last 6 months involving high energy and high electricity prices, ironically there is a small island within the southern part of the State that is enjoying inexpensive electricity and very reliable electricity, and it is 6 million people in the Los Angeles area.
The reason they are is because the Los Angeles Division of Water Power many years ago went to Utah and built a large coal generation plant and they are bringing in their electricity from Utah to California. That electricity is very inexpensive. It is reliably priced and reliable long term. Mayor Riordan has called for the construction of an additional power plant in Utah in order to meet Los Angeles' long-term needs.
The point of my testimony was that because of this Roadless Initiative, as much as 40 percent of the unleased Federal coal in this area will not be able to be developed, and that puts into harm's way the city of Los Angeles' ability, and in a broader sense California's ability to be able to pluck out this very low-hanging energy fruit and take advantage of it because of its growing electrical needs.
Mrs. NAPOLITANO. Okay, I get your point. The thing that puzzles me, though, is that the city of Los Angeles is fueled by the California Department of Water and Power, which so far has not been impacted because they stayed out of the deregulation. They have apparently been able to supply enough to its over 11 million customers so that they are staying afloat very well.
I just did not correlate what you were talking about because Los Angeles is being taken care of. It is the northern part of California, and to some lesser degree the rollouts are starting to affect mid-California and Southern California. So it just does not correlate. I think it is kind of stretching it a little bit to say that our ability to be able to produce in that area is going to have a tremendous impact or will be a significant change for us in California.
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Mr. O'CONNOR. Certainly, the impacts are not going to be immediate. But in the longer-term scheme of things, not just for the city of Los Angeles but for California itself, these Utah coal reserves stand available to be a major low-cost, reliable and affordable energy supplier, and this Roadless Initiative is a major impediment to that potential.
Mrs. NAPOLITANO. Well, hopefully, California will be found in a situation where it will not have to rely on outside help. The fact that the governor has promoted 6 new generation plants and has—actually, 3 being built, 3 on the books, and 6 more or 7 more, should be able to take care of the futuristic needs of California without having to rely on outside interests of any kind, and I am looking forward to that.
Mr. O'CONNOR. I honestly hope you are right.
Mrs. NAPOLITANO. Well, add to that the use of other kinds of power producers that are beginning to become more viable. At one time they were dormant and now they are becoming more interested in providing energy for those of us in California. So while I understand and I thank the State for its interest and for being there when we need them, I don't think that our reliance is going to be something they can count on.
Mr. CALVERT. I am going to wrap it up.
I am just curious. The coal that was mentioned in Utah is the cleanest coal that is available in the continental United States, as I understand it, or amongst the cleanest coal in the United States?
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Mr. O'CONNOR. It is among the cleanest coals.
Mr. CALVERT. Right. How many megawatts is that power plant that you mentioned producing in Utah?
Mr. O'CONNOR. I don't recall exactly, but I think it is about 3,500 megawatts.
Mr. CALVERT. 3,500 megawatts.
Mr. O'CONNOR. There are three units there and Mayor Riordan has called for a fourth unit.
Mr. CALVERT. And the expansion is for an additional 1,000-megawatt plant?
Mr. O'CONNOR. Yes.
Mr. CALVERT. So bringing that up to 5,000, which is about 10 percent of the total load in the State of California. Is that a correct statement?
Mr. O'CONNOR. Yes.
Mr. CALVERT. Thank you, and this panel is excused. Thank you for coming out and attending today.
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We are going to bring up our last panel as the gentlemen are leaving. I would like to recognize the people we have on our panel: Mr. Leland Hogan, a rancher from Utah; Mr. Chris Hocker, President of the National Hydropower Association; Mr. Robert Judd, Director of the USA Biomass Power Producers Alliance; and Ms. Leslie James, Executive Director of the Colorado River Energy Distributors Association.
With that, I would recognize Mr. Hogan for 5 minutes. Please limit your testimony to 5 minutes so we will have some time for questions.
Thank you.
STATEMENT OF LELAND J. HOGAN, STOCKTON, UTAH
Mr. HOGAN. Thank you very much. It is a pleasure to be here, Mr. Chairman and Committee members. I am a rancher and a farmer from Stockton, Utah, which is about 50 miles west of Salt Lake City.
My other credentials are in my written statement. I won't take the time to go through that and I will try and talk about things that are pertinent to our specific operation rather than to reiterate those things that are in the written comments.
My brother and I run a diversified farm operation, as I said, about 50 miles west of Salt Lake City. We have to pump our water in order to gain the water that we need in order to irrigate our crops. We are about fourth generation in this country. We came from the Scandinavian countries to this country, and we have been in agriculture back as long as our history records.
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We are in agriculture for the long term, and our contracts that we sign or the indebtedness that we take on indicates that we are there for the long term. In order to accomplish that, we need power that is affordable and also available in order to continue farming as we have in the past.
The data that has been collected by a magazine that is circulated through the industry called Irrigation magazine that gathers data from land grant colleges across the country indicates that a continued rise in irrigated crop land is happening across the country. In order for us to continue to be as productive as we have in the past and increase our production, irrigation seems to be the way that it is headed. With irrigation comes more consumption of power.
Where we live, it seems as though coal-fired power plants have produced power the most economically; it produces the most economic power that is available. If there is a better economic way to do it—and some of those things have been discussed today—I hope that those things are explored and that we insert them into our national energy policy.
I have seen and participated in this cycle as it has gone on over the past 30 years—an abundance of power, a shortage of power, a decrease in prices, an increase in prices. That really hurts us as individuals being on the farm. Our net income is affected directly. We are a taker of prices and not a setter of prices. Because our markets are national and international, we take prices that are set a long way away from where we produce. We have to fit within those categories or we go out of business. As prices escalate and we see these things happening, it is very disturbing to us.
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With the stroke of a pen, the Grand Staircase-Escalante National Monument was created, engulfing approximately 2 million acres of land. Under that land lies a great coal reserve; no one knows exactly, but perhaps enough coal to last the area that it is producing for for maybe hundreds of years.
As I said before, an affordable and available, consistent, readily usable amount of electricity is so important. Our production cycle is very short. We produce what we produce in approximately 6 months of the year. If we miss any portion of that time, our production decreases. Our ability to stay financially viable also decreases. So we are locked into a situation where we can't change things too much. We have to use the power.
It was alluded to this morning in some of the discussion that large users of power in the agricultural industry will not produce this next year. Well, that break-off is about at 4 megawatts. I don't think there is a producer in the State of Utah that uses 4 megawatts. There are those in Idaho, and there probably will be some who won't produce this year, but they will take a payment instead of production. That will cause a ripple effect throughout the whole agricultural industry because the feed or the commodities that would have been produced by those people will be minus from the equation this next year. Therefore, we are going to see ripple effects through the whole agricultural economy because of this isolated situation that is taking place this year. It will be very interesting to watch.
As a farmer, as a former elected official, a parent and as a grandfather, I plead with the members of the Committee to move toward a national energy policy that puts us in a position that we do not find ourselves today, a position where we have what we need in order to continue the standard of life that we have set for ourselves.
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I thank you very much for the opportunity to be here today.
[The prepared statement of Mr. Hogan follows:]
Statement of Leland J. Hogan, Stockton, Utah
My name is Leland J. Hogan. I am a fourth generation farmer. My brother and I operate a diversified ranch and farming operation, which includes 600 acres of alfalfa hay and grain crops in Stockton, Tooele County, Utah. In my area, as is true with much of the farmland in the West, crops must be artificially irrigated by pumping underground water or pressurizing surface water for sprinkler systems. I have served as a member and chairman of the Utah Committee of Consumer Services, an agency of Utah state government responsible for analyzing economic impacts of utility pricing on consumers. I have also served as chairman of the Tooele County Commission, a member of the Utah Quality Growth Commission, vice president of the Utah Farm Bureau Federation, and chairman of that organization's irrigation pumpers' committee. I am particularly pleased to appear before this Committee, because Chairman Hansen is my congressman.
Energy costs comprise a major, and rapidly growing segment of the cost of producing food and fiber for America's consumers. From the fuel for our farm implements, to the irrigation pumping costs, to the processing and transportation of this food and fiber, the impact of these skyrocketing energy costs is placing farmers in a serious economic squeeze.
The agriculture industry's ability to directly pass on these increases in energy costs is limited or non-existent. Due to the highly competitive national and international market for agricultural products, the price for our products is set by market forces and not by producers. As ''price takers,'' producers and processors must absorb increased costs resulting in the higher threat of widespread business failure. Moreover, in the long-run, increased energy costs to agriculture producers will ultimately be passed on to American consumers through higher retail pricing of goods.
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There are roughly 3,500 agriculture producers in Utah who rely on electricity to irrigate crops. Approximately 1,300 of these irrigators are customers of Utah Power, Utah's only investor-owned electric utility company. Last June, these regulated customers used 54 megawatts of power on the company's peak load, which, to put in perspective, is enough power to provide electricity for 30,000 homes for one month. The collective annual cost for electricity to these 1,300 irrigators was $7.2 million. However, these irrigators, along with all customer classes of the company, will be facing a 9.5 percent increase in their utility rates due to a recent interim rate adjustment ordered by our Public Service Commission. A rate case recently filed by Utah Power to adjust rates even higher is also pending.
To top it off natural gas pricing to Utah retail customers is up 50 percent from a year ago. While natural gas generally does not play as big a role in the cost of production for agriculture in Utah as electricity, it still takes a significant toll on residential cost of living.
So what can be done about these rapidly rising costs? While conservation and more prudent use of the energy we have is always a good idea, the current situation cries out loudly for the Bush Administration, working with congress, to develop a sensible energy policy. May I assure the Committee that this comment is not a call for nationalization of our energy production in any form. Rather it is a call for a new commitment to development of existing known reserves of crude oil, natural gas and other fuels in the carbon-based family. It is also a plea for the United States government to devote far more funding and other incentives to foster development of alternative energy sources, including plant-based sources.
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As a Utahn I cannot fail to again point out that in our state there is a vast supply of high grade, low sulphur coal. And perhaps hundreds of years' supply of it was locked up with the sweep of a presidential pen when the 1.7 million acre Grand Staircase-Escalante National Monument was declared in Southern Utah four years ago. Indeed, there are within that monument some important and apparently rare plant species and some rare, even spectacular scenery. As a farmer I am vitally interested in identification and preservation of endangered plants species. Future commercial agriculture plant genetics may depend on it. But there are vast acreages of that monument underlain by this high quality coal that could be harvested with very little surface disturbance. Isn't it time that we start to make the connection between the light switch on the walls of our houses and the coal mines of America?
In Utah most of the natural gas wells are on land managed by the Bureau of Land Management. The permitting process to gain access to these lands for energy development is daunting. Although I will defer to those who are experts in this area, surely this process can be streamlined and our government can encourage energy production rather than impede it. These are public lands. The resources they hold should benefit the public—all the public! We have learned much about more environment-friendly energy exploration and restoration of disturbed areas. I urge this Committee to move our government back towards multiple use of these lands.
Some of my farm and ranch colleagues have visited Alaska's Prudhoe Bay oil fields. Then, after flying directly over the Arctic National Wildlife Refuge while in that area, they came back convinced that with modern technology and the existing commitment to environmental protection while harvesting energy, there is no real reason to deny ourselves the vast quantities of recoverable high quality crude oil available within that refuge.
As a citizen, farmer, former elected public official, a parent and a grandfather, I plead with the members of this Committee to move this nation away from an ever-growing dependence upon foreign sources of energy supplies. I believe we can do it, and I believe we must do it. If the recent escalations in energy costs, including the manipulated oil prices by the cartels don't make us understand this, I am at a loss as to what will.
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[Mr. Hogan's response to questions submitted for the record follows:]
Mr. CALVERT. I thank the gentleman for his testimony.
Next, Mr. Chris Hocker, President of the National Hydropower Association.
STATEMENT OF CHRIS HOCKER, PRESIDENT, NATIONAL HYDROPOWER ASSOCIATION
Mr. HOCKER. Thank you, Mr. Chairman. My name is Chris Hocker. I am President of the National Hydropower Association, and I appreciate this opportunity to talk about hydropower, which is the number one renewable resource in the U.S.
Hydropower is the leading renewable. It represents about 10 percent of the nation's electricity overall and about 80 percent of its renewable energy overall. 98,000 megawatts of clean hydropower is produced, which is enough for about 98 million homes. But as was alluded to earlier today, hydro's contributions are beyond energy. They include irrigation, water supply, and recreation. They also contribute to clean air and a safe, reliable transmission system.
Despite all that, I would like to call your attention to two troubling facts. First, hydropower is on the decline. Second, there is quite a large amount of untapped hydropower that is being ignored. At a time when hydro should be most valuable, it is waning, and this is due to a regulatory scheme and actions by resource agencies who hold the upper hand in the licensing process. These are the same problems, frankly, that play a large part in why the development of new hydro capacity is being neglected. These problems can be fixed, but the time to do so is running short.
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Hydropower is losing capacity due to FERC's hydro licensing process. We strongly believe the process is broken and badly in need of repair. In fact, the Energy Information Administration (EIA) said for the first time last year that hydro capacity will decline due to regulatory constraints. This demands urgent attention, as half of the licensed capacity in the U.S. must be relicensed in the next 15 years, and over half of that is located in the West, where the energy crisis is paramount.
The licensing process is exceedingly complex, needlessly fragmented, excessively costly, and frustratingly inefficient. It fails to fully weigh the benefits of hydropower and often results in extended litigation, which costs both the project and the environment.
What can be done to fix this? Enact legislation this Congress which requires a more balanced review by resource agencies such as the Departments of Interior, Commerce, and Agriculture in their mandatory conditioning authority. We support legislation action because we honestly believe that our largest concern, which is balancing energy and non-energy values, can be achieved only through legislation. Administrative reform efforts that have already taken place have been helpful. We encourage them to continue, but we don't believe that administrative reform alone is enough. The problem must be addressed legislatively.
We must develop a process that permits agencies to consider non-resource issues in their review and conditioning authority. They should also be required to consider the economic effects of resource protection and bring balance and certainty to the process. Otherwise, we will continue to lose hydropower.
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We must also act to encourage undeveloped hydropower. We have an impressive amount of potential. A Department of Energy (DOE) study shows that there are 21,000 megawatts of potential at existing dams. There are over 4,000 megawatts available at existing hydro facilities, and again much of this potential capacity that is being undeveloped is in the West.
Again, this is undeveloped because of the complex regulatory scheme, and also because there are no incentives for producers to bring new generation online. Therefore, we strongly support production incentives that would encourage new hydro capacity at existing sites; that is, without the need to build new dams.
As I conclude, I want to leave you with a few final thoughts. First of all, the hydro industry takes very seriously its role as stewards of the rivers that we are privileged to use. We strongly believe that healthy rivers and hydropower can coexist. Resource agencies need to develop a better understanding that we can do both. We can achieve both environmental and energy goals, and we should all be in the direction of pursuing policies that recognize this.
Second, as we look for solutions to our energy problems, it is without question in our greatest interest to expand the use of our domestic renewable resources such as hydro. It is important for fuel diversity, energy security, reliability, and clean air.
Finally, I want to emphasize that the time is running short, with 20,000-plus megawatts being relicensed in the next 15 years. As we look to self-sustaining energy strategies, now is the time for policymakers to better incorporate hydro into the nation's energy mix. We can no longer afford to encourage energy policies that ignore this extremely valuable resource. We should no longer contribute to its decline.
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Thank you, and I look forward to your questions.
[The prepared statement of Mr. Hocker follows:]
Testimony of Chris Hocker, President, National Hydropower Association
Good morning Mr. Chairman, members of the Committee. My name is Chris Hocker. I am the President of the National Hydropower Association (NHA). I appreciate the opportunity to appear today to talk about hydropower—the nation's most valuable domestic renewable resource—and its relationship with Federal resource agencies.
As you may know, hydropower is the nation's leading renewable. It represents about 10 percent of the nation's electricity and about 80 percent of its renewable energy. Overall, 98,200 Megawatts (MW) of clean and efficient power is produced from hydro facilities—enough electricity for 98 million homes.
While these are impressive facts, hydro's contributions go well beyond energy. These benefits include irrigation, transportation, water supply, recreation, and invaluable contributions to cleaner air and a safe, reliable transmission system. De spite these benefits, today I bring to your attention two troubling facts I believe deserve policy consideration.
First, hydropower is on the decline. And second, there is a large amount of untapped hydropower that has been ignored for too long. I find it somewhat ironic that at a time when hydro should be most valuable, it is waning due to an arcane regulatory scheme and actions by resource agencies who hold the upper hand in the licensing process. These problems also play a large part in why development of potential new capacity is neglected. These problems can be fixed, however, but we need your help, and that of the Administration, to resolve them. And quite frankly, time is running short.
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Hydropower is losing capacity and operational flexibility due to the Federal Energy Regulatory Commission's (FERC) hydropower licensing process. We strongly believe the process is broken and badly in need of repair. In fact, the Energy Information Administration (EIA) said for the first time last year that hydro capacity will decline due to ''regulatory constraints.''
This problem demands urgent attention as half of licensed capacity—28,784 MWs—must to be relicensed by 2016, and over 52 percent of it is located in Western states where energy supply and reliability issues have already reached a critical stage, and water resource issues are paramount.
The licensing process is exceedingly complex, needlessly fragmented, excessively costly and frustratingly inefficient. Further, it fails to fully weigh the benefits of hydropower and often results in extended and contentious litigation, costing both the project and the environment.
Attached to my written statement, you will find a document that shows case after case where the process has failed, strongly highlighting the need for reform. I encourage you to carefully review it.
What can be done to fix a process all stakeholders agree needs improving? Enact legislation this Congress which requires a more balanced review by resource agencies such as the Departments of Interior (DOI) and Commerce (DOC) in their mandatory conditioning authority under Section 18 of the Federal Power Act, as well as the Department of Agriculture (USDA), under Section 4(e). We support legislative action because we honestly believe our largest concern, balancing energy and non-energy values, can only be achieved through legislation.
This is not to say that administrative reform efforts over the last 18 months have been useless. They have been very helpful, in fact, and we encourage these efforts to continue. We hope Congress will provide support and encourage agencies to continue efforts devoted to administrative solutions in the areas that are most appropriate. We also commend the resource agencies for their efforts as progress has been made. The fundamental problems with licensing, however, must be addressed legislatively.
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We must develop a process that permits agencies to consider non-resource issues in their review and conditioning authority. By requiring agencies to consider the economics effects of resource protection on other project values, we will bring balance and certainty to the process that is desperately needed. In addition, we ask that the process allow licensees to review and comment on mandatory conditions during the process, limit conditions to project-induced impacts, enforce process deadlines, and improve the collaboration amongst agencies and stakeholders. Otherwise, we will continue to lose clean, reliable hydropower.
While we must act to stop the bleeding of lost hydro capacity due to licensing, we can also act to encourage undeveloped, environmentally-sound hydropower. The U.S. has an impressive amount of new hydropower potential. A Department of Energy (DOE) study shows there are approximately 21,000 MWs of potential capacity at existing dams. Over 4,300 MWs are available at existing hydro facilities alone. More importantly, much of this potential—over 10,000 MWs—is located in the capacity-hungry west.
This hydro capacity sits unused largely because of the complex regulatory scheme I already mentioned. But, it is also undeveloped because there are no incentives for producers to bring new generation on-line, a process that is more expensive and complicated than ever.
Providing production tax credits for new hydropower capacity at existing sites will help resolve this problem. Production credits already exist for wind and biomass, why not hydro? Several proposals have been circulated this Congress to extend the credit to other renewables. NHA strongly supports the tax credit expansion to include hydro at existing facilities and non-hydro dams. Without it, development will not occur and we will fail to gain the benefits of additional hydro. Further, we will fail to replace capacity already lost.
Before I conclude my remarks, I want to leave you with a few final thoughts I hope you will remember as you examine policies regarding our natural resources and energy strategies.
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One, the hydropower industry takes very seriously its role as stewards of the rivers we are privileged to use. We strongly believe that healthy rivers and hydropower can coexist. Resource agencies need to develop a better understanding that we can achieve both and they should be directed to pursue policies that recognize this.
Our attempts to reform the licensing process will not remove the conditioning authority of the agencies or undermine existing environmental laws designed to protect our resources. NHA believes in both resource protection and the pursuit of effective and meaningful energy strategies that include hydropower.
Two, as we look for solutions to our energy problems, it is without question in our greatest interest to expand the use of our domestic renewable resources such as hydropower. It is important for fuel diversity, energy security, reliability and clean air.
Finally, time is running short. As we look to self-sustaining energy strategies, now is clearly the time for policymakers to better incorporate hydropower into the nation's energy mix. It behooves us all to craft energy policies that embrace this extremely valuable resource, not further contribute to its decline.
Thank you. I look forward to your questions.
What's Wrong With the Hydropower Licensing Process?
Real-Life Examples
Roughly half of all Federally-regulated hydroelectric capacity—240 projects in 38 states, representing 28,784 megawatts of electricity generation—is due to be relicensed by FERC in the next fifteen years. An inefficient licensing process that is time-consuming, arbitrary, and costly places all of these projects, and the future of hydropower as a clean, renewable energy source, at risk. The following examples, taken from hydro projects around the nation, illustrate some of the many problems associated with the current hydropower licensing process.
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ARBITRARY AND UNILATERAL EXERCISE OF MANDATORY CONDITIONING AUTHORITY
On February 23, 2000 FERC rescinded a license previously issued for the 4.1 MW Enloe Dam Project in, Okanogan County, Washington. Although FERC was in the process of engaging all parties in addressing fish passage issues at the dam, the National Marine Fisheries Service (NMFS) challenged that process as encroaching its unilateral conditioning authority under Section 18 of the Federal Power Act. NMFS insisted on imposing a fish passage requirement in the project license despite (i) opposition to such passage by the Washington Department of Fish and Wildlife, the Okanagan Indian Nation, and the Canadian government; and (ii) the desire of the Congressionally authorized Northwest Power Planning Council to assign financial responsibility for fish passage at Enloe Dam to regional entities.
NMFS had stated that its preferred position in the proceeding was license denial and dam removal. By insisting on fish passage as a condition of the license and at the licensee's expense, NMFS not only acted, in the words of FERC Commissioner Massey, ''out of sync with regional planning,'' but ultimately prevailed in gaining denial of the license application. As FERC Commissioner Hébert explained in his concurring opinion:
Unfortunately, the Commission's hope that this protracted dispute could result in a mutually-acceptable agreement has been undermined by the recalcitrance of a single agency. . . In today's order, the Commission states that it no longer has the discretion to continue to resist NMFS' overtures. . .
One party, carrying mandatory conditioning authority, and focusing myopically on its own particular interest, can upset the collaborative process if so inclined. To a party opposing licensing, stalemate may mean victory for one party and defeat to the rest of America. . .
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I view this process, where some participants, bearing veto power, have more negotiating authority than others, if indeed inclined to negotiate at all, as absurd. As a result, I am encouraged by pending legislative efforts to rationalize this process, by requiring a greater level of cooperation among Federal and state resource agencies. Such reform would benefit consumers by forcing all parties to the table in an effort to resolve such disputes in a fashion that is best suited for the benefit of all Americans.
ARBITRARY NATURE OF PROCESS/INAPPROPRIATE APPLICATION OF AGENCY AUTHORITIES
PacifiCorp is currently seeking a new FERC license for its eight-dam, 185 MW North Umpqua project in Douglas County, Oregon. PacifiCorp initiated the process in 1992 and went far beyond the normal requirements for public involvement and science collection in the hope that the North Umpqua licensing process would become a model of how a utility could work collaboratively with all stakeholders.
After submitting its relicense application in 1995, PacifiCorp initiated the North Umpqua cooperative Watershed Analysis to identify and address specific resource concerns that emerged during the relicensing process. The watershed analysis was the first-of-its-kind for a hydro project and involved PacifiCorp, Federal and state resource agencies, academic institutions and interested members of the public. PacifiCorp and other interested parties then entered detailed settlement discussions in 1997.
After two years of discussions, yielding little consensus, the U.S. Forest Service (USFS) insisted—without providing an adequate scientific explanation—that Soda Springs Dam (one of the eight dams on the project) be removed as a condition of settlement to meet objectives contained in the President's Forest Plan. This, despite the fact that removal of Soda Springs Dam would put the viability of the entire project at serious risk, from both an operational and economic standpoint, and despite there being other mitigation alternatives available. This also represents the first time that the Forest Service has indicated it intends to use its 4(e) conditioning authorities under the Federal Power Act to require a dam removal. This would create a broad, adverse precedent for other hydroelectric projects in the West located wholly or in part on Forest Service lands.
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PacifiCorp had recently agreed to remove its Condit Dam in south central Washington because compelling reasons existed. By contrast, no compelling reason exists for removal of Soda Springs. Citing an unreasonable bargaining position by USFS, and concerns over the precedential nature of the removal requirement, PacifiCorp walked away from settlement negotiations in November, 1999.
PacifiCorp remained interested in achieving a settlement that balances the need to mitigate for project impacts with the need for cost-effective renewable resources. The company and other stakeholders have been able to restart settlement negotiations and those discussions continue. But the North Umpqua experience points to significant flaws in the current law. If the Federal Power Act required conditioning agencies to take a balanced approach in setting their demands and included some accountability over them, the settlement negotiations might have been conducted more smoothly and efficiently in this case.
EXCESSIVE LENGTH OF PROCESS/JUDICIAL CALL FOR LEGISLATIVE IMPROVEMENTS
In March, 1997, the Eugene Water & Electric Board (EWEB) received a new FERC license for two projects (23.2 MW combined) on the McKenzie River in Oregon. In the license, FERC incorporated certain fishery conditions prescribed by Federal resource agencies under Section 18 of the Federal Power Act (FPA)—at a cost to EWEB of $14,000,000—but rejected several conditions because they did not meet the requirements of the FPA for ''fishway prescriptions.''
Despite the $14,000,000 of project improvements, several interest groups and agencies requested an administrative rehearing of the license before FERC; upon denial of the requests, the parties challenged the license before the U.S. Court of Appeals for the Ninth Circuit. Among other claims, the parties contended the FPA does not authorize FERC to refuse to accept any condition prescribed under Section 18. In other words, the parties asked the court to rule that the resource agencies had absolute power to dictate license conditions under the FPA whether they met the intent of the FPA for a fishway prescription or not.
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In its August, 1999 decision, the court did just that—concluding the FPA denied FERC the authority to modify, reject, or reclassify prescriptions submitted by resource agencies under Section 18, even while noting FERC's observation that the resource agencies ''do not concern themselves with the delicate economic versus environmental balancing required in every license.'' The court went on to acknowledge Congressional ''failure'' to require agencies to develop improved ''regulations, procedures or standards for implementing Section 18.'' The court noted that, absent Congressional action, the court was powerless to rewrite the statute. ''Our task,'' the opinion stated, ''is to apply the statute's text, not to improve upon it.'' The court's decision means that currently only a Federal court of appeals has the authority to determine whether a fishery condition offered by a Federal resource agency and required to be included in a license meets the requirements for a ''fishway prescription'' under the FPA.
With its hands thus tied, the court's decision will mean a remand of the license back to FERC to be re-written once the appeal is completed—8 years after EWEB first submitted its license application; with only the Ninth Circuit then having the authority to decide whether any condition prescribed by a resource agency meets the FPA requirements for ''fishway prescriptions.''
CONDITIONS MAKING PROJECT UNECONOMIC/ARBITRARY NATURE OF PROCESS/INSUFFICIENT IMPACT ANALYSIS
In 1996, during the relicensing of the Edwards Dam near Augusta, Maine, the U.S. Fish and Wildlife Service (USFWS) and the National Marine Fisheries Service (NMFS) prescribed a fishway system on the dam to safeguard a few species of fish. The fishery agencies estimated this fishway system would cost approximately $9 million while the licensee estimated the cost at $12 million—both of these estimates effectively rendered the project uneconomic. Lacking the authority to amend the prescription or otherwise balance it against the energy or other resource values of the project, FERC instead ordered the removal of the dam in November 1997.
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During the relicensing process, the USFWS and NMFS also recommended that flows of 4,500 cubic feet per second be released annually in July into a deep hole below the dam they determined was a spawning and nursery habitat for the Atlantic sturgeon. This flow recommendation had severe economic implications on the project since it would force the project to forgo power generation completely in July most years. This deep hole was located just below the area where the dam was eventually breached and this once-important spawning and nursery habitat is now assumed to be filled with rubble.
The U.S. Department of Interior and segments of the environmental community have hailed FERC's decision as a means of restoring a 17-mile stretch of the Kennebec River to its ''natural condition''. Moreover, certain environmental groups are now claiming that the simple act of removing the dam has successfully restored this section of the river yet no comprehensive studies are being planned to actually measure the success of this dam removal on the restoration of the river ecosystem.
ARBITRARY NATURE/EXCESSIVE LENGTH OF PROCESS
In an ongoing relicensing of a 35.5 MW facility in New York State, arbitrary fishway prescriptions have been proposed by the USFWS, at a cost of over $2 million. Why arbitrary?
The blueback herring, the primary species on which the prescriptions were premised, is not native to the river where the project is situated.
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With an 80-foot waterfall, blocking upstream fish passage, there would be no migration without the man-made lock system adjacent to the project.
The project (and other hydro facilities on the river) have operated without fishways for several decades and during that time the fish population has grown to over 100 million annually.
Pre-filing consultation started on this project in 1986, and a final license order still has not been issued. If the fishway prescription is included in the license along with other resource protection measures, the project would become economically unviable.
ARBITRARY NATURE OF PROCESS/FERC APPROVAL OF INAPPROPRIATE CONDITIONS
In a recent relicensing of a Western project, the U.S. Forest Service imposed numerous conditions, including one that required the project owner to annually send the Forest Service a set payment, expected to cover all operation and maintenance costs associated with existing campgrounds in the project vicinity. The owner pursued an administrative appeal of this condition at the Forest Service, arguing that the Forest Service failed to demonstrate that most of the campgrounds' use was related to the project. Furthermore, the Forest Service did not attempt to justify the amount of the annual payment for the operation and maintenance costs it sought from the licensee.
Nonetheless, FERC included the condition in the project license, concluding that it lacked the authority to even consider if a relationship between the condition and the project justified the Forest Service condition. Similarly, FERC was unable to reject an instream flow release imposed upon the project by the Bureau of Land Management, even though FERC summarily dismissed as inappropriate and unsupported the same exact amount of instream flow release recommended by the California Department of Fish and Game.
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After FERC issued the new license for the project, containing the contested condition, the owner challenged the condition at FERC and took the case before the U.S. Court of Appeals. Just prior to the case being heard and five years after the first of the two administrative appeals were filed with the Forest Service, the Forest Service decided that the operation and maintenance costs were indeed inappropriate and accepted an owner-proposed method for reimbursement of only those campground operation and maintenance costs related to the project—approximately 1.25 percent of the amount originally demanded by the Forest Service.
FERC APPROVAL OF CONDITIONS THAT RESULT IN ''NO QUANTIFIABLE BENEFIT''/EXCESSIVE LENGTH OF PROCESS
After FERC asserted jurisdiction over a 70 year old, 1.2 MW project in New England, the project owner reached agreement with one state agency on the level of minimum flows to be released from the project. However, a resource agency from an adjacent state and the USFWS prescribed a minimum flow that was nearly twice the agreed upon level. In its final environmental assessment for the project, FERC concluded that the owner's minimum flow could be provided with existing project equipment and that there was no ''quantifiable benefit'' from requiring the USFWS flow level rather than the level proposed by the owner.
However, because the recommendation was made under section 10(j) of the FPA, and because the recommendation appeared ''consistent with the FPA,'' FERC incorporated the higher minimum flow requirement in the license. FERC's rubber stamp approval of the USFWS 10(j) recommendation, along with other conditions imposed on the project, had the effect of reducing net revenue from the project by 60 percent, making the project economically marginal at best. (Note: Issuance of the license for this small project took more than 8 years.)
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DUPLICATIVE NATURE OF PROCESS
The Energy Policy Act of 1992 specifically prohibits Federal land managing agencies from requiring an existing hydropower project to obtain a Special Use Permit. However, in a number of licenses, the Forest Service has taken the standard Special Use Permit terms and included them in the conditions submitted to FERC under section 4(e) of the Federal Power Act. In turn, FERC has had no choice but to impose these conditions on the project license. These Special Use Permit conditions are designed to allow the Forest Service to regulate the project in the same manner that FERC administers the licensed project. Thus, despite the Energy Policy Act prohibition, the Forest Service is duplicating FERC's legislative mandate to administer Federally licensed hydropower projects.
CONDITIONS MAKING PROJECT UNECONOMIC
In 1997, six years after the licensee filed its initial plan, FERC issued an order approving a mitigation and management plan for the 170 MW Kerr Project in Montana. The FERC plan incorporated conditions submitted by the Department of the Interior requiring a variety of non-operational measures, including: a fish and wildlife implementation strategy to be funded through a one-time payment of $12.5 million and annual payments of $1.27 million, a fish stocking plan, the acquisition of 6,800 acres to serve as replacement wildlife habitat, the construction of five islands to serve as waterfowl habitat and construction of erosion control structures.
The FERC environmental impact statement (EIS) on the mitigation and management plan concluded that the conditions imposed by Interior would ''eliminate the project's positive economic benefits.'' The EIS found that the project's current annual net benefits were approximately $9 million, but that with Interior's conditions, the annual net benefits would be a negative $2.7 million. Not even Interior disputed that the conditions would reduce the project's net annual benefits by many millions of dollars. However, the Commission noted that ''any economic analysis of the impact of Interior's conditions is of at best tangential relevance to our decision,'' since FERC was obligated to impose the Interior conditions.
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CONDITIONS MAKING PROJECT UNECONOMIC/INSUFFICIENT IMPACT ANALYSIS/ ARBITRARY NATURE OF PROCESS/LITIGATION AS ONLY RECOURSE
The 700kW Yaleville project in upstate New York is one of the smallest
hydro facilities operated by Niagara Mohawk Power Corporation. In pre-filing consultation in connection with the 1988 licensing of the project, the USFWS raised the issue of fish passage. The agency recommendation was to provide for downstream passage of freshwater non-migratory resident species, namely bass and walleye. This, despite:
Spillage over the dam provided natural passage of fish at least 85 percent of the time;
Despite decades of hydro project operation, an abundance of bass and walleye was evident on the river both above and below the project; and
The $400,000 price tag for the agency-recommended fishway was prohibitive for such a small project.
Niagara Mohawk disputed the agency recommendation in its license application and FERC, in its 1991 draft Environmental Assessment (EA) for the project, agreed with the owner and recommended a lower cost fish protection alternative. USFWS, after failing to sway FERC away from its position in dispute resolution proceedings, responded by prescribing the downstream passage fishway under its Section 18 mandatory conditioning authority.
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FERC denied the fishway prescription in its 1992 license order because it did not meet the day's definition of ''fishway'' [at the time, a fishway had to serve the purpose of passing fish whose life cycle depended entirely on migration past the hydro facility—which was not the case with the Yaleville bass and walleye]. A broader ''fishway'' definition was established with the passage of the Energy Policy Act of 1992; accordingly, FERC had to rescind its prior denial and require Niagara Mohawk to install the fishway—despite the lack of biological basis and the fact that its cost would negate the economic operation of the project.
Niagara Mohawk promptly appealed the FERC order. Negotiations with USFWS ultimately led to an agreement to install a less expensive fishway design (at a cost one tenth of that originally prescribed). If the owner had not pursued an aggressive litigation action, USFWS would likely never had agreed to negotiate. Litigation, in this case, spawned reason; but only after more than 8 years of licensing process and a cost to the owner of nearly $300,000.
CONDITIONS MAKING PROJECT UNECONOMIC
In 1997, FERC issued a license for a 70 MW project in Washington state. In the text of the license itself, FERC noted that the prescribed resource agency conditions would result in a yearly operating loss of over $6.5 million for the project owner. Indicating that the project as licensed would not be ''economically beneficial'', FERC issued the license with the conditions, leaving it to the owner to ''make the business decision whether [to operate the facility] in view of what appear to be the net economic costs.''
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National Hydropower Association—Sustaining Hydropower: How Policymakers Can Reverse the Decline of America's Leading Emissions-Free, Renewable Resource
Hydropower is our largest renewable resource—accounting for about ten percent of the nation's electricity and over 80 percent of its renewable energy. It is an emissions-free, clean, reliable source of domestic energy which possesses many valuable benefits beyond power supply. Among its benefits are transmission system reliability, water supply, irrigation, flood control, recreation and transportation. More importantly, as an emissions-free power source, hydropower helps our nation meet its clean energy goals and reduces the number of health problems associated with air pollution.
Supply of hydropower is waning, however, and America is in danger of losing significant hydropower capacity at a time when it is most needed. As we face rising energy prices, increased levels of pollution, energy shortages and reliability concerns, now is clearly the time for policymakers at the Federal level to better incorporate hydropower into the nation's long-term energy strategy.
As we devise a clear long-term energy strategy, there are steps policymakers can take now to address the decline of hydropower. What's more, steps can also be taken to encourage development of additional hydropower capacity at existing sites, allowing the country to increase its use of renewable, emissions-free generation and strengthen the reliability of the transmission system.
What can be done to reverse the decline of hydropower and bring new growth to an industry that is crucial to the nation's energy strategy? The National Hydropower Association (NHA)(see footnote 6) suggests the following:
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Hydropower relicensing reform
First and foremost, the hydropower relicensing process needs to be reformed. Over the next 15 years, two-thirds of all non-Federal hydroelectric capacity—nearly 29,000 MW of power (enough to serve six million retail customers)—must undergo the Federal Energy Regulatory Commission's (FERC) relicensing process. This includes 284 projects in 39 states, much of it in western states where power supply is a major concern.
While there are many perspectives, all stakeholders agree that the relicensing process is in need of improvement. A multitude of statutes, regulations, agency policies and court decisions has made the process time-consuming, costly, contentious, duplicative and generally frustrating for all. Federal agencies are allowed to set conditions on licenses without regard to their effects on project economics, energy benefits and values protected by other statutes or regulations. Many times, agencies fight agencies and conflicting demands are issued. Worse, conditions are placed on a license that have little to do with project impacts.
Hydropower licensees have no recourse to appeal, or even question, the basis of mandatory conditions set by the agencies, except through litigation. Further, a typical hydropower project can take eight to 10 years to weave its way through the process—some have taken more than 20 years—and cost up to a million dollars a year. The end result of this broken process is the loss of operational flexibility and generation capacity—on average 8 percent per project—possibly putting at risk system reliability and clearly resulting in the loss of clean, renewable power.
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Enacting legislation, such as bills offered in the 106th and 107th Congresses—Congressman Joe Barton's substitute amendment to Congressman Ed Towns' H.R. 2335, or Senator Larry Craig's S. 71—would give Federal resource agencies the responsibility to consider and document the power, economic, and other impacts of their mandatory conditions before imposing them on a hydro license. The bills would also impose deadlines on Federal resource agencies for submission of final conditions. Reform legislation will not change or modify any existing environmental laws, nor will it eliminate mandatory conditioning authority of Federal resource agencies. What legislative reform will do is bring a much needed balance and certainty to the relicensing process and help stop the decline of hydropower, all while protecting the river resource.
Properly developed and implemented administrative remedies can certainly help on a number of fronts and should be encouraged as well. Taken alone, however, administrative reforms can not fully address the substantive problems with the process. In some instances, administrative reform can actually complicate matters. For example:
In January of 2001, the U.S. Departments of Interior (DOI) and Commerce (DOC) proposed a new policy regarding Section 18 fishway prescriptions. The proposed policy serves to define ''fishways'' broadly to include virtually any project structure or operational measure related to fish and would redefine the term ''fish'' to include virtually every form of water-related animal life other than mammals and birds. Further, it would give the agencies virtually unbounded authority to prescribe new or modified fishways, throughout the term of a license. This will result in further overlapping and conflicting Federal roles in the relicensing process and will exacerbate the uncertainties for licensees and other stakeholders that currently plague the relicensing process.
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Also in January, DOI and DOC implemented a new policy for administrative review of mandatory conditions and prescriptions developed by the departments under the authorities in sections 4(e) and 18 of the Federal Power Act. Despite agency intention to ''improve'' the hydro licensing process, the new policy fails to define substantive standards for review of mandatory conditions and to detail procedures for the development of an administrative record. While the proposal does represent a good faith effort to improve the process within the confines of current law, it does not resolve industry's concerns and it fails to address the fundamental problems with the process.
Again, NHA believes that legislative fixes are necessary to reform the relicensing process in a manner satisfactory to most stakeholders.
Market incentives for hydropower development
Although maintaining a strong and viable hydropower industry is a critical component of the nation's long-term energy strategy, hydropower development has been stagnant—almost nonexistent—for a long period of time. Yet, most legislative proposals that address renewable energy ignore hydropower and its increasingly marginal economic state due to regulatory costs and capacity restrictions. This misguided omission threatens to jeopardize our country's most successful renewable energy resource as competition, and serious concerns over reliability and power supply, comes to the electric power industry.
NHA forecasts that 21.3 GW of additional power from hydroelectric resources could be developed by 2020—none of which would require the construction of a new dam or impoundment. In terms of greenhouse gas reductions, this would equal displacing 24 million metric tons of carbon emissions. Of the 21.3 Gigawatts (GW), over 4,000 Megawatts (MW) can be developed at existing hydroelectric facilities alone.
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Bringing new hydro generation on-line, however, is increasingly difficult and expensive. While not the same disadvantages as those encountered by other renewable industries, hydro's disadvantages hold equal merit and demand similar counter-measures in policies designed to encourage the development of renewable sources of power. Providing financial incentives for hydro producers—such as those proposed in the 106th Congress by Congressmen John Shadegg and Albert Wynn, or proposals in the 107th Congress that expand the Section 45 production tax credit to include all renewables, including hydropower—will encourage hydropower development at existing sites, allowing the United States to rely more on a clean, domestic resource.
In the west, for example, 45 percent of hydro capacity in California, and 73 percent of Northwest capacity, faces the gauntlet of relicensing in the next 15 years. Given the current trend in relicensing, California and the Pacific Northwest might retire 1,200 or more megawatts of generation capacity. On the other hand, with changes to the process, and the proper financial incentives described above, another 8,800 MW of new capacity could be developed without building a single new dam. Given the current state of affairs in this region of the country, it is hard to imagine why we would not pursue policies to encourage additional clean, renewable hydropower capacity.
Dam decommissioning and removal
Hydropower dams have been a rich and vital part of our American history and continue to be an important part of our American landscape. Many of their benefits play a crucial role in regional economies and in national energy policy. Dams are not simply a remnant of our past, they continue to play an important role for our future.
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Despite this importance, there are some dams that have outlived their usefulness when considered within the context of rigorous new environmental standards. NHA recognizes the fact that maintaining some hydro dams, once their full public benefit is weighed against environmental and other social needs, may no longer be prudent. In these cases, decommissioning and removal may be the most appropriate course. However, we believe that when all benefits are considered, dam removal will occur only in rare instances. The real issue in dam removal is whether all of the benefits of a dam are appropriately weighed against the real, not subjective or hopeful gains.
There is a movement, mostly an ideologically driven one, to remove many of the dams in the country. As we consider all the aspects of dam removal, we must remember that this infrastructure is not easily replaced. Smart policy dictates that dam removal should be considered as a last resort when there is no other means to address the environmental consequences of the impoundment and all of the project benefits have been appropriately considered. Obviously, the growing interest in dam removal stems from our common concern over the health of our nation's rivers. The fact remains, however, that dams and healthy rivers can coexist. As a nation, our goal should be the preservation of both.
In those cases where prudence dictates removal, the hydropower industry believes that all stakeholders must be in common agreement. Removal should be a collaborative effort. FERC does not have the authority to unilaterally order removal of a facility, and the owner of the facility must be made whole in the process.
Hydropower owners and operators are good stewards of our waterways. Dam removal is a major issue of concern, not only to the industry, but also to the nation. Working with all stakeholders, policymakers can develop a rational national policy that can both protect and preserve our waterways and the infrastructure within them.
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Actions needed in the 107th Congress
1. Enact hydro relicensing reform legislation as soon as possible and continue to pursue administrative reform efforts where helpful.
2. Enact incentives legislation such as tax credits or incentives payments for capacity upgrades and efficiency improvements at existing hydroelectric facilities, and for new development at existing dams.
3. De-politicize the debate over dam decommissioning and dam removal and pursue national policy based on sound science with full consideration of all project benefits.
By focusing on the three areas NHA has discussed, Federal policymakers have an opportunity to not only protect our hydropower resource, but to also promote modest growth of a clean, renewable, domestic energy resource that is crucial to meeting long-term energy strategies.
National Hydropower Association—Hydropower Licensing Improvement: A Balanced Approach to Preserving Our Nation's Leading Renewable
Overview
In the wake of ongoing energy supply shortages and reliability concerns in California, the Pacific Northwest and throughout the nation, it is crucial that existing sources of energy—especially those that are clean, low-cost, reliable and efficient—remain in abundant supply. Yet, domestic generation of hydropower, our nation's leading emissions-free, renewable energy resource, is waning as a result of a Federal Energy Regulatory Commission (FERC) licensing process that all parties agree is in need of repair. It is indeed ironic that our nation's hydro supply is in decline when our nation needs it most.
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Hydro licensing improvement legislation introduced in the 106th Congress (H.R. 2335/S. 740) gained strong bipartisan support in both Chambers and was approved by the House Commerce Subcommittee on Energy and Power. With energy policy concerns taking center stage in the 107th Congress, Congress has an opportunity to build on this momentum and enact meaningful hydro licensing process improvements this year to ensure that crucial megawatts (MW) of hydropower are preserved for current and future generations.
Background
Since 1986, FERC has been required, under the Federal Power Act, to give ''equal consideration'' to a variety of factors when issuing hydro project licenses and relicenses. This balancing authority requires FERC not only to consider the power, economic, and development benefits of a particular hydro project, but also to consider energy conservation and the protection, mitigation of damage to, and enhancement of fish and wildlife. In other words, under Federal law, FERC has the responsibility and authority to strike a balance between power and environmental values.
The courts, however, have interpreted the Federal Power Act so as to prevent any balancing from taking place. The courts, in effect, have given Federal resource agencies the authority to set ''mandatory'' conditions on FERC licenses—conditions that are automatically attached to a final license. This means that FERC has no opportunity to question the basis of mandatory conditions set by the agencies.
This would not be a problem if Federal resource agencies, when imposing a mandatory condition, considered the various factors that FERC is required to examine pursuant to the Federal Power Act. However, this is simply not done. The net result is that no one is balancing. No one has the authority to look at the big picture of how hydro fits into our national energy policy.
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The implications are significant. Hydro project owners are facing higher costs, loss of operational flexibility, and lost generation due to new constraints imposed on operations. A typical hydro project can take from eight to 10 years to weave its way through the licensing process, at an average cost of $1 million per year. In its Energy Outlook 2000 Report, the Department of Energy's Energy Information Administration (EIA) for the first time forecasted decreased hydroelectric capacity as ''regulatory actions limit capacity at existing projects.''
The urgency
Over the next 15 years, more than half of all non-Federal hydroelectric capacity (nearly 29,000 MWs of power—enough to serve six million retail customers) must go through the FERC licensing process. This includes 284 projects in 39 states. What's more, 45 percent of hydro capacity in California, and 73 percent of Northwest capacity faces relicensing in the next 15 years. Given the current trend in relicensing, California and the Pacific Northwest might retire 1,200 or more MWs of generation capacity—enough power for 1.2 million homes. Given the current state of affairs in this region of the country, it is hard to imagine why we would not pursue policies to improve the licensing process.
Congress must do its part to ensure that this important renewable resource continues to operate in a cost-effective and environmentally compatible manner. If current trends continue, the nation could lose a number of hydropower projects and, with them, enormous clean energy, reliability, drinking water, flood control, irrigation, transportation and recreation benefits. Moreover, consumers could face increased energy replacement costs with polluting sources.
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Summary
Hydropower has been a rich and vital part of our American history and continues to be an important part of our American landscape. Many of its benefits play a crucial role in regional economies and in national energy policy. Hydropower is not simply a remnant of our past, it continues to play an important role for our future. Working with all stakeholders, policymakers can develop a rational national policy that can both protect and preserve our waterways and environment, as well as the infrastructure within them.
The hydro relicensing debate has, for years, been a search for balance: can the nation balance the benefits of hydropower with environmental protection and mitigation? A growing number of members of Congress from both parties believes it can. Given the enormous role that hydro plays and must continue to play in our national electricity grid, the time for balancing—and the time for Federal policymakers to better incorporate hydropower into the nation's long-term energy strategy—is clearly now.
National Hydropower Association—Forecast for Hydropower Development Through 2020
Two Federal agencies have estimated large potential capacity from hydroelectric facilities in the U.S. But the National Hydropower Association (NHA) expects that the existing licensing process will prohibit realizing any new capacity in the future. In fact, NHA is currently predicting a loss of renewable hydroelectric power in the U.S. without legislative changes to hydropower regulations.
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The Federal Energy Regulatory Commission's (FERC) river basin studies show a potential of 73,200 MW of additional U.S. hydroelectric capacity.1\ Emphasizing engineering feasibility and some economic analysis, but no environmental considerations, the FERC estimate is the likely ''upper limit of conventional water power potential in the United States''.2\
The U.S. Department of Energy (DOE) has undertaken an assessment of hydropower resources using FERC's river basin analysis while also screening for environmental, legal and institutional constraints at potential sites including threatened or endangered species, national designations, cultural values and other non-power issues.3\
DOE's results show there are 5,677 undeveloped hydropower sites with a potential capacity of about 30,000 megawatts.4\ Of that amount, 57 percent (17,052 MW) are at sites with some type of existing dam or impoundment, but no power generation. Another 14 percent (4,326 MW) exists at projects that already have hydropower generation, but are not developed to their full potential. Only 8,500 megawatts or 28 percent of the potential would require new dams.5\
NHA anticipates that, given the regulatory burden associated with the Federal licensing process—the cost, delay and duplication—none of this new capacity will.be developed by 2020. And worse, with no changes in the current licensing process, studies show an average eight percent 6 loss of hydroelectric generation in relicensing.6\ Furthermore, considering the uncertain future of some Federal projects, the potential loss of generation from our nation's hydroelectric system could be very significant.
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However, there are factors that could change NHA's bleak forecast:
The need for greenhouse gas reductions that would drive domestic policy to again encourage hydropower development;
The hydro licensing process is improved so that it increases investor certainty and recognizes the unique energy characteristics and environmental benefit of hydropower; and
The resulting licensing rules fairly balances environmental and energy needs.
Under these circumstances, NHA forecasts that 20,915 MW of additional power from hydroelectric resources could be developed by 2020—none of which would require the construction of a new dam or impoundment. In terms of greenhouse gas reductions, this would mean displacing 24 million metric tons of carbon emissions from coal.7\
Hydroelectric generating capacity would rise to 99,478 MW—a 27 percent increase from current levels—and this nation's use of hydropower resources would rise to 4.9 quads.8\
Other factors that could further stimulate the development of hydropower capacity are:
The development of commercially viable advanced turbines that further improve biological conditions for fish (fish friendly turbines);
Greater efficiency from these advanced turbines;
The trend in the growing deregulated market to value hydropower's ancillary benefits—its unique ability to stabilize the electric grid.
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Increased acceptance of green power programs that charge a premium for the delivery of clean and renewable electricity in a deregulated market.
FOOTNOTES
1\ Hydroelectric Power Resources of the United States; Developed and Undeveloped, FERC, Washington, DC, January 1, 1992, p. xi.
2\ Id. p. xxxv.
3\ ''Identification of Undeveloped Hydropower Resources in the United States, Based on Environmental, Legal, and Institutional Attributes'', Table 2, J.E. Francfort and A.M. Conner from Waterpower '97 Proceedings of the International Conference on Hydropower, Volume 2, ASCE, New York, NY, p. 1307.
4\ Hydropower Resource Assessment program draft report U.S. DOE Hydropower Program, Idaho National Engineering and Environmental Laboratory, <www.inel.gov/national/hydropower/index.html>, November 1998.
5\ Interview with Jim Francfort, Hydropower Resource Assessment program, September, 1998.
6\ ''Scenarios of U.S. Carbon Reductions: Potential Impacts of Energy Technologies by 2010 and Beyond'', Office of Energy Efficiency and Renewable Energy, U.S. DOE, September 15, 1997, p. 7.21.
7\ According to ''Impacts of the Kyoto Protocol on U.S. Energy Markets and Economic Activity,'' prepared by the Energy Information Administration, October, 1998, Table 17, p. 75, coal fired technologies emit 571 pounds of carbon per MegaWatthour.
8\ In 1996, total hydropower consumption was 3.911 quads. Hydropower capacity in 1996 was 73,129 MW. The ratio of quads consumed to capacity is .0000491.
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[Responses by Mr. Hocker to questions submitted for the record follow:]
Question 1 submitted by Representative James Hansen, Chairman of the Committee
In the early 1990's, the Advanced Hydropower Turbine Systems (AHTS) program was initiated by industry with a request to DOE for matching funds. The goal was to develop advanced turbines and other systems to improve safe fish passage while maintaining the operational efficiency. DOE responded positively, focusing its attention—and its hydro R&D funding—on the program. In some cases, interested parties in the hydropower industry also supported specific research items important to the AHTS program when funds were not available from DOE. Completion of the program would: minimize environmental impact to aquatic life; increase facility efficiency—savings that can be passed along to the consumer; improve relicensing negotiations; lower government's regulatory enforcement costs; increase government revenue from idled Federal projects that will benefit from this new technology; and encourage cooperation over conflict between industry, government and environmental advocates.
The Advanced Hydropower Turbine System program is important to industry and should be fully funded to its completion, including field verification. The focus of the research should be broadly conceived to include the transfer of technology to smaller applications at a variety of sites, as well as potentially contributing to salmon restoration in the Northwest.
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Currently, the majority of the DOE's AHTS funds are being directed to Alden/NREC turbine laboratory pilot testing. To minimize the elapsed time between laboratory and field tests of the new Alden/NREC turbine, it is important to establish criteria for site selection, to select a site(s) for field testing, and to design features needed for the turbine installation, all while the turbine is being evaluated in the laboratory. The selection process should be defined and one or more field sites should be selected. Due consideration would be given to the need for owner participation, site characteristics and changes, construction methods, design of the turbine for the site head and flow, means and scope of the fish testing, and cost and schedule.
The other focus of the AHTS program is devoted to the Voith Siemens Hydro AHTS design which is based on enhancing current turbine designs. A modified Kaplan turbine has been developed based on improved flow conditions and supported by field testing of existing turbines. Some of the advanced design features were included in the Bonneville Dam Minimum Gap Runner (MGR). Fish injury/survival tests were conducted at Bonneville Dam on the new MGR and on an existing turbine through a collaboratively funded project of DOE, U.S. Army Corps of Engineers, Bonneville Power Administration and Grant County PUD. To demonstrate that improvements have been made, it is essential to install and test a full size machine to prove these concepts.
An improved AHTS concept Kaplan design has been developed to replace existing turbines for a site on the Columbia River and is ready for testing. Additionally, industry-developed technology for advanced control systems to optimize fish-passage survival is also available for field verification in conjunction with the advanced Kaplan design. Further opportunities exist for collaboration with industry in the field verification phase.
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The hydropower industry has demonstrated its commitment to a competitive and environmentally sound future for hydroelectric generation. The industry's partnership with DOE and its willingness to contribute funds and resources to the AHTS program should be seen as the foundation for a new cooperative era between industry, government, and the public in addressing our nation's energy and environmental needs.
Industry urges that Federal water development agencies, principally the U.S. Army Corps of Engineers, the Bureau of Reclamation, and the Tennessee Valley Authority better coordinate their hydropower R&D efforts among themselves, with the DOE and with the private sector. In addition, Federal executive branch offices with science, technology and natural resource portfolios must pay closer attention to hydropower R&D as they examine their respective disciplines and coordinate R&D across Federal agencies.
Most importantly, industry stands ready to collaborate with the DOE in the expansion and coordination of R&D related to hydropower. Basic research of water-related environmental issues must receive greater attention across multiple DOE offices and its laboratories where it is mission-appropriate (e.g., Office of Basic Energy Sciences, Office of Biology and Environment, and the Office of Policy).
While much progress has been made already in devising new approaches to generating hydroelectricity while supporting healthy fisheries, much more work remains to be done. Now, DOE must expand its focus and devote attention and resources to other areas of hydropower R&D, while continuing to fund the AHTS program.
Research and development efforts in the private sector tend to focus on meeting short-term objectives and, increasingly in the restructured electricity sector, must be justified by a short-term return on the investment. Only the Federal Government can take a longer-term, higher-risk approach to research that addresses strategic national interests.
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The hydropower industry proposes that the DOE should take a ''three track'' approach to hydropower R&D. One track should continue the efforts to improve hydropower systems that support safe fish passage. The second track should be focused on laboratory and field verification projects that optimize hydro operations, increase efficiencies, and enhance environmental performance. The third track should focus on policy issues affecting hydropower. This final track would include, but not be limited to, stimulating hydro upgrades and new development, valuing hydro's role in electric reliability, assessing hydropower's environmental performance, and expanding hydro's contribution to avoiding greenhouse gas emissions (please see attachment on specifics of NHA's recommendations to DOE).
Funding for hydropower research has never reached the 1997 President's Committee of Advisors on Science and Technology (PCAST) Report recommended levels. Because of the lack of support for hydropower, and the Advanced Hydropower Turbine specifically, the program is behind schedule and possibly in jeopardy. The millions of dollars that have been spent, and the progress that has been made, may all be for naught if the program if the program is not fully funding in 2002 and beyond.
NHA strongly encourages Congress to appropriate finances for the turbine program that are much closer to the recommendations of the PCAST report. The program is at a critical stage and needs the appropriate financing to move to the next stage.
For 2002, NHA recommends $16,000,000. The amount provided is for cost-shared research and development of the AHTS. The amount is also for research to examine hydropower mitigation efforts; develop biological criteria for mitigation efforts; research and testing on the effectiveness of hydrokinetic energy systems; the development of consistent methodology for lifecycle analysis and total valuation of hydropower, including contributions to clean air; and to study the ancillary electric benefits of hydropower.
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Question 1 Submitted by Representative Ken Calvert
During the last 18 months, industry has been primarily involved in two non-legislative processes to address and resolve hydro relicensing issues—the Federal Advisory Committee (FACA) to the Interagency Task Force to Improve Hydroelectric Licensing Processes (ITF) and the National Review Group (NRG) headed by the Electric Power Research Institute (EPRI). Both of these administrative reform working groups produced a very helpful and positive dialogue concerning many of the relicensing issues and brought some helpful process-related improvements. The ITF and FACA completed their work for the most part (an implementation plan of the groups' recommendations is occurring but there is some concern regarding the level of implementation) while the NRG will continue into 2001 and focus on a few key issues. Industry will continue to play a very active role in those discussions and looks forward to working with the broad range of hydro stakeholders.
Properly developed and implemented administrative remedies can certainly help on a number of fronts and should be encouraged. Taken alone, however, administrative reforms cannot fully address the substantive problems with the process. In some instances, administrative reforms (in these cases, led by the Clinton Administration) can actually complicate and worsen matters. For example:
In January of 2001, the U.S. Departments of Interior (DOI) and Commerce (DOC) proposed a new policy regarding Section 18 fishway prescriptions. The proposed policy serves to define ''fishways'' broadly to include virtually any project structure or operational measure related to fish and would redefine the term ''fish'' to include virtually every form of water-related animal life other than mammals and birds. Further, it would give the agencies virtually unbounded authority to prescribe new or modified fishways throughout the term of a license. This will result in further overlapping and conflicting Federal roles in the relicensing process and will exacerbate the uncertainties for licensees and other stakeholders that currently plague the relicensing process.
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NHA strenuously objects to the Proposed Interagency Policy on the Prescription of Fishways and has asked that it be immediately rescinded and all processes related to this proposed policy be halted. Section 1701 (b) of the National Energy Policy Act of 1992 rescinded the Federal Energy Regulatory Commission's (FERC) definition of fishways. The Act clearly defers to FERC to redefine fishways by rulemaking with the concurrence by the Secretaries of Commerce and Interior. Quite simply, the Departments' proposed policy attempts to evade the express intent of Congress.
In addition to the serious concerns over the process of the Departments' proposed policy, we also stress that the proposed policy is premature, flawed and unbalanced. Moreover, contrary to the Departments' assumptions, the proposal could have serious economic impacts and should undergo review required by the Regulatory Flexibility Act.
As we face rising energy prices, increased levels of pollution and greenhouse gases, energy shortages and serious reliability concerns, this is the least opportune time, when viewed from the public interest perspective, for the Departments to mount a campaign for unbounded advocacy for their prescriptive powers. Now is clearly the time for policymakers at the Federal level to better incorporate hydropower into the nation's long-term energy strategies, not to devise policies that further diminish a waning resource that is so vital to energy adequacy, diversity and security.
Also in January, DOI and DOC implemented a new policy for administrative review of mandatory conditions and prescriptions developed by the departments under the authorities in sections 4(e) and 18 of the Federal Power Act. Despite agency intention to ''improve'' the hydro licensing process, the new policy fails to define substantive standards for review of mandatory conditions and to detail procedures for the development of an administrative record. While the proposal does represent a good faith effort to improve the process within the confines of current law, it does not resolve industry's concerns and it fails to address the fundamental problems with the process. Again, NHA believes that legislative fixes are necessary to reform the relicensing process in a manner satisfactory to most stakeholders.
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Question 2 Submitted by Representative Ken Calvert
The industry is committed to exploring options and keeping the dialogue open as we move forward on a reform bill. As a matter of fact, we are currently involved in such discussions in both the House and the Senate. Progress has been made in certain areas and that is largely due to the fact that a productive discussion with all stakeholders occurred. It is not in the interest of industry (nor is it likely) to jam a bill through Congress while ignore other stakeholders' concerns.
We understand that a bi-partisan approach is best and achievable. In fact, we feel ultimately that relicensing reform is a bi-partisan issue and we look forward to working in a bi-partisan environment. A few years ago, industry decided that taking a moderate approach to relicensing reform was best and we continue to believe that.
We made tremendous progress last Congress and hopefully that will pay off in the 107th Congress with a bill that is signed into law. We want to work with the resource agencies and other stakeholders so long as a bill that brings balance and certainty to the licensing process is achieved.
Question 3 Submitted by Representative Ken Calvert
The primary reason for lost hydro capacity is due to a relicensing process that is badly in need of repair. This problem demands urgent attention as half of licensed capacity—28,784 MWs—must to be relicensed by 2016, and over 52 percent of it is located in Western states where energy supply and reliability issues have already reached a critical stage, and water resource issues are paramount (please see attachment for specific state-by-state numbers).
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The relicensing process is exceedingly complex, needlessly fragmented, excessively costly and frustratingly inefficient. Further, it fails to fully weigh the benefits of hydropower and often results in extended and contentious litigation, costing both the project and the environment.
While there are many perspectives, all stakeholders agree that the relicensing process is in need of improvement. A multitude of statutes, regulations, agency policies and court decisions has made the process time-consuming, contentious, duplicative and generally frustrating for all. Federal agencies are allowed to set conditions on licenses without regard to their effects on project economics, energy benefits and values protected by other statutes or regulations. Many times, agencies fight agencies and conflicting demands are issued. Worse, conditions are placed on a license that have little to do with project impacts.
Hydropower licensees have no recourse to appeal, or even question, the basis of mandatory conditions set by the agencies, except through litigation. Further, a typical hydropower project can take eight to 10 years to weave its way through the process—some have taken more than 20 years—and cost up to a million dollars a year. The end result of this broken process is the loss of operational flexibility and generation capacity—on average 8 percent per project—possibly putting at risk system reliability and clearly resulting in the loss of clean, renewable power.
Enacting legislation, such as bills offered in the 106' '' and 107' '' Congresses—Congressman Joe Barton's substitute amendment to Congressman Ed Towns' H.R. 2335, or Senator Larry Craig's S. 71—would give Federal resource agencies the responsibility to consider and document the power, economic, and other impacts of their mandatory conditions before imposing them on a hydro license. The bills would also impose deadlines on Federal resource agencies for submission of final conditions. Reform legislation will not change or modify any existing environmental laws, nor will it eliminate mandatory conditioning authority of Federal resource agencies. What legislative reform will do is bring a much needed balance and certainty to the relicensing process and help stop the decline of hydropower, while protecting the river resource.
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Question 4 Submitted by Representative Ken Calvert
Although maintaining a strong and viable hydropower industry is a critical component of the nation's long-term energy strategy, hydropower development has been stagnant—almost non-existent—for along period of time. Yet, most legislative proposals that address renewable energy ignore hydropower and its increasingly marginal economic state due to regulatory costs and capacity restrictions. This misguided omission threatens to jeopardize our country's most successful renewable energy resource as competition, and serious concerns over reliability and power supply, comes to the electric power industry.
NHA forecasts that 21.3 GW of additional power from hydroelectric resources could be developed by 2020—none of which would require the construction of a new dam or impoundment. In terms of greenhouse gas reductions, this would equal displacing 24 million metric tons of carbon emissions. Of the 21.3 Gigawatts (GW), over 4,000 Megawatts (MW) can be developed at existing hydroelectric facilities alone.
Bringing new hydro generation on-line, however, is increasingly difficult and expensive. While not the same disadvantages as those encountered by other renewable industries, hydro's disadvantages hold equal merit and demand similar counter-measures in policies designed to encourage the development of renewable sources of power. Providing financial incentives for hydro producers—such as those proposed in the 106th Congress by Congressmen John Shadegg and Albert Wynn, or proposals in the 1071'' Congress that expand the Section 45 production tax credit to include all renewables, including hydropower—will encourage hydropower development at existing sites, allowing the United States to rely more on a clean, domestic resource.
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In the west, for example, 45 percent of hydro capacity in California, and 73 percent of Northwest capacity, faces the gauntlet of relicensing in the next 15 years. Given the current trend in relicensing, California and the Pacific Northwest might retire 1,200 or more megawatts of generation capacity. On the other hand, with changes to the process, and the proper financial incentives described above, another 8,800 MW of new capacity could be developed without building a single new dam. Given the current state of affairs in this region of the country, it is hard to imagine why we would not pursue policies to encourage additional clean, renewable hydropower capacity.
Question 1 Submitted by Representative Ed Markey
The National Hydropower Association does not advocate any particular formula or structure for fees charged for the use of Federal lands. As recognized for decades in the Federal Power Act, the production of electric energy from our nation's waterways is considered to be in the public interest, and licenses are granted based on the determination of a hydro project being in the ''public interest, convenience, and necessity.'' So long as hydropower is determined to be in the public interest, we believe that fees should not be so high as to threaten the viability of a hydro project.
To suggest, as the question does, that hydropower owners may ''abandon their projects or leave a mess behind'' is purely speculative and has no basis in historical fact. NHA advocates the responsible use of the nation's waterways and takes very seriously its role as stewards of the rivers we are privileged to use. We strongly believe that healthy rivers and hydropower can coexist.
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Question 2 Submitted by Representative Ed Markey
See answer to Question 1.
Question 3 Submitted by Representative Ed Markey
Again, the NHA does not advocate a particular fee structure or formula, nor do we take a position on the allocation of funds for water projects. Such allocation is currently been made in accordance with certain public policy decisions made by Congress, and it is Congress who properly should decide whether a change is necessary and if so, what the change should be. If such changes are considered by Congress, NHA will respond to the issue at that time.
Question 4 Submitted by Representative Ed Markey
We do not have specific information at this time comparing oil and gas leasing with hydropower fees. Even if such information were available, such a comparison would likely be inaccurate and incomplete, since hydropower is an emission-free renewable resource that is not subject to depletion. As far as mitigation efforts to reduce hydropower's impacts, industry has spent hundreds of millions of dollars to lessen its impacts.
Question 5 Submitted by Representative Ed Markey
The principle of scarcity applies universally, not just to hydropower. Again, a hydro project is recognized as being in the public interest by virtue of its holding a Federal license. NHA would be prepared to respond to specific proposals that modify the existing structure or formula for fees, and would be pleased to work with Congress to arrive at a fee structure that is reasonable and fair. In addition, NHA is pursuing polices that would maximize the power and non-power benefits of existing projects. While there are a substantial number of undeveloped sites where hydropower dams could be placed, NHA is more concerned with increasing the efficiencies and capacity at existing sites.
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Question 6 Submitted by Representative Ed Markey
NHA believes there is merit in shifting money collected from the FERC fees to the agencies participating in the relicensing process instead of allowing the money to be deposited into the general treasury. NHA has been discussing this issue with agencies and other stakeholders as the reform debated has moved forward. It is often pointed out by agencies and NGO's that resources for agency involvement in relicensing efforts are insufficient. We believe it is important for agencies to have appropriate resources available so a constructive and efficient relicensing process can occur with their full participation.
Question 7 Submitted by Representative Ed Markey
The question could just as aptly be reversed: How can FERC, which is charged with balancing the broad spectrum of power and non-power interests in the licensing of a hydro project, be expected to do so when other agencies have unrestrained authority over aspects of a project that represent only narrow interests? What NHA supports is balance—the recognition that power and non-power considerations should be treated equally.
We are not advocating a removal of mandatory conditioning authority or attempting to weaken the authorities of resource agencies. We are advocating a process that permits agencies to consider non-resource issues in their review and conditioning authority. By requiring agencies to consider the economics effects of resource protection on other project values, we will bring balance and certainty to the process that is desperately needed.
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Again, our attempts to reform the licensing process will not remove the conditioning authority of the agencies or undermine existing environmental laws designed to protect our resources. NHA believes in both resource protection and the pursuit of effective and meaningful energy strategies that include hydropower.
Question 8 Submitted by Representative Ed Markey
The Forest Service does have a review process but it is rarely used and is mostly ineffective. Hydropower licensees have no recourse to appeal, or even question, the basis of mandatory conditions set by the other agencies, except through litigation. A review process established by reform legislation can hopefully avoid the costly and lengthy litigation that is often the result of the current process, costing both the project and the environment. In addition, a review process within the licensing process would establish an administrative record, allow licensees to offer alternative suggestions for resource protection and greaten stakeholder involvement. Please see the attached comments NHA filed in response to DOI and DOC's Notice for Comments on a Proposed Policy For Review of Mandatory Conditions.
Question 9 Submitted by Representative Ed Markey
Again, what NHA seeks is balance, not a guarantee of profitability. We believe that a fair balancing of power and non-power interests will result, in an overwhelming majority of cases, in hydro projects that are both economically viable and protective of environmental resources. Under the current licensing system, however, the balance has been upset by the unrestrained mandatory conditioning authority of certain agencies who presently are not required to take economic viability into account. It's a stretch to suggest that the Federal Government is guaranteeing the hydropower industry's profitability. Industry's goals and the government's goals should not be mutually exclusive.
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Question 10 Submitted by Representative Ed Markey
I believe your question is attempting to ask how many projects have failed to acquire a new license because of actions by resource agencies. While there are projects