[Senate Hearing 117-126]
[From the U.S. Government Publishing Office]
S. Hrg. 117-126
OFFSHORE ENERGY DEVELOPMENT IN
FEDERAL WATERS AND LEASING UNDER
THE OUTER CONTINENTAL SHELF LANDS ACT
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
----------
MAY 13, 2021
----------
Printed for the use of the
Committee on Energy and Natural Resources
OFFSHORE ENERGY DEVELOPMENT IN FEDERAL WATERS AND
LEASING UNDER THE OUTER CONTINENTAL SHELF LANDS ACT
S. Hrg. 117-126
OFFSHORE ENERGY DEVELOPMENT IN
FEDERAL WATERS AND LEASING UNDER
THE OUTER CONTINENTAL SHELF LANDS ACT
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
MAY 13, 2021
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the
Committee on Energy and Natural Resources
Available via the World Wide Web: http://www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
44-732 WASHINGTON : 2023
COMMITTEE ON ENERGY AND NATURAL RESOURCES
JOE MANCHIN III, West Virginia, Chairman
RON WYDEN, Oregon JOHN BARRASSO, Wyoming
MARIA CANTWELL, Washington JAMES E. RISCH, Idaho
BERNARD SANDERS, Vermont MIKE LEE, Utah
MARTIN HEINRICH, New Mexico STEVE DAINES, Montana
MAZIE K. HIRONO, Hawaii LISA MURKOWSKI, Alaska
ANGUS S. KING, JR., Maine JOHN HOEVEN, North Dakota
CATHERINE CORTEZ MASTO, Nevada JAMES LANKFORD, Oklahoma
MARK KELLY, Arizona BILL CASSIDY, Louisiana
JOHN W. HICKENLOOPER, Colorado CINDY HYDE-SMITH, Mississippi
ROGER MARSHALL, Kansas
Renae Black, Staff Director
Sam E. Fowler, Chief Counsel
Peter Stahley, Professional Staff Member
Richard M. Russell, Republican Staff Director
Matthew H. Leggett, Republican Chief Counsel
Kate Farr, Republican Counsel
C O N T E N T S
----------
OPENING STATEMENTS
Page
Manchin III, Hon. Joe, Ranking Member and a U.S. Senator from
West Virginia.................................................. 1
Barrasso, Hon. John, a U.S. Senator from Wyoming................. 3
Cassidy, Hon. Bill, a U.S. Senator from Louisiana................ 4
WITNESSES
Lefton, Amanda, Director, Bureau of Ocean Energy Management, U.S.
Department of the Interior..................................... 5
Edwards, Hon. John Bel, Governor, State of Louisiana............. 13
Holmes, Russell, Director, The Center for Offshore Safety........ 42
Minarovic, Michael J., Chief Executive Officer, Arena Energy..... 50
ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED
Barrasso, Hon. John:
Opening Statement............................................ 3
Cassidy, Hon. Bill:
Opening Statement............................................ 4
International Energy Agency Special Report entitled ``The
Role of Critical Minerals in Clean Energy Transitions''
published in May 2021...................................... 81
Wall Street Journal editorial entitled ``Biden's Not-So-Clean
Energy Transition'' by Mark P. Mills, dated May 11, 2021... 368
Edwards, Hon. John Bel:
Opening Statement............................................ 13
Written Testimony............................................ 15
Letter addressed to Laura Daniel-Davis at the Department of
the Interior, dated April 15, 2021......................... 21
Pipeline and Hazardous Materials Safety Administration map
entitled ``National Pipeline Mapping System''.............. 24
Map entitled ``Gas Transmission and Hazardous Liquid
Pipelines''................................................ 25
Report entitled ``Louisiana: Our Coast, Climate & Future''
published by the Office of Governor John Bel Edwards,
Spring 2021................................................ 26
Responses to Questions for the Record........................ 391
Holmes, Russell:
Opening Statement............................................ 42
Written Testimony............................................ 44
Responses to Questions for the Record........................ 395
Invenergy:
Statement for the Record..................................... 404
Lefton, Amanda:
Opening Statement............................................ 5
Written Testimony............................................ 8
Responses to Questions for the Record........................ 378
Manchin III, Hon. Joe:
Opening Statement............................................ 1
Minarovic, Michael J.:
Opening Statement............................................ 50
Written Testimony............................................ 52
Letter to the President from Senators Cantwell, Menendez,
Schumer, and Markey, dated May 23, 2018.................... 78
Responses to Questions for the Record........................ 399
OFFSHORE ENERGY DEVELOPMENT IN FEDERAL WATERS AND LEASING UNDER THE
OUTER CONTINENTAL SHELF LANDS ACT
----------
THURSDAY, MAY 13, 2021
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The Committee met, pursuant to notice, at 10:09 a.m. in
Room SD-366, Dirksen Senate Office Building, Hon. Joe Manchin
III, Chairman of the Committee, presiding
OPENING STATEMENT OF HON. JOE MANCHIN III,
U.S. SENATOR FROM WEST VIRGINIA
The Chairman. I want to thank everyone for being here today
to discuss the status of offshore energy development of oil,
gas, and wind and the offshore energy leasing programs. In
January, the Administration announced a pause on new oil and
gas leasing while they conducted a review of both the onshore
and offshore leasing programs. In the meantime, it is my
understanding that activity on existing leases has continued.
Over 250 well permits have been approved for 89 unique wells
and production is continuing. I would like to acknowledge that
the leasing programs have very real impacts to many of the
states represented by members of this Committee. I believe the
new Administration has the right and the responsibility to take
a pause and evaluate how these energy programs are working. My
goal for this hearing, just as it was for our onshore energy
leasing hearing two weeks ago, is to set a baseline from which
the Committee can work to make sure that we strike the right
balance between American energy security and energy
independence, environmental stewardship, and ensuring fair
returns to the taxpayers from our shared resources. It is my
hope that the Administration will also take these discussions
into account as part of their ongoing evaluation and their
forthcoming report.
Turning now to focus on oil and gas production on the Outer
Continental Shelf, which we refer to as the ``OCS'': I would
like to acknowledge the significant role offshore production
plays in our domestic energy portfolio. The OCS provides 16
percent of all domestic oil production and three percent of
domestic natural gas production. This energy development
produced an average of $3.27 billion annually in revenue for
host states and the Federal Government over the last five years
through royalties, rents, bonuses, and other fees. 37.5 percent
of certain oil and gas revenue is shared with coastal states
under the Gulf of Mexico Energy Security Act, commonly referred
to as GOMESA, which I expect we will hear more discussion about
today. Additionally, 27 percent of the revenue from the first
three nautical miles of federal OCS waters is shared with the
closest state. But let me be clear, every state and county in
the country has benefited from OCS revenue through the Land and
Water Conservation Fund. We secured $900 million in permanent
annual funding for the Land and Water Conservation Fund last
year, along with addressing deferred maintenance on our public
lands in the Great American Outdoors Act. These programs will
preserve our majestic public lands for generations to come.
It is important to recognize the practical and historical
differences between onshore and offshore production and the
leasing systems, revenue sharing schemes, and the laws that
govern the different bureaus within the Department of the
Interior that manage leasing. For one, offshore leasing is
managed by the Bureau of Ocean Energy Management, often called
``BOEM.'' I also understand that the capital costs, the
timelines for development, the exploration uncertainty, and the
risks of offshore development are very different. In addition,
doing everything possible to mitigate the potential safety and
spill risks is incredibly important. I look forward to hearing
what lessons were learned from the Deepwater Horizon disaster
and what steps have been taken to make sure that it never
happens again.
I am also very interested in hearing more about how
offshore producers have taken steps to reduce damaging and
wasteful methane venting and flaring. As I have said before, I
am a strong supporter of an all-of-the-above energy policy, and
in that light, I am very interested in the Administration's
focus on expanding offshore wind. I know that manufacturers are
already working domestically in response to the opportunities
for wind energy here in the United States as well as designing
substitute materials that will not require particular critical
minerals with uncertain supply chains. This is important
innovation being driven by U.S. manufacturing know-how, and we
need to keep these concerns in mind as we look to develop
offshore wind energy. Unfortunately, in the past, BOEM and
other federal agencies involved in the process have not focused
on the offshore wind program, nor dedicated appropriate
resources. The Biden Administration seems keen to change that.
In fact, Vineyard Wind is slated to become BOEM's first
commercial-scale offshore wind project, having just received
their approval for construction and operation earlier this
week. Unfortunately, this comes after they submitted the plan
for approval in December 2017, nearly three and a half years
ago. With construction expected to take another three years, we
will be looking at almost six and a half years to produce
power. I understand that the first project is the hardest, but
I am hoping that we can find ways to improve the process and
provide some regulatory certainty for the offshore wind
industry. I look forward to hearing from BOEM about how we
might work together to remove some of the hurdles so that good
projects can move forward in a more timely manner. Ensuring
that our permitting environment makes efficient and orderly
development possible in a timely fashion is critical--whether
we are talking about pipeline infrastructure, critical mineral
mining and processing, electric transmission, or offshore wind.
If we cannot get the permits in place, all the great plans in
the world will not make a difference because we will not be
able to get anything built.
With that, I look forward to a robust discussion today with
our panel of distinguished witnesses. I will turn to my Ranking
Member and my dear friend, Senator Barrasso, to give his
opening remarks.
OPENING STATEMENT OF HON. JOHN BARRASSO,
U.S. SENATOR FROM WYOMING
Senator Barrasso. Well, thank you so much, Mr. Chairman. I
would point out we have 10 of the required 11 here with us.
The Chairman. We are close.
Senator Barrasso. And if you do notice a member coming in,
I know people are on tight timelines, please interrupt my
statement to take the vote and then I will continue.
The Chairman. Will do.
Senator Barrasso. Thank you, Mr. Chairman, and thank you
for holding this very important hearing today.
While Wyoming may be landlocked, we have much in common
with states that have oil and gas production off of their
coasts. Like western states, the states of Louisiana, Texas,
Mississippi, Alabama, and Alaska understand the importance of
federal oil and gas production. Jobs in the offshore oil and
gas industry pay well above the average state and national
wage. These are jobs that lift families out of poverty and put
children through college. Oil and gas production in federal
waters also generates a critical source of revenue for the
Federal Government and the states. Oil and gas production in
federal waters supports the Land and Water Conservation Fund
and the National Parks maintenance backlog fund. This funding
enables the Department of the Interior to preserve some of our
most treasured landscapes for generations to come.
Oil and gas production in federal waters also supports
coastal restoration projects which are especially important to
Louisiana and other Gulf states. In Fiscal Year 2019, oil and
gas production on federal land and waters accounted for 22
percent of our nation's oil production and 13 percent of our
nation's natural gas production. Like oil and gas production on
federal land, production on federal waters is essential to
America's energy and national security. It has helped the
United States become the largest oil and gas producer in the
world. It has given us energy independence from our nation's
adversaries and it has helped keep energy prices affordable for
American families and businesses.
While states in the West, along the Gulf Coast and Alaska
all recognize the importance of federal oil and gas production,
the Biden Administration does not. In January, President Biden
imposed a ban on new oil and gas leases on federal lands and
waters. This is not a pause or a review; it is a ban with no
end in sight. To make matters worse, there is no justification
for President Biden's ban. Oil and gas production on federal
land and waters is subject to some of the most stringent
regulations in the world. Ending oil and gas leasing on federal
lands and waters will do nothing to address climate change. As
Secretary Haaland admitted during her confirmation hearing, ``A
ban on oil and gas leasing on federal lands and waters will not
reduce global oil and gas production.'' A ban on oil and gas
leasing will simply push production to other countries. This
means fewer jobs for Americans, less revenue for states and the
Federal Government, and more imports of foreign oil. To that
point, in this very room, in this very Committee, Senator
Murkowski noted a few weeks ago, ``Russia is providing more oil
to the United States than Alaska is currently.'' This is
unacceptable. Subjecting American families to the whims of
Russia and countries in the Middle East is not an energy
policy. President Biden's leasing ban must end and it must end
immediately.
So today we are going to hear from John Bel Edwards, the
Governor of Louisiana. Like Wyoming, New Mexico, and other
western states, the people of Louisiana face deep uncertainty
from President Biden's actions. Governor, thank you for your
willingness to travel here and testify before us today. I know
my friend, Senator Cassidy, will do a full introduction of you
shortly.
Finally, I want to thank all the witnesses for appearing
before us today, and I look forward to your testimony.
Thank you, Mr. Chairman and we do have a----
The Chairman. Ta da, now we have a quorum. So we will go
into our business meeting right now.
[RECESS TO BUSINESS MEETING FOR VOTE.]
The Chairman. And with that, we have a tremendous lineup
today and a distinguished panel of witnesses are with us.
We have Ms. Amanda Lefton, the Director of the Bureau of
Ocean Management.
We have Governor John Bel Edwards of Louisiana.
We have Mike Minarovic, the President and CEO of Arena
Energy.
And we have Russell Holmes, the Director of the Center for
Offshore Safety and retired Coast Guard Captain.
With that, we will start, first of all, with an
introduction from Senator Cassidy.
OPENING STATEMENT OF HON. BILL CASSIDY,
U.S. SENATOR FROM LOUISIANA
Senator Cassidy. Thank you, Mr. Chairman and Senator
Barrasso for holding this hearing.
I welcome today the Democratic Governor of my State,
Governor John Bel Edwards. Governor Edwards and I are from
different parties, but without usurping his testimony, I can
say that we both recognize it is a false choice between
environmental stewardship and energy development. We, in
Louisiana, understand you have to balance both. The reason I
know he is going to say this is in a sense because he sent a
letter to President Biden that stated, ``Our ability to address
Louisiana's climate-related challenges, improve our structural
resilience to catastrophic water weather events, combat coastal
land loss, and reduce our carbon footprint relies heavily on
sustainable and predictable oil and gas production in the Gulf
of Mexico.''
Offshore energy production and environmental resiliency is
not a partisan issue in Louisiana. Governor Edwards and I have
worked together to best position our state for the energy
transition occurring while recognizing that oil and gas will
continue to be an important part of the U.S. energy mix for
years to come. We worked together because of climate change
impacting Louisiana unlike any other state in the nation and we
have the largest climate adaptation plan, which under his
leadership is helping to fight coastal erosion. The revenue
that we receive from this energy production off our shore is so
critical to this effort. Unfortunately, the current posture of
the Biden Administration threatens our long-term ability to
fund these projects while putting tens of thousands of jobs at
risk.
You said it, Senator Barrasso--eliminating U.S. production
does not reduce global demand. Energy will still be produced,
but not with American energy and emission standards--produced
by other nations with nonexistent emissions or laxly enforced
emission standards. Strengthening those nations while Americans
lose their jobs and global greenhouse gases go up is not a
policy to endorse. We need an energy policy rooted in science
which actually accomplishes worthy goals, not something that
sounds like you really care and gets awards from activist
groups, but puts hardworking Americans out of work. Solutions
are needed which move us in the right direction.
Thanks again for holding the hearing. I thank Governor
Edwards for coming up and to all the witnesses. I look forward
to today's discussion.
The Chairman. Thank you, Senator Cassidy.
And now we are going to move to our first witness. It will
be Ms. Lefton.
Ms. Lefton, your opening statement.
STATEMENT OF AMANDA LEFTON, DIRECTOR, BUREAU OF OCEAN ENERGY
MANAGEMENT, U.S. DEPARTMENT OF THE INTERIOR
Ms. Lefton. Good morning, Chairman Manchin, Ranking Member
Barrasso, and members of the Committee. I am very pleased to
appear before you today to discuss BOEM's role in developing
America's energy resources on the Outer Continental Shelf, or
the OCS. My name is Amanda Lefton. I am the Director of the
Bureau of Ocean Energy Management, and I am honored to have
assumed this role and responsibility of guiding the Bureau as
it fulfills its mission to develop America's offshore energy
and mineral resources in an environmentally and economically
sustainable way.
As part of tackling the climate crisis, the Administration
is committed to advancing the nation's transition to a clean
energy future. During his first week in office, President Biden
issued Executive Order 14008, which directed the Department of
the Interior to review processes for renewable energy siting.
On March 29th, the Departments of Interior, Energy, and
Commerce, all together, committed to a target to deploy 30
gigawatts of offshore wind by 2030 and announced a series of
initiatives that collectively demonstrate an all-of-government
approach that will catalyze the offshore wind industry in the
United States and create nearly 80,000 jobs. BOEM's delegated
authority to manage renewable energy development on the OCS
gives us a critical role in implementing the Administration's
offshore wind plan. Leasing activities to date include eight
competitive lease sales, 17 active commercial-scale wind energy
leases, and we have received 14 industry-submitted project
development proposals and two research leases to date.
Just this week, excitingly, Secretary Haaland and Secretary
Raimondo, together announced the approval of the Vineyard Wind
project. This is the first, large-scale, offshore wind project
in U.S. waters. Construction and operations of the 800-
megawatt, Vineyard Wind energy project will create 3,600 jobs
and will be built by union labor, ensuring that advancing
offshore wind is not only fighting climate change, but
supporting the American workforce. On March 29th, the
Department of the Interior announced that BOEM will finalize
the New York Bight wind energy area. BOEM has also submitted
notices of intent to prepare environmental impact statements
for Ocean Wind and Revolution Wind and also has ongoing
environmental impact statements for South Fork. These
advancements are truly a product of both BOEM's diligent work
to elevate environmental and multiple-use considerations and
our robust engagement with the industry, tribal governments, a
variety of partners and stakeholders, and state and local
governments. We anticipate continued interest and growth in
renewable energy on the OCS in years to come as we advance the
Administration's critical energy agenda and work to deploy 30
gigawatts of offshore wind by 2030 to fight climate change and
create good-paying jobs. I look forward to working with all of
you to ensure our offshore renewable energy resources are
developed efficiently, responsibly, and equitably.
BOEM is also the primary agency charged with OCS marine
minerals such as sand and gravel and is responsible for leasing
these resources. To date, our marine minerals programs have
largely focused on beach nourishment and coastal restoration
projects, but we are also examining the potential for
sustainable production of critical minerals in the OCS.
Executive Order 14008 directs the Department of the
Interior to pause new oil and gas leasing on public lands and
offshore waters pending a comprehensive review of federal oil
and gas programs. This directive is limited to leasing. It does
not impact production or plans or permit applications submitted
under valid existing leases. Such applications continue to be
reviewed and approved. The directive also does not apply to
state lands or lands that the United States holds in trust or
restricted status for tribes. The Executive Order does provide
an important opportunity to review our oil and gas program to
ensure that it serves the American public and to restore the
balance on America's public lands and waters to benefit current
and future generations. In undertaking this review, BOEM is
considering whether royalties and other fiscal terms amount to
a fair return to the taxpayer and it is incorporating the
corresponding costs to climate change in the environment
ensuring that our actions respect our government-to-government
relationships with tribal nations and of course, committing to
the principles of environmental justice in our decisionmaking.
We expect to complete this review in a timely manner, but do
not have an exact timeframe for completion. An interim report
to describe our focus and next steps for the review will be
released in early summer. Input received from a March 25th
virtual forum that included perspectives from industry, tribes,
academia, labor, and other organizations, as well as over
100,000 pieces of written input from the public, will also be
summarized in that report.
President Biden also issued an Executive Order that directs
the Federal Government to be guided by science and also ensures
the integrity of it in our federal decisionmaking. Secretary
Haaland also issued a Secretarial Order that provides guidance
for that. While these orders issued a renewed focus on and
respect for the importance and value that science brings to our
government in decisionmaking, BOEM has, of course, always been
guided by rigorous scientific research as a foundation for our
decisionmaking and that will, of course, continue with rigor.
As Secretary Haaland stated previously, we have put off the
transition to clean energy for generations. Now, the offshore
wind industry has the potential to create tens of thousands of
good-paying, family-supporting jobs. BOEM plays a vital role in
advancing safe and responsible offshore energy development and
we are committed to active engagement with all stakeholders and
partners, including members of this Committee moving forward. I
look forward to our continued work together and to answering
your questions today. Thank you very much. I am grateful for
your time.
[The prepared statement of Ms. Lefton follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, Ms. Lefton.
And now, we are going to hear from Governor Edwards.
STATEMENT OF HON. JOHN BEL EDWARDS,
GOVERNOR, STATE OF LOUISIANA
Governor Edwards. Thank you, Chairman Manchin, Ranking
Member Barrasso and members of the Committee, and Senator
Cassidy for the introduction. I appreciate the opportunity to
speak to you today on the issue of federal offshore oil and gas
development. As you all know, I am the Governor of an energy-
producing state, but also a state that is on the front lines of
the climate crisis. Because oil and gas development is
occurring in the Gulf of Mexico immediately adjacent to our
coast, Louisiana is directly affected and unquestionably
impacted by the federal policies regarding oil and gas
production and I am here today to urge the Congress and the
Administration to do two things. First, resume Gulf leasing for
the exploration of oil and gas by the third quarter of this
year and number two, to increase the revenue coming from oil
and gas production returning to coastal states to better
address the impacts of climate change and protect our coastal
communities.
Climate change is a serious threat to Louisiana. It is
impacting our state in two major ways. First, we are
experiencing stronger, wetter, and more frequent hurricanes and
other storm events. Last summer and early fall, Louisiana was
hit by four hurricanes. That's a record in modern times. Two of
the hurricanes, Laura and Delta, made landfall less than 15
miles apart and followed roughly the same path across
Southwestern Louisiana. Laura was the strongest hurricane to
hit the state since the 1850s and actually was at hurricane
strength as it approached Arkansas. That has never happened
before. Our people are still recovering from the devastation of
these storms.
The second major impact is sea level rise, which is
aggravating our effort to protect and restore our coastal
wetlands. Louisiana has lost approximately 2,000 square miles
of coastal wetlands since the 1930s. Since the 1990s, however,
both our people and our state and local leadership have been
committed on a bipartisan basis to the task of protecting and
restoring our critically important coastal wetlands. We have
established the agency--the Coastal Protection and Restoration
Authority, to lead this effort and we have developed through a
public and science-based process, a master plan for a 50-year,
$50 billion program to protect and restore our coastal
wetlands.
Last year, through an Executive Order, I established the
Climate Initiatives Task Force, consisting of 23 leading
experts from our state. The task force will produce a suite of
recommendations in February 2022. Today, the task force is
exploring carbon capture utilization and storage (CCUS), wind
power generation in our offshore waters and the federal
offshore waters, and the development and deployment of hydrogen
as a possible future base fuel. My Executive Order also adopted
for the state the goal of net-zero carbon emissions by 2050.
This is an ambitious goal, but it is what the global scientific
community says is necessary if we want to avoid the most severe
impacts from climate change. Our most recent economic
development announcement in Louisiana is a $1 billion renewable
diesel refinery, taking non-fossil fuels--in fact, pine tree
waste--with carbon capture and sequestration integrated into
that operation. It will be carbon negative when it's done. So
we are committed to these goals.
But at the same time, we are a major oil- and gas-producing
state. Louisiana's two liquefied natural gas terminals shipped
55 percent of the country's liquefied natural gas (LNG) exports
last year. We are home to a substantial portion of the nation's
refining and petrochemical capacity, and most of the support
industries and workers for oil and gas development in federal
waters in the Gulf of Mexico are located in our state. The oil
and gas produced offshore moves onshore through pipelines that
cross our coastline. The oil and gas industry, refining and
petrochemical industry, and offshore support industries
together are a foundational cornerstone part of our state's
economy. An abrupt halt or precipitous reduction or prolonged
pause to federal offshore oil and gas production would be
devastating to our economy and would leave many of the onshore
impacts of federal offshore oil and gas development
unaddressed.
In order for Louisiana to experience an orderly and
responsible energy transition, even for the nation and our
economy to be able to transition responsibly, federal oil and
gas production must continue in the Gulf and well into the
future. We also must continue to receive federal impact
assistance for that production. By constitutional amendment,
all federal revenue sharing from oil and gas production off of
our coast is committed to the protection and restoration of our
coastal wetlands and flood protection for Louisiana citizens.
Indeed, the federal impact assistance we receive must be
increased to be more closely in parity with federal impact
assistance for onshore federal energy development. Two weeks
ago, your hearing was focused on oil and gas development on
federal lands. The impact assistance for that energy
development is an even 50/50 split between the Federal Treasury
and the host states. Production from the Gulf of Mexico, which
accounts for 17 percent of U.S. crude production and five
percent of all U.S. natural gas, only provided 6.8 percent to
the Gulf Coast host states. So while $457.5 million went to
Wyoming and $707 million to New Mexico, only $249 million was
shared by all four Gulf States. I commend Senator Cassidy for
working with Senator Whitehouse and others on new legislation
to reflect an updated approach to revenue sharing that covers
revenue from offshore wind energy production and appropriately
updates revenue sharing from the Gulf of Mexico begun under
laws passed by this Committee in 2006.
Mr. Chairman, thank you for allowing me to testify today on
these vital issues. We are committed to addressing climate
change responsibly and to an orderly energy transition, but we
must find a way to take a balanced and responsible approach
where we are producing clean oil and gas while also mitigating
the causes of climate change. Environmentally responsible oil
and gas production must be allowed to continue on the Outer
Continental Shelf in the Gulf of Mexico.
Thank you.
[The prepared statement of Governor Edwards follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, thank you, Governor.
Now we are going to hear from Mr. Holmes.
STATEMENT OF CAPTAIN RUSSELL HOLMES,
DIRECTOR, THE CENTER FOR OFFSHORE SAFETY
Mr. Holmes. Good morning Chairman Manchin, Ranking Member
Barrasso, and members of the Committee. My name is Russell
Holmes and I am the Director of the Center for Offshore Safety,
known as COS. COS was established in 2011 with the mission to
advance offshore safety. COS is leading the industry to perform
optimally and we are on the right path toward making that
happen through the Safety and Environmental Management Systems
program, known as SEMS. Prior to joining COS last year, I
served for 27 years in the United States Coast Guard, where I
had the privilege of facilitating commerce while ensuring the
marine transportation system operated safely, reliably, and
securely. In my last assignment, I was the Coast Guard's lead
regulator overseeing offshore oil and gas safety, security, and
environmental compliance.
With the recent cyberattack on the Colonial Pipeline, it is
important to note at the outset that cybersecurity is a top
priority, and our industry leaders are engaged on a continuous
basis with government agencies to mitigate risk and fully
understand the evolving threat landscape. The events this week
demonstrate the vital importance of U.S. offshore and onshore,
along with the pipeline infrastructure of all the oil and gas
to be able to deliver safe, reliable, and affordable energy to
keep our economy running. U.S. offshore oil and gas production
is a significant source of energy for the nation and the world,
which is why its safe and reliable production has become the
centerpiece of the industry's continued work on the Outer
Continental Shelf. The Gulf of Mexico has long been a key
producing region for the United States. In 2020, Gulf of Mexico
production accounted for 15 percent of U.S. oil production and
two percent of gas production, lowering our dependence on
foreign energy sources. Additionally, offshore operations bring
substantial economic benefits to the Gulf region and the
country. Offshore exploration and production support hundreds
of thousands of good-paying jobs and are conducted under some
of the most stringent safety and environmental regulations in
the world.
Offshore exploration and production also contribute
billions of dollars to federal and state governments every
year, which support important programs like education,
infrastructure, and conservation efforts. In 2019 alone, the
Department of the Interior disbursed nearly $12 billion from
energy production on federal lands and waters to the United
States and state governments. In addition, earlier this month,
DOI announced $1.6 billion to address critical deferred
maintenance projects and improved transportation and recreation
infrastructure in national parks, national wildlife refuge and
recreation areas, and at Bureau of Indian Education schools.
This funding, through the Great American Outdoors Act, advanced
through this Committee, is provided by energy development on
federal lands and water.
While there are vast benefits of U.S. offshore oil and gas
exploration and production, it is essential to produce these
natural resources while ensuring the safety of the offshore
workforce and protection of the environment. Due in large part
to industry leadership and the lessons learned over the past
decade, industry has remained focused on enhancing its ability
to protect workers and prevent, intervene, and respond to any
spill with the most effective mitigation measures possible.
With this in mind, industry has made significant advancements
to promote safety culture; develop and revise industry
standards to minimize and prevent accidents and spills; track,
report, and learn from incidents; develop and improve subsea
containment and intervention capabilities; mitigate
environmental impacts and spills through greater spill response
technology; enhance safety and environmental management
systems; and establish the support and the efforts of the
Center for Offshore Safety.
It is with this focus that COS is now entering its second
decade of service. Formed to help offshore operations improve
safety, protect the environment, and increase sustainability on
the OCS through peer learning opportunities, sharing of good
practices, and the SEMS Certificate program. This program was
established based on American Petroleum Institute (API)-
recommended practice for development of a safety and
environmental management program for offshore operations and
facilities. Industries and COS' work has led to continued
advancements in technology, new and improved industry standards
and enhanced best practices, advances in risk management,
smarter regulations, and innovative approaches to addressing
offshore safety. Continuous improvements occur through
learning, collaborating, and innovating. The offshore oil and
gas industry remains committed to following through on its
responsibility to operate in a safe and environmentally sound
manner.
Together, with changes being made by federal regulators,
the collective action has served to improve and will
continually improve the safety of offshore energy development.
Thank you for the opportunity to address the Committee today. I
am happy to answer any questions that you might have.
[The prepared statement of Mr. Holmes follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, Mr. Holmes.
And now, we are going to have Mr. Minarovic. I try to get
it right, I don't know how close I am.
Mr. Minarovic. Yes, sir, it's Minarovic.
The Chairman. Minarovic. See, I was close.
[Laughter.]
STATEMENT OF MICHAEL J. MINAROVIC,
CHIEF EXECUTIVE OFFICER, ARENA ENERGY
Mr. Minarovic. Thank you, Chairman Manchin, Ranking Member
Barrasso, and members of the Senate Committee on Energy and
Natural Resources, for the opportunity to testify this morning.
My name is Mike Minarovic, and I am CEO of Arena Energy, an
independent exploration and production company with exclusive
focus on the federal waters of the Gulf of Mexico.
For 22 years, Arena has been drilling wells in the Gulf and
has invested over $4 billion of capital, and during that time
we paid the Federal Government $1.1 billion in royalties alone.
We have decommissioned over 300 wells and 45 platforms. During
the last 10 years, we have been one of the most active drillers
in the Gulf of Mexico. We conduct our operations with an
intense focus on safety and have produced significant volumes
of oil and natural gas in an environmentally responsible
manner. Our operations support thousands of jobs along the Gulf
Coast and throughout the country.
I also speak to you today on behalf of the Gulf Energy
Alliance, which is a coalition of leading independent offshore
producers. These are not household names, but we are the
backbone of the offshore industry. In 2019, independents
collectively produced approximately half of the oil and natural
gas from the Gulf and provided half of the total offshore
revenues paid to the U.S. Treasury. For 70 years, the U.S. Gulf
of Mexico has been a world-class basin for oil and gas
development and for U.S. energy security. The Gulf Coast
residents and adjacent states of Texas, Louisiana, Alabama, and
Mississippi overwhelmingly support offshore energy development,
which contributes to local communities with high-paying jobs.
From 2003 to 2019, U.S. offshore production contributed $107
billion to the U.S. Treasury through royalties, lease bonuses,
and rentals. About 17 percent of every dollar of revenue goes
straight back to the Federal Government and various state
programs, including the Land and Water Conservation Fund, the
Great American Outdoors Act, and GOMESA.
Finally, the extensive infrastructure in the Gulf
represents promising opportunities for emerging technologies in
support of a lower carbon future, including offshore wind,
hydrogen fuel generation, and storage of captured carbon. And
on top of all that, the oil produced in the Gulf of Mexico is
among the most environmentally advantaged in the entire world.
Oil and gas will remain critical fuel sources for decades to
come. As we transition to less carbon-
intensive energy sources, we should not reduce or constrain oil
production from the Gulf of Mexico. Doing so will not impact
domestic demand; it will simply force us to meet U.S. oil
demand by importing foreign crude with significantly higher
greenhouse gas emissions than that produced in the Gulf of
Mexico. The U.S. still imports about six million barrels of
crude every day. A recent Wood Mackenzie report shows that the
largest U.S. crude importers, including Canada, Mexico,
Columbia, Nigeria, Russia, and Iraq, have significantly higher
greenhouse gas emissions than U.S. offshore. This report
highlighted greenhouse gas emissions from these countries of
1.5 to 3.4 times the Gulf of Mexico greenhouse gas emissions on
a per-barrel basis.
Why is the Gulf of Mexico so much better? Well, there are
five main reasons. One, because offshore operations have been
stringently regulated for more than 70 years by the U.S.
Federal Government, and that's not necessarily the case for
those other six countries. Venting and flaring of natural gas
is very limited and is tightly regulated in the offshore. The
control and monitoring of potential greenhouse gas release
points is the key, and most offshore facilities produce very
high oil production volumes in the centrally located platforms
resulting in much smaller footprints where we can manage those
emissions. The use of leading-edge processing technology for
gas detection, methane capture, and reduced emissions that we
implement on those platforms is also key. And finally, there's
an extensive existing pipeline network that eliminates the need
for any shipping or trucking of our oil. We put it in the
pipelines, it goes onshore, ends up in a refinery, and there is
no significant exposure to the atmosphere.
After 70 years and with 55,000 wells having been drilled in
the Gulf of Mexico, we still find new sizable opportunities to
drill. One of the biggest advancements enabling new resource
discovery is simply the improvement in computing speed, with
which we are all so familiar. As better seismic and
reprocessing techniques open up new drilling opportunities, it
is uncertain where those resources might reside. So all of the
Gulf acreage needs to be available to lease. The recent pause
on federal lease sales has had an immediate and chilling effect
on offshore oil and gas producers, forcing companies,
shareholders, and capital providers to seriously rethink their
long-term commitment to the Gulf. I believe that more
uncertainty creates lower investment and that both investment
and oil production have already been impaired or reduced. The
result of a continued pause or an outright ban will be more
imports sourced from areas of the world where oil will be
produced under much lower environmental standards. Let's move
toward a significant lower carbon future and let's get there as
quickly as we can, but during the transition, we should ensure
that we maximize the distinct economic, security, and
environmental advantages of energy production from the U.S.
Gulf of Mexico.
Thank you very much.
[The prepared statement of Mr. Minarovic follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[
The Chairman. I want to thank all of you for your opening
statements, and now we are going to begin with our questions.
And my first questions, Mr. Holmes: We are having this
discussion almost 11 years after the BP Deepwater Horizon
explosion and oil spill. That accident had enormous financial,
environmental, and human cost and it's important to keep in
mind that 11 people lost their lives. So can you walk us
through what has changed since then and what has been done to
ensure that it will not happen again? And then to follow up on
that, is there more to be done that we are still working on or
do you feel confident that we have come to make sure this is
not going to happen again?
Mr. Holmes. Thank you for your question, Chairman Manchin.
I think we continue to learn every day. So part of my role
at the Center for Offshore Safety is--how can we do better
tomorrow than we did today and how can we continue to
constantly learn? And that is why the Center for Offshore
Safety exists--to be able to learn from catastrophes and
disasters like the Deepwater incident that happened and how can
we continue to----
The Chairman. Just tell us with the Deepwater Horizon, what
happened? Why did it blow up? I mean, what caused all this
damage and then what have you done to prevent it from happening
again?
Mr. Holmes. Certainly. So on that day, April 20th, 2010, 11
people tragically lost their lives when the Deepwater Horizon
was drilling a well--or dealing with a well--in the Macondo
area, and they lost control of it from a pressure perspective
and the well became uncontrollable. And it took, you know,
talking to people in the industry, I've had people before I
took the position in the Center for Offshore Safety, when I was
in the Coast Guard as well, and a lot of people talked about--
you know, there are so many different things that went wrong in
that incident that could have prevented and stopped it----
The Chairman. Was it a lack of inspection, lack of
oversight, or just negligence on the part of the driller?
Mr. Holmes. So if you ever look at--if one of the studies,
when you look at causality analysis, you have a Swiss cheese
model, where you try not to line up errors, you try to have
different barriers in place and mitigation things in place so
that in every part of the way between a process perspective,
your equipment, your different barriers and your different
aspects. And every now and then, when an accident and an
incident happened, all these different barriers and mitigation
measures that you had in place, the one time that there might
be a vulnerability in that piece or component of it, lines up
with the next one, with the next one and the next one.
The Chairman. And I hate to rush you along because we only
have so much time.
Mr. Holmes. Sure thing.
The Chairman. But let me just ask this. Have we been able
to put in place, since then, measures so we don't have a
runaway well like this, where this could happen again?
Mr. Holmes. Yes, we----
The Chairman. What type of equipment or technology has been
improved?
Mr. Holmes. We have improved, we have written over 250 new
standards to improve how we do our different processes across
the board. We have developed newer and improved technologies to
be able to drill, how we are being able to mitigate, how to be
able to prevent--the blowout preventers. We have significantly
improved the technology in that. We learned a lot of lessons
for what worked and what didn't work from that equipment.
The Chairman. Do we have enough inspectors right now making
sure they are adhering to this new technology and also to the
new restrictions?
Mr. Holmes. So if you look at it, the Bureau of Safety and
Environmental Enforcement (BSEE), in the past couple of years,
they have pushed out that they have increased the number of
inspections that they have done, significantly, with the
inspectors that they have out there to be able to look at it.
We have also implemented safety environmental management
systems that were not required by regulation before and so some
companies did it and some didn't and those are required now and
that is part of what COS does, is to help ensure that those
management systems are being done and they are required to be
audited every three years by BSEE.
The Chairman. Thank you very much. I appreciate it, and
there are going to be more questions on this.
I am going go to Governor Edwards at this time. I am going
to have to leave at about 11:15 or so to vote, so Senator
Barrasso will take over. I am going to take the privilege of
just a couple extra minutes, if you don't mind.
Governor Edwards, Louisiana has adopted a constitutional
amendment that requires that all funds it receives under GOMESA
go to coastal resilience projects. As far as I am aware, there
are not similar requirements for the other three coastal states
receiving GOMESA funds. GOMESA has some limitations about how
states can use the funds, but it is not as narrow a focus as
with Louisiana. You have spoken to the threats Louisiana faces
with climate change and coastal resilience. This is going to be
a two-part question, Governor. As we look at proposals to
change revenue sharing, and also adjusting the disbursement
caps that we have right now with GOMESA, how should Congress
think about how the other states would spend those funds?
Should we consider that as opposed to Louisiana, where the
money is directly targeted for coastal resilience, the other
states spend it on other things? It seems that all four states
in the Gulf would have the same problems with coastal
resilience and should focus there?
Governor Edwards. Thank you, Senator Manchin, for the
question.
I am reluctant to weigh in on how other states should spend
revenue that they get from the Federal Government because I
don't know the most pressing needs in those states. And I don't
know what limitations there may be on the sharing of revenue
with respect to federal lands either. I can tell you that there
is a 37.5 percent cap and the $375 million cap as well and then
whatever funds are produced from the Gulf then get split
according to a formula between the states of Alabama,
Mississippi, Louisiana, and Texas.
And so every dollar that we get goes to coastal restoration
and protection, but we know that is a pressing need. We have
identified at least $50 billion worth of investments we want to
make over 50 years. This is the only guaranteed source of
federal revenue that goes into that program every single year
for the life of GOMESA. So it is incredibly important for us
and we are doing really good work on the coast. I hope that
maybe you and other members of the Committee will come down and
we can show you the islands that we are building, the shoreline
protection projects that are really having a positive impact.
The hurricane that we talked about earlier, Laura, was
projected to have a storm surge over I-10 in Lake Charles. That
didn't happen and we believe one of the reasons it didn't
happen is because of the work that we have done along the
coast, particularly the shoreline protection projects. So these
projects are really important to us, but we have a long way to
go and lifting that cap and allowing more revenue to flow to
the states, comparable to what's happening on federal lands,
would be very beneficial to the State of Louisiana.
The Chairman. Thank you, Governor.
Senator Barrasso.
Senator Barrasso. Thank you, Mr. Chairman.
Governor Edwards, two weeks ago, Mark Gordon, the Governor
of Wyoming, was here and testified before this very Committee.
He testified on the impact of President Biden's oil and gas
leasing ban on Wyoming and Western states. Could you talk just
a little bit more about what the oil and gas leasing ban means
for the energy workers in communities in Louisiana and across
the Gulf?
Governor Edwards. Yes, sir, thank you so much, Senator
Barrasso, for the question.
We know that in just the first half an hour after the pause
was announced, the share prices for companies doing business in
the Gulf of Mexico were adversely affected. And so, there have
been challenges already. We know, for example, that lease sales
that haven't happened, that's another source of revenue that
comes to Louisiana, so we have lost some revenue there. The
biggest--there are existing leases, as you know, and the
permits are being issued in time for exploration there, but if
this pause really turns into something that's longer than the
word pause suggests, we know that it will have a tremendously
adverse impact on our state.
So just to give you the numbers: We are a top ten oil-
producing state and a top five natural gas-producing state and
that does not count what comes out of the Gulf of Mexico. We
have one-fifth of the nation's refining capacity in Louisiana.
I told you 55 percent of all LNG exports come out of Louisiana.
And when you add it all up, between exploration and production,
the fabrication, the
servicing, the refining, the chemical manufacturing--250,000
Louisianans. Now, we only have 4.6 million--250,000 Louisianans
are employed in this industry. It is responsible for about 26
percent of our gross domestic product and produces another $4.5
billion in state and local revenue. So that's how big this
industry is, Senator. And so, if this--and I don't mind the
word pause because pause, I think, by definition suggests that
there is going to be a resumption and we want the resumption
and we want it as soon as possible so that the worst impacts do
not happen and that these people do not lose their chance at
supporting themselves and their families.
Senator Barrasso. Thank you, Governor.
Mr. Minarovic, kind of following up a little bit on
something the Governor just said, you know, officials within
the Biden Administration have repeatedly claimed that oil and
gas producers stockpile federal oil and gas leases and permits.
Is stockpiling oil and gas leases and permits in federal waters
even allowed under current law?
Mr. Minarovic. Thank you, Senator. No, clearly not. There
are clear terms on which we have to develop the lease or we
return it back to the government. It is definitely a use it or
lose it proposition. When we buy a lease in the Gulf of Mexico,
there's a lot of money left to be invested and a lot of
analysis and technology that has to be applied to determine
exactly what we have discovered or what we potentially will be
drilling for and what opportunity is there.
Typically, in the Gulf, you spend about $1 to $2 million to
purchase a lease. That has been the average over the last
decade or so. But you are going to spend millions of dollars
beyond that as you invest and review and study seismic data and
do economic analysis and look at the cost to drill. In the deep
water today, a well can cost $100 million, and different from a
lot of the onshore areas, it can very likely be a dry hole. So
$100 million and you get no return of your capital. That's a
potential outcome.
So a lot of money is invested along the way to analyze that
opportunity, reprocessing seismic data with enhanced computer
technology that we have today to really dive in and really
understand what we have leased. So sometimes those leases don't
get drilled. That's the reality of it, but when we are looking
at investments of $100 million of risk dollars that will
ultimately result in potentially a billion dollars of capital
to develop the fuels fully, this is the kind of analysis and
commitment that has to be made.
Senator Barrasso. Can I ask you a little bit more in terms
of what you just mentioned, the word investment. You know, in
March, the Governor of New Mexico wrote to President Biden on
the impact of his oil and gas leasing ban on federal lands. She
explained the leasing ban is going to encourage oil and gas
producers to leave federal lands in New Mexico for private and
state lands in Texas. The result is going to be, of course,
fewer jobs, less revenue for New Mexico, more jobs, and higher
revenue for Texas. Is it fair to say that if the Biden leasing
ban does not end soon, offshore oil and gas producers will
shift their investments from U.S. waters to other parts of the
world? And is it fair to say that shift is going to mean fewer
jobs for Americans and less revenue for states and the Federal
Government?
Mr. Minarovic. Thank you, Senator. Absolutely, that is the
case. We have seen that already in our company. We had a rig
working and we decided we'd pick up a second rig which is
staffed, which is about 100 people, and we had trouble getting
the people to get on that rig and come to work. And part of the
reason was they saw a lot of uncertainty in leaving their
current position they were working in and committing to a
higher-wage job in the Gulf of Mexico. And that's true among
capital providers, shareholders, and investors across the
board. The chilling impact of what's been done already in the
Biden Administration with the immediate reduction in drilling
permits for 60 days. It was process. It is the fear that is out
there, the chilling effect of those statements, this pause
concept and how long the leasing ban is going to continue is of
great concern to the industry and capital providers. And as you
mentioned, the company's investors have pulled back from these
types of companies.
Senator Barrasso. Thank you, Mr. Chairman.
The Chairman. Senator Cortez Masto.
Senator Cortez Masto. Thank you. Thank you for the panel.
Mr. Minarovic.
Mr. Minarovic. Yes, ma'am.
Senator Cortez Masto. Let me follow up here because I am
trying to understand. I am from Nevada. We do not have a lot of
oil and gas. So for purposes of your unused permits, how many
does your company have that are actually--you have permits for
drilling and/or leases, but they are unused right now?
Mr. Minarovic. Yes, right now we have about 40 permits that
are in place.
Senator Cortez Masto. Okay.
Mr. Minarovic. In order to drill a well.
Senator Cortez Masto. Does the pause impact those 40?
Mr. Minarovic. No, ma'am, it does not.
Senator Cortez Masto. Okay.
And then to move those forward in production, does the
pause impact that?
Mr. Minarovic. Yes, I would say it does.
Senator Cortez Masto. Why?
Mr. Minarovic. And the reason is because we have investors,
so we are investing a couple hundred million dollars a year in
the Gulf of Mexico and our investors are concerned about the
regulatory environment in which we will be putting those couple
hundred millions of dollars to work. And so I have to get them
over the hurdle of uncertainty associated with a commitment to
drill the well. It does not impact the permit. The permit is
there. It is the commitment of the capital that makes the
difference.
Senator Cortez Masto. Okay.
And then how many new leases are you interested in pursuing
that you have been prevented from pursuing because of this
pause?
Mr. Minarovic. You know, historically we are not big oil
and gas purchasers of leases. We have purchased about 142 over
the history of the company. But we look at buying about five or
six per year.
Senator Cortez Masto. Are there any right now that you are
prevented from pursuing because of this pause?
Mr. Minarovic. Absolutely. We have identified a dozen or
more leases that we would like to evaluate and potentially bid
on in 2021.
Senator Cortez Masto. Okay, thank you. I appreciate that.
Mr. Minarovic. Yes, ma'am.
Senator Cortez Masto. Governor Edwards, great to see you
again.
Let me ask you. In your testimony you mention both a need
to transition away from oil and gas consumption and that we
cannot ignore the impacts from climate change while noting your
state's reliance on the funds derived from these revenues and
how they are also used to mitigate against coastal degradation.
In your testimony you also mention that it is important to have
a responsible transition period for continued production and
use of oil and gas resources that allows places like your state
and others to reposition themselves for a future sustainable
economy.
How do you envision the Federal Government aiding states
like yours in such a transition and what plans is your state
looking into to plan for that future?
Governor Edwards. Well, thank you very much for the
question, Senator. So we believe that orderly transition is
going to require some predictability and certainty and the
pause works against that, and I will tell you that I will adopt
by reference all of the things that Mr. Minarovic said about
oil produced in the Gulf being carbon advantaged. And so it is
not--I know some people would say, you know, it sounds like you
are speaking out of both sides of your mouth when you talk
about the climate change impacts on Louisiana and the need to
move toward transition to cleaner fuel sources, but at the same
time producing out of the OCS. But we know that the demand is
not elastic. And so the supply will be met from sources where
more greenhouse gases will be emitted into the environment. And
so we think these things work hand-in-hand and we use, as I
mentioned already, all of the revenue we get from production in
the Gulf to actually work along our coast to restore the coast
and to put in protection projects, levees, and things like
that.
So this transition period, and I don't think anybody can
say precisely how long it is going to take--a number of years,
a couple of decades--but throughout this transition period I
envision the State of Louisiana moving in the direction that
the Climate Initiative Task Force mentioned, where by 2050 we
are going to cut greenhouse gas emissions to net zero relative
to 2005 levels. And we are going to use that time to develop a
wind energy sector of our economy in Louisiana, to develop
hydrogen, to do more around carbon capture and sequestration.
We have tremendous opportunities. And by the way, money is
being spent today in Louisiana on these things. These are not
theoretical concepts. These are very real.
And so, we are going to use this opportunity to transition
toward less carbon-intensive fuel sources while developing
these other sectors of our economy. But that requires
predictability, and we don't really have that when you have a
pause and you don't know the duration of it.
Senator Cortez Masto. Okay. Thank you. I know my time is
up. Thank you.
Governor Edwards. Thank you.
Senator Cortez Masto. Thank you, panel members.
Senator Barrasso [presiding]. Thanks, Senator Cortez Masto.
Senator Cassidy.
Senator Cassidy. Mr. Minarovic, I just want to ask you to
answer briefly, but you mention in your testimony that as
regards life cycle, global greenhouse gas emissions, producing
oil and gas out of the Gulf of Mexico for the United States has
the lowest greenhouse gas emission profile per unit of energy.
Is that correct?
Mr. Minarovic. Yes, sir, according to the Wood Mackenzie
study, the only country that was close was Saudi Arabia and
that study did not include transportation of the oil back to
the United States. But the other importers that we use--Canada
in particular--expose us to a lot of extra greenhouse gas
emissions by importing oil from Canada relative to the Gulf of
Mexico.
Senator Cassidy. And I think I know from an Obama era study
that when we add those lifecycle costs of transportation to the
oil and gas brought in, from the oil brought in from Saudi,
their emissions profile is worse than ours.
Mr. Minarovic. That was stated in a 2016 BOEM report
prepared under the Obama Administration.
Senator Cassidy. So one more time, if you want to, since we
know people are going to be using oil and gas, if you are
producing oil and gas out of the Gulf of Mexico, it has the
lowest greenhouse gas emission profile per unit of energy that
comes to our shore than anyplace else that oil and gas comes
from in the U.S. or from around the world.
Mr. Minarovic. We have got to get our oil from the Gulf of
Mexico. And you know, we have talked for decades about economic
security associated with domestic production. We have talked
about energy security, about the ability for us to control
international events because of our production of domestic oil
and gas. Now we need to talk about greenhouse gas emissions and
producing our oil under tightly regulated environments that
allow us to produce the cleanest barrel in the world as we go
through this transition----
Senator Cassidy. One more thing. Ready?
Mr. Minarovic. Yes, sir.
Senator Cassidy. Now, there is obviously a lot of tension
worldwide. How do you create good-paying jobs for wherever you
live, but let us say Americans, who do not necessarily have an
advanced degree, good people, they are hardworking, but they do
not have a Ph.D. in solar engineering? Looking at your
workforce, not the engineers, I'm just talking about the folks
that go out to the rig, two weeks on, two weeks off. What is
the average amount of money they earn?
Mr. Minarovic. Yes, Senator, thank you for asking that. We
have a wonderful staff of very qualified technically driven
people that work offshore every day in our operations. Two
hundred of them are related to----
Senator Cassidy. Fast, fast, fast, man. How much?
Mr. Minarovic. Sorry, $100,000. We have----
Senator Cassidy. One hundred thousand dollars for a guy
that only has a high school education, but he's hardworking and
he's sending his kid off to better schools to have a better
future.
Mr. Minarovic. Yes, sir.
Senator Cassidy. Wow. We need more of those jobs.
Mr. Minarovic. Yes, sir.
Senator Cassidy. Governor.
Governor Edwards. Yes, sir.
Senator Cassidy. Our state was pounded by Katrina. We have
been hit by multiple hurricanes since. We need to restore our
coastline. Now, tell us, if you do not mind, how these dollars
leverage--BP oil dollars--in order to contribute to our coastal
restoration plan?
Governor Edwards. Thank you, Senator. There are a couple of
pots of funding under the BP oil spill settlement that the
State of Louisiana benefits from that work on a reimbursement
basis. So if we don't have the dollars in the first instance to
pay for the project, we don't have a project to be reimbursed
for and that is specifically the NRDA [Natural Resource Damage
Assessment] and the--pots of funding. So it is important.
Senator Cassidy. So the GOMESA dollars provide that
matching sum?
Governor Edwards. Yes.
Senator Cassidy. Now tell me, how much is our coastal
restoration plan over the next 50 years, i.e., the plan to
prevent us from having another Hurricane Katrina whack New
Orleans? How much is that?
Governor Edwards. It is a minimum of $50 billion.
Senator Cassidy. Fifty, with a B?
Governor Edwards. Yes, sir.
Senator Cassidy. Ms. Lefton, here we have heard about
fantastic jobs, $100,000 for folks who may have a high school
education only, but they are great people and they are getting
a better future for their family. We have the lowest emission
profile per unit of energy produced hitting our shores than
anyplace in the nation and it is providing matching dollars to
rebuild our coastline. How long will this pause last and why is
it even being considered?
Ms. Lefton. Well, thank you, Senator.
As I said in my testimony, we have a responsibility to the
American public to review our programs to ensure that they do
amount to a fair return to the American taxpayer. So that is
exactly what we are doing.
Senator Cassidy. So is the question that we need to raise
the royalty payments? I don't quite understand because right
now----
Ms. Lefton. Well, actually----
Senator Cassidy. Onshore gets far better royalty payments
going to the states, less to the federal, and here the Federal
Government is getting more of a reward.
Ms. Lefton. So actually, Senator, I believe you are
referring to the revenue sharing.
Senator Cassidy. Correct.
Ms. Lefton. I think it is critical first to acknowledge
that 90 percent of those revenues are actually coming from
royalties.
Senator Cassidy. Coming from?
Ms. Lefton. So that means as production continues----
Senator Cassidy. Coming from where?
Ms. Lefton. From royalties. That means as production
continues, which we expect it would. In fact, 55 percent of the
12 million acres that are under lease in the Gulf of Mexico, we
don't even have a plan for yet. Eighty percent of that acreage
is not yet currently producing. So there is plenty of
opportunity for what is currently----
Senator Cassidy. But that assumes that this pause is going
to end in the near term.
Ms. Lefton. No, sir, it does not.
Senator Cassidy. Because as we have heard, you chill
investment as long as there is this uncertainty going forward.
Ms. Lefton. Well, fortunately, actually, we are still
seeing plans come into BOEM and we are processing those plans
so that----
Senator Cassidy. No, but not for new leases though.
Ms. Lefton. So that development----
Senator Cassidy. The issue is the new leases.
Ms. Lefton. Well, we would have plans for leasing, right?
So their existing acreage under lease and then what happens----
Senator Cassidy. What I am hearing from our oil field
service folks is that as long as there is a pause, no one will
invest in new capacity. Now, and 250,000 people in our state
are directly or indirectly employed in this. Are you committing
to us that the Administration will once again begin to lease in
the Gulf of Mexico?
Ms. Lefton. I am committing to you, sir, that we will have
an interim report that is going to be out in the early
summertime and very glad to continue the conversation.
Senator Cassidy. I will finish with this. If you are
speaking of the American public, there are 250,000 workers,
some of them earning $100,000 without a college degree,
including the construction jobs rebuilding our coastline so we
don't get whacked by more hurricanes--that American public says
resume leasing.
If you are speaking of the American public benefiting from
the Great American Outdoors Act, which is rebuilding our
nation's parks from the Land and Water Conservation Fund which
depends on this funding, they are saying resume leasing.
I yield back. I am just frustrated by this kind of
inaction.
Senator Barrasso. Thank you, Senator Cassidy.
Senator King.
Senator King. Thank you, Mr. Chairman.
Mr. Holmes, I am a little unclear. Who is it that you work
for? Is this a government agency or private sector? Who is it?
Mr. Holmes. Senator, the Center for Offshore Safety is
supported by a group of offshore oil and gas companies. It is
an industry-sponsored group for the industry.
Senator King. Okay, I just wanted that clarification.
Sometimes I hate to be right. Three years ago, I sat right
here and cross-examined a representative from the Federal
Energy Regulatory Commission (FERC) about the failure to
adequately regulate pipelines because of the cyber threat. I
can guarantee that your systems are vulnerable to cyberattack
today. Whatever you tell me, I can guarantee that Putin's
hackers could be in there within several weeks. Your SCADA
[Supervisory Control and Data Acquisition] systems are
vulnerable, the valve's turnings are vulnerable. What kind of
strong systems do you have in place? Well, let me rephrase the
question. Would you accept regulation by the FERC or some other
agency of the Federal Government to ensure cyber protection
because right now you are vulnerable and we just saw this
weekend what that can mean.
Mr. Holmes. Senator, yes. I think a collaborative approach
between the industry and the whole of government is necessary
across the entire nation for cybersecurity.
In my last role in the Coast Guard, I oversaw the Gulf of
Mexico Area Maritime Security Committee, and safety and
security are two sides of the same coin. Within the security
side, you have both physical security and cybersecurity. Our
last couple of exercises over the last couple of years centered
on the cyber side of cybersecurity, for both, information
sharing, we would partner with the oil and natural gas--ISAC,
Information Sharing and Analysis Center, that has really
increased information sharing over the last couple years and
with--and our different exercises the oil and gas companies
would practice and work to find their vulnerabilities on their
cyber systems and how to improve them on a regular basis.
Senator King. Well, I hope you will continue that work and
Mr. Minarovic, I hope you will take this seriously. We keep
getting wake-up calls.
Mr. Minarovic. Yes, sir.
Senator King. And we keep not being fully awake. I cannot
emphasize more how serious this threat is. I have spent the
last two years as the co-chair of the national Cyberspace
Solarium Commission and what has come through to me is the
urgency of this problem and it just, you know, we keep learning
how serious it is. Are you, I assume, you are heavily focused
on this threat?
Mr. Minarovic. Yes, sir. And obviously the Colonial
situation brought it to a new level. Our IT Department--this
morning, actually--updated us on some methods that we are
using. We are backing up our data regularly. Of course, we also
have an offsite facility in Indianapolis to have backups put
separately from our Houston location. We have blocked all
access outside of the United States and we have a two-factor
authority to access that data.
Senator King. I think that is crucial because we do not yet
know the cause of Colonial, but it is likely somebody clicked
on a phishing email.
Mr. Minarovic. That's right.
Senator King. I mean, we can do all that we can do here,
but cybersecurity starts on the desktop, as culture within the
company. I hope that you are--I would urge you to, for example,
hire hackers or red teams to test your systems.
Mr. Minarovic. Right.
Senator King. Because your CIO tells you you are secure,
but you do not know it until somebody tries to break in.
Mr. Minarovic. I agree with you, Senator, and you know, we
have done that a little bit in the past, but certainly this has
elevated it. We will take your advice.
Senator King. Thank you.
Governor, welcome. Governor Manchin and I always welcome
Governors because they are the font of most wisdom in our
experience. We are all glad to have you here.
Do you think a state should have the right to say ``no'' to
offshore drilling off of their coast, if they--if their
legislature and governor make a determination that they feel
the risks outweigh the costs?
Governor Edwards. I do. That is not the decision we made in
Louisiana.
Senator King. I understand.
Governor Edwards. Yes, sir, but I do think that a state
should be able to make that decision.
Senator King. Thank you.
Ms. Lefton, offshore wind--a couple of suggestions. One is
we talk about offshore wind but in this country that usually
means onshore wind in the water with water up 50 feet or 100
feet. In other words, it is a pylon in the water. The real
future of offshore wind is in floating platforms, and as you
know, the University of Maine is working on an experimental
program. A couple of things--we have to work out the
compatibility of these facilities with traditional industries,
like fishing, and in my case, lobstering. The other thing I
would urge you to attend to is to think about an offshore grid
so that each offshore wind project does not have to develop its
own grid system to enter the grid. We do not have multiple
landing places. Quite often, we may want that power to be DC
rather than AC because of lower environmental impacts.
Therefore, fewer places to come ashore could be very important.
So we are in a period now where I hope that your agency
will be thinking about planning, not only for the offshore
wind, but also for how that power is going to get ashore and
how to develop that grid as part of the infrastructure plan
that we are discussing.
Ms. Lefton. Well, Senator, thank you very much. We are, in
fact, thinking of just very that, and I agree with you that we
need to ensure both that we are doing all that we can to
deconflict with existing ocean users and that we need a very
thoughtful approach to transmission to minimize impact and
ensure that we have adequate transmission to bring this energy
to shore. So undoubtedly, those are two things that we remain
very focused on and I appreciate you raising them.
Senator King. Thank you. My time is expired, but I want to
say the overall purpose here is to keep Wyoming and Nevada from
becoming coastal states.
Ms. Lefton. Indeed. Thank you, sir.
Senator Barrasso. Thank you, Senator King. We appreciate
your attention to our states. Grateful.
[Laughter.]
Senator Barrasso. Senator Daines.
Senator Daines. Thank you, Senator Barrasso.
Before I get to questions, I would like to briefly
highlight the events surrounding the Colonial Pipeline hack. As
we all know,
the hacking and subsequent shutdown of the Colonial Pipeline by
Russian-connected groups has caused gas shortages in many
southeastern states. First, I think we need to take aggressive
action to hold these bad actors accountable and empower
infrastructure companies to protect their networks.
But this attack also highlights another problem. Across the
Eastern Seaboard, particularly the Southeast, we are seeing
panic and worry as gas shortages grow in communities. The long
lines remind me of the early 1970s, when we had inflation, 55-
mile-an-hour speed limits, and lines around the blocks for
gasoline. We need to be doing everything we can to avoid these
types of panic-at-the-pump scenarios. Thankfully, because of
policies of the last Administration, we are still global energy
dominant, and thankfully now that the pipeline is back up and
running, this shortage will cease. However, because of
President Biden's war on made-in-America energy, we may see gas
shortages becoming norm and not the result of bad actors.
We need to be promoting an all-of-the-above energy
portfolio. We need to build the Keystone XL Pipeline. I was out
in eastern Montana last week and it is just tragic to see these
communities, frankly, bordering on poverty, that need these
jobs, need this economic activity. We have 2.5 million miles of
pipeline. I do not know why President Biden stopped that
pipeline. We need it. We need to approve new oil and gas
leases. We do not need to stifle American energy.
But I want to now turn to the hearing and how President
Biden's actions are already affecting our communities. Last
year, we passed that historic Great American Outdoors Act, and
I want to thank my colleague from Maine, Angus King, who was a
great partner in working together to get that strong bipartisan
support to get that done. That bill uses energy revenues from
onshore and offshore energy development to fix the aging
infrastructure at our parks. This bill brought Republicans,
Democrats, and Independents together to increase conservation
funding by using our robust energy economy to fund our parks
and our public lands. But the actions of President Biden to
stop leasing and his desire to end oil and gas development
permanently can and will have a negative effect on the good
work that Congress did last year, including on our national
parks.
Ms. Lefton, the leasing ban is already having an effect on
the revenue generated from federal lands that would go to our
parks. The longer Interior and the President keep the ban
going, the more harmful that effect will be. How can this
Administration reconcile their desire to increase conservation
and support our parks at the same time you are taking actions
to kill off the main source of revenue for restoring our parks
and our public lands?
Ms. Lefton. Well, Senator, thank you for the question.
Clearly, I cannot speak to the onshore program, but I can tell
you for offshore and what we regulate at BOEM, that 90 percent
of the revenues from oil and gas come from royalties. So we
know that there is continued production that is continuing in
the Gulf of Mexico and therefore, there is continued revenue
that is coming in to support things like LWCF, as you were
mentioning, Senator. So we see no impact to those funds at this
time and appreciate you raising it.
Senator Daines. Well, thanks for that, and you did say ``at
this time.'' I guess we are thinking about the longer-term
implications. It is having a chilling effect. In fact, today we
are seeing sales and pipeline leases stopped. Where they are
headed next, we will be stopping production and the revenue it
generates, and with wind and solar not generating the revenue
needed for conservation, it is only time before the parks will
begin to suffer.
I want to turn to the 30 by 30 initiative. Several months
ago, the Biden Administration announced their goal of
protecting 30 percent of all lands and waters by 2030. Montana
has a legacy of conservation, which I fully support, but the
lack of details on this initiative were deeply concerning. The
Administration refused to answer questions or meet with me to
discuss 30 by 30. Initially, it did not even make their report
public on how they would achieve that goal. Once the report was
public it contained high-level concepts and buzz words to
detract from the lack of information and contradictory
statements. While the Administration is adamant about placing
30 percent of lands in ``conservation status,'' they concede
they do not know how to define conservation. And even if they
did, they have no idea how many lands are already in this
status. This leads me, frankly, to fear the worst--that
President Biden will unilaterally--unilaterally--lock up lands
and waters from future development.
Governor Edwards, what are your thoughts on the potential
use of federal laws to unilaterally inhibit energy development
in order to meet vague conservation goals and how could a
designation like this affect a State like Louisiana?
Governor Edwards. Well, Senator, thank you for the question
and you know, I'm trying to figure out exactly how to phrase
the answer. Obviously, we know that the oil and gas industry,
like all businesses, likes stability and predictability and
there is a cadence associated with how they develop leases.
First of all, you have to be able to get the lease and then you
have to put it in line for development. And any time that you
have an abrupt pause, like we have right now, that is going to
have an adverse impact on their ability to maintain that
cadence and the longer the pause lasts, the greater the
interruption and the harder it is going to be to overcome that
and the more adverse the impacts and so forth.
And so, obviously, I acknowledge that the President has
inherent authority to review things. I am just hopeful that the
review will come out consistent with what the discussion has
been here today, especially by my Senator, Senator Cassidy, and
I am mindful that the current five-year plan for development in
the OCS was developed by the Obama Administration in 2016 and
it is pretty clear. It says that greenhouse gas emissions will
increase if you stop drilling in the Gulf and in the OCS
because you are going to deprive the market of these carbon-
advantaged barrels of oil and, instead, allow these barrels of
oil from elsewhere in the world to come into the market because
the demand is not going to change.
And so I am actually optimistic that will be the same
conclusion that they are going to draw because it seems
irrefutable to me. I just wish they would get there and create
the policy and the program going forward--lift the pause. I
don't know if that answered your question.
Senator Daines. It does and thank you for staying focused
on the science and the data.
Governor Edwards. Yes.
Senator Daines. Not ideology and politics. It is
appreciated. Thank you.
Governor Edwards. Yes, sir.
Senator Barrasso. Senator Hyde-Smith.
Senator Hyde-Smith. Thank you, Senator Barrasso.
Being from a Gulf State, I am very excited about the
conversation today. You know, it is such a part of our economy.
It is such a part of--just for generations, the livelihood that
our people in Mississippi have been able to enjoy. But Governor
Edwards, what kind of shift in revenue and substance, economic,
daily activity, of lives of Louisianans can you describe to us
if we continue to see the Gulf Coast state leasing were
continued to be paused? How is that going to affect the State
of Louisiana and all the Gulf states economically of just the
everyday lives of the people that we represent?
Governor Edwards. Well, thank you very much, Senator Hyde-
Smith. We know that the revenue sharing will diminish over time
because the lease sales are not happening and the production
will decrease and therefore, we are going to have less
opportunities to fix our coast and to protect coastal
communities and we know that we need to do more and not less.
We also know that we will shed jobs in the not-too-distant
future if the pause is not lifted. And I mentioned that all in
direct and indirect, it is about a quarter of a million jobs in
a state that has about two million people working.
And so this is very significant for a state like Louisiana.
And by the way, the very same companies that fabricate offshore
oil platforms and service them, they can also fabricate
offshore wind platforms and service them too. In fact, they are
already doing it. The Block Island Wind Project in the
Northeast--we had Louisiana people up there applying their
experience, their know-how, to get that done. We can develop
these things simultaneously, but if you pull the rug out from
the traditional oil and gas too abruptly and the pause lasts
for too long, then that transition is not going to be seamless,
it is going to be haphazard and we are going to hurt too many
people and the state economy in the process.
Senator Hyde-Smith. Thank you and we certainly share those
concerns as well as our borders.
Ms. Lefton, as we are all very aware, the Gulf of Mexico
oil and gas leasing, it is just truly under attack from the
Biden Administration. In my opinion, the moratoriums are, and
we have discussed the studies, the API study which was
performed to analyze the fallout of the long-term moratoriums
on oil and gas and natural gas production. But as it turns out,
my state is greatly affected, as I have already mentioned, at
least 2,000 jobs under a four-year moratorium and more than
400, obviously, under an eight-year moratorium. That is just in
Mississippi alone, and 157,000 jobs affected in a four-year
moratorium, but giving the detrimental impact that this pause
is causing to our states, how do you view the Gulf of Mexico in
terms of American oil and gas production now and in the future
and when do you think the Administration should lift this?
Ms. Lefton. Sure, well, thank you, Senator, for the
question.
First, let me say, we do, of course, share the goal of
supporting jobs and supporting American jobs. You know, I think
it is first perhaps important to note that there is a little
bit more of a nuanced story here and that is that we are
actually seeing decline of jobs in the oil and gas industry
over the years. In the past four years in particular, in fact,
we have seen a decline in jobs. I think it is really important
that we think about, well, what are our opportunities then
going forward? And Governor Edwards just spoke to one of those,
which is how can we help transition communities to support new
and growing industries like offshore wind. Just recently we
announced the Vineyard Wind project, which is going to create
3,600 jobs, and I am hopeful that we can build a supply chain
that is going to support businesses in the Gulf and other
places that know how to do energy development in the OCS.
But the last thing I'll say, of course, Senator, is we are
working quickly on the review. We also acknowledge that there's
quite a bit of production that continues. And as I stated
earlier, in fact, 55 percent of acreage under lease currently,
we do not even have an exploration plan for. Only 80 percent of
the acreage under lease is actually producing at this time. So
I think there is not only plenty of opportunity to continue to
have robust production in the Gulf, but also a great
opportunity to create new jobs for the future.
Senator Hyde-Smith. So you do not have a timeframe of when
you think that this freeze should be lifted?
Ms. Lefton. Well, most certainly we will see the outcome of
the interim report in the early summertime and we will continue
to drive toward an expeditious decision.
Senator Hyde-Smith. At that point. Thank you.
Senator Barrasso. Senator Murkowski.
Senator Murkowski. Mr. Chairman, thank you. To our
witnesses, thank you for being here, for your testimony, I
appreciate it.
There is so much here and I had a conversation with Senator
Cassidy coming in about it. It sometimes stuns me to think
about the resources that we have as a nation--our opportunities
to not only provide for an economy and jobs, but resources that
our nation needs and our friends and allies want and yet,
sometimes, we put in place policies that just handcuff us in
our ability to do much of anything. And we have heard some of
those matters discussed before this Committee in just these
past couple months.
Ms. Lefton, I want to begin with you. Back in November,
under the previous Administration, the Department of the
Interior announced a proposal to update the so-called Arctic
Rule with regards to offshore development in both the Chukchi
and the Beaufort. The Biden Administration has withdrawn this
proposal. The fact of the matter is that the 2020 rule, the
proposed 2020 rule, went through a pretty collaborative and an
open process, building on years of data, best practices,
operating in Arctic conditions, and yet, the Administration
comes in and in relatively short order, literally a matter of
months, with trying to understand if there was really any
process or any level of outreach to stakeholders by the
Department between the time that the new Administration came in
and the time that the proposed rule was rescinded. So you are
moving beyond the process, the efficiencies, the workplace
safety improvements that again, were built after years of
research and data of operating within the region.
So as one who, again with Senator Daines, we want people to
stay focused on the science and on the data. It is difficult to
understand how the Administration can come in and basically
just throw that all away in a very quick, very abbreviated
process and say ``nope, we are not even going to go there.'' So
can you speak to that very briefly?
Ms. Lefton. Well, Senator, thank you so much for the
question. Greatly appreciate you.
You know, I will say that what we saw with the Arctic Rule
is that really it was an opportunity--or I would say, the
motivation for the proposed Arctic Rule from the previous
Administration was to streamline the process. And we look at
the previous Arctic Rule that remains in place today and we see
that there are very appropriate protections that are in place
in that rule. Therefore, we sought to withdraw the Arctic Rule
proposed by the previous Administration to ensure the previous
one remains in place.
Senator Murkowski. So is it fair to say that the Department
continues to support the development of Alaska's offshore oil
and gas resources?
Ms. Lefton. There are existing lease holdings, certainly,
in the Arctic and that production, of course, can continue with
those lease holders. There is nothing that is preventing that
exploration now.
Senator Murkowski. Well, in fairness, we are not doing much
up on the North Slope when it comes to our offshore and I hope
that you know that.
Ms. Lefton. I am aware of the lease holdings currently,
yes.
Senator Murkowski. Yes, it is not as if we have a lot of
activity going on there.
I would like to ask about the five-year plan. Back in 2018,
Secretary Zinke announced a plan to open 90 percent of the OCS
to oil and gas leasing. The projected time horizon was
approximately 2019 to 2024. I was one of those members of
Congress who supported that plan. The plan included 19 proposed
lease sales in the State of Alaska. Can you share with the
Committee what the Department's plans are for offshore oil and
gas development in Alaska?
Ms. Lefton. Certainly. So of course, as you have noted,
Senator, the previous Administration did not complete their
plan. They had put out a draft proposed plan and then notice of
environmental--I'm sorry, a programmatic environmental impact
statement. So at this time, as we continue to do the review of
our oil and gas programs, that will certainly inform the five-
year program going forward, which we certainly do intend to
develop and are very glad to continue the conversation with you
as that occurs.
Senator Murkowski. Last question, Mr. Chairman, if I may.
A lot of discussion last year about what this Committee was
able to advance with permanent reauthorization of the Land and
Water Conservation Fund. I think we have recognized the
benefits that have come through the Great American Outdoors
Act. I had some concerns about the mandatory funding for LWCF,
including how we pay for it, but we all recognize that LWCF
derives from oil and gas royalties, but we are looking at an
Administration now that is not very enthusiastic about
development on our public lands. So as Interior is reviewing
the oil and gas program, is it considering the impacts to LWCF
and the other conservation programs that exist out there if
royalties from oil and gas are either no longer available or
are starting to decline, because believe you me, we are using
that money. We are going to spend these for these conservation
projects. But is the Administration actually looking at that,
that the impact of the policies that they are talking about
today, when you are pausing this kind of activity and you are
going in a different direction that it is not consistent with
the efforts that you would like to make on the conservation
side?
Ms. Lefton. Well certainly, I mean, first, I deeply
appreciate the question with respect to LWCF and the goals of
that fund. It is such critical conservation dollars for this
nation and I highly value the great work that this Committee
and others did to secure that.
As we continue with the review, undoubtedly, we need to
ensure that we are looking at revenues for LWCF, for GOMESA,
for all of those things that are out there. As I stated before,
as you well know, Senator, of course, and as you said as well,
the majority of those funds for LWCF come from royalties. So as
we continue to see production, which we expect that we will see
continued production on our public lands and waters for many
years to come. There are many existing leases. We do expect
that LWCF will continue to be supported, but it is undoubtedly
something that we should continue to look at together and I
appreciate you raising the question.
Senator Murkowski. Mr. Chairman, thank you.
Senator Barrasso. Thank you, Senator Murkowski.
I think Senator Hickenlooper is on from his office.
Senator Hickenlooper. I am on. And thank you all, all the
panelists for a really illuminating session. I appreciate you
all taking the time to come down here. Especially as a former
Governor, I appreciate Governor Edwards, your taking the time
out. I know how busy you are, and I appreciate your comments
very much.
You have committed your state to achieving net-zero carbon
by 2050. And as you said in your testimony, this is going to
require significant investment in renewables and electric
vehicles and other innovative options, but we are also going to
need to address emissions in other industries that are, well,
harder to innovate. I think we need to look at both sides of
the ledger. I mean, reducing emissions in the first place, as
well as the negative emissions technology, like carbon capture
or direct air capture.
I wanted to hear your perspective on this and what your
state is doing on carbon capture and how can Congress do a
better job of supporting those efforts?
Governor Edwards. Thank you so much, Senator Hickenlooper.
First of all, you all have already done a lot with the 45Q
tax credit around carbon capture and sequestration and I think
you may have some more legislation you're considering that
would actually make that more attractive for entities to invest
in. Louisiana has tremendous potential for carbon capture, and
the reason is we are the only state in the nation where the
largest portion of our CO2 emissions do not come
from power generation, they come from refining and chemical
manufacturing. And it is easier to capture in that environment.
We also have the pipeline density to transport the carbon once
it's captured and the geologic formations underground to store
it for hundreds or thousands of years. And we are already
seeing investment come into Louisiana around carbon capture and
sequestration.
And so I think your point is exactly right and that is
something we are pursuing in a robust way right now. I
mentioned in my opening statement, the most recent project, we
are actually going to--in Caldwell Parish, Louisiana--refine
diesel out of pine tree waste and capture the carbon that is
emitted in that refining process and sequester it in geologic
formations that are underground in the immediate vicinity of
the refinery. That is the wave of the future and we are moving
in that direction. And that is just one example. There are many
others, but I think your point is exactly right and we need to
see whether direct capture is something that is feasible in
Louisiana as well. And that is something that we are looking
at, Senator, but what the Congress can do is continue to make
sure that the business plan works and the 45Q tax credit, I
think, is the lynchpin for that.
Senator Hickenlooper. Great, I appreciate that.
And on the same direction that, obviously, we all agree
that we need to reduce carbon emissions dramatically. In
Colorado, especially on the west side of the state, we are
economically tied to fossil fuel extraction, jobs, and people's
livelihoods. I know that is true also in Louisiana. We need to
look at the greater good for all the individuals that are
affected during this transition and I wanted to hear some of
your perspectives on how you are addressing fossil fuel-
dependent communities as we move into a modern energy economy.
Governor Edwards. Well, that is a great question and it is
something that we are working on by making sure, as I mentioned
earlier, that those individuals, those companies currently
working to fabricate, for example, offshore oil platforms that
they actually can engage in the fabrication of offshore wind
platforms, and service companies and vessels can be engaged in
the same types of services, just for windmills rather than for
drilling rigs.
But that is the sort of thing that we can do in Louisiana,
and over the transition in an orderly way devote more and more
resources to building up the new energy industry that we
believe is coming. And by the way, I do not think we are ever
going to get totally away from oil and gas. I do not think that
works and a lot of people have no idea what it is that we
manufacture out of natural gas, for example, everything from
fertilizer to this bottle. So we are never going to get totally
away from it and that manufacturing is going to have to
continue. But those are the things we are doing. When General
Motors says that by 2035 it is not going to produce another
nonelectric vehicle, that is a serious cue for a state like
Louisiana that you better broaden your horizons and start doing
things in a different way and certainly, that is what we are
going to do in Louisiana.
Senator Hickenlooper. Well, I appreciate that. I am out of
time. I am sorry I am not there in person just because, well, I
respect you guys so much and Ms. Lefton, at some point, maybe
at a later date, I would love to get caught up on your ideas of
how we can improve the siting and permitting for these offshore
wind systems that you describe in your testimony. So we will
put that off down the road. I am out of time, but thank you all
for your efforts. I yield back to the Chair.
Senator Barrasso. Thank you very much, Senator.
A number of members have requested a second round of
questions. I am going to start just with one for Ms. Lefton.
During her confirmation hearing, now Secretary Haaland
committed to being transparent and engaging with all
stakeholders. The Department has not contacted me at all or my
staff to discuss the leasing program. The Department has not
responded to a letter that I sent on March 22nd and it is now
May 13th. And I requested answers at the time on the federal
leasing moratorium. Even the Bureau of Land Management's
website, that publicly tracks the applications for permits to
drill, has been offline now for three weeks. So what does the
Bureau need to take in terms of the next steps to reinstate the
federal oil and gas leasing program?
Ms. Lefton. Well, Senator, I very much appreciate the
question and your input, of course. First, I want to talk a
little bit about some of the input that we have received. On
March 25th, we held a forum as a department, in which we heard
from industry representatives, from labor representatives,
communities, environmental justice communities, tribal nations,
and other stakeholders about our oil and gas programs which, I
thought, was a very informative and helpful forum where we
learned quite a bit. Additionally, we provided the opportunity
for the public at large to provide written feedback and we
received actually over 100,000 comments during that time
period. In addition to that, we have consulted with governors,
we have talked to Members of Congress, we have had many
conversations with stakeholders. And with respect to your
letter, Senator, and your input, I am certain, of course, that
we have taken it into consideration and I am sure that we will
follow up with you.
And as we continue to move toward this review and come out
with an interim report in the early summertime, we will, of
course, summarize the feedback that we have heard from our
partners and our stakeholders, alike.
Senator Barrasso. Well, as you talk about summarizing the
feedback, really in the interest of transparency and
accountability, is the Department going to make the comments
submitted for that March 25th virtual forum, are you going to
make those all public?
Ms. Lefton. Yes.
Senator Barrasso. But not just a summary, but you are
actually going to make the comments public?
Ms. Lefton. Correct.
Senator Barrasso. Thank you.
Senator Cassidy.
Senator Cassidy. Thank you, Mr. Chairman.
Several things. First, it has been brought to my attention
that, per federal law, any revenue derived from GOMESA that
distributes to the four states in the Gulf has to be used for
hurricane protection or to mitigate damages caused by oil and
gas development. So Senator Manchin's opening questions to my
Governor suggested that perhaps some of the other states had
not done so. The only thing we have done additionally in
Louisiana is, we have codified it in our state constitution.
But this money in all those four states is being used for that
environmental purpose. I also want to point that out.
Second, we speak of, well, Mr. Minarovic, let me ask you.
The Governor mentioned that demand for oil and gas will remain.
Can you briefly tell us what independent statements, nothing
against my Democratic Governor, we occasionally disagree, but
what independent analysis states that there will be at least a
constant or growing demand for oil worldwide?
Mr. Minarovic. Yes, I can speak to that.
First of all, I would like to say, we have been in business
22 years, and when we started, 75 million barrels of oil were
being used in this world every day and in 2019, it was close to
100 million barrels of oil a day. So there has been a steady
and rapid increase in demand from other countries, like China
and India and others. And the International Energy Agency (IEA)
has projected that it is going to be 104 and 105 in the next
five years. We will continue to set all-time records. That may
or may not be the case. I think it is, but we may be wrong.
Maybe it will go down. There are a lot of projections out
there.
But I will tell you that the best place we can get oil is
from the U.S. Gulf of Mexico and because of the economic
security, because it puts people to work, because we generate
our own royalties and fund all these wonderful programs and you
know, most importantly, I think because it has lower greenhouse
gases. We regulate our own oil. You know, if I have a second, I
would like to reference a letter that was sent three years ago,
when oil prices were about the same.
[The letter mentioned above follows:]
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Mr. Minarovic. Four Democratic Senators sent a letter to
President Trump and asked him to pressure OPEC to increase
production because it was having an impact on the domestic
economic conditions. They summarized by saying ``The current
run-up in world oil prices is effectively a tax on every
American family's discretionary budget, except that the money
goes to the OPEC cartel rather than to the U.S. Treasury.
Adding to our constituents' pocketbook concerns is their
understanding that our nation's continued dependence on oil is
at the heart of many of our nation's greatest economic,
environmental, and national security challenges.'' That is
exactly right. That is without question. And that is why we
need to drill more wells in the Gulf of Mexico.
Senator Cassidy. Let me also point out that it is not just
that oil and gas is used for transportation, for propulsion.
Everything I am touching right now is a synthetic made from an
oil or gas product, the plastic, the synthetics, the carpet
that we are sitting upon. If somebody is a member of PETA and
they do not want to wear leather, they are wearing something
which is derived from oil and gas. And so, it is an essential
nature.
Now Governor, you mentioned GM saying that they are only
going to use batteries by some date in the future. Mr.
Chairman, I would like to submit for the record both an
International Energy Agency report on the role of critical
minerals in clean energy transition and I would also like to
have an editorial from today's Wall Street Journal, written by
Mark Mills.
Senator Barrasso. Without objection.
[IEA report and Wall Street Journal editorial follow:]
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Senator Cassidy. In this it points out that you are going
to mine the critical minerals that make these batteries. And
that the intensity of environmental despoliation involved with
critical minerals and the threat to our national security is
quite large because, one, the United States has almost no
footprint where these are produced. They are being produced in
nations with poor governance, per independent evaluations,
which use a lot of natural resources to produce in an
environmentally, shall we say, destructive way as opposed to
oil and gas, which has a very small footprint and in which it
is typically governed, at least in the Gulf of Mexico, by
environmental standards which are quite strong. We are just
replacing one set of mining procedures with another set of
mining procedures. One set of environmental concerns with
another, much larger set of environmental concerns. And secure
national security for insecure national security because we are
dependent upon other nations. That is from IEA--implied,
stated, but in bureaucratese, but it is clearly spelled out in
this editorial, which is why I raise it.
With that, Mr. President, I yield back. Mr. Chairman.
Senator Barrasso. Thank you.
Senator King, I apologize for skipping you there a minute
ago.
Senator King. Not at all. It is always a pleasure to listen
to Senator Cassidy, on any topic.
Ms. Lefton, is BOEM considering creating something like the
five-year planning process that you have for offshore oil and
gas for offshore wind so that we can have a more predictable
permitting and development process?
Ms. Lefton. Well, thank you, Senator.
As I mentioned earlier, Executive Order 14008 directed that
the Department of the Interior look at our processes for siting
renewable energy and of course, for us, that biggest renewable
energy, that resource, is offshore wind. So BOEM has been
looking internally at our procedures as well as coordinating
with other federal agencies, really with an effort of creating
greater certainty for the industry, for tribal governments, for
other ocean users, like the commercial fishing industry, so
that as we have a path, we can ensure that we have a
transparent process that has robust engagement from those many
partners. As part of that, it is certainly a goal of mine that
we have a more certain leasing process in which we can
demonstrate what our future lease sales will be in various
different wind energy areas.
Senator King. Thank you. Thank you, Mr. Chairman.
Senator Barrasso. Thank you, Senator King.
Senator Hyde-Smith.
Senator Hyde-Smith. Thank you, Senator Barrasso.
Congress enacted the Outer Continental Shelf Lands Act
primarily to facilitate the Federal Government's leasing of its
offshore mineral resources and energy resources. In this law,
Congress stated expressly that offshore resources should be
made available for expeditious and offshore resources and
development--orderly development.
Ms. Lefton, what assurances will you give us that BOEM will
not impose burdensome stipulations that make new leases
economically unacceptable and therefore effectively unavailable
for development, contrary to clear Congressional intent?
Ms. Lefton. Well, certainly, the OCSLA is our governing
statute that guides our work and our decisions and something we
take very seriously. As I said in my opening, our mission
really is to develop the Outer Continental Shelf resources in
an environmentally and economically sustainable way. So when we
approach our work, whether it's marine minerals, conventional
oil and gas, renewable energy, no matter what the resource, we
certainly ensure that that's guided by science and that's also
guided by a balance of our responsibilities under OCSLA and we
will absolutely commit to continuing to do that.
Senator Hyde-Smith. Thank you.
The Department of the Interior must go through multiple
environmental analyses before a lease can even be awarded.
Offshore oil and gas facilities maintain one of the smallest
environmental footprints compared to onshore facilities and
other industries, including transportation, because the United
States has strict regulations and the advancements in
technology through industry continue to reduce the
environmental footprint from offshore production. Why should we
stop progress on being energy independent and once again rely
on foreign production that is both unsafe and less
environmentally conscious?
And I'll start with you and I will ask all to respond.
Mr. Minarovic. Well, as you probably heard from my
testimony previously, I totally agree with that position and
you are right, the centralized facilities really reduce the
footprint. And you know, we can drill wells off of one facility
out to a radius of three miles or four miles, but then we would
also hook up a subsea well that is 30 or 40 or 50 miles away
and bring that under that central facility. It is that small
footprint that allows us to really manage our greenhouse gases.
Senator Hyde-Smith. Captain Holmes.
Mr. Holmes. So that is a great point about the
consolidation of the different facilities, for the numbers that
are out there over the years have definitely shrunk about 100,
150 each year being decommissioned offshore. You know, back in
the day there were about 5,500 facilities and right now there
are less than 1,800 that are active offshore. And so the
decreasing of the footprint of what you actually physically see
on the surface is one of the ways. Also, with technology over
the years, it has really allowed us to minimize the amount of
emissions that are occurring and then we continue to look at
ways of how we can do that safely as well.
Governor Edwards. Thank you, Senator, for the question.
Obviously, getting back to what you asked, I do not think
we should move in the direction that would cause us to move
away from exploration and production in the Gulf in a way that
would undermine our national security, our energy independence,
and damage the environment. I just think it is very clear that
if we do that there will be more, not less, greenhouse gas
emissions. And so the proposition that we are going to clean up
our environment by potentially not continuing to explore and
produce in the Gulf, I think, is ill-founded. And so we
certainly should not do that.
Senator Hyde-Smith. Ms. Lefton.
Ms. Lefton. It is such a thoughtful question, Senator.
You know, as I think about my response, maybe starting with
globally, you know, we know that climate change is a crisis
that is before us now. And we know that in order for us to
combat climate change, in order to reduce risks to states like
Louisiana and many others that we have talked about today, we
know we need to transition away from oil and gas. Having said
that, that is something that needs to be done to reduce demand.
And as we as a country reduce demand for oil and gas we can
then, of course, fight climate change.
As we think about our continued reliance on oil and gas,
you know, I have already acknowledged here today that there's a
lot of existing acreage that's under lease in the Gulf of
Mexico and also, I do not want to speak for my colleagues on
land, but also and our federal lands as well. And so I expect
that we are going to see continued production and exploration
of those resources for years to come with what is already out
there. I think over time, as we transition, we have a really
important responsibility to ensure that we are doing this to
fight climate change.
And I just want to note, we have talked about energy
security and I think another form of energy security and
domestic energy is things like offshore wind. The majority of
the people in the United States live in coastal cities. Let us
produce power that is near those people and ensure that we are
improving our energy security as a nation.
Senator Hyde-Smith. Thank you and I yield back my time.
Senator Barrasso. Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman.
Yes, when I think about energy security, to me, it really
is all-of-the-above. And so yes, wind generation should be part
of that, but again, I do not think we can put ourselves in a
position where we say it is only those renewable sources that
go into that energy security bucket. And having the resources
that we have been talking about here in Committee is so
critically important and a recognition that oil will be part of
our economy--our global economy--for years, generations to
come. It may just look different how we utilize it, but I think
our challenge here is to figure out, alright, if we are going
to continue to need this resource as humans, how are we going
to be able to access it in the most environmentally responsible
way, in a way that really works to reduce those emissions. The
technologies that we have been focused on here as a Committee,
I think, are kind of exciting. But I don't think that we should
put ourselves in this position that in order to get to a low
carbon, a no carbon future, that oil is no longer part of our
reality.
I want to ask one question to you, Ms. Lefton and this
relates to the 30 by 30 proposal. I walked into the room when
you were responding to a question from Senator Daines, so I may
be touching on the same issue, I am not sure. But I am a little
concerned about the approach that the Administration has taken
with this--30 by 30 sounds pretty great. We all want to work to
conserve our lands and our waters. But so much depends on what
it is that we are defining and the standards there and I have
not been able to get a lot of detail in terms of what the
Administration would consider conservation status, where the
conservation would take place. In my state, we have more
federal lands than any other state in the country. Much of it
is in a protected or a conserved status of some sort and when
we passed ANILCA [Alaska National Interest Lands Conservation
Act] back in 1980, one of the most comprehensive conservation
laws ever, it put over 100 million acres--nearly 25 percent of
Alaska's entire land mass--into new or expanded conservation
units.
So on the land side, Alaskans feel pretty strongly that we
have kind of given, if you will, at the office there. But we
also have many of our federal waters surrounding the state that
are also included in some level of status. So can you provide
to me any additional information on additional waters that the
Administration might seek to conserve as you are looking at
this 30 by 30 goal? Have those been identified yet?
Ms. Lefton. Well, thank you, Senator.
So I will say with respect to the broader 30 by 30
initiative, I certainly acknowledge just really the incredible
conservation efforts of your state and many states in the West,
but in particular in Alaska, on the just incredible work you
have done to conserve your lands and waters. I think what we
saw, excitingly, as part of the 30 by 30 initiative is ensuring
that we are sort of looking inclusively at what conservation
means and capturing, appropriately, the working lens and other
critical pieces there.
With respect to federal waters, you know, I expect that as
we continue to look at what the future of our programs look
like, there will be a process for identifying those. At this
time, there are, certainly from BOEM's perspective, we have not
advanced additional protections or conservations of federal
waters. But I would be glad to look into it with more detail
and circle back to you, Senator.
Senator Murkowski. I think it would be helpful to try to
understand how the Administration is defining conservation, and
in terms of engagement, I would urge you to be more engaged,
more open. When you say--you kind of threw out a compliment
there saying what Alaskans have done to conserve our lands. In
fairness, much of what we have in protected status is not
because Alaskans chose it, it is because the Federal Government
did it, without consultation with native peoples, whose lands--
who have now been denied access. It is a reality to us that we
come from a pretty special place. We recognize that and we
believe pretty strongly that we are some of the best
environmental stewards out there because we choose to live in
this place and raise our families and work there.
So we want to take good care of it, but we also do not want
to be in a situation where our ability to live, to work, to
raise our families is denied because we have no economic
opportunity. So if you are the strong fishing family out there,
you want to know that your waters are clean. You want to know
that they are sustainably managed fisheries. But you want to be
able to pursue that livelihood.
Ms. Lefton. Absolutely.
Senator Murkowski. And so when we are talking about
conservation, my fishermen now are a little bit worried about
what this 30 by 30 proposal might be. They are some of the
hardest-core conservationists that you will have out there, but
they want the ability to still be able to access our resources.
And so not coming from the Gulf, but knowing that you have a
lot of water down there, a little bit warmer than our water,
but again, you have families in Louisiana that want to be able
to live in this area, have good jobs, be good stewards, but
also be able to access the resources that we have had, ever
mindful of our environmental responsibilities.
Mr. Chairman, I have gone well over my time. Thank you.
Senator Barrasso. Thank you, Senator Murkowski.
Senator Hyde-Smith, any final question?
Senator Hyde-Smith. I just want to say thank you to the
panel. You know, we are all trying to get to a good place. We
are all trying to get to a reasonable place and I just thank
you for your efforts there. We are conscious of sustainability.
We are conscious of the economic impact, of the environmental
impact here. And it is pretty tough a lot of times to come
testify before a committee here and you have all done so well
and I just want you to know that I appreciate you continuing to
be a part of it.
Thank you, Mr. Chairman.
Senator Barrasso. Thank you, Senator Hyde-Smith.
Thank you all, to all of our witnesses for joining this
morning, for this discussion.
Some of the members had to leave or were not able to ask
all of their questions, so they are going to have until the
close of business tomorrow to submit additional questions for
the record.
Thanks again for being here. The Committee stands
adjourned.
[Whereupon, at 12:06 p.m., the Committee was adjourned.]
APPENDIX MATERIAL SUBMITTED
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