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July 14, 2008

OCS Scientific Committee - Associate Director Carolita Kallaur's Presentation - Full Text

INTRODUCTION

Good morning I appreciate very much the chance to be with you today and to discuss before MMS and how this Committee can help. I was at last May’s meeting when Jim and Will were elected chair and vice-chair of this committee, but I would like to reiterate my congratulations to them and extend my thanks and appreciation to Joanna for the fine job she did for serving as the chair for the past 2 years. We look forward to her continued involvement with the Committee.

I’d also like to introduce Julie Reynolds who will be providing the staff support to this committee and to thank Phyllis for the work she has done as the staff assistant over the last 9½ years. She now will be assisting Ken full-time in his duties as chief scientist and will continue to interact with the Committee, albeit in a different role than before. Bev Gonzales is also with us today. Bev is Julie’s supervisor and she wanted to see first-hand how the Scientific Committee works. You may also interact from time to time with Jeryne Bryant who has primary responsibility for the OCS Policy Committee. Jeryne and Julie will often work as a team in providing support to both of these committees .

I am very interested in some of the ideas for restructuring the Committee put forward by Jim Coleman and look forward to hearing your reaction to them. We all want to make sure we get the maximum benefit from all your hard work.

Before I give you a brief update on what is happening around the country, I would like to share with you what I see as our biggest challenges in moving the OCS oil and gas program forward in the coming years. I hope this will be useful in figuring out the key areas where this Committee can help.

Over the short term, we are faced with rapidly changing technology that is allowing companies to explore and develop in water depths a few years ago no one thought possible.

Cynthia mentioned that companies have acquired leases in 13,000 feet of water. Along with water depth, there is some talk of gas hydrates not only being a safety problem, but a potential huge natural gas resource. The economic and energy benefits at stake are enormous. Yet these benefits can be realized if industry is able to maintain its excellent environmental and safety record and the American public has confidence in the integrity of the program.

As a regulator, we need to keep up with the science and the evolving technology so that our permit decisions are based on solid facts. We also need to know how best to foster a high level of performance by the industry--should it be prescriptive or more performance based? There are many models to look at and we need to settle on one that fits the unique circumstances found in the U.S.

Clearly this committee has already contributed significantly through the work of the deepwater subcommittee which has helped chart a course for us to follow in pursuing the critical deep water research which is needed. One of the add-ons Congress provided by giving us responsibility for oversight of the deepwater research at the Offshore Technology Research Center will also be helpful by providing us an opportunity to interact with industry as new technology is developed. How we regulate may not be an issue of direct interest to the Committee, but it does involve the issue of what is the best motivator for top performance recognizing that 80% of accidents are caused by human error, not a failure in technology.

The second challenge we face is the globalization of the offshore industry ,both in terms of the mobility of the companies, both independents and majors from one part of the globe to another, and the growing interest in international guidelines and standards. We have traditionally been an agency with a domestic focus, yet now for us to do our job we need to be everywhere from meeting of the I.M.O. on platform decommissioning requirements to learning about the experiences of other nations who have had FPSO’s operating in their waters. We have also found we can benefit by partnering with other nations on environmental issues of common concern, such as the work being done in Norway in partnership with industry on deepwater blowouts. I know many of the members of this Committee work globally and we need to think strategically how we stay on top of and benefit from the international character of the program we regulate.

The last challenge I want to mention is what to do between now and year 2012 when the Presidential moratoria Cynthia mentioned expires. A good part of the debate surrounding moratoria is how people perceive the risks of offshore oil and gas activity to their coastal environment. We need to some how find a way to identify what are the important issues, attempt to address them, and find a forum or fora where all parties can engage in intelligent discussion. We will need to watch closely and be engaged in the federal ocean policy review that is a follow-up to the Ocean Conference. We are closely monitoring the situation in the Canadian portion of the Georges Bank where a moratoria has been in place for approximately 10 years, studies were commissioned, and now there is a public debate relying in part on the studies conducted to decide whether to lift the moratoria. We may be able to learn a lesson or two from our neighbors to the north. We welcome any ideas the Committee may have on this difficult, but important issue.

Now, I’d like to spend a few minutes highlighting what is happening around the county that may be of interest to you. You also have been provided the update that was prepared for the OCS Policy Committee that provides greater detail on what has transpired over the last 6 months.

GULF OF MEXICO REGION

I’ll first turn to the Gulf. I’m pleased to announce that we have a new Regional Deputy Director, Mr. Chuck Schoennagle. Chuck, a long-time Gulf of Mexico employee, will have his hands full, with the many diverse activities in the Gulf, especially the deepwater activities that continue to play a part of the major ongoing projects in this Region and our continued focus on safety.

In August, there were 30 deepwater rigs simultaneously drilling in Gulf of Mexico water depths greater than 300 meters. While depressed oil prices have had an effect on shallow water drilling, we have not seen a slackening in deepwater exploration and development at this point. Companies currently hold 3,200 leases in water depths greater than 800 meters and in order to hold those leases they will need to be diligently explored during their primary terms.

MMS’s recent lease sales clearly indicate industry’s confidence in the Gulf’s deepwater potential. In fact, one of the latest GOM lease sales, Sale 171 in the Western Gulf, attracted over $550 million in high bids from 63 companies on over 402 tracts, over 300 of which are in water depths of 200 meters or more. In fact, ninety percent of the $550 million in high bids was offered on tracts in water depths greater than 800 meters.

To address the myriad of environmental issues associated with deepwater, our Gulf of Mexico Region has been preparing an environmental assessment which will likely lead to full blown environmental statements on selected topics.

We had hoped to have this document released in time for the Gulf ITM next month, but have realized we need more time to have a quality document and do not expect the document to be available until early next year. We are thinking about how best to publicly release this document and are considering holding a workshop when it is available.

As technology advances and costs are reduced, deepwater development projects will become more feasible, allowing companies to venture into ultra-deep waters—exceeding 800-meter water depths. As I mentioned at the outset, one of our major challenges is keeping abreast of the technological changes and being able to respond in a timely manner. The latest challenge involves Floating Production, Storage, and Offloading Systems (FPSO’s). To adequately evaluate potential environmental effects from FPSO’s, we are currently in the early steps of procuring a contract for preparation of a NEPA document to assess the effects of using FPSO’s, and we hope to award the contract by spring 1999.

This document is being paid for by industry through the Deepstar consortium. The first application for an FPSO was filed recently by Texaco for their Fuji prospect and the decision tree for that project will need to be consistent with the timetable for the NEPA analysis.

The Gulf Region has also been preparing an EIS for the proposed Destin Dome development project in the Eastern Gulf of Mexico, and we plan to ask the Governors of Alabama, Florida, and Mississippi to review a preliminary draft some time this month. We expect to issue the draft EIS in February, hold public hearings in April, and issue the Final EIS in January 2000.

We will also begin the planning process for the first sale in the Eastern Gulf for over 12 years in December. The sale is tentatively proposed for 2001 and involves acreage at least 100 miles from Florida’s coast.

PACIFIC REGION

The Pacific Region continues to interact with various stakeholders. A significant part of this cooperative effort is the California Offshore oil and Gas Energy Resources Study (COOGER), a joint effort of State and local jurisdictions, offshore operators, and the Federal Government, which began in 1995. COOGER is a study of the onshore constraints to potential future development of leased, but presently undeveloped, oil and gas tracts offshore southern California. The final report, expected to be available for public review by the end of the year, will be an encyclopedia of information describing existing onshore and offshore oil and gas facilities.

Although the contractor, Dames & Moore, continues to work on the study, its completion, unfortunately, has been delayed for a number of reasons including difficulty in obtaining critical data, responding to public comments provided at two sets of public workshops, one in October 1995 and the other in March of this year, and responding to input provided by the Steering Committee. Another matter contributing to the delays was the announcement by Chevron, a major operator in the region, that they have decided to sell their interests to another company.

The Pacific Region and the Santa Barbara Museum of Natural History are sponsoring the Fifth California Islands Symposium March 29-April 1, 1999. This conference will focus on all aspects of research and resource management on the islands off the coast of California and their proximate ocean and mainland areas.

One example of the fruits of our labors is the recent release of the proceedings of the 1997 MMS/State Lands Commission Decommissioning Workshop, (Decommissioning and Removal of Oil and Gas Facilities Offshore California: Recent Experiences and Future Deepwater Challenges). As a follow up to the workshop, an interagency working group has been developing an action plan to coordinate and organize a series of small, issue-focused forums to disseminate information and facilitate dialogue and communication among all interested parties. The first forum will be held in conjunction with the Fifth California Islands Symposium I just mentioned. A special session will be devoted to presenting the results of scientific research being conducted to evaluate the ecological role offshore platforms play in supporting rocky reef fishes and other invertebrate communities.

ALASKA REGION

To quote Regional Director, John Goll, “we have a full plate of activities before us in the Alaska Region.”

In August, we held Lease Sale 170 in the central Beaufort Sea. The sale was small, centering around existing infrastructure on Alaska’s North Slope, and offered 241 whole and partial blocks encompassing about 1 million acres for lease. We received high bids totaling over $6 million on 29 tracts, all near shore. Evaluation of the bids has been completed with one bid rejection, and we are in the process of issuing leases.

Our emphasis in 1999 in the Alaska Region will be on the review of the Northstar and Liberty development and production plans in the Beaufort Sea. BP’s Northstar Project involves both State and Federal leases, with the MMS and Corps of Engineers cooperating on the EIS. The Corps hope to complete the final EIS later this year so that decisions can be made in early 1999.

For the Liberty Project, we are preparing a draft EIS with cooperation from other agencies, the State and the North Slope Borough and hope to have it out on the street late this year or early 1999.

MMS continues its research into using traditional knowledge in various MMS efforts. One such effort was awarding the Ukpiagvik Inupiat Corporation a contract to collect, catalog, and organize traditional knowledge information associated with Alaska’a North Slope. The final report of this research will be available in 2001.

As in previous years, some of our MMS scientists have recently been up on the Arctic coast to survey the fall bowhead whale migration, and similar to last year, they observed a great number of whales during their overflights. The information collected on the migration was passed on to the National Marine Fisheries Service each day to assist NMFS monitoring efforts. Another coordinating effort was with the Alaska Eskimo Whaling Commission to ensure that our overflights did not interfere with the Inupiat communities traditional fall subsistence hunting activities.

There is another concern that will require future regional involvement—the National Petroleum Reserve--Alaska. MMS played a major role in preparing the portion of the EIS dealing with potential oil and gas development. Last month, Interior Secretary Babbit signed off on a plan for oil and gas leasing on 4.6 million acres of the NPRA. Under this plan, about 87% of the northeast portion of NPRA will be completely open to leasing, while another 900,000 acres will be available only for subsurface activities, with the exception of essential roads and pipeline crossing. About 580,000 acres will be withheld because of “key habitat” concerns. Although eight environmental groups had recently filed a federal lawsuit to block exploration in the reserve, contending that the EIS used to support the decision was “deeply flawed,” the Secretary believes that this is the right thing to do to ensure national energy security for present and future generations.

INTERMAR

As we all know, mineral resource development does not only relate to oil and gas. Sand and gravel will continue to be the most sought after mineral commodities from the OCS. These reserves on the OCS are immense, with estimates of over 2 trillion cubic meter on the Atlantic shelf alone. MMS continues to support use of these ocean resources.

Through its Marine Minerals Program, MMS continues to focus on integrating geologic and environmental information to identify sand deposits in Federal waters suitable for beach nourishment. Past and ongoing partnerships have been formed with several States along the East Coast and the Gulf of Mexico to collect and analyze necessary data and participate in and fund various beach restoration projects.

Our current and future activities are laying the groundwork for effective Regional Management of OCS sand resources. For fiscal year 2000 we are planning a pilot project analyzing the development of an effective long-term cooperative management system for offshore shoals likely to be used as long-term sand sources for beach nourishment and coastal restoration. Efficient management of these OCS sand areas requires treating them as interconnected components rather than as individual projects.

As authorized under the FY 1998 appropriations bill, the MMS was given management responsibility over the Mississippi Marine Minerals Research Center, which consists of three divisions: Continental Shelf at the University of Mississippi, Ocean Basin at the University of Hawaii, and the Arctic Seas at the University of Alaska. No funding was provided for continuation of these Centers in the FY 99 Appropriations bill, with the exception of $600 thousand for the center at Mississippi where we expect the bulk of the work to focus on gas hydrates. Late this fall, MMS will submit a report to Congress summarizing MMRC’s 1998 research activities.

Besides efforts here in the United States, MMS’s International Activities Program has been busy abroad. We have been cooperating with various government organizations and private companies in the United Kingdom to study the environmental impacts associated with dredging operations for offshore sand and gravel.

Just this fall, MMS and the Australian Department of Primary Industries renewed a Memorandum of Understanding to exchange scientific and technical information related to offshore oil, gas, and mineral activities. This cooperation will include exchange of information on many topics, such as resource assessment, administrative procedures and practices, leasing, development, risk perception, safety, and environmental protection.

MMS will also be assisting the Republics of Kazakhstan and Turkmenistan through the Caspian Partnership for Regulatory Cooperation. Through this partnership, MMS will provide geologic, oceanographic, environmental, economic, engineering, and accounting assistance to these countries. We believe that our experience and expertise in managing oil and natural gas resources will be beneficial as the legislative and regulatory systems in these nations evolve.

On another front, MMS continues its history of working cooperatively with the Kingdom of Norway by signing a Memorandum of Understanding with the Norwegian Petroleum Directorate concerning scientific and technical cooperation related to offshore mineral resources. This MOU highlights the international leadership roles that the United States and Norway have assumed in developing sound policies and procedures for the environmentally sound and safe development of offshore oil and gas resources.

The MMS also helped organize a Workshop on the Decommissioning of Offshore Oil and Gas Platforms held last month in Jakarta, Indonesia. This workshop was conducted under the auspices of the Asia Pacific Economic Cooperation (APEC) Marine Resources Conservation Working Group, and included representatives from MMS, universities, U.S. oil and gas companies, and other industry organizations.

ENVIRONMENTAL STUDIES PROGRAM

Much of MMS’s work requires a strong Environmental Studies Program (ESP), which will provide the solid scientific underpinnings for the critical program decisions that must, by law, accommodate a balance for the Nation’s search for petroleum energy and marine minerals with the protection of the human, marine, and coastal environments. We appreciate the efforts this Committee puts into reviewing and making recommendations on our regional studies plans and overall research strategy for collecting important environmental information to assist MMS in its resource management responsibilities.

We are pleased that the ESP will continue to receive funding equal to the FY 1998 appropriation pf $19.55 million, which included a $4 million supplemental increase over past budgets. Tomorrow morning you will be meeting in subcommittees to review MMS’s proposed studies plans for fiscal years 2000-2001. You will hear much more about specific issues and projects than I can cover here, but I’d like to give a quick synopsis of where our priorities and information needs lie:

Later this afternoon, we will hold a deepwater session and discuss environmental issues that this Committee could help us address, such floating storage, production and offloading systems, deepwater oil spills, and port facilities and infrastructures. We look forward to your able assistance on some of the other key challenges we are facing.

I’d like to thank this Committee for helping us achieve our goals in the past and look forward to working with all of you in the future. This afternoon, at our roundtable session, we will be discussing possible new roles for this Committee, and I hope the information that Cynthia and I have shared with you this morning has provided ample fodder for those discussions.

That concludes my presentation, and I’ll be happy to answer any questions you may have.

For more information, contact Julie Reynolds.