May 14, 1998

Madam Chairwoman and Members of the Subcommittee, thank you for the opportunity to testify on the Department of the Interior’s Outer Continental Shelf (OCS) oil and gas program and the issue of moratoria. As you may recall, I appeared before your Subcommittee almost two years ago and presented testimony on the same issue. My testimony at that time briefly cited the economic and environmental benefits of the OCS program; described in some detail the history of federal offshore oil and gas activity and the associated conflicts and controversies that led to moratoria; and outlined the Department’s approach to managing the program and resolving some of the problems we inherited. I also related to the Subcommittee a number of difficult issues we were confronting and gave several examples that demonstrated varying degrees of success for our efforts.

Today, I would like to take the opportunity to describe further the Department’s approach to moving the OCS program from conflict to consensus—including the role of OCS moratoria in that approach—and to update you on the progress of some of our efforts. However, as a preface to those remarks, I would first like to briefly note the significant benefits associated with the OCS program.

First, the OCS program is a major source of energy for the Nation, currently providing about 18 percent of our total domestic production of oil and 27 percent of our production of natural gas. Hand in hand with this much needed energy production, the program generates substantial national and regional economic benefits. Those benefits come in the form of bonus, rent, and royalty payments to the Federal Treasury (almost $5 billion in 1997 and over $120 billion to date)—a portion of which is distributed to coastal States under section 8(g) of the OCS Lands Act—as well as income and taxes generated by petroleum companies and a host of manufacturers and other firms located throughout the country. Furthermore, OCS revenues are the major funding source for both the Land and Water Conservation Fund (LWCF) and the Historic Preservation Fund (HPF)--programs that benefit all Americans. To date, over $18.8 billion and $2.6 billion have gone into the LWCF and HPF, respectively. Finally, the OCS program has an excellent safety and environmental record.

These benefits notwithstanding, the OCS program and the way it was managed in the past led to conflict, controversy, and—ultimately—moratoria that have been in effect for many years for certain areas of our Nation’s OCS. I do not plan to detail the history of moratoria as I did in my previous testimony. That history is well documented in two reports produced by Committees of the Minerals Management Advisory Board—Moving Beyond Conflict to Consensus (OCS Policy Committee - April 1993) and Environmental Studies in OCS Areas Under Moratoria: Findings and Recommendations (OCS Scientific Committee - May 1997). The former had a significant influence on the Department’s development of its management approach, and the latter was a project I mentioned in my previous testimony that had not yet been completed. The OCS Scientific Committee has now completed its report, and I would like to submit it for the Subcommittee’s consideration.

The Department of the Interior's Approach to the OCS Program

When this Administration assumed management of the OCS program in 1993, there were substantial problems facing the program--congressional moratoria were in effect for both the Atlantic and Pacific coasts, the Eastern Gulf of Mexico, and the North Aleutian Basin off Alaska; there were lease sales scheduled in the Atlantic and Eastern Gulf of Mexico areas under leasing moratoria; there were drilling restrictions on previously issued leases in the southeastern part of the Eastern Gulf of Mexico, in the North Aleutian Basin, and off North Carolina; and there was breach-of-contract/takings litigation that had been filed by the companies holding those leases. In addition, there were existing leases in the areas subject to leasing moratoria off the Florida Panhandle and off California that demanded our attention, and there were proposed lease sales off Alaska that were generating controversy. For this hearing, I would like to explain the Department’s general approach to managing the OCS program and dealing with these issues. In doing so, I will cite some specific examples of where we have been able to resolve or reduce conflicts and controversies.

Resolving Existing Controversies to Set the Stage for Consensus Building

First, the Department recognized that conflict resolution would have to be a high priority and that the best way to proceed would be to consult with, and listen very carefully to, the OCS program’s stakeholders. We endorsed the existing annual congressional moratoria as a way to assure stakeholders that the status quo would be maintained while discussions ensued. We felt that it was extremely important to ensure that no new leasing occur in areas where we were attempting to resolve intense disputes concerning already existing leases as well as some controversial areas where leasing was contemplated. The annual moratoria that were in effect proved to be a very useful tool that we believe helped us:

	settle litigation concerning the leases in the North Aleutian Basin and in the southeastern part of the Eastern Gulf of Mexico, which resulted in their relinquishment;
	settle litigation on the majority of leases off North Carolina, resulting in their expiration or relinquishment, while preserving the promising "Manteo Unit" for possible exploration;
	cancel proposed lease sales in the Atlantic and in the Eastern Gulf off Florida that were precluded by moratoria, thereby allowing us and the stakeholders to concentrate on resolving issues related to potential exploration and development of remaining leases; and
	focus efforts off California on discussing the possible development of some 40 existing leases without the distractions that proposals for new leasing would engender.

In short, annual moratoria and the actions we were able to take with them in place, helped us to begin building trust with our stakeholders and make strides in putting the OCS program on firmer footing in those controversial areas. At the same time, we took under careful consideration the sales off Alaska that had been proposed in the OCS 5-Year Oil and Gas Program for 1992-1997 that had been approved by the previous Administration. After consulting with stakeholders, we made the decision to:

	cancel sales in the Chukchi Sea, Hope Basin, Gulf of Alaska, and St. George Basin Planning Areas based on a combination of low industry interest and some concerns for other resources that were expressed by Native groups and others; and
	proceed carefully and deliberately in the presale processes for Beaufort Sea Sale 144 and Cook Inlet Sale 149, which resulted in successfully conducting those two sales after a 5-year hiatus in Alaska OCS leasing.

Our decisions to cancel three proposed Alaska sales—as well as cancellation of the Atlantic and Eastern Gulf of Mexico sales—were made with the view that this Administration would soon have the opportunity to formulate its own OCS 5-year program and could consult further with stakeholders to reach consensus on any future sale proposals for those areas and others.

Developing the OCS 5-Year Oil and Gas Program for 1997-2002 by Consensus

The Department developed the current OCS 5-Year Oil and Gas Program (1997-2002) based on the substantive and procedural requirements of section 18 of the OCS Lands Act and three general guiding principles endorsed by the Secretary: 1) consensus-based decisionmaking; 2) science-based decisionmaking; and 3) the use of natural gas as an environmentally preferred fuel. We consulted with and listened to our stakeholders from start to finish of the 2-year preparation process. At this time, I would like to highlight some of our experiences in that process and give you a summary of the program we produced, as well as accounts of other related issues in each region.

Pacific OCS Region

Our attention in this region focused on the Santa Barbara Channel and Santa Maria Basin, where there were both existing producing leases and existing undeveloped leases. We consulted closely with the three counties located adjacent to those areas (through a body known as the Tri-County Forum) as we considered proposing a small, focused lease sale after 2000. Although it appeared initially that two of the counties did not oppose such a sale, we consulted further with them and other stakeholders, including the State of California. We concluded from those consultations that scheduling a Pacific sale in the 1997-2002 timeframe was unwarranted. In retrospect, I believe the absence of a scheduled lease sale in this area has enabled us to work undistracted with stakeholders to resolve issues concerning existing producing leases. As a result, production from those leases has been increased significantly--to about 150,000 barrels per day.

We are continuing to work closely with the Tri-County Forum and other stakeholders in the "California Offshore Oil and Gas Energy Resource Study." The study is intended to frame better the issues and potential impacts associated with additional development, thus contributing a good scientific foundation to continuing discussions with our stakeholders.
 

Atlantic Region

In this region, we looked at the vicinity of the "Manteo Unit" off North Carolina and the Hudson Canyon area off New Jersey as possible candidates for lease sales. We decided not to propose a sale off North Carolina due to ongoing litigation and controversy concerning the existing leases there. We also decided, after consulting with state and local officials and other stakeholders, that scheduling a sale in the Hudson Canyon area would be premature and that we would need more time for outreach and conflict resolution. Again, I believe that our decision not to schedule a lease sale off North Carolina enabled us to focus on working toward an appropriate and acceptable resolution concerning existing leases. We have been consulting with state officials, and our Gulf of Mexico Regional Office held a North Carolina Offshore Workshop in Raleigh in February 1998 to discuss environmental issues associated with possible exploration of the "Manteo Unit." There is still much work to be done, but discussions so far have been fruitful.

Technological advances, especially those associated with deepwater operations in the Gulf of Mexico, may be applicable to the Atlantic, where most of the more promising hydrocarbon prospects are farther from shore and in the deeper waters. We also have been monitoring closely developments affecting the Canadian waters of the Atlantic. Canada is poised to reconsider its Georges Bank moratorium which is due to expire on January 1, 2000. Based on the success of existing Canadian OCS production projects off Nova Scotia and Newfoundland and their demonstrated compatibility with fishing and other uses of the sea, Canada may not renew the ban and may allow oil and gas leasing/development to proceed in its waters. If so, the Department will consider carefully any ramifications such a decision may have with respect to managing the resources on our side of Georges Bank. In addition, MMS has received an application for a pipeline right-of-way and related permits for a segment of a pipeline that is planned to transport natural gas from reserves off the coast of Newfoundland to a landfall on the coast of New Hampshire.

Alaska OCS Region

As I mentioned before, the Administration canceled Alaska sales in four areas that were on the schedule for 1992-1997 with an eye toward revisiting the areas when we developed our own

OCS 5-year program. In order to facilitate stakeholder participation in the consideration of those and other Alaska planning areas, we established the Alaska Regional Stakeholders Task Force, as recommended by the OCS Policy Committee. Based on the findings and recommendations of that task force, the new program proposes consideration of leasing in three of the areas that had been deferred previously—Gulf of Alaska, Chukchi Sea, and Hope Basin—as well as in Cook Inlet and the Beaufort Sea.

We have continued to consult with the Alaska OCS Region Offshore Advisory Committee, which was established as a successor to the Stakeholders Task Force, on individual Alaska sales included in the current OCS 5-Year Oil and Gas Program. Presently, we are proceeding toward consideration of an August 1998 sale date for Beaufort Sea Sale 170. We also are continuing our consultations with Alaska Native organizations, the State of Alaska, and other stakeholders concerning several Beaufort Sea development projects. Those projects and the planned lease sales point to a vibrant future for the OCS program in that area.

Gulf of Mexico OCS Region

Based on the strong consensus of stakeholders supporting the OCS program in the Central and Western Gulf of Mexico planning areas, we decided to continue the practice of holding annual areawide lease sales in those areas during the 1997-2002 period. We are continuing to consult with the States and other stakeholders in those areas, and the program is thriving, as evidenced by the most recent lease sale results and numerous recent discoveries.

After consulting with the Governors of Florida and Alabama, our focus in the Eastern Gulf of Mexico turned to that part of the planning area located off Alabama and more than 100 miles off Florida, which both governors indicated would be acceptable for an OCS lease sale in 2001. As consultation with stakeholders continued, we learned that industry wanted access to more deepwater blocks in that area and that coastal residents of Alabama had concerns about possible negative visual impacts of nearshore oil and gas development. The final configuration of the lease sale area that we established accommodated both industry and State concerns—384 blocks in deep water were added, and 22 blocks within 15 miles of the Alabama coast were excluded. I think this solution exemplifies our approach to the OCS program, since it is based on consensus and science and promises to make environmentally preferable natural gas resources available to the Nation. I am extremely proud that we were able to come up with a reasonable and acceptable proposal for leasing in an area of the OCS that had been subject to congressional leasing moratoria since 1990. I firmly believe that we could not have consulted meaningfully and gained the acceptance of a consensus of the stakeholders if we had decided to pursue additional nearshore leasing off the Florida Panhandle or if the annual leasing moratorium in that area had been lifted during the process.

Currently, we are continuing to attempt to resolve conflicts concerning the existing Florida Panhandle leases. Again, as in other areas, the absence of a controversial proposal for additional leasing off the Florida Panhandle has enabled us to concentrate on analysis and consultation related to the development and production plan filed by Chevron USA for its natural gas discovery in the Destin Dome Block 56 Unit. We have begun the process of preparing an environmental impact statement (EIS) for the project and have held five public scoping meetings. We plan to issue a draft EIS in November of this year and hold public hearings on it in January 1999. Just recently, the State of Florida officially objected to Chevron’s certification that the development and production plan is consistent with Florida’s federally approved coastal zone management program, and Chevron has filed a formal appeal with the Department of Commerce.

Results of Consensus Building—The OCS 5-Year Oil and Gas Program and Congressional Moratoria Are Now Consistent

After the OCS 5-Year Oil and Gas Program for 1997-2002 was approved by the Secretary, the Department proposed amendments to the Fiscal Year (FY) 1998 budget that were designed to conform the annual congressional moratoria provisions to the new leasing program. The amended language proposed to delete drilling restrictions in both the North Aleutian Basin and in the Eastern Gulf of Mexico south of 26 degrees North Latitude since these restrictions were no longer necessary. More importantly, the proposed language also reconfigured the existing Eastern Gulf of Mexico leasing moratorium so that it would not apply to the area proposed for possible lease in 2001 in the current OCS 5-Year Oil and Gas Program. Congress accepted the proposed language. Therefore, the current OCS 5-Year Program and the annual moratoria provisions are now consistent, i.e.; all areas included in the congressional restrictions are excluded from leasing consideration. Thus, for the first time since OCS moratoria were enacted in the early 1980's, we have a OCS 5-year program that does not propose leasing anywhere that opposition and controversy led to those restrictions. As part of its FY 1999 budget request, the Department has again proposed to carry forward the language enacted in FY 1998.

Looking to the Future

It is possible that changing international conditions or evolving domestic conditions and attitudes eventually could result in future consideration of leasing in areas currently under moratoria. However, as experience has shown us, any such consideration should be based firmly on science and consensus or we will likely repeat the mistakes of the past. As I have stated previously, our support of moratoria and our focus on resolving issues related to existing leases before conducting more leasing in certain areas has been designed to build public trust and set the stage for a rational and civil discussion of possible future courses of action.

We also realize that prior to considering leasing in areas under moratoria, as part of this effort we must first identify scientific information needs, and that is why we requested a joint subcommittee of the OCS Policy and Scientific Committees to conduct a review of such needs and report to the Secretary. The report was finalized in May 1997, and its recommendations were unanimously approved by the group (which represents a wide range of stakeholders). In addition to providing an excellent account of the OCS program’s history that I mentioned earlier, their report presents a great deal of information that is useful for future planning.

One important point that can be gleaned from the Policy/Scientific Committee report is that times—and more importantly, technology—have changed dramatically since OCS moratoria first were enacted. Tremendous advances have resulted in:

	cleaner and less toxic drilling fluids and associated discharges;
	cleaner and less intrusive offshore structures, including zero discharge rigs;
	safer and more efficient drilling and monitoring systems, including Measure While Drilling and Logging While Drilling, and faster blowout preventers;
	better seismic data gathering and interpretation techniques that lead to fewer wells being drilled than in the past;
	better oceanographic and meteorological forecasting and earlier response;
	cleaner and less toxic produced water;
	smaller and fewer platforms;
	better and faster communications equipment;
	better and faster oil spill response and cleanup; and
	safer and more efficient pipelines and pipeline burial techniques.

Summary and Conclusion

In summary, I believe we have made significant strides in building public consensus concerning the OCS program in the past several years. As I have stated previously, we have found moratoria to be a useful tool that enabled us to address and resolve specific difficult conflicts that we inherited with the OCS program as well as develop a OCS 5-Year Program that is consensus-based. As a result, moratoria language in the Department’s FY 1998 Appropriations Act and areas considered for possible lease in the Department’s OCS 5-Year Oil and Gas Program for 1997-2002 are now consistent.

Madam Chairwoman, this concludes my prepared remarks. However, I will be pleased to answer any questions Members of the Subcommittee may have.

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