Madam Chairman and Members of the Subcommittee, I appreciate the opportunity to testify on H.R. 33--a bill to impose restrictions and requirements on the leasing and development of certain Outer Continental Shelf (OCS) lands offshore Florida. However, before addressing the specifics of H.R. 33, I would like to begin by highlighting some important facts concerning the OCS program.

First, the OCS program is a major source of energy for the Nation, currently providing about 22 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 $6 billion in 1998 and over $125 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, local jobs, 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, as of last year, the Historic Preservation Fund (HPF)--programs that benefit all Americans. To date, over $19.7 billion and $3 billion have gone into the LWCF and HPF, respectively. The OCS program has an excellent safety and environmental record, and it produces a large quantity of natural gas, which is the most environmentally preferred form of fossil fuel.

These benefits notwithstanding, the OCS program has been the subject of conflict, controversy, and—ultimately—moratoria that have been in effect for many years for certain areas of the Nation’s coast. The history of moratoria is well documented in two reports produced by the Minerals Management Advisory Board—Moving Beyond Conflict to Consensus (April 1993) and Environmental Studies in OCS Areas Under Moratoria: Findings and Recommendations (May 1997). These reports were previously provided to the Committee. The former had a significant influence on the Department’s development of its management approach, and the latter we use in managing our OCS Environmental Studies program.

THE DEPARTMENT’S APPROACH TO MANAGING THE OCS PROGRAM

When this Administration assumed management of the OCS program in 1993, 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. There also 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.

The Department believed that while the OCS program held great potential, it had become mired in controversies because it had been insufficiently attentive to the public’s desires. Therefore, the Department embarked on a strategy designed to decrease the controversy so that conflicts and concerns could be addressed in a more rational atmosphere. This approach placed a high priority on conflict resolution and consulting with--and listening very carefully to--the OCS program’s various stakeholders.

Endorsing Annual Congressional Moratoria

The first approach we used was to endorse the existing annual congressional moratoria as a way to assure the 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. In retrospect, the annual moratoria that were in effect proved to be a very useful tool that enabled us to:

• 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 leases off North Carolina, which resulted in the relinquishment of 32 leases while preserving the Manteo Unit for possible exploration;
• cancel proposed lease sales in the Atlantic and in the Eastern Gulf off Florida that were precluded by the moratoria, thereby allowing us and the stakeholders to concentrate on resolving issues related to potential exploration and development of remaining leases; and
• focus our efforts off California on the possible development of existing leases without the distractions that proposals for new leasing would engender.

In short, the annual moratoria provisions and the actions we were able to take helped us begin building trust with our constituents and 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 Program for 1992-1997 that had been approved by the previous Administration. After consulting with stakeholders, we decided to:

• cancel sales in the Chukchi Sea, Hope Basin, Gulf of Alaska, and St. George Basin Planning Areas based on 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 resulting in the cancellation of three proposed Alaska sales—as well as cancellation of Atlantic and Eastern Gulf of Mexico sales—were made with the view that this Administration would have the opportunity to formulate its own 5-year program (covering the 1997-2002 timeframe). In developing that program, we would consult further with stakeholders to reach consensus on any future sale proposals for those areas and others.

Developing an OCS 5-Year Program by Consensus

The second approach we used to address past controversies with the OCS program was to develop an OCS 5-Year Program for 1997-2002 that was based not only on the substantive and procedural requirements of section 18 of the OCS Lands Act, but also on three general guiding principles endorsed by the President and the Secretary—consensus-based decisionmaking, science-based decisionmaking, and the use of natural gas as an environmentally preferred fuel. We consulted with and listened to stakeholders from start to finish in the 2-year preparation process.

As a result, the current OCS 5-Year Program is one that was developed by consensus and through the active participation of our various stakeholders. As such, it has allowed us to focus our energies on constructively discussing and resolving specific issues related to areas to be leased, as opposed to debating which areas are appropriate to even consider for lease.

The President’s June 1998 OCS Directive

The third approach the Administration used to address stakeholder concerns regarding OCS leasing and development was to administratively withdraw certain OCS areas from further leasing consideration for a period of time. Specifically, in June 1998, the President issued a directive to the Secretary of the Interior to withdraw from leasing consideration until at least 2012 OCS areas located offshore the east and west coasts of the United States, the majority of the Eastern Gulf of Mexico, and the North Aleutian Basin offshore Alaska. In general, the areas adminstratively withdrawn were the same areas that had been under annual congressional moratoria for many years and where controversies or concerns still remained. Further, the President’s directive also permanently prohibited future OCS leasing activity in marine sanctuaries.

As a result of the actions I have just discussed, the OCS program now reflects stakeholder desires with respect to the role the program should play in meeting the Nation’s energy needs. Furthermore, it is important to note that the current OCS 5-Year Program, the President’s June 1998 OCS directive, and annual congressional moratoria are in harmony; i.e., all areas prohibited from leasing consideration in the Department’s annual appropriations legislation are excluded from leasing consideration in the Department’s 5-Year Program and are administratively withdrawn from future consideration until 2012. Of note, the Department requested, and the Administration included in the President’s FY 2000 Budget, the areas under leasing moratoria in the Fiscal Year 1999 Omnibus Appropriations Act (P.L. 105-277) be continued in Fiscal Year 2000.

PROVISIONS OF H.R. 33

With respect to OCS leasing, exploration, and development activities offshore the State of Florida, H.R. 33 proposes to--

• prohibit leasing and preleasing activities offshore Florida at least until after the expiration of the period covered by the next OCS 5-Year Program (ie; until 2012), and permanently prohibit leasing activities in areas in the Eastern Gulf south of 26 degrees N. Latitude and east of 86 degrees W. Longitude;
• extend the prelease and leasing prohibition even further until 1) all environmental research, assessment and studies called for in the bill are completed and peer-reviewed; and 2) the Secretary prepares a report certifying that he has adequate information to carry out his duties under the OCS Lands Act with a "minimal level of uncertainty;"
• permanently prohibit the approval of any exploration or production activities in the Eastern Gulf south of 26 degrees N. Latitude and east of 86 degrees W. Longitude, and for other areas offshore Florida--to prohibit the approval of any permit or exploration or production activity until 1) all environmental research, assessments and studies called for in the bill are completed and peer-reviewed; and 2) the Secretary prepares a report certifying that he has adequate information to carry out his duties under the OCS Lands Act with a "minimal level of uncertainty;" and
• establish a joint Federal-State Task Force to supervise the peer-review of all research and to review the report prepared by the Secretary certifying that he has adequate information available to carry out his duties under the OCSLA.

These provisions would apply to three OCS planning areas--that part of the South Atlantic Planning Area located offshore Florida; the Straits of Florida Planning Area; and that part of the Eastern Gulf Planning Area located offshore Florida. However, there is no OCS leasing proposed in the 1997-2002 OCS 5-Year Program for either of the first two areas, and likewise, there are no existing OCS leases in these areas. Therefore, the only area affected by the legislation would be the Eastern Gulf of Mexico Planning Area. There is a small area located 15 miles offshore Alabama and more than 100 miles offshore Florida that is proposed for possible lease in late 2001, and there are approximately 110 existing leases located in that part of the Eastern Gulf affected by the provisions of the bill.

VIEWS ON H.R. 33

We have carefully reviewed the provisions of H.R. 33 in light of current law, the President’s OCS directive, and the Department’s efforts to address past controversies with the OCS program. We appreciate the intent of the bill--to protect Florida’s coast--but we have concerns regarding the effect that the moratoria provisions and the environmental research requirements will have on the OCS program.

Proposed Leasing Moratorium in H.R. 33

With regard to the leasing restrictions proposed in the bill, we would again note that the current OCS 5-year Oil and Gas Leasing Program for 1997-2002 is a consensus-based program which proposes only a limited area for potential lease in 2001 in the Eastern Gulf of Mexico and no leasing in other OCS areas offshore Florida. In the Eastern Gulf of Mexico, the area for possible lease is located primarily offshore Alabama and more than 100 miles off the coast of Florida. During development of the current OCS 5-Year Program, both the States of Florida and Alabama agreed to allow this area to be considered for possible lease.

Furthermore, the President’s June 1998 OCS directive prohibits the Department until at least 2012 from considering leasing areas offshore Florida that are located outside the limited area in the Eastern Gulf of Mexico previously agreed to by the States of Florida and Alabama.

 Even if an area offshore Florida were to be considered for possible leasing after 2012, it is important to note that there is a comprehensive set of laws in place to guide that decisionmaking process. I have attached a chart to my testimony that outlines that process from the development of an OCS 5-Year Program all the way through the review and approval process for an OCS Development and Production Plan. From this chart, it is readily apparent that at each point of the OCS process, decisions would be subjected to a detailed planning and consultation process as outlined in the OCS Lands Act as well as requirements under the National Environmental Policy Act and numerous other environmental statutes. Also, in the case of proposed lease sales, exploration plans, and development plans, preparation of a section 307 consistency determination under the Coastal Zone Management Act would also be required. Therefore, there are many points in the curent OCS leasing process that would ensure that State concerns are substantively addressed prior to any final decisions regarding an activity.

Finally, and as I previously mentioned, through the annual appropriations process as well as the President’s OCS directive, the Department has endorsed a leasing prohibition offshore Florida for areas lying outside mutually acceptable areas contained in the OCS 5-Year Program for 1997-2002 in order to work cooperatively with the State to resolve issues of concern and obviate the need for long-term moratoria. H.R. 33 could be counterproductive to continued dialogue with affected constituencies and may diminish the motivation to continue the difficult process of building trust with all affected parties.

Proposed Drilling Moratorium in H.R. 33

H.R. 33 also contains language that would impose a drilling moratorium offshore Florida for a period of time that is tied to the completion of certain reseach, assessments and studies. The Department has concerns with this provision. First, it could undermine the statutory and regulatory processes in place to consider proposals for industry operations on leases with already-approved exploration or production plans. Second, it could undermine the ongoing consultation and dialogue necessary with the State of Florida and local governments to determine the most appropriate ways to explore for or develop existing OCS leases.

Most importantly, imposition of a drilling moratorium would have an immediate impact on the approximately 110 existing leases located in the Eastern Gulf offshore Florida. In turn, the drilling moratorium could have severe economic implications on lessees and operators and could very likely set the stage for litigation for a potential buyback of those leases. Although none of these leases are yet producing, many have been explored, several have "producible" wells, and in at least one instance, the lessees are pursuing efforts to develop a significant natural gas find on their leases. The value of these existing leases would be significant, and the potential liability to the American taxpayer could be sustantial.

In Conoco v. United States, decided in 1996, language similar to that contained in H.R. 33 was addressed by the United States Court of Federal Claims. The Court found that the Federal government was liable for breach of contract and the plaintiffs were entitled to damages. Although the case was subsequently reversed on other grounds, it is true that similar language spawned expensive and time-consuming litigation for both sides. Therefore, if H.R. 33 is enacted with these restrictions on the process of approving and permitting exploration and other drilling activities, it could set the stage for extensive litigation and possible buyback.

Proposed Environmental Research Requirements of H.R. 33

MMS has concerns with the section 4 environmental research requirements since they do not take into account the comprehensive and open process MMS uses to determine what environmental research is necessary for a given OCS area. Further, the bill fails to give adequate recognition to the extensive suite of environmental studies MMS has developed with regard to areas offshore Florida--particularly in the Eastern Gulf of Mexico. In addition, section 4 does not take into account the extensive peer review process that is already in place to ensure the integrity of OCS environmental research.

Finally, although section 4 references the need to conduct studies as recommended by the National Research Council (NRC), it does not take into account the recommendations coming out its review of the MMS Environmental Studies Program. The NRC provided final guidance in its report to MMS--Assessment of the U.S. Outer Continental Shelf Environmental Studies Program: IV. Lessons and Opportunities, NRC, 1993--and MMS has relied heavily on its recommendations and guidance as it considers environmental studies needs for the Eastern Gulf of Mexico.

Listed below is a status of of our environmental research in the Eastern Gulf of Mexico and an overview of NRCguidance vis-a-vis various provisions of the bill.

1.) Studies required in H.R. 33.

Section 4 outlines certain specific studies that should be conducted by MMS and also requires an unlimited number of additional, unspecified studies that may be requested by the Governor of Florida or the Joint Task Force (as proposed in section 5 of the bill).

In fact, the socioeconomic study called for in section 4(1)(A) should be completed in late 1999 and is entitled "Socioeconomic Baseline and Projections for Selected Florida Panhandle Communities." The ecosystem study called for in section 4(1)(B) is scheduled to be undertaken in Fiscal Year 2001. In conjunction with that study, MMS plans to hold a workshop this October in Florida to delineate the scope of the study. Finally, the physical oceanography studies called for in section 4(1)(C) are currently underway and scheduled for completion in the near future.

With regard to the NRC studies called for in section 4(1)(D), it should be noted that the NRC report referenced in the bill discussed the adequacy of information with respect to the southwestern Florida area and indicated that the physical oceanographic information was marginal for that area. However, no existing leases remain in this area and, this is part of the Eastern Gulf that is both under annual congressional moratoria and the President’s June 1998 OCS directive regarding new leasing.

However, MMS has added a considerable amount of information to our knowledge of ocean circulation in the Eastern Gulf, a matter of concern expressed in the NRC report. We are nearing completion of several projects employing anchored instruments, satellite images, surface drifting buoys, and computer models to look at how ocean currents move in this area. In particular, we are studying the interaction, if any, between the nearshore currents and eddies from the head of DeSoto Canyon. Although, to date, there have been only natural gas discoveries in the area, this knowledge will help us better understand what might happen if an oil spill did occur. These efforts will be reviewed at the October workshop to determine what additional research should be considered. Additionally, new meteorological information will also help us see if there may be any potential effects from the emissions of OCS activities.

We have also improved our understanding of the biological and coastal resources in the eastern Gulf. A recently completed field study of whales in this area is providing new information on where these animals can be found. In a cooperative effort, MMS and the State of Florida have just finished updating information on a wide variety of coastal resources for storage on a geographic information system to aid the State and Federal government in assessing potential impacts to these resources.

Our understanding of the human environment in this area has also improved. Baseline information regarding the socioeconomic conditions of selected Florida panhandle communities has recently been completed and is being examined to project how these conditions may change in the future. Several new studies that have either just started or are planned to start in the near future should also give us a better understanding of the Florida socioeconomic environment.

In summary, through these studies MMS has addressed the issues raised by the NRC report and has continued to identify new issues through outreach programs and issue specific workshops to ensure that decisions are based on the best available information.

2.) Peer review of studies.

H.R. 33 proposes to require all research required by the bill to be peer reviewed by qualified scientists who are not employed by the Federal Government. MMS already has an available peer review mechanism recognized by the NRC. In Report IV, the NRC strongly emphasized that MMS should use the OCS Advisory Board Scientific Committee for advice on environmental research. Scientific Committee members are independent, nationally-recognized experts in the marine and social sciences, appointed by the Secretary of the Interior, and not employed by the Federal Government. Most members have served on NRC committees and other special "peer review" panels, and are very frank in giving MMS advice in open, public meetings. Furthermore, the Scientific Committee provides peer review on MMS research.

Therefore, the additional layer of peer review provided for in the bill is not necessary to ensure quality science and, indeed, provides no method to resolve conflicts that could occur from these two separate reviews.

3.) "Minimizing Uncertainty" Through Studies.

H.R. 33 would require the Secretary to certify that he has adequate information available to carry out his duties under the OCS Lands Act with a "minimal level of uncertainty" before approving leasing or exploration/development activities. This requirement implies that the only way to minimize uncertainty is by conducting additional research and that all studies mentioned by the NRC must be completed. However, in Report IV, the NRC stated that -

"it cannot - and should not- prescribe a detailed plan of studies for the Environmental Studies Program. Because the state of knowledge, budget constraints, and other factors change continuously, this committee can provide only broad guidance on priorities based on its assessment of current conditions."

The MMS has followed the guidance from the NRC and is under the oversight from its Scientific Committee in setting its research agenda, as recommended by the NRC.

Further, the bill proposes that the Secretary be prohibited from conducting any leasing or development activities until all assessments specified in the bill are completed, peer reviewed, and approved. This requirement could be interpreted to mean that all information, including that needed for exploration and development activities, must be completed and approved prior to even considering a leasing action. This requirement would run counter to both recommendations by the NRC and the environmental assessment process envisioned in NEPA.

The OCS program and NEPA both recognize that levels of environmental information necessary to make the first decision (i.e.; holding a lease sale) are not the same as those necessary to make a decision on the placement of a platform. It would be literally impossible to have all the information necessary to make decisions with "a minimal level of uncertainty" on the approval of an exploration or development plan prior to the decision to hold a lease sale. Such information is best gathered and assessed once the location and specific circumstances of the proposed exploration or development activity are known.

Finally, H.R. 33 also permits the Governor of Florida or the Task Force to require "any" additional information to "minimize uncertainty." This provision would essentially give the Governor and the Task Force a blank check to require any kind of study, or endless numbers of studies, regardless of the applicability of that study to OCS decisionmaking. In Report IV, the NRC stated -

"The process of deciding how much science is enough should be a process whereby scientific knowledge provides to decision makers an assessment of potential impacts and risks-including the range of uncertainty-associated with an action. The response to scientific uncertainty need not always be the commissioning of additional studies. Any decision whether or not to conduct further studies should have a rational basis that can be documented."

The NEPA process provides the best approach to defining what the real issues are with regard to a project and uses the "scientific knowledge" method highlighted by the NRC to provide to decisionmakers and the public an assessment of potential impacts and risks, including uncertainty. For example, many of the deliberations by the NRC centered on oil. But to date, only natural gas has been discovered in commercial quantities in the Florida Panhandle area, and gas is expected to comprise a significant portion of the hydrocarbon resources found in that area. The development of natural gas can have quite different impacts than oil. One would not need to know everything possible about the effects of oil spills to develop gas fields. For development of a gas field, the NEPA analysis would key on issues associated with impacts from gas development.

CONCLUSION

In summary, while we appreciate the intent of the legislation, we believe that the current consultative and environmental processes already in place--along with the Administration’s willingness to listen carefully to its stakeholders and make decisions based on good science--are the best way to proceed with the OCS program. As experience has shown us, consideration of OCS areas to lease and develop should be based firmly on science and consensus, or we are bound to repeat the mistakes of the past. We believe we have made significant strides in building public consensus concerning the OCS program in the past several years. Further, our Environmental Studies program supports the NRC’s recommendations regarding scientific studies. These efforts should be allowed to continue.

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

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updated August 6, 1996