Fuel Fix: Obama officials face tough questions on oil drilling, land access

“Our priority is processing permits to drill that are already in flight” rather than work on new applications, Interior Secretary Sally Jewell told reporters after a Senate budget hearing in Washington on Tuesday. (Andrew Harrer/Bloomberg)

Interior Secretary Sally Jewell and a top deputy were questioned about drilling on federal lands, the cleanup of legacy oil wells in Alaska and how the government will protect endangered species in the West during a wide-ranging hearing Thursday before the Senate Energy and Natural Resources Committee.

The hearing marked the first time that Secretary Jewell has testified before the committee since her confirmation in April and probably the last appearance by Deputy Interior Secretary David Hayes, who is stepping down.

Sen. Lisa Murkowski, R-Alaska, the panel’s top Republican, pushed Jewell to outline a plan for cleaning up legacy oil wells in her home state.

“I think the department is presiding over an environmental disaster,” Murkowski said, in reference to the more than 100 wells drilled decades ago by the Navy and U.S. Geological Service in the National Petroleum Reserve-Alaska. “All that’s left is an eyesore and contamination,” Murkowski said.

Murkowski said she wants to see the federal government pay for the cleanup, without tapping state funds. But Jewell signaled she may pursue a different approach, given tight spending constraints.

“They do need to be cleaned up,” Jewell said. But, she added, “we do need money to be able to do it. We need to work on how to pay for it, because right now, there isn’t sufficient money.”

Separately, Jewell committed to “an ongoing collaborative effort” to address protections for the sage grouse, a bird whose habitat includes such oil drilling hotbeds as North Dakota and Montana. Sens. James Risch, R-Idaho, pleaded for a “state-driven” approach to protecting the species, now a candidate for protection under the Endangered Species Act. Sen. Mike Lee, R-Utah, asked Jewell to heavily consider Utah’s own management plan for the bird, amid oil industry concerns that some safeguards could block energy development.

Jewell acknowledged that endangered species protections are “a challenging issue” but pledged cooperating with state and local stakeholders as the Interior’s Fish and Wildlife Service prepares to make final decisions on hundreds of creatures that are candidates for protection.

A major dispute Thursday arose over the status of drilling on federal lands and waters, with Murkowski and Jewell squaring off over whether oil production had climbed or fallen in areas under the Interior Department’s control.

Murkowski cited “a pattern of falling production on federal lands.”

“Production on federal lands is in trouble,” she said. “Contrary to some of the rhetoric we’ve heard, oil production from the federal estate actually fell 5 percent last year, after falling by even more than that in 2011.”

And Murkowski insisted that natural gas production from the same federal areas “is in virtual free fall, down 8 percent last year, and down 23 percent since 2009.”

But Jewell took issue with those stats.

“Onshore oil production on public lands is actually at its highest level in a decade,” Jewell said. “The amount of producing acreage continues to increase.”

Jewell told Murkowski she could “provide some statistics that are a little different than those you just referenced in terms of oil production.”

And she noted that despite the 2010 Deepwater Horizon disaster — and a five-month ban on some offshore drilling that followed — “there are now more floating rigs operating in the Gulf of Mexico” than before the spill.

Murkowski acknowledged the debate over oil development statistics is inherently thorny, but she didn’t let the issue slide.

Federal onshore production has climbed to 108.7 million barrels in 2012 from 89.5 million barrels in 2003, Murkowski said, calling that a “substantial increase.” During the same time frame, however, she noted that production from offshore acreage dropped from 532.7 million barrels to 430.6 million barrels last year.

“What we’ve got is federal onshore production, which rose by about 20 million barrels, while federal offshore production fell by 100 million barrels, more than five times the onshore increase,” Murkowski said. “So I think it’s important as we talk about this to look at the full picture.”

Sen. Al Franken, D-Minn., questioned the role of the moratorium on most deep-water exploration in 2010 with suppressing production. “We had a huge thing happen,” he said of the 2010 spill.

Hayes acknowledged a decline in Gulf oil production “because of the safety issues that arose and the need to upgrade our safety standards.”

“There certainly was a time that we did a pause and increase the safety standards and change the way we did business and that did affect — we believe temporarily — production in the offshore,” Hayes said.

But he noted that the Energy Information Administration has documented “a strong upward trend” in the Gulf, where more than 10 major new discoveries have been made recently and more than 50 rigs are now drilling. Robust industry bidding for new offshore acreage in recent lease sales also is a positive sign, Hayes said.

“We expect to be back to where we were, and further” in the Gulf, he said.

Sen. Mary Landrieu, D-La., used the hearing to make the case for giving coastal states a greater share of royalties and other revenues tied to nearby offshore drilling. Right now, a portion of federal offshore drilling revenues are steered toward conservation projects around the nation.

“We are using revenues generated off the coasts of Louisiana and Texas, when Louisiana and Texas and Alabama and Mississippi and Florida — our coastal areas — have so much need,” Landrieu said. “We’re saving the redwoods in the Northeast and California and the sequoias but we’re not saving the marsh where the revenues are coming from.”

“Our states are serving as platforms for the production” of oil offshore, Landrieu added.

Inland states generally claim 50 percent of the revenue from oil and gas production on federal lands within their borders. Coastal states don’t have the same deal, though existing federal law, guarantees four coastal states – Alabama, Louisiana, Mississippi and Texas – will be able to begin collecting 37.5 percent of oil and gas royalty revenue on some leases beginning in 2017, capped at $500 million annually.

Landrieu and Murkowski have introduced legislation that would move that timeline up for the Gulf, while extending similar revenue sharing deals to every other coastal state. Under the pair’s bill, other coastal states could claim 27.5 percent of offshore drilling revenues, with the option to use an additional 10 percent to fund conservation and restoration programs.

Jewell called the question of greater revenue sharing a “tricky issue,” and said she had not yet reviewed the Murkowski-Landrieu bill. During a recent trip to Louisiana and Texas – including a visit to two offshore oil facilities – Jewell said she saw the economic benefits of energy development.

“I saw firsthand the positive impact it has on the residents of Louisiana through the job it creates, including our offices there,” which have 500 workers, Jewell said.

“We appreciate the jobs,” Landrieu shot back, “but 500 jobs — and the jobs it has created along the coast do not compensate for the loss of revenues” from the decline of Gulf Coast marshland and coastal erosion. “This is the largest land loss in the continent of North America.”

While the Senate hearing was under way, lawmakers in the House were scrutinizing legislation that would force the Interior Department to sell oil and gas leases in waters off the coast of Virginia, South Carolina and California. A five-year Interior Department plan for auctioning those leases between 2012 and 2017 contains no planned sales of waters near Virginia that were previously targeted for oil development.

Jewell told reporters that’s a done deal.

“We’ve done a 5 year plan. It doesn’t include the Atlantic,” she said after the Senate hearing. “I don’t expect to go back.”

But seismic assessments of the mid- and south-Atlantic could yield information that would guide future leasing and drilling decisions in the region, Jewell said. The Interior Department’s Bureau of Ocean Energy Management is working to finish an environmental assessment of the proposed geological and geophysical research.

Sen. Tim Scott, R-S.C., pressed for a more specific timeline. Hayes insisted the ocean energy bureau was “moving forward in a deliberate pace” despite the financial challenges of the sequester. “We are very, very interested in getting this done,” Hayes said. “We’re certainly not dragging

Source: By Jennifer A. Dlouhy